Blackstone announced that Doug Ostrover will step down as a Senior Managing Director of Blackstone and will become a Senior Adviser to the firm. Mr. Ostrover was, along with Bennett Goodman and Tripp Smith, one of the foundersof GSO, Blackstone’s alternative credit platform. Blackstone acquired GSO in 2008 and it now has assets under management of $75 billion. Mr. Ostrover intends to found a family office to invest capital and work alongside management teams.
Bennett Goodman and Tripp Smith,the co-heads of GSO, said, “Doug has been our great friend and colleague for the last 25 years. The success of GSO as the leading alternative credit platform in the market today is in no small measure the result of Doug’s creative thinking and energy. While we will miss him as a colleague, we are delighted that we will still have the benefit of his advice and counsel as a Senior Adviser.”
Stephen A. Schwarzman, CEO, Chairman and Co-Founder of Blackstone, added, “On behalf of all of us at the firm, I want to thank Doug for his many contributions to Blackstone and GSO. He leaves behind a deep bench of finance professionals at GSO, whom he helped mentor and train over the years. I wish him well in the next stage of his career and I am glad that he is keeping a continuing affiliation with the firm.”
Before co-founding GSO in 2005, Mr. Ostrover was Chairman of the Leveraged Finance Group of CSFB. Mr. Ostrover received a BA in Economics from the University of Pennsylvania and an MBA from the Stern School of Business of New York University.
CC-BY-SA-2.0, FlickrPhoto: Willy Verhulst. Bank Degroof and Petercam Sign Final Merger Agreement to Create an Independent Leader in Belgium
The reference shareholders of Bank Degroof and Petercam signed a definitive merger agreement on May 2015 following the successfully completion of the due diligence phase initiated after the signing of the Memorandum of Understanding on 19 January 2015.
By signing, Bank Degroof and Petercam formally engage in creating a leader at the service of its clients. With assets under management of over 50 billion, the new entity becomes the reference independent financial institution in Belgium with a leading position in its three businesses (private banking, institutional asset management and investment banking) and a leading player in Europe.
The Merger Agreement provides that the merger will be preceded by transactions in each group in order to align the shareholder base and the activities of the new group.
Bank Degroof will transfer – through a partial demerger – its long-term equity portfolio in a new entity called Degroof Equity. In parallel, the family shareholders of Petercam will constitute a new company called Holding Petercam to which they will contribute their shares and acquire Petercam shares available for sale, bringing their stake in Petercam to approximately 70%.
The combination of the two companies will be effected through a merger involving the transfer of all assets and liabilities of Petercam to the legal entity Bank Degroof, which will allow the new group to maintain its banking license. The merged entity will issue new shares to the shareholders of Petercam based on a valuation of 70% for Bank Degroof and 30% for Petercam.
Immediately after the merger, Bank Degroof ‘s reference shareholders will bring in their shares in the merged entity into a holding company called DSDC.
After the merger, the capital ratio Basel III (CET1) of the new group will amount to minimum 15%. The shareholdings will be allocated as follows: ca 50 % DSDC and minimum 20% Holding Petercam. The balance will be held by the former partners of Petercam, the management and staff, the financial partners and by the company itself. A shareholder agreement will be established between DSDC and Holding Petercam.
The board of Bank Degroof Petercam will be composed of seven members of the executive committee, two independent directors, five members proposed by DSDC, and three by Petercam Holding. The board will be chaired by Alain Philippson.
The teams are jointly working to finalize the organizational model of the future group activities by capitalizing on their complementary services and expertise to strengthen and expand its offering to the clients. The integration and the actual organization of the group.
With GDP growth significantly lower in the United States, slightly better economic figures in Europe, no clear trend in Japan and continuing weakness in emerging markets: as has been the case in recent years, hopes of an upturn in economic growth may well be disappointed again this year. This is the view of Guy Wagner, Chief Investment Officer at Banque de Luxembourg, and his team in their monthly analysis, ‘Highlights’.
