What Is the Asian Infrastructure Investment Bank (AIIB)?
The Asian Infrastructure Investment Bank (AIIB) is a new international development bank that provides financing for infrastructure projects in Asia. It began operations in January 2016.
How the Asian Infrastructure Investment Bank (AIIB) Works
The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank headquartered in Beijing. Like other development banks, its mission is to improve social and economic outcomes in its region, Asia, and beyond. The bank opened in January 2016 and now has 105 approved members worldwide, as of Jul. 30, 2022.
The History of the Asian Infrastructure Investment Bank
China’s leader Xi Jinping first proposed an Asian infrastructure bank at an APEC summit in Bali in 2013. Many observers have interpreted the bank as a challenge to international lending bodies, which some consider too reflective of American foreign policy interests such as the International Monetary Fund (IMF), the World Bank and the Asian Development Bank.
In this bank’s case, China controls half of the bank’s voting shares, which gives the perception that the AIIB will function in the interests of the Chinese government. The U.S. has questioned the bank’s governing standards and its social and environmental safeguards, perhaps pressuring allies not to apply for membership. However, despite American objections, approximately half of NATO has signed on, as has nearly every large Asian country, with the exception of Japan. The result is widely considered in an indicator of China’s growing international influence at the expense of the United States.
The Structure of the Asian Infrastructure Investment Bank
The bank is headed by a Board of Governors composed of one Governor and one Alternate Governor appointed by each of the 86 member countries. A non-resident Board of Directors is responsible for the direction and management of the Bank such as the Bank’s strategy, annual plan and budget and establishing policies and oversight procedures.
The bank staff is headed by a President who is elected by AIIB shareholders for a five-year term and is eligible for re-election once. The President is supported by Senior Management including five Vice Presidents for policy and strategy, investment operations, finance, administration, and the corporate secretariat and the General Counsel and Chief Risk Officer. Mr. Jin Liqun is the current President.
Asian Infrastructure Investment Bank Priorities
The bank’s priorities are projects that promote sustainable Infrastructure and to support countries that are striving to meet environmental and development goals. The bank funds projects linking countries in the region and cross-border infrastructure projects for roads, rail, ports, energy pipelines and telecoms across Central Asia and maritime routes in South East and South Asia and the Middle East. The bank’s priorities also include private capital mobilization and encouraging partnerships that stimulate private capital investment such as those with other multilateral development banks, governments, and private financiers.
An example of an AIIB project is a rural road connectivity initiative that will benefit approximately 1.5 million rural residents in Madhya Pradesh, India. In April 2018, the AIIB announced the project, which is also expected to improve the livelihoods, education, and mobility of the residents of 5,640 villages. The project is a U.S. $140-million jointly financed by the AIIB and the World Bank.
An Appraisal Management Company (AMC) is an independent entity through which mortgage lenders order residential real estate valuation services for properties on which they are considering extending loans to homebuyers.
AMCs fulfill an administrative function in the appraisal process, including selecting an appraiser and delivering the appraisal report to the lender. Individual appraisers who work for AMCs provide the actual property valuation services.
Key Takeaways
An Appraisal Management Company (AMC) is an independent real estate appraisal company hired by a lender to perform valuations on potentially mortgaged properties.
AMCs select state-licensed or state-qualified appraisers to valuate properties and deliver appraisal reports to lenders.
Customers seeking a mortgage on a prospective property, lenders, and mortgage brokers cannot choose the appraiser.
The U.S. government developed appraiser independence guidelines, restricting the influence lenders have on appraisers.
AMCs have been a part of the real estate landscape for the past 50 years. However, their numbers remained limited until the financial crisis of 2007 to 2008.
In 2009, the New York Attorney General, government-sponsored enterprises Freddie Mac and Fannie Mae, and the Federal Housing Finance Agency (FHFA) established the Home Valuation Code of Conduct (HVCC) appraisal guidelines. The HVCC guidelines, no longer on the books, laid the foundation for the appraiser independence found in the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Truth in Lending Act. Laws obligating lenders to use independent appraisers led to a sharp rise in the use and number of AMCs.
