Thursday 24th July 2014
slib33
According to a local press reports, the Mobileye initial public offering on Wall Street will be valued at approximately $3.8bn. The original prospectus was for a valuation between $3.5-5bn, making the actual valuation at the lower end of estimates. The Israeli company will offer 8.325m shares at a price of $17-19 per share. The offering will most likely take place in two weeks, when the stock will be traded under the ticker MBLY on the New York Stock Exchange. Mobileye was founded in 1999 and has developed a camera-based system to mount on vehicles in order to aid in collision prevention - Rubicon Minerals Corporation has closed its previously announced bought deal financing of 7,060,000 flow-through common shares of the Company at a price of C$1.70 per Flow-Through Share for aggregate gross proceeds to the Company of C$12m. The Offering was conducted by a syndicate of underwriters co-led by TD Securities Inc. and BMO Capital Markets, and included National Bank Financial Inc. and Canaccord Genuity Corp. The gross proceeds from the offering will be used to incur eligible Canadian Exploration Expenses - BNP Paribas 2nd Quarter 2014 Results will be available on Thursday 31 July 2014 from 6.00 am (London time). A live webcast in English with synchronised slides of the analysts conference call hosted by Lars Machenil, chief financial officer, will be available on the bank’s website starting at 1.00 pm (London time) - After six years of severe recession that led to a cumulative loss of 1.1m jobs, the Greek labour market has started to show signs of recovery says National Bank of Greece. More than two thirds of employment losses in the private sector (730,000 jobs) are due to the closure of about 220,000 micro and small firms (30% of the existing micro and small enterprise population) together with layoffs in this segment. NBG Research’s composite indicator of employment trends, that combines information from forward-looking and coincident indicators, points to an employment growth of +0.6% y-o-y in Q3:2014 (or +20,000 jobs) and +0.9% y-o-y (or +32,000 jobs) in Q4:2014 compared to the same period of 2013 - Trading Technologies International, Inc. (TT), a provider of high-performance professional trading software, says Robbie McDonnell has been transferred to EVP Global Sales from VP/Managing Director of Asia/Pacific. McDonnell will relocate from Sydney to TT’s headquarters in Chicago, where he will report directly to CEO Rick Lane and be responsible for leading TT’s worldwide sales operation - Eze Software Group, a provider of global investment technology, has expanded its Regulatory Filings Manager service to support Alternative Investment Fund Managers Directive (AIFMD) Annex IV filings. Clients can now leverage the robust functionality of this enterprise reporting solution to generate necessary reports in accordance with the compliance deadlines of AIFMD. Proposed by European Securities and Markets Authority (ESMA) last year, AIFMD requires that alternative investment funds meet specific risk management standards for better monitoring, measuring, and reporting. Funds need to provide supervisory authorities with detailed investment data on a quarterly or bi-annual basis for increased transparency into funds’ activity. “Our AIFMD solution is a natural extension of all that we have learned in helping our clients file Form PF and CPO-PQR,” explains Michael Hutner, senior managing director and co-head of global sales for Eze Software Group - Cordea Savills, the international property investment management company, has purchased three canal side office buildings in Camden, North London for a total of £14.07m on behalf a corporate pension fund client. The complex is on the former site of the Camden Brewery and comprises three buildings. Elephant House and The Cooper’s Building are Grade II-listed and let to Viacom for over 8 years. The Lock Building is let to a Charity, which offers the potential for redevelopment in the short term as there are mutual break options in 2015. Cordea Savills’ were represented by Fineman Ross and CBRE acted for the vendor, Derwent London -
Eastern European funds face reality Photograph ©Soldeandalusia/ Dreamstime.com, supplied March 2013.

Eastern European funds face reality

Tuesday, 19 March 2013
Eastern European funds face reality The range of investment options available to local and foreign institutional investors across central and Eastern Europe (CEE) is matched by the disparity in performance and development of individual markets. Writing in UniCredit’s CEE report for Q1 2013, the bank’s chief Eastern Europe, Middle East and Africa economist Gillian Edgeworth says the predominant theme across CEE last year was the influx of foreign liquidity via portfolio flows. Part of this inflow was structural in nature, reflecting a shift in asset allocation from developed to developing markets, but the remainder was cyclical as investors searched for yield in the face of record amounts of G7 central bank liquidity. Paul Golden reports. http://www.ftseglobalmarkets.com/media/k2/items/cache/2a9ceb674dd25489978c3ffc90b75279_XL.jpg

The range of investment options available to local and foreign institutional investors across central and Eastern Europe (CEE) is matched by the disparity in performance and development of individual markets. Writing in UniCredit’s CEE report for Q1 2013, the bank’s chief Eastern Europe, Middle East and Africa economist Gillian Edgeworth says the predominant theme across CEE last year was the influx of foreign liquidity via portfolio flows. Part of this inflow was structural in nature, reflecting a shift in asset allocation from developed to developing markets, but the remainder was cyclical as investors searched for yield in the face of record amounts of G7 central bank liquidity. Paul Golden reports.

