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Showing posts from November, 2015

Elite Funds Prepare For Reflation?

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Ambrose Evans-Pritchard of the Telegraph reports, Elite funds prepare for reflation and a bloodbath for bonds:
One by one, the giant investment funds are quietly switching out of government bonds, the most overpriced assets on the planet.

Nobody wants to be caught flat-footed if the latest surge in the global money supply finally catches fire and ignites reflation, closing the chapter on our strange Lost Decade of secular stagnation.

The Norwegian Pension Fund, the world's top sovereign wealth fund, is rotating a chunk of its $860bn of assets into property in London, Paris, Berlin, Milan, New York, San Francisco and now Tokyo and East Asia. "Every real estate investment deal we do is funded by sales of government bonds," says Yngve Slyngstad, the chief executive.

It already owns part of the Quadrant 3 building on Regent Street, and bought the Pollen Estate - along with Saville Row - from the Church Commissioners last year. But this is just a nibble. The fund is …

Battered Bonds For Thanksgiving?

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Rob Copeland and Sarah Krouse of the Wall Street Journal report, Hedge Funds Stalk Battered Corner of Bond World:
Wall Street traders are circling a corner of the bond world they say is taking an unwarranted beating in anticipation of rising interest rates.

They are betting on closed-end funds, often-volatile structures that mostly cobble together risky collections of bonds and often employ leverage, or borrowed money, to try to boost returns.

These funds as a group are wallowing in their lowest levels since the financial crisis, partly on the expectation that the Federal Reserve’s expected interest-rate increase will make their holdings less attractive.

The average closed-end fund recently traded around a 9% discount to the value of its holdings, according to Morningstar Inc., and some funds focused on bank loans and junk bonds run by Blackstone Group LP and KKR & Co. are down even more (click on image).


Some investors, including hedge-fund manager Boaz Weinstein and mutual-fund h…

A Bad Omen For Private Equity Returns?

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Sebastien Canderle, a consultant, university lecturer in private equity and author of Private Equity’s Public Distress, sent me a guest comment, A Bad Omen for Future Returns in Private Equity:
A recent report by research firm Preqin (the 2016 Private Equity Compensation and Employment Review) received some well deserved attention. Apparently, the year 2015 has already seen more private equity General Partners raise their first fund or at least reach their first close than the previous record year of 2007 had witnessed. For Limited Partners currently participating or planning to participate in this segment of the alternative investment sector, this growing number of GPs is bad news. The healthy clearing-up of underperformers that had taken place in the years since the financial crisis is poised to be undone. The weaklings that rightly failed to raise follow-on vintages after 2008 are being replaced by new managers with questionable or unproven track records.

We can understand why GPs …

AIMCo Investing in Renewable Energy?

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Geoffrey Morgan of the National Post reports, TransAlta Renewables gets $200M investment from Alberta fund manager AIMCo:
Alberta’s provincially owned investment management company bought a $200-million stake in a local renewable power provider Monday, the day after the province announced it would phase out coal-fired electricity generation.

Alberta Investment Management Corp., which manages more than $75-billion worth of investments from the province’s government pension funds, bought $200 million worth of TransAlta Renewables Inc. shares Monday from the green-electricity provider’s parent company, TransAlta Corp.

TransAlta Corp. will continue to be the largest investor in the renewables company, and plans to use the proceeds from the sale to pay down its debt.

The deal would make AIMCo the second-largest investor in TransAlta Renewables, with eight per cent of its shares, after parent company TransAlta, which also owns coal-fired power plants throughout Alberta.

AIMCo CEO Kevin Uebele…

Mario Draghi’s Worst Nightmare?

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David Oakley of the Financial Times reports, Nightmare of Mario Draghi’s crowded trade:
Investors are putting too much faith in Mario Draghi. The European Central Bank president is largely responsible for one of the most overcrowded trades in markets — and there is a risk it could all go horribly wrong.

In the past month, every investor I have spoken to has told me they are overweight European equities, citing the quantitative easing policy of Mr Draghi and the ECB as one of the main reasons. But is Mr Draghi creating a potential nightmare scenario for investors?

The European equity trade makes sense for a variety of reasons. The eurozone economy is recovering, albeit sluggishly, earnings are growing, valuations are relatively attractive and, most important of all, the ECB is buying billions of euros of bonds to underpin the market.

Indeed, European equities have rallied sharply since the start of September when Mr Draghi first hinted he was prepared to launch a second r…

The Caisse's Big Stake in Bombardier?

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CBC News reports, Caisse putting $1.5B US into Bombardier for stake in rail business:
Bombardier has signed a deal that will see the Caisse de dépôt et placement du Québec (CDPQ) invest $1.5 billion US in a newly created company that will hold the company's rail transportation business.

The giant Quebec pension fund — Canada's second-largest — says the investment will help stabilize the company's current financial situation.

The Caisse says it's betting on Bombardier and in rail transportation.

The $1.5 billion represents a 30 per cent stake in a new holding company, BT Holdco.

The company is a subsidiary of Bombardier Transportation and will be based in Germany.

The investment comes less than a month after the provincial government announced a bailout of more than $1.3 billion in the company's struggling CSeries jet program. Bombardier posted a loss of $4.9 billion US in the third quarter. Rail industry has 'growth potential'

The Montreal-based company says …

Forcing Green Politics on Pension Funds?

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Andy Kessler, a former hedge-fund manager and the author of “Eat People,” wrote a comment for the Wall Street Journal, Forcing Green Politics on Pension Funds:
The beauty of the stock market is that no one can tell you where to put your money—until now. Last month the Obama administration’s Labor Department issued Interpretive Bulletin 2015-01, which tells pension funds what factors to use when choosing investments, including climate change. Only a few tax lawyers noticed, but with U.S. pensions at $9 trillion, this is a gross power grab that will hurt the retirees it claims to protect.

In 2008 Labor issued guidance for parts of the Employee Retirement Income Security Act of 1974, affectionately known as Erisa, that environmental, social and government factors—for instance, climate change—may affect the value of investments.

Most pension fund managers, who have a fiduciary responsibility to maximize returns, have assumed that such factors can act as a tie breaker, if all other t…