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A constant balancing act. (Special Advertising Feature: Wealth Management).

In private banking and international trusts, your research is the key

Nelson Ramirez

President of Stanford Trust Company Limited

The demand for institutions and services that work to protect assets is always high among individuals who would like to see their wealth preserved. History supports this, and it's the reason why private banking and international trusts have been around for many years. As long as there's wealth to protect, there will always be a place for private banking. Removing any time restriction for this necessity, the question then becomes who, not when. To whom should the potential client turn for private banking and international trust services? What criteria should be used in determining which private bank or international trust company provides best for clients' needs?

Safety and Stability. Conduct as thorough an investigation as possible prior to making a decision. Choosing an institution that has a history of stability and financial strength, as well as respect for the privacy of the client and the sanctity of the client relationship, are sound guidelines during this process.

Physical Presence. Seeing an actual working operation, or just knowing that a physical premises is available for your review at anytime, is an effective indicator that your assets would remain safe and secure.

Conservative Approach. In either a private bank or an international trust company, a conservative approach is preferred. Clearly, we invest in order for assets to grow, but working to maintain value and using strategies to grow assets conservatively is a hallmark of an established and competent financial institution.

Hedge Fund Risks and Returns

R. McFall Lamm, Jr., Ph.D

Chief Investment Strategist

Deutsche Bank Private Banking, New York

In today's challenging investment climate, significant allocations to hedge funds are still appropriate, although investors need to be highly selective in their strategic choices. It is a mistake to assemble eclectic hedge fund portfolios that ignore the benefits of strategy diversification or ignore the benefits of professional risk management techniques.

The advantages of hedge fund investing are now generally accepted by the vast majority of private investors:

* Hedge funds are a distinct asset class that offer superior risk-adjusted returns versus stocks and bonds. Our internal studies show that adding hedge funds to stock and bond portfolios can increase returns 2 percent for the same overall risk.

* The correlation between hedge funds and other assets is low. Thus, hedge funds offer diversification benefits.

* Hedge funds generally offer downside protection and absolute returns.

Most investors are also aware that hedge fund portfolios need to consist of at least 15-20 managers broadly diversified across strategies. In addition, most investors believe that hedge funds should constitute 15 to 25 percent of invested assets or more, depending on risk tolerance and objectives.

However, recent developments have brought into question the accepted principles of hedge fund investing. First, and most important, there are concerns that massive fund inflows into the industry are challenging the performance of some traditionally successful hedge fund strategies by arbitraging away profit opportunities.

A related issue is that incoming money is going to new managers without adequate track records who may not produce the same results as their more experienced peers. In fact, hedge fund returns appear to be in a long-term downward trend. Last year's average industry return of 4 percent was very low by historical standards.

To achieve superior performance, rigorous professional hedge fund portfolio management will be necessary. One way to obtain professional management is via investing in a fund-of-funds (FOF) portfolio, where large institutional managers provide professional strategy allocation and in-depth research, as well as ongoing monitoring and reporting. Already, nearly 20 percent of hedge fund assets are managed via FOE vehicles, and this share of assets appears set to increase further in the year ahead.

In the future, large institutions that have deep resources and access to quality hedge fund managers will become increasingly dominant in this industry, bringing an every greater array of products needed to satisfy investor needs.

Investing Strategies for 2003

Leonel Narea

CEO, Coutts (USA) International

Miami, FL

In the late 1990s, an investment in the U.S. stock market might have generated returns of 20 to 30 percent. In 2002, the continued weakness in corporate profits, investor distrust and international uncertainties have resulted in a serious market decline.

Looking ahead to 2003, it is essential for individual investors to have realistic expectations about the equities market, which will continue to be highly volatile. While fixed-income securities, such as U.S. Treasuries, are much safer, they offer a relatively low return on a historical basis.

In order to maximize returns in the coming year, investors will need to accept a certain degree of risk. That means investing in equities in market sectors that have above-average prospects for growth, such as in the defensive industry, like consumer goods, for example. But the best result is likely to be "normal" growth and profit expectations -- certainly not double-digit returns.

Hedge fund products, which benefit from short-term movements between two types of assets, offer another investment option. In an uncertain equities market, hedge funds can generate an attractive return without incurring needlessly high risks.

In considering a hedge fund investment, diversification is an important factor. Rather than focusing on just one market or fund manager, a multimanager hedge fund can provide a balance between different assets and varying investment styles.

In a volatile investment climate, hedge fund products that are well constructed and based on sound investment parameters tend to outperform the equity markets. The same strategy may hold true in 2003.

U.S. Investments and Obtaining Immigrant or Non-Immigrant Status

Roy Barquet

Partner, Steel Hector & Davis, LLP, Miami

By carefully structuring their investments, Latin Americans can enjoy the lifestyle and security advantages associated with U.S. permanent residency or long-term non-immigrant status. But sound legal advice and careful financial planning are essential for any investor seeking either immigration status.

Two types of employment-related investment visas are available to foreign investors. An immigrant investment visa, commonly referred to as an "EB-5" visa (employment-based immigrant visa preference number 5) is considered most desirable and is the most difficult to obtain. This immigrant visa requires an investment of $1 million or more in a U.S. business that employs at least 10 people. However, the U.S. Immigration and Naturalization Service (INS) is notorious for denying these visa petitions.

A more readily available and commonly employed option is the non-immigrant visa (E-2) for "treaty" investors. This visa is available only for residents of Latin American nations, such as Colombia and Argentina, which have signed enabling treaties with the United States. The E-2 visa is issued for as long as five years, can be renewed indefinitely, and applies to the investor's spouse and children.

The principal requirement of the E-2 visa is an equity, at-risk investment in an active U.S. enterprise that produces a product or service. Passive investments in the stock or real estate market do not qualify. The level of required investment varies, but generally involves 75 percent of the capital required in a venture of $500,000 or less. The investor's required equity percentage gradually declines for larger businesses.

For Latin Americans, the E-2 visa offers more flexibility. Investors can select a manageable investment in a commercial activity of their choice. Invested funds can be used to purchase an ongoing business or to create a new one. The investor must control at least 50% of the equity stock of the company. There is no "magic number" when it comes to assessing whether sufficient dollars have been invested in a company. INS requires only that the level of funding be sufficient for the commercial activity. For instance, a Latin American could purchase a beauty salon in South Florida for approximately $50,000.

A third option, and the most commonly used residency vehicle, is the L visa, which involves an intracompany transfer. The L visa permits a foreign company that has been established abroad for at least one year to open an affiliate office in the United States. Once the U.S. office has been established, the foreign company can transfer to the United States an executive/manager or specialized worker. The executive/manager visa beneficiary can later apply for residency with his family once the U.S. and foreign company demonstrate continued commercial activity and viability.
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Title Annotation:Stanford Trust Company Ltd.
Comment:A constant balancing act. (Special Advertising Feature: Wealth Management).(Stanford Trust Company Ltd.)
Publication:Latin Trade
Geographic Code:1USA
Date:Nov 1, 2002
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