Brian Bollen's Blog

Tremé: If You Haven't Already Seen It...

Just finished watching the first series of Tremé last night. This latest TV series from the team that created The Wire (Zola's La Bete Humaine for the 21st century) is a slow burn but well worth devoting the time to it. The last few minutes of the last episode left me sobbing. If you haven't already seen it, I recommend you get hold of the DVDs, set aside a few evenings and give yourself a treat.

No Quarter Asked, Or Given?

Newedge - Blain's Morning Porridge - September 30 2011

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

Quarter end...ouch...although the numbers will be miserable...remember a new one begins tomorrow!!

German EFSF vote passes and market goes. So what? No real reaction except scepticism. I could fill this morning's porridge with analysis of how dangerous it is waiting till mid-October for the Slovaks to ram their vote through, or how German legislators hedged the vote: they didn't make themselves popular: recent polls show 80% of German electorate is opposed to European bailouts, so the 90% of Bundestaggers voting for the EFSF needed to sound harsh about things like no increase in its size, etc etc etc. It’s just more noise.

Merkel says Germany is not a bottomless money pit for the euro – but does that mean it is? Best news I saw yesterday was Deutsche Bank getting a two-year €1bn senior funding deal away – apparently the first senior deal for three months. But the spread, at Libor + 98 basis points, is pain indeed. So instead of more agonising about who pays what when Greece defaults, or who gets today's Barroso award for the most useless contribution to the euro debate, it's time for a good old-fashioned rant.

Everyone from the smallest child to as-yet-undiscovered tribes in the Amazon basin knows that banks are to blame for this crisis, and every banker is definitionally an evil fatherless son or daughter. Investors around the globe are quite properly spanking the be’jesus out of any financial stock. Viva la revolution! Overturn the banks and decimate bankers.

PFI/PPP Outlook Stable: Moody's

The outlook for the EMEA private finance initiative/public-private partnership (PFI/PPP) sector over the next 12-18 months is stable, says Moody's Investor's Service in an Industry Outlook report.

"The stable outlook and fundamentals for the EMEA PFI/PPP sector are driven by the strong underlying credit quality of the asset class and resilient contractual structures," says Declan O'Brien, an analyst in Moody's infrastructure finance group.

"Projects generally continue to be well insulated from the financial crisis," explains O'Brien. "During the period 1 January 2009 to 31 August 2011, we took 27 rating actions from a total portfolio of 46 publicly monitored transactions; positive actions have outweighed negative actions by 22 to 5, although many of these rating actions reflect de-risking as projects complete construction," he adds.

Northern Trust Pension Fund Boost

Northern Trust says it has enhanced its asset and liability risk reporting to help its pension fund clients across the globe monitor their coverage ratio risk over different time horizons. It says the reporting uses multiple risk models to deliver scenario and factor stress testing data and is particularly appropriate for the Dutch market where it supports clients’ requirements for risk reporting compliant with FtK regulations.

New Indices From The East

From Singapore comes the news that Eurekahedge, an alternative fund data provider, is to launch a suite of new asset-weighted indices, under the name Mizuho-Eurekahedge Index.

This suite of indices, we are told, follows a rigid methodology that will enable investors to easily utilise them for benchmarking portfolios and building products such as replication indices, passively managed index funds and exchange-traded funds.

Taking Pills From Newcastle

European private equity firm Silverfleet Capital is to invest in Aesica Pharmaceuticals, one of the UK’s fastest growing companies. Completion, which is subject only to obtaining clearance from the German authorities, is expected to occur within the next four weeks.

Headquartered near Newcastle, Aesica, we learn, has the expertise to both develop and manufacture primary (API) and secondary stage (finished product dosage forms) pharmaceuticals. Aesica partners with pharmaceutical companies throughout the key stages of a drug’s life cycle to supply product from the early stage through to final commercial supply.

