About Catey

Catey is a partner owned firm specialised in primarily on advising private and corporate clients on;

- Stock option plans and deferred compensation, where we help our clients in their periodic wealth creation, from grant to vesting to exercise and investing the proceeds.

- Compliance based asset management where our clients are subject to supervision and reporting of their personal investments. We help our clients comply with an ever-increasing regulatory scrutiny of potential inside information and market abuse risks.

- Portfolio Management where we manage individually discretionary portfolios for private clients who seeks a dynamic but traditional equity portfolio

Employee Compliance Asset Management

When a culture of compliance is essential to your business

Consulting, audit firms, bankers and listed companies with officers considered insiders have one thing in common. They implement policies and restrictions on how its executives and staff can benefit economically from financial investments.

The difficulty is that no organization, regardless of its compliance efforts and size can eliminate the risk of insider trading. We must understand that they are very real, and come with the potential for significant regulatory consequences – none of them good.

Making sure your staff and executives are not in breach of compliance must be at the top of the agenda of any risk manager. From experience, we know this can be difficult and cumbersome. Catey implements solutions to make this easier and scalable by creating portfolios with a set of entities / unrestricted holdings are made available for employees to investment in.

We make sure your staff’s investments are compliant according to your rules and regulations at all times. This is achieved by maintaining a direct line of communication with your compliance department. We report holdings and take the necessary steps should any investment become restricted. We make sure trading windows are respected and executives hold a minimum amount of company shares at all times, as required by corporate policy.

An agreement between your company and Catey, defines the rules and time frames for reporting in accordance to your compliance restrictions. Each participating employee agrees that Catey can, within a stipulated time frame, divest any investment that becomes restricted.

Employee based compensation plans

It is common for many U.S. based companies to include non-U.S. employees in its equity based compensation plans. What is less known is that by doing so, the company could expose them to U.S. estate/inheritance taxes.

In this context, ignoring the U.S. inheritance tax risks would go against company values by leaving its employees vulnerable and exposed.

A Reputation risk
  • Avoid “the morning after” events, similar to the recent corporate scandal where the company knew about issues but did not take proper action to address them.
  • Liability/Lawsuit from the estate: The employee could claim that the company acted out of negligence, as the executive was not informed of the risks that were associated with owning U.S. based assets.
  • Protecting employees’ wellbeing and their participation in the company’s success is in everybody’s best interest. Failing to do so will have a direct impact on the HR department’s credibility.
B Loss of significant wealth for employees and their families
  • Current legislation is not sufficient to protect European individuals against U.S. inheritance taxes.
  • Assets and accounts are frozen and not available to the heirs until they complete the IRS administration process and filings
  • Difference in treatment/level of support offered to U.S. expats vs. local employees. Many U.S. corporations provide outside consul for U.S. executives on their global tax exposure.
U.S. estate taxes

In the last few years the regulatory environment for international executives working for U.S. companies has become increasingly complex. The U.S. in particular is increasing its reach by imposing its tax laws beyond its borders.

In this context, the most challenging is the U.S. inheritance taxes. Anyone who holds assets from a U.S. company (such as shares and options) is exposed to U.S. inheritance taxes, regardless of nationality and domicile.

In case of death, all accounts and assets based in the U.S. will be blocked and not released before completing the IRS filings.

Taxation of nont-U.S. citizen/resident

There is an important distinction to how these taxes are applied for non-U.S. persons. Where a U.S. taxpayer currently enjoys a tax free amount of more than USD 5 million, a non-U.S. taxpayer will only have USD 60,000.

Assets at risk

Contrary to common knowledge it is not only real estate that is considered when estate taxes are applied. All of the below and more are at risk:

  • Shares & stock options in U.S. corporations
  • U.S. based pension plans
  • USD cash, U.S. common stocks and bonds
  • U.S. real estate
Risk Management

Most of our executive clients have the following wealth characteristics at the start of the relationship, they are invested in:

  • One derivative
  • One company
  • One market
  • One currency
  • Multiple tax exposures

Compliance Based Asset Management

If you are an auditor, an officer or for any other reason considered an insider, restrictions will apply to your possibility to hold economic interest in your own company and external companies who are clients.

