Investors are rapidly losing confidence in the government’s ability to secure a good Brexit deal, according to new data from Assetz Capital’s Q3 Investor Barometer.

The peer-to-peer business lender carries out its Investor Barometer every quarter, a survey of its 29,000-strong investor community.

The Investor Barometer has tracked Brexit sentiment since the start of 2018, and as the UK’s withdrawal gets closer, confidence of a positive outcome to the negotiations has dropped. In Q3, only 10% were ‘confident’ or ‘very confident’ of a good deal. This is down from 20% in Q2 and 21% in Q1.

Conversely, the number of ‘not confident’ or ‘not at all confident’ has continued to rise. The figure hit 90% in Q3, up from 80% in Q2 and 79% in Q1.

The results come following Chancellor of the Exchequer Phillip Hammond warned that a no-deal Brexit would lead to ‘large fiscal consequences’.

Stuart Law, CEO at Assetz Capital said: “Whatever optimism our investors had around the Brexit negotiations is slipping away. The view from the Assetz Capital community is that there’s significant economic pain on the horizon.

“Post-withdrawal, it will be more important than ever that the whole alternative finance industry works hard to deliver for both investors and borrowers. It’s when the economy struggles that growth capital becomes even more scarce. Peer-to-peer lenders must stand up and support the country through this Brexit uncertainty.”

(Source: Assetz Capital)

Gold has long been known as a store of value to help investors weather turbulent financial markets. Below, Shaun Djie, Co-Founder and COO of Digix, explains why digital gold is a forward moving solution for everyone.

In recent years, it has also become far easier for the average individual to buy and sell gold. There are online bullion dealers and high-street shops selling gold, as well as exchange-traded funds for gold, which are effectively investment funds that track the price of gold.

However, while it’s now easier to purchase, the spread between what individuals pay for this asset and what dealers sell it for can be very big. This is especially true for small denominations of gold. Exchange traded funds overcome many of the associated complications of investing in gold but they tend to be more expensive than physical gold because of the inclusion of brokerage and management fees.

But for those interested in investing in gold and getting a better deal for it, the good news is an alternative to owning physical gold and relying on ETFs is emerging – thanks to blockchain technology.

Understanding blockchain’s potential

Blockchains are shared digital ledgers that record every transaction ever made on them. So physical assets like gold can be divided and represented by tokens, and blockchain technology can keep track of the ownership of those tokens.

Gold has become one of the first real-world assets to be tokenised and freely traded on the blockchain. With this comes a level of divisibility that hasn’t been seen before. Emerging gold ownership and trading protocols can ensure that tokens are minted on a proportional basis – so, for example, one token is equivalent to one gram of a physical gold held in a secure vault.

In some systems, the delivered gold is subject to verifications at the point of deposit into the vault, as well as at quarterly reviews by independent auditors. Hence, there should never be more tokens created than the total weight of physical gold bullion backing them.

Simplicity and liquidity

In this way, gold-backed tokens not only bring divisibility but also an easy, reliable and secure way to own and trade gold. Liquidity would increase, which would be good news for current gold investors and any prospective investors who may have been put off by an inability to access small denominations or by the fees that ETFs charge.

For existing investors, more profits from gold can end up in their pocket too. Buying a gram of gold through leading smart asset companies on the Ethereum blockchain costs under US$40, where as the retail price for a 1g bar hovers around the US$77 mark.

That’s because, by removing the physical and administrative costs of creating 1g gold bars, tokenised gold can get as close to the the spot price of gold than any method – regardless of the size of purchase.

Stability that investors can rely on

While these benefits will sound appealing to many investors, some may point to the historical volatility of cryptocurrencies as a sign that they won’t appeal to gold investors’ needs. It’s certainly true that the huge speculative bubble in virtual currencies has led to immense volatility.

However, gold-backed tokens are totally different to existing cryptocurrencies because of the bridge they have to the real world asset. To build confidence in crypto markets, gold-backed tokens are needed. They can also diversify portfolios and be used as collateral for lending and other financial products.