Silverfleet Capital has agreed a majority investment with Aesica replacing that of LDC and members of Aesica’s Executive will reinvest a significant amount of money for a large minority stake. Debt is being provided by Lloyds, HSBC and Yorkshire Bank.

Welspun Turns To J.P. Morgan For GDR

J.P. Morgan has been named depositary bank by Indian manufacturer Welspun Corp Ltd in relation to the company’s $115m Global Depositary Receipt (GDR) listing.

Welspun, which manufactures and delivers pipes to a global client list including Fortune 100 companies in the oil and gas sector, issued 23,026 GDRs representing 23,026,000 common shares.

B.K. Goenka, Welspun chairman, says: “This GDR listing is a crucial step in our journey to realise our ambitious ‘ore to pipes’ vision for the company.”

 

Uber-Sanctimonious BeCapital Raises €148.325m

BeCapital, a European private equity firm focusing on expansion capital investments in cleantech companies, announced the final closing of its first fund at the oddly unrounded sum of €148.325m, well above the €100m initial target. Initiated by BeCitizen, Cobepa and La Compagnie Benjamin de Rothschild, BeCapital gathered interest from what it describes as a unique network of investors, mostly European families with well diversified industrial and geographical backgrounds.

One wonders which of them might have been short of the €1.765m needed to limp on to a full €150m.

But let's put that slight carp aside and focus on the facts. BeCapital says its approach is based on the principles of Positive Economy. This is a framework it has developed which asserts that economic growth can only be sustained if it preserves and restores the environment and natural resources. Furthermore, companies addressing these challenges will benefit from significant growth prospects.

While the usual approach to assess the environmental impact of technologies focuses on energy efficiency and climate impact, Positive Economy takes a holistic perspective by also taking the resources, toxicity and biodiversity dimensions into account (will someone please pass the eco-sick bag?).

Hedge Funds To Spend $2bn-plus On IT

Hedge funds will spend more than $2bn on information technology (IT) in 2011, representing an average of approximately nine basis points of assets under management.

This is the verdict of the Prime Finance 2011 IT Survey released today by Citi Prime Finance and First Derivatives, a global provider of software and consulting services to the financial services industry. Citi goes on to say that the report - Managing Your Hedge Fund IT Spend to Achieve Differentiation - surveyed over 75 hedge funds in the US and Europe and 15 vendors, documents for the first time both the industry’s aggregate expenditure on information technology and the average expenditure per hedge fund.

“The Prime Finance 2011 IT Survey demonstrates the powerful impact of technological innovation on the hedge fund industry,” says Sandy Kaul, US head of business advisory services of Citi Prime Finance. “The survey, providing information on IT investment for the first time, enables industry participants to evaluate their own expenditures and see how they stack up against their competitors. While the $2.09bn spent by hedge funds is equivalent to just 2.8% of forecast total industry-wide securities and investment spending of $75bn, hedge fund IT investments have a disproportionately large impact on advancing the capabilities of the overall financial services industry due to their complex trading strategies and multi-asset focus.”

European Politician Says Stupidest Thing Award

Newedge - Blain's Morning Porridge - September 29 2011

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

And this year’s FIM Award – for the European Politician who says the stupidest thing – goes to...

Another risk-off day in prospect as perceptions of an orderly solution to the European crisis wobble. Although Finland said yes to EFSF, and the Bundestag should approve the expansion of the fund (but raising further doubts as to Merkel's control of her party and her political longevity) there are just too many known and unknown unknowns to face the day with much confidence.

The likelihood of someone saying something spectacularly stupid is just one of the many threats to our sanity this fine and sunny day. On balance, however, we think the groundwork has been done, so there is more upside than down from some well chosen European plays!

The problem for the euro is irrelevant noise – which tends to get the focus. This ranges from the understandable frustrations of 'private investors' who signed up to the Greek exchange nonsense last month and now face not a 21% haircut, but seeing their agreement ripped up and replaced by a 50% cut.

