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Farringdon to open new office in Labuan and appoints a new CEO

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Over the past 11 years, we have amassed a client bank of well over USD1 billion across our offices and with a recent addition of Dubai, we are now proud to announce our new set up in Labuan.

Labuan FSA announced at the beginning of 2019 that all companies registered in Labuan, will need to maintain an office and staff in Labuan or face changes to the way they are taxed and monitored.

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Stuart Yeomans Now CEO of Farringdon Asset Management (Dubai) stated that “Although we are moving and setting up a physical operation in Labuan, we will still maintain our offices in Kuala Lumpur. We have made some changes to the office and are happy to announce Daniel Carnie will replace me as the new CEO of Farringdon Asset Management (Malaysia: Formally – Farringdon Group)

Daniel has been working under myself for over 8 years and is 100% ready to make the big step into becoming the new CEO and to run his new office. There is no end to changes to our industry and even this week we have been informed by clients that competitors are saying we are closing our door. It just goes to show that no matter what you do; like expand into Singapore and Dubai, then into Labuan, not to mention break the USD1 billion barrier, there is always a way in which our industry twists things. These types of rumours are exactly why we need someone knowledgeable at the top and Daniel is the right man for the job.

Daniel commented that “It makes us glad that we made the move to asset management and have expanded the team significantly to ensure that client assets are managed correctly.

Our main aim now is to focus on managing current clients and we are not focused on dozens of sales people; we are now strongly working from referrals and introducers and no longer need to focus on a core sales team. This is good news for prospects as we see the curtain coming down for these heavily sales driven teams as opposed to selecting the lowest cost investments that perform and working from referrals.

The office has gone under some recent restructuring to ensure that in the long term it is viable; we have new introducers that pass us business that they can’t do anymore, and we are always on the look out for good quality consultants. We are specifically after people with USD10 million in AUM to join and we have the correct set up to ensure that they are looked after correctly.

New members of our team will have an existing book that our asset management team can assist on lowering fees for the end client, whilst getting them better performance. This really is possible with our knowledge and because we control a relatively large AUM we can get better deals than most companies.

Stuart closed by saying that people will be surprised that very soon, we are on target to exceed US$2 billion under management this year which will make us one of the dominant players in the offshore wealth space in the world.

Market Wrap 2018

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The past year has officially been the worst year for investments since 2008 and it was capped off by the worst December since 1931. Despite strong economic and job performance from most major economies, markets have been thrown off balance by the actions of Donald Trump and his interactions with the US Federal Reserve as well as his ongoing trade battles with China and now his shutting down of the US Federal Government. However, as we enter 2019, there is cause for optimism and markets have already begun to rise substantially in the first week of 2019.

The Federal Reserve

Donald Trump brought in Jerome Powell to replace Janet Yellen at the Federal Reserve. Trump’s original intention was that Powell would go easier on interest rate rises than Yellen had previously done. However, almost as soon as he took over at Fed, Powell began to raise rates sharply and unwind the long-standing QE assets held by the Federal Reserve at a rate of $50 billion per month. Donald Trump has responded by describing the Federal Reserve as one of Americas biggest enemies. This spat culminated in the Federal Reserve once again raising rates in December against all expectations of the market, which is the principal reason for the sell off in assets at the end of the year and the reason for equities experiencing their worst December in 87 years.

Quickly realizing the folly they have created, Jerome Powell came out on the 4thof January and issued a statement stating that the Federal Reserve will respond flexibly to market conditions and may consider halting the unwinding of QE. The Fed did much the same in 2013 and 2016 following the so-called Taper Tantrum. This has been the principal reason behind the rally of early January.

Oil Prices

Oil Prices were sent significantly lower in the last quarter, again by the actions of the Trump administration. In expectation of harsh sanctions to be imposed on Iran, key producers in Saudi Arabia and Russia had substantially increased production to make up the short fall in global crude supplies once Iranian production was removed. In the traditional Trump style at the very last minute almost all countries that purchase crude from Iran were awarded exemptions from sanctions by the US to continue doing so. This left a massive over supply in the market. It is unlikely that the Saudis and Russians will be fooled again and will likely refuse production increases next time Trump threatens sanctions on Iran.