The HVCC and later federal regulation sought to limit the amount of direct contact that lenders could have with appraisers. Essentially, the U.S. federal government created appraiser independence requirements to prevent lenders from influencing appraisers to inflate property values, a problem believed to have contributed to the housing crisis.
With an AMC, mortgage brokers, loan officers, nor homeowners may select the appraiser for the property on which they want to lend/borrow funds. Since the former parties have a financial interest in the transaction, there is a risk they might attempt to influence the appraiser to assign a higher value to the property than market conditions support so the transaction will go through.
When the system works correctly, the AMC chooses an appraiser with local knowledge of the market for the property being appraised.
Appraisal Management Company (AMC) Requirements
AMCs maintain a pool of state-licensed or state-qualified appraisers to meet requests from lending institutions. An appraiser is then assigned to provide an appraisal report for the property.
AMC appraisers are not provided with any prior information regarding the property or put in contact with the lending institution. The appraiser’s assessment must meet the Uniform Standards of Professional Appraisal Practice (USPAP) guidelines. If there are any issues, the AMC can legally assist.
An activist investor, typically a specialized hedge fund, buys a significant minority stake in a publicly traded company in order to change how it is run.
The activist investor’s goals may be as modest as advising company management or as ambitious as forcing the sale of the company, divestitures or restructuring, or replacing the board of directors.
Unlike private equity firms that buy and restructure companies in order to profit when they are resold, activist investors seldom acquire full or majority stakes. Instead, they use public communications and private discussions to win over other shareholders and company insiders. When such efforts fail, an activist investor may pursue a proxy contest to elect new directors in order to force the company to meet their demands.
Key Takeaways
Activist investors buy minority stakes in public companies to change how they are run.
If they fail to persuade company managers, they may wage a proxy fight for board seats.
Some hedge funds specialize in activist investing while institutional investors may engage in it from time to time.
Investor activism may focus on maximizing shareholder value or on the company’s social responsibilities.
The SEC has proposed tougher disclosure rules for activist investors that critics contend may make activism unprofitable.
Understanding Activist Investors
Activist investors are sometimes called shareholder activists, a term also used to describe those lobbying companies to improve working conditions for the overseas employees of their contractors, or backers of a dissident board slate elected to fight climate change.
However, many activist investor campaigns seek only to maximize shareholder value, and most of those are the work of hedge funds specializing in the unique mix of public pressure, behind-the-scenes lobbying, and business expertise required.
Unlike the public pension funds and mutual funds that also engage in activism at times, activist hedge funds may hold highly concentrated stakes and supplement them with additional leverage from derivatives like stock options to offset the considerable cost of such campaigns. In contrast with institutional investors that sometimes turn to activism after owning a disappointing investment for years, activist hedge funds typically buy a stake in an underperforming company shortly before calling for change, and hope to profit from the resulting turnaround and price appreciation.
In contrast to institutional investors, activist hedge funds are also more willing to use confrontational tactics, from poison-pen letters to management and unflattering public reports to proxy fights seeking to oust incumbent directors.
The rise of activist investors has been described as an effective market response to the agency problem, which arises when agents (in this case company managements) have the opportunity and the means to enrich themselves at the expense of clients (in this case shareholders—a diffuse group with limited powers to safeguard its ownership interests.)
How Activist Investors Make Their Case
Investor activists often announce their campaigns by filing a Schedule 13D form with the U.S. Securities and Exchange Commission (SEC), which must be filed within 10 calendar days of acquiring 5% or more of a company’s voting class shares.
