Photo: Nelson48. Man Group Acquires Numeric Holdings
Man Group has entered into a conditional agreement to acquire Numeric Holdings LLC. Numeric is a privately-owned, Boston-based quantitative equity manager with $14.7 billion of funds under management as at 31 May 2014.
Founded in 1989, Numeric has an attractive and established investment track record across a range of long only and long-short, fundamentally based quantitative strategies. Based on annualised returns, over 95% of Numeric’s current strategies have historically outperformed their selected benchmark over 1, 3 and 5 years. 100% of Numeric’s long only strategies covered by eVestment rank in the top quartile of their respective peer groups over 1, 3 and 5 years.
Numeric’s business has seen substantial growth in recent years, with funds under management increasing from $7.6 billion at the end of 2012 to $14.7 billion as at 31 May 2014. Numeric generated EBITDA of $47 million for the year ended 31 December 2013.
Under the terms of the Acquisition, Man will pay $219 million in cash at completion, with up to $275 million of further consideration payable to a broad group of the Numeric management team and employees (“Numeric Management”) following the fifth anniversary of completion under an option arrangement, dependent on the run rate profitability of the business. The regulatory capital usage associated with the Acquisition is expected to be approximately $325 million.
The Board of Man believes that the Acquisition provides attractive strategic, commercial and financial benefits to Man and its shareholders through the:
Creation of a diversified, global quantitative investment platform comprising AHL and Numeric, with over $25 billion of funds under management and a broad product range across alternative and long only, trend following, technical and fundamental strategies;
Further development of Man’s footprint in North America, through a recognised brand, a presence in an important investment centre and relationships with a range of institutional clients;
Provision of investment capacity in a number of strategies with an attractive and long investment track record and therefore the potential to add incremental funds under management through combining Numeric’s investment offering with Man’s global distribution capability;
Addition of a highly experienced and well regarded team with a strong cultural fit;
Alignment of the interests of Numeric Management with those of Man’s shareholders through having over 90% of the maximum aggregate consideration payable to Numeric Management being dependent on the run rate profitability of the Numeric business at the fifth anniversary of completion; and
Opportunity to achieve a strong risk-adjusted return on capital; additionally the Acquisition is expected to be earnings accretive from completion.
Commenting on the Acquisition, Manny Roman, Chief Executive Officer of Man, said: “We are delighted to announce the acquisition of Numeric, which has an excellent track record of performance and innovation in quantitative investing. The transaction provides us with the opportunity to advance two of our core strategic objectives: first, to build a diversified quantitative fund management business with significant assets in fundamentally based quantitative strategies and second, to develop further our presence in the US market. Man’s strategy is to provide the optimal infrastructure and environment for its investment divisions, enabling entrepreneurial asset management focused on delivering attractive risk-adjusted performance for clients. Numeric is well positioned to benefit significantly from our scale and resources.”
Mike Even, Chief Executive Officer of Numeric commented that: “Man stood out to us as a perfect strategic partner and today’s announcement signifies the full support of Numeric’s management team. Our key criteria from the outset was to find a new partner with a strong cultural fit who would preserve complete independence of our investment process and provide strategic support. We are excited and energised by this transaction and look forward to serving our clients with the support of Man.”
The Man Board, which has received financial advice from Credit Suisse, considers the terms of the Acquisition to be fair and reasonable. In providing financial advice to the Board, Credit Suisse relied upon the Board’s commercial assessment of the Acquisition.
Completion is subject to the satisfaction (or, where permitted, waiver) of certain conditions including the approval of Man’s shareholders. A circular setting out further details of the Acquisition and containing a notice convening a general meeting to seek shareholder approval for the Acquisition will be sent to Man’s shareholders. The timing of satisfaction of certain of the other conditions to the Acquisition is uncertain given the involvement of third parties but it is currently expected that the circular will be published in August 2014 and completion is currently expected to occur in September 2014.
Photo: Martin Falbisoner . Santander Signs Alliance with a Group Led by Warburg Pincus to Create a Leader in the Custody Business
Banco Santander has entered into a definitive agreement with FINESP Holdings II B.V., an affiliate of Warburg Pincus, to create a leader in the custody business. Under the terms of the agreement, which is conditional upon legal and regulatory approvals, the group which will also include Temasek, a Singapore based investment company, will acquire a 50% stake in Santander’s current custody operations in Spain, Mexico and Brazil, as the business newspapper Expansion had informed some months earlier. The remaining 50% will be owned by Santander. The transaction is expected to close in the fourth quarter of 2014.
