Brian Bollen's Blog

Cyprus Needs Carrot And Stick To Get Russian Help

By Norman Villamin, Chief Investment Officer Europe at Coutts. 

Parliament’s complete rejection of Cyprus’ bailout plan has sent policymakers back to the drawing board and is testing the resolve of the European Commission, International Monetary Fund and the European Central Bank “troika”. On the sidelines sit the Russians, who have the capability, but so far have not shown the willingness, to help.

The European Union (EU) is holding its ground, saying Cyprus needs to come up with its share of the funding for the bailout, which can’t rely on borrowed funds. Interestingly, the troika needs to be careful not to take too hard a line, as that may push Cyprus much closer to Russia. That seems to be the little leverage that Cyprus has.

SEB IM Appoints BNYM

SEB Investment Management AB has appointed BNY Mellon to provide fund administration services for over 150 funds valued at €40bn.

Domiciled across Sweden, Luxembourg and Finland, the funds include SEB’s fund of hedge funds and private equity funds. BNY Mellon will also be providing transfer agency for the Luxembourg-domiciled funds.

Peter Branner, CEO of SEB Investment Management AB, said: “BNY Mellon are able to offer us a solution that breaks new ground in the Nordic region, providing a platform for us to grow our funds range and to continue to innovate in the asset management space. Enhanced efficiency and reduced risk were our key priorities, and we were also looking for a partner who could support our growing ambitions around broadening our distribution capabilities across the region.”

Hani Kablawi, head of Europe, Middle East & Africa (EMEA) for asset servicing at BNY Mellon, said: “We will be delivering a highly integrated solution to SEB across a diverse range of funds, which include some of the most complex in the marketplace today. Accordingly, this new and valued partnership with SEB is very much a landmark deal, for both BNY Mellon ourselves and the wider Northern European fund administration business, in terms of the scope of the assets involved and the sophisticated servicing capabilities we will be providing to SEB.”

Congratulations Paxo: Cyprus To Quite Euro If Need Be

Congratulations to Jeremy Paxman, for persisting with one of the oldest tricks in the journalist's trade. Ask the same question at least three times, not necessarily one after the other, or in the same form, but ask it at least three times.

Doing this on the BBC2 flagship current affairs programme Newsnight last night (March 19) he forced the hapless spokesman for Cyprus to state in public on the record that Cyprus will leave the euro and revert to using a Cypriot pound if all else fails.

Once the principle has been conceded, it is only a matter of time till the practice follows.

One other question immediately presents itself. Who's next? Quitting the euro and devaluing are surely preferable to the alternative suggested by the various depictions of Chancellor Merkel as the most infamous of her predecessors in the role...

Depositors Beware! Cyprus Sets Poor Precedent

No sooner have I said my own piece on Cyprus than additional, informed comment comes in from Azad Zangana at Schroders.

“After months of negotiations, an agreement has been reached on a bailout for Cyprus and, in particular, Cypriot banks. Cyprus will receive €10bn of European funds, but is controversially being forced to fund €5.8bn from Cypriot banks. It appears that latter amount will come directly from depositors. Accounts holding over €100,000 will be forced to pay a 9.9% levy, while those holding less will pay 6.75% - making a mockery of the newly agreed €100,000 European-wide deposit guarantees scheme.

"Despite EU officials stating that Cyprus is a special case, the move sets a dangerous precedent for future bailouts of member states with problem banks. The move will obviously spark outrage in Cyprus, and exacerbate the distrust already present between the public and banks. However, the bigger danger for international investors is the potential spread of fears to other countries, particularly Spain which is yet to complete its banking bailout.

Cyprus: Devaluation By The Back Door

Something struck me about Cyprus earlier today, once I had stopped ranting and fulminating about the universal Government tendency to steal other people's money when its own runs out.

It's devaluation by the back door, in a sense. Deprived of its own currency, how else can the island (which clearly should never have been in the European Single Currency experiment) impoverish its inhabitants to the required extent? If you can't drive down your wages, steal from what they have in the bank.

What's next? A run on all banks across Europe? A return to stashing under the mattress what little spare cash we have left after our Governments have helped themselves? 

Cui bono out of all this? A pound to a penny it's the banks...

First Names Group Boosts Senior Management Team

Trust and corporate service provider First Names Group reports the appointment of three new directors. Alan Mayo, Chris Tushingham and Craig Brown have joined the Isle of Man office significantly increasing the local senior management team as the multi-jurisdictional group continues to grow.

Mayo, it continues, has taken the reins as the group’s change and integration director.  Based in the Isle of Man, Alan will be responsible for the implementation of the Group’s ambitious growth strategy that will see continued international expansion both organically and through strategic acquisitions.

The best way to destroy the capitalist system...

Mint – Blain’s Morning Porridge  - March 18 2013

The best way to destroy the capitalist system is to debauch confidence in the currency…

This morning: Cyprus, bank disaster, will corporates exit Europe? Stock charts.