For existing investors, gold forming a central part of the crypto economy would be beneficial, pushing up the demand for the metal even further. These investors have always been able to see the value of their investment in this asset. However, through the tokenisation of physical gold, they can benefit from the liquidity, divisibility and security of these digital assets just as much as entirely new investors can.

New research from eFront shows that while the 1990s might be thought of as a “golden era” for venture capital, returns figures do not back this assumption up.

• Conventional wisdom has it that in the decade 1990, returns of venture capital funds were higher and cash was returned faster.
• The decade 1990 can indeed be singled out for its shorter time-to-liquidity, but not for its higher returns.
• The 1990s recorded an average time-to-liquidity for US early-stage VC funds of 3.62 years, compared with 6.7 years for the 2000s.
• Returns (TVPI), meanwhile, stood at 1.1x for the 1990s and 1.57x for the 2000s.
• The figures for European early-stage funds were similar, with holding periods of 3.7 years and 6.9 years in the 1990s and 2000s respectively. Returns were just 0.96x for the 1990s and 1.56x for the following decade.
• A more detailed analysis shows that there are in fact three successive and distinct periods in the decade of 1990, which marks a transition for venture capital.

Analysis

Were the 1990s the golden decade of venture capital? Listening to veteran investors of that time, it would be easy to conclude positively. In collective the memory, that decade remains associated with high VC fund performance, meteoritic entrepreneurial successes and a certain ease of doing business. Fast-forward to today, and VC fund managers complain today of high levels of competition and high valuations of start-ups.

Conventional wisdom is right on one point: that the 1990s can be singled out. But this is because of a much shorter time-to-liquidity that seen before or since. The 1990s recorded an average time-to-liquidity for US early-stage VC funds of 3.62 years, compared with 6.7 years for 2001-2010. However, overall performance for the decade does not look particularly good, with funds returning just 1.1x, compared with 1.57x for the 2000s. If a few vintage years made a strong impression on investors, the overall decade appears as fairly poor in terms of pooled average total value to paid-in (TVPI).

Figure 1 – Performance and time-to-liquidity of US early-stage VC funds, by decade

Beyond the aggregate figures, a more detailed analysis by vintage years shows that there is a tale of three successive and distinct periods in 1990: one with high TVPIs and short time-to-liquidity in 1993-1996, then one with low TVPIs and short time-to-liquidity in 1997-1998 and a final one with negative returns and long time-to-liquidity in 1999-2000. Therefore, more than a golden decade, the 1990s appear as a period of transition.

The following decade is more consistent over time both in terms of seeing fairly high TVPIs of 1.5 to 2.5x (except in 2001) and a longer time-to-liquidity (4.8 to 6.4 years).

Could this be a US-centric phenomenon? Looking at Figure 3, the answer is negative: the picture is rather similar for Western European VC funds. European early-stage funds saw time to liquidity of 3.7 years and 6.9 years in the 1990s and 2000s respectively, while returns were just 0.96x for the 1990s and 1.56x for the following decade.

Figure 3 – Performance and time-to-liquidity of Western European early-stage VC funds, by decade 

Thibaut de Laval, Chief Strategy Officer of eFront, commented:

“A few exceptional years have marked a decade and an asset class. The venture capital boom years of the decade 1990 have left investors with the wish to see them happen again. The analysis of that decade has shown that indeed it was unusual, not because of overall high TVPIs but mostly due to shorter time-to-liquidity.

“Said differently, the vintage years associated with the subsequent stock market crash have wiped out a significant part the overall outperformance of the decade. In that sense, wishing to return to the ‘golden years’ bears the risk of calling as well for a performance bust. The following decade, still partially in the making, contrasts with the 1990s in surprisingly positive ways.”

(Source: eFront)

Nearly 50% of 2017’s Initial Coin Offerings are currently failing, and one serious factor in this lack of success comes from the lack of trust in a business. Investing in ICOs is risky. Little regulation results in a vulnerability to fraud, and is putting off people from contributing - and rightly so, why would you want to just throw away money?

