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New EDHEC-Risk Institute survey reveals that European private wealth managers wish to offer their clients customised risk management but generally fail to do so
December 15, 2010--This European survey conducted by EDHEC-Risk Institute as part of the “Private ALM” research chair in partnership with Ortec Finance draws on responses from 159 private wealth managers (PWMs), whose clients include the mass affluent (financial assets of less than $1 million) as well as so-called ultra-high-net-worth individuals, or UHNWIs (financial assets of more than $30 million).
The 159 respondents are mainly senior European investment professionals working in private banks, asset management firms, and family offices; more than half represent organisations managing more than €1 billion of clients’ money.
The key findings of the survey can be summarised along three lines:
PWMs see the relationships with their clients as the principle source of value they add. But they fail to exploit this close relationship to customise the services they offer their clients: when portfolios are designed for clients, market factors are taken into account more frequently than are the individual characteristics of the clients. Wealth managers often assess their clients’ level of risk aversion, but other individual risk factors—longevity risk, individual income risk, and individual spending objectives—are accorded much less importance.
PWMs also generally fail to provide state-of-the art means of horizon-dependent asset allocation. Current practice is inconsistent in the sense that horizon effects are recognised as important but the factors that generate horizon effects—stochastic outside income and time-varying equity risk premia—are not. PWMs rarely work with explicit models of mean reversion of the equity risk premium. 77% of respondents do not model long-term equity returns at all.
Finally, PWMs see the potential of taking into account client-specific spending objectives, but only a small minority actually attempts to realise this potential. The methods PWMs are most familiar with are traditional investment analysis, which focuses on direct alpha generation (fundamental and macroeconomic analysis), or fund-selection concepts, which focus on accessing alpha indirectly (performance analysis and due diligence). These concepts, by aiming mainly at alpha, are unrelated to client-specific spending objectives, and PWMs acknowledge that they are of little value in achieving these objectives. Together, PWMs who are unfamiliar with ALM and those who are familiar with it but do not use it make up a majority of our respondents. The lack of adoption of ALM has more to do with unfamiliarity with the concept and with the perceived difficulty of using it than with sceptical views of its usefulness.
view the EDHEC-Risk Publication European Private Wealth Management Survey
Source: EDHEC
STOXX launches new Optimised Country Indices for Emerging Markets and Asia
December 15, 2010--STOXX Limited, a global index provider and creator of the leading European equity indices, today announced the launch of the STOXX Optimised Country Indices for select emerging markets, as well as that of the STOXX Optimised Asia Select Index. The country indices are available for Brazil, Chile, China, Colombia, Egypt, India, Indonesia, Israel, Malaysia, Mexico, the Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey and Vietnam. All new indices are part of the STOXX Optimised Index family.
“With the launch of the STOXX Optimised Country and STOXX Optimised Asia Select indices we take another significant step towards the globalization of our index offering,” said Hartmut Graf, chief executive officer, STOXX Ltd. “STOXX offers an unparalleled access to emerging markets, ensuring a maximum of liquidity and constant tradability for these regions. The new indices are an addition to our existing Optimised Index family, which applies superior concepts to improve liquidity and diversification in the index.”
The STOXX Optimised Country Indices are available in two versions: the local indices represent a variable number of companies - with a maximum of 30 for each country – which are listed on the respective markets local stock exchanges. Furthermore, a depository receipt (DR) version which includes DRs that are listed on London Stock Exchange, New York Stock Exchange or NASDAQ, is calculated for the following countries: Brazil, India, Mexico, Russia and China.
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The STOXX Optimised Asia Select Index covers all companies which are based in Hong Kong, Singapore, South Korea and Taiwan, and are listed on a North American stock exchange.
The STOXX Optimised Country and STOXX Asia Select indices follow a similar methodology as the STOXX Optimised Indices. The most defining features of this index family is, that it does not only take into account the average daily trading value (ADTV) for stock selection but also for the derivation of the index constituents’ weights. In case of large discrepancies between a listing’s market capitalization and its liquidity, the initial weight derived from a constituent’s market capitalization will be decreased to ensure tradability of the index.
The STOXX Optimised Country and STOXX Asia Select indices are available in price, net and gross return versions, and are reviewed annually in September. The indices are calculated in euro and U.S. dollar. Single component weights are capped at 10%.
Further information on the STOXX Optimised Indices is available at www.stoxx.com.
Source: STOXX
ETF Landscape: European STOXX 600 Sector ETF Net Flows for week ending 10-Dec-10
December 15, 2010--For the week ending 10 December 2010, there were US$216.6 Mn net inflows to STOXX Europe 600 sector ETFs. The largest sector ETF net inflows last week were in banks with US$93.4 Mn and basic resources with US$71.3 Mn while insurance experienced net outflows of US$118.9 Mn.
Year-to-date, STOXX Europe 600 sector ETFs have seen US$335.4 Mn net inflows. Banks sector ETFs have seen the largest net inflows with US$197.3 Mn, followed by construction and materials with US$90.1 Mn while food and beverage has experienced the largest net outflows of US$167.6 Mn YTD.
As of 10 December 2010, there is US$9.9 Bn AUM invested in the STOXX sector ETFs which is almost double the US$5.1 Bn open interest in the sector futures. The ETF AUM is greater than the open interest in the corresponding futures contract in 18 out of 19 sectors.
to request report
Source: Global ETF Research & Implementation Strategy Team, BlackRock
Although Majority Remain Opposed, Significant Minority Of Fund Managers Support Final AIFM Directive
32% Believe Regulation Is Necessary With 31% Backing The Legislation
December 15, 2010--A Preqin survey of over 100 alternative assets fund managers and investors found that just under a third support the AIFM Directive to some extent, with firms in certain countries where the new legislation will replace more restrictive existing rules believing that it will serve to improve conditions. However, for the majority there exists significant
resentment towards the Directive.