Santander is a leading custody provider in Spain, Brazil and Mexico, with EUR 738 billion in assets under custody. The transaction values Santander’s custody operations in these countries at EUR 975 million and will generate a net capital gain for the Santander Group of approximately EUR 410 million, which will be used to strengthen the balance sheet. The company will focus on enhancing the products and services provided to its customers through greater investment in its technology platform and team.
Warburg Pincus is a global private equity firm focused on growth investing with more than $37 billion assets under management. The firm has a long standing successful track record in financial services investing, and has previously partnered with Banco Santander to jointly build best-in-class businesses. Incorporated in 1974, Temasek is an investment company based in Singapore. Supported by 11 offices globally, Temasek owns a $215 billion portfolio as at 31 March 2013, with 71% of its underlying assets in Asia (including Singapore), and 25% in the mature economies of North America, Europe, Australia & New Zealand. Around 2% of the portfolio is held in Latin America.
Banco Santander’s Chief Executive Officer, Javier Marín said: “With this alliance, Santander will significantly increase its fund administration, depositary and custody business in markets where we are already leading providers. The transaction will enable us to increase and improve the products and services we offer our clients, with a higher value-added proposition adapted to their needs.”
Daniel Zilberman, Warburg Pincus Managing Director and Head of its European Financial Services Group, said “We are pleased to partner with Banco Santander and the Santander Custody management teamto enhance the company’sfocus on providing best-in-class products and services to its customers in Spain and Latin America. The custody market benefits from long term structural growth and we look forward to supporting management in accelerating the company’s growth and service offering.”
Towers Watson has appointed Craig Baker to the new role of global Chief Investment Officer (CIO) responsible for all aspects of the company’s investment philosophy and process, while Chris Mansi will take on the new role of global delegated CIO, with responsibility for the construction and management of delegated clients’ portfolios. The appointments are effective immediately.
Chris Ford, global head of Investment at Towers Watson, said: “In order to provide a competitive advantage for our clients we have to make the best possible use of our global resources, both in finding investment ideas and in helping our clients decide which are appropriate for their portfolios. There are significant advantages to be gained by establishing a level playing field between alpha, smart beta and bulk beta investments, as well as by treating risk management as a source of value creation rather than only considering return generation.
“To this end, Craig’s role as Global CIO for our whole investment business brings together all of our research and portfolio construction resources. Consistent with our commitment to provide our investment ideas to any client that requests them, irrespective of service model, this role has responsibility for our investment philosophy and approach across both advisory and delegated services, ensuring consistency across the investment processes used in each case.
“In an increasing number of jurisdictions our clients are asking us to augment their internal resources by taking on the responsibility for implementing part of or their entire portfolio through a delegated or outsourced CIO service. In appointing Chris Mansi to the role of Global CIO for our delegated service, with responsibility for portfolio management for these clients, we will further increase our ability to deliver our best investment ideas to these clients whatever their jurisdiction.”
Craig Baker and Chris Mansi between them have worked in most areas of the Towers Watson Investment business during their tenures of 20 and 15 years respectively.
EFG International has recruited Adrian Kyriazi as Regional Business Head for Continental Europe and Switzerland, with effect from 14 July. He will be a member of both the EFG International and EFG Bank Executive Committees, subject to regulatory approval.
Adrian Kyriazi will take over responsibility for Switzerland from John Williamson, CEO, EFG International (who assumed regional business responsibility for Switzerland during the second half of 2013, on a temporary basis) and for Continental Europe from Alain Diriberry, Chairman, Private Banking Geneva and market co-ordinator for CEE and Africa.
Adrian Kyriazi was previously with Credit Suisse, where from 2010-14 he was Managing Director, Market Group Head for Greece, CEE/Poland. Previously he spent nineteen years at HSBC in a variety of different roles, including: Managing Director, Private Banking and Co-CEO, HSBC Private Bank, Monaco; CEO of West Coast Region, USA, HSBC Private Bank; and CEO of Global Practices (encompassing wealth and tax advisory, corporate finance, and family office), HSBC Private Bank.
John Williamson, CEO, EFG International: “I am very pleased that Adrian Kyriazi is joining us as Regional Business Head, Continental Europe and Switzerland. He brings extensive private banking and client management experience across a range of markets and disciplines, providing a compelling fit for EFG. He is also a proven business leader, well equipped to develop our Continental European and Swiss businesses in a coordinated fashion.”
Adrian Kyriazi, Regional Business Head, Continental Europe and Switzerland: “I am excited to be joining EFG International. It is a strong and dynamic business, with a clear focus on private banking, and a clear commitment to delivering profitable growth. I am convinced there is significant potential to grow, and I am really looking forward to working with the EFG leadership team to make this happen.”