With that said, ICOs can prove an incredible investment opportunity, with huge potential for growth starting at the pre-sale; and if a potential contributor has trust in a project, there is absolutely no reason for them not to invest.

So how can you earn investors’ trust? This week Tomislav Matic, CEO of Crypto Future, provides Finance Monthly with his top five ways to incite trust in potential investors.

1. Be transparent

One key factor in convincing others of your legitimacy is through being as transparent as possible. Of course, not every detail can be given away, but letting potential contributors understand the inner workings of your company can go a long way to showing them all the work being put into your ICO.

Being transparent develops a unique relationship with investors. Show them you align with legal compliance - you could even go as far as showing off clips of on-site testing; whatever it takes to show the world that you are genuine in your efforts, working hard to make this project a success - it goes much further than you might think.

2. Go social

On average, people spend 116 minutes of their day on social media - just under two hours checking what other people are doing. Only a fool would miss out on this opportunity for both exposure, and a chance to involve future contributors.

Use Facebook, LinkedIn and Twitter - and other social media sites too - to give people regular updates on product details, blog posts, interviews, information; anything you can think of. Frequent updates through a channel that people will be checking regardless go a long way to making investors feel involved in the progression of the project, connected and valued - that extra insight only helps towards bridging that relationship.

3. Introduce your team

By now, contributors feel the platform is safe, they know the inner workings of your product, and they feel involved with the project; it’s time to show them the team behind it. It’s all well and good having a brilliant product, but if you’ve got someone running the ICO who isn’t capable of delivering it, how can an investor trust it?

Roll out the blogs, the interviews, the Q&As, and get their social media accounts active too. Does your CEO have an incredible track record of getting ICOs off the ground? Shout about it. And an inexperienced leadership team isn’t necessarily a bad thing either - you just need to show to contributors why they are in the position they hold.

4. Create an extensive whitepaper

Not everyone will go through the entire whitepaper from front to back, but having a detailed outline of everything to do with your project gives contributors access to any specific information they might need.

Having a strong, comprehensive whitepaper in place allows investors to complete their due diligence at their own leisure. It’s a recurring theme: access to information. The more access, the more allowance you give for trust to blossom.

5. Outlining a clearly defined roadmap

Actions speak louder than words, but if you’re showing future contributors exactly what you’re planning and how you’re going to implement that plan, and then following through on it, there is absolutely no reason for them to believe that you can’t continue in that vein.

Outlining your strategy is a brilliant way of proving that you follow up on promises, and if you can do it before the ICO even starts, even with the smallest steps, investors will be more inclined to put their faith in you once the sale has kicked off.

Building trust is by no means easy, but it is incredibly vital to aiding your ICO’s success. It can without doubt be the difference between an ICO that hits the ground running, and one that flops completely.

The process starts early, and requires a huge amount of time and effort - much like building trust face to face - but the rewards are tremendous.

The biggest risk to stock market investors right now is US Federal Reserve policy error - not a sharp bond market sell-off.

Tom Elliott, International Investment Strategist at deVere Group, is speaking out as financial markets have shown increasing nervousness in recent days.

Mr Elliott comments: “Investors in all assets can be forgiven for fearing a bond market sell-off, given the recent sharp increase in Treasury yields. Higher Treasury yields are likely to lift yields in other core government bond markets, increasing the risk-free rates that other assets have to compete against.

“But if the stock market rally is about to end, is it really going to be because bond investors become afraid of the growth and inflation risks of the strong US economy?

“This is, surely, not realistic given the modest inflation data.

“Fed chair, Jay Powell, has repeatedly made clear his nervousness of reading too much into the recent uptick in US wage growth, and the tightening labour market, which are often considered key determinates for inflation.

“Indeed, it is worth noting not only that September’s hourly wage growth, of 2.8% year-on-year, was actually lower than August’s 2.9%, but also that inflation expectations are broadly stable.

