Showing posts from September, 2016

Much Ado About Deutsche?

Evelyn Cheng of NBC reports, How US regulators may be creating panic around Deutsche Bank:
Deutsche Bank finds itself in the center of a panic, and some analysts are pointing fingers at U.S. regulators.

Germany's biggest bank fell under fresh scrutiny beginning on Sept. 16 when it surfaced that the U.S. Department of Justice was demanding it pay a $14 billion fine for its mortgage lending activities during the housing bubble. Shares of Germany's biggest bank plunged on Thursday on reports that a handful of its big hedge fund clients were limiting their exposure to Deutsche Bank, though the bank has characterized those media reports as "unjustified concerns."

Certainly, the Justice Department is not the only organization scrutinizing Deutsche Bank: The IMF released a report this summer stating that that Deutsche Bank poses a greater risk to the global financial system than any other bank in the world.

But the size of that Justice Department fine has many analyst…

Private Equity's Misalignment of Interests?

Sebastien Canderle, author of The Debt Trap: How leverage impacts private-equity performance, sent me a guest comment (added emphasis is mine):
It usually takes a financial crisis of the magnitude witnessed in 2008 for glitches within an economic system to come to light.

It has been widely known and reported that private equity dealmakers could at times be ruthless when dealing with their portfolio companies’ management, employees and lenders. But at least these PE fund managers (general partners or GPs) were treating one party with all the respect it deserved. Their institutional investors (the limited partners or LPs) could feel appeased in the belief that the managers’ interests were aligned with their own. According to a report recently issued by research firm Preqin and entitled Investor Outlook: Alternative Assets, H2 2016, 63% of PE investors agree or strongly agree that LP and GP interests are properly aligned.

One of the most prevalent urban legends perpetuated by GPs and the…

Treacherous Times For Private Equity?

Devin Banerjee of Bloomberg reports, Blackstone’s Top Dealmaker Says Now Is The Most Difficult Period He's Ever Experienced:
Joe Baratta, Blackstone Group LP’s top private equity dealmaker, can’t be too cautious right now.

“For any professional investor, this is the most difficult period we’ve ever experienced,” Baratta, Blackstone’s global head of private equity, said Tuesday, speaking at the WSJ Pro Private Equity Analyst Conference in New York. “You have historically high multiples of cash flows, low yields. I’ve never seen it in my career. It’s the most treacherous moment.”

Private equity managers have tussled with a difficult reality for several years. The same lofty valuations that created ideal conditions to sell holdings and pocket profits have made it exceedingly difficult to deploy money into new deals at attractive entry prices. Several executives, including Blackstone Chief Executive Officer Steve Schwarzman, have pinned those conditions squarely on the Federal Reserve’…

Teachers' Cuts Computer-Run Hedge Funds?

Maiya Keidan of Reuters reports, Canada public pension plan ditches 10 computer-driven hedge funds:
Canada's third-largest public pension plan has halved the number of computer-driven hedge funds in its investment portfolio and put more money into the funds its sticking with, sources with knowledge of the matter told Reuters.

The Ontario Teachers' Pension Plan this summer pulled cash from 10 of the 20 hedge funds in its portfolio which use computer algorithms to choose when to buy and sell, two of the sources said.

Ontario Teachers' allocates $11.4 billion to hedge funds, making it the fourth-largest North American investor in the industry, data from research house Preqin showed.

Hedge funds worldwide are under increasing pressure in the wake of poor or flat returns as well as investors' efforts to cut costs. Data from industry tracker Eurekahedge showed that investors have pulled money from hedge funds globally every month in the four months to end-August.

One of the he…

Caisse Bets Big On India's Power Assets?

Abhineet Kumar of India's Business Standard interviewed Prashant Purker, Managing Director & CEO of ICICI Venture Funds, who said they will acquire power assets worth $3.5 billion:
This month, came up with a new investment platform to acquire conventional power assets. The fund comes at a time when capital goods maker Bharat Heavy Electricals (BHEL) is seeing 45 per cent of its Rs 1.1-lakh core order book face the challenge of stalled or slow moving projects. A large number of this are stuck due to financial constraints that ICICI Venture’s power platform plans to benefit from. Prashant Purker, managing director and CEO of ICICI Venture Funds, spoke to Abhineet Kumar on his plans for that. Edited excerpts:

What is the worth of assets you are targeting to acquire with your $850-million power platform?

We’re targeting to acquire $3-3.5 billion worth of (enterprise value) assets in the conventional power segment across thermal, hydel (hydro electric) and transm…

CPPIB to Aid China With Pension Reform?

Rob Kozlowski of Pensions & Investments reports, CPPIB to aid China with pension reform, other issues:
Canada Pension Plan Investment Board, which manages the assets of the C$287.3 billion ($217.4 billion) Canada Pension Plan, Ottawa, signed a memorandum of understanding with the National Development and Reform Commission of the People’s Republic of China to offer its expertise to the country on a variety of issues, a CPPIB news release said Thursday.

The memorandum of understanding includes the CPPIB assisting China’s policymakers “as they address the challenges of China’s aging population, including pension reform and the promotion of investment in the domestic senior care industry from global investors,” the news release said.

“As we continue to deploy capital in important growth markets like China for the benefit of CPP contributors and beneficiaries, there is significant value for a long-term investor like CPPIB in sharing information, experience and successful practices with…

Twilight of the Central Bankers?

Gina Chon, a Reuters Breakingviews columnist, wrote an op-ed, Fed “forward guidance” blows too much smoke:
The U.S. Federal Reserve is still enabling financial markets. The central bank on Wednesday again declined to raise rates, despite recent remarks from Chair Janet Yellen suggesting an increase was becoming more likely. The Fed counts talking to the market – what it calls giving “forward guidance” – as one of its tools, but the story has changed so often that Yellen and her colleagues might do better being less chatty.

The Fed initially signaled four rate hikes in 2016 after raising the range for the federal funds rate to 0.25 percent to 0.5 percent last December, the first increase since the financial crisis. Falling unemployment and an improving housing sector helped push the central bank to make the move. At that time, the jobless rate was at 5 percent. U.S. GDP increased by 2.4 percent last year.

In March, rate-setting officials scaled back the central forecast to two hikes t…