China

2018 saw US equities loose as much as 10% at the start of Trump’s Trade war with China. While US Equites recovered in the middle of the year they have fallen again. Much of this fall has been led by Tech companies such as Apple who have seen production costs rise and have also experienced drops in sales in China. Chinese equities have dropped by as much as 40% in 2018 in Foreign Currency Terms. Trump and Xi Jinping have now met in Argentina and had what were described as very productive talks. The Chinese are already making trade concessions but it’s open to debate if this is enough to change Trump’s policy on Tariffs.

US Government Shutdown

The Republican Congress refused to approve $5 billion in funding for the Trump wall with Mexico. The New Democratic Congress is also continuing to hold to the same position. This has led to a shutdown once again in the US Federal Government with 25% of Federal staff going unpaid. While this in itself is insufficient to send markets into a downward spiral it all added to the negative sentiment at the end of the fourth quarter.

Moving Forward 2019

The drops in markets across the fourth quarter have to a certain extent removed much of the risk of an inflationary bust in the world economy that may have happened in late 2019 or early 2020. Central banks are likely to pull back on interest rate rises and countries like China look set to begin full-on stimulus again. The first quarter of 2019 will remain volatile, however there is now substantial room for growth in investments this year. Historically, bad years are always followed by good years in the stock market and many markets from China’s Shang Hai composite to the UK’s FTSE 100 are at their cheapest valuations in years.

Week 46 In Review – US Tax Bill Clears First Legislative Hurdle

 

 

 

 

 

 

 

 

 

  • GOP tax bills passed by House, Senate committee
  • Japan economy expands for 7th quarter
  • Eurozone reports solid growth, inflation pace slows
  • ECB warns economy still reliant on stimulus

 

Global equities edged slightly lower this week amid an uptick in volatility. Yields on benchmark US 10-year Treasury notes slipped 3 basis points, to 2.35%, while the price of a barrel of West Texas Intermediate crude oil fell about $1 to $56.10. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), rose to 11.60 from 11.10 a week ago, but traded as high as 14.5 at midweek.

 

MACRO NEWS

 

US House passes tax cut; Senate bill passes committee

The US House of Representatives passed its version of the Republican tax bill by a vote of 227–205, with 13 Northeast Republicans, angered by the loss of tax deductibility of state and local taxes, voting no, along with all the Democrats The Senate Finance Committee passed its version of the bill late Thursday, with the full Senate expected to vote after the Thanksgiving holiday.

If the Senate passes its version, the differences in the two bills could be ironed out in a conference committee before a final vote. GOP leaders hope to complete the process by Christmas, though it could linger into early 2018 if the two versions of the bill cannot be reconciled quickly.

 

Japan growth streak continues

Japan reported its seventh consecutive quarter of growth in the third quarter, the longest streak in more than 15 years. The economy expanded at a 1.4% annual pace last quarter, down from a growth rate of 2.6% in the April–June period. Rising exports were the main contributor to growth, the government reported.

 

Eurozone maintains solid growth

Europe is experiencing the fastest growth rate in a decade, rising 2.5% year over year, which is a faster pace than the 2.3% US rate. The United States, however, experienced stronger growth in Q3 than the Eurozone. While growth is solid around the world, inflation remains below central bank targets.

Eurozone core inflation rose a scant 1.4% in October, well below the European Central Bank’s target of near 2%. Growth in the United Kingdom was more subdued than on the continent, coming in at 1.5% annually.

 

ECB’s Draghi: Robust recovery reliant on stimulus

Europe’s economic recovery is robust and the fall in unemployment has been remarkable, European Central Bank president Mario Draghi said on Friday, but inflation is not at a point where it can be self-sustaining without stimulus.

 

Venezuelan bondholders in limbo

Venezuela and state-owned oil company Petróleos de Venezuela (PDVSA) were declared to be in selective default by the three major credit rating agencies this week. Meanwhile, Russia agreed to restructure nearly $3.2 billion in Venezuelan debt, while China said it has confidence that Venezuela will be able to properly handle its debt issues. In an effort to assuage bondholders’ concerns, PDVSA reportedly this week made an $80 million interest payment that was due on 12 October.