Despite In the United States, GDP growth came in significantly below expectations in the first quarter, mainly due to difficult weather conditions during the winter and strikes at the country’s west-coast ports. In Europe, economic statistics improved slightly thanks to the weakness of the euro, despite fewer positive economic surprises since the beginning of April. In Japan, economic activity is still not displaying any clear trend, while in emerging markets it is continuing to slacken. “As has been the case in recent years, hopes of an upturn in economic growth may well be disappointed again this year,” says Guy Wagner, Chief Investment Officer at Banque de Luxembourg and Managing Director of BLI – Banque de Luxembourg Investments.
Stable oil prices have stemmed a further drop in inflation rates
With the stabilisation of oil prices, inflation rates have consolidated at low levels. In the United States, inflation dipped from 0% in February to –0.1% in March, while in the eurozone, the inflation rate rose from –0.1% in March to 0% in April. The Chinese central bank has reduced the commercial banks’ required reserve ratio. The US Federal Reserve has not given any further indications about a timetable for a first interest rate rise. As a result, analysts are not expecting the Federal Reserve’s first rate hike until September at the earliest. In Europe, the ECB is continuing to buy up government bonds at the rate of EUR 60 billion per month. In China, the central bank reduced the commercial banks’ required reserve ratio from 19.5% to 18.5% and is preparing to accept debt issued by regional governments as collateral.
Government bond yields are rising in Europe and the United States
In April, eurozone government bond yields rose. The upturn in yields in Germany, Italy and Spain seems to have been triggered by short positions adopted by hedge funds in view of the paltry level of almost all bond yields in the eurozone. Bond yields also rose in the United States. “Despite the rise, European long rates still lack appeal. US government bonds are the only viable alternative in industrialised countries given that they still have potential to appreciate if economic activity slows further,” asserts the Luxembourg economist.
Equities remain the default investment
US and European stock markets held their high levels in April, while Japanese and Asian stock markets even continued to rise. According to Guy Wagner: “Given the good performance of most shares since the start of the year, a stock market correction at the beginning of the May to October period – a time historically less favourable for stock markets than November to April – would not be particularly surprising.” Unless there is an external shock, equities should maintain their status of investment by default due to the ongoing prospect of a zero interest rate environment for the coming months.
The European Fund and Asset Management Association (EFAMA) has today published its latest Investment Funds Industry Fact Sheet, which provides net sales of UCITS and non-UCITS for March 2015.
27 associations representing more than 99.6 percent of total UCITS and non-UCITS assets at end March 2015 provided us with net sales and/or net assets data.
Net assets of UCITS break through the EUR 9 trillion mark for the first time in March 2015, while Net sales of UCITS remained strong in March attracting EUR 69 billion in net new money, albeit down from EUR 87 billion in February. This reduction in net sales can be attributed to a turnaround in net flows of equity funds and money market funds during the month.
Long-term UCITS (UCITS excluding money market funds) registered a second consecutive month of net inflows of EUR 71 billion in March: Bond funds posted net sales of EUR 26 billion, being the same level as February; Equity funds experienced net outflows of EUR 3 billion, against net inflows of EUR 14 billion in February; And Balanced funds registered a jump in net inflows to EUR 39 billion, up from EUR 22 billion in February.
Money market funds registered a turnaround in net sales in March to post net outflows of EUR 2 billion, compared to net inflows of EUR 16 billion in February.
Total non-UCITS net sales amounted to EUR 18 billion, compared to EUR 21 billion in February. Net sales of special funds (funds reserved to institutional investors) decreased to EUR 12 billion during the month from EUR 16 billion in February.
Total net assets of UCITS stood at EUR 9,004 billion at end March 2015, representing a 2.5 percent increase during the month.Total net assets of non-UCITS increased 2.3 percent to stand at EUR 3,547 billion at month end. Overall, total net assets of the European investment fund industry stood at EUR 12,551 billion at end March 2015.
Bernard Delbecque, Director of Economics and Research commented: “Long-term UCITS continued to attract strong net inflows in March thanks to a leap in net sales of balanced funds, which continued to attract investors by providing broad market, asset class and sector diversification.”
Global investors have less appetite for higher risk exposures, particularly in the U.S., according to the BofA Merrill Lynch Fund Manager Survey for May.
