Brian Bollen's Blog

BaltCap Sells Medicap

Have just heard that BaltCap, a Baltic-focused private equity firm, has delivered its latest successful exit, selling Medicap Holding AS to synlab, the leading European provider of laboratory services. 

synlab, we are advised, has acquired 100% of Medicap Holding, which owns Estonian, Finnish and Lithuanian laboratories operating under the Quattromed and Sorpo brand names, from BaltCap and individual shareholders.

Airdrie Savings Bank. Now There's A Bank!

By Brian Bollen

I know I'm grossly old-fashioned when it comes to banking matters. I think banks are first and foremost for looking after money belonging to customers, enabling transmission of that money and prudent lending of a sensible proportion of that money to well qualified would-be borrowers.

Banks should not confuse custodianship of customers' money with ownership of that money. It seems to me they do that routinely. The very expression of the thought that depositors' money should not lie idle betrays the institutionalised mindset. Depositors' money that isn't flogging its guts out overnight in the financial insitutional equivalent of a sweatshop is not lying idle. It is sitting readily available for its owners to reclaim it. Anyone more concerned with a personal bonus than sterling customer service is not a banker.

July is dressed up and playing her tune...

Mint – Blain’s Morning Porridge  - July 31 2013

Sweet days of summer, the jasmine’s in bloom. July is dressed up and playing her tune...

Last day of July and markets are still in summer stasis. We’re expecting the usual run of end-of-the-month rebalancing trades – so worth taking a look to see what bargains crop up through the day. The main influencers on direction ahead of the FOMC minutes (remember no comment) then Europe and UK, have been corporate stories and earnings.

As usual I was overly focussed on financial news - in particular the Barclays rights issue, although Deutsche Bank, Tullet and Aberdeen results were also worth a look in terms of future clues. (Aberdeen suffering the widespread investor flight common to many fund managers, while Tullet saw declining business and looks open to “consolidation” suggestions.)

IOSCO Recommendations for Rating Agency Supervisory Colleges

The International Organization (sic) of Securities Commissions (IOSCO) published today the final report on Supervisory Colleges for Credit Rating Agencies. It recommends establishing supervisory colleges for internationally active credit rating agencies (CRAs), and provides preliminary guidelines on how to constitute and operate them.

The recommendations are aimed at improving the integrity of CRAs, as part of IOSCO´s effort to enhance investor protection and the fairness, efficiency and transparency of securities markets. G20 leaders are also concerned with the integrity of CRAs and have repeatedly encouraged IOSCO to work to improve their effectiveness.

ETF Outlook From ING IM

I've just been sent this Q&A with Siu Kee Chan, Investment Manager, multi-asset at ING Investment Management on the outlook for bond exchange-traded funds; any linguistic curiosities are of its own making...

Q: There have been concerns about bond funds due to liquidity and redemptions. Is this a concern for the bond fund ETFs listed in London?

A: Yes, as with all pooled vehicles large continuous redemptions are always concerns. After many years of bond inflows where fixed income was the place to be on both continuously lower trending government yields and attractive return pick up in the credit and emerging market bond segments, we seem to have entered into a phase of outflows from fixed income type of investments. On the back of central bank actions and improving fundamentals in the economy, investors are making a shift up the risk curve and slowly moving to more risky asset. As a consequence, investors perceive the current upside opportunities are low in the bond space in an environment of low treasury yields and tight credit spreads.

Barclays: Twixt Rock And Hard Place

Justin Cooper, CEO of Capita Registrars said on the confirmation of the Barclays rights issue:

“Barclays is between a rock and a hard place. The health of the banking sector matters to investors. It makes up £1 in every £11 of all dividends paid by UK companies, less than half the pre-crisis levels.  The regulator’s demand to hold large amounts of capital is one of the main reasons for the sharp decline. The regulator’s insistence that Barclays raise another £12.8bn in capital is a big blow. Half of this will come through a hugely dilutive rights issue. To announce an increase in the dividend for next year at the same time is a contradiction, raising money from shareholders with one hand and paying it straight back to them with the other. However, even though it is more logical to cut the dividend, investors would doubtless punish the bank with an even bigger share price fall.”