“The Fed’s preferred measure of inflation, the core PCE index, stands at just 2%.”

He continues: “With three more interest rate hikes expected next year, which would take the Fed’s target range to 2.75% – 3%, there is a growing risk not of inflation derailing the U.S economy, but Fed policy error whereby growth is harmed because of an overly-aggressive policy mix.

“This would include not only raising interest rates too fast, but also its quantitative tightening programme that is withdrawing $50bn a month from the U.S. economy, and so contributing to higher bond yields.”

Mr Elliott concludes: “Therefore, the risk to stock market investors comes not from a sharp bond market sell-off which raises the risk-free yields on Treasuries. It is from the Fed ignoring its chair’s own advice and tightening monetary policy faster than the American economy can stand.”

(Source: deVere Group)

As Bitcoin reaches its 10th year since its launch announcement by Satoshi Nakamoto, IW Capital has commissioned a national representative piece of research, from 2,007 respondents, exploring the UK’s attitudes to cryptocurrency as an investment opportunity opposed to traditional and alternative investments.

The data reveals that, fundamentally, Brits do not have enough information or knowledge on the topic of cryptocurrency. In fact, many have no knowledge about the subject whatsoever.

• Nearly 20 million Brits do not understand cryptocurrency at all
• 17.5 million people believe that the cryptocurrency bubble will burst
• Only 7% - 3.5 million - believe cryptocurrency is more valuable than traditional investments (i.e. stocks and shares)

Across the sample of investor and critical mass society, the enlightening body of data unveils the relevance of bitcoin and the wider cryptocurrency arena as an investment opportunity. Launched at a time dominated by the new-age investment form, its momentum filled rise to fame has gained global awareness, today’s research reveals however that the age of bitcoin is seemingly unsupported by the vast majority of money-minded Britain.

Londoner's Value Cryptocurrency Higher than Elsewhere in the UK

A fifth of Londoners believes that cryptocurrencies are more valuable than traditional investments, such as stocks and shares. This is higher than the North East (10%), South East (7%) and Yorkshire and Humberside (5%), which are the following regions that value cryptocurrency more. The South East (29%), Scotland (27%) and the South West (24%) are the largest traditionalists, believing that traditional investments are more valuable than cryptocurrency.

Trial and Error 

Despite a widespread dearth of knowledge surrounding this particular asset class, disconcertingly, one in 20 Brits - nearly three million - have invested in cryptocurrency without fully understanding it, with only 5% having taken advice from a financial adviser when investing in cryptocurrencies.

• Only 5% of those who have invested in cryptocurrency have made financial gains
• 11.5 million have failed to make a financial gain when investing in a cryptocurrency

Old Vs New

More than three times - 12 million - (23%) who have previously invested, prefer to invest in stocks and shares than in any form of cryptocurrency (7%). Equally, three times more prefer alternative investments - 10.5 million - (21%) than to cryptocurrencies (6%).

With only 18% of respondents believe stating that they have an understanding of cryptocurrency, over a quarter of those surveyed - 14 million - (27%) believe that SME investments are a more stable an investment vehicle investment than cryptocurrency and a further 23% value these traditional investments over cryptocurrency. Alternative investments also hold greater weight as over a fifth (21%) believe that they hold more value than cryptocurrencies.
Over a quarter of Britons (27%) hold the belief that cryptocurrencies are a less stable investment than SME investments, however, only 18% agree that they fully understand what cryptocurrency is. Among 18-34-year olds, this rises to a quarter (25%) who believe they fully understand compared to just 13% of those aged 55+.

Luke Davis, Founder, and CEO of IW Capital has responded to the survey results. "With so much advertising and airtime dedicated to cryptocurrencies, particularly over the past 12 months, it is shocking, but not surprising, to see so much confusion around the topic of cryptocurrency. To see that investments have been made without the proper financial advice and a lack of facts is very concerning. With so many high-profile celebrities and business people coming out and supporting cryptocurrency investments, I believe that we will continue to see confusion and a lack of information surrounding them.

