The document provides a quarterly investment outlook and discusses recent volatility in financial markets. It notes that sentiment has been swinging between irrational optimism and excessive pessimism. While most equity markets have rebounded in recent months, bond prices have also risen due to deflation fears. The document discusses the debate around whether the threats are inflation or deflation and argues that subdued growth does not necessarily mean deflation will take hold. It outlines some areas where investment opportunities still exist, such as global equity income funds and Japanese equities, and concludes by emphasizing the need for diversification given the current environment of low predictability.
SJP Special Investment Bulletin Feb 2016Tyler Stuart
The document discusses recent declines in global stock markets and concerns about the health of the global economy. It makes three key points:
1) While global economic growth is slowing, experts do not believe a global recession is imminent or that the current situation resembles 2008.
2) Well-diversified investment portfolios can help reduce risk and allow investors to achieve long-term goals, even with market volatility.
3) Periods of market decline have historically been followed by strong five-year returns for patient investors, suggesting current downturns may present opportunities.
Geopolitical events continued to make headlines this quarter but did little to quell investors’ enthusiasm as markets continued to advance. Russia and the Ukraine managed to agree to a temporary ceasefire just as sectarian violence in Iraq exploded driving oil prices higher. China garnered attention with its hegemonic designs on the South China Sea much to the displeasure of Japan and Vietnam as well as pushing back on any pro-democracy desires in Hong Kong. In addition, Argentina once again threatens to default on its debt after losing a Supreme Court decision to creditors in the US.
The Edge 29 January 2012 Business Insight Stefan Keitel Global CIO Credit SuisseMiles Masterson
The document discusses trends in global asset management. It makes three key points:
1) To properly build a global asset allocation strategy, one needs to do on-the-ground research in different markets rather than relying solely on analysts. This allows you to understand local valuation levels.
2) Traditional bonds currently offer very low yields, making alternative investments more attractive for achieving adequate returns. Real assets like real estate and commodities are seen as healthier long-term investments compared to nominal assets.
3) While volatility will likely continue, strategic trends point to increasing allocations to real assets, alternative investments, and emerging markets over the next years. This is due to low bond yields, volatile equity prices, and the
The portfolio manager discusses the Third Avenue Focused Credit Fund. They reiterate their commitment to maximizing value in the portfolio and returning capital to shareholders in a timely manner. Eight of the top ten holdings have restructured in the past two years, reducing debt levels. The manager believes the portfolio contains significant embedded value that will be realized as market conditions normalize and corporate events occur. They intend to provide transparency to shareholders through monthly fact sheets and quarterly commentary on the fund's website. The manager also discusses recent volatility in the high yield and distressed debt markets, noting that credit spreads spiked in 2015 but it is unclear if this will lead to recession or opportunity.
Tricumen / Revenue and (lack of) volatility_17-June-14Tricumen Ltd
Revenue and (lack of) volatility
The current lack of volatility is not exceptional; in equities, FX, and rates it has merely returned to pre-‘Crunch’ levels.
The link between banks’ revenue and volatility has been overstated. Equally important factors – to name a few - are banks’ risk management, regulatory initiatives, and investors’ inertia.
We reiterate our view that successful banks adapted to ‘flat’ markets by better monitoring of trading patterns and by successfully internalising trades via their electronic trading units.
This document provides BlackRock's outlook for 2015 global markets and economies. It identifies divergence as a key theme, with the US and UK tightening monetary policy while other regions maintain stimulus. Volatility is expected to increase from low levels as valuations are high and investor confidence in monetary policy is stretched. Geopolitical risks also remain. The outlook calls for active risk management and hedging given low potential returns and the diminished ability of bonds to offset equity declines.
The document discusses how economic tailwinds that supported markets in 2009 may transition to headwinds in the second half of 2010. It notes that extraordinary global policy efforts that created economic growth tailwinds in 2009 will likely fade or possibly reverse, contributing to a potential economic slowdown and challenging market conditions later in the year. It also provides recommendations for portfolio positioning in light of this expected shift from tailwinds to headwinds.
The document provides a quarterly investment outlook and discusses recent volatility in financial markets. It notes that sentiment has been swinging between irrational optimism and excessive pessimism. While most equity markets have rebounded in recent months, bond prices have also risen due to deflation fears. The document discusses the debate around whether the threats are inflation or deflation and argues that subdued growth does not necessarily mean deflation will take hold. It outlines some areas where investment opportunities still exist, such as global equity income funds and Japanese equities, and concludes by emphasizing the need for diversification given the current environment of low predictability.
SJP Special Investment Bulletin Feb 2016Tyler Stuart
The document discusses recent declines in global stock markets and concerns about the health of the global economy. It makes three key points:
1) While global economic growth is slowing, experts do not believe a global recession is imminent or that the current situation resembles 2008.
2) Well-diversified investment portfolios can help reduce risk and allow investors to achieve long-term goals, even with market volatility.
3) Periods of market decline have historically been followed by strong five-year returns for patient investors, suggesting current downturns may present opportunities.
Geopolitical events continued to make headlines this quarter but did little to quell investors’ enthusiasm as markets continued to advance. Russia and the Ukraine managed to agree to a temporary ceasefire just as sectarian violence in Iraq exploded driving oil prices higher. China garnered attention with its hegemonic designs on the South China Sea much to the displeasure of Japan and Vietnam as well as pushing back on any pro-democracy desires in Hong Kong. In addition, Argentina once again threatens to default on its debt after losing a Supreme Court decision to creditors in the US.
The Edge 29 January 2012 Business Insight Stefan Keitel Global CIO Credit SuisseMiles Masterson
The document discusses trends in global asset management. It makes three key points:
1) To properly build a global asset allocation strategy, one needs to do on-the-ground research in different markets rather than relying solely on analysts. This allows you to understand local valuation levels.
2) Traditional bonds currently offer very low yields, making alternative investments more attractive for achieving adequate returns. Real assets like real estate and commodities are seen as healthier long-term investments compared to nominal assets.
3) While volatility will likely continue, strategic trends point to increasing allocations to real assets, alternative investments, and emerging markets over the next years. This is due to low bond yields, volatile equity prices, and the
The portfolio manager discusses the Third Avenue Focused Credit Fund. They reiterate their commitment to maximizing value in the portfolio and returning capital to shareholders in a timely manner. Eight of the top ten holdings have restructured in the past two years, reducing debt levels. The manager believes the portfolio contains significant embedded value that will be realized as market conditions normalize and corporate events occur. They intend to provide transparency to shareholders through monthly fact sheets and quarterly commentary on the fund's website. The manager also discusses recent volatility in the high yield and distressed debt markets, noting that credit spreads spiked in 2015 but it is unclear if this will lead to recession or opportunity.
Tricumen / Revenue and (lack of) volatility_17-June-14Tricumen Ltd
Revenue and (lack of) volatility
The current lack of volatility is not exceptional; in equities, FX, and rates it has merely returned to pre-‘Crunch’ levels.
The link between banks’ revenue and volatility has been overstated. Equally important factors – to name a few - are banks’ risk management, regulatory initiatives, and investors’ inertia.
We reiterate our view that successful banks adapted to ‘flat’ markets by better monitoring of trading patterns and by successfully internalising trades via their electronic trading units.
This document provides BlackRock's outlook for 2015 global markets and economies. It identifies divergence as a key theme, with the US and UK tightening monetary policy while other regions maintain stimulus. Volatility is expected to increase from low levels as valuations are high and investor confidence in monetary policy is stretched. Geopolitical risks also remain. The outlook calls for active risk management and hedging given low potential returns and the diminished ability of bonds to offset equity declines.