While a net 47 percent of respondents remain overweight equities, this is down seven percentage points month-on-month. Appetite for U.S. stocks has declined to a net 19 percent underweight, in contrast to strong overweights across Q1. Confidence in corporate profitability has also fallen, with only 7 percent of investors viewing the U.S. as the region with the most favorable earnings outlook. Long U.S. dollar remains investment markets’ most crowded trade, in fund managers’ view. However, the survey’s 41 percent reading on this measure has fallen sharply from last month.
At the same time, overweight cash positions have risen sharply. This month’s reading of a net 23 percent is the survey’s highest since December 2014.
These shifts follow the recent aggressive sell-off in bond markets. The survey shows a strong rise in panelists’ assessment of bonds as the asset class most vulnerable to volatility in 2015 – up to 56 percent. Bond underweights have also increased.
Investors’ macroeconomic views have changed little since last month. A net 59 percent still expect the global economy to strengthen this year, though forecasts of corporate profitability have fallen a little. Seventy percent of respondents see both growth and inflation remaining below historical trends over the next 12 months.
They are increasingly divided over the timing of a U.S. rate rise, however. Almost as many now see this in 4Q as in 3Q – 36 percent versus 45 percent, respectively.
“There is no loss of faith in economic recovery, and positioning still assumes that the U.S. dollar goes up, but doubts are creeping in – hence this jump in allocation to cash,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research. “Investors are keeping faith with European stocks for now, but this remains biased towards currency plays,” said James Barty, head of European equity strategy.
Europe and Japan still preferred
In contrast to their reduced conviction towards U.S. equities, which a net 39 percent now intend to underweight over the next year, investors remain positive on both Europe and Japan – both economies where quantitative easing continues. A respective net 49 and 42 percent of fund managers are overweight the two markets.
Europe also remains the market most would like to overweight from a 12-month perspective. A net 33 percent still take this position, although this is now down as much as 30 percentage points from March’s very strong reading.
A net 18 percent make Japan their top pick for the coming year. This is a slight decline from last month.
At the same time, fund managers are less negative on emerging markets. Only a net 6 percent are now underweight, compared to April’s net 18 percent. Intention to own emerging markets stocks over the next year has risen similarly.
U.K. picks up
Britain’s recent decisive election result is reflected in investors’ more positive stance on U.K. assets. Global investors have halved their equity underweights month-on-month, while a net 3 percent of European fund managers now intend to overweight the U.K. market over the next 12 months. Last month, a net 50 percent said they would underweight it over this time period.
Similarly, views of sterling as overvalued have fallen notably. Only a net 8 percent of global fund managers now take this stance, compared to April’s net 15 percent.
Currency correlation
Investors’ stance on the major currencies correlates with their equity positioning. A net 69 percent expect the U.S. dollar to appreciate over the next 12 months. This is up slightly from April’s reading. In contrast, a net 32 and 35 percent expect the Euro and yen to decline. Yen bearishness has risen by 16 percentage points since March.
Bullishness on oil has fallen, meanwhile. Fewer than half of fund managers now expect the commodity to trade at a higher price in 12 months’ time. This is down significantly from April and March’s reading of 64 percent.
Photo: José María Mateos
. Japanese Private Capital Interested in Investing in Peru
Mr. Carlos Herrera, Executive Director of Proinversion, the Peruvian Investment Authority concluded a successful investment roadshow in Tokyo on Friday, which also included Beijing and Seoul. The government delegation was joined by over 80 attendants at the Mitsubishi Bank Office and had more than 10 bilateral meetings with private investors and conglomerates, all of who were keen to discuss investment opportunities in Peru.
The conference, organized with the support of the Peruvian Embassy in Japan and the prestigious Japanese Bank of Tokio-Mitsubishi UFJ, was inaugurated with an introduction by Peruvian ambassador Elard Escala, highlighted the more than 140 years of diplomatic relations and the fact that Japan is Peru’s fifth largest trade partner. He noted the favorable investment conditions for foreign capital such as the equal conditions for foreign and domestic investors and the solid legal framework to protect assets.
