Wikimedia CommonsFoto: Léon Cornelissen. Robeco: investing in emerging markets as a protection to currency war
Talk of a currency war is in the air. A currency war occurs when two or more countries devalue their own currencies via fiscal or monetary policy to improve or to prevent deterioration in their export competitiveness.
“Increased exports and lower imports lead to higher production,” explains Léon Cornelissen, Robeco’s Chief Economist.
At first sight, then, a currency devaluation in order to boost growth looks attractive. But Cornelissen emphasizes that the policy has many drawbacks. A weaker currency often leads to inflation. This is especially the case when no domestic substitutes for imports are available. Desides, other countries, which also want to drive down their currencies, may implement similar measures. In the end, a competitive devaluation is a zero-sum game. The production gains of one country leads to production losses in another.
Cornelissen sees no end to the currency war. “In the end, most governments and/or central banks still try to bring down their currency and see this as a quick fix for their economic problems”, says Cornelissen.
But that can be a mistake—a big mistake. “Aiming for a lower currency is easier than implementing structural reforms,” he says. “But a currency war will not bring prosperity.”
So how should investors protect themselves against a currency war? Cornelissen suggests investing in emerging markets, with unhedged currency exposure. He cautions that the risks of investing in these markets are higher than in developed markets.
“Participating in a currency war can turn out to be the road to ruin”, Léon Cornelissen
What is the rationale for this? “When a round of competitive devaluations starts, the options of central banks in emerging markets to keep their currencies from rising are limited,” he says. “This is because they cannot easily lower interest rates.”
Lowering interest rates is the most powerful weapon a central bank has at its disposal to weaken its currency. “The problem in emerging markets is that lowering interest rates leads to a credit boom, and the subsequent surge in domestic consumption leads to higher inflation,” he explains.
There is another reason why emerging markets currencies offer investors the best protection: a prolonged currency war leads to demand for alternative reserve currencies outside developed markets.
Although emerging markets offer protection during a currency war, Cornelissen points to one final potential downside when investing in these markets: “A currency war can lead to the imposition of capital controls,” he says. “This can complicate things for investors.”
Foto: Balint Koch
. EFG International vende su 20,25% en EFG Financial Products por 74 millones de dólares
EFG International has agreed to sell to Notenstein Private Bank (a subsidiary of Raiffeisen Switzerland), subject to regulatory approvals, its remaining stake of 20.25% in EFG Financial Products for CHF 70.2 million (1,350,000 shares at CHF 52 per share, compared with the IPO price of CHF 45). The transaction is expected to complete during the first half of 2013, and is in keeping with EFG International’s desire to focus on its core business of private banking.
Upon closing, EFG Financial Products will be deconsolidated from EFG International. In addition, EFG International’s representatives on the board of EFG Financial Products will step down at closing (although Patrick de Figueiredo, Chief Risk Officer of EFG Group, will remain, but as a representative of the founders).
EFG International will continue to access EFG Financial Products’ structured investment products expertise as a white-labeling partner. In this context, while unsecured credit facilities will cease upon closing, it will continue to provide a secured credit line. It will also provide transitional support to EFG Financial Products until the end of 2013. EFG Financial Products will discontinue using EFG in its name by end-2013 at the latest.
This transaction is expected to result in an exceptional accounting gain of approximately CHF 37 million in EFG International’s 2013 financial statements. Taking this and the deconsolidation into account, EFG International’s pro forma Basel III fully phased in BIS Total Capital Ratio would have increased from 15.9% as of 31 December 2012 to 17.5% (CET1 12.8%).
Wikimedia CommonsEl cambista y su esposa, de Quentin Massys. BNP Paribas Securities Services firma con Euroclear un acuerdo de gestión de colateral
BNP Paribas Securities Services, and Euroclear Bank announced the launch of their joint tri-party collateral management arrangements via Euroclear’s Collateral Highway. The initiative enables mutual clients to access securities held at BNP Paribas Securities Services as collateral for tri-party operations conducted by Euroclear Bank.
BNP Paribas and Euroclear Bank entered into a collaboration agreement in 2012 and have since been working together to develop the joint initiative to support clients in sourcing securities to meet their growing collateral needs. High demand, stricter risk management practices and new regulation are increasing the need for collateral at a time when high-grade collateral is increasingly difficult to source easily.
“As the first agent bank live on our Collateral Highway, we applaud BNP Paribas’ foresight and drive to offer their clients a flexible and innovative option to ease collateral flows.”