It appears to be more accessible to invest into currencies these days, with e-currency and e-trading platforms easily accessible via smartphones and tablets, but there is a lack of information around other, more stable investments, such as SME investments, which can deliver a consistent return when advised upon by a qualified professional. Ambassadors have a responsibility to supply accurate and correct information to potential investments. Many treat cryptocurrency decisions like a bet in a bookmaker, rather than as a serious investment decision like it is.

There is a place for cryptocurrency investment, but there are so many other investment opportunities that are not taken advantage of. My major concern within cryptocurrency investment is the lack of transparency in the investment. There are so many great SME-based investments that have superb tax incentives to build a portfolio upon, but they are undersold against the allure of Bitcoin and other cryptocurrencies as a viable investment for the first-time investor."

(Source: IW Capital)

The estimated 1.8 million British expats living in the EU should consider reviewing their personal financial strategies as ‘no-deal’ Brexit looks increasingly likely, warns the deVere Group.

The warning from James Green, deVere Group’s divisional manager of Western Europe, comes after British Prime Minister Theresa May claimed that a no-deal Brexit “wouldn’t be the end of the world,” as she sought to downplay statements made by Chancellor Philip Hammond.

It also follows the UK government publishing last week its first technical notices advising businesses and consumers on the preparations being done for the prospect of there being no Brexit deal.

Mr Green comments: “A no-deal Brexit is now expected by a growing number of experts and the wider population to be the most likely outcome.

“If the UK crashes out of Europe with no deal in place, the estimated 1.8 million expats living in the EU could be financially impacted in two key ways.

“First, the pound would inevitably suffer and it could fall hard. This would deliver another heavy and serious blow for those who receive UK pensions or income in pounds as the cost of living, in effect, would be significantly more expensive.

“Second, unless there is considerable post-Brexit collaboration between the UK and EU there is a risk that existing payments from British companies, including pension and insurance companies, to those living within the European Economic Area (EEA) could be disrupted or even made impossible. Of course, this would be a major inconvenience to many UK expats.”

He continues: “Against this chaotic backdrop it is prudent that British expats in the EU consider reviewing their personal financial strategies sooner rather than later with a cross-border financial expert. This will help best position them not only to mitigate the risks of a no-deal Brexit, but also to enable them to take advantage of potential opportunities that may arise.”

Mr Green concludes: “Unfortunately, a smooth and orderly exit of the EU is looking increasingly unlikely and this can be expected to hit the finances of many expats.

“They should seek to make their financial strategies ‘no deal Brexit’ proof.”

(Source: deVere group)

The Enterprise Investment Scheme Association (EISA) has released a national and investor representative piece of research, gauging whether the British public and its investors feel that they will be wealthier in a post-Brexit UK, and how they feel the negotiations have gone.

With the date that Britain leaves the EU edging ever closer, the Enterprise Investment Scheme Association (EISA) has launched The Brexit Wealth Index 2018. Based on research conducted across a sample of 2007 respondents - of which - 1,122 were nationally representative investors, the data outlines the wealth creation opportunities available to them post-Brexit. Providing anecdotal and quantitative analysis as to whether the country will be richer after leaving the European Union, the survey specifically questions whether they feel their individual wealth will and has increased after the decision to leave was made.

Three in 10 British investors - 8.75 million - believe that securing a good deal with the European Union will be crucial to their continuing investments into UK SMEs. This is opposed to 5.75 million investors who do not agree that a good deal will affect their investments into SMEs in the future. British investors - 12.5 million of them (43%) - believe that the Government's actions affect their investment decisions more than ever before. This is opposed to four million (14%) who do not believe this to be the case. Moreover, 13 million investors believe that Brexit will not make them wealthier. This amounts to 44% of British investors, versus a fifth (19%) who believe that Brexit will make them wealthier. Of the wider sample, half of British investors - 14.5 million - believe that their wealth has not increased since the referendum decision in June 2016, while 5.5 million do believe that their wealth has increased since the vote to leave the European Union was made.