 

Info:   Barclays paid out £891m in gross dividends in the twelve months to the end of June 2013.

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We are doing what the PRA tells us...

Mint – Blain’s Morning Porridge  - July 30 2013

After careful consideration of the all the options, we are doing what the PRA tells us...

The headlines this morning are dominated by the larger than expected Barclay’s £5.9bn rights issue. Wish them luck with it. I’d be very interested in reader reaction to the news. Apparently they aren’t going to stuff investors with yet more CoCos. Why not? Perhaps because retail investors who don’t know any better are on holiday? (Oh such cynicism)

Markets are very much in a holiday stupor. But...there are all kinds of economic information to look at, sending pretty mixed signals about the prospects for a global boom.

Long/Short Credit Garnering Interest

In the July 2013 issue of The Cerulli Edge - U.S. Monthly Product Trends, Cerulli provides special coverage on alternative strategies. July's Monthly Spotlight takes a close look at pinnacle player AQR Capital.

Highlights from this research:

Even though long/short credit funds only represent 2%, or $4.5bn, of alternative mutual fund assets, the category experienced robust growth in 2012, boosting assets by 46%. It was the third-fastest growing among the alternative categories, behind MLP funds and inverse/bear market funds, which expanded by 115% and 67%, respectively. 

Aberdeen, Artemis, Schroders Entrust Settlement To Euroclear

Euroclear UK & Ireland (EUI) reports that it has been selected by three leading investment fund houses in the United Kingdom to settle transactions in their funds: Aberdeen Asset Management, Artemis Fund Managers and Schroders Investment Management. All three already use EUI for automated fund order routing.

International Equities King of The Mountain, For Now

This week from OppenheimerFunds’ chief economist Dr Jerry Webman’s market note:

·         Bonds and domestic stocks saw outflows last week, leaving international equities the king of the mountain, for the time being.

·         Reporting S&P 500 cos exceed expectations. With a little over half of the companies in the S&P 500 Index having reported second quarter earnings, 74% have beat or met profit expectations (well above the long-term average) and 57% have exceeded or matched revenue expectations (slightly below average).

·         Earnings: The winners and losers. Financial and health care companies’ earnings have surprised the most to the upside, while utilities have been the biggest disappointments.

·         Eurozone GDP may turn positive in Q3. One encouraging signal: Eurozone Purchasing Managers Index (PMI) unexpectedly came in slightly above 50.

Check out the accompanying charts and graphs to this note here. 

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Mexico: Investing In The Future

Dean Newman, head of emerging markets equities at Invesco Perpetual, comments on Mexico’s current economic outlook

Economic activity in Mexico may have slowed down during Q1 2013 but sequential data suggest that the economy picked up speed in the second quarter as manufacturing exports gained momentum.

The unveiling last week of a huge new infrastructure investment plan by the government should have a further positive impact on growth.

President Enrique Pena Nieto’s announcement of a National Infrastructure Investment Plan surpasses any other investment project seen in the past.

BNP Paribas Securities Services Does 3PD Reporting

BNP Paribas Securities Services has confirmed its agreement with the London-based DTCC Derivatives Repository Limited (DDRL) to help its buy and sell-side clients to comply with obligations set by the European Market Infrastructure Regulation (EMIR) for the reporting of derivatives trades.

In order to enhance transparency in the market and mitigate systemic risk, EMIR requests all participants to report both their OTC and listed derivative transactions to a trade repository. The repositories will act as information warehouse, storing the details of all derivatives trades exclusively for reference and inspection by regulators. One party to the contract can delegate the reporting obligations to the other, or third party can be used to reduce not only cost but the time burden to parties and systemic risk.

We had to destroy the village to save it

Mint – Blain’s Morning Porridge  - July 29 2013

We had to destroy the village to save it

So what we got to look forward to this week?  I suspect this week’s Fed will take more heat out the market. The growing realisation the pace of US growth will be slower than bond markets feared will likely put back taper expectations to later this year – September to November/December?  Watch how changing dollar, treasury and growth expectations sway thin summer market sentiment through the week.