The document discusses how economic tailwinds that supported markets in 2009 may transition to headwinds in the second half of 2010. It notes that extraordinary global policy efforts that created economic growth tailwinds in 2009 will likely fade or possibly reverse, contributing to a potential economic slowdown and challenging market conditions later in the year. It also provides recommendations for portfolio positioning in light of this expected shift from tailwinds to headwinds.
The document summarizes economic concerns from a single day in May 2012. It discusses Greece potentially leaving the eurozone and going into economic collapse. It also mentions the weakening European economy, troubles in the European commercial real estate market, and issues with J.P. Morgan that were hurting market sentiment. However, the document expresses that diversification may help investors weather volatility and that the outlook is better than 2008-2009 despite some challenges still existing.
W(h)ither Yields? Dividend Capacity & BDC Stock Prices: A Mortgage REIT Case ...Mercer Capital
The sustained low yield environment is pressuring BDC earnings. If business development companies implement modest dividend cuts, will stock prices decline to maintain investor yield, or will investors accept lower stock yields amid a dearth of compelling alternative income plays? The experience of mortgage REITs examined in this whitepaper, published September, 2014, suggests that erosion of NAV per share from credit-related writedowns is a bigger threat to stock prices over time.
Business development companies are an important and growing source of funding for middle market companies. Along with private equity and other investment funds, BDCs provide billions of dollars of investment capital to private companies in every segment of the economy.
For over thirty years, Mercer Capital has met the valuation needs of the same middle market companies to which BDCs and other funds provide capital.
This document provides a portfolio update from an investment advisor. It discusses changes made to bond fund allocations in client portfolios. Specifically, it eliminated three bond funds (focused on foreign bonds, TIPS, and short-term bonds) and replaced them with two new funds that have more flexible investment mandates. This was done to improve chances of success in a rising interest rate environment. It also discusses replacing an existing small-cap value fund with a new fund that has a strong long-term track record and is managed by an experienced team with a classic value investing approach.
The Global Portfolio Strategies Group's economic outlook notes that global equity markets peaked in early April before falling sharply in May, as they had anticipated. While not compelled to reduce equity exposures, they recommend maintaining a neutral stance given ongoing economic and political uncertainties. They continue to favor U.S. equities over international ones, seeing the U.S. economy in better shape despite political uncertainty. Emerging markets have faced challenges from slowing growth and currency declines, but aggressive policy actions and cheaper valuations may provide a boost going forward. Markets are expected to remain volatile in this environment of uncertainties over the European situation, U.S. economy, and upcoming elections.
The document discusses the economic outlook for 2010, noting that while markets are expected to perform well initially due to policy "tailwinds", challenges are anticipated in the second half of the year as these tailwinds fade or become headwinds. It recommends overweighting stocks, cyclical sectors, and emerging markets initially, but becoming more defensive later in 2010.
The document provides an investment outlook and analysis from Fasanara Capital for March 2012. It summarizes that the ECB's LTRO2 liquidity injection was larger than expected and has fueled a risk rally in markets. However, the author believes this rally will be tested in the coming weeks. The outlook discusses the ECB's strategy of using monetary policy to buy time for banks and sovereigns, but notes this comes at a high price tag and risks inflation or defaults if the strategy fails. The author argues for defensive positions, hedges against negative scenarios, and opportunities to cheaply hedge risks.
The fund returned -10.8% in February, underperforming its benchmark. The short equity book and long equity book both made negative contributions after currency hedging. Within the short book, negative contributions came from Anglo American, Las Vegas Sands, and Royal Dutch Shell. Within the long book, negative contributions came from Nokia, Sky, and Bank of America. Elsewhere, active currencies returned -0.4% while government bonds and commodities returned +0.1% and +1.4% respectively. The manager remains convinced markets will continue to struggle without credit expansion and believes central banks have limited options to address slowing growth and falling productivity.
The Henley Group's Market Outlook - September 2013Winston Lai
This document provides an investment outlook and analysis across various asset classes from a wealth management firm called Henley. It discusses that markets are experiencing low liquidity and volatility due to uncertainty around central bank actions like tapering of quantitative easing. It recommends that investors stay diversified, think about total portfolio returns rather than focusing on short-term performance of individual investments, and maintain a long-term perspective despite short-term volatility. Fixed income faces challenges from potential interest rate rises if tapering occurs, while emerging market currencies have weakened significantly against the US dollar.
Sprung Investment Management is an independent investment management firm serving high net worth individuals. It has over 120 years of combined investment experience among its principals. In the third quarter of 2013, markets were volatile due to political uncertainty in the US and slowing growth in emerging markets. Sprung believes this environment creates opportunities for value investors.
It has been seven years since the last financial crisis. In that seven-year period, the total global debt has increased by even more than it did in the seven years previous (2000-2007). From the end of 2007 through to the end of the first half of last year, total global debt increased by 40%, or $US 57 TRILLION! This massive increase in debt has been a consequence of easy money in a low interest rate environment aided and abetted by programs of quantitative easing (the provision of liquidity by central banks) in order to promote economic growth and investment.
The first quarter managed to record some positive results overall, despite severe declines in some sectors.
The document summarizes LPL Financial Research's economic and market outlook for 2011. They expect the economy and markets to be range-bound with GDP growth between 2-4% and modest single-digit returns for stocks. Bonds may see below average but positive returns of 0-5% while volatility remains elevated. Foreign policy issues may also impact markets.
Simon Morris - A Guide to Property Investment in 2015Simon Morris
Simon Morris, an independent investment consultant with in-depth knowledge of the property market, offers his expert advice in the Guide to Property Investment in 2015. The guide aims to help private and commercial investors make an informed choice about where they put their money in 2015.
Vanguard’s 2015 economic and investment outlookJoão Pinto
To treat the future with the deference it deserves, Vanguard believes that market forecasts are best viewed in a probabilistic framework.
This publication’s primary objectives are to describe the projected long-term return distributions that contribute to strategic asset allocation decisions and to present the rationale for the ranges and probabilities of potential outcomes.
Here is our recent revision webinar on commercial banks and the UK economy. We look at how commercial banks made a profit (or loss!) and consider the factors that affect how much they can lend out.
The document provides an investment outlook from Fasanara Capital. It expects the ECB and Germany to find a short-term solution to avoid a disorderly Greek default, despite remaining bearish long-term. It anticipates using massive ECB liquidity to hedge against negative scenarios through selective shorts and hedging programs. Opportunities also exist in industries vulnerable to banking retrenchment and slowing Chinese imports.
Our Dad enjoys fishing as a hobby, which may seem strange to others but his children find it cool. He is an excellent fisherman who loves adventure. Our Dad works hard during the day and deserves to relax by napping in the "man zone" as that is his favorite pastime, especially after a long day of work. God gave our Dad strength, wisdom, patience and other qualities to make him the perfect father figure for his family.
The document proposes methods to accelerate PageRank computations using extrapolation techniques. It discusses how PageRank works and is typically computed using an iterative power method. The authors' approach is to use successive PageRank vectors to estimate the components in the directions of the first few eigenvectors, subtracting them to remove their influence and speed convergence. Empirical results show quadratic extrapolation can significantly speed up PageRank convergence, though not enough for truly personalized computations. The extrapolation techniques may help accelerate other similar problems.