Frederic Hannequart, Chairman of Euroclear Bank, said: “This partnership is particularly timely and important as demand for collateral continues to increase. By joining forces, we alleviate one of the challenges of collateral fragmentation by making the transfer of collateral to the right place at the right time as seamless and operationally simple as possible. As the first agent bank live on our Collateral Highway, we applaud BNP Paribas’ foresight and drive to offer their clients a flexible and innovative option to ease collateral flows. We are delighted to be partnering with them.”
The BNP Paribas/Euroclear Bank collateral transfer arrangement ensures that mutual clients of both institutions achieve greater risk protection and manage their available assets more efficiently. In this collaboration, securities held in local custody with BNP Paribas may be used as collateral in triparty collateral management deals managed by Euroclear Bank.
Alain Pochet, Head of Clearing, Settlement and Custody at BNP Paribas Securities Services, said: “This is a major achievement for both parties, and comes at a very appropriate timing for our clients who face significant regulatory changes. From today, they will be able to flawlessly finance their available securities, which will help them address the ever-increasing demand for collateral. The first trade completed through this partnership was executed in the Spanish market. It allowed our mutual client to use available securities held with BNP Paribas Securities Madrid as collateral for the tri-party transaction administered by Euroclear Bank.”
Both companies are co-operating to extend the scope of the arrangement to the main European and Asian markets.
Foto: Loz (L. B. Tettenborn) . Las firmas de private equity y capital riesgo generan inversiones récord en América Latina en 2012
Private equity and venture capital firms committed $7.9bn to investments in Latin America in 2012, representing a five-year high and a 21% increase over 2011, according to data released by the Latin American Private Equity and Venture Capital Association (LAVCA).
The $7.9bn total reflects 237 investments, a 37% increase in the number of deals from the previous year. Seven large firms that had raised over $11bn for pan-regional and Brazilian funds in 2010 and 2011 put that money to work in new deals across a range of markets and sectors.
Investments in consumer-related sectors dominated in 2012, capturing 40% of the $7.9bn total. Consumer retail represented $2.2b of investments, with the rest coming from deals in financial services, restaurants, education, fitness, healthcare and consumer goods. IT deals also posted strong growth in 2012, with both the number of IT deals and dollars invested in the sector more than doubling from 2011.
As in previous years, Brazil was the largest market for PE/VC investments in Latin America, accounting for 72% of the total invested and 62% of the total deals. In Mexico, the total number of deals was on par with 2011, but dollars committed increased by 50% over 2011. Activity in the Andean region was driven by an increasing number of cross border deals, with managers in Colombia, Peru in Chile investing across all three markets.
Fundraising for private equity and venture capital in Latin America in 2012 was dominated by smaller funds, with $5.6bn committed to 42 closings. The 2012 fundraising figure represents an important shift from 2010 and 2011, which saw record totals of $8.1bn and $10.3bn respectively, as managers targeted fund sizes under $500m. A total of 40 managers reported 42 partial or final closings in 2012, versus 35 partial or final closings from 28 firms in 2011.
Rather than representing a change in the appetite of international investors to commit capital to Latin America, the decrease shows a fundamental shift in the size of the funds being marketed.
“It was another dynamic year for private equity and venture capital in the region,” said Cate Ambrose, President of LAVCA. “We continue to see international firms moving into Latin America, at the same time that new funds are being formed across Brazil, Mexico, Peru, Colombia, Chile and other smaller markets. Fundraising was much less concentrated, with more firms in the market, as compared to previous years. That, and the record level of deals, point to a deepening and maturing of the investment ecosystem.”
One notable development in 2012 was the continued expansion of venture capital investment in technology companies in Brazil and other markets, with both international and Latin American VC firms raising new funds and backing new start ups. Exit activity in 2012 returned to 2010 levels, following an extraordinary year in 2011 when two to three firms generated over $6bn from strategic sales and two large IPOs. A total of $3.8bn was generated in 44 exits in 2012, driven by a vibrant M&A market across Latin America.
Wikimedia CommonsFoto: Sanfranman59
. Hines e Invesco se unen en la compra del Rialto Building de San Francisco
Hines, the international real estate firm, andInvesco Real Estate, announced hat they have jointly acquired the Rialto Building located at 116 New Montgomery Street in San Francisco’s South Financial District, from Africa Israel USA (AFI USA). Financials on the transaction were not disclosed. Hines will oversee management and leasing of the property on behalf of the partnership.