• 17 million (59%) do not think the Government is doing a good job in securing a deal for the UK’s financial services sector
• 12.5 million (43%) of British investors feel that the Government's actions now affect their investment decision more now than ever before
• 8.75 million (30%) believe that securing a good deal with the EU will be crucial to their continuing investments into UK SMEs
• Half of British investors – 14.5 million – have seen their wealth decrease since the referendum decision
• 13 million (44%) do not believe that Brexit will make them wealthier
• Nearly half (45%) - 13 million – believe that there will be a Brexit deficit which will make the UK poorer after March 2019
• Four in 10 – 11.5 million – believe that the Brexit deficit will make the UK poorer after March 2019
• A third of British investors – 10 million – feel that there will be more opportunities to invest into SMEs in post-Brexit Britain
• Four in 10 – 11.5 million British investors – feel that there will be more opportunity for wealth creation and entrepreneurship post-Brexit
• A third of British investors - 10 million – believe that there will be a Brexit dividend which will make the UK richer after March 2019.

Overwhelmingly, 17 million British investors do not think that the Government is doing a good job in securing a deal for the UK’s financial services sector. Six in 10 (59%) of respondents believe this to be true.

A third of British investors (32%) - 9.5 million – do not believe that there will be more opportunity for wealth creation and entrepreneurship post-Brexit. However, nearly four in 10, (39%) - 11.5 million – do. This sentiment continues as 10 million British investors believe that there will be more opportunities to invest into SMEs in a post-Brexit Britain while seven million disagree.

A third (34%) of respondents believe that there will be a Brexit dividend which will make the UK richer after March 2019. This amounts to 10 million British investors. However, 11.5 million – 39% of respondents – disagree with this. In fact, when asked, I feel that there will be a Brexit deficit which will make the UK poorer after March 2019, 45% of respondents – 13 million – agreed, while just over a quarter (27%) disagreed.

Mark Brownridge, Director General of the Enterprise Investment Scheme Association (EISA), commented on the results of the survey: “It is clear that from this research that British investors feel that Brexit has not made them wealthier to date, and they do not believe that it will in the future either. Moreover, they feel that our Government does not have their back, and in fact, is contributing to the negative sentiment surrounding Brexit. The fact that so many investors feel this way is going to have a knock-on impact on the rest of the country and the economy.

However, there is some positivity, with many feeling that there will be great opportunities for wealth creation, entrepreneurship, and investment into SMEs in a post-Brexit Britain. We must remain optimistic yet cautious, we need to ensure that investors have the confidence to continue to look to UK SMEs as a viable investment, and also ensure that there is enough capital for investors to reinvest back into UK businesses.’

(Source: EISA)

To learn about Environmental Due Diligence, Finance Monthly talks to Alex Ferguson, Managing Director for Delta-Simons Environmental Consultants – a company specialising in Environment, Health & Safety and Sustainability, providing support and advice within the property development, asset management, corporate and industrial markets. One of the firm’s specialisms is providing environmental due diligence services to investment and pension funds, commercial property developers and banks for UK and international transactions. It also supports clients with the environmental aspects for the sale, purchase and development of potentially contaminated land and property.

Environmental due diligence is a now an important part of a broader due diligence process – what makes environmental due diligence so important? In what ways does it increase the value of portfolios/real estate investments?

Environmental liabilities have the potential to manifest in significant costs in both M&A and Real Estate transactions. Costs can take the form of both immediate financial impacts to address liabilities and also in terms of longer-term reputational issues. A programme of targeted environmental due diligence can manage risks and avoid liabilities.

Traditional environmental due diligence is the process that assesses assets for potential risk associated with environmental issues such as: soil and groundwater contamination; flood risk; and permitting and compliance issues.