This document discusses the stark differences in experiences between girls in developing countries compared to America. It describes girls in places like Afghanistan, Iraq and Sudan who must wear full body clothing and need a male escort to leave home. It contrasts this with an American girl walking to school freely. It then discusses the problems of child marriage, mentioning an 8 year old girl being married to her 30 year old cousin. The document calls on people to help stop these issues through an organization called Girl Effect and provides their website for learning more.
The document summarizes economic concerns from a single day in May 2012. It discusses Greece potentially leaving the eurozone and going into economic collapse. It also mentions the weakening European economy, troubles in the European commercial real estate market, and issues with J.P. Morgan that were hurting market sentiment. However, the document expresses that diversification may help investors weather volatility and that the outlook is better than 2008-2009 despite some challenges still existing.
W(h)ither Yields? Dividend Capacity & BDC Stock Prices: A Mortgage REIT Case ...Mercer Capital
The sustained low yield environment is pressuring BDC earnings. If business development companies implement modest dividend cuts, will stock prices decline to maintain investor yield, or will investors accept lower stock yields amid a dearth of compelling alternative income plays? The experience of mortgage REITs examined in this whitepaper, published September, 2014, suggests that erosion of NAV per share from credit-related writedowns is a bigger threat to stock prices over time.
Business development companies are an important and growing source of funding for middle market companies. Along with private equity and other investment funds, BDCs provide billions of dollars of investment capital to private companies in every segment of the economy.
For over thirty years, Mercer Capital has met the valuation needs of the same middle market companies to which BDCs and other funds provide capital.
This document provides a portfolio update from an investment advisor. It discusses changes made to bond fund allocations in client portfolios. Specifically, it eliminated three bond funds (focused on foreign bonds, TIPS, and short-term bonds) and replaced them with two new funds that have more flexible investment mandates. This was done to improve chances of success in a rising interest rate environment. It also discusses replacing an existing small-cap value fund with a new fund that has a strong long-term track record and is managed by an experienced team with a classic value investing approach.
The Global Portfolio Strategies Group's economic outlook notes that global equity markets peaked in early April before falling sharply in May, as they had anticipated. While not compelled to reduce equity exposures, they recommend maintaining a neutral stance given ongoing economic and political uncertainties. They continue to favor U.S. equities over international ones, seeing the U.S. economy in better shape despite political uncertainty. Emerging markets have faced challenges from slowing growth and currency declines, but aggressive policy actions and cheaper valuations may provide a boost going forward. Markets are expected to remain volatile in this environment of uncertainties over the European situation, U.S. economy, and upcoming elections.
The document discusses the economic outlook for 2010, noting that while markets are expected to perform well initially due to policy "tailwinds", challenges are anticipated in the second half of the year as these tailwinds fade or become headwinds. It recommends overweighting stocks, cyclical sectors, and emerging markets initially, but becoming more defensive later in 2010.
The document provides an investment outlook and analysis from Fasanara Capital for March 2012. It summarizes that the ECB's LTRO2 liquidity injection was larger than expected and has fueled a risk rally in markets. However, the author believes this rally will be tested in the coming weeks. The outlook discusses the ECB's strategy of using monetary policy to buy time for banks and sovereigns, but notes this comes at a high price tag and risks inflation or defaults if the strategy fails. The author argues for defensive positions, hedges against negative scenarios, and opportunities to cheaply hedge risks.
The fund returned -10.8% in February, underperforming its benchmark. The short equity book and long equity book both made negative contributions after currency hedging. Within the short book, negative contributions came from Anglo American, Las Vegas Sands, and Royal Dutch Shell. Within the long book, negative contributions came from Nokia, Sky, and Bank of America. Elsewhere, active currencies returned -0.4% while government bonds and commodities returned +0.1% and +1.4% respectively. The manager remains convinced markets will continue to struggle without credit expansion and believes central banks have limited options to address slowing growth and falling productivity.
The Henley Group's Market Outlook - September 2013Winston Lai
This document provides an investment outlook and analysis across various asset classes from a wealth management firm called Henley. It discusses that markets are experiencing low liquidity and volatility due to uncertainty around central bank actions like tapering of quantitative easing. It recommends that investors stay diversified, think about total portfolio returns rather than focusing on short-term performance of individual investments, and maintain a long-term perspective despite short-term volatility. Fixed income faces challenges from potential interest rate rises if tapering occurs, while emerging market currencies have weakened significantly against the US dollar.
Sprung Investment Management is an independent investment management firm serving high net worth individuals. It has over 120 years of combined investment experience among its principals. In the third quarter of 2013, markets were volatile due to political uncertainty in the US and slowing growth in emerging markets. Sprung believes this environment creates opportunities for value investors.
It has been seven years since the last financial crisis. In that seven-year period, the total global debt has increased by even more than it did in the seven years previous (2000-2007). From the end of 2007 through to the end of the first half of last year, total global debt increased by 40%, or $US 57 TRILLION! This massive increase in debt has been a consequence of easy money in a low interest rate environment aided and abetted by programs of quantitative easing (the provision of liquidity by central banks) in order to promote economic growth and investment.
The first quarter managed to record some positive results overall, despite severe declines in some sectors.
The document summarizes LPL Financial Research's economic and market outlook for 2011. They expect the economy and markets to be range-bound with GDP growth between 2-4% and modest single-digit returns for stocks. Bonds may see below average but positive returns of 0-5% while volatility remains elevated. Foreign policy issues may also impact markets.
Simon Morris - A Guide to Property Investment in 2015Simon Morris
Simon Morris, an independent investment consultant with in-depth knowledge of the property market, offers his expert advice in the Guide to Property Investment in 2015. The guide aims to help private and commercial investors make an informed choice about where they put their money in 2015.
Vanguard’s 2015 economic and investment outlookJoão Pinto
To treat the future with the deference it deserves, Vanguard believes that market forecasts are best viewed in a probabilistic framework.
This publication’s primary objectives are to describe the projected long-term return distributions that contribute to strategic asset allocation decisions and to present the rationale for the ranges and probabilities of potential outcomes.
Here is our recent revision webinar on commercial banks and the UK economy. We look at how commercial banks made a profit (or loss!) and consider the factors that affect how much they can lend out.
The document provides an investment outlook from Fasanara Capital. It expects the ECB and Germany to find a short-term solution to avoid a disorderly Greek default, despite remaining bearish long-term. It anticipates using massive ECB liquidity to hedge against negative scenarios through selective shorts and hedging programs. Opportunities also exist in industries vulnerable to banking retrenchment and slowing Chinese imports.
Our Dad enjoys fishing as a hobby, which may seem strange to others but his children find it cool. He is an excellent fisherman who loves adventure. Our Dad works hard during the day and deserves to relax by napping in the "man zone" as that is his favorite pastime, especially after a long day of work. God gave our Dad strength, wisdom, patience and other qualities to make him the perfect father figure for his family.
The document proposes methods to accelerate PageRank computations using extrapolation techniques. It discusses how PageRank works and is typically computed using an iterative power method. The authors' approach is to use successive PageRank vectors to estimate the components in the directions of the first few eigenvectors, subtracting them to remove their influence and speed convergence. Empirical results show quadratic extrapolation can significantly speed up PageRank convergence, though not enough for truly personalized computations. The extrapolation techniques may help accelerate other similar problems.
This document discusses the stark differences in experiences between girls in developing countries compared to America. It describes girls in places like Afghanistan, Iraq and Sudan who must wear full body clothing and need a male escort to leave home. It contrasts this with an American girl walking to school freely. It then discusses the problems of child marriage, mentioning an 8 year old girl being married to her 30 year old cousin. The document calls on people to help stop these issues through an organization called Girl Effect and provides their website for learning more.
