News > Financial Services

Career Insights: Shaped by the financial crisis, millennial bond manager readies for rate hike
Asset Management
Andrew Szczurowski is the new breed of bond manager: For the bulk of his career, interest rates have hovered near zero. Szczurowski is one of many millennials who came charging onto Wall Street just as the markets crested, joining Eaton Vance in 2007 after two years at BNY Mellon.  Mortgages, of course, were ground zero for the crisis. Szczurowski, who
Opportunities for Asia's private bankers
Asset Management
<p>Asia’s wealth management scene is competitive, fluid and expensive. Cost-to-income ratios in Hong Kong are more than 70%, almost double the proportion in Western Europe, as blue chip private banks fish for talent in a small pool of relationship managers with networks among China’s new rich.</p> <p>The bait is a big salary and juicy benefits; the reward for the banks are connections to the world’s fastest growing market of high net worth individuals, according to the latest Capgemini and RBC Wealth Report 2015.</p> <p>However, single- and multi-family offices are gaining traction within Asia, undermining the strategies of the leading banks who argue that scalability is essential to survive. Experienced staff see an opportunity to use their contacts to set up on their own or join a niche, more focussed firm with a realistic expectation of even higher compensation as well as greater independence.</p> <p>Kenneth Ho, the former head of Julius Baer’s investment solutions group in Asia Pacific is the latest high profile banker to make the move. At the beginning of this month, he joined US-based Carret Asset Management where he is tasked to set up an Asian multi-family office, reports AsianInvestor.</p> <p>He is looking to buy independent asset managers in Hong Kong and Singapore, and might also form a private equity fund.</p> <p>In September, another private banking veteran, Stephen Repkow quit Union Bancaire Privée to launch an independent platform in Singapore that will serve both as an external asset manager and a multi-family office.</p> <p>If more bankers strike out for independence then, of course, the talent pool for the big wealth managers will become even shallower. They will have to offer larger salaries and bonuses which will push the cost-to-income ratio higher so that eventually head office must wonder: why bother?<br /> Photo: Mart</p>
ETF industry needs major reform: SEC’s Aguilar
Asset Management
<p>It looks like the ETF industry is under the gun. Securities and Exchange Commission officials held a meeting of the Investor Advisory Committee in Washington, D.C. on Thursday, and began to lay out the case for reform in the ETF industry. In specific, SEC Commissioner Luis Aguilar outlined the kind of questions they’re asking in their inquiry regarding the rapidly-growing exchange-traded funds market.</p> <p>Questions about the ETF industry began to emerge after August 24th, an extremely volatile trading day and he worst session for U.S. stocks in four years. August 24th witnessed multiple halts in both stocks and ETFs, stoppages that short-circuited the arbitrage mechanism of ETFs and led to ETF prices plunging well below the indexes they’re designed to track for a short period of time. The major glitch in the system was a painful lesson for investors and has brought regulators attention to a number of problems with overlapping market rules implemented following the 2010 “flash crash”.</p> <p>Statement from SEC Commissioner Aguilar about ETFs<br /> Commissioner Aguilar did not beat around the bush in his speech at the SEC committee meeting. He made his agenda clear in his introduction: “Why ETFs proved so fragile that morning raises many questions, and suggests that it may be time to reexamine the entire ETF ecosystem.”</p> <p>In his remarks, Aguilar raised four general questions about the events of August 24th.</p> <p>1) Should ETFs have industry-specific volatility curbs? Do so-called limit up/limit down volatility bands need to be updated? Should market-wide circuit breakers factor in the number of securities that are currently halted?</p> <p>2) Should rules for “clearly erroneous” trades be reformed?</p> <p>3) What roles should exchanges have in ETF trading?<br /> 4) How can market makers be more incentivized to stay in the market during times of extreme volatility?