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Jonathan Berger, Chief Executive Officer and Chief Investment Officer at AS Birch Grove, is hosted by Naji Nehme, Chief Investment Officer at Petiole Asset Management AG, to discuss the credit markets and the liquid equilibrium. Below are the highlights of the webinar.

Credit Market: The New Equilibrium

Credit Market, The New Equilibrium | Jonathan Berger

This presentation is provided to you by The Family Office Co. BSC(c) (“The Family Office”) for informational purposes only, and contains proprietary information that may not be reproduced, distributed to, or used by, any third parties without The Family Office’s prior written consent.

All information, figures, calculations, graphs and other numerical representations appearing in this presentation have not been audited and may be subject to change over time. Furthermore, certain valuations (including valuations of investments) appearing in this presentation are subject to change as they may be based on either estimates or historical figures that do not reflect the latest valuation. Although all information and opinions expressed in this presentation were obtained from sources believed to be reliable and in good faith, no representation or warranty, express or implied, is made as to their accuracy or completeness. The information contained herein is not a substitute for a thorough due diligence investigation. Past performance is not indicative of and does not guarantee future performance. Exit timelines, prices and related projections are estimates only, and exits could happen sooner or later than expected, or at a higher or lower valuation than expected, and are conditional, among other things, on certain assumptions and future performance relating to the financial and operational health of each business and macroeconomic conditions.

The Family Office makes no representation or warranty, express or implied, with respect to any statistics or historical or current financial data, whether created by The Family Office through its own research or quoted from other sources. With respect to any such statistics or data delivered or made available by or on behalf of The Family Office, it is acknowledged that (a) the investor takes full responsibility for making its own evaluation of the materiality of the information and the integrity of the quoted source and (b) the investor has no claim against The Family Office.

Amounts in currencies other than the US Dollar are translated using prevailing market rates as calculated by The Family Office or its service providers and may differ from the rates used by banks. The rates are indicative only and do not reflect the rates at which The Family Office would be prepared to enter into any transactions with other parties.

Certain information contained in this presentation constitutes “forward looking statements,” which can be identified by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “plans,” “estimates,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. To the extent this presentation contains any forecasts, projections, goals, plans and other forward looking statements, such forward looking statements are inherently subject to, known and unknown, significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond The Family Office’s control and may cause actual performance, financial results and other projections in the future to differ materially from any projections of future performance, results or achievements expressed or implied by such forward looking statements. Investors should not place undue reliance on these forward looking statements. The Family Office undertakes no obligation to update any forward looking statements to conform to actual results or changes in The Family Office’s expectations, unless required by applicable law.

The Family Office makes no representation or warranty, express or implied, with respect to any financial projection or forecast With respect to any such projection or forecast delivered or made available by or on behalf of The Family office, it is acknowledged that (a) there are uncertainties inherent in attempting to make such projections and forecasts, (b) the investor is familiar with such uncertainties, (c) the investor takes full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts so furnished to it and (d) the investor has no claim against The Family Office.

In addition, this presentation does not constitute an offer to sell, or a solicitation to buy, any instrument or other financial product, nor does it amount to a commitment by The Family Office to make such an offer at present or an indication of The Family Office’s willingness to make such an offer in the future.

The Family Office is a Category 1 Investment Firm regulated by the Central Bank of Bahrain 

.53871 dated 21/6/2004. Paid Up Capital: US$10,000,000. The Family Office only offers products and services to ‘accredited investors’ as defined by the Central Bank of Bahrain.

Nouriel Roubini, CEO of Roubini Macro Associates LLC, was hosted by Naji Nehme, CFA, Chief Investment Officer at Petiole Asset Management AG, to discuss market uncertainty, rising inflation and the looming recession. Below are highlights of the discussion:

Economic Trends That Will Shape 2023 And Beyond

The Family Office is a Category 1 Investment Firm regulated by the Central Bank of Bahrain C.R.No.53871 dated 21/6/2004. Paid Up Capital: US$10,000,000. The Family Office only offers products and services to ‘accredited investors’ as defined by the Central Bank of Bahrain.

Thomas Stolper, Chief Investment Officer at Embankment Currency Research, is hosted by Naji Nehme, Chief Investment Officer at Petiole Asset Management AG to discuss changes within central banks to fight inflation. Below are the highlights of the webinar.