Attached Newsletter is an attempt to cover monthly issues relevant in the context of transactions - covers SEBI, Companies Act, Income Tax, Stamp duty and other regulatory changes
Este documento presenta la unidad 4 sobre datos y probabilidades. Los objetivos de la unidad son calcular el promedio de datos e interpretarlo, leer e interpretar tablas y gráficos, describir la posibilidad de ocurrencia de eventos usando términos como seguro, posible e imposible, y utilizar diagramas de tallo y hojas para representar datos. Se explican conceptos como promedio, tablas, gráficos de barras y líneas, y experimentos aleatorios seguros, posibles, poco posibles e imposibles. Se incl
The document provides an overview of the 2011 cross country and indoor track seasons for the College of William and Mary. It discusses top individual performances and team results at major competitions. Key athletes like Alex McGrath and Elaina Balouris achieved all-region honors, while the men's and women's teams both saw success, with the men winning their 12th consecutive CAA championship. The program relies on alumni donations to support travel to major competitions.
Zaggora LLP - UK Real Estate Investment AdvisorsToniPopova
This document summarizes the key details and experience of Chris Hancock, a senior partner at Zaggora. It outlines his background in investment banking at JPMorgan for 10 years, where he specialized in serving family businesses and private clients. It notes that he has since started his own corporate finance boutique, Cleaver Consulting, focused on M&A and financing for entrepreneurs. The summary establishes that Chris began working with Zaggora's managing partner Malcolm Bell in 2009 to establish the Zaggora partnership.
11 eaton vance volatility - the black widow returns123jumpad
Richard Bernstein warns that investors are again ignoring the risks of income investing strategies during a period of global credit deflation. He notes that high-yielding assets like MLPs, REITs, and emerging market debt have historically underperformed and faced higher risks during credit downturns. However, many investors continue to view them as "safe" or "opportunistic" despite abnormally high yields often indicating hidden risks. Bernstein argues sustainability of dividends and cash flows is more important than yield alone during the ongoing deflation of the global credit bubble. His portfolios focus on fundamentals suggesting continued dividend payments rather than stretching for income.
The document discusses how investors should allocate to different credit asset classes in the current market environment. It notes that different credit sub-asset classes perform better in different market cycles, with some benefiting from growth periods while others protect capital during downturns. Recently, high yield bonds have seen strong returns but spreads are now close to fair value, so a more dynamic approach across credit quality and regions may be better. Carefully selected absolute return, credit relative value, and multi-class credit strategies could add value going forward.
The document provides an economic update and market outlook from Peter Martin and Freddie Lait of HC CAERUS. It notes that the HC CAERUS UK and European Equity Fund offering period is underway, seeking £3m in seed capital. Equities are outperforming bonds and cash as inflation erodes their value. Opportunities exist in unfavored UK sectors like consumer stocks, banks, and staples which offer high yields. While commodities have pulled back, equity markets may pause over the summer but this will provide a buying opportunity. Returns from equities are expected to significantly outpace bonds and cash in the next 2-3 years.
The document provides an economic update and market outlook from Peter Martin and Freddie Lait of HC CAERUS. It notes that the HC CAERUS UK and European Equity Fund offering period is underway, seeking £3m in seed capital. Equities are outperforming bonds and cash as inflation erodes their value. Opportunities exist in unfavored UK sectors like consumer stocks, banks, and staples which offer high yields. While commodities have pulled back, equity markets may pause over the summer but this will provide a buying opportunity. Returns from equities are expected to significantly outpace bonds and cash in the next 2-3 years.
Montello Real Estate Opportunity Fund Feb 2015 FactsheetMontello
1) The Montello Real Estate Opportunity Fund consolidates Montello's position as a 'one-stop shop' for real estate entrepreneurs, able to fund developers for property acquisition through bridging finance and development completion.
2) The fund launched in January 2014 and provides high level returns between 6-10% annually while preserving capital across a diversified portfolio of UK real estate projects.
3) Montello and transaction advisor CBRE undertake extensive due diligence on projects and partners to mitigate risk and support the fund's target of consistent, stable returns.
Thiet ke Bao cao thuong nien - Vietcapital 2008Viết Nội Dung
The annual report summarizes Viet Capital Fund's performance in 2008, a difficult year for the fund and markets. The fund lost 57% in value compared to a 66% loss for the market index. While the fund outperformed the market, its net asset value fell to VND 418 billion by year-end. The fund increased its cash position from 22% to 44% over the year as it focused on capital preservation during the market turmoil. Top holdings were reduced in industries like real estate that were hit hard by the economic downturn. Going forward, the fund will emphasize quality companies and maintain a risk-aware strategy while seeking recovery opportunities.
Included in this Invast Insights report, Turkey's economic condition was highlighted along with potential trading opportunities if the Turkish Lira collapses completely. Despite the economic issues of other countries, our Wealth Creation portfolio continued to hold up well and the Drawdown Phase portfolio traded above target.
Meanwhile, a case study for assessing other stocks is also included in this report. The case study - Forge Group (FGE): Example Of Fragility - showed that it is better to buy a robust business with little earnings than buying a business which appears to be making strong earnings but with poor composition.
The Global Portfolio Strategies Group's economic outlook predicts continued uncertainty and choppy markets. While U.S. fundamentals remain relatively strong, political uncertainties could trigger recession. Emerging markets face slowing growth and currency declines but improving conditions may boost their economies and cheapen their equities. Investors face many questions over the summer including the durability of Europe's latest agreement and outcomes of the U.S. election, keeping markets volatile.
The Global Portfolio Strategies Group's economic outlook predicts continued challenges in global markets. While U.S. fundamentals remain relatively strong, political uncertainties could trigger recession. In Europe, serious issues threaten break-up scenarios and economic struggles persist in the U.K. and emerging markets. The investing environment remains difficult with many questions unanswered around the U.S. economy, European agreements, and upcoming elections. As a result, markets are expected to remain volatile in the near term.
The document provides an investment outlook and analysis from Fasanara Capital. It summarizes that:
1) Markets are expected to continue rallying in the short term but correct markedly in the next few months once the EMU crisis flares up again.
2) Positions in Europe will be held with incremental hedging, as the rally is based on false assumptions and will be terminated prematurely.
3) Italy may provide opportunities around national elections in late February as volatility is expected to rise.
THIRD QUARTER 2015 RETROSPECTIVE AND PROSPECTIVE We’ve Seen This Movie BeforeRobert Champion
Global markets remained in turmoil as concerns regarding the global economy persisted. While much of the international focus was centred around the slowing economy in China, there were few places that investors could hide as even cash, paying little to negative interest in some parts of the world, was a relative winner in the quarter.
3 Reasons You Should Be Investing In Real EstateCarter Boehm
The document provides 3 reasons to invest in real estate:
1) Investing in real estate can diversify your portfolio since real estate has a low correlation with other asset classes.
2) The income return from real estate is attractive and stable, with around 80% of total returns coming from rental income over the long term.
3) Data shows that over a 10-year period, private market commercial real estate returned an average of 8.4% with relatively low volatility compared to equities and bonds.
WHV Investment Management changed its name in 2012 to better describe the firm's activities in fixed income and equity asset classes. In 2011, the firm saw an increase in key financial metrics like EBITDA and net income despite a decline in assets under management due to market declines. Some accomplishments included establishing management by objectives between the board and top management and implementing several recommendations from a consulting firm. The outlook discusses economic growth trends and expectations for 2012.