The Managing Director for the Lima branch of the Bank of Tokyo-Mitsubishi, Kohei Hoshide, gave a presentation on the general state of the Peruvian economy. He emphasized, “With their economic reforms, solid growth projections and political stability, Peru is one of the leading and most attractive investment destinations for Japanese businesses and private investors.”
Carlos Herrera, Executive Director of Proinversion, presented to Japanese businesses and investors some of the many projects available for private investment in the Agency’s portfolio of infrastructure projects and explained the way in which the private investment and tender process works in Peru. He exhibited several projects such as Lines 3 & 4 of the Lima – Callao metro, the Huancayo – Huancavelica railway and several regional roads. He included also the calls for tender that are open such as for the construction of electricity generation plants, correctional facilities, real estate and solid waste treatment plants. Mr. Herrera concluded: “the visit to Tokyo has been a great success, proving that there is an ever increasing interest from Japanese companies in doing business in Peru, due to a like-minded approach of transparency and public responsibility.”
CC-BY-SA-2.0, FlickrFoto: Julio César Mesa
. Los bancos venezolanos resisten pero se enfrentan a mayores desafíos
Private Venezuelan banks continue to report resilient loan quality ratios and earnings, even when adjusted for inflation. However, growing macroeconomic imbalances, high unseasoned loan growth and government policies that favor state banks pose additional challenges, according to a Fitch Ratings report.
‘The banking system’s significant exposure to the public sector, as well as a marked shift in portfolio composition toward more vulnerable economic segments and consumer loans, could lead to a sudden deterioration in asset quality in the event of a forced economic adjustment,’ saidMark Narron, Director. ‘Further government regulations and intervention could create additional challenges.’
In December 2014, Fitch downgraded the long-term Issuer Default Ratings (IDRs) ofthe seven largest private banksto ‘CCC’ from ‘B,’in line with a downgrade of the sovereign. All these banks’ ratings are limited by the sovereign given their vulnerability to the country’s weak economic performance, high inflation and policy choices.
In addition to long-standing interest rate caps and floors and compulsory loan requirements, beginning in 2014, the government enacted policies favoring state banks. These included the migration of public sector deposits to state banks, and restrictions on private banks’ ability to provide customers with access to hard currency.These actions led to one-off liquidity events, evidenced by spikes in inter-bank rates. However, in the absence of further government intervention, Fitch does not expect these policies to lead to a sustained divergence in deposit growth relative to state banks.
Venezuelan banks continue to rely on demand deposits for the vast majority of their funding, maintaining a large, negative mismatch between short-term assets and liabilities. However, this position remains manageable under Venezuela’s current scheme of foreign exchange controls which acts as a barrier to capital flight.
The effects of inflation on operating expenses, plus an uptick in funding costs, led to weaker profitability and internal capital generation in 2014. In addition, the government’s elimination of the inflation adjustment for the calculation of income tax will further pressure profitability in 2015. Weaker profits and high nominal asset growth in turn continue to pressure capital ratios. While capital levels vary across banks, Fitch expects that capitalization will deteriorate further if the rate of deposit growth does not decline.
Loan quality ratios have been stable but belie potential risks as they are distorted by inflation. The banking system’s significant exposure to the public sector, as well as a marked shift toward more vulnerable economic segments and consumer loans, could lead to a sudden deterioration.
Many banks have continued to proactively increase reserves for impaired loans in order to better confront macroeconomic imbalances. Although reserve levels compare favorably with those of international peers, Fitch views them as potentially insufficient given the volatility in asset quality exhibited during past crises.
EFAMA has reiterated its strong support for the European Commission’s aim to build a Capital Markets Union.
In its formal response – published today – to the EC Green Paper on Capital Markets Union, EFAMA has welcomed the European Commission’s initiative, saying that an integrated capital markets union that succeeds in unlocking capital and shifting it towards long-term investments will be to the benefit of investors, the cornerstone of the asset management industry.
Peter de Proft, Director General of EFAMA, commented: “Europe is facing an important challenge, which is also a unique opportunity. We very much welcome the fact that EU policymakers are embracing the opportunities that the asset management industry offers in terms of supporting sustainable economic growth and long-term financing.”