CC-BY-SA-2.0, FlickrMark McGoldrick, managing director de Concept Capital Markets. Hedge Fund Association nombra nuevos codirectores para su chapter de Nueva York
The Hedge Fund Association (“HFA”) announced the appointments of Mark McGoldrick, Managing Director of Concept Capital Markets, and Greg de Spoelberch, Director of Marketing and Operations at Opalesque, as the New York Chapter‘s Regional Co-Directors. McGoldrick and de Spoelberch will lead HFA in the region and help produce member educational programs and events. They will serve alongside McGladrey Partner Sal Shah, Regional Director for both the HFA’s Northeast Chapter and Connecticut Chapter.
McGoldrick has been a Managing Director at Concept Capital Markets since August 2011 following the firm’s acquisition of Alaris Trading Partners, an introducing brokerage he founded in February 2006. Earlier in his career, he worked at UBS Securities in prime brokerage.
“I am honored to be appointed by the HFA as Regional Co-Director for the New York Chapter,” said McGoldrick. “I look forward to helping enhance the organization’s frequent programs that aim to educate, connect and accelerate success for HFA members in the largest hedge fund city in the world.”
De Spoelberch has been with Opalesque since 2009, initially as Head of Product Development until 2011 before he was appointed Director of Marketing and Operations. He also serves as Producer of Opalesque TV, interviewing top “Legends and Leaders” in the alternative investment industry.
“As Regional Co-Director for the HFA’s New York Chapter, I am eager to help enhance business and professional development programs for our members,” said de Spoelberch. “In the years ahead we plan to boost the HFA’s already frequent member events in New York City, and foster best practices and new business development opportunities for all of our members.”
“I want to welcome Mark and Greg to their new leadership roles as HFA’s Regional Co-Directors for New York,” said Shah. “I look forward to working alongside them to plan high-quality member events for New York and more broadly, the Northeast. Their experience in the industry will allow us to take the organization’s activities in the region to the next level.”
Shah heads the HFA’s Northeast and Connecticut Chapters, and Foley Hoag Partner Robert Sawyer also serves as the HFA’s Regional Chapter Director for Boston.
“As Chairman of HFA, I am pleased to announce new leadership positions for two very well-respected individuals in the hedge fund industry,” said David Friedland, President of Magnum U.S. Investments. “Mark and Greg will play a vital role in augmenting the HFA’s efforts in the New York Region.”
Wharton Research Data Services (WRDS), a data research platform and business intelligence tool for corporate, academic and government institutions worldwide, announced the winners of the Wharton-WRDS Best Paper Award in Empirical Finance. The 2014 Best Paper Award winners, Raghuram G. Rajan, Governor of the Reserve Bank of India and Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago, and Rodney Ramcharan, Chief of Financial Studies at the US Federal Reserve Board, explored bank failures during the agricultural collapse of the 1920s, leading up to the Great Depression.
The award for their paper, Financing Capacity and Fire Sales: Evidence from Bank Failures, was presented to the researchers on June 17 at the Western Finance Association (WFA) conference. WRDS, a part of the Wharton School of the University of Pennsylvania, provides instant access to over 200 terabytes of data across Accounting, Banking, Economics, Finance, Insurance, Marketing and Statistics disciplines, making it the gold standard business intelligence tool for over 30,000 users in 33 countries.
“WRDS believes that highlighting excellence in financial research strengthens the field and we are honored to sponsor this Best Paper Award,” said Robert Zarazowski, Senior Director of WRDS. “Expanding current knowledge and pushing the boundaries of learning and analysis is at the heart of what we do at WRDS. We congratulate this year’s winners for finding new ways to examine a historic financial collapse and in turn shed new light on our most recent financial crisis.”
Rajan and Ramcharan set out to explore whether bank failures lead to contagion, causing shocks throughout the larger banking and financial sectors due to reduced liquidity and asset devaluation. During the 2008-09 crisis, policy debates focused on the merits of the US government bailing out failing banks. To examine this question the researchers looked to the 1920s – when most banking was highly localized due to restrictions and outright prohibitions on interstate banking and when banks were left to fail. For the first time, research shows credible evidence that types of liquidations and fire sales do feature significantly in financial crises.
“This WRDS Best Paper Award is a terrific honor and we are really pleased to have our work acknowledged in this way,” said Rodney Ramcharan. “It’s always gratifying to have an opportunity to discuss and share original research, and we are grateful to WRDS for supporting this award and creating a venue to expand the conversation about the real world impacts of federal bank policies.”