‘Over the Horizon’ share market commentary – July 2014David Offer
- The Australian stock market was up 4.5% in July but has since fallen 1.1% as the corporate reporting season begins.
- Telstra reported a 14.6% rise in profits and announced an off-market share buyback. BHP Billiton is also expected to announce a spinoff and buyback when it reports.
- Low bond yields have left investors seeking higher yields in stocks, leading to gains in high-dividend sectors and hybrid securities. However, future returns on hybrids will be more modest once factoring in redemption values.
Liquidity in the US corporate bond market has become more challenging in recent years despite significant growth. Secondary market trading, where existing bonds are traded between investors, has seen turnover rates decline for both investment grade and high yield bonds. Additionally, large investment banks that once provided ample liquidity as market makers have significantly reduced their bond inventories and market making activities due to increased regulatory costs. As a result, bond investors should expect greater pricing volatility, higher trading costs, longer execution times, and reduced liquidity compared to the past.
Introduction to Metro in India by cosmo soil.pptxcosmo-soil
The metro system in India is a vital part of urban mobility, providing eco-friendly, efficient, and affordable transportation. This article explores its history, benefits, and future developments, highlighting how metros enhance quality of life and drive urban development.
Heather Elizabeth HamoodHeather Elizabeth Hamoodheatherhamood
Heather Hamood is a Licensed Physician who enjoys playing the Violin in her spare time. In addition to helping people as a Doctor, she loves to share her passion for the violin.
CRYPTOCURRENCY REVOLUTIONIZING THE FINANCIAL LANDSCAPE AND SHAPING THE FUTURE...itsfaizankhan091
Cryptocurrency, a digital or virtual form of currency that uses cryptography for security, has revolutionized the financial landscape. Originating with Bitcoin's inception in 2009 by the pseudonymous Satoshi Nakamoto, cryptocurrencies have grown from niche curiosities to mainstream financial instruments, reshaping how we think about money, transactions, and the global economy.
The birth of Bitcoin marked the beginning of the cryptocurrency era. Unlike traditional currencies issued by governments and controlled by central banks, Bitcoin operates on a decentralized network using blockchain technology. This technology ensures transparency, security, and immutability of transactions, fundamentally challenging the centralized financial systems that have dominated for centuries.
Bitcoin was conceived as a peer-to-peer electronic cash system, aimed at providing an alternative to the traditional banking system plagued by inefficiencies, high fees, and lack of transparency. The underlying blockchain technology, a distributed ledger maintained by a network of nodes, ensures that every transaction is recorded and cannot be altered, thus providing a secure and transparent financial system.
June 20, 2024
CRYPTOCURRENCY: REVOLUTIONIZING THE FINANCIAL LANDSCAPE AND SHAPING THE FUTURE
Cryptocurrency: Revolutionizing the Financial Landscape and Shaping the Future
Cryptocurrency, a digital or virtual form of currency that uses cryptography for security, has revolutionized the financial landscape. Originating with Bitcoin's inception in 2009 by the pseudonymous Satoshi Nakamoto, cryptocurrencies have grown from niche curiosities to mainstream financial instruments, reshaping how we think about money, transactions, and the global economy.
#### The Genesis of Cryptocurrency
The birth of Bitcoin marked the beginning of the cryptocurrency era. Unlike traditional currencies issued by governments and controlled by central banks, Bitcoin operates on a decentralized network using blockchain technology. This technology ensures transparency, security, and immutability of transactions, fundamentally challenging the centralized financial systems that have dominated for centuries.
Bitcoin was conceived as a peer-to-peer electronic cash system, aimed at providing an alternative to the traditional banking system plagued by inefficiencies, high fees, and lack of transparency. The underlying blockchain technology, a distributed ledger maintained by a network of nodes, ensures that every transaction is recorded and cannot be altered, thus providing a secure and transparent financial system.
#### The Proliferation of Altcoins
Following Bitcoin's success, thousands of alternative cryptocurrencies, or altcoins, have emerged. Each of these altcoins aims to improve upon Bitcoin or serve specific purposes within the digital economy. Notable examples include Ethereum, which introduced smart contracts – self-executing contracts with the terms of the agreement
13 Jun 24 ILC Retirement Income Summit - slides.pptxILC- UK
ILC's Retirement Income Summit was hosted by M&G and supported by Canada Life. The event brought together key policymakers, influencers and experts to help identify policy priorities for the next Government and ensure more of us have access to a decent income in retirement.
Contributors included:
Jo Blanden, Professor in Economics, University of Surrey
Clive Bolton, CEO, Life Insurance M&G Plc
Jim Boyd, CEO, Equity Release Council
Molly Broome, Economist, Resolution Foundation
Nida Broughton, Co-Director of Economic Policy, Behavioural Insights Team
Jonathan Cribb, Associate Director and Head of Retirement, Savings, and Ageing, Institute for Fiscal Studies
Joanna Elson CBE, Chief Executive Officer, Independent Age
Tom Evans, Managing Director of Retirement, Canada Life
Steve Groves, Chair, Key Retirement Group
Tish Hanifan, Founder and Joint Chair of the Society of Later life Advisers
Sue Lewis, ILC Trustee
Siobhan Lough, Senior Consultant, Hymans Robertson
Mick McAteer, Co-Director, The Financial Inclusion Centre
Stuart McDonald MBE, Head of Longevity and Democratic Insights, LCP
Anusha Mittal, Managing Director, Individual Life and Pensions, M&G Life
Shelley Morris, Senior Project Manager, Living Pension, Living Wage Foundation
Sarah O'Grady, Journalist
Will Sherlock, Head of External Relations, M&G Plc
Daniela Silcock, Head of Policy Research, Pensions Policy Institute
David Sinclair, Chief Executive, ILC
Jordi Skilbeck, Senior Policy Advisor, Pensions and Lifetime Savings Association
Rt Hon Sir Stephen Timms, former Chair, Work & Pensions Committee
Nigel Waterson, ILC Trustee
Jackie Wells, Strategy and Policy Consultant, ILC Strategic Advisory Board
Monthly Market Risk Update: June 2024 [SlideShare]Commonwealth
Markets rallied in May, with all three major U.S. equity indices up for the month, said Sam Millette, director of fixed income, in his latest Market Risk Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
ITES KPO BPO IT sector in the country has increased at an incredible rate o...yashwanthkumar517728
ites KPO and BPO,IT sector in the country has increased at an incredible rate of 35% per year for the last 10 years reinforces the view that India is world class in IT
The IT sector is one of the largest employers of women, and therefore, can play a crucial role in women empowerment and the reduction of gender inequalities.
5 Compelling Reasons to Invest in Cryptocurrency NowDaniel
In recent years, cryptocurrencies have emerged as more than just a niche fascination; they have become a transformative force in global finance and technology. Initially propelled by the enigmatic Bitcoin, cryptocurrencies have evolved into a diverse ecosystem of digital assets with the potential to reshape how we perceive and interact with money.
How to Invest in Cryptocurrency for Beginners: A Complete GuideDaniel
Cryptocurrency is digital money that operates independently of a central authority, utilizing cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies are decentralized and typically operate on a technology called blockchain. Each cryptocurrency transaction is recorded on a public ledger, ensuring transparency and security.
Cryptocurrencies can be used for various purposes, including online purchases, investment opportunities, and as a means of transferring value globally without the need for intermediaries like banks.
