Brian Bollen's Blog

Congratulations Anna and Tom (even if a bit belated)

For the true freelance, the commitment to work sometimes gets in the way of important family matters, such as the buying of shoes for one’s children or even more serious matters. That is my excuse for the delay in communicating important family news.

Mrs Margaret Patricia Bollen and I are delighted to be able to announce the engagement of our older daughter Anna Louise Bollen, late of the parish of Loughton, in Milton Keynes, to Thomas Eastman-Thoy, late of the parish of Ecton Brook, in Northampton, after a three-year courtship.

The marriage will take place on June 7 2013 at the Kettering Park Hotel, Kettering, Northamptonshire. Or, as Anna might put it, one year, 10 months and eight days, but who’s counting?

 

Spain Credit Downgrade No Material Shock: Invesco

Luke Stellini, product director, European equities, Invesco Perpetual comments on Moody’s possible downgrading of Spain’s credit rating.

“This is clearly not a positive development in terms of sentiment. Having said that, Spanish bank share prices are not underperforming the broader European banks sector and Spanish bond spread widening has not changed dramatically, implying that this move does not amount to a material incremental shock.”

Solar Flair For Hands?

A company wholly owned by Terra Firma Capital Partners III forms part of a three-strong consortium which has just taken over Italian solar power company Nuova Rete Solare (which translates as New Solar Network). RTR Capital, the company in question, lines up alongside Terna S.p.A. and SunTergrid S.p.A. as the owners.

NRTS is involved in the development, construction and operation of photo-voltaic (PV) plants located inside or adjacent to Terna’s substations, which are currently at different phases of development. By the planned closing date, NRTS will have finalised PV plants from 50MWp to 78MWp capacity, located in various Italian regions.

Debt Woes And Bad Luck?

Debt woes and the question of bad luck dominate new comment on the outlook for the global and UK economies by Schroders’ chief economist and strategist, Keith Wade, and European economist, Azad Zangana.

From a global perspective, debt woes are bringing political risk to the fore. While markets remain focussed on debt problems in US and Europe, the progress of recovery is being forced to take a backseat.

It is widely expected that a last-minute deal will be agreed by the Republicans and Democrats, or that the US Treasury will find a way to meet coupon payments.

It can be said with some certainty that an agreement to lift the debt ceiling will not be the end of the story – the US could still be downgraded unless a long-term solution is found.

EDM Issues Free Meeting Invites

The EDM Council in New York is inviting anyone who is interested to a members’ briefing and global regulatory discussion on Thursday, September 8, from 16.00h till 18.30h. HSBC is acting as host at its offices on 452 5th Avenue, T11 Americas Room. A reception will follow at Butterfield 8, 5 East 38th Street.

Agenda

Key note speaker - Lew Alexander (financial stability adviser, New York Federal Reserve)
 Systemic risk reporting requirements and banking supervision.

Global overview of EDMC activities and accomplishments - Mike Atkin.

Panel discussion - regional data management trends and requirements.

Contact [email protected] if you would like to register to attend this meeting (those already registered have a seat reserved). As seating is limited the organisers are asking interested parties to book early to avoid disappointment. There is no charge for this meeting.

 

In Diversification We Trust?

The EDHEC-Risk Institute is no slouch at touting for publicity. Its most recent effort in that direction is to draw attention to an article published in the winter 2011 (repeat, yes WINTER 2011, though that will come as little surprise to those of us shivering in a middle England summer) issue of The Journal of Porfolio Management by Noël Amenc, director, and Lionel Martellini, scientific director, EDHEC-Risk Institute.

In an article entitled In Diversification We Trust? the authors state that by focussing on security selection decisions as a single source of added value, the investment industry has somewhat distracted from another key source of added value, namely, risk management.

Parliamentary Pots Call Football Kettles Black

If ever there was an instance of pots calling kettles black, this is surely it.

In a major report released today, the Commons Culture, Media and Sport Committee (part of that bastion of moral and financial rectitude the UK Houses of Parliament, and which just last week allowed an 80-year-old man to be physically assaulted during one of its sessions) says big changes need to be made to the way football is run in England to address financial instability and levels of debt in the game, and to secure its future.

Crucially, reform must be undertaken without impinging on English football’s many strengths. The Football Association (FA) as the national governing body of English football is the most appropriate agency to take the lead in addressing the weaknesses of English football, but it needs urgent reform itself to carry out its responsibilities effectively and meet the future challenges of the game.

The Committee recommends:

Broker Numbers To Fall: Bloomberg

Buy-side traders, facing lower volatility and volumes, say that the number of agency brokers will decrease over the next year, according to comments by Bloomberg Tradebook, a global agency broker. 

