Brian Bollen's Blog

Europe's Relatively Vulnerable: S&P

Standard & Poor's Ratings Services says it has constructed a new index that measures the relative vulnerability of emerging European countries to disruptions in capital inflows.

Nineteen non-eurozone sovereigns are assessed in a report titled, S&P's Sensitivity Index Measures Emerging Europe's Vulnerability To Eurozone Shocks, published on the Global Credit Portal on Feb. 28, 2012.
 While the Emerging Europe Sensitivity Index (EESI) does not directly affect our sovereign credit ratings, it does measure relative sovereign vulnerabilities to external shocks that could - via foreign exchange and GDP effects - materially increase public debt levels and imply downward ratings pressure.

Franklin Templeton Enjoys A Threesome

Franklin Templeton Real Asset Advisors reports the hiring of three new professionals to strengthen its investment and distribution capabilities globally, noting continuing investor interest in private real estate and private infrastructure and real resources.

Christopher Casey, institutional portfolio manager, is the member of the investment team responsible for communicating the product strategies, capabilities and expertise of the private real estate, infrastructure and real estate securities groups both to and through the firm’s global distribution channels. Casey is based in New York and reports to Jack Foster, head of real assets.

Witsard Schaper, vice president, will focus on identifying private real estate fund and co-investment opportunities in European markets. Schaper is based in Franklin Templeton’s London office and reports to Raymond Jacobs, managing director.

Emily Foshag, investment manager, is responsible for sourcing and underwriting global private infrastructure and real resources investments. Foshag is based in New York and reports to Joyce Shapiro, managing director, infrastructure and real resources.

Emerging Market Ugly Duckling Grows Up: Ashmore

The latest Ashmore Emerging View by Jan Dehn, Strategist at Ashmore Investment Management, is entitled The Ugly Duckling Grows Up. The piece discusses the future of emerging markets fixed income asset class and predicts that it is likely to triple or even quadruple in size by the end of the current decade, with local currency in particular to become hugely dominant.

“The growth of the asset class is a virtuous circle: financial deepening and broadening and a shift in capital from the public to the private sector will improve liquidity conditions as well as raise trend growth rates in parts of the world, where the private sector until recently was - and still in many cases remains - entirely capital constrained. We believe investors underestimate what an emerging markets fixed income asset class of $47trn by 2020 means for their asset allocation, whether they are based in G10 or manage money for emerging market central banks or sovereign wealth funds.”

 

Chief Economist Job In Saudi Arabia

I'm not a recruitment specialist, although I have written about it a few times for the Financial Times, but this news of a chief economist job in Saudi Arabia just dropped into my in-tray and I thought that one or two readers might be interested in it (note: Saudi nationality is preferred).

http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&discussionID=97910341&gid=3272309&trk=eml-anet_dig-b_jb-ttl-cn&ut=3PMkO_Xm3PnB81

The LTRO: I Predict A Rally – Followed by A Riot

Bill Blain’s Morning Porridge Supplemental – February 29 2012

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]

The scale of the LTRO is less than we feared it might be, but it’s triggered some fervid drumming by the rally monkey as the market persuades itself higher on the imagined liquidity flooding the market. Saner minds will quickly realise that unlimited ECB 'Trash for Cash' money is not a recipe for long-term stability. The fact Euribor-OIS immediately rose reflects the reality of banks being concerned about lending to other banks that might be loading up on trashy assets – especially if European sovereign assets make their expected move south in coming weeks.

Lots of comment is hitting the screens say this 'eases EMU tensions', or 'supports risk markets further'. Frankly… that’s very short-term. As our head of Repo said: “it's like watching a junkie getting a fix.. In a few days time he’ll be looking for the next one…”

We expect the common-sense market will want to see who the big borrowers were (we suggest Spain), and what signs are there of any real turn around in bank funding sentiment.

For the sake of balance, here is our Senior Strategist’s comment:

“*ECB LENDS BANKS €529.5BN FOR THREE YEARS; ESTIMATE €470BN

*ECB SAYS 800 BANKS ASKED FOR THREE-YEAR LOANS.

Continued Uncertainty And High Volatility: IAM Q1 Outlook

 Morten Spenner, CEO at International Asset Management Limited (IAM), one of the oldest specialist independent fund of hedge funds managers, shares IAM's outlook for a selection of their most favoured strategic themes and market views

Market Views:

While the evolving European developments have the potential to meaningfully impact the direction of markets, our central expectation is for continued uncertainty and associated high volatility in underlying markets.

In this environment diversification, sought across strategies as differentiated performance, is more likely to be driven by manager selection.

A greater focus placed on strategic themes that are less dependent on macroeconomic developments. This both includes managers with defensive characteristics producing more predictable returns and managers that are capable of providing higher potential upside captures from more opportunistic areas.

If it wasn’t for these pesky kids, we’d have got away with it...

Bill Blain’s Morning Porridge – February 29 2012

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]

Lots to talk about this morning. Ireland. Greek ISDA default determination meeting. Three-year LTROs. And just for a change… I’m negative on just about all of it.