How to Invest in Cryptocurrency for Beginners: A Complete Guide
Investment Environment May 2010
1. Investment Environment Q2 2010
Summary
Equity markets over‐priced the recovery and are now correcting (down 10‐15%)
Volatility is back, the DJIA moved 1,800 points on May 6th in 50 minutes’ trading
Treasuries yields are compressed by flight to quality and are unattractive at these prices
because of associated inflation and default risks
Commodities remain volatile and are due for a correction
Gold is due for a correction, surely gold bullion ATMs are a sure sign of a bubble
Alternative defensive holdings, such as cash and gold, do not yield a return
Inflation risk in medium/long term with negative real interest rates
Real estate offers low volatility, high yielding regular returns against rated covenants such as
Tesco Plc, UK Government, BT with built‐in inflation protection, whatever the economic out‐
turn within a fully hedged rate and income structure.
Notice
This memorandum was prepared by Zaggora LLP.
This document is for information purposes only and should not be construed as a solicitation or offer, or recommendation to acquire or
dispose of any investment in real estate assets or securities or any other transaction. Whilst all reasonable efforts have been made to
obtain information from sources believed to be reliable, no representations are made that the information or opinions contained in this
term sheet are accurate or reliable.
Nothing in this document constitutes investment, legal, accounting or financial or other advice. Any investment decision should only be
made after consultation of professional advisers. Zaggora LLP is not authorised or regulated by the Financial Services Authority and does
not promote, give investment advice on or make arrangements in financial instruments. This presentation does not constitute an offer to
invest.
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Zaggora LLP
Zaggora LLP is a boutique real estate investment advisory partnership focused on acquiring direct commercial
property assets in the UK and Europe on behalf of private investors. The partners of Zaggora have a wealth of
experience in acquiring, financing and managing commercial real estate assets and companies in the UK and
European markets with a combined £5bn of deal experience.
UK Investment Environment
The combination of a sluggish recovery in the economy and concerns over the UK’s fiscal position and credit
rating has weighed on UK asset markets over recent weeks. The rally in the equity market has lost steam, while
UK bonds have underperformed their overseas counterparts and the sterling exchange rate has fallen sharply.
Such concerns seem unlikely to dissipate in the near term and the recent hung parliament result of the general
election has added to a feeling of instability.
More broadly, the financial markets have begun to re‐price risk after images of rioters in Greece protesting
against austerity measures brought the realisation of the overwhelming size and scale of public sector deficits
direct to the trading floor courtesy of CNBC.
Key Market View
In this environment we believe that risk averse investors should focus on yielding assets with inflation
protection as a strategy that is uncorrelated with the volatility of equity and fixed income markets. Our view of
the world is that:
Equity markets over‐priced the recovery and are now correcting with high volatility
Treasuries are low yielding given flight to quality and are unattractive at these prices because of
associated inflation and default risks
Commodities remain volatile and are due for a correction
Alternative defensive holdings, such as cash and gold, do not yield a return
Macro overview
Our macro view is that:
Despite the MPC’s decision to pause quantitative easing, money market interest rates look set to stay
at very low levels for a long time, as the weak recovery delays official rate hikes.
As a result, market swap rates are at an all‐time low and we expect 3M Libor to remain between 0.5‐
0.7% until at least Q1 2011. This enables low cost borrowing against real assets that offer inflation
protection and real yield.
While fiscal concerns have pushed bond yields higher, the outlook for economic growth and inflation
suggests that yields will fall again this year. Not least given investors flight to the safety of traditional
safe havens.
The lacklustre recovery has already poured cold water on the rally in UK equities. But there is still a
large risk that the recovery falls further short of market expectations, forcing equities lower. There is
a very real risk of ‘double‐dip’ to the extent the economy falls back into recession. This is not likely to
be compared to the same ‘peak to trough’ declines as 2007‐2008, but may be significant nevertheless.
Sterling has been hit hard by fears for the UK’s credit rating. But a major fiscal tightening due to be
announced in the emergency budget should ease some of the pressure on the pound.
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Equity Markets
Fears of higher borrowing costs and the effects on growth of fiscal austerity have seen a reversal of the equity
market rally. The bull‐run that we have seen since March 2008, albeit from distressed levels, has been
consistent across the worldwide exchanges as investors bought the recovery trade and the ‘bargain prices’ of
both blue‐chips and secondary market listings.
However, the market responded nervously to the debt woes of Dubai earlier in the year, the first cloud of the
gathering sovereign debt storm. The continued rally in the equity markets came to an abrupt end with the
announcement of civil investigations by the SEC of the Goldman Sachs (GS) CDO trades, quickly followed by
news of a potential criminal investigation of GS and other firms. This was followed by the request of Greece for
an IMF bailout and subsequent riots on the streets in protest at austerity measures.
The increasing volatility was represented in a spike in the Vix Index and a ‘flash crash’ of the NYSE on May 6th
when the market fell 10%, before recovering 8%, all in the space of 8 minutes. It is no wonder investors have
taken profits and re‐positioned their portfolios in the face of such volatility.
Fundamentally, there is the risk that the economic recovery story continues to fall short of market
expectations, causing equities to fall during 2010, correcting downwards by a further 5‐10%. From today’s
levels.
In addition, the rate at which investors discount future profits has fallen significantly as a result of actions by
policymakers to boost liquidity in financial markets as well as signs that official interest rates are likely to be
very low for a prolonged period. We know that the rally in the FTSE 100 has coincided with the drop in real
yields on government bonds, consistent with our belief that equity markets would rally as long as interest rates
remain low.
However, the headwinds represented by the risks of sovereign debt default/re‐structuring and austerity
measures to cut spending both lead to an outcome of higher interest rates, lower growth and greater
uncertainty which are now being priced by the market.
The rally has also coincided with a sharp rise in confidence in the economic outlook. But the latter index has
recently risen to its highest level in over 11 years. We doubt that such high expectations for the recovery will
be met.
While the prospects for economic growth are bad, the outlook for corporate profits looks worse. The large
amount of spare capacity in the economy, combined with the recent sharp rise in firms’ unit wage costs, is
likely to squeeze firms’ margins severely. We expect macroeconomic profits to fall by around 6.5% this year
and to be flat in 2011. Forward‐looking indicators of corporate earnings, such as the CBI’s balance of
manufacturers’ order books, are consistent with further falls in corporate earnings over the next year. (See
Fixed Income –Corporate Bonds).
As a result, the drying up of dividend income could mean that investors switch to other asset classes. Indeed,
they may already have good cause to do so – commercial property gross yields exceed the earnings yield on
equities, while the gap between index‐linked bonds has also narrowed (see Real Estate)
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Fixed Income – Treasuries & Corporate Bonds
While bond yields have edged a little higher since Q4 2009, the prospect of a major fiscal squeeze, sluggish
growth and low inflation and interest rates should provide a more favourable backdrop for bonds later in the
year.
The recent rise in yields has reflected three factors:
1. The rapid deterioration of the public finances and a hung parliament at the general election have
raised concerns about the risk of sovereign debt default. The CDS premium on UK government debt –
a measure of the cost of insuring against sovereign default – has risen alongside the rise in bond
yields.
2. Worries that the recent rise in headline consumer price inflation will prove longer‐lasting than the
Monetary Policy Committee expects have pushed inflation expectations higher.
3. The rise in yields has coincided with the easing in pace and (at least temporary) pause in the Bank of
England’s bond purchases under its quantitative easing scheme. The previous narrowing in the spread
between gilt yields and overnight index swaps – which had been attributed to the effect of QE – has
recently been reversed.
