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EDHEC research suggests that the traditional approach to private wealth management is misguided
September 28, 2009-The results of a new study by EDHEC-Risk entitled “Asset-Liability Management in Private Wealth Management,” by Noël Amenc, Lionel Martellini, Vincent Milhau and Volker Ziemann, suggest that suitable extensions of portfolio optimisation techniques used by institutional investors can be transposed to private wealth management, precisely because these techniques have been engineered to incorporate in the portfolio construction process an investor's specific context, objectives, and horizon.
The EDHEC-Risk analysis has great potential implications for the wealth management industry. Most private bankers actually implicitly promote an ALM approach to wealth management. In particular, they claim to account for the investor's goals and constraints. The technical tools involved, however, are often inappropriate and do not give the clients any insight on the risk related to reaching their objectives.
According to EDHEC-Risk, while the private client is routinely asked all kinds of questions about his current situation, goals, preferences, constraints, etc., the resulting service and product offering mostly boil down to a rather basic classification in terms of risk profiles with no link to the recommendation. In this new paper, EDHEC provide a formal framework suggesting that asset-liability management can ensure that private wealth managers are able to offer their clients investment programmes and asset allocation advice that improve the probability of meeting their individual objectives.
Broadly speaking, the EDHEC analysis shows that taking an ALM approach to private wealth management generates two main benefits:
1. First, it has a direct impact on the selection of asset classes. In particular, it leads to a focus on the liability-hedging and goal-specific properties of various asset classes, a focus that would, by definition, be absent from an asset-only perspective.
2. Second, it leads to defining risk and return in relative rather than absolute terms, with the liability portfolio used as a benchmark or numeraire. This is a critical improvement on asset-only asset allocation models, which fail to recognise that changes to asset values must be analysed in comparison to changes in liability values. In other words, private investors are not seeking terminal wealth per se so much as they are seeking terminal wealth whose purchasing power enables them to achieve such goals as preparing for retirement or buying property.
This study was produced by EDHEC-Risk as part of the ORTEC Finance ‘Private ALM’ research chair.
View the publication “Asset-Liability Management in Private Wealth Management” For more information, please contact:
Carolyn Essid, EDHEC-Risk: New Central Bank Gold Agreement went live on Sunday
•2. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on
27 September 2009, immediately after the end of the previous agreement. Annual sales will not exceed 400 tonnes and total sales over this period will not exceed 2,000 tonnes.
•3. The signatories recognize the intention of the IMF to sell 403 tonnes of gold and noted that such sales can be accommodated within the above ceilings.
•4. This agreement will be reviewed after five years.
read more
CESR responds to the Commission’s consultation on the UCITS depositary function
Please find enclosed CESR’s response to the Commission’s consultation on the UCITS depositary
function.
Since late 2008, CESR has been working on a number of issues related to UCITS depositaries. At
the outset, the focus was on assessing the impact of the Madoff fraud on the fund industry; this work
was then widened to include consideration of the duties and responsibilities of UCITS depositaries.
In this context, CESR carried out a mapping exercise to establish how the various rules on
depositary obligations have been implemented in Member States. A summary of this mapping
exercise is included as an annex in CESR’s response.
In the meantime, the Commission launched its public consultation on UCITS depositaries. Since the
scope and topics of this consultation are very similar to the ones on which the CESR technical group
had worked with a view to making suggestions to the Commission, CESR considered that it should
provide a response to the public consultation. View CESR’s response to the European Commission’s consultation on the UCITS
depositary function CESR re-assesses the application of its Standard No. 1 on financial information in Europe
The update of Standard No.1 has been conducted in the form of a self-assessment, followed by
a peer review undertaken by the Review Panel, CESR’s peer pressure group. The purpose of
this work is to achieve greater supervisory convergence, market transparency, efficiency and
market integrity. Carlos Tavares, Chair of the Portuguese Comissão do Mercado de Valores Mobiliarios
(CMVM) and Vice-Chair of CESR and Chair of the CESR Review Panel, stated:
“The publication of today’s re-assessment of CESR’s Standard No. 1 shows the progress
made in achieving convergence on how national enforcers apply CESR’s Standard No.
1 on the enforcement of standards on financial information. This is quite an important
instrument to ensure that investors across Europe are provided with comparable
standards of high quality information upon which to base their decisions.
This work is one further contribution by, and an example of, the Review Panel’s role in
acting as a peer pressure group. By increasing transparency of implementation, CESR
identifies those areas where efforts to convergence are still needed and where peer
pressure should continue to be applied in order to adopt best practices and achieve an
appropriate standard of convergence.