These opportunities are outlined in EFAMA’s recent Asset Management Report, which illustrates how the asset management industry plays a vital role in the general financing of the economy and contributes to an efficient and well-functioning Capital Markets Union.
In its response, EFAMA also aims to underline what it considers to be the necessary conditions to make a Capital Markets Union successful – particularly highlighting the crucial role of promoting long-term savings and creating a single market for personal pensions. EFAMA thinks necessary to encourage European citizens to save more for retirement, and it is convinced that developing private pensions in Europe is crucial. The creation of a European personal pension product would offer the potential to increase the volume of retirement savings while channelling those savings to long-term investments across the EU. EFAMA’s recent report on this topic provides further details and recommendations.
European asset managers have long supported the ELTIF regulation as a concrete step towards unlocking capital and encouraging a shift towards investments in long-term projects. EFAMA believes that to make this a success story, important refinements, a right framework and appropriate incentives are necessary.
In the context of building a capital markets union, ensuring appropriate calibrations in Level 2 must be a priority: appropriate and well calibrated level 2 measures in both MIFID II and Solvency II can encourage and promote, as they should, long-term investment.
EFAMA reiterates that it is crucial to ensure a regulatory level playing field and consistent regulation across sectors in the distribution of similar retail investment products. Retail investors must receive the same level of protection, whether these products are governed by MIFID II or IMD II.
Finally, EFAMA seeks to remind EU policymakers that the Financial Transactions Tax (FTT) represents a potential significant obstacle to the successful implementation of a Capital Markets Union. This proposal carries a significant risk which would cause distortions to the creation of an EU single market as it would relocate financial activities outside of the 11 participating Member States, or if applied in the 28 Member States, outside of the EU altogether. FTT would increase the costs for investors as it will render EU investment funds more expensive. It would also jeopardise long-term savings, growth and investment as it would channel investments to products not subject to FTT.
Peter de Proft, Director General of EFAMA, concluded: “Asset managers have an important role to play in the changing landscape of a more capital market based economy, and we stand ready to constructively engage with EU policymakers in the road towards financing growth in Europe.”
Foto: Julien Chalendard. La actividad de M&A entre RIAs se mantiene, pero la alineación de objetivos estratégicos cobra importancia
Registered investment advisor firms (RIAs) continue to initiate the bulk of mergers and acquisitions (M&A) of RIAs, but the success of these transactions increasingly rests on the alignment of the strategic objectives of the firms involved, according to a report recently released by Pershing LLC, a BNY Mellon company. The report, Real Deals: Achieving Purposeful Growth with Purposeful Transactions, analyzes RIA deals and offers guidance to firms for determining if or when a transaction is the optimal course of action.
According to the report, one in four advisory firms was involved in a transaction within the past five years. During this period, nearly half (48 percent) of all deals involved RIAs transacting with each other. RIA-RIA deals now account for twice the proportion of industry transactions compared with 10 years ago, when banks and other institutional buyers tended to dominate transactions. Although the total of 42 real deal transactions in 2014 is slightly less than the 48 recorded in 2013, the numbers represent a largely consistent level of M&A activity over recent years. Real deal transactions are defined as those mergers involving an RIA or acquisition of an RIA that is retail-focused, and manages $50mor more in assets or earns $500,000 or more in annual revenues.
“RIA deal-making will invariably continue and grow in frequency,” said Gabriel Garcia, director of relationship management at Pershing Advisor Solutions. “Firm owners are increasingly aware of the potential benefits of a transaction and are more confident in initiating one.”
A transaction can result in a host of strategic advantages, the principal of which include: greater economies of scale, accessing new markets, accessing new expertise and facilitating an ownership or management succession solution. But in order to gain any one of these advantages, Garcia urges firms to consider both organic and inorganic growth approaches. Organic growth is achieved from maximizing existing business capabilities such as growing the firm’s existing client base, improving efficiency to increase profitability and reinvesting profits to increase service capacity. Inorganic growth is achieved as a result of a merger with, or acquisition of, another firm.
