Brian Bollen's Blog

Deutsche Bank Appointed Custodian For Kepler Capital Markets’ Fixed Income Activity Across 14 Markets

Deutsche Bank says it has been appointed custodian for Kepler Capital Markets’ fixed income activity across 14 markets in Europe. Deutsche Bank has already begun providing services to Kepler’s French fixed income activity and expects to have completed the roll-out to all 14 countries by the end of this month.

Joseph Cusanno, managing director, head of fixed income and Olivier Segonne, head of fixed income operations & process control, Kepler Capital Markets commented, “Deutsche Bank is the ideal partner to provide a global clearing solution tailored to our clients’ needs and our business lines.”

Michael Aschauer, head of global sales and relationship management, Direct Securities Services (DSS), Deutsche Bank said, “We are delighted Kepler has chosen us for such a broad mandate. This agreement represents a further expansion of our footprint in Western Europe and demonstrates our commitment and dedication to Direct Securities Services.”

 

Dell Isn’t Broken! Fundamental Shift Under Way

Dell isn’t broken. That is the verdict of Tim Daniels, TMT Sector Strategist at Olivetree Securities, commenting on recent market beliefs which have seen Dell’s stock come under recent pressure as concerns grow over the cost and availability of parts and components with the PC business.

“The stock has been downgraded and analysts are in unison that the stock is fundamentally broken,” he opens by saying. “We beg to differ - CEO Michael Dell has bought $250m worth of stock in only the last four months. Considering he already holds over $3bn - it doesn’t seem likely that he needs the money.  The stock purchases show that a fundamental underlying shift in the business model is taking place. He certainly isn’t taking a quarter of a billion dollar punt on DRAM (Dynamic random access memory) and LCD pricing.”

“Dell’s PC business accounts for 50% of the total company, but this is on the slide as value-added-services and products now make up two thirds of the gross margin. It is difficult to turn a $65bn revenue company on a dime, particularly when deals are being completed and the product range extended within a company that is continually shifting focus. We can, however, see the company profit margins beginning to improve much to the analysts’ dismay.”

“Dell has beaten GM forecasts by 430 basis points in the last two quarters alone. Analysts might as well have been analysing John Deere, rather than Dell, given how accurate their estimates have been - the stock is being valued like it is going out of business. Michael Dell’s return to his eponymous company might not be as mythical as the ‘second coming’ but it just might be more profitable.”

 

 

 

A global asset class – born in Beverly Hills

By Felix Martin, Economist, Thames River Capital, LLP

When Michael Milken was almost single-handedly creating the US high-yield market – the bond market for non-investment grade issuers – from his famous Beverly Hills office beginning in the late 1970s, few would have predicted that 35 years later what were then derisively called ‘junk bonds’ would become a global asset class with $740bn of bonds outstanding. In those early days, high-yield bonds were an ingenious innovation designed for a specific, narrow purpose: the financing of leveraged buy-outs and hostile takeovers of underperforming US companies. Today, they have become a key component of the capital structure for corporate and financial issuers across virtually every sector in the US, Europe, and Asia.

We believe that what we have seen over the past 25 years is just the beginning for global high-yield as an asset class, for two reasons. First, the tremendous growth of the high-yield market in the 1990s and 2000s was disproportionately concentrated in the US. Corporate finance in the US had always been based more on capital markets – in contrast to Europe or Asia, where banks have tended to dominate – so that the idea of extending bond market access beyond large-cap, blue-chip, investment grade issuers was not a difficult one. When the Savings and Loans crisis erupted in the late 1980s, crippling the US banking system and leading corporate lending to shrink every year for three years between 1991 and 1993, the high-yield bond market was on hand to take up the slack for higher risk companies shut out of the loan market. The result was a once-in-a-generation broadening and deepening of the US high-yield market, with issuance reaching over US$150bn in 1998. 

It is not hard to see the similarities between the US in the early 1990s and Europe now. Following the global financial crisis of 2008- 09, Europe’s banks are in repair mode, under pressure from regulators and markets to delever their balance sheets and rebuild their capital bases. It is a process that will take many years.

The result is a dramatic squeeze on the loan market: bank lending to the Eurozone corporate sector shrank in both 2009 and 2010. And as in the US in the 1990s, the high-yield market has risen to the challenge: 2010 saw the highest volume of Euro high-yield issuance ever, with 94 issues worth a total of €36bn. The bond market is stepping in to fund creditworthy companies that cannot access financing from the broken banks. The potential is enormous: if, over the coming decade, the eurozone high-yield market were to reach the same scale as the US market enjoys today, we could expect issuance to grow nearly tenfold – to the region of €300bn a year.