Qualified institutional investors and passive investors, meaning those not trying to acquire or influence control of the company, may instead file a simplified Schedule 13G with less stringent disclosure requirements and thresholds. Schedule 13D filers must disclose, among other facts, their reasons for acquiring the stake and any plans they may have for the company in terms of mergers and acquisitions, asset disposals, capitalization or dividends, or other policies.
The initial 13D filing gives the activist investor a golden opportunity to publicize their case for change at the targeted company. At the same time, the filing curtails the activist’s ability to alter their stake in, and plans for, the company out of the public eye. Any changes to the facts disclosed on a Schedule 13D must be reported in an amended filing “promptly,” under current SEC rules.
Activist investors may use amended Schedule 13D filings to comment on a company’s response to their proposals. For example, when Netflix, Inc. (NFLX) adopted a poison pill after funds affiliated with Carl Icahn reported a stake of nearly 10% in the video streaming company, the funds filed an amended disclosure calling the poison pill “an example of poor corporate governance.” Activist investors may also write sharply worded letters to incumbent managers, issue press releases arguing their case to other shareholders, or privately lobby institutional investors to side with them.
Whichever tactics activist investors use must be persuasive, since the only way to overcome opposition from entrenched company management short of a hostile takeover is to persuade a sufficient number of other shareholders to replace the board in a proxy fight, or at least to be able to credibly threaten to do so.
The Future of Shareholder Activism
There has been a claim that “activism is dying,” lamented Carl Icahn in May 2022, contrasting the legendary investor’s few-holds-barred approach seen in the past. Some have feared the changes proposed to the Schedule 13D disclosure requirements in 2022 constitute a pressing threat, with Elliott Investment Management stating publicly that the proposed rules “will virtually shut down activism.”
In February 2022 the SEC had proposed shortening the initial Schedule 13 filing deadline from 10 calendar days to 5, with amendments due within a day of a material change rather than “promptly” as currently. The proposal, if passed, would effectively force 13D filers to specify holdings of derivatives (such as options) that confer an economic interest in the company without the shareholder rights associated with an outright stock position. Perhaps more controversially, the proposed rules would no longer require investors to agree to act in concert and be designated a single group by the SEC for Schedule 13D reporting purposes. Rules have also been proposed to make it harder for activist shareholders to squash a company’s environmental or other pro-ESG initiatives.
SEC Chair Gary Gensler argued the stepped up requirements proposed would address “an information asymmetry” between activist investors and other shareholders. Critics countered the proposed rules would make activism unprofitable by making it more difficult and costly for activist investors to accumulate significant stakes, while inhibiting communication among shareholders.
Despite these proposed rule changes, shareholder activism does not seem to be slowing down (at least, not yet). For example, activist investor Nelson Peltz reportedly made a profit of more than $150 million by acquiring shares of Disney (DIS) in November 2022, in a move that prompted a proxy fight against the returning CEO, Bob Iger; however, this brief fight was called off after Iger announced a restructuring plan that is expected to save the media giant $5.5 billion in costs and cut 7,000 employees. Peltz has expressed satisfaction with the company’s direction and decision to make changes, praising Iger and his management team. In early 2023, ValueAct Capital Management, a San Francisco-based activist hedge fund, took a stake in streaming media company Spotify Technology SA (SPOT), with the goal of cutting costs and streamlining management. ValueAct has also disclosed a major position and board seat in SalesForce (CRM), which now has no less than five large activist investor shareholders on board with long positions, resulting in early 2023 cost cutting measures that include layoffs of 10% of the company’s employees. In all three of the these examples, markets have reacted positively to the inclusion of activist shareholders, seeing their share prices afterwards outperform.
Do Activist Investors Ever Settle With Companies?
Yes, because activist investing is not a zero-sum game. Since activist investors and incumbent managers share an interest in the company’s success, they may sometimes agree to a mutually acceptable compromise. Such agreements typically grant the activist investor representation on the company board in exchange for a pledge to support management and the company’s director nominees for a specified time. The agreements may also specify steps management will take at activist investors’ behest, while including standstill provisions preventing the activist from increasing their stake in the company or requiring them to maintain a specified minimum stake.