Viewpoints on consolidation in the industry came at an invitation-only Bloomberg Tradebook forum rather imaginatively called The Future of the Buy-side Trader. The event was attended by senior buy-side traders and heads of institutional trading desks at leading hedge funds and asset management firms representing more than $1 trillion in assets under management, and simulcast live in Boston and New York.

Kelly Cuts BNYM Tokyo HQ Ribbon

BNY Mellon’s chairman and chief executive officer Robert P. Kelly officially opened the company’s new office at Marunouchi Trust Tower Main in Tokyo yesterday (photo shows, left to right: Dominick Falco, Makoto Saji, Thom Fisher, Bob Kelly, Shogo Yamaguchi and Steve Lackey).

.

McKinsey: Mapping Global Capital Markets 2011

The 2008 financial crisis and worldwide recession halted a three-decade expansion of global capital and banking markets. Today, growth has resumed, fuelled by expansion in developing economies but also a $4.4 trillion increase in sovereign debt.

The total value of the world’s financial stock, comprising equity market capitalization and outstanding bonds and loans, has increased from $175 trillion in 2008 to $212 trillion at the end of 2010, surpassing the previous 2007 peak. Similarly, cross-border capital flows grew to $4.4 trillion in 2010 after declining for the two previous years.

In its 2011 updated analysis of more than 75 countries on the size of their outstanding equity and debt, cross-border capital flows, and the stocks of foreign investment assets and liabilities, MGI finds that the recovery of financial markets remains uneven across geographies and asset classes and significant risks remain. Emerging markets account for a disproportionate share of growth in capital raising as mature economies struggle. Debt markets remain fragile in many parts of the world - the growth of government debt and of lending in China accounts for the majority of the increase in credit globally.

Highlights of the report include:

Solar-Powered Light At End Of Tunnel?

If there is light at the end of the tunnel for investment in solar power, it might well be that the light is being held in one of eight arms. Or perhaps there will be one in each.

That is the slightly facetious but still admiring reaction to the news that Octopus Investments announced today that it has successfully funded the installation of 11 large scale solar power sites throughout England ahead of the August 1 deadline for the government-backed Feed In Tariff incentive offered to larger scale solar power sites.

We are told that completing the sites was a huge undertaking for Octopus’ partners, Lightsource Renewable Energy, who were responsible for developing each of the sites (Promens site pictured below). The investment has funded the installation of 118,000 solar panels, with a total rated capacity of 30MW. The capacity will deliver around 26GWh each year, enough to power 7,400 homes.

Caveat AIFMD

By Michael Crossan

The PwC article on AIFMD and its impact on private equity remuneration is interesting, but hats off to Michael Crossan, an employment partner at Clifford Chance law firm in London ([email protected]) for tackling the subject several weeks earlier in an article which the firm has now greenlit for use here.

Much has been written about the European Commission’s Alternative Investment Fund Managers Directive (AIFMD) before and since its final text emerged from the European Parliament approval system on 11 November 2010.  Little has appeared in detail about its possible impact on remuneration practices in the private equity world.

Most private equity firms fall outside the scope of the Financial Services Authority (FSA)’s earlier Remuneration Code (the Code) though limited numbers of firms fall into Tiers 3 and 4.  The industry is also generally well positioned in relation to the requirements of AIFMD.  However, unlike the Code, it has far broader application to PE Houses and raises some issues on application to an industry with its own financial alignment to investments and incentive structures.  

Whilst we await regulations to implement the  provisions of AIFMD in the UK (not due to come into effect until mid 2013),  PE Houses would be well advised to begin planning their strategy and tactics relating to complying with the Directive sooner rather than later.

Dollar Undervalued, Swissie Costs Too Much: Dighton

Dighton shorts Swiss Franc despite ‘safe haven’ status

The US dollar is undervalued, especially versus the Swiss Franc, which has been seen as the leading safe haven currency by investors in recent months because of the economic and budget limit issues in the United States, according to Dighton Capital Management, a managed futures fund managers.

Dighton says it is backing the greenback versus a basket of leading currencies –including sterling, the Japanese yen and the euro - by going long the Intercontinental Exchange (ICE) US Dollar Index. It is also exploiting what it sees as a 25% undervaluation of the US dollar versus the Swiss franc by selling franc futures.

While the current political wrangle over raising the maximum debt level in the US has caused some flows from the dollar to the franc, the almost inevitable resolution will only lead to a small bounce in the dollar because markets largely anticipate it. Dighton believes there will be a more significant readjustment in the exchange rate in the next three to six months, when investors will rush to exit the Franc.

Expect The Worse, Reduce Disappointment!

If you always expect the worse, you will seldom be disappointed!