Originally built in 1902, the H-shaped Renaissance-style building was designed by Meyer & O’Brien Architects. The nine-story building contains 135,486 square feet of office and retail space. After the great earthquake of 1906, the building’s interiors were completely rebuilt, leaving the steel, brick and concrete exterior structure intact. AFI USA acquired the building in 2007, and soon after, undertook a capital investment program to restore the property to its original grandeur. Restoration work focused on original architectural components in the main lobby, including the bronze staircase, ornate metal elevator doors, the painted panel ceiling and the marble flooring.
Hines Senior Managing Director, Cameron Falconer, commented, “The Rialto Building is one of San Francisco’s true architectural icons, and we are pleased to add it to our portfolio. Going forward, Hines and Invesco will continue to invest in the building to complete its transition to a ‘creative core’ asset that caters to San Francisco’s burgeoning technology and multimedia industry tenants.”
The Rialto Building is currently 85 percent leased to strong tenant roster including office tenants Trulia, Nelson\Nygaard and LaunchSquad, and retail tenants Walgreens and Chipotle.
“This sale proves that San Francisco is still unmatched as the nation’s top-performing office market,” said Tamir Kazaz, CEO of AFI USA. “The combination of historic architecture, creative layouts and central location make this a highly attractive property, one that will ensure long-term value and stable cash flows.”
Wikimedia CommonsDavid Samuels se incorpora a Promontory Financial Group como director general. Foto cedida. David Samuels se incorpora a Promontory Financial Group como director general
Promontory Financial Group, a premier strategy, risk-management, regulatory, and compliance consulting firm for financial services firms worldwide, announced that David Samuels, former Global Head of Risk Solutions and Analytics for S&P Capital IQ, has joined the firm as a Managing Director. Samuels, who is based in New York, but will continue to spend extensive time in Europe, the Middle East, Africa, and the Asia-Pacific region, will drive the development of a stress-testing solutions business and expanded analytical solutions, benchmarks and models, on a global basis.
“The financial crisis highlighted the critical importance of effective risk management. Today, institutions must handle heightened regulatory oversight as well as new and changing expectations,” said Promontory Chief Executive Officer and Founder Eugene A. Ludwig. “David brings the right mix of analytic and senior managerial strengths to this initiative and has developed a strong reputation for helping financial institutions proactively monitor their individual and enterprise-wide risks in an evolving environment.”
Samuels has spent more than 25 years developing and providing risk-management solutions across industry, asset, and geographic lines. During six years at S&P IQ in his role as Global Head of Risk Solutions and Analytics, he oversaw the development of an innovative suite of risk-management solutions, including analytics, services, and data sets. From 2004 to 2007 he was Chief Operating Officer and Global Head of SunGard ERisk, where he oversaw quantitative modelers, programmers, and consultants in developing customized risk solutions for clients. Before that, he was President and Chief Executive Officer of Zoologic Inc., a provider of flexible learning tools for the financial services industry.
Mr. Samuels holds a Bachelor of Science in Finance and Management Information Systems from the State University of New York at Albany.
Wikimedia CommonsFoto: U.S. Coast Guard Petty Officer 3rd Class Elizabeth H. Bordelon. La OCDE publica un estudio sobre el precio del crudo: el barril de Brent puede subir a 190 dólares en 2020
Following a sharp drop amidst the global economic crisis and a subsequent recovery, the spot price of crude oil has been broadly stable for the past couple of years. This paper discusses the factors that drive oil demand and supply and, hence, the price of the resource. A set of oil demand equations is estimated for OECD and non-OECD countries, which is then combined with assumptions about the behavior of supply to analyze the impact of a range of macroeconomic and policy scenarios on the future oil price path. The scenario analysis suggests that a return of world growth to slightly below pre-crisis rates would be consistent with an increase in the price of Brent crude to far above early-2012 levels by 2020. This increase would be mostly driven by higher demand from non-OECD economies– in particular China and India. The expected rise in the oil price is unlikely to be smooth. Sudden changes in the supply or demand of oil can have very large effects on the price in the short run.
Access to the OECD Paper: Fournier, J. et al.(2013), “The Price of Oil – Will it Start Rising Again?”, OECD Economics Department Working Papers, No. 1031, OECD Publishing.
Wikimedia Commons. Neuberger Berman recauda 1.100 millones para su II Global Private Equity Co-Investment Fund
Neuberger Berman Group LLC, one of the world’s leading employee-controlled money managers, is pleased to announce the final close of NB Strategic Co-Investment Partners Fund II LP (“NBCIP II”), Neuberger Berman’s second global private equity co-investment fund. NBCIP II was oversubscribed, closing on $1.1 billion and surpassing its target of $750 million.