The second long-term force favouring global high-yield is demographic. There is a major demographic transition underway in the US, Europe, and Japan, which is seeing the largest generations in history reaching retirement age and consequently shifting from longer-term, growth-oriented investment strategies to shorter-term, income-oriented ones. This transition is creating a powerful secular force favouring fixed income investing in general – but the desire for investments that are less sensitive to interest rates and inflation are prompting a special interest in the high-yield sector.

The complete version of this article can be read in the Thames River Capital monthly newsletter for March 2011, issue number 151.

 

Farglory Glory For J.P. Morgan: named depositary bank for landmark GDR listing

J.P. Morgan communicates out of Hong Kong that has been appointed depositary bank for Farglory Land Development Co., Ltd.’s landmark Global Depositary Receipt (GDR) listing on the London Stock Exchange’s Professional Securities Market. 

The listing, which the bank adds marked the first ever GDR by a Taiwanese property company, saw Farglory raise $210.3m after issuing 43,000,000 GDRs at an issue price of $4.89 per unit. Farglory, described as Taiwan’s largest property developer, expects to use the capital raised to expand its operations into China.

Farglory, known before 2006 as Metropolitan Construction Co., Ltd., was founded in 1978. It is a member of the Farglory Group, a diversified conglomerate whose business interests include property development and construction, commercial development, real estate brokerage and agency, finance and insurance, air cargo logistics and recreation and leisure. Farglory is a publicly traded company on the Taiwan Stock Exchange. 

Steven Hsu, vice president of finance, Farglory, said: “We’re extremely excited to have broken new ground as the first Taiwanese property developer to launch a GDR programme. Our listing on the London Stock Exchange’s Professional Securities Market is an important part of our long-term growth plans, and the capital raised will be instrumental as we build out our China strategy.” 

Kenneth Tse, Asia Pacific head of J.P. Morgan’s depositary receipts group, said: “This partnership further demonstrates our regional capabilities when it comes to supporting Asian corporates in their quest to raise capital on the global stage.”

J.P. Morgan shamelessly takes the opportunity to remind readers that it launched the world’s first DR programme in 1927 for Selfridges and the first DR programme in Asia in 1961 for Sony.

 

 

 

New Name On La Strada For RBC Dexia Italy

RBC Dexia Investor Services has appointed Mauro Dognini as managing director for Italy, subject to regulatory approval. He will report to Tony Johnson, global head, sales & distribution. Dognini will be responsible for local market strategy, leading the company's integrated sales, relationship and strategic client management model in Italy. He will also chair RBC Dexia’s Italian management committee and oversee local regulatory relationships.

Dognini joins from BNP Paribas Securities Services where he was Paris-based global head of asset managers and asset owner solutions. Before that he was deputy general manager for BNP Paribas Securities Services Italy for more than a decade.

“Italy is a leading European fund market undergoing important structural changes which offer significant opportunities for RBC Dexia’s proven expertise in both onshore and offshore markets,” said Johnson. “We welcome Mauro to the team and look forward to his contribution as we consolidate our leading market position in Italy.”

Dognini replaces Paride Amiotti who retires from RBC Dexia in May. The legacy from his many years with the company includes the acquisition and integration of UBI Banca’s depositary activities.

 

So You Think You Might Want To Invest In Argentina?

Copernico Capital Partners launches Advance Copernico Argentina Equity Fund

Copernico Capital Partners, a specialist Latin American fund manager, reports the launch of the Advance Copernico Argentina Equity Fund. It says the fund, a Cayman-domiciled open-ended investment company, is the first actively managed, long-only fund of Argentinean equities.

Readers who are familiar with the long-term financial history of Argentina and its continental neighbours might reasonably ask if there could be a reason for there not being one earlier. My own background as a journalist features five years writing about Latin American debt problems in the 1980s for a weekly Financial Times newsletter, FT Euromarket Letter. Slightly unusually, my sceptical comments are well informed. Human behaviour, I firmly believe, doesn't change. Only speed and scale.

The fund, Copernico says, invests in value opportunities with the intention of outperforming the local MERVAL Index.  It is not offered to US investors.

The Argentine economy is as we all know one of the largest economies in Latin America, second only to Brazil. As we all equally well know it also has a crimesheet as long as your arm in defaulting on debt, rescheduling, going through a form of financial rehab, re-entering the international markets and defaulting again.

Some say they wouldn’t touch it with someone else’s bargepole, despite the claim that it has an educated work force (97% literacy), has a substantial middle class (GDP per capita is approximately $9,000, estimates Copernico) and the fact that it is a member of the G20. The latter titbit brings to mind Groucho Marx’s oft-quoted line about his not wanting to join any club that would accept him as a member.

Despite strong growth in the economy over the last decade, Argentina’s capital markets have become marginalised as a result of political and sovereign crises and self-imposed capital controls. In 2010, Argentina was reclassified by MSCI as a frontier market, a term that comes embedded with images of general lawlesslness, saloon bar brawls and inebriate cowboys being thrown through the louvre doors into the street.