We are also recognising that there are other emerging issues to be considered as part of corporate M&A and real estate due diligence. At the forefront of these is the concept of Responsible Investment. Responsible Investment explicitly acknowledges the relevance to the investor of environmental, social and governance (ESG) factors and addresses the key elements of value, risk and compliance associated with ESG.

Investors and asset owners are increasingly looking at due diligence that incorporates ESG. We are seeing more investors integrating ESG into their acquisitions – 60% of assets managed for EU investors now incorporate sustainable investment strategies.

Can you detail your typical environmental due diligence process? Which strategies do you employ?

We work with both vendors and purchasers to inform them on potential environmental risk/liability and impact on receipt/purchase price. This is a staged process commencing with a Phase I report but may also include assessment of environmental conditions through ground investigations and other surveys such as flood, asbestos or ecology. We also provide environmental advice to Development Planning professionals on development feasibility and abnormal cost appraisals. ESG advice focusses on reviewing corporate level ESG commitments and advising on the impacts the asset under consideration will have on the wider portfolio performance against ESG criteria.

An important part of the due diligence process is the monetisation of environmental risks. We work with our clients to advise early on potential opportunities to add value.

At Delta-Simons, what are the common challenges you face when trying to obtain information for an environmental due diligence process? How do you overcome these challenges?

M&A deals present a unique set of environmental, health & safety and sustainability risks and liabilities which require rapid and rigorous quantification as part of the transaction process. On average, the due diligence window lasts two to eight weeks (according to the number of people involved and the scale of the deal) and, therefore, a structured process is critical to ensure that effective and focused due diligence is delivered. The key challenge on the acquisition side of the deal is obtaining rapid access to the key data. When working with vendors, we pull together a clear and robust vendor pack to smooth the due diligence process and minimise uncertainty.

Going forward, the challenge is translating Corporate ESG commitments into standard format for investment committees or other decision makers. Working with our clients to ensure that we capture risks and opportunities around corporate stated environmental goals.

More investors are looking to create sustainable properties as investments – why do you think that is?

Strong performance in ESG means better stakeholder engagement, greater operational-savings and higher asset values. The aim for many is now investment in assets that are truly sustainable over the investment period, both in terms of the environment and in terms of business longevity. Our global alliance, Inogen, is a partner of Global Real Estate Sustainability Benchmark (GRESB) so we work closely with GRESB’s objective to provide real estate investors and managers with the tools they need to accurately monitor and manage sustainability performance to prepare for increasingly rigorous environmental, social and governance obligations.

GRESB is an investor-driven organisation committed to assessing the ESG performance of real assets globally. More than 250 members, of which more than 60 are pension funds and their fiduciaries, use GRESB data in their investment management and engagement process, with a clear goal to optimise the risk/return profile of their investments.

Website: https://www.deltasimons.com/

Said markets present anticipated price developments daily, weekly, monthly and yearly, and when scouting for profits, bidding investors will act according to the market sentiment.

If the anticipated price development of a market’s stock is upwards, meaning the value of certain stock is rising or expected to rise, as a consequence of trends, single events, supply materials, current affairs or many other factors, the market sentiment is expressed as bullish. Vice versa, if the anticipated price development is on the downtrend, by any of the same reasons, the market sentiment is expressed as bearish.

It isn’t always as simple as this however. Market sentiment is also considered to be a contrarian indicator. For example, extremely bearish markets may subsequently display dramatic spikes – the turning point for this is often where the risky decision making appears.

Market sentiment, the overall expression of a certain market as bullish or bearish, is normally determined by a variety of technical and statistical methods that factor in the comparisons of advancing & declining stocks as well as new lows & new highs in the market. One of these is known as the Relative Strength Index (RSI); it relates the number of assets bought to assets sold, indicating whether capital is flowing in or out of the market in question. Normally, as a market follows sentiment either way, the flock follows, meaning the overall movement of the market’s stock follows the market sentiment directly. To quote a popular Wall Street phrase: “all boats float or sink with the tide.” The more investors buy, the more investors buy; it’s usually exponential development.