Lots of hyperbole about Cyprus in the press and comments this morning. European markets distinctly cautious, but if we see an overreaction to the bizarre bailout, then it’s probably a risk-on buying opportunity. Don’t expect a deep sell-off – won’t happen. Market participants are simply shaking their collective heads in minor bewilderment and will keep arbitraging Draghi promises. For now.

My commodities guru, Daryl French, just sent me a great chart showing how Gold has just broken out of its long term down-trend versus the euro. The dollar's still down – but does this tell us euro change is in the air? The real problem will be the further damage done to the euro's credibility. The terms of the Cyprus bailout don't reflect much wisdom from the European elites. Credibility is a finite resource – and gold may be a great way to measure how little is left.

ALFI On Islamic Funds Best Practices

ALFI has kindly sent a link and short synopsis for this week’s ALFI podcast.

Best practices for setting up Islamic funds aims to establish a standard in the industry, according to Germain Birgen, RBC Investor Services and Chairman of the ALFI Middle Eastern sub-committee

As a result of assets under management in this sector in Luxembourg reaching $5bn, and a number of major fund launches, ALFI’s working group on Islamic Funds decided to produce a collection of best practices for setting up and servicing Islamic funds.  According to Germain Birgen, RBC Investor Services and Chairman of the ALFI Middle Eastern sub-committee, this is not regulation, but an industry standard which has been created in order to achieve a consistency amongst service providers.

Thought For The Day

Today Rome. Tomorrow Port Stanley...

I’ve set my laser from stun to kill”.. “Great, if anyone attacks we can blink em to death…

Mint – Bill Blain’s Morning Porridge  - March 14 2013

I’ve set my laser from stun to kill”.. “Great, if anyone attacks we can blink em to death…

This morning: Ireland, European fault-lines, Greece worries, Buy the Nikkei, Germany/Italy wealth discrepancy simplified.

Markets opened and market closed. Lots happened in between, including a new Pope. (Argentina? Italian v2.1 methinks) I was busy out trying to find buyers for a new bilateral (and very exciting) deal we are putting together, and then trying to understand what’s happening. If Ukrainian chicken farms can raise new money, who can’t! (I can assure you, our new deal is much much better.) Tonight's EU statements on Cyprus bailout and next tranche of Greek aid will be.. “interesting”.

Aligning The Interests Of Executives, Shareholders And Investors.

Keith Skeoch – Speech Transcript
 Marketforce Future of Fund Management conference March 13 2013

Reaching Consensus: 
Aligning the interests of executives, shareholders and investors.

Good morning, what an interesting question, well in fact I think there are actually 2 big questions! In answering them I will try and build on Ed and Helena’s remarks by adding a long-term perspective.

The first is the age-old question about how to align the interests of the various stakeholders in an enterprise, in our case a modern fund management firm. How to co-ordinate harness and mitigate the base effects of self interested behaviour in what academics term, the principal - agent problem, has been the subject of debate for centuries. The first corporate-governance conversation that took place in 1609 between the investors and executives of the Dutch East India Company and was later first identified as an item for academic debate by Adam Smith in 1776 in the Wealth of Nations. Arguably one of the most meaningful governance conversations took place around 800 years ago and resulted in the signing of the Magna Carta in 1215.

The second big question -

Japanese Assets: To Buy, Or Not To Buy?

Standard Life Investments suggests that there are tactical arguments in favour of Japanese assets, especially equities and real estate, but a strategic call depends on the Japanese Government adopting further structural reform.

The latest edition of Global Perspective looks at a key question facing investors, whether to buy or sell Japanese equities, government bonds and real estate. The monthly publication summarises a recent round table discussion on the pros and cons of investing in Japan, involving Standard Life Investments and its strategic partner, Sumitomo Mitsui Trust Bank.

Andrew Milligan, Head of Global Strategy, Standard Life Investments said:

We Can't Afford To Be Green

Mint – Bill Blain’s Morning Porridge  - March 13 2013

Lowering greenhouse emissions while economic aspirations rise is essentially unsolvable…

This morning.. UK – is anyone doing anything to sort it? Spain auction – smart. Japan about to destroy the planet, and why Italy yields may back up.. and why the Germans aren’t happy…

Another consolidative day in prospect. Eurogroup is meeting on Friday to talk about this “special deposit tax on Cyprus” which might reduce the bailout to €10bn rather than €17bn. Who said fudge? But Germany won’t even think about voting on Cyprus till April. (Which will give plenty of time before bond matures in June..) Meanwhile, Ireland about to come to market with a new sovereign 10-yr deal – wheeee.. that will cause an outbreak of joy and happiness across Europe. Except for the fact Merkel and Hollande are going to have a very public spat about France missing deficit targets by a country mile..

That UCF Moment

 Mint – Bill Blain’s Morning Porridge  -   March 12 2013

I was walking with the chief ranger when lightning struck way off. The chief said, 'I'll see you later.