But we suspect that at least some of these pressures will ease later on in the year. For a start, the cross‐party
consensus on the need to tackle the fiscal position suggests that, even under a hung parliament, further plans
and action to reduce the budget deficit will emerge. These are due to be announced in the emergency budget
may keep the rating agencies happy.
Second, inflation concerns should also fade in time as the full disinflationary effects of the recession and the
vast amount of spare capacity created become evident.
And finally, while gilt issuance will remain very high over the coming few years, a further extension of the
quantitative easing programme is yet possible. Meanwhile, new liquidity requirements requiring banks to hold
more government debt should also help soak up some of the supply.
Coupled with a fall in international bond yields as the global economic recovery disappoints and inflation
elsewhere remains subdued, we still expect these developments to pull 10 year gilt yields back down to
around 3% by the end of the year.
Meanwhile, corporate bond spreads have continued to tighten over the quarter. But they may struggle to
narrow further. Spreads are not much wider than during the 2000s credit boom. And the relationship between
the growth rate of economic activity (as measured by the CIPS surveys) and corporate bond spreads hints that
they may widen a little again.
Commodities
The commodities market has largely responded to the positive outlook for the recovery in line with the risk
seeking trend of the equities market.
The normally inverse correlation between gold and equity prices was broken some time ago as fears over
currency levels have pushed investors into Gold, Silver and Platinum. As the equity markets have begun their
correction, commodities such as crude oil have seen a correction.
We strongly believe that the gold market is due for a significant correction. The demand/supply factors behind
the $1,250/oz gold price cannot justify this level. The development of gold plated bullion ATMs as rolled out in
Abu Dhabi are surely indicative of a bubble.
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Money Markets
Despite the Monetary Policy Committee (MPC)’s decision to pause quantitative easing, market interest rates
look set to remain close to their very low levels for the foreseeable future, as the weak recovery prevents
monetary policy from being tightened.
Spreads of 1 and 3 month Libor over overnight index swaps have remained very tight over the last few months.
Meanwhile, the MPC has continued to vote unanimously for Bank Rate to be held at 0.5%. We see little reason
to think that the low interest rate environment will end soon. For a start, while the MPC voted to pause its
asset purchase programme in February, the Committee has struck an increasingly dovish tone.
The Bank of England’s quarterly Inflation Report showed that inflation was expected to be below target at the
two‐year policy horizon, even if Bank Rate were held at 0.5%, largely due to the disinflationary impact of the
spare capacity in the economy.
In addition, the Governor has left the door open to further policy stimulus, stating that “it is far too soon to
conclude that no more [asset] purchases will be needed.” A tightening of monetary policy therefore seems a
long way off.
In response to these signals, markets have revised down their rate expectations. But they still expect Bank
Rate to rise by 150bps or so over the next two years, in line with expected hikes in the US and Euro‐zone.
In contrast, we expect Bank Rate to remain on hold for the foreseeable future. A key effect of such low Libor
and real rates is that fixed borrowing costs in the UK swaps market over 1‐30 years are historically low.
Borrowers can fix 5 year loans at 2.5% and 30 year loans at 4%.
Real Estate
We continue to analyse the real estate markets, seeking to understand their drivers and direction and so to
find opportunities for investors. Owing to the central role of the asset price bubble in creating the financial
crisis, real estate has been avoided by many investors since 2007, many of which have been waiting for prices
to fall further before looking at the asset class again. However, unlevered real estate is a relatively low
volatility asset class and bargain basement opportunities on the anticipated scale have not arisen.
Since 2008, we have been asking questions such as:
‐ What is it that financial institutions are going to do with their distressed assets?
‐ What is attractive and interesting to investors in what has been a time of great dislocation? What are
investors truly concerned about?
‐ How can we capitalise on this dislocation and what are the opportunities and challenges?
‐ Which asset classes and markets offer best long term value growth on a risk‐adjusted basis?
Our answers to these questions are set out below:
What is it that financial institutions will do with distressed assets?
‐ Banks are going to carefully manage, rather than fire‐sell, assets. Notable sales of loan or asset
portfolios include the $6bn loan book sale by Merill Lynch to Lonestar in October 2008, the sale of a
£4bn loan book by Barclays with a £3.6bn staple financing and more recently the sale of a £1bn
portfolio by Anglo Irish to private investors. These more recent sales, are outliers.
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‐ Instead, banks – under protection from the Asset Protection Scheme (UK), NAMA (Ireland),
TARP/TALF (US) – are managing for themselves their distressed real and loan assets. For instance,
RBS has created an off‐balance sheet company called West Register to manage its real estate assets
and Lloyds Banking Group has formed a team of 800 people in BSU (Business Support Unit).
Banks have reconciled themselves to self‐managing a lot of their assets for three key reasons.
1. They believe that the market (January – August 09) would not offer them anything more than 40‐
50p on the £1 for assets. This is following a cascade of PE, private investor interest in ‘bidding’
banks below market value for assets.
2. The belief that, over time, markets will recover and they will be able to exit at face value or less
of a discount to fire selling today.
3. Banks have learnt from the mistakes of the last recession (1990/3) when many, most notably
Barclays, panicked and defaulted borrowers in the largest enforcement of security packages in
the UK. This left the banks with thousands of real estate assets that continued to fall in value
because of under‐management.
What is it that is attractive and interesting to investors in this environment?
Investors are concerned about growth, inflation, underlying economic strength as well as systematic
imbalances. At the same time, they recognise there is an opportunity to acquire UK real estate assets because;
1. GBP is below long term trend against most major currencies but notably USD
2. Interest rates are historically low
3. The UK is politically stable and has a large, transparent, real estate market
4. Lease structures are the longest in the world (20/25 years) and are landlord friendly
5. Cash and treasuries offer low returns, increasing the opportunity cost of holding risk free assets
6. Equity markets may well have out‐run corporate earnings and real economy performance
However, transaction volumes have been thin and there has been a distinct lack of liquidity in the open market
for prime and secondary location assets and across most sectors (office, retail, industrial). This lack of liquidity
has been caused because existing investors do not wish to sell into a falling market and there is no pressure for
them to do so since banks have clearly decided to focus only on assets which are no longer able to service
interest. Assets and borrowers which are in breach of covenant (such as LTV, ISCR) or due for maturity in
2010/11/12 have been ignored by lenders.
The opportunity to acquire assets in the open market after a 25%‐30% drop in values (Savills, Moodys, IPD) has
been recognised by many investors and a series of new investment vehicles have been established. PE firms
are also believed to have £20‐30bn to spend on real estate assets from funds raised in 2006/7 (Datalink).
However, the lack of supply of available assets has meant that those assets which have been sold, have
received more interest that normal and have traded at better than asking prices.
Notwithstanding this, there was a flurry of ‘distressed’ sales in Q1 09 from fund investors such as ING and large
listed companies such as British Land which were facing covenant breaches on debt facilities and redemption
requests. But these came to an end in Q2 as a sense of stability returned to the market.
Investors have also been attempting to access off‐market opportunities. However, many overseas investors
into the UK do not have the relationships within the market with principal owners of assets to be able to
source and structure deals. Secondly, those investors approaching banks with distressed assets have all sought
– almost exclusively – to bid at 30%‐50% of loan or asset value on the basis that it is ‘distressed’. The banks will
simply not trade at these levels, for the reasons mentioned above.
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Thus, there is distress, but it is very much an insiders’ market because banks do not want to openly advertise
the number of problem loans and assets they have and borrowers who are in default or under‐water do not
wish to be seen to be in difficulty.
Which asset classes and markets offer best long term value growth on a risk adjusted basis?
