Fundsnet News

BC Partners raises £5.4 billion

February 22nd, 2012

Finance expert BC Partners has managed to raise £5.4 billion with its latest fund as it attempts to wrest control of Fitness First from shareholders.

The firm's European Capital IX fund had been subjected to unprecedented levels of demand and had long been oversubscribed.

It has resulted in a 60 per cent increase in BC Partners' investor base.

The firm is hoping to raise hundreds of billions of pounds before the end of 2012 and use the capital to consolidate its assets.

BC Partners is concerned that Fitness First could be paralysed by the fact that more than a third of the company is now owned by rival fund Oaktree, entitling the latter firm to block potential covenant wranglings.

If BC Partners fails to service the interest on debts covering Fitness First, lenders could push through an insolvency.

Charlie Bott, managing partner of the firm, said that the deal took longer than usual as arranging finance was much more difficult than during the boom years.

Europe teeters on brink of recession

February 22nd, 2012

Europe's finances are once again in the spotlight as global growth slows and the continent teeters on the brink of recession.

Despite the Greek bailout agreement, which will see billions injected into the nation's economy, shares dipped and fund investors continued to side-step riskier assets.

Even China, which some saw as an economic dynamo capable of lifting western economies out of disarray, is on the ropes with growth sliding.

Primarily, investors are worried about the ability of Greece to service its debts, which is having a far-reaching impact on the euro and share prices far beyond Athens.

Speaking to Reuters about the bleak financial future for the eurozone, Peter Dixon, global equities economist at Commerzbank, said: "The economy remains stuck in low gear. It's indicative of a flatlining economy, maybe slightly contracting rather than a major slowdown."

In Asia, the financial crisis has been affecting exports and China's manufacturing industry, for example, has contracted for four consecutive months.

The initial response to the Greek bailout was muted, but as stock markets fail to bounce back following the agreement, sentiment has started to rapidly deterioirate.

Many analysts believe that the deal will not be enough to stop the country from defaulting and even being ejected from the euro.

Greece will receive in the region of £160 billion from its fellow eurozone partners and the International Monetary Fund. This sum is expected to give Greece breathing room as it pushes through widespread economic reforms.

It is the second time that the country has received a multi-billion pound bailout – with the first coming in 2010, at the height of the economic crisis.

Gary Jenkins, managing director of Swordfish Research, told the Washington Post: "There are still a lot of moving parts in order for Greece to actually achieve the bailout of course and doubts remain about their ability to keep to the terms and conditions over the medium term."

Gibraltar to overhaul fund industry

February 22nd, 2012

Gibraltar is set to overhaul its fund industry by scrapping rules that limit the scope of investment vehicles.

The state is hoping to up the ante and ensure its funds can compete with other international players – such as Ireland and Luxembourg.

Under current rules, the administrator of a fund must be based in the same country as the investment vehicle itself. However, ministers believe this archaic stipulation is damaging the industry and curbing investment – particularly as Gibraltar is vying to become a gateway for investment.

The country's financial services minister Gilbert Licudi hopes the location rule will be scrapped in the coming weeks. It is expected to be replaced by a system that will require funds and their administrators to be authorised, reports Reuters.

"It will permit funds to be established in Gibraltar even if the administrator is not in Gibraltar," Mr Licudi told reporters.

However, he added that the move would not bring an end to fund regulation in the country.

"We are not going to open the door to anyone. We need to be selective," he added.

Gibraltar hopes that its European location will add to the perception that it is a safe place to invest.

However, Europe's fund market has performed relatively poorly in recent times.

New figures released by the European Fund and Asset Management Association show that the final quarter of 2011 witnessed a contraction in investment in fund assets on the continent. Investments fell by 2.8 per cent – or by EUR 7,920 billion.

Cross border fund investment did remain buoyant during the same period though, with both Ireland and Luxembourg managing to increase their market shares – something that Gibraltar will be hoping to do when it ratifies its new fund investment rules.

Investors not expecting oil price reduction

February 21st, 2012

Investors are not expecting oil prices to fall any time soon.