Despite these prejudices, Ricardo Maxit, CEO of Copernico Capital Partners, sounds optimistic. “We believe the current situation in Argentina provides an opportunity for investors to earn outsized returns through a focussed investment programme,” he says in the despatch communicating the fund’s existence to the world.  “Companies are trading at a significant valuation discount to regional peers; the Argentinean peso is amongst the most undervalued currencies in the world [wonder why??].  Also, there is strong and continued demand for Argentina’s agricultural exports and an election will be held in October 2011, at which a change of leadership is a real possibility.” 

To which one can only respond, SFW?

 

Do Electric Sheep Dream Of Inorganic Milk?

Lyceum Capital teams up with founders and management to buy Eat.  

Private equity investors continue to demonstrate faith in certain elements of the UK High Street despite the general prevailing feeling of doom and gloom. Mid-market growth investor Lyceum Capital is acquiring a controlling interest in the irritatingly named EAT., which it also confusingly describes as The Real Food Company. The transaction will see Lyceum Capital invest alongside the founders and management to support what the firm describes as a significant store roll-out and brand development programme.

Founded in 1996, EAT. has established itself as one of the leading brands in the £3bn specialist food and coffee takeaway market (though oddly enough I’ve never even heard of it until now!). It has 110 stores across the UK selling a wide range of soups, salads, sushi, panini, sandwiches, baked goods and coffee, which are freshly prepared in-house by EAT. each day. The business has performed robustly during the downturn, we are told, with sales in the last twelve months topping £85m, up from £68m in 2008. Even Victoria Beckham and Kate Moss, readers might be surprised to learn, occasionally have to ingest some form of nutrients.

Lyceum Capital says it will now help the founders and management accelerate a store opening programme in the UK which could support well over 300 branches. The strategy will also develop the business and brand in the UK and internationally based on its leading product ranges.

Founders Faith and Niall MacArthur will retain a substantial shareholding along with other management and the deal will see Penta Capital sell its interests in the business. Lyceum Capital’s Simon Hitchcock and Phillip Buscombe will join the board of EAT. alongside chairman John Herring.

Niall MacArthur, founder and managing director of EAT. said: “This deal marks the next major stage in EAT.’s development and will be the catalyst for an expansion programme that will see us extend our reach throughout the UK and continue to develop our successful brand proposition. Providing our customers every day with the innovative, high quality and great value products we are well-known for will remain at the core of this exciting growth strategy. We plan to invest further in our products, shops and great people to ensure we continue to build on our loyal customer base.”

Philip Buscombe, chairman of Lyceum Capital, said: “EAT. has performed really well over the last two years by continuing to offer great products, exceptional service and good value, whilst demonstrating its underlying strength through the loyalty of its customers. With its established presence and its leading product ranges, EAT. is ideally positioned to capitalise on the gradual recovery in consumer confidence, particularly in London, and the continuing shift to branded eating out or food-to-go in the sub-£10 meal sector. EAT. also plans to build on its successful presence in major cities around the UK and in international travel locations.”

Niall MacArthur added: “We are delighted to partner with Lyceum and we’ve secured the backing of a dynamic investor with a proven ability to execute successful roll-out strategies and a team that has a strong track record of building value in the consumer and business services markets in both the UK and internationally. This is a bold deal and shows confidence in the growth of the business and the UK economy, where we will create 1,500 jobs in the next few years as we double in size.”

Lyceum Capital’s partners boast significant experience in building consumer-facing, multi-branch businesses including, Yates Wine Bars, Gucci, Hamleys, Circle K, Costa, Asquith Day Nurseries, Carewatch and Clinovia.

Torquil Macnaughton of Penta Capital, said: “EAT has been an extremely successful investment for Penta and it has been a pleasure working with Niall, Faith and their team over the last five years. During our period of involvement the business has grown from 45 shops to well over 100 shops and we believe that it is well placed to continue this strong growth profile with its new partners. We wish the MacArthurs, the management team and Lyceum every success for the future.”

EAT. was founded in 1996 by Niall and Faith MacArthur with their first shop in Villiers Street, close to Trafalgar Square, which the official announcement confirms is still trading well today. They are joined on the board of EAT., by Ed Grimes, retail director and Ed Godwin, people director, and the non-executive chairman John Herring.

Lyceum says that EAT.’s secret is that all its sandwiches, salads and soups are hand-made in its own kitchens every day for maximum freshness and quality. EAT. soup is cooked from scratch in the EAT. kitchen every day using EAT.’s own recipes and fresh ingredients – you just can’t get soup like it anywhere else! Unless, of course, you do it yourself at home with your own fresh ingredients for a fraction of the price.

