Money managers under the microscope
The moment of truth has come: the new government is going to outline £6 billion of spending cuts and to make sure it will stick to deficit tackling measures, it has appointed a new fiscal watchdog, the Office for Budget Responsibility (OBR).
As part of its remit, the new agency will also ”have a role in making an independent assessment of the public sector balance sheet including analysing the cost of ageing, public service pensions,” the Treasury says.
Public employees retain a pension deal that entitles them to a portion of their wages when they retire, a right that private sector workers have mostly lost. This disparity has been described as ”pension aristocracy”. But while aristocracy is defined under strict parameters, you would need a title for starters, when it comes to finding out how much it costs to pay for public pension, covering the NHS and the police for instance, there are different schools of thoughts.
There is the official line: the cost of the public pension obligation over a year is about £20 billion a year or 20 percent of pay-roll, while fund manager Neil Record, who has spent years researching the issue, reckons it costs double that.
Hedge fund firm Man Group apparently pricey deal to buy GLG Partners gives Man – the world’s biggest listed hedge fund -- better access to the large and lucrative U.S. market. It also counts as a small win for the human race in its apocryphal war for investors' funds with cheaper, faster and -- many would argue -- far more dangerous algorithmic trading machines known as black boxes.
The $1.6 billion cash-and-shares deal represents a heady 55 percent premium to GLG's closing price on Friday. Clearly some investors are worried it's a little too rich. It has so far driven the shares of Man – which had already lost about a fifth of their value since mid-April -- down by a little more than 8 percent.
News and views on the fund industry from Reuters and elsewhere:
Waddell a piece in the plunge puzzle – Reuters
PIMCO on contagion and UK risk – Zero Hedge
Osborne admitting defeat – Telegraph
News and views on the fund sector from Reuters and elsewhere:
Matrix appoints head of risk from Man Group – HedgeWeek
Guest blogger Yu-Dee Chang is the sole principal and chief trader of ACE Investment Strategists. He has continuously been registered in the commodity industry for the past 14 years. From August of 1997 to the present he has operated Chesapeake Investment Services Inc., a Virginia based Introducing Broker where he is the President and Chief Executive Officer.
The views expressed here are entirely the author’s own and do not constitute Reuters’ point of view.
EU crackdown on hedge funds hits third delay - Independent
Pension schemes have retrenched in the wake of the global crisis.
To put it in more delicately: it is a universally acknowledged truth that a pension fund in deficit must be in want of a sustainable source of returns to bridge the funding gap, at moderate risks.
For some the solution has been to change investment strategy, but not necessarily at the expense of equity. In fact, for some the shift has been within an already existing fixed income portfolio, from UK gilts — a popular choice in the post-Lehman days — to corporate bonds, a senior fund manager tells me. Nice work if you can get it — this could be what some investors are saying now, especially if they are UK/euro zone sovereign debt holders.
Hedge fund firms are finding themselves back in demand with mainstream asset managers despite a mixed record during the downturn. Threadneedle recently reiterated its interest in acquiring a hedge fund firm whilst adding to its absolute return range with a US equity long/short fund. The rise in interest has also been apparent in F&C’s purchase of Thames River at the end of April and Aberdeen’s recent buy of RBS’s non-core assets which gave the fund manager access to alternative products.
Threadneedle has been on the prowl for something in the absolute return space since last summer, but Campbell Fleming, head of distribution, said the hedge funds business remains “a work in progress”. “We continue to look at a lot of opportunities but not many suitable businesses have presented themselves,” he told Reuters.