Global X Management has announced that its suite of income producing ETFs has achieved several key milestones in assets under management. The Global X SuperDividend ETF crossed the $1 billion threshold, while the Global X SuperDividend U.S. ETF, the Global X SuperIncome Preferred ETF, the Global X MLP ETF and Global X MLP & Energy Infrastructure ETF (MLPX) each reached $100 million in assets.
SDIV, launched in August 2011, tracks the Solactive SuperDividend Index, providing exposure to 100 equal weighted companies that are among the highest dividend yielding stocks around the globe. U.S. securities account for 23 percent of the fund, while Australia and the U.K. represent 20 percent and 10 percent respectively. The fund has a 12-month dividend yield of 6.06%. The 30 Day SEC Yield (as of the most recent month end) is 5.85%.
Global X added SPFF in 2012 and DIV in 2013 to provide additional tools to investors looking to access alternatives to fixed income with high yield potential. SPFF equal weights 50 of the highest paying preferred stocks listed in the US and Canada, while DIV equal weights 50 of the highest yielding US dividend payers.
The strong inflows into the three funds come at a time when persistently low interest rates have made alternatives to fixed income securities, such as dividend stocks and preferred shares, attractive to investors.
“In this low and uncertain interest rate environment, we believe exposure to global dividend payers can provide key diversification to income-oriented portfolios,” said Jay Jacobs, research analyst. “Our SuperDividend™ ETF provides access to a class of dividend payers that have traditionally been overlooked by the market.”
Global X is a New York-based sponsor of exchange-traded funds that facilitates access to investment opportunities across the global markets. With $3.8 billion in managed assets as of May 2014, Global X offers income-oriented, international, and alternative exchange-traded funds.
Following years of sharp increases to wages and real estate prices, has China become too expensive? To answer this question, Andy Rothman, Investment Strategist at Matthews Asia, makes a proposition: start with lunch.
“I recently moved to San Francisco to join Matthews Asia after living in China for more than 20 years. So when I made my first trip back to Shanghai in April, I was eager to visit my favorite neighborhood noodle joint, a short walk from my house there.
I had been experiencing a bit of sticker shock in the U.S. so it was comforting to find that a fantastic (and large) bowl of beef noodle soup still cost only about US$1.50 (9 renminbi). Keep in mind, this is a fairly labor-intensive meal—the beef is stewed with the broth and simmered for hours, and the hand-pulled noodles are made right there in the middle of the small restaurant. There’s no way to find a bargain like that in any part of San Francisco.
But what can a visit to a noodle shop tell us about the macroeconomy? Well, the restaurant’s beloved bowls of beef noodle soup are not products traded internationally and, therefore, the cost should be driven to a significant degree by wages in the domestic economy”.
Chinese exporters are also managing to deal with higher costs, both by improving productivity and by moving up the value chain. This is evident from the rising share of U.S. imports from China. Since the end of 2004, the renminbi (RMB) has appreciated by 41% in real effective terms, and the minimum wage in Dongguan (a key export-processing center in southern China) rose by 196%. What has been the impact on the competiveness of Chinese exports? In 2004, Chinese goods accounted for about 13% of all products imported to the U.S. (while Mexico’s share was about 10.5%). Despite sharp increases in wages and in fuel costs, as well as the benefits of the North American Free Trade Agreement, China remains competitive today, even compared to Mexico. Last year, China’s share of U.S. imports for goods rose to about 19%, while Mexico’s share was about 12%.
“China is no longer the cheapest place to manufacture such items as shoes, toys and textiles, but it remains competitive for higher value-added machinery . . . and of course, there are those delectable hand-pulled noodles.”
Photo: Fabio Rodrigues Pozzebom/ABr - Agência Brasil. Dilma, Lula and What Comes After the World Cup
As all eyes turn to Brazil this month for the World Cup, Threadneedle’s Latin America fund manager Daniel Isidori reflects on the current pressures on the country and his portfolio positioning in Brazilian stocks:
In 2006 when Brazil won the right to host the World Cup that kicks off on Thursday, the government hoped it would showcase the progress the country is making to becoming an economic giant. Back then the economy was growing by 4 to 5% a year powered by high commodity prices and domestic consumption. However, economic growth has faltered in recent years. Commodity prices remain well below the peaks reached in the middle part of the last decade, while domestic demand has been softening with consumers now weighed down by high levels of debt.
The run up to the World Cup has also highlighted widespread dissatisfaction among Brazilians. Protesters have taken to the streets of many Brazilian cities to attack the government for the perceived high cost of preparations for the World Cup and the 2016 Olympics, which will be hosted by Rio de Janeiro, calling for the authorities to place more priority on education, health and transport. President Dilma Rousseff, who is seeking re-election in October, has sought to deflect criticism, saying that the World Cup will spur growth.