Clearly an investor who could have bailed out of bonds with a modest loss is going to be mightily displeased when they now lose half. Tough - but that's the downside of holding risky sovereign debt - get over it...(And next time we say sell - do it! Remember Blain’s Maxim No 1: 'The time to sell is the moment you first think about it - not when you have to'.

Deutsche Bank Wins Kentucky SecLend Mandate

Deutsche Bank says it has won a mandate to provide securities lending services for the Commonwealth of Kentucky, Finance and Administration Cabinet - Office of Financial Management (OFM) based in Frankfort, Kentucky. Securities lending, we are reminded, generates incremental revenue in a secure way, which facilitates OFM’s mission of creating financial value for the Commonwealth of Kentucky. OFM is a long-time participant in securities lending on a non-custodial (third-party) basis.

“Deutsche Bank offers financial strength, access to a seasoned management team and real-time technology,” said Dwight Price, head of fixed income, trading and risk management for OFM. “The bank was able to clearly differentiate itself as a manager based on its track record and ability to customise a programme for us.”

 

 

The Cupidity Of SWIFT

I have to say that since experiencing Sibos for the first time in Amsterdam in 2010, I have been appalled at the sheer cupidity of its parent, the Society for Worldwide Financial Telecommunication.

Some readers will know that SWIFT point blank refused complimentary entry to my wife, who is also my personal assistant and company secretary. She could come in, they said, of course, but only if she handed over hundreds of euros.

To then rub salt in the wound, they refused me access to the press room on the grounds that I was there as part of the BNP Paribas Securities Services delegation rather than as a journalist (even though I had submitted a separate request for press accreditation and the juniors manning the door recognised me at once and hailed me by name, and even though the press room was in fact full of public relations practioners rather than hacks).

I didn't think SWIFT could slip much lower in my personal estimation, but with the news that
Virtual Sibos opens online today (giving you the opportunity to experience the events and conference sessions and collaborate with exhibitors and other participants). I thought that sounded mildly interesting, until I found out that it would cost me €600 to pick over last week's cold vomit.

NSD Names Gennady Booth Director of Planning and Control

From Moscow comes the news that Gennady Booth has been appointed a Director of the Planning and Control Department of Russia's National Settlement Depository (NSD). In his new position Booth will be responsible for issues related to the functioning of the planning office, implementation of a balanced scorecard system and a quality control system in the company.

Booth graduated with honours from Moscow Power Engineering Institute in 1989, specialising in the automation and management of technical systems. In the same  year he also received Diplom-Ingenieur degree with honours from TH Ilmenau. In 1995 he graduated from the Moscow Government's Modern Business Institute with a specialty in banking and finance. Booth holds an MBA degree in financial management and is a member of the Association of Chartered Certified Accountants (ACCA).

 

Younger, Smaller Hedge Funds Outperform: PerTrac

Small hedge funds outperform mid-size and large funds, and young funds outperform older ones, according to PerTrac, a provider of hedge fund analytics. Its newly released report, Impact of Fund Size and Age on Hedge Fund Performance, finds that funds with less than $100m in assets under management (AUM) returned 13.04% in 2010, compared to 11.14% posted by mid-size funds ($100m to $500m AUM) and 10.99% gains achieved by large funds (over $500m AUM). The study also found the performance of small and mid-size funds through the first six months of 2011 was better than their performance over the same period in 2010.

Young funds, defined by PerTrac as less than two years old, gained 13.25% in 2010, compared with gains of 12.65% and 11.77%, respectively, for mid-age funds in existence two to four years and ‘tenured’ funds older than four years. Moreover, young hedge funds appear to have achieved these returns with less risk than their competitors.

AST 23 Now On The Virtual Newsstands!

Issue 23 of Asset Servicing Times is now available at http://www.assetservicingtimes.com/astimes/ASTimes_issue_23.pdf.

