Reuters blog archive

from Breakingviews:

Europe’s investors miss value cues, again

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It is one of the oldest rules in the investment book: buy what’s cheap, sell what’s expensive. The current crop of European fund managers must have slept through that lesson.

Throughout the second half of 2009, the forward-looking price-earnings ratio on the MSCI world index was persistently 14 or higher. That’s expensive by historical standards, but it didn’t deter investors. Data from Goldman Sachs shows net inflows were buoyant, topping 20 billion euros in December 2009, well above the monthly norm, and 158 billion euros for the year as a whole, a level not subsequently matched. Valuations then became more attractive as flows slowed in 2010 and 2011, bottoming at a forward p/e of 10 in September 2011. But cheap stocks did not attract buyers. On the contrary, European investors were net sellers of equities for the rest of that year.

It has been the same story in 2013. Equities have enjoyed strong net inflows, holding up even as the forward p/e ratio pushed up over 13. Of course, there is a direct interplay between flows, equity prices and valuations. Moreover, it makes sense to buy shares when economic clouds appear to lift. Higher valuation ratios may be justified if the medium-term earnings outlook improves. Yet the fact remains. European asset allocators generally get stuck in a rut of selling when they ought to take advantage of bargain prices. Now stocks are getting more expensive, investment managers seem hooked on buying.

from Global Investing:

New frontiers to outpace emerging markets

Fund managers searching for yield are increasing exposure to frontier markets (FM) as a diversification from emerging markets (EM), as the latter have been offering negative relative returns since January, according to MSCI data.

Barings Asset Management  said on Monday it plans to launch a frontier markets fund in coming weeks, with a projected 70 percent exposure to frontier markets such as Nigeria, Saudi Arabia, the UAE, Sri Lanka and Ukraine.

from Breakingviews:

Fund managers should be able to say no to new cash

It stands to reason that the more money flowing to a particular investment strategy, the more likely returns will diminish. By logical extension, fund managers should therefore occasionally say no to new cash to keep from hurting performance. But in the money business, that's easier said than done, especially when considering the growing number of alternative asset managers that are publicly traded.

For a fund manager with shareholders to please, this makes for a potential conflict of interest with investors in its funds. The more assets a firm gathers, the greater its earnings. That's particularly true in more specialized arenas of the investment world, such as private equity, distressed debt, event-driven and convertible arbitrage, where the fees typically amount to 2 percent a year plus a 20 percent slice of any profit.

from Global Investing:

Live Blog from Reuters Funds Summit in Luxembourg

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Original Post Text:

from Funds Hub:

UCITS IV Everyone

It is early days at the Reuters fund summit in Luxembourg, but already a few themes are building. For one thing, no one seems to be too negative about the investment climate.

For the most part, however, the attendees are focused on how the industry will recuperate from the battering it has suffered during the financial crisis. Again, there appears to be a degree of optimism. Most of the talk is about UCITS IV, which is fundspeak for a new kind of pan-European fund that is easier to distribute.

from Summit Notebook:

Tax evaders on the run

  By Neil Chatterjee
    The U.S. has promised it will hunt down tax evaders.
    And it seems tax evaders are on the run.
    DBS bank, based in the growing offshore financial centre of
Singapore, told Reuters it had been approached by U.S. citizens
asking for its private banking services. But when told they would
have to sign U.S. tax declaration forms, the potential clients
    Swiss banks also approached DBS on the hope they could
offload troublesome U.S. clients to a location that so far has
not been reached by the strong arms of Washington or Brussels.
    DBS said no thanks. In fact many private banks and boutique
advisors now seem to be avoiding U.S. clients.
    Will this spread to other nationalities, as governments
invest in tax spies and tax havens invest in white paint?
    Is this the end of offshore private private banking?

from Summit Notebook:

Geneva is for wealth management

Even for an American who's not wealthy, Geneva has a reputation as a global centre for wealth management - the place the world's rich come to stash their money and (they hope) make it grow.

    But you don't necessarily expect it to be so aggressive -- after all, the rich tend to be demure when it comes to their banking.

from Funds Hub:

Crosby aborts its Apollo mission

As predicted last November, troubled fund firm Crosby's joint venture Apollo Multi Asset Management has struggled to attract assets and today Crosby announced it is pulling out as a partner in the loss-making boutique.

rtr1ub49Apollo, a fund of funds venture with fund manager Tom McGrath, produced some respectable performance from its Balanced fund but attracted just 31.2 million pounds in assets.