The economy could certainly do with a lift with GDP expanding by just 0.2% from the previous quarter in the first three months of 2014, while economic growth in the last quarter of 2013 has been revised down to 0.4%. Slowing economic growth in China, Brazil’s top trading partner, weighed on prices for key commodities like iron ore and soybeans as well as demands for these exports. Moreover, the central bank has been raising interest rates since early 2013 to bear down on inflation with the benchmark Selic rate now standing at 11%. Consumer prices have risen by about 6% a year since 2010.
Perhaps unsurprisingly given this background, President Dilma Rousseff is increasingly unpopular. Moreover, financial markets have been reacting positively to her sliding poll ratings in the belief that a new president would make the changes Rousseff is unwilling to implement. Although the president remains ahead of her two main contenders, Aécio Neves and Eduardo Campos, and we still believe she will be re-elected, a poll upset now looks far more likely than just a few months ago. Both Neves and Campos are trained economists and have been successful state governors. According to the ‘Economist’ magazine both want to grant independence to the central bank, simplify Brazil’s convoluted tax system, slash the number of ministries and boost private investment in much-needed infrastructure. Rousseff’s campaign managers have sought to arrest her fall with TV adverts warning that poorer Brazilians will suffer if she loses the vote. TV adverts (which are free, and distributed according to previous electoral results), are critical in Brazilian elections given the relatively low education levels of a large proportion of the population. Rousseff has a huge advantage in that she can lay claim around two-thirds of the total advertising time allotted to the candidates. However, if Rousseff’s popularity were to plummet so low that election defeat appeared unavoidable it is possible that her immediate presidential predecessor Luiz Inácio Lula da Silva, Brazil’s most popular and influential politician, could make a comeback. Both Lula, who served as president from 2003 to 2011, and Rousseff are members of the Workers Party. But the markets would welcome another term by Lula who was a far more pragmatic president than Rousseff has proved to be.
Brazilian stocks have performed well recently on the prospect that the election result could usher in a new reformist administration. However, the medium to long-term outlook for Brazil is not particularly positive. The economic model that has served Brazil – high commodity prices and strong consumer demand – appears exhausted. Rising inflation and weak growth are also just two of the problems facing the country. The current account is widening, while power blackouts and electricity rationing may be introduced as a drought prevents Brazil from recharging its hydroelectric dams. Hydro reservoirs, which generate two-thirds of Brazil’s power, are at near-record lows. In March, when Standard & Poor’s downgraded the credit rating on Brazil’s foreign currency debt, the agency said that the risks of rationing and costs associated with the drought threatened growth and investment in the country.
Given all these problems, it might appear odd that we have recently reduced our underweight in Brazil. However, we have done so in a highly selective manner and to benefit from the rally which is linked to the possibility of a more reform-minded president taking power. In addition, generally when we research stocks, we look for a catalyst that will propel the stock higher and Brazil now has a potential catalyst in terms of a possible change of government. The Brazilian market would perform very well in that eventuality as investors bank on a new administration implementing reforms that unleash the economy’s full potential – we have seen a similar phenomenon in Mexico where a new administration is introducing wide-ranging reforms.
In terms of our portfolio, the companies most affected by the upcoming election are state owned and rather than taking exposure to all of them, we now have a small overweight in the energy giant Petrobras because it is the most liquid and the most easy for international investors to buy into. By contrast, we are avoiding utilities because they could suffer if electricity is rationed. We are also wary of certain sectors which will be negatively affected by the World Cup such as airlines and retailers as people stay close to their TV screens.
Georges Chodron de Courcel, 64, BNP Paribas’ Chief Operating Officer, will retire on September 30, 2014.
Georges Chodron de Courcel has devoted his entire 42-year career to BNP and then BNP Paribas, and has made a decisive contribution to the Group’s development, and especially to the project which eventually led to the creation of the new BNP Paribas entity.
The Board of Directors of BNP Paribas pays tribute to the career and work of Georges Chodron de Courcel, who has been one of the key players in the expansion of BNP Paribas and its businesses, especially outside France, through the various positions that he has held.
Georges Chodron de Courcel commented: “I am proud to have contributed to building this outstanding Group, which has now become one of the European leaders in its industry. I am convinced that BNP Paribas will be able to play a prominent role in the coming years”.
As a Director of several listed companies, in order to continue to fulfill his director roles while complying with the new French banking law, which limits the number of such mandates for bank corporate officers, Georges Chodron de Courcel will stand down from his role as BNP Paribas’ Chief Operating Officer on 30 June at his own request.