The product range includes many healthy and magnificently delicious-sounding eating alternatives including vegetarian and wheat-free products, no-mayo (apologies, incidentally, for the Americanisms; they are Lyceum’s, not mine) and low-fat options, seasonal salads and sushi, as well as a range of breakfast items including porridge, bircher muesli, fresh fruits salads and fruit (don't all rush at once). All milk is organic and all coffee is Fair Trade. Which prompts two final questions. One, what is classed as unfair trade coffee? And is there such a thing as inorganic milk? Back to the chemistry books...

 

Lyceum Capital bills itself as an independent investment firm that invests in innovative and growing mid-sized UK- headquartered businesses. It says it has acquired over 60 businesses in the UK and internationally over the last 10 years and plans to invest a further £300m in the UK over the next two to three years.

 

Lyceum Capital says it makes highly targeted investments in mid-sized businesses with the potential to become larger participants in fragmented and growing sectors; and has a strong track record across a number of industries.

 

Lyceum Capital works alongside management teams to increase scale by driving growth through investing in infrastructure and improved operations as well as sourcing and funding complementary acquisitions or new sites in the UK and Internationally. Through a combination of investment, operational and strategic input Lyceum Capital helps management build robust and successful businesses with good long-term growth prospects.

 

Penta Capital LLP is a UK mid-market private equity house targeting investments in the £10m to £100m enterprise value range. Independently owned, it has demonstrated (we accept without question) a strong track record in a number of sectors including leisure and consumer retail and prides itself on delivering innovative and creative funding solutions against an ever-changing private equity landscape.

Funders and advisers on the deal included:

•            Debt funding: HSBC (Stuart Mills & Mike Henderson) and Andrew Aylwin, Lyceum Partner, led the banking aspect of the deal for Lyceum Capital.

•            Advisers to Lyceum Capital: Altium Capital (Sam Fuller), Javelin (Michael Fine), PwC (Chris Glazier), Travers Smith (Paul Dolman), Highwire (Sandra Aldridge), Intuitus (Calum Stewart) and GVA (Jason Sibthorpe).

•            Advisers to EAT.: PwC (Simon Boadle/Sean Williams), CMS Cameron McKenna (Peter Smith) and DLA (Richard Crossfield).

•            Advisers to Penta : Dickson Minto (Andrew Todd).

 

 

RBC Dexia Reaping R&M Awards

RBC Dexia Investor Services reports that it has achieved its best ever ranking in the much-esteemed and hugely influential R&M Consultants Global Custody Survey. It delightedly elaborates that it secured the top position in no fewer than 10 categories, including the overall client service award. The R&M survey is long established as a perception-based qualitative survey rather than a purely mechanical survey, measuring customer satisfaction based on questionnaires completed by a wide range of institutions around the world. 

RBC Dexia adds that it came first in the UK for the sixth consecutive year and was also elected best custodian in Europe, Canada, North America and in the Rest of the World category. In the categories reserved for votes by asset managers, RBC Dexia says it came top overall, and secured the highest ranking amongst direct, indirect and UK-based asset managers.   

“We pride ourselves on the attention we pay to clients’ needs and we have invested heavily in our technology and in the integration of  our  sales and client service functions to ensure we present a consistent, world class value proposition to our clients,” said Tony Johnson, global head, sales & distribution at RBC Dexia. “The R&M survey results are a welcome validation of our efforts.” 

More than 40% of RBC Dexia’s clients reported an improvement in service, while no clients said service had declined, ensuring that the company achieved its highest ever score in the survey. 

RBC Dexia takes the opportunity to remind readers that these results are the latest in a series of industry accolades it has garnered. The company was recently named 2010 European Custodian of the Year by Funds Europe magazine and also received top scores in seven key categories in the 2010 Global Investor global custody survey, including Number 1 overall for the Americas and EMEA. RBC Dexia was also awarded Top Ranked status in four key categories in Global Custodian's 2010 Global Custody Survey and European Transfer Agent of the Year, Fund Administrator of the Year: Luxembourg and European Client Relationship Manager of the Year at the 2010 ICFA European Awards. 

 

Drinking It All In; Fine Wine As An Investment

There are alternative investments, and there are alternative investments, such as art, which became hugely popular with the pension funds of certain nationalised British industries in the 1970s and 1980s. And then there is wine. Whether or not you buy into the high-faluting talk about so-called fine wines, the fact is that it does attract attention as a means of making money over the longer term.  “Wine is a perfectly valid alternative investment asset,” says Richard Brierley, head of the ‘fine wine’ department at Mayfair, London, UK-based Vanquish Wine. “It is trackable, capable of being subject to analysis and it is a commodity. You can see the price go up, you can see the volumes being traded and the prices being paid on Livex. It also boasts a number of underlying fundamentals such as the year of vintage and the quality of the chateau from which the wine originally emanated.”

