Guy Hands, head of private equity house Terra Firma, warns US and Europe could suffer ‘Japanese problem’ unless banks’ leveraged loans are restructured
Goldman apologises for role in crisis and pledges $500m to help US small businesses
Mark Lowe, who set up Nomos Capital Partners is being sued for discrimination by a former employee
Doomed to repeat history? asks whether we need to learn from excessive consumer debt or was it an issue of leverage in the financial system
Bankers fear over-regulation
Tankers store oil as futures prices rocket
The blog posts on websites read by UK independent financial advisers are alive with objections to comments by Andrew Fisher, outspoken chief executive of Towry Law.
Mr Fisher runs a fee-based advice outfit, but revealed recently that his firm gets £6m a year in trail commission on legacy business it inherited from firms it has taken over. Towry Law does not provide a service in return for this money – an example of how it is possible to earn money for nothing in the strange world of financial advice.
The Irish National Pensions Reserve Fund is getting a rough ride at the moment. Having been forced to pick up the tab for the recapitalisation of the Irish banks (some €7bn worth of preference shares in Bank of Ireland and Allied Irish Banks), it is about to lose its chief executive, John Corrigan, who moves upstairs to replace his boss, head of the National Treasury Management Agency, the NPRF’s parent body.
This will not be a pleasant job, but nor will running the NPRF. As well as easing in a new chief executive, it has to work on reconciling its responsible investment policy (it has signed up to the UN Principles for Responsible Investing and is a member of the Carbon Disclosure Project) with its legal mandate to “secure the optimal total financial return provided the level of risk to the moneys held or invested is acceptable”.
According to human rights advocate Mark Cumming, the contradiction between this and the NPRF’s own stated intention to “incorporate ESG factors into investment research, analysis and decision making” stands in the way of its developing coherent policies.
If the Irish government can push through amending legislation requiring the NPRF to bail out the banks, surely it should be able to rewrite the NPRF’s mandate in order to allow it to take long term non-financial risk factors into account and ensure Irish pensioners will not profit from destructive corporate practices such as human rights abuses or uncontrolled environmental damage.
Praying for a market miracle
The revelation that the Church of England is relying almost exclusively on returns from equities to pay vicars’ pensions in the future raises an interesting question: which institutions can afford a sufficient time horizon to be able to rely on the expectation that equities will outperform bonds over the longer term?
Synthetic ETFs – an efficient way to use modern financial technology to do something useful for investors or a sinister investment banking kinda plot to cream off extra revenue from naive investors who just want to track an index?
In Monday’s FTfm, former Eurizon chief executive Francis Candylaftis called for these evil instruments to be cast into the outer darkness. This sparked a thoughtful explanation by FT Alphaville of precisely where the problem might lie (hint – it’s about the bit where you need collateral), using db x-trackers’ own diagram of how it all works.
Then blogger Andrew Clavell picked up the theme, suggesting a much firmer regulatory hand on the collateral would solve the problem.
Does anyone else have any suggestions?
One meeting to watch out for today is the sustainable stock exchanges event in New York, hosted by several United Nations’ bodies including the the UN Principles for Responsible Investment.
The aim of the gathering is to take stock of how the world’s exchanges can work together with investors, regulators and companies to increase corporate transparency and encourage responsible long-term investing.
This will involve tackling environmental, social and corporate governance issues. Eiris, the Ethical Investment Research Services, says one of the key drivers will be to include ESG disclosure into listing rules and corporate governance standards.
Paul Abberley, chief executive of Aviva Investors London says little support from listing authorities “who play a crucial role in setting out what companies report to the market” has come so far.
Many present today will be hoping to discuss measures to encourage best practice among companies through sustainable indices. Some exchanges such as Johannesburg Stock Exchange Socially Responsible index or the Deutsche Borse Daxglobal Alternative Energy Index, and the Indonesian exchange have already done this but there is plenty of scope for others to follow.
Global stock exchanges are likely to hear some challenging calls to take action.
The banks be stealing our ETFs!
Exchange traded products – everyone wants a piece of this pie.
Exchange traded funds started as an investment management product. They were run by investment managers, who had to build scale in order to make any money out of them.
Then the European regulations allowed funds to use swaps and investment bankers realised there was an opportunity to use their skills. Lyxor, an offshoot of Societe Generale, but not its asset manager, and db x-trackers set out to promote their synthetically replicated ETFs, but still claimed they were offering investment management.