Is Shareholder Activism Dying?
While some fear recently proposed SEC rule changes may put a damper on activist investing, it has not yet seemed to slow down. After taking a dip in 2020 and 2021 due to COVID19 restrictions, activist investors were seen back above 2019 levels. In fact, shareholder activism activity hit a record high in 2022. Some predict this upward trend will continue through 2023 and beyond despite regulatory roadblocks that may be put in the way, although only time will tell.
Do Activist Investors Create Value?
Activist investors have been effective at times in addressing the agency problem faced by shareholders whose interests don’t always coincide with those of entrenched management teams. They’ve certainly created value for themselves and other shareholders. Activist investing can’t easily be pigeonholed as good or bad, however. Activist investors look out for themselves and realize the lion’s share of the value they unlock. Their relatively short-term focus on strategies likely to lift the share price, such as return of capital to shareholders in the form of dividends or share buybacks, can prevent companies from making needed long-term investments.
Which Activist Investor Generates the Largest Share-Price Gains at the Outset?
It is difficult to know for sure which activist investors have been the more successful dollar-for-dollar and what other factors may cause particular stocks to rise in addition to an activist taking on a stake, but we can look to SEC disclosures and public statements made by these investors. Elliott Investment Management, for one, claims that its investments receive an average rise of 8% in the shares of the target company on the day the firm made its stake public. According to Elliot, its activist engagements have increased the market values of the targeted companies by an aggregate of more $30 billion.
Who Are the Biggest Activist Investors?
The largest activist shareholders by assets under management (AUM) as of Q1 2023 are listed in the table below, led by New York City-based Third Point Partners:
Largest Activist Investment Firms by AUM (Q1 2023)
Rank
Profile
Managed AUM
Region
1.
Third Point Partners
$18,1 billion
North America
2.
Pershing Square Capital Management
$16,8 billion
North America
3.
ValueAct Capital
$13,2 billion
North America
4.
Eminence Capital
$10,5 billion
North America
5.
Pentwater Capital Management
$9,9 billion
North America
6.
Starboard Value LP
$9,2 billion
North America
7.
Trian Fund Management
$7.6 billion
North America
8.
Effissimo Capital Management
$6,8 billion
Asia
9.
Sachem Head Capital Management
$6,2 billion
North America
10.
Scopia Capital Management
$2,7 billion
North America
Source: Sovereign Wealth Fund Institute (SWFI)
The Bottom Line
When activist investors use their significant but still relatively small minority stakes to push for change at publicly listed companies, they must often exercise their rights as shareholders to the fullest to get the attention of incumbent management and persuade other shareholders. Activists often call for extreme cost cutting measures, including layoffs, more streamlined management, and disposing of unprofitable units. The discipline they impose promotes shareholder-friendly policies at other companies as well. But they are not always right, and any public benefit they provide may be incidental to their pursuit of profits for themselves and their clients.
What Is an Accredited Asset Management Specialist (AAMS)?
The Accredited Asset Management Specialist (AAMS) is a professional designation awarded by the College for Financial Planning to financial professionals who complete a self-study program, pass an exam, and agree to comply with a code of ethics.
Successful applicants earn the right to use the AAMS designation with their names for two years, which can improve job opportunities, professional reputation, and pay.
Key Takeaways
The Accredited Asset Management Specialist (AAMS) professional designation is recognized as an industry benchmark for asset management credentials and is endorsed by the top financial firms.
To earn the AAMS, financial professionals must complete a rigorous self-study program, pass an exam, and agree to comply with a code of ethics.
To maintain the designation, AAMS holders must complete 16 hours of continuing education every two years and pay a $95 renewal fee.
Understanding the AAMS Designation
The AAMS program began in 1994 and is taught exclusively online using the CFP’s platform. The College for Financial Planning (owned by Kaplan) is a financial education provider for working adults in the financial services industry.
