Saturday 31st January 2015
NEWS TICKER FRIDAY, JANUARY 30TH: Morningstar has moved the Morningstar Analyst Rating™ of the Fidelity Japan fund to Neutral. The fund was previously Under Review due to a change in management. Prior to being placed Under Review, the fund was rated Neutral. Management of the fund has passed to Hiroyuki Ito - a proven Japanese equity manager, says Morningstar. Ito recently joined Fidelity from Goldman Sachs, where he successfully ran a Japanese equity fund which was positively rated by Morningstar. “At Fidelity, the manager is backed by a large and reasonably experienced analyst team, who enjoy excellent access to senior company management. While we value Mr Ito’s long experience, we are mindful that he may need some further time to establish effective working relationships with the large team of analysts and develop a suitable way of utilising this valuable resource,” says the Morningstar release - The Federal Deposit Insurance Corporation (FDIC) today released a list of orders of administrative enforcement actions taken against banks and individuals in December. No administrative hearings are scheduled for February 2015. The FDIC issued a total of 53 orders and one notice. The orders included: five consent orders; 13 removal and prohibition orders; 11 section 19 orders; 15 civil money penalty; nine orders terminating consent orders and cease and desist orders; and one notice. More details are available on its website - Moody's Investors Service has completed a performance review of the UK non-conforming Residential Mortgage Backed Securities (RMBS) portfolio. The review shows that the performance of the portfolio has improved as a result of domestic recovery, increasing house prices and continued low interest-rates. Post-2009, the low interest rate environment has benefitted non-conforming borrowers, a market segment resilient to the moderate interest rate rise. Moody's also notes that UK non-conforming RMBS exposure to interest-only (IO) loans has recently diminished as the majority of such loans repaid or refinanced ahead of their maturity date - The London office of Deutsche Bank is being investigated by the Financial Conduct Authority (FCA), according to The Times newspaper. Allegedly, the bank has been placed under ‘enhanced supervision’ by the FCA amid concerns about governance and regulatory controls at the bank. The enhanced supervision order was taken out some months ago, says the report, however it has only just been made public - According to Reuters, London Stock Exchange Group will put Russell Investments on the block next month, after purchasing it last year. LSE reportedly wants $1.4bn - Legg Mason, Inc. has reported net income of $77m for Q3 fiscal 2014, compared with $4.9m in the previous quarter, and net income of $81.7m over the period. In the prior quarter, Legg Mason completed a debt refinancing that resulted in a $107.1m pre-tax charge. Adjusted income for Q3 fiscal was $113.1m compared to $40.6m in the previous quarter and $124.6m in Q3 fiscal. For the current quarter, operating revenues were $719.0m, up 2% from $703.9m in the prior quarter, and were relatively flat compared to $720.1m in Q3 fiscal. Operating expenses were $599.6m, up 5% from $573.5m in the prior quarter, and were relatively flat compared to $598.4min Q3 of fiscal 2014. Assets under management were $709.1bn as the end of December, up 4% from $679.5bn as of December 31, 2013. The Legg Mason board of directors says it has approved a new share repurchase authorisation for up to $1bn of common stock and declared a quarterly cash dividend on its common stock in the amount of $0.16 per share. - The EUR faces a couple of major releases today, says Clear Treasury LLP, and while the single currency has traded higher through the week, the prospect of €60bn per month in QE will likely keep the euro at a low ebb. The bigger picture hasn’t changed, yesterday’s run of German data was worse than expected with year on year inflation declining to -.5% (EU harmonised level). Despite the weak reading the EUR was unperturbed - The Singapore Exchange (SGX) is providing more information to companies and investors in a new comprehensive disclosure guide. Companies wanting clarity on specific principles and guidelines on corporate governance can look to the guide, which has been laid out in a question-and-answer format. SGX said listed companies are encouraged to include the new disclosure guide in their annual reports and comply with the 2012 Code of Corporate Governance, and will have to explain any deviations in their reporting collateral. - Cordea Savills on behalf of its European Commercial Fund has sold Camomile Court, 23 Camomile Street, London for £47.97mto a French pension fund, which has entrusted a real estate mandate to AXA Real Estate. The European Commercial Fund completed its initial investment phase in 2014 at total investment volume of more than €750m invested in 20 properties. Active Asset Management in order to secure a stable distribution of circa 5% a year. which has been achieved since inception of the fund is the main focus of the Fund Management now. Gerhard Lehner, head of portfolio management, Germany, at Cordea Savills says “With the sale of this property the fund is realising a value gain of more than 40%. This is the fruit of active Asset Management but does also anticipate future rental growth perspectives. For the reinvestment of the returned equity we have already identified suitable core office properties.” Meantime, Kiran Patel, chief investment officer at Cordea Savills adds: “The sale of Camomile Court adds to the £370m portfolio disposal early in the year. Together with a number of other asset sales, our total UK transaction activity since January stands at £450m. At this stage of the cycle, we believe there is merit in banking performance and taking advantage of some of the strong demand for assets in the market.” - US bourses closed higher last night thanks to much stronger Jobless Claims data (14yr low) which outweighed mixed earnings results. Overnight, Asian bourses taken positive lead from US, even as Bank of Japan data shows that inflation is still falling, consumption in shrinking and manufacturing output is just under expectations. According to Michael van Dulken at Accendo Markets, “Japan’s Nikkei [has been] helped by existing stimulus and weaker JPY. In Australia, the ASX higher as the AUD weakened following producer price inflation adding to expectations of an interest rate cut by the RBA, following other central banks recently reacting to low inflation. Chinese shares down again ahead of a manufacturing report.” - Natixis has just announced the closing of the debt financing for Seabras-1, a new subsea fiber optic cable system between the commercial and financial centers of Brazil and the United States. The global amount of debt at approximately $270m was provided on a fully-underwritten basis by Natixis -
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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