Raj Dhaliwal had high hopes for Texas’ famous hospitality while getting the inside track from some of the state’s biggest players... and she wasn’t disappointed!
The last time I was in Texas was in 2018, when I caught up with wealth managers preparing clients for a changing market environment. A year on, and the themes of unpredictability and uncertainty that were pervasive in 2018 were still dominating this time around. But they say everything’s bigger in Texas, and when it comes to optimism and resilience amid shaky market conditions, they may have a point.
I touched down in Houston and headed to the offices of US-registered broker-dealer Actinver Securities to meet with its president Xavier Maza.
The wealth management firm, a subsidiary of Corporación Actinver in Mexico, manages $2 billion in assets and has Pershing as its custodian. Actinver services both institutional and private investors, with a focus on international wealth management as only 15% of its clients is domestic.
In total, it has 15 international advisors between its Houston and San Antonio branches, and another eight in Argentina.
Maza joined the firm in 2004 after 12 years with GBM, one of Mexico’s biggest broker-dealers, and oversees the firm’s investment strategy. It was under his leadership that the firm launched Actinver Wealth Management in 2007 and made its move into the advisory space.
Along with his colleague Cristal Valdez, who he recently hired from JP Morgan in San Francisco to help with the manager due diligence process, Maza builds and runs the firm’s three in-house model portfolios: conservative, moderate and aggressive risk profiles.
As capital preservation is the primary concern for most of their clients, and they already incur risk by having their businesses abroad, most opt for the conservative model. Maza said that clients gravitate toward unconstrained funds within their portfolios as they are focused on performance over time, rather than short-term gains.
Typically, he looks for a portfolio manager with a process that makes sense, as the manager has discretion over the asset allocation within the fund. While a proven track record is an obvious necessary criterion, Maza said: ‘A great track record tells us that we should have invested in that fund three years ago. We are looking forward to how the fund will perform in the next three years. What about the manager’s process sets them apart?’
In addition to its three model portfolios, Actinver also has two proprietary funds. The first is an in-house fixed income fund and the second is a fund of funds, which is managed by Morgan Stanley Investment Management.
The following morning, I woke up bright and early to drive from Houston to San Antonio to meet with Isidoro Korngold, chairman of Intercontinental Wealth Advisors (IWA).
Korngold (pictured above) and his partner, John Kauth, founded their first company together in 1981 to offer financial services to international clients with whom they had preexisting relationships. Those early relationships established the framework of their current service-oriented philosophy: ‘Engage clients on a personal level to understand where they are today and where they want to be tomorrow,’ he said.
Today, IWA together with its affiliated broker-dealer Intercontinental Asset Management Group manage $1.3 billion in assets utilizing Pershing as its custodian. Approximately half of those assets belong to international clients that include high-net-worth individuals and families, corporations, institutions, foundations and endowments.
‘We use the Markowitz modern portfolio mathematical framework to understand the historical portfolios that have provided the best risk-adjusted returns. We then overlay the historical analysis with an investment outlook of these variables based on the time horizon at hand,’ Korngold said.
IWA has an investment committee responsible for aiding in the asset allocation process and in the selection of investment vehicles for all of the asset classes. The committee of eight, led by executive vice president Alfredo La Rosa, takes an agnostic view of vehicle structure and investment strategy.
Ultimately, the decision of which strategies are selected depends on the client’s individual needs and objectives. However, the committee has developed an in-house quantitative grading tool (Vehicle Selection Grid) in order to rank vehicles and create a priority list of strategies for every asset class.
Each strategy is evaluated on four different criteria and given a quantitative score: the value proposition of the manager, the historical risk-adjusted performance, the quality of service and the structural strength of the company. The investment committee will then review the quantitative scores on a quarterly basis and rebalance their portfolios as needed.
Last but certainly not least, I caught up with Tomas Esteve of GEF Financial, a Bolton Global Capital affiliate based in San Antonio.
The firm was founded by Flavio Gonzalez, Esteve, Ricardo Filizola (pictured left to right) and Xavier Montemayor in 2008, with all four of them having previously worked at Merrill Lynch. They first left the wirehouse in order to pursue a venture with a regional bank in southern Texas. After exploring various opportunities, they decided to join Bolton, which showed an interest in the type of business they wanted to pursue and was open to all of their suggestions.
As it turned out, they were one of the first teams catering to international clients to join Bolton. Esteve highlighted another advantage of working with Bolton, which is the support offered through the in-house research webpage Bolton Connect. This database grants them access to Value Line reports, Bloomberg’s insider guide, Morningstar reports, Bank of New York Mellon’s investment guide and much more. Apart from Bolton Connect, they gather research from Trustnet and Thomson Reuters to help choose the best in class funds for each sector.
Although Latin American clients are typically fixed income oriented, Esteve believes that bonds hold more structural risk than equities in the current investment landscape. Therefore, their portfolios have a greater allocation toward equity strategies.
A typical client portfolio is invested 25% in US value, 15% in US growth, 15% in international (a combination of both developed and emerging markets), 15% in bonds, 5% in alternatives, and the remaining 15% is invested in certificates of deposit of less than a year, money markets or short duration funds.
The firm currently employs five financial advisors, four based in Brownsville and the other in The Woodlands, and they are equally focused on both international and domestic wealth management.
Since a majority of their international clients reside in Mexico, Esteve said: ‘We’ve seen assets flow back into the US over the past six months due to the political uncertainty surrounding the current administration and its views toward the market.’