The AAMS program consists of 10 modules, starting with a review of the asset management process, and then covers a broad range of topics, such as investments, insurance, taxation, retirement, and estate planning issues.
To keep the privileges associated with the designation, AAMS professionals must complete 16 hours of continuing education every two years and pay a fee. The AAMS continuing education program is developed alongside some of the nation’s top investment firms. Applicants explore case studies based on real-life scenarios designed to prepare them for effectiveness in the real world and help them build lasting relationships with clients.
What Does an AAMS Do?
The AAMS certification is designed to equip new advisors with the information they need to help clients plan for and accomplish their personal financial goals. The specialists help people plan college savings, taxes, and retirement savings.
An AAMS focuses on personal finances, over and above checking and savings account management—asset management, investments, and much more.
How to Attain AAMS Certification
The AAMS certification is granted by the College of Financial Planning, the college that created the Certified Financial Planner certification.
To achieve certification, you’ll need to enroll at the College of Financial Planning. This process is not similar to traditionally enrolling in a college. You select the program from the college’s website, choose your options, and pay for the materials. You’re given an opportunity to choose printed study materials when you’re checking out.
Once you receive your materials, you have 120 days from the day you’re granted access to the online material to complete testing and pass the final exam. You follow the course online—using prerecorded videos, self-study, and printed study materials if you buy them.
The final exam for the AAMS program contains 80 questions. A passing score on the AAMS final examination is 70% or better. The time limit for the final exam is three hours, and you’re allowed two attempts to pass.
The self-study program covers several topics:
The asset management process
Investment strategies
Policy and change
Risk, return, and investment performance
Asset allocation and selection
Taxation of investment products
Investment opportunities for individual retirement
Investment considerations for small business owners
Executive compensation and benefit plans
Insurance products for investment clients
Estate planning
Regulatory and ethical issues.
Once you receive your AAMS certification, you must complete 16 hours of continuing education credits per year and pay a renewal fee of $95 once every two years to maintain your certification.
AAMS vs. CFP
AAMS certification focuses on personal finance, asset management, and investments. It is intended for newer financial planners or planners transitioning from other financial work.
Certified Financial Planners (CFP) are finance professionals certified by the College of Financial Planning to help people plan and achieve their financial goals. A CFP can assist someone throughout their lifetime, helping them adjust their finances to meet changing life events and updated financial goals.
The CFP certification is the highest accreditation available for financial planners, requiring 6,000 hours of professional planning experience within the ten years preceding the certification exam.
Special Considerations
The Financial Industry Regulatory Authority (FINRA) specifies that it does not approve or endorse any professional credential or designation. Still, it does list the AAMS as one of the available designations in the financial services industry. According to the College for Financial Planning (CFP), some organizations recognize the AAMS designation as representing 28 hours of continuing education credit.
The CFP maintains an accessible database of the names of all certificate holders and their status. When AAMS students pass their final exam, they receive credit for completing module FP511 from the CFP course.
What Does AAMS Stand for?
An Accredited Asset Management Specialist is certified by the College of Financial Planning to advise clients about personal finance matters, asset management, and investments.
Which Is Better AAMS or CFP?
The AAMS is more for entry-level advisors or those that enjoy advising clients about personal finances, investments, and asset management. A CFP professional helps clients plan their finances throughout their lifetimes, advising them on everything from savings to retirement funds to investment portfolios.
How Long Does It Take to Study for AAMS?
Once you receive access to the online material, you have 120 days to pass your final exam. How long it takes depends on your study habits and knowledge retention.
The Bottom Line
An AAMS is a financial advisor certified by the College of Financial Planning to advise clients about personal finances, asset management, and investments. It is a challenging course of study for those unfamiliar with investing and assets, but it is also a stepping stone for achieving the highly coveted Certified Financial Planner designation.