A comparison between the results of the current re-assessment and the findings in 2006,
reveals that the overall compliance with the Standard has increased compared to 2006,
but, at the same time, that further harmonisation is needed. The results also show that
the work of CESR’s Review Panel does effectively contribute to changes in the Members’
jurisdictions, improving compliance and delivering greater convergence over time.”
Overall application of Standard No. 1 has increased
The work carried out by the Review Panel shows that (see the table in the annex for more
details):
• less than half (45%) of the 29 EU National Enforcers fully apply Standard No. 1 on
financial information, and 6% of the enforcers either did not apply the Standard or did not
contribute to the review; view the Final report of the Review Panel
concerning the updated self
assessment and peer review of
CESR's Standard No.1 on financial
information iShares launches accumulating fund range
The new fixed income products are:
• iShares Barclays Euro Corporate Bond ex-Financials contains fixed-rate, investment-grade Euro-denominated securities from non-financial issuers only. Inclusion is based on the currency of the issue and not the domicile of the issuer.
• iShares Barclays Euro Corporate Bond ex-Financials 1- 5 contains fixed-rate, investment-grade Euro-denominated securities from non-financial issuers only with at least one and up to, but not including, five years to final maturity. Inclusion is based on the currency of the issue and not the domicile of the issuer.
• iShares Barclays Euro Corporate Bond 1-5 contains fixed-rate, investment-grade Euro-denominated securities with at least one and up to, but not including, five years to final maturity. Inclusion is based on the currency of the issue and not the domicile of the issuer.
• iShares iBoxx GBP Corporate Bond ex-Financials tracks the market for non-financial corporate bonds denominated in Pound Sterling. The index contains fixed-rate, investment-grade GBP-denominated securities from basic material, consumer goods, consumer service, healthcare, industrial, oil and gas, telecommunication and utility issuers. read full story
Credit Suisse May Expand ETF Products by Adding Commodities read full story Unscheduled free float adjustment in TecDAX
The next regular review of the Deutsche Börse equity indices is scheduled
for
3 December 2009. EU's alternative invesment Directive to cost industry and investors billions
· Alternative investment fund managers provide investments and create growth, jobs and more efficient markets across Europe. Based on our surveys, we estimate that the hedge fund and private equity sectors contributed around €9 billion (£7.9 billion) in tax revenues to the EU economy in 2008. This is enough to fund almost all the subsidies that France receives every year from the EU's Common Agricultural Policy.
· At the same time, the hedge fund industry and private equity sector directly employ an estimated 40,000 people in the EU - 18,000 of whom are employed in the UK.
· The benefits from these industries are spread across Europe. For example, alternative investment firms have invested billions of euros in renewable energy projects around the EU. The industry also offers significant benefits for European investors such as pension funds and charities - and vital capital for European firms struggling to rebound from the financial crisis.
· Our surveys reveal that unless a range of amendments take place, the AIFM Directive will impose substantial costs across the board, without offering sufficient benefits for the industry, investors and the wider economy. In a worst-case scenario, thousands of jobs and millions in tax revenues could be at stake.
· The study shows that if the draft Directive comes into force, the ability of European investors to choose freely from amongst the best funds and managers could be cut by up to 80 percent. At the same time, managers' ability to deliver returns for their investors could in some cases be reduced by as much as 5-10 percent. Taken together, this would make European investors billions of euros poorer - a cost which will be passed on to individual savers and pensioners .
· Although better protection for investors is one of the main objectives of the Directive, our survey shows that only 2 percent of managers' clients are in favour of the draft Directive. 46 percent of clients oppose it.
View report-The EU’s AIFM Directive:
Likely impact and best way forward Read the DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
on Alternative Investment Fund Managers and amending Directives
DB Index Research -- Weekly ETF Reports - Europe
European Style ETFs, led by short and leveraged products, kept its position as the leading product area with total turnover of E349m accounting for 30.96% of total ETF turnover, followed by European Regional ETFs with total turnover of E304m with 26.97% of total turnover. The DAX ETFs remain the dominant country products with total average daily volume of E141m across the nine listed products and accounting for 12.5% of all equity ETF volume.
DJ Euro STOXX 50 ETFs accounted for 13.4% of turnover trading E151m per day with liquidity split across 25 ETFs and 41 different listings on 9 exchanges.
Market Share
Assets under Management (AUM)
Overall, the largest ETF by AUM was the Equity based ETF, Lyxor ETF DJ Euro STOXX 50 with AUM of E5.0bn. The largest Fixed Income ETF by AUM was the iShares € Corporate Bond with AUM of E3.1bn.