Elsewhere it’s about Japanese speeches and the new science of Likonomics (China if you weren’t paying attention). And then the great question of the age: what the devil is going on in Europe? (Not much is one answer!) Some folk say Europe is on the up with signals of anaemic growth in Spain and Italy – apparently. On the other hand – we’ve got a political rumpus in Spain, Brelusconi not going to jail in Italy, and yet another Troika vs Greece battle predicted for September. More noise, more noise.

Graphite Capital Dining Out On Hawksmoor

Graphite Capital, a UK mid-market private equity specialist, has backed the management buy-out of Hawksmoor, operator of four successful, high-end steak restaurants in London.

Hawksmoor, the press relates narrates, was started by childhood friends, Will Beckett and Huw Gott, who have created a distinctly British steakhouse where the provision of consistently high quality beef and strong customer service are paramount.

Graphite’s investment provides an exit for the friends and family investors who had funded Hawksmoor’s early expansion. Beckett, Gott and non-executive director, Paul Campbell, will all stay in their roles and are re-investing into the company.  

Reasons To Be Cheerful

Jeffrey Taylor, head of European equities at Invesco Perpetual, comments on European PMI data

Markit’s July PMI data from France and Germany published yesterday surprised positively both with regard to the manufacturing and the service sector surveys. Data for the eurozone as a whole is (sic) similarly good.

In France the manufacturing PMI, though still fractionally below the 50 level indicating expansion, was at a 17-month high. While the manufacturing output index for France shot up from 47.9 in June to a 25-month high of 51.3 this month. Markit pointed to better trends in new business, employment, backlogs of work and a more positive outlook for future activity in the service sector, all of which would be supportive of a return to growth in H2.

Reasons To Be Positive: Coutts

Alan Higgins, chief investment officer, UK at Coutts, finds much to be positive about in the UK

Further confirmation of our positive UK outlook came in two parts today. Second quarter GDP was 1.4% higher than in Q2 2012 or 0.6%q/q. By far the largest contribution to growth was services, where growth made up 80% of the total. Within services, the sectors where conditions most improved were hospitality, retail and business services. The main difference between the picture in Q2 and the three previous months was the revival in construction activity and the virtual standstill now experienced in the mining sector.

Nothing To Do With The Royal Family

This has nothing to do with the British Royal Family, I promise. From Windsor, Connecticut, SS&C Technologies, a global provider of investment and financial software-enabled services and software, reports that Signet Investment Management has successfully launched five managers on the Signet High Income Series platform, administered by SS&C GlobeOp.

Ashmore's Dickson On EM Equities

Julie Dickson, product manager, equities, at Ashmore Investment Management, discusses the benefits of a macro approach to emerging markets (EM) equities.

The video can be found on the Ashmore home page www.ashmoregroup.com, alongside a number of other videos on the 'Insights' page www.ashmoregroup.com/insights/videos

You can’t convince a deaf man by talking…

Mint – Blain’s Morning Porridge  - July 25 2013

Is China about to become the big “No-See-Um” moment of 2013?

This morning’s news the China leadership has launched a “mini-stimulus” package might confirm what we’ve long feared – China’s economic situation is more perilous than we thought. It looks a comparatively modest supply-side package of tax cuts, export boosts and railway stimulus, designed to “arouse the energy of the market” according to the State Council. But it could be the first of many new programmes according to analysts.

UK Growth Continues To Improve

Azad Zangana, European Economist at Schroders, comments on today's UK GDP estimate

"The Office for National Statistics (ONS) estimates the UK economy to have grown by 0.6% in the three months to June 2013 – twice the pace of the growth in the previous three months. The results are in line with city expectations, along with our own forecast.

"Within the details, almost 70% of the GDP growth seen in the second quarter came from the services sector. Production, including manufacturing, grew by 0.6%, while the construction sector also grew by 0.9%.