Our clients are corporate executives, employees and partners of companies that require restrictions on their private investments.

We create a pre-approved list of investments that partners, staff and their immediate family members may invest in through the advisor.

This is to create a safe harbour of investments to make sure we decrease the risk of regulatory breaches.

Benefits

As a client of Catey, we make sure your portfolio is compliant according to your company’s investment rules and regulations at all times. This is achieved by maintaining a direct line of communication with your employer’s compliance department. We report your holdings and take the necessary steps should any investment become restricted.

Your advantage: Once your risk profile and possible investment restrictions are established, we create your portfolio in line with our market expectations and tuned to your personal strategy. We provide you with a monthly report of your account and performance of your assets which you can view at any time via our online services. Finally, we do the compliance reporting on your behalf, so you can focus on your work.

Catey Investment Strategy

Our emotions are one of the greatest obstacles to obtaining a satisfactory performance in the market. A good strategy executed with consistency will most of the time outperform a great strategy, executed inconsistently.

We study what has led to success in the past, year over year, decade over decade and apply it today.

To evaluate if the markets are too complacent or too oversold, we use the look for:

  • Leading Economic Indicators
  • Earnings estimates for the major indices
  • Price to Sales (P/S)
  • The inverse behavior of the VIX, (excessively high number, indicates an oversold market)

In selecting investments, they must display 3 characteristics that are likely to lead to strong performance.

  • Recent institutional accumulation, i.e., stocks that are showing unusually strong price momentum.
  • Upside changes to earnings estimates
  • Low Price to sales (P/S). This ratio is less subject to accounting manipulation than price to earnings (P/E)

Catey is a blend of what we believe are the most important aspect to market performance.

- Recent institutional accumulation. Buying low and high is nearly impossible to actually do successfully. However, buying stocks that have been doing what you want to is much more likely to lead to growth in value. We first seek those stocks that have been under recent institutional accumulation.

- Seeking value. Weather buying a car, house, or a stock, you want to buy the item with the best value. In equities, there are two main measures of value, price to earnings, or price to sales. In selecting equities with better value, they are often not as well known as those with higher price to sales, or price to earnings, however, studying which is the better investment decision, the clear voice from the market, is that the lower price to earnings, and price to sales are likely to offer a better return, and a lower risk during bear markets.

- Favourable future earnings outlooks. We look at the earnings estimates from next quarter up to the earnings for next year. Shorter than that is not too useful, and longer than 3 years into the future is too uncertain.

These characteristics are not exclusive. Combining growth and value characteristics and applying them together is likely to lead to favourable results in the future as it has done in the past.

As always. past performance is no guarantee of future returns.

Wealth Management

Catey chose to work with Interactive Brokers (IB) after extensive due diligence. Some of the key points and advantages for our clients are:

  • Access: Complete access to all electronically traded markets worldwide
  • Execution: IB’s trading execution is in the top-tier of all online brokers
  • Financial Stability: During the Financial Crisis, IB actually received an upgrade from various rating agencies due to their sound financial status
  • Ownership: IB has a very unique ownership structure; They are publicy traded but the founder and their employees maintain ownership of over 85% of the company stock, so they are just as invested in their firm’s stability as we are as customers
Our Fees

Catey offers three fee schedules, aligning our objectives with those of our clients:

Quarterly fee of 0.30%

which includes all bank, management, transaction and custody costs, with a incentive bonus of 12% of net profits to Catey Group

Quarterly fee of 0.15%

which includes all bank, management, transaction and custody costs, with a incentive bonus of 20% of net profits to Catey Group

Quarterly fee of 0%

which includes all bank, management, transaction and custody costs, with a incentive bonus of 30% of net profits to Catey Group

With us it does not matter how many trades you make or how many times your strategy has to be adjusted.

Our revenues come from increasing and preserving your wealth.

Catey’s incentive bonus is calculated using the highest watermark principle. This means that the client’s assets need to be at a higher level than any previous quarter in order to generate an incentive bonus. Any assets in and out of the client’s account is adjusted for. The watermark is perpetual and never resets.