Brian Bollen's Blog

Crisis? What crisis?

This article first appeared in the summer 2006 issue of European Fund Manager

The pension fund ‘crisis’ made its way out of the trade journals and onto the front pages of Europe’s favourite newspapers many many months ago, and has appeared there intermittently but prominently ever since. And this is despite the efforts of politicians in many countries to distract our attention with a series of top-notch farces ranging from the Italian election results and the reluctance of the loser to leave office, and Britain’s quadruple whammy in late April: the home secretary and his foreign prisoner problem, the health secretary being ridiculed at a nursing conference, the defence secretary found to have cannabis in his constituency home, and the Deputy Prime Minister with a totally unexpected and literally unbelievable successful track record in extra-marital sex.

The immediacy and potency of the pension crisis has almost become an article of faith to believe in it, like the Virgin Birth, Resurrection from the dead, and Transubstantiation (the doctrine that the communion wafer literally becomes the body and blood of Jesus Christ at the moment of Consecration). Anyone who questions its very existence is dubbed a heretic and unbeliever, who must be made to recant. Just as with global warming (or, to give its new name, climate change, a label applied once the penny dropped that in recent years it’s actually been significantly colder and wetter than for a decade or two previously.

What Next For Funds of Private Equity Funds?

This article first appeared in Private Equity News in early 2007

What possible role can funds of private equity funds continue to play in the modern world? Surely their time has come, and gone, and will not be seen again. Everyone who is anyone knows just what private equity is. Everyone who is anyone and has money to invest can bypass the funds of funds, and simply invest direct.

As one industry participant puts it, however, it is not that straightforward. “We have an in-house joke,” says one fund of funds specialist in private equity. “Whenever I hear a first-time investor saying that, I go straight to my colleagues and tell them I’ve identified a future secondary.”

Despite the air of awkward resentment building up around the subject in the UK as trade unions start to complain about job losses, investors, not just institutions but private individuals, are clamouring to invest in private equity. History shows that it is at the point at which an investment form is at its height of popularity that the greatest dangers lurk. Many agree that in what has become a seller’s market, with the balance of power having swung firmly towards general partners and away from limited partners, private equity is arguably fast approaching that point.

Anders Hilding Goes To The Mattresses

A version of this article appeared in Corporate Financier magazine, issue 92.

Fans of the novel The Godfather will have a quite different view of terms involving movement and mattresses than non-fans will have. In The Godfather, ‘going to the mattresses’ effectively meant a family put its soldiers on battle alert, with a view to ensuring that the family was best prepared for an outbreak of war, and would win the war. For Investcorp, the private equity house with a distinctly middle eastern investor base, going to the mattresses was an exercise that delivered exceptional financial returns in a relatively short time.

Money Talks

A version of this article appeared in Private Equity News in May 2006

Money talks. And it talks as fluently in German as it does in the language of any other free market economy. This is one of the principal conclusions to be drawn from discussions with those close to private equity in Germany, where a genuine sea change in thinking seems to be taking place.

The realisation that there is money to be made by selling off unwanted businesses to private equity houses has blown away at least some of the suspicion that still stubbornly surrounds private equity in Germany. Corporates and families who either don't want to, or simply can't, face up to the changes that are needed to ensure a viable economic future arguably see the attractions of private equity more clearly today than ever before.

Very Familiar Forces

A version of this article appeared in Private Equity News in May 2006

The driving forces behind change and development in the provision of fund administration services to private equity firms sound familiar, very familiar indeed. In fact, they are mostly identical to the driving forces behind the outsourcing of fund administration services in the mainstream investment world.

One, the need for fund managers to seek out new ways to improve efficiency, and offset cost pressures. Two, the need to access better technology without incurring unsupportable new costs. Three, the increasing size and complexity of the private equity investment industry.

Securities Lending

Article originally appeared in Financial News

It might surprise non-specialists to learn that the turmoil experienced in Far Eastern markets over the past two years or so can be viewed as a positive selling point for the securities lending product. Anecdotal evidence suggests that any losses taken during this period were suffered not by lenders, as positions were recalled by agent banks from borrowers almost immediately, but by borrowers who were caught off guard.

Private Equity

Article originally appeared in The Banker Magazine, January 2000

All the early indications are that 1999 will have turned out to be something of a landmark year for the private equity industry.

With less than a month to go before the New Year celebrations, the value of UK management buy-outs and management buy-ins for 1999 had beaten all records, already exceeding £15bn, according to early figures released by the Centre for Management Buy-Out Research, sponsored by Barclays Private Equity and Deloitte & Touche.

Based on recorded deals for the year to early December, the value of UK MBOs and MBIs had already beaten the 1998 total of £14.1bn by more than £1bn. Although the total number of transactions is down, average deal size has risen substantially, by 66% to over £35m. Bigger deals are again at the forefront and the number exceeding £100m has risen to 33, from 26 in 1998.

The Time Has Come, The Walrus Said

A version of this article appeared in Investor Services Journal, Summer 2006

The time has come, the walrus said, to talk of many things. Of shoes. And ships. Of sealing wax. Of securities lendings.

That's not true, of course, it was 'cabbages and kings', not securities lendings, but author Lewis Carroll would surely have had some fun writing about the arcane and often misunderstood world of securities lending, especially when the time comes to take a look back at the past 12 months and ahead to the next 12.

Opinions on how and where the market has developed, and on what lies ahead, are as many and varied as the underlying markets, even the underlying stocks. "It's been a very good year for both beneficial owners and providers," says Chris Jaynes, President of the auction specialist eSecLending. "People have seen solid growth in returns and in underlying demand. We are also seeing more borrowers participating on an exclusive basis and seeing increased demand for exclusives across a wide range of asset classes including fixed income."