To request a copy of the report click here Commission cuts red tape and improves investor protection on securities prospectuses
The Prospectus Directive lays down the rules governing the prospectus that has tobe made available to the public in case a public offer or admission to trading of transferable securities in a regulated market takes place in the EU. One of its major achievements is the introduction of a "passport mechanism": the prospectus approved by the competent authority in one Member State is valid for public offers and admission to trading of securities in the entire EU.
Despite the significant positive impact on the quality and appropriateness of information available to investors, this legal framework needed to be further refined in order to increase legal clarity and efficiency in the prospectus regime and reduce administrative burdens.
The new rules will make securities issues more efficient by making the rules easier to understand (greater legal clarity); reducing administrative burdens for issuers and intermediaries; giving issuers' employees access to a full range of investment opportunities; and helping retail investors more effectively analyse the prospects and risks posed by a security before investing.
The main changes proposed are as follows:
some types of securities issue will be subject to less comprehensive disclosure requirements (small companies, small lenders, rights issues and government guarantee schemes);
the format and content of the prospectus summary have been improved;
there are clearer exemptions from the obligation to publish a prospectus when companies sell through intermediaries (“retail cascades”) and for employee share schemes;
disclosure requirements that currently overlap with the Transparency Directive will be repealed;
issuers of all non-equity securities will be able to determine their home Member State;
the definition of 'qualified investors' in the Prospectus Directive will be aligned with the one of 'professional clients' as defined in the D irective on markets in financial instruments .
About the Prospectus Directive
The Prospectus Directive came into force on 31st December 2003 by its publication in the EU Official Journal. Member States were required to implement it in their jurisdictions no later than 1 July 2005.
Article 31 of the Prospectus Directive required the European Commission to assess the application of the Directive five years after its entry into force and to present, where appropriate, proposals for its review.
Moreover, in January 2007, the European Commission launched the Action Programme for reducing administrative burdens in the European Union to measure administrative costs arising from legislation in the EU and reduce administrative burdens by 25% by 2012. The Prospectus Directive has been identified as one area that contains a number of burdensome obligations for companies, some of which can be alleviated. At the same time, also in the light of the current financial crisis, it has been considered appropriate to review certain provisions of the Prospectus Directive in order to increase its efficiency as well as upgrade investor protection. To this effect and in line with the "Better Regulation" principles, the European Commission set up a public consultation process. This proposal and its impact assessment are the result of an extensive and continuous dialogue with all major stakeholders, including securities regulators, market participants (issuers, intermediaries and investors), and consumers. It takes due account of the observations and analysis contained in the reports published by the Committee of European Securities Regulators (CESR) and the European Securities Markets Expert Group (ESME).
The proposal is available at:
view prospectus
If you are looking for a particuliar article and can not find it, please feel free to contact us
Tel.: +33 (0)4 93 18 78 24 – E-mail: carolyn.essid@edhec-risk.com
Sascha Vrolijk, ORTEC Finance:
Tel.: +31 (0) 10 498 66 66 – E-mail: svrolijk@ortec.nl
Source: EDHEC
September 28, 2009--The third Central Bank Gold Agreement (CBGA3) goes live on Sunday 27th September, with the same signatories as those to the second Agreement. These countries, listed below, plus the European Central Bank, have agreed to cap their combined annual sale at 400 tonnes per annum, down from the 500 tpa limit of CBGA2 and back to the original level imposed by CBGA1 in September 1999. The statement, released early in August, reads as follows:-
•1. Gold remains an important element of global monetary reserves.
Source: Mineweb
September 28, 2009--Dear Mr McCreevy,
Meanwhile, in February 2009 CESR was requested to advise the European Commission on the
measures to be taken by a depositary in order to fulfil its duties in the case of cross-border
management situations (Articles 23 and 33 of the modified UCITS Directive). For that purpose,
CESR created a technical group which is chaired by the French market authority (AMF). This group
was also tasked by the CESR Members with establishing whether further clarity is needed on an
EU-wide basis on the status, role and liability of UCITS depositaries and, if so, to prepare a
recommendation for CESR’s Investment Management Expert Group with a view to advising the
European Commission on the legislative proposals or modifications that would be required.
Source: Committee of European Securities Regulators (CESR)
September 28, 2009--CESR publishes today an updated self-assessment and peer review (Ref. CESR/09-374) on the
application and implementation of CESR’s Standard No. 1 on financial information by EU
National Enforcers. This report updates the findings of an earlier peer review (Ref. CESR/06-
181) conducted in 2006, on the basis of the same criteria.