 

May’s continued leadership in focus

UK prime minister Theresa May’s continued leadership of the Conservative Party was called into question last weekend as the Sunday Times reported that 40 members of her party have agreed to sign a letter of no confidence. Forty-eight signatures are needed to spark a leadership vote.

May’s grip on power remains tenuous, but with no obvious replacement waiting in the wings she may be able to hang on to her post as the Brexit process unfolds.

 

EARNINGS NEWS

 

Earnings growth faster for multinationals


According to FactSet Research, companies who make more than 50% of their sales outside the US showed much faster earnings growth in the third quarter than companies whose overseas sales come in at less than 50%. For the S&P 500 Index as a whole, earnings growth is running around 6.1%. For companies with the majority of their sales outside the US, that figure jumps to 13.4%.

Companies whose sales are mainly inside the US saw their earnings grow just 2.3%. The revenue story is similar. Those with greater sales outside the US saw Q3 revenues jump 10% year over year, while those with mostly US sales rose 4.2%. The technology and energy sectors, with their heavy global exposure, were responsible for much of the out-performance, FactSet said.

 

The Week Ahead

 

 

 

 

 

All the best and have a great week

Stuart

CEO

Farringdon Group

+60 3 2026 0286

QROPS Factsheet

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QROPS stands for Qualifying Recognised Overseas Pension Scheme. These are non-UK schemes that have been declared to HMRC which then fit the QROPS criteria and should be recognised as such.

Living offshore and transferring a UK pension offshore can possibly help an individual to avoid paying higher tax rates than if they stayed or kept their pension in the UK.

On the 6th April 2006 also known as A-Day, the British government bought in sweeping changes to the pension system affecting anyone with a UK Personal or Corporate Pension.

The idea was to simplify the hugely complex system for UK personal and corporate pensions and to relax the rules governing how much and how we pay money into pensions schemes. The new rules apply to all personal and employer paid pensions, bringing them all into line for the first time.

Pension A-Day changed the way that you can draw your pension and the date at which you can receive the benefits forever, below you will see the fundamental differences between UK resident pensions and a QROPS.

UK Resident Pension

  • You are now able to draw part of your pension from a company scheme when you are still working full or part time for the same employer.
  • UK Residents – Many pension schemes now offer pension commencement lump sum, meaning you can take up to a quarter of your pension as long as it is less than 25% of your lifetime allowance. This was originally £1.8 million up until 2012, lowered to £1 million on 6 April in 2016.
  • From 2010 the minimum age for receiving your pension increased from 50 to 55.

In a case when a non-UK resident has a UK source of income or receives payment from a UK Registered Pension this person is obliged to pay UK tax at marginal rate, unless there is a Double Tax Agreement with their country of tax residence and the UK offers exemption from UK tax on such income.

QROPS

As mentioned earlier QROPS offers an opportunity to improve an individual’s tax position on their pension. I would like to now share with you who is eligible to apply for QROPS and what kind of benefits you may gain.

  1. Any person who is planning or already retiring overseas and becoming resident in a foreign jurisdiction or country for five years or more.
  2. Furthermore, in order to get benefits from QROPS, an individual does not have to leave the UK forever. An individual can continue his/her visits to UK, but must stay as a non-tax UK resident.

Below are the main fundamental points about QROPS:

  • You can consolidate all of your pensions into the same account and reduce your fees
  • Currently you are able to take up to 30% commencement lump sum in Gibraltar & Isle of Man at aged 55 and currently 25% in Malta.

However, if the QROPS contains UK tax relieved pensions funds and the member is UK tax resident, or has been UK tax resident at any time inside the previous five full complete and consecutive UK tax years, the maximum lump sum is limited to 25%

  • You can potentially draw down up to 150% of GAD each year, depending on your jurisdiction – Or flexible drawdown in Malta
  • A QROPS member is not subject to death tax if he dies after the age of 75 and has lived out of the UK for 5 full tax years, while UK resident is liable to a flat rate tax charge of 45%.
  • You can possibly withdraw monies tax free from a QROPS depending on jurisdiction or at a lower tax rate.
  • You have access to thousands of investments, as opposed to a limited number at present
  • You have complete control with regards to currency

There are various QROPS jurisdictions for investors and the best location for transfers depends on the result each individual is looking for. Most common jurisdictions for QROPS are Malta, Gibraltar and Isle of Man.

