Thursday 30th October 2014
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THURSDAY TICKER: OCTOBER 30TH 2014: - In ConvergEx’s survey of financial market professional, released today, uust 17% of respondents say they approve of the job Barack Obama is doing as president, while 73% said they disapprove. (This compares with a 41% approval/54% disapproval rating for the President in the RealClearPolitics average, 10/8-10/23/2014) Half (50%) of those surveyed give the President a “D” or “F” grade on handling issues of concern to the financial services industry. Opinions of Congress are even lower, with just 8% approving of the job being done by Congress and 81% disapproving. (This compares with a 13% approval/79% disapproval rating for Congress in the RealClearPolitics average, 10/3-10/20/2014. Almost half (46%) give Congress a “D” or “F” grade on handling issues of concern to the financial services industry. 69% of respondents say they would like Republicans to be in control of the Senate following the elections, a figure above even the 65% who say they plan to vote Republican in their own House districts. By 61% to 14%, Republicans are trusted over Democrats on issues impacting the financial services industry. For 8 of 9 market sectors, a higher percentage of respondents said equities would respond positively to a GOP win than to a Democratic win. Only for the Heath Care sector do more investors expect a positive outcome in response to Democrats holding the Senate - The Commercial Bank of Qatar (CBQ) posted a net profit (before deducting minority interest) of QAR503m in 3Q2014, flat QoQ, but 79% higher than a particularly weak 3Q2013. CBQ’s operating income in 3Q2014 increased 16% YoY but dropped 10% QoQ, driven by lower-than-expected results at subsidiary ABank. ABank’s operating income tumbled around 23% QoQ as non-interest income plummeted. For CBQ excluding ABank, operating income stood at around QR 764 million in 3Q2014, up 12% YoY, down 6% QoQ - Moody's has today assigned a provisional (P)B1 corporate family rating (CFR) to Kompania Weglowa SA, the parent company of the group. This provisional rating is subject to the successful completion of the issuance of new notes as currently contemplated by management. Concurrently, Moody's has assigned a provisional (P)B1 rating with a loss-given default (LGD) assessment of 3 (46%) to the senior unsecured notes to be issued by Kompania Weglowa Finance AB (publ), a financing vehicle owned by the company. The outlook on all ratings is stable - ING Group will release its 3Q 2014 results on Wednesday November 5th around 7:00 am CET - AIMCo, Allianz Capital Partners, EDF Invest andHastings have closed its buy of Porterbrook, a UK-based rolling stock leasing company. orterbrook is one of three main rolling stock companies (ROSCOs) in the UK that owns and leases a fleet of passenger and freight rolling stock to Train Operating Companies and Freight Operating Companies under long term contracts. It owns 32 per cent of total passenger rolling stock in the UK. No financial terms were disclosed - Fixed-income markets remain volatile: Europe is challenged, Brazil might struggle, and China is dealing with a potential property bubble. Opportunities nonetheless remain rife for savvy investors, particularly in the high-yield markets. Western Asset believes high-yield should be a key component of any successfully diversified bond portfolio. "We are pretty bullish on credit in general, and high-yield in particular," says Michael Buchanan, head of Global Credit at Western Asset. "Credit is less about the overall economic environment and more about strong corporate fundamentals. Corporations can do well in a mediocre economy, and that seems to be what's happening. Three factors are important right now: the overall economic environment is supportive; strong active management allows us to identify the right opportunities; and valuations are as compelling as they have been in months. This is a good time to take a fresh look at high-yield." Western Asset also believes high-yield products will offer price appreciation as spreads should tighten. On the global economic environment, Mr. Buchanan echoed Western Asset views that interest rates are poised to rise – albeit slowly, and via a process that will be carefully measured. Rates will not be meaningfully higher in the near future, or at least the moves will be gradual – According to Moody’s while the US government's current fiscal position remains relatively healthy, mandatory social spending will begin weakening the current fiscal profile of the US government at the end of the decade. For the next few years, barring another shock like the global financial crisis, the US budget deficit is expected to remain well within historical norms with Federal government debt ratios stable. However, the fiscal implications of the US government's healthcare-related programs likely will put pressure on its credit profile before the end of the decade, absent unexpected and sustained growth in revenue due to higher than expected GDP growth, additional tax increases, or reductions in planned expenditures, says Moody’s.
Mark Wiedman, global head of BlackRock’s iShares brand. Mark Wiedman, global head of BlackRock’s iShares brand. Photograph kindly supplied by iShares, November 2011.