By Bill Blain, senior director, special situations group, Newedge

July 28 2011: What a miserable market. ‘As liquid as set concrete’ sums up activity across most of the street and brokerages. However, we’re seeing some very good flows in specific assets and certain classes. At the moment our money markets team are searching for short corporates, and we’re seeing selective demand for capital instruments. I’ve also a growing list of selected bank bonds I’m looking for. We’re also buyers of high-grade ABS. I have to ask the question: is anyone a buyer of US agency paper? Happy to explain the logic behind all these flows – they make perfect sense in the current fervid rumour and sigh markets.

Looking at the newsflow this morning it’s clear why markets have a serious dose of the wobbles:

Still no agreement in US over debt ceiling, US CDS hits new high, and FT reports bankers worried about the apparent lack of ‘scenario’ planning. (Hmm.. if the Fed preparing the next line of defence you’d hardly expect them to be telling us…) White House spokesman wins a “No Sh*t Sherlock” award for his observation a downgrade would be a bad thing. (Too late mate.. bad thing is coming to a Treasury near you.. soon).

Sweeping Changes To Fund Manager Pay On Way: PwC

Sweeping changes to pay are heading to many asset managers, private equity firms and hedge funds, say experts at PricewaterhouseCoopers.
Buried in the recent consultation paper on the Alternative Investment Fund Managers Directive (AIFMD) are stringent rules on pay that will have far reaching consequences for the asset management industry.

The rules, from the European Securities and Markets Authority, will affect alternative investment firms which escaped the FSA’s regulations on bank pay, including many private equity houses and hedge funds. They will also mean more onerous restrictions for those investment firms already caught by the FSA requirements, and could even hit some firms outside Europe.

F&C On GEM, Et Al

The latest News in Brief bulletin from F&C Investments is now available. Topics include:

- Felix Martin, Economist, Thames River Global Credit Team, discussing the team’s view on the latest developments in the Eurozone debt crisis and the US debt ceiling debate.

- Rob Burdett and Gary Potter, co-heads of the Thames River Multi-Capital Team, explain the rationale behind their purchase of the Jupiter Growth & Income Fund within their lifestyle range.

- F&C launches online TV channel.

GEM credits cash in on Eurozone debt crisis, whilst US unlikely to avoid a downgrade

The market's positive reaction to last Thursday’s announcement on the new bail-out package for Greece was short-lived, with longer term concerns over growth and creditworthiness in Spain and Italy continuing to nag away. 

The Thames River Global Credit Team judged the outcome on two axes: (i) Who pays for the new bail-out - bondholders vs official sector (the contribution of the Greeks themselves having already been decided)? (ii) What else is put in place to avoid contagion to Ireland/Portugal/Spain/Italy? 

Capital Support Right Up Throgmorton's Street

Capital Support, an IT solutions supplier, reports that Throgmorton, one of the UK’s largest independent professional service providers to the hedge fund, private equity and other SME financial services businesses, is its latest mandate win. Capital Support says that Throgmorton will be using its full suite of IT services.

Capital Support boasts that it offers 'complete' proactive IT solutions to ensure its clients' technology is always working profitably for their business. These regulatory-compliant outsourced IT solutions include: cloud-based infrastructures & applications, network design, hardware installation & procurement as well as office relocations & new start up support.

LDI Five Launch From Schroders

Schroders’ liability-driven investment (LDI) team, which the firm claims is one of the fastest growing in the industry, is launching a range of five LDI strategies that will provide an effective hedge of the interest rate and inflation risks within clients’ liabilities through the use of synthetic gilts.

Schroders goes on to say that the new fund range is made up of five pooled vehicles; two providing fixed interest gilt exposure and three providing index linked gilt exposure. Each fund targets cash flows with specific maturities and characteristics. 

European Infra Stable: Moody’s

The outlook for the European infrastructure sector over the next 12-18 months remains stable, despite downside risks, says Moody's Investors Service in a special comment published today.

"The stable outlook for the sector predominantly reflects Moody's expectation that infrastructure companies across Europe will experience a continued recovery from the difficult economic conditions of 2008-09, and that they will be able to obtain the funds necessary to meet capex and debt maturity commitments," says Andrew Blease, author of the report.

BP2S Ups HK IPO Ante

BNP Paribas Securities Services reports that it has launched a share registration service in Hong Kong and joined the Hong Kong Federation of Share Registrars (FSR), strengthening its on-the-ground support for clients seeking IPOs or dual-listings in the Asian financial centre.

The bank adds that as a member of the Hong Kong FSR, it will be able to offer clients its comprehensive suite of corporate and trust solutions, tailored to help international companies tap into the liquidity opportunities in Hong Kong – including the imminent introduction of dealing in listed RMB-denominated securities on the Hong Kong Stock Exchange.