According to an array of fund managers, the elevated price of oil looks like it is here to stay – not least because of the supply pressures resulting from Iran's decision to bar sales to western nations.

Just last week the cost of crude oil leapt to $120 per barrel as the west proposed new economic sanctions on the Middle Eastern country.

It is unlikely that the political division will be patched over in the short-term and as a result oil prices will stubbornly stay put.

Speaking to the Financial Times about the rise of crude oil since the start of February, Mark Burgess, chief investment officer at Threadneedle, said: "We have recently had a close look at the energy sector where we expect the oil price to remain high, with Brent averaging $115-$120 for 2012 as supply remains tight, inventories low and geopolitical risks numerous."

He added that the picture was very unlikely to change this year and noted that Saudi Arabia was targeting a floor price of $100 per barrel – which is still high, albeit lower than the current $120 being paid.

Oil is also a safe bet for investors because the world is no nearer to reducing its reliance on the black stuff.

Even Scotland, which is forging ahead with a major overhaul of its energy industry and investing heavily in renewable generation, is not abandoning oil.

Malcolm Webb, chief executive of industry body Oil and Gas UK, said: "This country will remain a petroleum-driven economy for decades yet to come. That is not an anti-renewables statement, it's simply a statement of practical truth."

He said the North Sea still had the potential to yield an astonishing 24 billion barrels of oil before extraction becomes unfeasible.

Europe pushes through new Greek bailout deal

February 21st, 2012

European finance ministers have hammered out a new finance deal with Greece that will see the country receive a £108.7 billion rescue package from the eurozone.

The deal will come just in time to avert a default in the debt stricken nation, however, the deal is unlikely to be popular with the people as it requires the Greek government to get on top of its finances by implementing far-reaching austerity measures.

Ministers agreed the deal after 13 hours of talks. Targets include the reduction of Athens' debt to 120.5 per cent of the country's gross domestic product (GDP) by 2020.

Speaking after the agreement was finalised, Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, said: "We have reached a far-reaching agreement on Greece's new programme and private sector involvement that would lead to a significant debt reduction for Greece … to secure Greece's future in the euro area."

The deal buoyed some European investors. However, others were concerned that the bailout and Greece's guaranteed position in the eurozone could jeopardise economic recovery on the continent.

David Miller, partner at Chevoit, told Reuters: "The deal in addition to the long term refinancing operation, and creation of the EFSF are steps towards eurozone stability, but none are more than temporary fixes."

"The lack of economic growth in peripheral Europe and structural imbalances are slowly being mixed into the crisis," he added.

The deal did have a better impact further afield, with investors in Australia welcoming the eurozone bailout deal. The S&P/ASX200 index in Sydney climbed by 35.1 points following the announcement.

John Curtin, associate director with Patersons Securities, told the Sydney Morning Herald: ''The positive is that they've got the deal done – unlike other deals – earlier than when the deadline was. So, that's going to be good for confidence."

Dividend growth expected by BlackRock

February 20th, 2012

Dividend growth is likely to accelerate in 2012, according to Chris Leavy, chief investment officer for US equities at BlackRock.

His views have been echoed by a number of other analysts, who are concerned about the level of returns from investments in the wobbly global financial marketplace.

Speaking to the Financial Times, Mr Leavy said: "We think 2012 will be the year that dividends grow faster than earnings."

Dividend payouts currently lag behind bonds when it comes to growth, but many expect that to change.

According to Jack Ablin, another analyst concerned with the fate of dividend rewards, dividend-paying stocks will catch and soon overtake stocks that do not pay out.

"Dividend-paying companies will take more of a leading role as the rally matures," he told the FT.

This week, chip manufacturer CSR said that it was increasing its dividend to 7.1 cents per share after completing a £31 million share buyback deal.

Invesco Perpetual launches risk-rated funds

February 20th, 2012

Investment risk has become increasingly important as the ongoing economic turmoil in the US and Europe continues to impact upon yields.

Capital is being spread ever thinner as investment specialists look to mitigate the risks associated with investing in a tumultuous marketplace.