Investors can either invest directly, tapping into the experience and expertise of  a firm like Vanquish, which in its own words will act as prime broker, custodian, and investment advise. Or they can invest indirectly via an entity such as the Fine Wine Fund, the vinicultural equivalent of a unit trust. One benefit of taking physical ownership is that because Her Majesty’s Revenue & Customs view wine as a wasting asset (despite all evidence to the contrary) any profits are not currently subject to UK capital gains tax.

For the record, this writer is a fine wine sceptic who is working his way through a case from Berry Brothers & Rudd, vintners to more than one member of Britain’s ‘Royal Family’. With only one or two bottles left I am distinctly underwhelmed. The Lindemans Cawarra Shiraz Cabernet on offer for £4.99 at my local Netto store is greatly superior in both absolute and relative pound-for-pound terms than anything in the BB&R case.

For what it is worth, the best red wine I have ever tasted is the Lanz Thomson 2006 Shiraz from the Barossa Valley, a marvellous SwFr48 companion to the weekly cheese fondue at the Hotel Baeren in the Swiss Alpine upmarket ski and summer hiking resort of Wengen. Snobs might literally turn up their noses at it, but if there is a fuller bodied more enjoyable way on the planet to pleasure the taste buds, I’d love to sample it.

Back in the Old World, the following communication landed in my in-tray in late February: “I was wondering if you might be interested in speaking to the Fine Wine Department at Vanquish Wine (www.vanquishwine.com). Vanquish Wine started out as London's leading drinks distributors to top clubs and bars and in 2009, the company used their experience to adapt their business so as to make the most of the recession. The business expanded and they launched a fine wine division for private clients and investors and work with those just starting to build their wine portfolio to the more experienced.”

As a Scotsman, on the editorial team, and the whiff of a complimentary drink or two swung the internal debate.Ie reached the conclusion that the principles of custody, safekeeping, regular portfolio valuations and changes are more or less identical whether the asset involved is a collateralised mortgage obligation or a bottle of wine. So I took on the challenge.

Richard Brierley joined Vanquish as head of fine wine from New York, where he was vice president and head of Christie’s North America wine department and was responsible for $27m in sales in 2007. He now sources and sells the rarest wines to elite clients on a global scale. In 2010, he and the team launched Magenta Wine Investors Ltd, a dedicated investment vehicle for the purchase and sale of fine wine. He spends a good deal of time, he says, persuading owners with rare wines languishing unappreciated in their cellars to part with them. “It’s like trying to convince people to give away their children,” he says.

Vanquish, he says, manages bespoke portfolios of blue chip wines for both the investor and investor/drinker. Their team of specialists will craft a balanced basket of investment worthy cases to meet personal requirements.They arrange for the cases to be stored in an underground, temperature and humidity controlled,  fine wine storage facility in the individual's name.  Each quarter or on request, Vanquish provides regular updates on the market value of the  collection, opportunities to add to the basket or liquidate certain portions. One client wished to create a vertical collection of Sassicaia (Italy) in six-litre large formats. Vanquish, we learn, was able to put together the collection in perfect condition in their original wooden cases from each vintage from 1995 – 2007.

Brierley defines a fine wine as one that represents a combination of price (£25-plus a bottle), the way it is marketed, the producer’s production values and its pursuit of quality. It will also drink for several years. His own favourite? “Red burgundy pulls at my heart strings, but it also pulls at the purse strings. A very good red will sell for thousands of pounds per bottle, but is delicious and otherwise very accessible.” At home, he will drink wines from the Rhone Valley (such as Chateauneuf du Pape). A particular favourite is Vacqueyras, normally based on the Grenache or syrah grapes. “It’s a big rich wine that almost smells of where it comes from,” he says. “You can pick it up for around £15 [the Berry Bros price is £15.65 a bottle at the time of writing, end-February 2011].”

The Market In Asia

Reflecting the broader macroeconomic environment, China is identified as a key source of future growth. Indeed, sales to Asia already represent more than 50% of Vanquish's fine wine sales. The team, we are told, has worked hard at developing long term relationships with both private and trade clients in the region and makes regular trips to Greater China throughout the year. Face to face meetings in Asia count for a great deal and Vanquish have been eager to be sensitive to business practices and culture in the region.

 Brierley comments: "We are not just looking to sell to these people but deeply understand how individuals are learning about new products.  For example – In Beijing we held a dinner/seminar with 10 young wine collectors who agreed to join us to discuss their approach to fine wine, what they wanted to learn and which wines they were excited to try. It was a frank, open discussion about their preferences and their ‘wine journey’.  Bordeaux and Burgundy continue to dominate Vanquish's portfolio of wines sold, as well as vintage Champagne. 

