Four of the largest banks in the United States—Bank of America, Citigroup, JPMorgan Chase and Wells Fargo—intend to establish covered bond programs as an alternative to finance mortgage loans.
“I believe covered bonds have the potential to increase mortgage financing, improve underwriting standards, and strengthen U.S. financial institutions by providing a new funding source that will diversify their overall portfolio,” says U.S. Treasury secretary Henry Paulson. “A U.S. covered bond market also will present new opportunities for further international investment in the United States.”
Covered bonds, which are a $3 trillion market used widely in Europe for mortgage funding, are debt securities backed by cash flow from mortgages. They’re similar to asset-backed securities, but covered bond assets remain on the issuer’s balance sheet.
The U.S. hopes that by establishing a covered bond market, it will help alleviate the downturn in the housing market.
“Covered bonds are simply one tool for mortgage financing and will not, alone, complete the housing correction,” Paulson says. “We will continue to pursue our efforts to avoid preventable foreclosures and to speed, without impeding, the necessary course of this housing correction.”
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BCE Cutting 2,500 Jobs
BCE, which is being taken over by a consortium led by the Ontario Teachers’ Pension Plan, plans to cut 2,500 management jobs.
The cuts represent approximately 6% of the total Bell Canada workforce or about 15% of management. These changes include the 30% reduction in executive positions announced earlier this month.
Combined with other reductions undertaken earlier this year, the changes are expected to provide annualized savings of about $300 million.
“This new structure positions us as a far more efficient and cost-effective operator in the intensely competitive Canadian communications marketplace,” says George Cope, president and CEO of BCE and Bell Canada.
BCE is scheduled to be taken private by the Teachers’-led consortium by mid-December.
For more about the BCE deal, click here to read our special online report, The Rise of Private Equity.
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Commodities-Based ETFs Popular
Horizons BetaPro’s exchange traded funds (ETFs) based on NYMEX natural gas, crude oil and COMEX gold prices have reached more than $500 million in assets under management since their inception six months ago.
Also, 240 million shares have traded since their creation. The Horizons BetaPro NYMEX Crude Oil Bear Plus ETF is one of BetaPro’s most successful products with daily average volume of more than 1,000% since inception.
“The marketplace has shown a strong demand for our NYMEX- and COMEX-branded ETFs,” says Howard Atkinson, president of BetaPro.
“NYMEX is pleased with the success these products have shown in such a short time,” adds NYMEX chairman Richard Schaeffer. “We believed there was a strong need for innovative energy and metals risk management tools in Canada, and we are proud to work with BetaPro to meet that need.”
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In less than 18 months, the Horizons BetaPro family of funds reached $1.75 billion in assets under management.
In addition, the Horizons BetaPro ETFs were the most highly traded ETFs on the Toronto Stock Exchange last month, for the fourth consecutive month.
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Institutions Seek Better Service from Asset Managers
The investment management industry is growing rapidly in Asia, where institutions have amassed more than an estimated US$3 trillion in assets under management, but a study finds that the quality of service delivered by asset management firms to Asian institutions is not up to par with that seen in other markets.
Greenwich Associates’ 2008 Asian Investment Management Research study shows that institutions across the Asian region do not have access to the same level of asset management service and investment expertise enjoyed by institutions in other regions.
The reason for this discrepancy is simple: Asia is still a relatively small market. Asian institutions allocate only about $1 trillion in total to external investment managers. That compares to about $1.7 trillion allocated to external managers by institutions in the United Kingdom, $3.8 trillion in Japan and more than $7.8 trillion in the United States.
“Although Asia is growing rapidly as an institutional market, at present it cannot compare to the sheer size of the institutional asset bases in Japan, Europe and the United States,” says Greenwich Associates consultant Markus Ohlig. “In addition, this comparatively modest institutional asset base is spread among nearly a dozen countries across an immense geographic region, which makes the economics of providing broad and intensive coverage quite unfavorable for asset management organizations.”
The study also reveals that Asian institutions are about twice as likely as institutions in other markets to say they would like more frequent personal contact with their investment managers and more than three times as likely to say they would prefer more personal contact with these firms’ portfolio managers.