This is probably the reason why Invesco Perpetual is bringing its range of risk-rated funds across the Atlantic to the UK.
Its multi-asset investments will be run by chief investment officer Scott Wolle, who is based at the international firm's Atlanta office.

The various products expose investors to differing levels of risk and the returns on these investments vary accordingly.
For example, balanced Risk 6 – which is one of three products in the range, including Balanced Risk 8 and 10 – will target an average volatility of six per cent during one full market cycle.

Commenting on the new products, which give the investor flexibility, Craig Newman, Invesco Perpetual sales director, said: "The Balanced Risk 8 fund is a medium risk fund with slightly less volatility than the average Cautious Managed fund."

"Our clients in the US have used it as a core to their portfolios, building other products around that," he added.

Mr Newman concluded that one of the things that investors are demanding is transparency and these new products offer just that – highlighting what is owned and the volatility that the fund is targeting.

Investments are spread across equities, bonds and commodities – allowing for a much more fine-tuned approach to exposure.

Invesco Perpetual has also launched a fund that primarily invests in financial services equities and bonds. Headed up by Paul Causer and Paul Read, with the support of chief investment officer Nick Mustoe, the fund has a medium to long-term outlook and it is hoped that the wide geographical spread of the portfolio will help secure the fund against further economic turmoil in the sector.

Fidelity Investments to jump on dividend bandwagon

February 20th, 2012

The clarion call for stock investments that rely on share dividends is getting louder. Just this week BlackRock claimed that the future of dividends in the investment market looked promising and believes yields are set to grow in the coming year.

BlackRock's chief investment officer for US equities Chris Leavy even told the Financial Times that 2012 would be the year that dividends outstripped earnings, highlighting one of the major benefits of investing in strong, large companies that, while lacking in short-term growth potential, will offer a guaranteed return.

It is not just BlackRock that is championing these less-risky stock options, however. Fidelity Investments is getting in on the action and this April plans to join the growing number of investment specialists that are boosting yields with the help of healthy dividend performance.

Fidelity's Global Equity Income Fund is expected to offer better returns that the MSCI All-Country World Index.

The key, Fidelity Investments hopes, will be the spreading of capital over strong, developed markets like the US and Europe and those in emerging economies.

Managed by Ramona Persaud, the fund is expected to benefit from the increasing appreciation of dividend-based investments, which have soared off the back of rising interest rates and a dip in bond yields.

Nicole Goodnow, a spokeswoman for Fidelity Investments, claimed a number of other factors were impacting upon the market and bolstering dividend investments.

She said: "As the population continues to age, we expect there may be increased demand for income- oriented solutions.

"Therefore, we believe the Fidelity Global Equity Income Fund may interest equity- income-oriented investors and intermediaries seeking to pursue their equity income objectives through global investments."

Fidelity portfolio manager James Griffin recently claimed that the uncertain economic outlook was making larger firms, which are more adept at handling financial turmoil, seem like a safer bet among investors.

Greece ‘needs further austerity measures’

February 17th, 2012

The austerity measures in place for Greece do not go far enough to help the country to recover from its current debt crisis, according to BNY Mellon Asset Management.

Tom Higgins, global macroeconomic strategist at Standish, has looked at the latest points raised by the Greek bailout attempt and stated that they simply do not go far enough to meet the targets needed to rectify the nation's debt situation.

He noted that the social unrest being seen across the country as people take to the streets to protest against job cuts and reductions in public spending cuts have created a very unnerving situation as the country's goals are still unlikely to be met.

To help the country, he proposed an orderly default to be the best outcome, especially as this will remove some of the fear that is still dogging the markets caused by uncertainty.

BNY Mellon has also recently drawn attention to the tough nature of the current market and called for care to be taken when selecting funds.

BlackRock announces launch of new ETF

February 16th, 2012

BlackRock has announced it is to launch a seven new fixed income exchange traded fund (ETF) in order to meet with customer demand.

The first fixed term income ETF to target sectors and corporate credit quality, the fund will be a part of the iShares ETF business and has been created in order to meet investors' increased demand for targeted fixed income exposures in one of the funds.