“While M&A activity is highly regarded as a means of expansion, it is important to recognize that a transaction is not necessarily the only way to achieve growth,” said Garcia. “RIAs must first understand the strategic context of a potential transaction.”
To evaluate whether a transaction is appropriate, the report provides a four-step course of action:
Define objectives: The personal objectives of shareholders, the strategic objectives of the firm, and other clearly defined objectives serve as valuable guideposts. Without them, it is impossible to adequately determine whether a transaction is in the best interest of the firm and its shareholders.
Identify the problem: Firms are often tempted to pursue any deal opportunity that presents itself. However, a purposeful transaction should help firms address a specific problem such as the need to scale, access new markets, or acquire new capabilities, etc.
List all options: While a transaction may take the firm in the direction it wants to go, another initiative might do the same but more effectively. Identify all practical options, inorganic as well as organic, for achieving the objectives of the firm.
Analyze and discuss: Conduct a thorough analysis of each option to determine which solution will be most effective for driving the firm’s growth strategy. Review and evaluate the best options for achieving the firm’s objectives from the perspectives of cost, risk, timing, business continuity and associated distractions.
. BM&FBOVESPA and S&P Dow Jones Indices Sign Index Agreement
BM&FBOVESPA, the largest equity and futures exchange in Latin America, and S&P Dow Jones Indices, one of the world’s leading providers of financial market indices, announced today the signing of a strategic agreement to create and launch new, co-branded equity Brazilian indices. The signing, as well as a bell ringing commemorating the event, took place at BVMF.
Yesterday also marks the launch of the S&P/BOVESPA family of smart beta indices, the inaugural series of indices developed and launched as a result of this agreement. The five indices – S&P/BOVESPA Low Volatility Index, S&P/BOVESPA Inverse Risk Weighted Index, S&P/BOVESPA Quality Index, S&P/BOVESPA Momentum Index, and S&P/BOVESPA Enhanced Value Index –measure the performance of stocks within the Brazilian equity markets based on exposure they provide to respective risk factors and are the first suite of smart beta indices in Brazil. Market participants can use these indices, and combinations thereof, in various ways depending on their investment objectives.
“As the Brazilian financial market develops, BM&FBOVESPA continues to play an integral role for both local and international investors,” says Alex Matturri, CEO of S&P Dow Jones Indices. “Through this agreement, S&P Dow Jones Indices expands its mission of bringing greater index-based solutions, research, ideas, and analysis to the markets of Latin America. By launching this family of smart beta indices in Brazil, we are meeting the evolving needs of investors throughout the world for benchmarks that tilt towards certain styles, sectors, and factors.”
According to Edemir Pinto, CEO of BM&FBOVESPA: “The agreement between BM&FBOVESPA and S&P DJI is a very important step toward increasing index based opportunities for investors and further educating them on the merits of the Brazilian capital markets. The association of our brand to S&P DJI’s on new co-branded indices will reinforce BM&FBOVESPA’s position overseas through S&P DJI’s global index distribution.”
S&P/BOVESPA Smart Beta Index Offering:
S&P/BOVESPA Low Volatility Index tracks the performance of the top quintile of stocks in the Brazilian equity market, defined by the S&P Brazil Broad Market Index (BMI), that have the lowest volatility, as measured by standard deviation.
S&P/BOVESPA Inverse-Risk Weighted Index calculates the performance of the Brazilian equity market with stocks weighted based on the inverse of their volatility. It provides the exposure to the low volatility factor using a tilted approach.
S&P/BOVESPA Quality Index measures the performance of the top quintile of high-quality stocks in the Brazilian equity market as determined by their quality score. This score is calculated based on return on equity, accruals ratio, and financial leverage ratio.
S&P/BOVESPA Momentum Index computes the performance of the top quintile of securities in the Brazilian equity market that exhibit persistence in their relative performance, measured by their risk adjusted price momentum.
S&P/BOVESPA Enhanced Value Index tracks the performance of the top quintile of stocks in the Brazilian equity market with attractive valuations based on “value scores” calculated using three fundamental measures: book value-to-price, earnings-to-price, and sales-to-price.