This new-found interest in foreign wines reflects not only China’s economic growth but also the glacially paced opening up of the country over the past 15 to 20 years. “As European restaurants have opened, serving European wine to go with the food, so interest in the wine has grown,” he observes. Another contributing factor was the decision to cut to zero Hong Kong’s duty on wine in February 2008. “That made Hong Kong in essence China’s freeport for wine,” he adds. “Wine is everywhere, in bars and in restaurants. It reminds me a lot of mid-America 10 to 12 years ago. The US wine culture was to be found mostly on the east and west coasts, and in Chicago and Houston, but today there are great wine bars and restaurants all over the country.”

The rich are different in India, too. According to a recent story in London newspaper The Times, Moet & Chandon, one of the world’s best known Champagne houses, is reportedly planning to produce a new sparkling wine in the state of Maharashtra to satisfy demand from the sub-continent’s growing middle class. Indians drink an estimated 1.5m cases of wine each year, compared to 150m cases in the UK, the story relates, but growth has plateaued in the UK while India’s consumption is growing at 25% a year.

Interestingly, wine has taken on a secondary function in today’s China, helping to lubricate trade and business with government at all levels. Chateau Lafite 1982, it seems, is the gift of choice at the top of the hierarchy in Beijing. In such an environment, one cannot help wondering what influence or favours might be bought by deploying bottles of Mateus Rose, Asti Spumanti and Chianti, staples of the mass British wine scene in decades past. The thrusting go-getters of China are highly unlikely, we suspect, to be driving around with cases of those in their car boot on the off chance that a spot of lubrication might be needed to clinch a deal of some kind. The Chinese might be consuming fine wines five years younger than connoisseurs in the west might, but they are no mugs.

Chateau Lafite, incidentally, pulled off something of a coup by announcing that it plans to carry the Chinese symbol of the number ‘eight’ on its 2008 bottles. That number is synonymous with wealth and good fortune in China, and the price jumped 25% in 24-48 hours, recalls Brierley.

Their enthusiasm for drinking young vintages that Europeans would leave in the cellar somewhat longer is, though, inevitably affecting the pricing dynamics of the industry. “Fine wine is being consumed quicker than it is being produced for the first time in a long time, and supply can’t rise,” explains Brierley. “The land devoted to vineyards is pretty much fixed, and you can’t increase quantity at the top level without compromising quality. This is putting upward pressure on young vintages; the wines from 2000 to 2008 coming to the market are more expensive.” What we will see, he believes, is that the grand chateaux will stay top quality but will produce more, younger, second wines.

In the meantime, 2009 prices were the highest on record, and existing vintages responded to that. When the 2010 prices are set in April/May this year, Brierley expects the same to happen again for a wine as buyers position themselves to secure an allocation of wine that won’t actually be released to the market until 2013. “You’re buying a future,” he says, concluding by beginning to use language that is meat and drink to sophisticated financial readers.  “Whoever can work out a way to replicate wine-style investment returns using derivatives could make themselves a lot of money.”

 

 

RBC Dexia Investor Services Asia and Calastone Limited form strategic alliance to boost investment fund automation in Asia

RBC Dexia Investors Services Asia and Calastone, a global messaging and settlement transaction network for the global fund industry, report with a Hong Kong dateline that they have formed a strategic alliance to increase investment fund automation in Asia. The move has been made in response to the significant growth in the Asian fund market, and is a major step towards greater efficiency in fund transactions in the region, the duo add. 

Under the arrangement, RBC Dexia’s Asian fund promoter clients and their respective fund distributors will benefit from direct connectivity to Calastone’s fund messaging and translation service. Asian fund distributors can connect directly to the network to deal into Asian domestic and cross-border funds administered by RBC Dexia, using their preferred communication channel and message protocol. This will minimise IT resources, costs and timeframes usually required to move to a straight-through-processing model, we learn. Messages received into Calastone are normalised to industry standard ISO 20022 format using Calastone’s automated message translation service before being sent to RBC Dexia IS Asia.

With the increased popularity of domestic and cross-border investment funds amongst Asian distributors and investors, the volume of activity in the region has seen a spectacular rise in the last few years, the official release continues. Lack of automation in the Asian fund market has created growing operational challenges, risks and costs for fund promoters active in the region. It is estimated that today over 95% of fund orders in the region are still processed manually via faxes and phones.

Brent Reuter, managing director, Hong Kong for RBC Dexia Investor Services, comments: “As the leading cross-border fund administrator, our primary objective is to offer our global client base the most efficient service levels from trade to settlement while managing operational risks and costs. This collaboration with Calastone enhances our existing offering by giving our fund clients and their respective fund distributors and investors more flexible and cost effective ways of placing trades electronically into the domestic and cross-border funds for which we provide transfer agent and sub-transfer agency services in Asia.”