Key Findings of the Survey Include:
89% believe the Directive should be amended to further take into account the differences between the
various asset classes.
59% foresee the AIFM Directive creating a European lock-in/lock-out.
45% think that it is likely or very likely that fund managers will relocate to outside of Europe as a result of the AIFM Directive; 26% felt that it was likely their firm specifically would relocate.
28% believe that the introduction of the EU Passport will have the biggest impact on the industry, while 22% feel the requirement that non-EU fund managers comply with the Directive will be the most significant measure.
Just 3% believe that increased regulations relating to retail investors will have the greatest impact.
The impact of the Directive on innovation, the additional costs firms will incur, and the effect of these costs on profitability are all major causes for concern.
A significant number feel that venture capital firms should be excluded from the jurisdiction.
view The AIFM Directive December 2010 A Preqin Special Report
Source: Preqin
EU watchdog placed at the heart of credit rating agency supervision
December 15, 2010--The latest amendments to the rules regulating credit rating agencies (CRAs) were approved by Parliament on Wednesday. These changes were needed to effectively entrust ESMA with the direct supervision of the agencies. MEPs, with Member State support, empowered ESMA, rather than the Commission, to impose fines on CRAs.
European Securities and Markets Authority (ESMA) to directly supervise agencies by July 2011
ESMA empowered to make dawn raids, impose fines, and ensure agencies evaluate the accuracy of their past ratings
All credit rating agencies to be checked by July 2014
The amendments were approved with 611 votes in favour, 15 against and 26 abstentions.
Fining power
The Commission's initial proposal argued that the Commission itself was best placed to impose fines, upon a recommendation from ESMA. However, the final text agreed in negotiations and approved by Parliament gives this role to ESMA. A range of fines, reflecting the type of infringement, the size of the CRA, and possible aggravating or attenuating conditions, is laid down in the rules. ESMA will be able to impose fines of up to 20% of a CRA's turnover for the previous year.
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Source: European Parliament
EEX To Focus On Organic Growth
Strategy adopted until 2015 – Organic growth key focus on way to becoming leading European energy exchange – Doubling of sales revenue by 2015 planned – Considerable increase in sales and results for 2010
December 15, 2010--Over the next five years, the European Energy Exchange AG (EEX) will focus its efforts in order to become the clear leader among European exchanges on the basis of its own strength.
The strategy will see EEX concentrating on organic growth, without using additional funds from its shareholders and without cut-backs in the annual results. The partnership model will be maintained and expanded only if it is commercially sensible and viable.
This five-year aim is to be achieved through a reinforced expansion of EEX’s position in the four main strategic directions – power, natural gas, emissions and clearing
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Source: European Energy Exchange (EEX)
FESE European Equity Market Report – November 2010
December 15, 2010--FESE has published the FESE European Equity Market Report –November 2010 report.
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Source: FESE
Spain put on debt watch by Moody’s
December 15, 2010--Ratings agency Moody’s warned Spain on Wednesday that its debt rating could be downgraded, pushing Spain back into the euro zone debt spotlight ahead of an EU leaders’ summit starting on Thursday.
Moody’s said it was concerned about Spain’s high debt funding needs, its heavily indebted banks and its regional finances, but said it did not expect Madrid to have to resort to an EU bailout like Greece and Ireland. Spain, which with Portugal has come under intense market pressure in recent weeks, raising concerns it could be driven into a bailout, needs to refinance around 60 billion euros of debt early next year, according to JP Morgan research.
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Source: Todays Zaman
Basic Rules of ISE Stock Indices has been changed
December 15, 2010--At the meeting of the Executive Council of our Exchange, the following resolutions have been made with regards to the Basic Rules of ISE Stock Indices:
- Circular Letter number 292 on “Basic Rules of ISE Corporate Governance Index”, Circular Letter number 299 on “Basic Rules of ISE City Indices”, Circular Letter number 315 on "Basic Rules of ISE 10 Bank Index” and Circular Letter number 316 on “Basic Rules of ISE Stock Indices” have been combined and the Circular Letters in question have been abolished.
The new text with Circular Letter number 353 regarding the “Basic Rules of ISE Stock Indices” which has been reconstituted via the combination of Circular Letters number 292, 299, 315 and 316, has been adopted.
The number of companies which are required in order to Start/End Calculating Indices has been established as 5 and 1, respectively, and accordingly, the calculation of ISE Defense Index will be discontinued effective from January 03, 2011 as ISE Defense Index only includes the ASELSAN stock.
ISE All Index will be continued to be calculated as an index that covers all the stocks traded on the ISE (except List C and Watchlist market), and accordingly, stocks which are not currently included in its scope will be included in the index effective from January 03, 2011.
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Source: Istanbul Stock Exchange (ISE)
Baymarkets’ EDGE Energy
December 14, 2010--Baymarkets has designed a new OTC price discovery and execution platform for making trading energy futures, swaps and options easy.
Crude Oil, Natural Gas, Electricity, Ethanol, Coal and Environmental Commodities are all covered in the range of energy products handled by the platform.
EDGE Energy is an ideal system for brokerage firms, banks’ sell-side and anyone planning to create an electronic marketplace in the energy space. Brokers can increase their deal flow by attracting traders to the broker-centric screen where they can view their own activity. Brokers can offer screen trading by granting full access rights.
The system can be used as an internal whiteboard and order management system that easily connects offices worldwide, helping brokerage firms expanding their business to multiple sites.
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Source: Baymarkets
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