Monday 25th May 2015
NEWS TICKER: FRIDAY, MAY 22ND: The California Public Employees' Retirement System (CalPERS) has named Beliz Chappuie as CalPERS' Chief Auditor, effective July 31, 2015 - Saudi Arabia's oil minister has said the country will switch its energy focus to solar power as the nation envisages an end to fossil fuels, possibly around 2040-2050, Reuters reports. "In Saudi Arabia, we recognise that eventually, one of these days, we are not going to need fossil fuels, I don't know when, in 2040, 2050... we have embarked on a program to develop solar energy," Ali Al-Naimi told a business and climate conference in Paris, the news service reports. "Hopefully, one of these days, instead of exporting fossil fuels, we will be exporting gigawatts, electric ones. Does that sound good?" The minster is also reported to say he still expects the world's energy mix to be dominated by fossil fuels in the near future - Barclays has appointed Steve Rickards as head of offshore funds. He will lead the creation and implementation of the bank’s offshore funds strategy and report directly to Paul Savery, managing director of personal and corporate banking in the Channel Islands. For the last four years Mr Rickards has been heading up the Guernsey Funds team providing debt solutions for private equity and working with locally based fund administrators. Savery says: “Barclays’ funds segment has seen some terrific cross functional success over the past year or so. Specifically, the offshore business has worked hand in hand with the funds team in London to bring the very best of Barclays to our clients, and Steve has been a real catalyst to driving this relationship from a Guernsey perspective.” - Moody's has downgraded Uzbekistan based Qishloq Qurilish Bank's (QQB’s) local-currency deposit rating to B2, and downgraded BCA to b3 and assigned a Counterparty Risk Assessment of B1(cr)/Not prime(cr) to the bank. The agency says the impact on QQB of the publication of Moody's revised bank methodology and QQB's weak asset quality and moderate loss-absorption capacity are the reasons for the downgrades. Concurrently, Moody's has confirmed QQB's long-term B2 foreign-currency deposit rating and assigned stable outlooks to all of the affected long-term ratings. The short-term deposit ratings of Not-prime were unaffected - Delinquencies of the Dutch residential mortgage-backed securities (RMBS) market fell during the three-month period ended March 2015, according to Moody's. The 60+ day delinquencies of Dutch RMBS, including Dutch mortgage loans benefitting from a Nationale Hypotheek Garantie, decreased to 0.85% in March 2015 from 0.92% in December 2014. The 90+ day delinquencies also decreased to 0.66% in March 2015 from 0.71% in December 2014.Nevertheless, cumulative defaults increased to 0.65% of the original balance, plus additions (in the case of master issuers) and replenishments, in March 2015 from 0.56% in December 2014. Cumulative losses increased slightly to 0.13% in March 2015 from 0.11% in December 2014 – Asset manager Jupiter has recruited fund manager Jason Pidcock to build Asian Income strategy at the firm. Pidcock J has built a strong reputation at Newton Investment Management for the management of income-orientated assets in Asian markets and, in particular the £4.4bn Newton Asian Income Fund, which he has managed since its launch in 2005. The fund has delivered a return of 64.0% over the past five years compared with 35.9% for the IA Asia Pacific Ex Japan sector average, placing it 4th in the sector. Since launch it has returned 191.4 against 154.1% for the sector average. Before joining Newton in 2004, Jason was responsible for stock selection and asset allocation in the Asia ex-Japan region for the BP Pension Fund.
Investors come back to the markets in search of returns Photograph © Xy/ Dreamstime.com, supplied March 2013.

Investors come back to the markets in search of returns

Tuesday, 19 March 2013
Investors come back to the markets in search of returns The markets this year have started with a bullet. The current bull market hints that investor confidence might be rising as the debt crisis in Europe looks to be under control and the US is managing its fiscal cliff. What are the implications of this sea-change? Carey Olsen, which advises on the largest total number of funds and assets under management in Guernsey, believes there will be slow and steady growth in both fund creation and the breadth of investments they adopt. Corporate partner, Graham Hall, examines where this growth will come from and what innovations investors and private equity houses are employing to realise returns. http://www.ftseglobalmarkets.com/media/k2/items/cache/e37cb185c8f2dc5dd52ce2fc045570ec_XL.jpg

The markets this year have started with a bullet. The current bull market hints that investor confidence might be rising as the debt crisis in Europe looks to be under control and the US is managing its fiscal cliff. What are the implications of this sea-change? Carey Olsen, which advises on the largest total number of funds and assets under management in Guernsey, believes there will be slow and steady growth in both fund creation and the breadth of investments they adopt. Corporate partner, Graham Hall, examines where this growth will come from and what innovations investors and private equity houses are employing to realise returns.