Commenting on the agreement, Kevin Lee, chief executive of Calastone, said: “Following the tremendous expansion we have experienced with our fund message communication and translation service in the European market and the growing number of Asia distributors connecting to Calastone, we are very excited to roll out our services into the fast growing Asian fund market. This alliance with the largest cross-border third party transfer agent and one of the key local fund administrators, will provide Asian fund distributors with an easy, efficient and low cost solution to automate their fund processing flows into a very wide range of locally domiciled and cross-border funds distributing in Asia.”

 

 

 

Kingdom of Spain Appoints BNP Paribas Securities Services for Collateral Management and Custody

Felicitaciones a BNP Paribas Securities Services (BNP Paribas). It has been appointed by the Kingdom of Spain (Tesoro Público) to provide a fully integrated suite of collateral management for OTC derivatives, and custody services.

Tesoro Públic, is responsible for the design and implementation of the funding strategy of the Spanish Central Government. Commenting on the development, Ignacio Fernandez-Palomero, head of the debt division at Tesoro Público (or, more likely, someone writing on his behalf), said: “The new platform has given us the base to enhance our collateral activities, with the safety and security of BNP Paribas Securities Services’ custody services. We also appreciated the team’s expertise, both on a technical and regulatory level. The fact that they had a deep knowledge of both collateral management and custody under one roof was a key factor in our decision.”

BNP Paribas says that its collateral management platform also enables clients to benefit from multi-jurisdictional booking of collateral across more than ten locations – a feature that it describes as completely unique in the market today (the pedant in me feels compelled to point out that as with perfection there are no degrees in uniqueness; one is either perfect or unique, or one is not). The platform, we hear, can either be integrated seamlessly into existing client systems, or provided as part of the bank’s full suite of services for OTC derivatives including trade management, independent valuations and collateral management.

Hélène Virello, head of collateral management services at BNP Paribas Securities Services said: “We are delighted that the Kingdom of Spain has entrusted us with its collateral management and custody requirements. Meeting ever increasing collateral requirements is essential to clients trading OTC derivatives today, and this development demonstrates our dedication to supporting our clients across the entire post-trade lifecycle.”

 

 

Endless Never Sleeps; Turnaround Specialist Backs TJ Hughes Secondary Buyout

‘The possibilities are endless’ is a favourite slogan of Garry Wilson, Managing Partner at Endless Partners, the UK turnaround private equity specialist. It often looks like we should take him at his word. While everyone else in Britain is spouting a gospel of doom and gloom, and predicting rivers of blood on the High Street as impecunious shoppers stay away, Endless has taken what looks to this obersver like a copper-bottomed gamble.

Endless is backing the management of TJ Hughes, the discount department store chain, in its buyout from Silverfleet Capital, a mid-market private equity firm.  The price and IRR of this secondary buyout are undisclosed.

Gareth Whiley, partner of Silverfleet Capital who was on the board of TJ Hughes said: “TJ Hughes has in place an excellent management team and it has been a pleasure working with them. We wish them, and Endless [their punctuation, not mine] every success in this next phase.”

TJ Hughes was backed by Silverfleet Capital in 2003 and under its ownership the business grew from a total of 37 stores to 57 now. It is claimed to be the only high street department store that offers discounts on all its famous brands in both Fashion and Home.  TJ Hughes employs over 4000 members of staff.

 

EFAMA Hails Updated Framework for Fund Processing Best Practices

EFAMA reports from Brussels that it has published new recommendations to increase efficiency in the processing of fund orders. EFAMA says the report was prepared by its Fund Processing Standardisation Group (FPSG).  It adds that the report consolidates the recommendations that were published in 2005 and updated in 2008, and extends the recommendations in two key areas: 

·         Transfers. Transfers of units between two accounts recorded in the legal register of fund holders are generally instructed using physical documents and faxes. As such, they require manual intervention, which makes them resource intensive and exposes them to the risk of human error. Moreover, their processing is usually not time-critical, leading to delays that can have a knock-on impact on a custodian’s ability to service their client effectively. The report makes concrete recommendations to improve communication between the actors involved, shorten processing timelines, thereby reducing the risk of human error.

·         Corporate actions. The report discusses various aspects in relation to events that arise from or have an impact upon holdings of units in an investment fund. These events include fund reorganisations, income entitlements, unit holder meetings and other investor notifications. The recommendations aim at improving communication with the wider market in order that underlying investors and their services agents are able to receive and process the information in a timely fashion.

EFAMA goes on to say that the report encompasses the full scope of activities that were envisaged when the FPSG was formed. To highlight the value of the FPSG’s recommendations for the industry, the report also includes a series of quotes from senior industry stakeholders. 