We have spent the last 12 months analysing various asset classes ranging from commercial office, retail,
hotels, student accommodation, healthcare and residential property. Are conclusions are as follows:
Residential Property – Little or no Distress
There was a lot of excitement in Q4 08/Q1 09 at the prospect of acquiring central London residential assets at
distressed prices. However, given that over half of UK mortgages are on a variable rate basis, the reduction of
the base rate to 0.5% has meant that most borrowers have seen a fall of 90% in their monthly mortgage
payment. This has led to an increase in supply of properties being made available to let as the arbitrage
between mortgage and rental is now larger than ever.
Thus, in residential, there is as yet little distress. We know historically that there is a clear correlation between
unemployment rates and average residential home values so that home values do not ever really bottom until
unemployment peaks. Unemployment is expected to peak in the UK in 2011 and we expect home values to
bottom at the same time. This indicates there may be a further 10‐15% drop in values on a nationwide basis.
Commercial Office – Some distress
The UK commercial office market has seen a significant weakening of the classic fundamentals of occupancy,
rental rates and covenant strength. There has also been a lack of available financing for new acquisitions (or at
least on terms that make investing attractive). Rental rates in the city of London have dropped for prime space
from £65 to £45. Other city centre markets, such as Manchester, Birmingham, West‐End, have seen similar
falls. Vacancy rates have increased by 5‐7% in most markets to an average of 10% (Knight Frank).
However, supply of assets for acquisition has been thin. This is because there has been little distress caused by
banks accelerating loans or funds forced into marketing through redemptions. Many office properties
financed in 2006‐7 will now be over‐leveraged and over‐rented but with facilities not maturing until
2011/2012, sponsors and banks are not looking to sell as long as tenants continue paying rents (which by and
large they are).
From our perspective, there is a strong equity story to commercial office assets within the M25 as we believe
in the equity story for London far more than that in the regional office market. London contributes 32% to UK
GDP and has done for decades. We do not believe this will change, although the weakening of the financial
service sector may result (temporarily) in a reduction in this contribution. Tenant demand will always be
highest in London but the investment market in the regions may offer more attractive valuations while the
market shifts towards the safety of London.
Student Accommodation & Healthcare – No Distress
These two sectors have attracted a lot of investor interest in recent years. The long term demographic trend
in the UK (ageing population) is increasing the demand for care rooms while the growth in student population
and trend towards purpose‐built accommodation has driven the demand for student rooms. The model
adopted by most healthcare operators (Bupa, Spire, Four Seasons) and student accommodation operators
(United) is to grant 20‐30 year RPI leases to property owners. This attractive, long term income stream with
bond‐like characteristics, has drawn interest from many financial investors as well as property companies. The
attractive structure, underlying sovereign‐like covenant and supply demand imbalance arising from the overall
demographic trends created a very compelling investment case for these assets.
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As a result, prices – like most real estate asset classes – in 2006/7 became unsustainable with some
transactions trading at a 4.5% yield (Southern Cross). Since then, yields have significantly shifted outward as
the value of these assets has dropped.
Now, healthcare assets on long leases are available at 7‐8% yields with student accommodation trading at
6.5% ‐ 7%. Prices have therefore moved to sustainable levels and the continuing attractive underlying
investment case has meant that distressed assets have been able to find refinancing (Four Seasons, Unite).
Investors are increasingly chasing these types of assets as they are ‘defensive’ and in many ways counter
cyclical. However, the difficulty in financing new transactions has reduced the ability and willingness to pay
higher prices.
Like office assets, there is a limit to distress as banks are not forcing borrowers to re‐capitalise or sell assets.
This will perhaps come with refinancing dates in 2010/11.
Retail – Much Distress
The retail sector has experienced a lot of distress since Q3 2008. The fall in consumer spending coupled with
rising unemployment has resulted in a squeeze on revenue for all retailers in the UK at the high to mid range of
the market with discount retailers benefiting from a flight to value by consumers. Tesco have continued to
increase their revenue (£260bn) and net profit (£2.8bn) as consumers shop for value at lower prices. This
knock‐on effect for landlords has been an increase in vacancy rates as several large tenants have collapsed as
well as falling rental levels across the UK. Secondary retail shopping centres, in out of town locations, have
seen yields widen from 5.5%‐6% in 2007 to 9‐10% in 2009.
The required asset management for multi‐let assets has also caused a problem for many lenders as borrowers
literally hand back the keys for assets to banks which are now over‐rented and under‐tenanted. This presents
an opportunity to acquire quality assets in good locations for distressed prices from lenders as well as forced
sellers. The assets require asset management but there is much value to be gained by doing this over the next
3‐5 years.
Banks are also increasingly concerned about having to manage multi‐let shopping centres given their limited
resources and lack of familiarity of speciality retail assets. More on this later.
Hotels – Much Distress
Outside of central London, since Q3 2008, hotel performance in terms of occupancy, revenue per available
room (RevPAR) and average daily rate (ADR) has fallen significantly ‐ by as much as 20%. Within central
London, occupancy levels have fallen by 10% but RevPAR has been resilient, with a fall of just 5%.
Given the nature of hotels, in that tenants pay (or not) the rent daily, income available for debt service falls on
a weekly basis. This has left many hotel owners unable to service interest to lenders. Lenders are frightened
because hotels require more asset management than any other real estate class and few of the banks have
developed teams for hotel assets. As a result, there is much distress in the sector for assets managed by
operators such as Hilton, Marriot, Radisson and others.
From experience, we know that the hotel operators also require management. Under‐managed assets fail to
achieve robust operating margins and many are trading at sub 20% (EBITDA/Revenue) as costs have not been
flexed in line with falls in revenue. As a result, many assets are under water and in default after being over‐
leveraged by borrowers in 2005‐7.
Much like retail, we believe there to be a very strong story for a growth in the value of hotel assets over the
next 3‐5 years in the UK. Especially given that in 2012 London will host the Olympics.
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Investment criteria
We believe that in this uncertain environment, investors should be focused on earning real returns from low
volatility assets with in‐built inflation protection. We are therefore targeting assets offering the following
investment characteristics;
8‐15% Fixed annual equity return (received quarterly)
10‐15% Annual IRR
Fixed income with annual increases (RPI/CPI/Fixed)
FRI Income (All costs, management, insurance, maintenance, paid by tenants)
Strong residual value driven by quality of asset and location
Market structure
The UK market structure and framework provides the strongest opportunity because;
Ultra‐Long leases 10‐20 years+ (w/o tenant break options)
Upward‐only rents, if markets rents fall, tenants continue paying same rent
FRI leases making tenants responsible for all management, maintenance and insurance costs
Active lending market to secure leverage on modest basis (60%‐70% LTv)
Market Opportunity
The opportunity exists to earn low volatility, annual equity returns of 8‐15% (received quarterly) by acquiring
UK commercial real estate assets let to excellent covenants (UK Government, Tesco leases etc) for 5‐10 years
with a 10‐15% annual IRR.
We believe in the current, limited visibility environment this represents an extremely interesting low risk, real
asset investment strategy. As a defensive play, the potential returns profile compares well with other
defensive alternatives such as cash/gold/treasuries. The strategy offers investors low volatility, transparent
returns with in‐built inflation protection at a time when GBP borrowing costs are low (2.5% for a 5 year fix and
4.04% for a 30 year fix) and exchange rates favourable relative to USD.
Equity investment can range from £10‐£50ml for each play, levered to £30‐£150ml of gross commercial real
estate assets
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