Summit Notebook
Exclusive outtakes from industry leaders
from Funds Hub:
Here’s lookin’ at you KIID
The vexing question of how much to tell retail investors about what exactly they are buying has been exercising industry participants at the Reuters European Funds Summit. Although the sentiment is for more transparency and simplicity, as exemplified by the EU's new two page marketing document, some managers feel this won't fully reflect the risks and processes involved in a product.
The Key Investor Information Document (KIID), to be rolled out under UCITS IV, will replace the little loved "simplified" prospectus as the primary document via which fund promoters communicate with prospective clients - something that makes some managers very uneasy.
Noel Fessey, managing director of Schroder Investment Management in Luxembourg, admitted he had a bee in his bonnet about KIID, which requires managers to be very concise in their descriptions. "Under UCITS IV the fund prospectus becomes the subordinate document but that's the main document in which you can set out all the risks."
He agreed that the KIID would allow investors to compare products - something the simplified prospectus had failed to do, but added, "There's a significant degree of optimism by the regulator about what the KIID can do."
The problem for regulators and fund managers is trying to strike a balance. "If you are too technical you will scare people," said Andrea Favaloro, head of retail at BNP Paribas IP/Fortis Investments. "We need to explain what happens in simple words."
Maybe fund managers will have to experiment with some very small fonts.
from Funds Hub:
UCITS IV Everyone
It is early days at the Reuters fund summit in Luxembourg, but already a few themes are building. For one thing, no one seems to be too negative about the investment climate.
For the most part, however, the attendees are focused on how the industry will recuperate from the battering it has suffered during the financial crisis. Again, there appears to be a degree of optimism. Most of the talk is about UCITS IV, which is fundspeak for a new kind of pan-European fund that is easier to distribute.
Essentially, it a) allows fund managers to register a fund in one place and have it listed across Europe and b) allows for smaller, local funds to be fed into it.
The big hope is that this will both build the industry and save money at the same time. Hence the optimism.
It does little, however, to address the underlying problem facing fund managers -- to get distrusting retail investors back into a market that many are still afraid of.
from Funds Hub:
Hedge funds: Greece is the word
This week's Reuters Hedge Fund and Private Equity Summit gave us some new insights into how hedge funds are betting on Greece's debt crisis and their attitude to talk that politicians and regulators may clamp down on their activities.
According to Cheyne Capital, for instance, buying Greek CDS is an "old trade" that many hedge funds have moved out of. Many have instead moved to short bets on the euro, as the single currency comes under pressure from the debt of some southern European countries.
Then again, two managers from GLG, ranked by Eurohedge this week as Europe's 6th biggest hedge fund firm, said they are actually long the euro.
The rationale, according to fund manager Karim Abdel-Motaal, is that the euro is the least ugly major currency and hasn't seen the same quantitative easing used elsewhere.
In addition, the strength of France and Germany's economies coming out of recession means interest rates could rise sooner than expected, boosting the single currency.
They were also quick to dismiss the idea that banning or limiting CDS would somehow improve the situation.
"Let's assume you ban credit default swaps, and Greek spreads automatically go to the same level as German spreads ... Would you rather hold a German bond at a spread of 1 percent or a Greek bond at a spread of 1 percent? You've just made Greek debt unfinanceable."
2010 Reuters Hedge Funds and Private Equity kicks off
Some of the world’s leading names in the hedge funds and private equity industries are visiting the Reuters bureaus in New York, London and Hong Kong this week to discuss the outlook for the sector in a series of exclusives interviews as part of the 2010 Reuters Hedge Funds and Private Equity Summit.
Private equity is still struggling with the triple problem of raising funds, exiting investments and striking deals — although the last has become a little easier of late. M&A has picked up and there have been a few single-digit billion LBO deals struck in recent months. Still, volatile markets have been making for an uphill struggle to exit investments, and raising money for new funds is uphill. On top of that, executives are facing the possibility of higher tax and tougher scrutiny on their firms.
Investors whose portfolios were decimated during the financial crisis are searching for better returns and are now ready to send new money into hedge funds. However despite the industry’s strong returns in 2009, investors are still asking managers for greater insight and transparency at a time regulators and legislators are also putting the industry under a new spotlight.
Will the industry continue to post high returns? Have expectations for performance changed?
from Funds Hub:
A “remote, silent whirlwind”?
We may have just lived through the biggest financial crisis in 80 years, but its impact may still not have been big enough for people to learn the right lessons for next time.
Philip Wood, special global counsel at Allen & Overy, told today's Reuters Restructuring Summit in London's Canary Wharf that the effects on the Western world's populace of the credit crisis, while large, have simply not reached the proportions of 80 years ago.
"Do people remember (the lessons from a crisis)? Sometimes they do."
It took 140 years for the British to get over the South Sea Bubble of 1720 and introduce the Companies Act in 1862, he said.
"German inflation of the 1920s still casts a shadow over the German folk memory," he added.
"(But) I'm not too sure people will remember much about this one. Apart from a few unpopular people losing their jobs, it's not hit the population in the same way the Great Depression has, where people were hungry... it was catastrophic.
"We've lost a year's GDP, but for most people it's been a remote, silent whirlwind."
from Funds Hub:
The morgue after Christmas
He said at the Reuters Restructuring Summit in London that by the end of the year banks will issue "in patient", "out patient" or "morgue" judgements as they go about the business to decide who gets much needed loans and who does not.
Moscow: The least worst place for your money
Russian investment bank Renaissance Capital was a big backer of Moscow’s ambition to become a major emerging-markets financial centre, a bridge between European and Asian capital, a rival to Dubai.
It not only trumpeted the idea, but was one of the first big local firms to take out offices in a sleek glass skyscraper by the Moscow River, surrounded by foundation pits and towers of naked steel girders that were to become Moscow’s Canary Wharf.
This doesn’t seem to make any logic and how does this blog entry tally with the headline ?
from Funds Hub:
Shadow of Madoff
It's hard enough for fund firms to get investors to put money into markets when stocks are so volatile, but it seems they're also still having to wrestle with the bad publicity from U.S. financier Bernard Madoff's giant fraud.
Ashraf Mohamed, portfolio manager and head of Islamic funds at investment firm Stanlib in South Africa, told the London leg of the Reuters Islamic Banking and Finance Summit that investors are still nervous of another Madoff.
"All they are doing right now is saying we want to make sure there isn't any risk. One comment is 'let's make sure we don't have another Bernie Madoff situation'," Mohamed said.
However, he doesn't seem too worried about a repeat of the massive Ponzi scheme.
"My take is that it's all hit the fan," he said. "You don't need to concern yourself with assets being inflated (or) with people trying to deceive you because that's come and gone."
from Funds Hub:
Counting sheep
By Lorraine Turner
Speakers at the Reuters Hedge Fund and Private Equity summit this week were asked "what keeps you awake at night" and the answers were wide-ranging, from "my 7-week old daughter" to "the next meteorite".