</p> <p>Democratic SEC Commissioner Aguilar also went on to argue that the commission needed to ask bigger, even existential questions about the ETF industry and its very rapid growth, including the issue of whether the growth needed to be curtailed. Here, he outlined four general areas for consideration:</p> <p> How does the growth of ETFs and their gradual movement into less liquid asset classes challenge the effectiveness of the ETF arbitrage and pricing mechanisms?<br /> Are sophisticated traders able to exploit inefficiencies in the pricing mechanisms of less liquid ETFs and exploit retail investors?<br /> Should alternative pricing methods for less-liquid ETFs, such as so-called NAV-based trading, where ETFs are traded at a specific premium or discount to the ETF’s net asset value, be allowed?<br /> Should the growth of ETFs be limited to protect investors and the entir</p>
People Moves: Nuveen builds ETF business; Voya poaches JP Morgan exec
Asset Management
Nuveen building ETF business. Nuveen Investments has hired Martin Kremenstein for the newly created role of head of ETFs. Kremenstein will report to Greg Bottjer, head of product strategy. Kremenstein most recently worked as managing director for asset and wealth management at Deutsche Bank, helping establish the firm's US ETF business. Voya grabs JP Morgan exec. Karen Eisenbach has joined
Hedge funds are fleeing stocks: one chart tells the story
Hedge Funds
<p>&nbsp;</p> <p> Evercore ISI’s recent hedge fund survey indicated that funds have their lowest net-long exposure to stocks in two years.</p> <p> Net-long exposure to stocks peaked in September of 2014.<br /> Analyst James Walsh said that funds’ net exposure has been a good contrary indicator of stock market movement.</p> <p>&nbsp;</p> <p>In a new report, Evercore ISI analyst James Walsh looked at hedge fund exposure to stocks. According to Evercore’s most recent survey, funds have been consistently reducing exposure to stocks for quite a while.<br /> Method<br /> Evercore surveyed 31 hedge funds with net assets of about $86 billion and asked them to rate their long exposure to stocks on a scale of 0 to 100, where 50 indicates normal net exposure. “Over the years, we have noticed that our hedge fund survey has been a good contrary indicator for the market,” Walsh wrote.</p> <p>Read more and see the chart at Benzinga. <br /> Photo: Umberto Salvagnin</p>
Raj Rajaratnam sued by brother Rengan
Hedge Funds
<p>Raj Rajaratnam is not a happy man. Not only does he still have nine years left on his prison sentence, but apparently, he’s having family problems as well.</p> <p>According to Reuters, the once high-flying Galleon chief was recently sued by his younger brother Rengan, who claims that Raj, as well as Galleon, owe him over $13 million in unpaid performance fees and legal costs.</p> <p>Rengan, who was cleared of insider trading charges following his brother’s conviction, alleges that Galleon failed to pay him his 10% share on the $83 million he made for the fund back in 2009, and not only that, he also claims the fund stiffed him for up to $1 million over his stock recommendations, among other things:<br /> “He said Galleon also wrongly did not pay him up to $1 million for telecommunications stock recommendations he made in his other role as an analyst, and also failed to advance his legal fees and costs during the insider trading case.</p> <p>As a result, Rengan Rajaratnam said he had to pay $2 million in legal fees out-of-pocket and may owe another $2 million. Galleon also failed to help cover any of the $840,000 civil settlement he reached with the U.S. Securities and Exchange Commission after his acquittal, the lawsuit said.”<br /> Raj, who recently had an awkward reunion with Rajat Gupta in Ayer, probably isn’t too pleased about this.<br /> Photo: Marc Treble</p>
Mega rounds keep rolling in amid IPO slump
Venture Capital
<p>It be might a lousy exit market right now but the big VC deals have still been coming through thick and fast these past three months with 68 startups globally each raising $100 million or more, according to a new report.</p> <p>The joint report by KPMG and CB Insights reveals there have been 170 of these so-called mega rounds for the first nine months of the year raising an aggregate $19 billion. In total VC-backed startups raised $37.6 billion worldwide during the three months and $98.4 billion for the year so far, already exceeding the 2014’s $88.7 billion total.  </p> <p>Asian mega deals in particular tipped the scales for the third quarter, with massive investments into the likes of Didi Kuaidi, LY.com, One97 Communication and Eleme. The top five deals in Asia accounted for $5.3 billion, or 39% of fundraising in the region. </p> <p>But the report also shows that while there are more late stage deals, there are fewer IPO exits than previous years, exacerbated by the fact that China suspended IPOs once again in July. The number of late-stage investments has affected the availability of cash for seed-stage investments. Despite more funds investing at the seed stage, seed investments have dropped to a five-quarter low of 28%, globally. </p> <p>In the short term at least it seems the gigantic late stage deals will continue to spur the rise of the unicorns - startups valued at $1 billion or more. There were 23 new unicorns in the quarter: 17 in the US, 3 in Asia and 3 in Europe.<br /> Photo: Maxwell Hamilton</p>
People Moves: JPAM CIO relocates to HK; Manulife AM adds CFO, CMO
Asset Management
<p>Carlyle names Southeast Asia chief. Sunil Kaul, a 30-year veteran of private equity and banking scene, has been appointed head of Southeast Asia of the Carlyle Asia buyout advisory team. Greg Zeluck, Managing Director and Co-Head of the Carlyle Asia buyout advisory team, had this to say:<br /> “Sunil is a Carlyle veteran with a wealth of experience in the private equity and financial services industries. With his deep industry expertise and strong networks, Sunil has significantly contributed to the success of many of our investments in Asia over the last seven years. In this newly created role, Sunil will lead our investment advisory activities in Southeast Asia as we continue to see great opportunities in this fast-growing region.”<br /> Before joining Carlyle in 2008, Kaul was president of Citibank Japan, a role he served concurrently with his chairmanship of Citi's credit card and consumer finance companies in Japan. He was also a member of the banking giant’s Global Management Committee and Global Consumer Planning Group. Carlyle</p> <p>JP Morgan AM CIO returns to Hong Kong. Richard Titherington, JP Morgan Asset Management’s London-based CIO for emerging market equities, will be returning to Hong Kong to lead the U.S. investment firm’s newly-merged emerging markets and Asia Pacific equity team. Titherington, who previously spent 14 years in the region, seems to be pretty stoked on the move:<br /> “For me, this move feels like coming home and I couldn’t be more pleased. The firm has a long and proud history in the region, backed by a very strong group of investment professionals. I am honoured to have been entrusted with this role and am very excited about the prospects for our team.”<br /> Despite the move, he will remain as portfolio manager for his UK and Luxembourg-domiciled portfolios. AsiaAssetManagement</p> <p>Manulife AM adds two key hires. Frederick Reidenbach, an old hand in the Japanese asset management space, has been named chief financial officer, wealth and asset management, Asia by Manulife Asset Management. Joining him at the firm will be Grace Ho, a ten-year veteran of the financial services marketing arena. She’ll be serving the firm as its chief marketing officer, wealth and asset management, Asia.</p> <p>Prior to joining Manulife, Reidenbach spent 10 years at Nikko Asset Management in Japan, working in various capacities including a dual role of CFO and COO. Ho meanwhile was the previous head of marketing, Asia Pacific for Schroders. Before that, she spent two years at JP Morgan as a VP in marketing following a four-year stint at AIG in a similar role. They will both be based in Hong Kong. FundSelectorAsia</p> <p>For Capital Markets moves, click here.<br /> Photo: Luke Ma</p>
Activist funds tank; down 10.3% in quarter 3; now -8.1% ytd
Hedge Funds
<p>Managed futures and quantitative equity funds excelled while activists’ pain continued.</p> <p>The hedge fund industry produced an aggregate return of -1.20% in September, dropping YTD returns further into negative territory for 2015, -2.35%. The industry’s last annual decline was 2011 when average returns were -4.99% and the S&amp;P rose +2.11%.</p> <p>For many in the hedge fund industry, 2015 is shaping up as the worst year since 2011, if not since 2008. One primary difference between 2015 and 2011 is many major markets produced positive returns in 2011, more so on the credit side, and the hedge fund industry was generally perceived to have lagged significantly. In 2015 the industry is mostly outperforming equity, multi-asset, commodity and regional/country specific indices.