Peter De Proft, Director General of EFAMA, adds: “With the publication of this new report, EFAMA confirms its central role in leading the European fund industry’s efforts to make fund processing simpler and more automated.  Harmonising fund processing practices in the direction recommended by the FPSG and accelerating convergence towards the proposed standards represent an effective approach for reducing operating costs and serving the interests of investors.  We are encouraged by feedback received that the FPSG’s recommendations are taken seriously by market participants and infrastructure providers.  Still, progress towards full implementation could be faster.  We therefore call upon our member associations to accompany the release of this report with specific actions to foster a higher degree of convergence at national level, taking into account their specific challenges.” 

Reactions to the publication of the attached report from major industry stakeholders can be found on pages 32 to 34 of the report which EFAMA says include comments from:

Martyn Cuff, Managing Director, AllianzGI Luxembourg;

Josée-Lynda Denis, Chairwoman, ALFI TA & Distribution Forum;

Fabio Galli, Director General, Italian Association of Investment Management (Assogestioni);

Peter Gnepf, International Securities Services Association (ISSA);

Pierre Yves Goemans, Managing Director, Commercial, Euroclear;

Gary Janaway, Head of Operations Schroders Luxembourg, Chairman of the Findel Group;

Armin Kammel, Head of Legal & International Affairs, Austrian Association of Investment Fund Management Companies (VÖIG);

Wolfgang Mansfeld, former President of EFAMA (FEFSI) and founder of the Fund Processing Initiative in 2003;

Jan Monster, Head of Robeco's Fund Information Services;

Richard Saunders, Chief Executive, Investment Management Association;

Philippe Seyll, Head of Investment Funds Services, Member of the Executive Board, Clearstream International S.A.;

Kathy Shackle, Operations Automation Director, Continental Europe, FIL (Luxembourg) S.A., Fidelity International.

 

 

Societe Generale Securities Services mandated by Ethias to provide independent valuations

Societe Generale Securities Services (SGSS) reports from Paris that it has been mandated by Ethias, a Belgian insurance company, to provide independent valuation services. These services, it adds, cover a portfolio of complex structured products. SGSS says with the appropriate tone of humbleness that it was retained because of its expertise in this area, alongside the quality of its services (database of mathematical models developed in-house, flexibility in valuation frequency, analysis of discrepancies with counterparties, etc.) and the competitiveness of its bid.

This additional mandate won by SGSS, it goes on to explain, illustrates the increasing need among investors to obtain a precise valuation by third-party specialists of the complex financial instruments held in their portfolios. It also underlines SGSS' capacity to provide state-of-the-art and adaptable solutions in response to the specific needs of clients.

Ethias, SGSS concludes by saying, ranks as the fourth-largest insurer in the Belgian market, all sectors included, with a 10.4% market share as of the end of December 2009. Unless of course, dear readers, you know differently…

 

Citi, BP2S and the mystery of the missing €11m

Citi, BP2S and the mystery of the missing €11m

‘The mystery of the missing €11m’ sounds like the title of one of Enid Blyton’s jolly adventures involving a group of four or five English middle-class children, and their dog, or parrot, who have been abandoned by their parents for the summer or half-term holidays and gone off to adventure. It is in fact the story of what Journal de Dimanche, which broke the story, says is nearly the perfect burglary (Cela a failli etre le fric-frac parfait: http://www.lejdd.fr/Societe/Actualite/La-BNP-a-depose-plainte-pour-detournement-de-fonds-282291/?from=headlines).

‘Onze millions d’euros disparus, ni vus ni connus, des livres de comptes de la BNP et virés en toute discrétion sur une banque du Monténégro’, the story continues. Eleven million euros gone, neither seen nor even known about, paid to a bank in Montengro. And a 35-year-old football-loving scooter-riding clerk identified only as Fréderic G is now incarcerated in Fleury-Mérogis, protesting, as one would expect, his complete innocence.

According to JDD, the affair began on March 23 2005 when Citibank sent €11m to BP2S as what seems to have been an overpayment following a calculating error between the two banks. It took Citibank more than four years to realise what had happened. Although the balance generated interest, details of the interest were erased from the bank’s ledgers, helping to render the money invisible.

JDD goes on to report that on June 16 2006, at 12.58h, a fax bearing two signatures arrived instructing that the money be paid to an account at a bank in Montenegro. “At 14.21h, after lunch, the money was paid,” narrates JDD. It was another three years before anyone noticed the vanishing act. 

The incarcerated clerk is suggesting identity fraud (On a pu prendre son identité, says his lawyer) but the money does appear to have done some good in its adventurous Enid Blyton-ish existence. One suggestion is that it helped finance local football in Montenegro.

Citi and BP2S have both been asked if they can field a suitable interviewee to take the matter further if at all possible.