The danger of viewing central and eastern Europe (CEE) as a homogenous market was highlighted in the aftermath of the global financial crisis, when Poland emerged as the only country in the region whose economy expanded during 2009 while its Baltic neighbours experienced significant falls in GDP. Professor Krzysztof Rybinski of Warsaw’s Vistula University refers to the degree of fiscal easing, the scope of public investment and the degree of cross-border financial leverage available to individual countries to explain this disparity. However, with EU guidelines on public debt levels limiting the scope for fiscal stimulus and investment moving away from large scale construction projects, he warns that no part of region will be immune from the effects of economic turmoil in the European Union in 2013.


Various funds are more than aware of the continuing impact of macro trends on the performance of local funds. Even so, the growing diversity of fund investment strategies is a clear indication of the deepening of the asset management industry across the sub-region.


Schroders manages the ISF Emerging Europe fund, which is mainly invested in Russia, Poland and Turkey but also in Hungary, Slovakia and the Czech Republic. The fund has been in existence since 2000, is in the first quartile for its peer group and is one of the five largest funds in the region at around €500m. Lydia Malakis, the firm’s director for central and Eastern Europe says there are no local restrictions around investment in liquid securities. Many CEE asset managers still tend to focus on their local market, mainly because they can generate strong performance for their clients by staying purely domestic, particularly in the larger markets of Poland, Russia and Turkey.


“They don’t see the need to look outside their own markets for capital growth because these markets are still growing and there is a pool of IPOs and corporate bond issuance yet to come to the market,” she explains.


The sophistication of the CEE institutional investor base varies significantly. For example, Poland has a well-developed pension fund system, whereas Russia pension funds are virtually non-existent. Institutional investors generally identify investment opportunities in the region by doing their own research, analysing economic and company specific data and meeting with finance ministers, central bankers and prominent local businessmen to gain an understanding of local regulations and political dynamics, says Andrey Popel, director Greylock Capital Management.


“CEE offers opportunities for index trackers, pension funds, insurance companies, corporate bonds managers and hedge funds. In the Russian bonds market, for instance, there is a wide selection of liquid investable assets in the sovereign, quasi-sovereign and corporate space, although in some jurisdictions—most notably Hungary, Serbia, Croatia, Georgia and even Ukraine—corporate bond supply is quite limited.”


Despite these limitations, Popel says his firm continues to identify interesting distressed and high yielding opportunities in Kazakhstan, Hungary, Russia and Ukraine. These opportunities are often company or country specific event-driven investments (a hedge fund investment strategy that seeks to exploit pricing inefficiencies that may occur before or after a specific corporate event) and have lower correlation with the broader market.


Dainius Bloze, fund manager at Bank Finasta observes that some international investors choose to rely on publicly available company information and make investments from outside via bourses, while other are brought into the market by investment bankers. “Value investing and strategies that combine tenets of both growth investing and value investing (known as ‘growth at a reasonable price’ or GARP) are employed, but in general there is little discrepancy between strategies in this region compared to developed markets,” he observes. “CEE markets are smaller and less liquid than developed markets so strategies have to be adjusted and generally require more involvement from investment managers, since publicly available information is scarce and imperfect. Russia stands out as a market that is very much event driven and dependent on commodities.”


Stefano PregnolatoStefano Pregnolato, head of portfolio management EMEA at Pioneer Investments.While having local expertise is important, it is also possible to tap into investment opportunities through global asset managers. That is the view of Stefano Pregnolato, head of portfolio management EMEA at Pioneer Investments, whose equity and fixed income products are managed in London and Vienna while its emerging markets analysts leverage portfolio managers and analysts based in the region.


“Foreign investors usually prefer internationally available funds when they invest in CEE, whereas investors from within the region tend to prefer local domiciled products,” he states. “Fixed income strategies are much more popular than equities, but that is not unique to this region. Different interest rate environments and risk levels in each country affect the structure of institutional investor mandates.”


Albin RosengrenAlbin Rosengren, partner East Capital. There are fewer specialised managers focusing on Russia or CEE than on other emerging markets such as China according to Albin Rosengren, partner East Capital, who describes a broad eastern European or in some cases a Russia fund as the most common ways of accessing the market.


“There are around 100 funds that focus on Eastern Europe, very few of which are run by independent specialist asset managers and most of which are based outside the region. In addition there are perhaps 20-30 focusing purely on Russia. Many of these funds belong to banks and are run by smaller and often non-specialised teams.”


There are a few investment houses in Russia and other parts of Eastern Europe, but most assets come from outside the region, he continues, “These assets come mainly from western Europe, although some US endowments have invested and pension funds in Latin America and Middle East sovereign funds are increasingly looking at opportunities in central and Eastern Europe.”


Rosengren points out that some institutional investors have opted for passive alternatives and that ETF exposure to the region has increased. He believes this can be explained at least in part by two years of ‘risk-on-risk-off’ where political decisions and macroeconomic events have almost been more important than the performance of individual companies.


Rosengren reckons that most investors are not overly concerned about falling commodity prices but still want exposure to CEE that is not driven by commodities, which is why his firm launched a Russia domestic fund last year that excludes investments in commodities or companies reliant on exports.