NBCIP II seeks to achieve superior risk-adjusted returns by investing directly into attractive deals alongside premier private equity firms in their core areas of expertise. It seeks to build a high-quality, diversified portfolio of strategic co-investments primarily in buyouts and growth financings on a global basis across multiple industries. NBCIP II has made nine investments to date for approximately $185 million and continues to experience strong deal flow.
NBCIP II is managed by six senior professionals with significant experience and a proven track record in private equity as co-investors. The Neuberger Berman team also manages NB Strategic Co-Investment Partners Fund I LP (“NBCIP I”), which closed in 2006 with $1.6 billion of investor commitments. The investment team leverages a large pool of talent within Neuberger Berman’s private equity group, which includes approximately 60 investment professionals in the U.S., Europe and Asia, and 115 investor services professionals.
NBCIP II’s global investor base of more than 25 institutional clients includes public pension plans, global asset managers, endowments and foundations, corporate pension plans, and insurance companies. Investors are based globally, including Asia, Europe, Latin America and North America. A substantial number of these clients previously invested in NBCIP I.
“We are delighted with client response to NB Strategic Co-Investment Partners Fund II LP and their support for our investment approach of serving as a strategic partner to lead private equity firms,” said David Stonberg , managing director and co-head of the team managing NBCIP I and II. “We estimate Fund II will have in excess of 30 portfolio company investments across multiple industries, geographies, enterprise value sizes, transaction types, vintage years and premier lead managers,” added David Morse , managing director and co-head of the team.
BNY Mellon announced that effective 20 February 2013, the WestLB Mellon Compass Fund, an umbrella fund providing investors a range of equity and bonds sub-funds, has been renamed BNY Mellon Compass Fund. With this move, the fund’s name now reflects the change in shareholder structure of the former WestLB Mellon Asset Management, which was fully acquired by BNY Mellon in October 2012.
The management company of the BNY Mellon Compass Fund has been operating under the name of BNY Mellon Fund Management (Luxembourg) S.A. since last November.
Launched in 1998, the BNY Mellon Compass Fund is a Luxembourg-domiciled SICAV with EUR 2.1 billion in assets under management. Through its 13 sub-funds, investors can build a diversified portfolio that meets a range of risk / return profiles. The BNY Mellon Compass Fund aims to offer investors core portfolio products such as global or corporate bond funds as well as ways to diversify their asset allocation through small caps, high yield or emerging markets funds. The sub-funds are managed by Meriten Investment Management GMBH (formerly WestLB Mellon Asset Management KAG) and other BNY Mellon Investment Management boutiques.
PeterPaul Pardi, Global Head of Distribution for BNY Mellon Investment Management, commented on the name change: “The BNY Mellon Compass Fund has in the past enjoyed investor interest from both inside and outside of Germany. As part of BNY Mellon’s multi-boutique investment management model, the Luxembourg-domiciled fund is a premier example of the rich array of complementary strategies available to investors. With this name change to better reflect BNY Mellon’s robust global reach, we intend to deepen and broaden our international footprint.”
BNY Mellon Investment Management has $1.4 trillion in assets under management. It encompasses BNY Mellon’s affiliated investment management firms, wealth management services and global distribution companies.
Wikimedia Commons. Market Vectors Emerging Markets Local Currency Bond ETF supera los 1.500 millones de dólares
Market Vectors Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), has surpassed $1.5 billion in assets under management (AUM). EMLC has seen an increase of more than $500 million in AUM in the last three months.
“Many local currency-denominated emerging market bonds are currently delivering more attractive yields than traditional fixed income investments, while at the same time offering currency and credit fundamentals that appear to be on more solid footing than fixed income investments denominated in U.S. Dollars, Euros or the Yen,” said Fran Rodilosso, fixed income portfolio manager at Market Vectors ETFs and one of two EMLC portfolio managers. “EMLC offers an excellent way to gain exposure to this space and the list of constituent countries in the Fund’s underlying index has been growing, with Romania and Nigeria having been recently added.”
When EMLC was brought to market in 2010, it was the first U.S.-listed exchange-traded fund designed to provide investors with exposure to an index that tracks a basket of bonds issued in local currencies by emerging market governments. The Fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of J.P. Morgan GBI-EMG Core Index. As of March 1, 2013, the Index tracked a selection of bonds issued in local currencies by 16 emerging market countries: Brazil, Chile, Colombia, Hungary, Indonesia, Malaysia, Mexico, Nigeria, Peru, Philippines, Poland, Romania, Russia, South Africa, Thailand and Turkey.