The lead story slightly flogs the ailing horse that is Sibos 2011 (Regulation-driven technology key theme at Sibos) but that is only to be expected, given the investment of the time, effort and money required to go to it. Enjoy the read!

 

Societe Generale Selects Broadridge BPO/Technology Solutions

From Lake Success, New York, Broadridge Financial Solutions reports that Societe Generale has chosen it as one of its key strategic partners for a range of technology and outsourcing services for the firm's US broker-dealer, SG Americas Securities, LLC.

Broadridge says that Societe Generale is leveraging this strategic partnership to support the growth of its US market businesses. In doing so, it will utilise Broadridge's industry-leading institutional securities processing platform, including Broadridge's Business Process Outsourcing (BPO) solution.  

BofE Credit Conditions Survey Paints Bleak Picture: Metro

Mark Price, Managing Director of Business and Commercial Banking, Metro Bank comments on the Bank of England Credit Conditions Survey

“Today’s Bank of England Credit Conditions survey seems to paint a bleak picture for British businesses, very few of whom are requesting and being granted working credit. Q3’s small increase in available credit made has been offset by far tighter loan conditions, and British businesses are being left without a viable funding source for expansion. Our research shows that the main reason businesses request a loan is to fund growth.

“Today’s survey shows that demand for credit is expected to remain weak as businesses are reluctant to request and take on more credit, but our research shows just 36% feel their bank has been supportive of their business over the past 12 months. Businesses without a good relationship with their bank are less likely to feel able to discuss their lending requirements. Metro Bank’s focus on local community based banking means that local managers are able to make lending decisions based on the relationship between Metro Bank and each business.”

 

De-leveraging Remains Primary Corporate Theme: EY

Dougald Middleton, partner and head of Ernst & Young’s capital and debt advisory team, comments on today’s Bank of England Q3 Credit Conditions Survey

“The survey data confirm what we are hearing from our clients that de-leveraging remains the primary theme for corporates in managing capital. Businesses are keen to shift debt from their balance sheets so they are more financially nimble to navigate the choppy waters ahead. Corporate balance sheets are getting stronger, with lower debt and substantial cash reserves.  

"The survey reveals that banks are increasingly willing to lend, boosted by the unlimited liquidity being provided by the EIB.  This has resulted in some very competitive loan pricing for large corporates. Supply for sub-investment grade borrowers and small enterprises is much tougher to find and the pricing is much higher. The cost of debt for the companies which make up the core of the economy is undoubtedly impacting on the appetite to borrow.

“The survey also indicates a pickup in demand for debt to finance M&A activity. Our clients confirm this trend and we expect to see an increase in strategic acquisitions by public companies using their retained cash and bond or bank debt."

 

Volatility As An Asset Class?

I'm still learning new stuff after 54 years seven months and seven days on earth. I've just been listening to Michael Purves, head of derivatives at BGC Financial, on Bloomberg TV. He is plugging the notion of volatility as an asset class, something that I would like to hear more about, and maybe even try to understand.

He also threw a new animal into the market, as an alternative to bulls and bears. We are in a wolf market, I think he said, which I think means pouncing on opportunities and eating them, rather than listening to the advice of a buy-and-hold financial adviser. Maybe I'll see if I can persuade him to come on here and share a bit more.

From Russia With (Low) Latency

Last week Sibos in Toronto, this week TradeTech Russia, in Moscow. And once the trade exhibitions begin, the press releases hailing new triumphs inevitably follow. Such as this one about how Otkritie Capital, one of the largest financial groups in Russia, has partnered with QuantHouse, the leading provider of next generation trading solutions, to launch low latency market data for MICEX, the country’s main equity market, via the company’s QuantFEED solution. Still awake? Then read on...

“The collaboration allows Otkritie’s international clients a competitive advantage in terms of market data latency. This, in combination with Otkritie’s fastest order routing into Moscow, will give its clients the cutting-edge into the matching engine. It also opens up Russian securities to a broader investor audience with global participants being able to get Russian data through a consolidated feed.