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Wealth Management
World View
Florida wealth managers are betting on oversea markets.
Jim Grinney
Senior vice president, Florida
Northern Trust Bank, North Palm Beach
Assets under management: $30 billion (Florida)
Minimum investment: $1 million
Recommended international allocation: 19% to 22% (18% to 20% in developed countries and 1% to 2% in emerging markets)
Sectors he likes: » Infrastructure — In emerging countries like India, there’s a need for roads and other infrastructure. But even in developed countries, infrastructure needs to be replaced. Grinney likes General Electric and Dutch steel company Arcelor Mittal. » Consumer products — Companies that offer consumer products to countries such as China, where middle-class incomes are growing. McDonald’s and Pepsi are two examples.
Broad market exposure: Grinney uses Northern Trust’s proprietary international funds as well as the iShares MSCI Emerging Markets Index (EEM) and the IShares MSCI EAFE Index (EFA).
Andrew Mehalko
Chief investment officer
GenSpring Family (an affiliate of SunTrust), Palm Beach
Assets under management: $10.5 billion
Minimum investment: $10 million
Recommended international allocation: “A little over 20%”
Markets he likes: » Europe — Companies large and small are shedding non-core businesses and outsourcing labor to Eastern Europe, says Mehalko.
» Russia and the former Soviet countries — Mehalko says GenSpring has a small exposure there, but, “There are underlying industries or sectors that no one is paying attention to.” Instead of oil and energy, he is looking at companies that focus on Russia’s basic infrastructure needs — things like rebuilding power grids. He’s also looking at financial companies that could benefit from Russia’s mortgage industry, which is in its infancy, and the more established banking system in places like Kazakhstan. Mehalko says he prefers small, private companies in Russia. » Japan — Four years ago, GenSpring targeted 40 to 60 companies that were trading below their net cash value. “Since we’ve been invested there, we’ve doubled our money,” says Mehalko, adding that the overall Japanese market did nothing over the same period. Going forward, Mehalko likes Japan and Korea.
For the long term: > China — Too much capital is flowing into the market right now, says Mehalko, who adds that GenSpring has “a little bit of exposure” there. But, he says, “Long term, it’s a great opportunity.”
Markets he doesn’t like: » India— “They have a lot of problems,” says Mehalko, noting that there is so much bureaucracy that nothing gets done. Also, he says that although we hear about well-educated Indians, many of the people are uneducated. “The infrastructure in India is not good.”
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Vice president
Merrill Lynch, Tampa
Minimum investment: $500,000 in investible assets
Recommended international allocation: Varies with client’s situation and comfort level
Markets Merrill Lynch likes: » Brazil and central Europe — Key sectors in those areas include basic materials, telecom and utilities. » Europe —
Howarth likes oil and gas, personal household (consumer) products and healthcare.
Economic impacts: If the U.S. economy falls into recession, Taiwan, South Korea and Mexico would suffer while Russia, Brazil and central Europe would prosper, Howarth says. If there is a commodity shock, such as an oil field explosion or disruption from a hurricane, Russia, Brazil and central Europe would suffer because there would be demand for oil and resources, but those countries have less access to capital and might be unable to meet demand. In a credit, or liquidity, crisis, cash-poor countries such as Turkey, South Africa, Hungary and India would suffer while cash-rich countries including China, Malaysia and Taiwan would prosper.