In announcing the new fund, the group highlighted how it is offering a number of firsts, such as creating the first fixed income ETFs that provide exposure to specific industry sectors.

It will also be specific towards certain sectors within the mortgage-backed securities marketplace and high credit quality corporate bonds.

Matt Tucker, head of iShares fixed income investment strategy at BlackRock, said the funds have been created in response to the demand for liquid and transparent fixed income investments that are easy to both buy and trade.

The interest for ETFs is clearly in place as investors have readjusted their fixed income portfolios in order to accommodate these types of fund.

"Fixed income ETFs are truly an innovative development giving investors the ability to adjust their portfolios to express their investment views and help gain control in a low yield market environment," Mr Tucker said.

He added that based on the well-regarded industry benchmarks and drawing on the expertise of BlackRock in fixed-term incomes, these new products have the ability to expand the investment potential for both investors and advisors alike.

The popularity of BlackRock's ETFs is only likely to increase in the future, as the group has seen its global asset flows for exchange traded products and ETFs rise to hit record levels during the month of January.

Barings offers investment update on negative rating

February 15th, 2012

Barings has offered an update to its investors following the news that Moody's had changed the rating of the UK to suggest it could lose its top ranking position.

Moody's has taken the step to move the UK into having a negative outlook, alongside France and Austria, which suggests it could lose its current top AAA credit rating status.

Citing the risks of the further shocks that could be caused by the Eurozone credit crisis and the uncertainty currently being felt over the prospects for institutional reform in the area, the company explained these are the major factors in announcing the downgrade.

Looking to the UK specifically, the credit rating agency highlight how the challenges to achieving debt reduction targets in the timeframe that has been laid out by the government could pose difficulties.

It added that these could in turn have an impact on the country's short term growth prospects.

Considering these reasons, Barings offered its response to the move and stated that it has expressed concern for some time that the policy being used in the UK is currently too aggressive.

"To date, the government's ambitious fiscal consolidation programme has been meeting and even exceeding debt reduction forecasts. However, as Moody's have just confirmed, the general economic environment remains very challenging," Barings stated.

It added that against this backdrop, austerity measures could harm economic growth and actually make hitting the debt reduction targets even more difficult.

The UK now has the choice of either continuing down the same route or making changes, which could impact on investors who have taken out sterling bonds.

Last month, Barings cautioned that the global outlook for the economy still looked uncertain for the coming year, as it suggested there was still the possibility that the markets could split between disaster and safety.

AEGON comments on ONS inflation report

February 14th, 2012

The new figures for inflation in the UK have been commented on by AEGON, which stated that it appears the risks taken by the Bank of England appear to be paying off.

Considering the decline in inflation reported by the Office of National Statistics, Kames Capital's joint head of fixed income and manager of the Kames Inflation Linked Fund Stephen Jones noted there had been a lot at stake when the Bank of England's Monetary Policy Committee took steps last year to bring about change.

He noted the restarting of quantitative easing (QE) last October and the additional boost of funding which was pumped into the economy only last week ran the risk of potentially having a negative effect, with the committee taking risks on hoping inflation would come down dramatically during this year.

However, the figures published have appeared to show that in the very short term at least, these risks appear to be paying off.

Consumer price inflation fell in line with expectations and retail price inflation declined by far more than had been expected, although it was noted that the latest round of QE still needs to see results to be justified.

"To justify the latest tranche of £50 billion of quantitative easing it is likely that the Bank, at the least, sees inflation continuing to fall at some pace over the rest of the year, driven lower by excess capacity in the economy, weaker than trend domestic growth and uncertain prospects for overseas markets, notably in Europe," Mr Jones added.

Last month, AEGON announced that it thought the changes being introduced as part of the Retail Distribution Review should be seen as being an opportunity for the industry.

Consider international options for equity investment

February 13th, 2012

When searching for equity investment options, investors have been advised to consider looking to those offered overseas due to the wide range of fortunes being experienced around the world in the current economic climate.

