Global ETF News Older than One Year
Insurance-linked securities-A niche market expanding
October 4, 2010--The market for insurance-linked securities (ILS) expanded strongly during the past few years. Although exact data on issuance volumes is not available – due to the private nature of many transactions – estimates suggest that the market grew tenfold during the past decade and more than doubled during the past five years.
Despite high growth rates, ILS have not yet found their way into mainstream asset management. Compared to other securitised products ILS represent a niche market, which to date has not justified the build-up of large buy-side resources. The main buyers of insurance-linked products are dedicated cat funds, hedge funds and money managers, followed by (re-)insurers and banks. Retail clients have so far been largely absent from the ILS market.
Insurance-linked securities have weathered the financial crisis relatively well. Due to the low correlation between insurance risk and credit or asset price risk, ILS were less affected by the crisis than other securitised products – although more than previously anticipated. Issuance declined during the crisis but has resumed pre-crisis levels in the non-life segment.
Lessons learned from the financial crisis will lead to more robust products, including the use of higher quality collateral and less complex structures. Meanwhile, systemic threats to financial markets appear to be limited, given the relatively small size of the ILS market.
Going forward, the market will receive support from various directions:
For the insurance sector, ILS provide unique coverage unavailable in the traditional marketplace. They allow purchasers of protection to diversify their counterparties and access a separate pool of capital.
Investors are presented with an uncorrelated asset class, which can be used to generate synergies in a portfolio context. ILS provide an efficient mechanism to place macro and micro views on specific insurance risks.
Source: Deutsche Bank Research
Just Do It—Shaping the New Financial System
October 4, 2010--Fearful financial markets, an uncertain growth outlook, fiscal anxieties, long unemployment lines….no other financial crisis since the Great Depression has led to such widespread dislocation in financial markets, with such abrupt consequences for growth, trade, and employment.
The crisis exposed fundamental weaknesses in many areas of the world economy, the most obvious being dramatic deficiencies in the regulation and supervision?nationally and internationally?of financial institutions and markets.
On the bright side, the crisis has provided the impetus for a major overhaul of the financial regulatory system. So, are we making the most of this opportunity to fix the system?
Three years into this crisis, the good news is that policymakers have made important progress in some areas, and the work underway is moving in the right direction.
view new Staff Position Paper-Shaping the New Financial System
Source: IMF
Asia takes gamble on US Treasuries
October 1, 2010--Some of the biggest US Treasury bulls reside across the eastern side of the Pacific and they have few doubts that the world’s largest economy is turning Japanese.
For many months, US Treasury traders and investors have noted a particularly strong demand for bonds coming out of Asia, which has helped foster low bond yields for much of this year.
A bigger issue for global markets is whether the pessimistic view from Asia about the US is correct; namely that the country faces a sustained period of low economic growth, accompanied by disinflation – a slowing in the rate of price inflation – or even outright deflation.
Source: FT.com
Component Changes Made to Dow Jones Asia Select Dividend 30 Index
October 1, 2010--Dow Jones Indexes, a leading global index provider, today announced that SK Telecom Co. Ltd. (South Korea, Telecommunications, 017670.KS) and KT Corp. (South Korea, Telecommunications, 030200.KS) will be removed from the Dow Jones Asia Select Dividend 30 Index.
SK Telecom Co. Ltd. will be replaced by Highwealth Construction Corp. (Taiwan, Construction & Materials, 2542.TW) and KT Corp. will be replaced by Sincere Navigation Corp. (Taiwan, Industrial Goods & Services, 2605.TW) in the Dow Jones Asia Select Dividend 30 Index. SK Telecom Co. Ltd. and KT Corp. are being removed due to failure to meet index eligibility requirements. All changes will be effective before the open of trading on Thursday, October 7, 2010.
Further information on the Dow Jones Asia Select Dividend 30 Index can be found at http://www.djindexes.com.
Company additions to and deletions from the Dow Jones Asia Select Dividend 30 Index do not in any way reflect an opinion on the investment merits of the company.
Source: Dow Jones Indexes
Devaluation talk prompts rush to hard assets
October 1, 2010--A leading index of commodity prices rallied close to its highest levels in two years this week, as the prospect of currency devaluations by central banks prompted a rush into hard assets.
The commodity benchmark, the Reuters-Jefferies CRB index, which tracks the price of 19 raw materials from copper and oil to orange juice and live cattle, gained 1.9 per cent over the week to hit a peak of 288.93 points on Friday – the highest level since January and just below a two-year peak.