20-20: Turning BlackRock's ETF fortunes

Thursday, 15 December 2011
20-20: Turning BlackRock's ETF fortunes Mark Wiedman’s appointment as global head of BlackRock’s iShares brand is a concerted effort to sharpen the focus of the consortium of exchange-traded funds launched by BGI in May 2000 that combines index fund-style diversification with the liquidity of stock trading. To date, iShares accounts for roughly half of the estimated $1.1trn in US-based ETF assets. While AUM continues to grow at a steady clip, competitors have gradually whittled away at the company’s domestic market share (currently around 43%). Can Wiedman buck the trend? David Simons reports. http://www.ftseglobalmarkets.com/media/k2/items/cache/bd3eebf32e04c907d6d9fc42f4213df5_XL.jpg

Mark Wiedman’s appointment as global head of BlackRock’s iShares brand is a concerted effort to sharpen the focus of the consortium of exchange-traded funds launched by BGI in May 2000 that combines index fund-style diversification with the liquidity of stock trading. To date, iShares accounts for roughly half of the estimated $1.1trn in US-based ETF assets. While AUM continues to grow at a steady clip, competitors have gradually whittled away at the company’s domestic market share (currently around 43%). Can Wiedman buck the trend? David Simons reports.

During a recent earnings conference call, Laurence Fink, BlackRock’s chairman and chief executive, likened the recent run-up in ETF product innovation to the pre-crisis market for mortgage-backed instruments. BlackRock, said Fink, “needs to be very assertive as a firm” in order to prevent “a lack of disclosure on these products”.

To help address issues such as transparency—while also enhancing its ETF product line—BlackRock in September 2011 announced it had tapped Mark Wiedman, managing director in charge of corporate strategy, to serve as the new global head of  iShares, the ETF provider acquired by BlackRock as part of the 2009 buyout of Barclays Global Investors (BGI). Wiedman succeeds Mike Latham, who will continue as iShares chairman. Having served as an adviser to global financial institutions on balance-sheet issues at the height of the crisis, as well as heading up corporate strategy for BlackRock, Wiedman got a “crash course” in understanding clients’ problems and mobilising BlackRock’s capabilities in order to solve them. “I worked closely with iShares throughout the BGI integration and on iShares strategy work, so I stepped into the role with some familiarity with the businesses and the terrific leadership team,” says Wiedman.



ETFs appear to be still in their infancy, and have benefited from factors that include greater use of fixed-income and commodity-based products, increased uptake among fee-based advisers, as well as new product launches within the major exchanges. These conditions will likely pave the way for larger ETF fund allocations over the near term. Wiedman claims: “ETFs are one of the top two or three socially productive financial innovations of the past 40 years, with a value proposition that speaks to a galaxy of clients, from sovereign wealth funds to retail investors. ETFs deliver efficient exposure to global markets using the most democratic, transparent, and liquid vehicle yet devised.”

From the perspective of iShares, key growth drivers over the near term include fixed-income ETFs (which currently represent only a fractional amount of total outstanding bonds within the US), as well as equity income. Meanwhile, the potential for across-the-board ETF uptake exists in nearly every market around the world, says Wiedman.

Unifying US and foreign ETF platforms was a priority for BlackRock following the acquisition of iShares, and the ability to offer both US and European product lines to investors around the globe has been one of iShares’ greatest strengths to date.  “Some 15% of the assets in domestic ETFs are currently held outside the US and in Europe in 2011, we’ve seen over 15% organic growth, in part driven by buyers from Asia. As we look forward, our UCITS-compliant European product line could possibly become the de facto global standard,” says Wiedman.

The rise in ETF fund flows has coincided with a marked increase in product complexity, and, in some instances, has sparked concerns over opacity. For its part, the SEC continues to take a dim view of derivatives-based ETF products, compelling many providers to back away from such offerings.  

Wiedman notes: “We would call products that trade on an exchange ‘exchange-traded products’ or ‘ETPs’ while reserving the label ‘ETF’ for a sub-category that meets certain agreed standards of simplicity and transparency, including backing by underlying securities, rather than derivatives. We understand that regulators around the world will have different views. However, we believe that a standardised classification system could help regulators develop appropriate rules in each jurisdiction.”

The proliferation of so-called “cheap beta” ETF products—or, in some instances, ETFs that are totally commission-free—has had a dramatic impact on the business as a whole. Rather than attempt to compete on price, however, iShares has instead turned its attention toward product development, including active ETFs, which mimic the performance of hedge funds at a fraction of the cost. In August 2011, the company sought the SEC’s permission to launch a set of actively-managed equity ETFs, each based on proprietary BlackRock benchmarks.

“If there is a one thing I learned from my past experience at BlackRock, it’s that iShares will succeed by doing what we do best—not by playing on others’ terms,” offers Wiedman. “We are the sole global player competing against regional players in every market. No one can match our global presence, scale, or brand. Capitalising on that unique position is where our future lies.”

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