</p> <p>Systematic strategies performed well during September's global volatility<br /> Systematic, or quantitative strategies performed well during September’s global volatility. Most interesting was the performance of those focused on equity markets, given declines seen following the US Fed meeting mid-month. Quantitative equity strategies returned an average of 0.58% in September and were down only slightly in Q3, -0.39%, while the S&amp;P 500 and MSCI were -6.44% and -8.45% in Q3, respectively.</p> <p>After four down months in the last five, managed futures funds, heavily populated with systematic strategies, gained +1.01% in September, ending Q3 only -0.26%. The difference between large and smaller managed futures funds has been significant in 2015. Those with greater than $1 billion in AUM entering 2015 returned an average of +2.53% in September, +3.62% in Q3 and +4.40% YTD, while their smaller peers returned +0.80%. -0.54% and -1.59% in the same periods.</p> <p>Through the end of Q3, event driven returns are on pace for their worst year since 2008, having eclipsed 2011 losses of -3.90%. Event driven funds fell an additional -2.53% in September, bringing YTD returns to -4.15%. The group declined -20.48% in 2008, but bounced back with +30.35% in 2009 and +11.78% in 2010.</p> <p>Activist fund returns decline<br /> Activist fund returns have been increasingly negative in each of the last four months, having declined an average of -10.92% during this stretch. Losses in September of -5.06% are the largest since September 2011. Activist funds went on to return -4.26% in 2011, followed by 14% in 2012 and 20% in 2013.</p> <p>Credit strategies posted their fourth consecutive aggregate decline in September, with losses accelerating in each of the last two months. In the last twelve months, credit funds have declined -3.82% and experienced nine monthly declines. Larger funds continue to mitigate losses more effectively than their smaller peers, returning -2.60% in Q3 and -1.00% YTD compared to -3.34% and -2.64%, respectively. However, the securitized sector continues to be a standout in 2015.</p>
Paul Singer says developed countries are “utterly insolvent”, buy gold
Hedge Funds
<p>Billionaire Paul Singer, founder of hedge fund firm Elliott Management and one of the most disliked people in the world, hammered central bank monetary policy at a conference in Israel on Wednesday.</p> <p>Making his controversial comments at the first ever Tel Aviv Sohn Conference, Singer argued that since the financial crisis blew up in 2008, advanced nations have been propped up by a cult of central bankers. Paul Singer’s comments are courtesy of tweets from Bloomberg TV’s Elliott Gotkine, who is attending the conference.</p> <p>Singer is no stranger to controversy. A well-known and less-than popular “vulture investor”, Singer is known for figuratively going for the throat in many of his business dealings. His unrelenting pursuit of defaulted sovereign Argentina bonds through the U.S. court system, even though some note that he paid just pennies on the dollar for the bad debt, is one example of his “vulture” style of investing.</p> <p>According to the tweets from Gotkine, Singer commented that “the balance sheets of developed economies were hopelessly and utterly insolvent once long-term entitlements were added in”.</p> <p>Of note, Singer has previously argued that prices of stocks and bonds have been notably “distorted” by over-accommodative central-bank monetary policy. Singer has also gone on record as saying if central banks make the disastrous decision to “do more” (such as another round of QE) then a global recession or depression likely. Singer has echoed these themes in the past in his letters to investors.<br /> Gotkine also tweeted that Singer said “I like gold. I believe it’s underowned.”  Singer further noted “every institutional portfolio should be 5-10 percent invested in gold to protect against zero interest rates that are degrading the value of paper currency.”<br /> Singer also argued that gold was the one tradable asset that has been “treated unfairly”, and pointed out that his fund holds gold through options.</p> <p>“Gold is the only real money,” Singer claimed. “Gold would do well if people felt they needed some real asset to protect against inflation, government policy and/or diversification from stocks and bonds.”</p> <p>Singer also commented:</p> <p>“In a world where the value of paper money is affirmatively aimed at being degraded by central bank policy, it’s kind of surprising to me that gold can’t catch a bid.”</p> <p>This article was originally published by ValueWalk.</p> <p>Photo: Bullion Vault </p>