Offering his overview on the developments taking place in the market, Rob Birchman, divisional director at Brewin Dolphin, explained that while things might seem to be getting slightly better for Europe, the reality is the Eurozone is faring far worse than may other areas.

He explained that the region has to wake up to the fact there is no one-stop solution to improving conditions and instead steps need to be taken in the short-term to ensure there is not a major financial meltdown.

With these risks in mind, Mr Birchman looked beyond the immediate region and highlighted how things are starting to get better for the US.

He explained the most recent jobless numbers were looking very good and although the economy is not back up to its former standard again, it is certainly seeing some increases that are indicating some signs of recovery.

Further afield, the emerging markets are also showing signs of continuing at a strong pace.

He explained that there had been concerns China would have a hard landing after its recent wave of success, but the figures emerging from the nation are indicating otherwise.

"There are still dangers, there are always dangers with equity investment but I think the likelihood now is that China will manage to engender a softer landing," Mr Birchman added.

The risks that come with investing in China were also recently highlighted by Jeremy Cook, chief economist at World First, who explained that people should be cautious despite the obvious attractions of investing in an economy that is seeing an eight per cent rate of growth.

Threadneedle releases investment strategy

February 10th, 2012

Threadneedle Investments has announced its latest investment strategy, with Mark Burgess, chief investment officer, offering his views on the developments forecast to take place.

Looking at the highlights from the report, Mr Burgess pointed out some of the key factors set to be affecting the sector in the coming months will see the diverging geographic circumstances that are having an impact on the Eurozone coming to a fore.

Economic data is currently pointing to these conditions remaining at crisis levels, but with Asia and the emerging economies it will be a completely different story, with these regions maintaining strong rates of growth.

The improved economic data and the boost to liquidity which has come from the LTRO has seen to significantly increase the risk appetite in investment markets, which is leading demand for more cyclical high risk sectors and assets that performed badly over the last year.

In addition, Mr Burgess stated that oil prices are something which it is expecting to remain high and as a result of this Threadneedle is looking to promote exploration and production stocks, in addition to oil service companies.

The group has also moved to a tactical overweight in basic materials, which has been based on an improved outlook being forecast for mining companies.

"We continue to believe that equities offer good value and retain an overweight position. We also see value in corporate and emerging market bonds where fundamentals are healthy and spreads offer decent value," Mr Burgess added.

The concerns expressed about a geographical divide being seen across the Eurozone were previously highlighted by the company late last year, as it noted a north/south divide was emerging across the nations.

It noted that in general the countries in the north were seeing a stable performance, while those in the south were seeing continued difficulty, a trend which is still being seen some weeks later.

Exchange traded funds hit record levels for BlackRock

February 8th, 2012

Consumers looking for a low risk option with the potential to turn a yield on their product have been looking towards exchange traded funds (ETFs) in record levels, BlackRock has revealed.

The company noted that global asset flows for exchange traded products and ETFs rose to hit record levels during the month of January, which illustrated a continuing market revolution globally as investors turned toward the fixed income offered by ETFs.

Using the funds in this way was noted to be an attempt by many to look to restore their investment yield in a climate where many have been seeing a decline from their existing portfolios.

Peter Fisher, senior managing director and head of BlackRock's fixed income portfolio management, said the trend comes from investors looking to find new ways of generating investment income in the currently low return climate.

"We see a quiet revolution building in the asset class as more and more investors learn how to use fixed income ETFs to build portfolios that combine low risk with the potential for yield," Mr Fisher commented.

He added that over the last decade, fixed income ETFs have helped to democratise access to fixed income markets by creating new centres of transparent liquidity.

They also offer the investors a cost effective way to express a view on specific fixed income sectors.

Last month, BlackRock offered its overlook for the ETF landscape from the past year and released the Industry Highlights documents in response to calls from its clients.

It highlighted how the report showed that by the end of the year, there was $1.525 trillion (£925 trillion) in AUM to be found in the funds, a 2.9 per cent rise on the $1.482 trillion recorded at the end of 2010.