“Central and Eastern Europe is still mostly a general broad strategy equity play, but we are seeing the emergence of some plays on different parts of the economy (such as consumer funds) and there are also a few fixed income funds emerging. However, regionally specialised bond funds have not yet generated a large volume of transactions.”


Rosengren suggests that very narrow country funds have struggled to raise assets compared to wider regional funds. “Turkey was a major theme in 2012 on the back of its credit rating upgrade and better than expected economic development. Growth this year is again looking strong and the market is not expensive.”


Paul SeverinPaul Severin, managing director at Erste Asset Management.Erste Asset Management managing director Paul Severin estimates foreign participation in the Polish bond market has risen above 40% compared to approximately 30% this time last year. “Assets managed by local investors (pension funds, insurance, investment funds) have also grown and local market participants have become much more sophisticated, although local fund managers usually cover only one country. There are also some large domestic players in the shape of real money accounts, banks and hedge funds.”


In general, foreign investors are comparing different countries from a fundamental perspective, analysing structural and cyclical issues and trying to find under- and over-valued markets/securities, he explains. Severin refers to increased interest in local FX bonds (both sovereign and corporate) with the Russian local fixed income market being opened to foreign investors, but adds that private equity is still a very small part of the market.


“Global emerging market funds dominated investments last year and emerging Europe accounts for 10-15% of these portfolios. ETF funds captured flow in 2012. Investors use a wide range of investment strategies, from relative country comparison to single name relative value trades, depending on the asset class and assets under management.”


Miroslav KubenkaMiroslav Kub˘enka, head of equity research at Generali PPF Asset Management.Miroslav Kub˘enka, Generali PPF Asset Management head of equity research says foreign investors account for roughly half of total equities turnover on each of the CE3 (Czech Republic, Poland, Hungary) stock markets but that this includes institutional investors from other CE3 countries who view these three nations as almost a single ‘domestic’ market. “Over the last couple of years, the attractiveness of the CE3 equity market region has been decreasing for outside investors. These countries do not enjoy superior growth compared to Western Europe anymore.”


Generali PPF Asset Management considers low liquidity to be a major drag on foreign institutional investment, adds Kub˘enka. “The Prague stock market is a great example. Its equities turnover last year fell to the lowest level since 2003 and several international banks have already closed their equity trading departments in the city.”


Radomir Jac Radomír Já˘c chief analyst at Generali PPF Asset Management.His colleague and chief analyst Radomír Já˘c says that in contrast, participation of foreign investors in the government bond market has risen over the last three years although they still account for less than 50% of outstanding bonds in the CE3 countries with the majority held by domestic banks and pension funds.


“In Q4 2012 non-residents held just over 46% of all Hungarian government bonds, with domestic banks holding around 30% and pension funds the remainder. In Poland, foreign investors control between one third and half of government bonds, compared to 23% by domestic pension funds, 17% by banks and just over 10% by domestic insurance funds.”


According to Kub˘enka it is relatively easy to identify investment opportunities in central and eastern Europe without going through local fund managers. “Foreign institutional investors can choose from a wide range of local brokers and banks, whose support includes research conducted by local analysts. Also, many international banks cover blue chip firms in the CE3 countries and are able to arrange calls with analysts, investor visits, etc.”


He sees little variance in the investment strategies and objectives of institutional investors located outside CEE and those based within the region. The biggest difference between the two is that CE3 equities represent a significant part of the total equity exposure for domestic institutions.


CEE sovereigns have taken advantage of the liquidity window created by low government bond yields in many developed economies to raise cheap funding to finance post-crisis budget deficits and improve maturity profiles. Ukraine, Hungary and Serbia in particular have significantly increased their reliance on international bond funding and have been able to postpone fiscal and structural adjustments.


Lydia MalakisLydia Malakis, Schroders’ director for central and Eastern Europe.Malakis reckons there are about 60 emerging Europe equity funds and agrees that emerging market debt has received a lot of attention from fixed income funds in recent years. “One notable difference from the rest of Europe is that you have a lot of smaller companies that cannot raise finance through the capital markets, which encourages private equity structures.” Property structures are another non-listed option, although she acknowledges that real estate investment performance in CEE is a “mixed bag”.


According to Malakis, local investors in Turkey have been favouring hedge fund-type absolute return strategies investing in local fixed income, equities and money markets. Closed ended, tax optimised strategies were well received in Poland last year, whereas in Russia there is much interest in FX-type strategies and commodities.


“Local deposit rates are also a factor in terms of what you recommend to clients because they may need to hedge their currency risk,” she adds. “Many of our CEE clients are asking for hedged strategies back into their local currency.”


It is clear that CEE is not a ‘one size fits all’ market when it comes to investor preferences. However, for all the region-specific recommendations and warnings, Rosengren concludes that CEE allocation decisions are based on the same factors as for any other region—growth prospects, risk and valuations.

Tweets by @DataLend

DataLend is a global securities finance market data provider covering 42,000+ unique securities globally with a total on-loan value of more than $1.8 trillion.

What do our tweets mean? See: http://bit.ly/18YlGjP

Related News

Related Articles

Related Blogs