This morning: more of the same in Europe, UK vs France, OECD Leading Indicators, New Issue Market and the UCFM!

Bit of a slow, slow, quick day yesterday with a somnambulant morning followed by a US uptick. Lots to worry about what next in Europe, but nothing we haven’t heard a trillion times already: Italy, Cyprus, etc etc etc.. yawn… With Germany posting recovery and Europe still sliding, you’ve got to wonder how the Bundesbank/ECB plays that one through this year – easing in the face of German growth will be a challenge!

But things must be picking up. It’s the first day of the Cheltenham Festival, (horse racing girls), and a staggering number of market participants are off attending.  Well… it either means everyone is making so much money they can afford to blow some, or everyone is so broke they’re off to gamble the last few pennies on a three-legged nag with a bad sense of direction (you will know which one that is when you see me place a fiver each way..)

The Royal Bank of Scotland Privatisation: You Read It Here First

I've been reading reams of newspaper coverage the past three or four days, written by journalists whipping themselves into a state of frenzy over the possibility that The Royal Bank of Scotland might be privatised in the foreseeable future.

Oddly enough, I wrote about exactly that in May 2011. See for yourselves:

http://www.brianbollen.com/bbb_brian_bollens_blog/2011/05/the-royal-bank-of-scotland-a-strong-buy-privatisation-in-october-2013.html#more

It's Raining Proof!

It is suddenly raining proof that the UK's Coalition Government is doing something right. I've just read an editorial piece in the Financial Times this morning (March 11) stating that Britain needs an activist chancellor. With the utmost respect to my publishing alma mater, I take that as clear proof that the dreaded Osborne is on the right track, even if he is nowhere near extreme enough.

Personally, I'd privatise the National Health Service overnight, and get it off the books. Give the buildings and equipment to the staff, tell them they will be paid as usual for a year, and to get on with preparing for life once that year is up.

I'd abolish the welfare system as it stands, and start again from scratch. The measure of a civilised society is how it looks after those who are unable to look after themselves, not doling out allowances to young, fit people who do not have a job.

My nephew and his fiancée have just returned to the UK after two years working as English language teachers in South Korea. Within eight days they both had jobs.

The UK Government Is Doing Something Right

The UK Government is at last doing something right. I don't quite follow the detail but it is being condemned by the Archbishop of Canterbury on at least two fronts, one to do with the capping of benefits, the other to do with bank leverage.

Those of us who have been around the economic cyclical block two or three times know some things instinctively. These include the certainty that condemnation by the head of the minor, heretical sect known to some as the Church of England, and to others as King Henry VIII's personal piggy bank, is a surefire copper-bottomed guarantee that whatever is being condemned will turn out to be the right course of action (economically speaking, that is).

C'moan the Coalition!!!

Get Out Of Jail Card

Looking for an excuse to get out of the office for a couple of days? Need to brush up your awareness of the value for money (or otherwise) your market data vendors offer? This information comes with no endorsement or assessment by me; I'm just passing it on as a public service.

Then this invitation to a  FIMA market data conference in London in May, just landed in my in-tray, might interest you.

After 6 months of researching with the market data community and talking to your peers it seems that there are some key challenges that remain unanswered for 2013:

BNP Paribas Joins Euroclear Highway

They make an unlikely Thelma and Louise, but BNP Paribas Securities Services and Euroclear Bank today jointly report the launch of their joint tri-party collateral management arrangements via Euroclear’s Collateral Highway. The initiative enables mutual clients to access securities held at BNP Paribas Securities Services as collateral for tri-party operations conducted by Euroclear Bank.

BNP Paribas and Euroclear Bank entered into a collaboration agreement in 2012 and have since been working together to develop the joint initiative to support clients in sourcing securities to meet their growing collateral needs. High demand, stricter risk management practices and new regulation are increasing the need for collateral at a time when high-grade collateral is increasingly difficult to source easily.

SEP: Someone Else’s Problem – until...

Mint – Bill Blain’s Morning Porridge  -   March 11 2013

SEP: Someone Else’s Problem – until suddenly it’s not and becomes your problem

As anticipated, Friday’s strong US employment data Friday put markets in a tizz. US Treasuries recorded a returns bursting collapse. The blogosphere is buzzing with speculation about further equity strength and 101 technical reasons for stocks to rally further. On other hand, interesting to read on wires how Norway’s Sov Wealth Fund has been buying treasuries, bunds and JGBs, and dumping OATs and gilts.

While not everyone believes the US is on the road to boom recovery, the Nikkei remains on a roll. Yen’s resumed weakening against the resurgent dollar and the potential of real economic growth has been boosted by stock-specific stories like Mitsubishi Aircraft posting gains from weaker yen on recent plane sales, and the potential of bullet train sales to India. New BoJ head-elect Kuroda says he may consider quick easing! That trade – buy Nikkei, sell Yen continues apace..