I love BBC Radio 4’s Today programme. Sometimes the views expressed are quite extraordinary and can cheer me up no end! Like this morning: some loon from the FX markets declared the proposed Irish referendum to be an absolute irrelevance for the markets. He said the market now understands politics – conclusively demonstrating he did not. He also said the larger the three-year LTRO today, the better it is for markets.

And Irish referendum is relevant. Very relevant.

A big LTRO is a bad thing. Although markets will no doubt rally like a scalded cat on a big sploosh of lurvely liquidity, it’s a very bad thing! 10.15 we will know.

Investment Defence Is Coming Of Age; Bill Gross, PIMCO

PIMCO’s latest Investment Outlook by Bill Gross highlights the following key issues.

Over the past 30 years, an offensively minded Federal Reserve and its global counterparts were printing money, lowering yields and bringing forward a false sense of monetary wealth.

Successful investing in a deleveraging, low interest rate environment will require defensive in addition to offensive skills.

The PIMCO defensive strategy playbook: Recognise zero bound limits and systemic debt risk in global financial markets. Accept financial repression but avoid its impact when and where possible. Emphasise income we believe to be relatively reliable/safe; seek consistent alpha.  

 

Barrett In Perpetual Motion

Invesco Perpetual has appointed Rob Barrett to its institutional sales team, based in Portman Square in London.

Barrett will focus on working with prospective institutional clients within the UK and he will report to Hugh Ferrand, head of UK institutional sales & service.

He joins Invesco Perpetual from Swisscanto where he spent the past three years heading up the UK institutional business. He has more than 25 years experience in the industry having previously held positions at HSBC Global Asset Management, AXA Rosenberg Investment Management, JP Morgan, UBS and State Street.

 

 

Buy & Build In H2 2011 Slump

Buy & Build activity in Europe was significantly weaker in the second half of 2011, according to research by Silverfleet Capital, in conjunction with mergermarket. The jointly published 2011 Buy & Build Monitor shows that whill overall 2011 saw Buy & Build activity increase both in volume and value terms, the number of add-on transactions decreased considerably during the second half of the year slumping to levels last seen at the end of 2009.

2011 saw the highest number of add-ons undertaken by private equity-backed portfolio companies since 2008, at 364 (versus 335 in 2010). However, despite a strong start to the year, with 210 add-ons undertaken in H1, the second half of the year saw activity levels decline significantly, with only 154 add-ons undertaken in H2. 

Just say no to drugs – even the really really good ones…

Bill Blain’s Morning Porridge – February 28 2012

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]

Apparently the markets are full of confidence ahead of the three-year LTRO tomorrow. Germany passed the Greek bailout vote – although didn’t sound like any legislators were particularly persuaded what a great deal it was. Demand for the EU’s latest three-year funding was strong and included some Asian participation – which will no doubt have the powers that be in Brussels high-fiving themselves. Problem? What problem?  

That Greece has been put in selective default by S&P should barely wibble markets – holdout investors will get hit by collective action clauses. Get over it… unless of course you have a blocking stake in one or more of the bonds on the list. Then it becomes a case of who blinks first. But, the ECB has also suspended the use of Greek bonds as collateral – which could prove an issue for Greek banks hoping to fund! (We believe they can go to the Bank of Greece for 'emergency liquidity assistance' and we’re also sure the new GREECE bonds after the PSI exchange will be postable!)

The most interesting story this morning is the ECB’s confirmation Italian and Spanish banks 'filled their boots' buying over €50bn of government debt since the LTRO in December. Hardly a surprise – it's an open secret leading Italian and Spanish bankers were herded into a room and politely but firmly told that buying government bonds was the quid pro quo for unlimited ECB funding largesse.

BNP Paribas Securities Services Hails N Am Milestone

BNP Paribas Securities Services has appointed Claudine Gallagher as regional manager North America. Gallagher joins from JPMorgan, where she was most recently a managing director in charge of the US bank’s American Depository Receipts business.

The bank says that Gallagher's appointment marks a key milestone in its strategy to grow in North America, as it aims to support the increasingly global focus of its client base across Europe and Asia.

She will spearhead regional expansion, and oversee the roll-out of the bank’s global and local custody services in the US later this year. She will also lead efforts to enhance the bank’s award-winning* correspondent clearing service for broker dealers.

Gallagher will report to Charley Cock, head of client development at the division.

New Energy For US A Game Changer

PIMCO’s latest Global Credit Perspectives by Mark Kiesel - the catchily titled Game Changer includes the following highlights.

“In our opinion, numerous opportunities exist for investors willing to do on-the-ground research on the companies and industries that stand to benefit from the strong growth in the energy sector.

“In addition to strong secular tailwinds supporting the energy sector, highly expansionary global monetary policies from many central banks are adding cyclical support to globally traded commodities like oil.

“In the US energy sector, we believe that onshore natural gas shale and oil shale developments are creating opportunities to invest in energy companies that may grow significantly faster than the overall U.S. economy.

In combination, we believe increasing natural gas and onshore oil production could potentially see the US overtake Russia as the world’s largest energy producer in the next ten years, and over time America should make great progress in becoming more energy self-sufficient as a nation.