CESR’s Standard No. 1 was first published in March 2003 and sets out 21 principles which
should contribute to achieving a common approach to the enforcement of standards on
financial information which is considered an effective and important tool in securing efficient
capital markets and an actual level playing filed within the European Union. In particular,
the Standard gives a precise meaning to the notion of enforcement, clarifies what type of
bodies can be “enforcers”, and how they should carry out their work (including what powers
the body should have, who should be ultimately responsible, and what independence means
in that context). In addition, the Standard sets out the type of financial information the
principles of enforcement should apply to, and what the methods of enforcement should be
(for instance, in terms of procedures to follow, the most appropriate way to select issuers and
documents for review, or the kind of checks to apply). Finally, it clarifies in some detail what
actions should be taken once a material misstatement is detected, points out that “enforcers”
have to co-ordinate their decisions both ex-ante and ex-post, and stresses that they must
periodically report to the public (including a prescription about the ways to do this).
Source: Committee of European Securities Regulators (CESR)
September 28, 2009--Exchange-traded fund provider iShares has launched nine ETFs on the London Stock Exchange including four corporate bond ETFs and five accumulating versions of iShares largest and most successful core equity benchmarks.
There are now 129 iShares listed on the LSE and the launch takes the iShares range of fixed income funds to 40 in Europe, the most of any provider in the market.
Source: ETF Expess
September 28, 2009-Credit Suisse Group AG, Switzerland’s second-largest bank, may expand its exchange- traded funds to include commodities such as precious metals.
Assets in the bank’s existing 24 Zurich-listed ETFs for bonds and global equity indexes totaled about 7.8 billion Swiss francs ($7.6 billion) as of Sept. 24, said Thomas Merz, head of marketing and distribution at the bank’s asset management unit.
Source: Bloomberg
September 25, 2009--Deutsche Börse has announced an unscheduled adjustment to the free float of IDS Scheer AG in TecDAX®. Due to the takeover of IDS Scheer AG by SAG Beteiligungs GmbH, the free float of the TecDAX member altered by more than 10 percentage points. The company’s free float will thus be reduced according to the index rules from the current 37.08 percent to 11.00 percent.
The adjustment will become effective next Tuesday, 29 September 2009.
Source:Deutsche Börse
September 25, 2009--Open Europe today publishes the most comprehensive study to date on the likely impact of the EU's proposed Alternative Investment Fund Managers (AIFM) Directive. The study is based on two surveys of BVCA members (private equity managers) and AIMA members (hedge fund managers), which Open Europe carried out during August 2009. In total, the survey respondents manage over €545 billion worth of assets worldwide.
Key findings:
Source: Open Europe
September 24, 2009--Highlights
ETF Volume
Exchange based Equity ETF turnover rose by 1.6% on the previous week. Daily turnover for the previous week was E1.1bn. European fixed income ETF turnover declined by 2.4% to E181.2m, with money market ETFs continuing to be the main focus.
In exchange based bond ETFs, db x-trackers II EONIA TR Index ETF has the highest daily turnover of E21.84m. Among the Equity ETFs, iShares DAX (DE) has the highest daily turnover of E66.22m.
There were 8 new listings recently. db x-trackers launched 4 new ETFs on Deutsche Borse and 4 ETFs on London Stock Exchange
The Deutsche Borse XTF platform has the largest market share with 35.6% of total turnover. The Euronext NextTrack platform has 22.2% market share. The LSE’s combined Italian Exchange and London market share is now 24.9%.
Total European Equity related AUM rose by 2.5% to E98.8bn during last week. AUM for DJ Euro STOXX 50 ETFs was E19.8bn accounting for 20.0% of total European AUM. Fixed Income ETF AUM remained at about the same level at E32.7bn.
Source: Aram Flores and Shan Lan -DB Index Research
September 24, 2009--In line with the "Better Regulation" principles, the European Commission has today put forward a proposal for the review of the Prospectus Directive. The proposal is part of simplification exercise within the Action Program of the European Commission for the Reduction of Administrative Burdens in the European Union. The proposal increases legal clarity and efficiency in the prospectus regime and reduces administrative burdens for issuers and intermediaries. It also bears in mind the importance of enhancing the level of investor protection and ensuring that the information provided is sufficient and adequate to cover the needs of retail investors. It reflects consultation with all major stakeholders. The proposal now passes to the European Parliament and the Council of Ministers for consideration.
Internal Market and Services Commissioner Charlie McCreevy said: " These new rules meet the needs of issuers and investors and removes any unnecessary burdens on businesses. It takes account of the lessons learned from the financial crisis and will ensure that investors have all the information they need."
Source: Commission of European Communities