This of course could happen indefinitely, if it weren’t for the fact that as stock trading volumes rise, as does the price. Eventually the price hits a market high and the potential for profits is minimized. At this point the fall to a bearish market usually comes to fruition. On the other hand, as trading volumes fall, prices go down, to the point where eventually the price is so low it would be foolish not to buy, therefore turning the market on its head.

As obvious as it may seem, the words bullish and bearish reflect exactly what you would expect and are not simply paraphrases. An optimistic investor, happy to buy, buy, buy as the market sentiment is bullish, is considered a bull; aggressive, optimistic and almost reckless, striking upwards with its horns. Equally a bearish investor is considered a bear because he or she does not trade without utmost consideration, he or she is pessimistic towards trading expectations and believes prices will fall, or fall further than they already have. The bear therefore decides to sell, sell, sell, and pushes the prices down; as a bear that strikes its paws to the ground.

Make sure you check one of our top read features ‘The Top 10 Greatest Stock Market Trades Ever’.

In the past year MIFID II has enticed change and development across the financial markets and research sector. Here Fabrice Bouland, CEO of Alphametry, analyses said change and the impact it has had on innovation.

Six months in and MiFID II research unbundling regulation has appeared to create an even worse market for investment research than we had previously. With many commentators decrying the ‘unintended consequences’ of the new legislation – namely bringing the research market to a grinding halt as asset managers assess their needs and sparking a price war which has all but crippled smaller, niche research houses – one might wonder if there is anything positive to say about the impact of MiFID II on the research market and whether anything which can be done to revive it?

In truth, MiFID II has ultimately shown us the historical ambiguity investment managers have always had with research. There has never been an easy way to answer fundamental questions like ‘what research is needed’, ‘how much should we pay for it’ and ‘how do we measure the value’. This lack of structure has been pulled well and truly into the spotlight under the new EU regulation, as well as the financial services sector’s slow take-up of new technology to answer these questions.

Thanks in some part to the new regulation, active management might be at a historic turning point. The progress in investment technologies is about to experience a quantum leap forward plus the expected deluge of new alternative data will unleash an unprecedented potential. R&D and new technology must play a leading role in this and MiFID II can claim credit for creating this opportunity to innovate.

Time to innovate

From a buy-side perspective, research providers need to adopt entirely new strategies to survive.

In the past six months, we have seen two developments. Firstly, Tier-1 providers are pushing content exclusively on their websites. This is a step back from a user experience perspective as remembering numerous passwords is impractical for portfolio managers to the extent that some have cut providers which do not provide easy access to their portals. Distributing research via aggregators or marketplaces in order to reach the maximum number of channels is another option in today’s market. This could be applied to any type of research or data, in whatever format, for the easier and faster use of the portfolio manager.

The second innovation we are starting to see is from research providers who, in response to plummeting prices, are reducing the number of analysts and opted for more automated production. Commerzbank is one provider which is experimenting with artificial intelligence to see if it can write basic analyst notes automatically to trim research costs.

Alternative research and AI

With regulation forcing active managers to value their historical research franchise, it’s become clear that research has barely evolved whereas the world of investible assets has changed dramatically. Factors affecting a company’s valuation go way beyond the simple analysis of its financials or strategy.

The rise of alternative datasets which cover a wide range of digital inputs from social media to credit card data, are becoming increasingly valuable to asset managers. In many ways, the rise of alternative data is one of the first manifestation of how research is changing for the better under MiFID II.

Similarly, the research product may no longer be exclusively research reports but also the technology layer which is able to extract intelligence from them automatically, quickly and at scale. Since the buy-side has always heavily relied on the sell-side when it comes to technology, most active investors are stuck in a technological gap. Capturing and processing a more and more sophisticated and voluminous information resource seems the way forward.

Is MiFID II helping or hindering innovation in financial markets? It already seems that asset managers are considering how tomorrow’s technology is affecting today’s research – let’s hope the speed of implementation can match the exponential changes in data volume and value which we are seeing in the wider world.