Back To The 1980s – Re-Emerging Opportunities In Currency Markets

Abdulmohsin Al Omran, Founder and CEO of The Family Office, is hosted by Mazen Nahawi, President of News Group, to discuss the main success factors for investors in their investment and wealth management journey. Abdulmohsin shared The Family Office investment philosophy as well as advice to investors on preserving and growing their wealth. Below are the highlights of the discussion:

Success Factors In Private Market Investments

Jim O'Neill, former Commercial Secretary of the British Treasury, former chairman of Goldman Sachs Asset Management, and senior advisor to Chatham House, was hosted by Naji Nehme to discuss the future of the European economy in light of the geopolitical change. Below are the main discussion points.

The Future Of The European Economy Amidst Geopolitical Change

During our February webinar, Senior Advisor and Chief Strategist to The Family Office David Darst discussed with Naji Nehme, Chief Investment Officer at Petiole Asset Management AG., how the endowment model applies to private wealth management. Major highlights included:

The Endowment Model: The Quest For Return Enhancement And Risk Management

2021 was “a year of recovery,” with very little downside in the stock markets. 2022 was “a year of reversals.”

The sharp recovery in the global manufacturing and services Purchasing Manager’s Index (PMI) in 2021 is reversing. Hayes does not expect a slowdown similar to that in 2020, but foresees moderating economic growth against inflationary pressures.

Another reversal is in central bank policies. The Federal Reserve (the “Fed”) is likely to raise rates starting March. With slower global growth, a reversal in corporate earnings growth is also expected. All these reversals indicate uncertainty and a sharp return of volatility.

Factors that contribute to this uncertainty include monetary policy, supply chain issues, and the Ukraine-Russia situation. Central banks in emerging and developed countries alike are moving into a tightening phase, as the Fed intends to reduce its balance and raise rates in 2022. But Hayes does not believe that this will change the longer term trend. That would require a significant deterioration in the macro-economic environment.

Hayes highlighted that markets usually withstand the early stages of a rate hike as markets recognize a favorable earnings environment. But after a series of rate hikes—historically, three rate hikes—yields start to flatten sharply, turning into a more negative situation.

Four rate hikes are expected this year, reflecting higher inflation and defensive market expectation. This could trigger another round of selling. But will the rise in interest rates replicate the events in the 1970s? Tim thinks that this requires a much higher inflationary environment than that experienced so far.

With the market rising 15% annually since 2009, NDR considers that a secular bull market has been in effect since 2009 and shall persist, consistent with past secular bull markets. While a cyclical bear market is inevitable, Tim was uncertain whether it will take place this year or next year.

Earnings yields and market valuations have improved, and stocks are not overvalued relative to bonds. The wide spread between earnings yields and wide bond yields have persisted for the past 20 years.

With real interest rates dropping below zero to nearly -6% and likely to remain negative, gold should benefit.

Amid such uncertainty and consequent volatility, markets undergo extreme rotations as money moves away from sectors such as technology towards sectors that benefit from high interest rates such as financials. Tech is overvalued in the US, weighing down the entire market. Energy and materials have held up and around 10 emerging markets have performed well.

The performance of cryptocurrency assets cannot be predicted or studied accurately. NDR models based on historical relationships between data series and markets do not apply to Bitcoin, given its lack of history and inconsistent correlation. It is hard to observe long-term secular or cyclical trends. The volatility of Bitcoin exceeds any other asset class and investors in cryptocurrency must be ready for such volatility. Bitcoin is not a viable option for a portfolio that aims to preserve capital given its volatility and increased regulations.

Naji concluded that amid the long-term secular bull market, our clients’ long-term investment strategy should be resilient to the cyclical bear sell-offs, allowing them to over-ride these downward trends and minimize volatility.

The Family Office has been preserving and growing the wealth of hundreds of GCC investors, individuals and families, by adopting a risk-adjusted approach to achieve optimal returns. Schedule a call with our financial advisors to start your wealth preservation journey.

Below are the major highlights of our first webinar of 2022, featuring Tim Hayes, Global Chief Investment Strategist at Ned Davis Research (NDR), as our guest speaker, hosted by Naji Nehme, Chief Investment Officer at Petiole Asset Management AG, discussing the global market outlook for 2022.

2022 Global Market Outlook: What Should Investors Look Out For In 2022?

The US Federal Reserve focuses on two major goals: unemployment and inflation. The world economy had recently suffered a significant slowdown with the Covid-19 pandemic, but rebounded sharply after the successful vaccination, which led to shortages in many materials, used in modes of transportation and ships, etc. This affected oil prices especially, which became negative during the pandemic. All these factors together increased inflation. However, current inflation levels are transitory and may exceed the 2% targeted by the Federal Reserve.