The fiscal laws vary from one jurisdiction to another, therefore the key point in choosing jurisdiction is the future location for retirement.

I would like now to compare the key features of these jurisdictions.

  Gibraltar Malta Isle of Man
Investments Flexible Flexible Flexible
Retirement Age 55-75 55-75 55-75
Pension Commencement Lump Sum 30% 25% 30%
Income Basis 150% of UK GAD Rates Flexi-Access Drawdown 150% of UK GAD Rates
Income Tax 2.5% Up to 35% 20%
Full Double Taxation Agreements 0 60+ 9 in force
Death Benefits Pre- age 75 100% lump sum or dependent’s pension 100% lump sum or dependent’s pension 100% lump sum or dependent’s pension
Death Benefits Postage 75 100% lump sum or dependent’s pension 100% lump sum or dependent’s pension 100% lump sum or dependent’s pension

As you can see, Malta relies heavily on its extensive range of Double Tax Agreements (a full list can be obtained from the Maltese Financial Services Authorities. http://www.mfsa.com.mt/pages/viewcontent.aspx?id=196.

Unlike Malta, Gibraltar does not have an extensive range of Double Taxation Agreement and instead applies a flat income tax of 2.5% on income payments from a QROPS. The Isle of Man is similar to Malta as the income tax rate is dependent on whether there is a DTA in place with the country the individual is tax resident in when he draws an income.

As it can be observed QROPS is a complex system where regulations vary based on the jurisdictions, however circumstances change and you are able to switch to a more suitable jurisdiction if required. Furthermore, not everyone will take advantage from transferring their pension funds overseas.

Farringdon Group and their team of expert advisors can assist in pension valuations and whether it is beneficial for you to move a pension offshore and we are always happy to discuss this with you further.

 If you need any assistance please contact us at syeomans@farringdongroup.com

I hope that you have enjoyed reading this post.

Stuart Yeomans 

CEO

Farringdon Group

Kuala Lumpur : Malaysia

 

Sterling Volatility

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The pound fell to an eight-week low today while the cost of hedging against big swings in its exchange rate against the euro over the coming month hit a record high, this happens with 48 hours remaining on Britain voting whether to remain in the European Union.

Betting markets suggest the possibility of the option to remain in the EU is high but some recent polls have shown a lead in the Brexit option, causing anxiety amongst investors.

The “volatility index” – a measure of investors’ uncertainty – has hit levels last seen in the 2008 financial crisis.

The pound was down 0.2% against the dollar at $1.4226. Against the euro, sterling was down 0.6% at €1.2605 and weakened by 1 % against the Japanese yen to just over 151.

A senior analyst at IronFX Global, Charalambos Pissouros expected that incoming polls would move the pound more aggressively than before. If the new polls continue to show a tight race between the two campaigns as the voting day approaches, resulting in even more uncertainty and thus, volatility in sterling is likely to heighten further.

Hedge funds and asset managers are increasingly seeking to protect their exposure to UK markets through derivatives.

Data suggests speculators are adding to bets against the pound with short positions at their highest in at least three years.

A lot of analysts reckon a vote to leave the EU on June 23 would jolt Britain’s economy and send sterling tumbling by 15-20%, while a vote to stay would be likely to drive the currency sharply higher.

The Brexit issue has dominated the market since late last year, driving a decline of more than 10% in sterling on a trade-weighted basis between the middle of November and the middle of April.

The equivalent sterling / dollar one-month implied volatility rocketed to 28.15 percent, close to its 2008 peak of around 29 percent.

I hope that you have enjoyed reading this post.

Stuart Yeomans 

CEO

Farringdon Group

Kuala Lumpur : Malaysia