In addition, institutions in markets like Europe are more than twice as likely as Asian institutions to say that their asset managers provide particularly insightful ideas beyond their specific investment mandates.
Although complaints about asset manager service quality can be seen as endemic to a still-developing and geographically diverse market, they are beginning to have a potentially serious secondary effect: Asian institutions are less-than-confident in their managers’ ability to deliver strong investment performance.
“It is here that the consequences of the existing service coverage shortfalls become clear,” says Ohlig. “When compared to institutions in Europe, Japan and North America, Asian institutions have much less confidence in their managers’ ability to deliver in the future.”
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SEI Offers World-Screened Funds
SEI has announced a broadening of its institutional investment solutions with the launch of the SEI Screened World Equity Ex-U.S. Fund.
The new fund addresses the increased desire of institutional investors, specifically nonprofit organizations, to invest in funds that eliminate companies that generate revenue through business relationships with Sudan or Iran.
The fund has already been supported by nine of SEI’s nonprofit institutional clients who have allocated more than US$80 million in seed investments for the launch.
The new fund represents a further expansion of SEI’s overall solutions geared towards meeting the unique needs of nonprofit institutional investors.
The fund will invest in securities of foreign issuers located in developed and emerging market countries, excluding companies whose activities directly or indirectly benefit the governments of countries that support terrorism, genocide or human rights abuses.
“Nonprofit organizations in particular have become increasingly sensitive to what types of activities their investments support,” says Carolyn McLaurin, vice-president and managing director of SEI’s nonprofit group. “The new fund is another example of SEI expanding our investment options to meet the social investment criteria of our clients and prospects.”
The actively-managed fund uses a multi-manager approach, relying on a number of sub-advisers with differing investment strategies to manage portions of the fund’s portfolio. The investment strategies utilize diversified sources of alpha with the objective of achieving returns above the fund’s benchmark (MSCI All Country World ex-U.S. Index adjusted for screens).
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IIAC Seeks Common Securities Regulator
The Investment Industry Association of Canada (IIAC) believes the Expert Panel on Securities Regulation can make a positive contribution to more efficient securities regulation in Canadian markets by charting a clear transition path to achieve a common securities regulator and more principles-based regulation.
In its submission, the IIAC encourages the Panel to build on the analysis and recommendations of previous reform efforts and bring forward recommendations to make a common securities regulator a reality.
The IIAC submission makes clear that regulatory reform can make a significant contribution to market efficiency that will in turn improve the productivity and competitiveness of Canadian business.
“The legacy of the Expert Panel will be its success in identifying needed structural and content reform for securities regulation and defining a process that achieves these results,” says the IIAC’s president and CEO, Ian Russell.
Click here to read the IIAC’s submission on its website.
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Torrisi Joins MFC Global
MFC Global Investment Management has named Brian Torrisi as its managing director and head of U.S. consultant relations.
He fills a new role and is responsible for the development, implementation and management of MFC Global’s relationships with investment consultants.
Most recently, Torrisi was a partner and director of consultant relations for Lee Munder Capital Group. Earlier in his career, he was a principal with Boston Partners Asset Management, responsible for the institutional sales and marketing of long-only and alternative strategies. Torrisi also spent six years with Putnam Investments, including serving as a vice-president in sales and client services.
“Brian’s experience and knowledge will assist our team’s efforts to build long-term relationships with U.S. consultants and their clients, as part of MFC Global’s strategic goal to grow our institutional investment management business,” says Frank Saeli, senior managing director and head of U.S. sales and relationship management. “We are delighted to welcome Brian to the firm.”
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CPPIB Appoints Tilford
The CPP Investment Board has appointed William Tilford to the position of vice-president and head of global corporate securities.
He will lead the global corporate securities group as it builds and executes bottom-up, active security selection strategies in securities issued by public companies.
Most recently, Tilford spent 12 years at Connor, Clark & Lunn Investment Management where he built and led the quantitative investment team managing $6.5 billion in assets.
With more than 20 years of financial experience, he previously held senior positions at BMO Capital Markets and Merrill Lynch Canada.