Savers shouldn’t keep their money in current bank accounts, but invest it to protect it from inflation. 30 to 40 years ago, people would build their houses by buying some material and hiring some workers. This model no longer exists. People hire engineers who determine their needs and ensure the building is safe. The same goes for the investment model that changed in the last three years with the financial knowledge sought by the GCC generally and Saudi Arabia specifically with Vision 2030 to educate investors about saving and investing.

Investment and Asset Management in the GCC

When we established The Family Office in 2004, there was no licensing for wealth and asset management in the GCC. During the last 17 years, however, each country in the region established financial supervisory and legislative authorities for this industry, which led to substantial development. Undoubtedly, countries are keen to protect small investors as the minimum investment amount remains at SR1 million, but we expect different investment products in the coming period that would allow small investors to invest safely.

Every investor is different, depending on their risk appetite, available liquidity, and the time horizon they desire starting with three years. The shorter is the time horizon, the higher the risk, so we always advise investors to invest over the long term to preserve their wealth.

Investment is a culture. The more confident the investor is that investment companies are highly professional, the more they will invest. The pearl trade was the first in the GCC in the 1950s and 1940s. The pearl is not formed overnight. Like wealth, it requires a long time and needs a specific environment. Investors should treat wealth like pearl formation over the years, and avoid exposing it to storms and risks by being in a rush to create wealth.

Diversification to Protect Wealth from Investment Risks

Risk affects the performance of the investment portfolio. At The Family Office, we design an investment strategy for the client based on a questionnaire that determines risks, liquidity, and the desired time horizon by the investor. We then determine asset allocation and invest these assets in many countries, sectors, and companies. We form a diversified portfolio of strong companies that have cash flows, not unreal speculations with unreasonable valuations.

You cannot have a very high level of safety and very high returns. The ideal way is to make diversified investments that may have a high risk individually but can be decreased with diversification.

We have been reading from the beginning bad news about China, but the country’s economy keeps growing and is today the second largest economy in the world. China’s economy is also expected to surpass the US economy.

When a certain company or sector is affected for a specific period, this does not mean the end of the country’s economy. If we look at the sky and see a black cloud, would we say the sky is black? The news we hear about China is just this cloud, and China and the Asian markets are the promising markets. Even US portfolio managers allocate investments to these markets specifically. China has a very strong economy with a status in the world.

Safe is comfortable, but what is the result of comfort? When savers do not invest their deposits, the bank does. They only benefit if they are shareholders in the bank and will be harmed otherwise. Investment is not a choice. We advise you to start saving early and invest professionally with trusted, regulated investment companies, while avoiding adventure, speculation, and borrowing against your savings. Anyone following these principles will be safe.

We have been telling investors since the beginning and for 17 years that they must accept returns between 6% and 8% to preserve their wealth with minimum risk, and that an average of 7% means that their capital will double every 10 years. Some might borrow from banks and speculate to achieve returns between 14% and 20% per year. The question is, will speculation achieve the same 7% return over 20 years?

We spared no effort from the beginning to find solutions for investors based on the information we acquire when we analyze the economies and markets of the world. We are committed to the duty entrusted to us and we shall persist in our policy. No client has ever invested with us for more than three years and lost even one riyal. This is a duty we shall continue to preserve.

The Family Office follows the same investment process for every investor regardless of their investment amount. We start with knowing clients and their needs through a questionnaire, then offer several proposals and move to implementation that is done in stages to protect the client’s wealth.

It is worth noting that The Family Office is licensed by the Capital Market Authority in Saudi Arabia, the Central Bank of Bahrain, the Securities and Futures Commission of Hong Kong, the Swiss Financial Market Supervisory Authority (FINMA), and the U.S. Securities and Exchange Commission (SEC). Our presence in these markets allows us to evaluate market performance and determine investment opportunities with the best strategic partners to create the right portfolios for investors. We aim to diversify client portfolios into different regions, industries, companies, and sectors worldwide.

Shariah-Compliant Investments at The Family Office

Shariah-compliant investment solutions differ from one company to the other. At The Family Office, 55% of our clients invest in deals that are approved by our Shariah panel.