Equities have started to move this year. Having locked up money for four years, keeping their money in ‘safe’ investments, investors now look to be interested again in assets which they think offer potential for higher yields. There is, of course, some residual skittishness but recent movement in the markets indicates there is a lot more confidence and enthusiasm.


There have been rallies in the past which have not stuck and there is still a question mark as to whether (or how long) this one will hold. However, the market does seem to think there is a way to go before there will be any sort of correction.




If the past four years has taught anything it is that it often pays to be innovative and funds are seeking unusual opportunities where the risk is seen as manageable. With interest rates remaining at historic lows, investors are chasing yield and the focus is firmly on emerging, or high growth markets, particularly those with a history of under-investment. Eastern Europe is a particular case in point. Bulgaria, Hungary, Czech Republic, Slovenia, Poland, Slovakia, Estonia, Lithuania and Latvia joined the European Union club in the past eight years while Montenegro, Serbia, the Republic of Macedonia and Turkey remain in the wings, with EU membership only a function of time.


In spite of some structural economic problems, growth figures across the region remain attractive. The Polish economy, for instance, grew by 3.8% in 2011; Austria grew by 3.3%, while Moldova, Estonia and Lithuania all grew between 6% and 7% in real gross domestic product (GDP) terms.


These figures compare to Germany’s 2.7% growth and the Eurozone’s blended growth rate of around 1.6%, over the same year. The growth rates in the eastern European zone points to opportunities in the development of infrastructure and commercial property (where property values remain low, but high returns are predicted); it is an attractive combination for investors recently starved of promising investments in Western Europe and the United States.


Graham HallGraham Hall, corporate partner, Carey Olsen, Guernsey.Debt is also attractive as banks get rid of their loan books and finance houses adjust their loan-to-asset ratios. Much of this debt is now being sold off, sometimes their whole debt portfolios.  Debt books can be picked up relatively cheaply by smaller operators at significantly reduced rates. Of particular interest, but not openly discussed, are lease car debt books. These books are sold at significant discounts and it is an area of significant potential returns as the economy improves and the risk of holding this debt reduces.


Hedge funds also have appeal right now. They are performing better than they have in a long while and investors are beginning to recoup, or certainly looking to, the losses of the past. Whether it means more money being invested in hedge funds remains to be seen. It is difficult to give a time frame on when we might see a return to more halcyon days because, while there are individuals and select funds rallying, it is the big institutional pension funds that are needed to ensure a true return to performance. This sector is traditionally cautious and, having been severely hit in the crisis, their return will be slow and steady. It is really only 10% of the market that is prepared to take a risk and they appear to be a lot more open to the idea this year.


There was a flight to Luxembourg by many hedge funds during the economic crisis thinking they needed to be seen to be onshore. Many are now realising this was a false perception as Luxembourg is an expensive and bureaucratic place to do business which has an impact in the efficiency of the funds and the returns that can be made. These funds are starting to look at other jurisdictions that offer ­stability and pragmatic regulation without the expense or bureaucracy. As ever, Guernsey is ideally placed to reap these opportunities. According to the Guernsey Financial Services Commission, the net asset value of total funds under management and administration increased in the third quarter (Q3) in 2012 by £3.6bn (1.3%) to reach £274.4bn.


For the year since 30th September 2011, total net asset values increased by £3.3bn (1.2%). Guernsey is indicative of the worldwide trend where the interest in open-ended funds has decreased by £1.6bn (-3.2%) over the quarter to £51.5bn. The closed-ended sector increased over the quarter, by £4.2bn (3.3%) to reach £130.3bn. This represents an increase of £4.6bn (3.7%) over the year since 30th September 2011.


The market recognises Guernsey’s proven operating model with highly skilled professionals across the board. It is up to Guernsey to ensure it does not become too expensive but this is a secondary consideration to investors with the level of expertise and experience being far more important. Investors and funds, now more than ever, want to know that a jurisdiction has breadth and depth.


It would be overstating the case to suggest the fund markets are entirely out of the woods; but there are definitely strong ‘green shoots’. Guernsey certainly remains the most popular jurisdiction for private equity albeit with fewer funds being created. There is activity from global private equity houses investing in infrastructure (Terra Firma, Permira, and Apex). They continue to invest but at lower levels. For example, the focus has been on global farmland as a sound investment for some of these closed-ended funds with investments being made in cattle stations in Australia and New Zealand (beef and dairy) and in China.


It is tighter market and funds are looking much harder at efficiencies and costs. It is harder to raise the money and it takes longer and funds are launching with lower expectations which, arguably, is no bad thing.


Closed-ended funds are the majority of the market now and will continue to grow. 2013 has started as a bull market. The driving sentiment is one of optimism. There is a movement away from bonds and corporate gilts but there will not be a return the pre-2008 activity for a long time—slow and steady seems to be this year’s watchwords.

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