Source: FT.com
Global Private Equity Fundraising Still Slow, but Turning Corner
$57bn raised in Q3 2010, a 16% increase on the $49bn collected in Q2
Conditions still challenging, but further improvement expected in Q4 2010 and beyond
September 30, 2010--Putting the Results in Context:
81 private equity funds worldwide reached a final close in Q3 2010 raising an aggregate $57bn, a small increase from the $49bn raised in Q2 2010. Preqin would anticipate these figures rising slightly (10% - 20%) as further information becomes available. It is clear that fundraising remains extremely challenging, and is occurring at a fraction of the rate that the industry was seeing in 2006 –
2008. However, Preqin is projecting that conditions will continue to improve in Q4 2010 and beyond.
Fundraising by Region: Funds primarily focusing on the US have raised the most capital during Q3 2010, with 37 funds raising a total of $41.1bn. 21 primarily European focused funds raised an aggregate $8.3bn, while 23 funds focusing primarily on Asia and the Rest of World region gathered a total of $7.8bn.
Fundraising by Type: Buyout funds raised the most capital, with 11 funds raising an aggregate $20.4bn. This figure includes Blackstone Capital Partners VI, which closed on $13.5bn in mid-July. Five distressed private equity funds raised an aggregate $8.9bn. 19 private equity real estate funds closed with total commitments of $8.8bn. Three infrastructure funds closed raising $8.3bn while 20 venture funds held final closes totaling $3.7bn.
Funds in Market: After the number and aggregate fundraising target of funds in market fell consistently over the last year, Q4 2010 sees a small rise in both the number and value of funds being raised when compared to the previous quarter – possibly a sign of rising confidence among fund managers that conditions are starting to improve. There are currently 1,550 funds on the road seeking $573bn worldwide.
Time Taken to Close Funds: For funds closed in 2010 the average time taken was 19.8 months, double the average time taken in 2004 – further evidence of the challenging nature of the fundraising market.
Fundraising Momentum: The increased time taken for funds to achieve a final close is leading to more funds holding multiple interim closes in order to put capital to work while continuing to attract new investments. 44% of funds currently raising have held an interim close, with these funds seeking an aggregate $247bn. 13% of funds in market have now held two or more interim closes, meaning that they are likely to hold a final close within the next few months. This does indicate good momentum in the market and hints at possible improvement in the future
Source: Preqin
Internal research teams as important as ever, says AXA
September 30, 2010--Exchange traded funds, direct equities, direct fixed interest and structured products are some of the areas AXA’s research team is keeping an eye on at the moment, according to AXA general manager of technical research Robert Thomas.
Thomas said that while there could be negativity around any product, this only illustrated the importance of internal research teams that would have a greater focus on how products were used within a portfolio.
Thomas added that while AXA made use of external research, it was not the “be-all-and-end-all of an advice business”.
Source: Money Management
IMF Urges Close Regulation Of Credit Rating Agencies
September 30, 2010--“Credit rating agencies need tighter supervision because their activities have a strong impact on funding costs for debt issuers and can affect financial stability, the International Monetary Fund (IMF) said on Wednesday.
The IMF released some analytical chapters from its Global Financial Stability Report, which will be issued next week before the semiannual meetings of the lender and its sister institution, the World Bank. ‘Policymakers should continue their efforts to reduce their own reliance on credit ratings, and wherever possible remove or replace references to ratings in laws and regulations, and in central bank collateral policies,’ the IMF said.
Source: World Bank
Will It Hurt? Macroeconomic Effects of Fiscal-World Economic Outlook (WEO) IMF
September 30, 2010--To restore fiscal sustainability, many economies need to reduce their budget deficit. This chapter analyzes the impact of fiscal consolidation––tax hikes and
spending cuts––on growth in advanced economies.reforms are still needed in our view. So stay tuned for that release. You’ve had an opportunity to look at the chapters and the press points on the embargo and to remind everyone the documents and this press briefing are embargoed until 11:00 a.m. Washington time which is 1500 GMT.
Fiscal consolidation typically lowers growth in the short term. Using a new data set, we find that after two years, a budget deficit cut of 1 percent of GDP tends to lower output by about ½ percent and raise the unemployment rate by ? percentage point.
Interest rate cuts and a fall in the value of the currency usually soften the impact of fiscal consolidation on growth. However, this cushioning effect is lower when interest rates are already near zero, or when many countries consolidate at the same time.
Over the long term, debt reduction can raise output by bringing down real interest rates and allowing taxes to be reduced.
view the Will It Hurt? Macroeconomic Effects of Fiscal Consolidation
Source: IMF
Currency Composition of Official Foreign Exchange Reserves (COFER)
September 30, 2010--COFER is an IMF database that keeps end-of-period quarterly data on the currency composition of official foreign exchange reserves. The currencies identified in COFER are:
U.S. dollar,
Euro,
Pound sterling,
Japanese yen,
Swiss francs, and
Other currencies
Source: IMF