Outlook for the GCC and the World Following Economic and Investment Transformations

The GCC region is doing well and is blessed with its oil wealth, financial wealth that was amassed over the years, and human assets with 70% of the young generation less than 30 years old. Anyone who visits the region is amazed by the progress year after year. There are challenges of course but the direction is right and the determination huge, and we will keep believing in our youth and investing in them. At The Family Office, we train 10 graduates every year, and will reach 20 trainees in the next period.

Internationally, you cannot predict but must be optimistic and have a written investment strategy that does not change based on moods. In the end, we urge you to partner with the best investment offices and you’ll be fine.

During a webinar held on 6 October, The Family Office Founder and CEO Abdulmohsin Al Omran discussed with Mohammed Albaz, Bahrain Bureau Senior Reporter at Sky News Arabia, rising inflation after the Covid-19 pandemic, investment horizons in the region, asset allocation, etc.


Abdulmohsin AlOmran | A Deep-Dive Into Diversification, Retirement, And Asset Protection In Wealth Management

Emerging Markets Readiness to Weather the Crisis

Although emerging markets were better prepared for this crisis than in previous episodes, they were not prepared enough. They had better access to debt to offset the crisis, higher reserves, and good fiscal policies that allowed them cut interest rates, ensure liquidity and intervene to weather the shock better than previous incidents. But this readiness was hampered by low growth compared to the 1990s and political events.

The growth in the developed world may translate into growth in emerging markets. As exporters of commodities, emerging markets would benefit from a rise in prices in the developed world.

The wide vaccinations in emerging markets enable them to better deal with the pandemic. Herd immunity is achieved sooner than expected.

However, debt in emerging markets increased by 11%, with a 60% average debt to GDP. Debt service burdens these countries.

Debt of Developed Markets vs. Emerging Markets

For the purposes of this analysis, Dr. Bisat excludes from emerging markets the most developed economies, such as China, Korea, Taiwan, Poland, Chile, etc.

Although debt is lower than in developed markets, the debt burden remains heavy in emerging markets as these countries can neither print dollars nor ask their central banks to buy their debt. They resort to companies like BlackRock to buy their debt at high interest rates and returns.

Chinese bonds are attractive as the country can tolerate high indebtedness. Its relationship with the US is clearly changing: the Trump administration thought that by pushing hard enough China would collapse. The approach of the Biden Administration is more systematic and comprehensive, applying pressure on multiple fronts beside trade. Tensions may seem to have eased, but the Chinese are far more wary of the Americans than they were last year.

If we are entering a long period of global growth funded by aggressive fiscal policies in the US and Europe and high spending on infrastructure and manufacturing, we are in a super cycle of commodities. This will affect demand for oil directly.

If this is transient, resulting from reopening, pent-up demand and unsustainable fiscal policies, alternative energy sources will become the driver again and commodity prices will drop.

Dr. Amer does not foresee a 10- year cycle of growth. Eventually, in a year or two, fuel prices will drop.

The following cycle may not constitute a bull market similar to that from 2008 to 2019 despite multiple crises. Inflation remains a serious risk that may burst this bubble.

To simplify the comprehensive, complicated process adopted by Dr. Bisat and his team, they follow a top-down then bottom-up approach.

In the top-down approach, they consider three things:

3- A very strong view of technical arguments  

The bottom-up approach entails studying each country before making a decision. The top three emerging markets are:

The countries that worry Dr. Bisat include Lebanon, Argentine and Turkey.

Delving into emerging markets with certainty is a big mistake. Consider the many possibilities. Be prepared, humble and ready to tackle all scenarios.

Dr. Amer Bisat, Managing Director and Head of Sovereign and Emerging Markets at BlackRock, joined our webinar to discuss the performance of emerging markets amid a high interest rate environment. The session was moderated by Naji Nehme, Chief Investment Officer at Petiole Asset Management AG.

Webinars

Market Insights

Credit Market: The New Equilibrium

General

Economic Trends That Will Shape 2023 And Beyond

General

Back To The 1980s – Re-Emerging Opportunities In Currency Markets

General

Success Factors In Private Market Investments

Market Insights

The Future Of The European Economy Amidst Geopolitical Change

Market Insights

The Endowment Model: The Quest For Return Enhancement And Risk Management

Market Insights

2022 Global Market Outlook: What Should Investors Look Out For In 2022?

Education

Abdulmohsin AlOmran | A Deep-Dive Into Diversification, Retirement, And As…

Education

Dr. Amer Bisat | Emerging Markets Debt In A Rising Interest Rate Environme…