United Biscuits: End Of An Era

The consolidation of the European biscuit industry more or less ended not with a bang, but with a whimper. It also ended with a transaction that forms part of a trend that is widely predicted to continue for the foreseeable future, as the details of the UK's post-industrial landscape begin to sharpen.

The sale of United Biscuits to an international consortium comprising financial buyers and trade buyers is being viewed by investment bankers specialising in food as marking the end of the shakeout in European biscuits. It leaves Danone of France and Nabisco of the US as the last two big rivals left standing.

Mainstream Management

A version of this article was riginally published in the June 2000 issue of The Banker magazine

Money market funds have become firmly established as a mainstream cash management tool in the USA. The stage is set for the UK and European markets to follow.

Beyond Europe, too, the prospects are hailed as bright. "We believe there are exciting opportunities everywhere," concludes Paul Thomson, head of offshore funds at Goldman Sachs in London. "Governments and corporates around the world are examining different ways of managing their cash; the use of triple-A-rated funds is gaining widespread acceptance as a means of achieving diversification quickly and cost-effectively without compromising on security."

US Bank Results

One word recurs with almost monotonous regularity in the announcement of 1999 results at the major US investment banks. That word is 'record', with the explosion in mergers and acquisitions activity and strong equity issuance being the major driving forces behind performance. These factors combined with M&A-related financing and the rapid development of a corporate credit market in Europe following the introduction of the euro to produce a year of almost undiluted good news for the industry.

Custodians on the Net

Article originally appeared in Financial News Global Custody Review survey in September 2000

"The Internet is transforming securities services, effectively exploding boundaries and changing the concept of information on demand into reality." Thus spake Tom Perna, senior executive vice president, Bank of New York, in a recent article entitled Web Technology at the Core of Industry Evolution. "The impact of the medium is just beginning to be felt."

The Secret Life of GIPS

A version of this article appeared in the Financial Times FT FM report on July 31 2006

The perception of Global Investment Performance Standards (GIPS) as the driest of esoteric subjects presents a significant barrier to explaining their importance. But this is a hurdle that must be overcome by wise investors, both individuals and institutions. The standards are there to enable them to make decisions about who is best qualified to look after their money on a more fully informed basis.

LDI: Right or Wrong?

A version of this story appeared in the Spring 2006 issue of European Fund Manager

Is the shift towards liability-driven investment (LDI) fundamentally flawed as a concept and appallingly timed in its execution? The posing of that question to a number of industry participants sparked a broad range of reactions, some positive, some negative, some supportive of the thesis, others dismissive, even hostile. Brian Bollen reports.

Hitting The Nail On The Head

The principal findings of this LDI mini-survey are not universal. Broadly speaking, there is agreement that the first part of the proposition is wrong, while the second part hits the nail on the head. Paul Bourdon, Director of Investment Solutions at Threadneedle Investments, disagrees with both premises. "Pension funds have an obligation to produce a portfolio that delivers the pension liabilities it must meet," he summarises simply. "Any portfolio constructed without due regard for that basic truth is fundamentally flawed."

International Banking: Review of 2005

This article first appeared in Eurograduate 2006, an annual publication published by Setform Ltd
by Brian Bollen and Jennifer E Bollen 

The international banking market has proved a hive of activity in 2005, and that activity looks certain to continue during 2006 and beyond. Internationalisation is the order of the day at both the wholesale and retail level, with interesting developments taking place around the world. Many emerging markets are witnessing an expansion in the presence of a growing number of foreign-headquartered banks, opening up new opportunities on a global scale. Who could possibly have forecast ten years ago, even five years ago, that BNP Paribas would be acquiring a 51% stake in a Ukrainian bank? Or that JP Morgan Chase would be announcing its intention to have a total of 9,000 Indian staff by the end of 2007, one-third of whom will work for its investment bank? Or that Morgan Stanley would be opening a branch in Dubai, its first on-the-ground commitment to the region?

Custodian Quality

Article originally appeared in Financial Times Global Custody Review survey in July 1999

The quest to deliver quality service in global custody is intensifying, in tandem with the growth of customer demand for such service, the growing breadth and complexity of the global custody product and the custodian's role, and the increasing need for providers to differentiate themselves from the opposition.

Speedy Hire Founders Head For Exit

A version of this article first appeared in Corporate Financier magazine

"There are few more impressive sights in the world than a Scotsman on the make," wrote the Scots playwright J M Barrie, creator of the ultimate boy who never grew up, Peter Pan. More than 70 years later, the observation rings as true as ever. While much of the land north of Hadrian's Wall is so imbued with the ethos of the welfare state and benefits culture that it could easily pass for a Soviet Socialist Republic on a bad day, pockets of entrepreneurialism and wealth creation do remain. One of those is LCH Generators, widely recognised as a leading provider of temporary power for hire in the UK, and recently sold to Speedy Hire, a heavy plant hire specialist. When the transaction completed in May, the founders, John and James Pirrie, and John's former wife, Glynnis Pirrie, walked away with £54.5m in cash and £4.5m in Speedy Hire shares between them, for a business that the brothers built literally from scratch.

High Yield

Article originally appeared in The Banker magazine in December 1999

Several key words and phrases feature prominently in any conversation with investment bankers about the international debt capital markets.

There is the threat of illiquidity, caused by Y2K fears. Although a recent convertible research report from Goldman Sachs argues that 'the consequences of Y2K are likely to be short-lived rather than lasting, the truth of course is that no-one knows what the full impact will be, how long it will last, or what unexpected side effects there might be.