 

Invesco Perpetual Clinches Clinch

Invesco Perpetual has appointed Simon Clinch as US equity fund manager within its global equity team in Henley.  He will report directly to Simon Laing, head of US equities, when he joins in early March.

 

 

KPMG Boosts A-Team

KPMG LLP, the audit, tax and advisory firm, continues to expand its alternative funds team with the appointment of industry figures John Budzyna and Maurice Holmes to key posts.

Budzyna, an internationally recognised leader and spokesman for the alternative investments industry, has been named KPMG’s national leader, market development for alternative investments. 

Holmes, who also has extensive experience advising hedge funds and service providers to the hedge fund industry, has been named managing director, market development for alternative investments.  

Budzyna served most recently as CEO of Cutting Hedge Consulting Co. LLC, an advisory firm to the hedge fund industry, and also serves as the chairman of the board of Hedge Funds Care, one of the leading charitable organisations supported by the hedge fund community. 

How does it feel, to be scrabbling round for your last dime...

Bill Blain’s Morning Porridge – February 27 2012

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]

What’s on the agenda this week? US employment data on Friday might re-focus markets back onto growth fundamentals. We’ve got the three-year LTRO on Wednesday – and I’ve got to think it's going to be a  frighteningly large €500bn+ number – which I reckon is long-term bad for markets. But hey-ho...even UK banks are set to tap the cash according to FT.

Otherwise it's going to be another messy week watching for the next tragic turn or twist in the Greek odyssey. Assuming the Germans (today), Finns and Dutch (Wednesday) approve the bailout, and the Greeks agree to 340 more slashing cuts, then it’s a done deal...apparently.

Over the last few days we’ve seen a number of trends develop in Greek debt as a number of trading strategies take shape. There is demand for the very short-end bonds on the basis they may yet get paid – but we’d be suspicious of GGBs – especially the March 12 bonds. It’s highly likely Collective Action Clauses will be exercised to force any holdout investors to share the pain.

However, expectations London law international GREECE bonds will be money good (something we predicted weeks ago) are now endemic across the market. Greek CP has caught a bid for the same reasons! There are buyers for large blocks of Greek intermediate bonds – so if any holders reckon this iteration of the bailout, the PSI and the subsequent actions will get even messier – give us a call! US funds remain keen to load up!

It's got nothing to do with your Vorsprung Durch Technik you know…

Bill Blain’s Morning Porridge – February 24 2012

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]

Lloyds results worse than expected – poor economic outlook, further non-core asset sales, higher wholesale funding costs don’t bode well for future. But don’t they have access to cheap ECB money – only through its European subs! So perhaps that’s a positive for UK banks – surviving (just) without the messy distraction of been given too much money!

German economic confidence hits a seven-month high. I can just see it – ECB hikes European rates as a result of German overheating. They’ll love that in the periphery!

Germany and IMF are on collision course on Greek aid. Portugal now firmly in market sights as the next big event.. (well maybe not.. Greek default on PSI take-up remains nailed-on.) Analysts say Portugal’s existing package not big enough so they should go for a debt swap as well.. but austerity is driving debt/GDP higher! (Remember Keynes’s last words: 'I should have drunk more champagne…')

Harvest Festival For BNP Paribas Securities Services

BNP Paribas Securities Services (BNP Paribas) reports that it has implemented a mandate from Harvest Global Investments to launch an emerging market fund investing in Mongolia. It says this makes it the first global custodian to support foreign investments in this Asian frontier market.

Harvest, described by BNP Paribas as China’s second-largest asset manager with $37bn in assets under management, appointed BNP Paribas as global custodian, fund administrator and transfer agent in support of its Asian Frontier Equity Fund.

The fund went live in late 2011 and has since been investing in Mongolia. In so doing, Harvest became both the first Chinese and the first cross-border asset manager to take direct investment exposure in the country.

Booming Demand Pushes Farmland To Record Levels

Surging demand for commercial farmland saw prices reach record levels for the third consecutive period, says the latest RICS Rural Land Market Survey, H2 2011.

The average price per acre increased to £6,514* during the second half of the year. Farmland has now almost doubled in value in the last five years.

This dramatic jump was driven by growing interest from commercial farmers, looking to expand their enterprises in order to capitalise on the strength in commodity prices. A net balance of +53% of chartered surveyors reported an increase in demand for commercial land over the previous 12 months, while demand for residential farmland remained flat (-4%).

Schroders Shares Top 10 Tips for De-Risking

Schroders’ UK Strategic Solutions Team, led by Mark Humphreys, shares its Top 10 Tips for successful de-risking

1.            Start with the end in mind: What is the goal of your de-risking plan? A buy-out of the liabilities? Or to achieve self-sufficiency (where the scheme is run on a low risk basis with no additional contributions required)?

2.            Look to take ‘rewarded’ risks: Some risks are rewarded with higher expected returns (e.g. equity risk) and some generally are not (e.g. liability risks). Schemes should focus on reducing unrewarded risks.

3.            Protecting against liability risk doesn’t mean giving up growth: There are a range of liability-driven investment (LDI) strategies that can free up assets to invest in return-seeking strategies.