February 2008

Greg Medcraft, former global head of securitization at SG, has left the bank after a 27-year career there. The new global chief, Jean-François Despoux, has appointed Jerome Jacques to replace Medcraft in the US, as head of securitization in the region.

The growth in size, expertise and therefore competition in the Shariah-compliant market in 2008 made Euromoney’s choices for our Islamic finance awards the hardest to date. The best firms not only got bigger, they brought new levels of innovation to bear in a series of landmark deals.

US and European fund managers are snapping up stakes in Brazil’s small, specialist fund boutiques. They are looking to gain exposure to some of the world’s fastest-growing financial markets, diversify revenues, and capture the huge Brazilian shift out of bonds into equities and other assets. For their part, Brazilian managers are gaining know-how, technology and access to well-oiled marketing machines.

Emerging markets Equity indices in emerging markets outperformed those of developed markets in 2007, rising 42% compared with a gain of just 9.4% in developed markets, according to Standard & Poor’s global stock market review, The World by Numbers.

"It’s mainly America’s fault," says a Tokyo analyst with a smile as he walks to the elevator after a meeting. The US is often unjustly invoked as the cause of problems in Japan but this time it’s hard to argue with the assessment. On January 22 the Nikkei 225 stock average plummeted 5.7% to 12753, prompted largely by fears of a US recession. It was a depressing year for Japanese stocks in 2007, with IPO volumes shrinking by more than 50% year on year and the Nikkei creeping downwards. This year looks to have had a bad start too: blame the US or not, local analysts say the index could dip below 12000 this year.

Proposals for establishing an EU-wide definition for bank capital have caused a stir in the arcane world of hybrid regulation.

The credit crunch has spurred an increase in the number of new hedge fund launches. Marco Masotti, partner in the fund formation practice at Paul, Weiss, Rifkind, Wharton & Garrison in New York, says he has had an increasing number of enquiries from new managers over the past two to three months. "Some are setting up as they wish to take advantage of the investment opportunities that have sprung up, others are leaving financial institutions to start on their own as they are unhappy with management changes, or bonuses at their financial institutions."

Ulan Bator has become the latest destination for hedge fund managers, following the creation of the first offshore investment fund to be focused exclusively on Mongolia. The Mongolia Discovery Fund has been established by Alisher Djumanov, formerly of Uzbek investment banking firm Asher Group, who has raised an initial $5 million of seed capital for the new fund, which is being launched by newly established management company Silk Road Fund Management.

In a sign of growing economic cooperation between Russia and China, VTB, Russia’s second-largest bank, has become the first bank from the country to receive a licence to open a branch in China. VTB’s Shanghai branch will primarily service Russia-China trade, big industrial inter-state projects and the investment projects of Russian and Chinese companies.

Regulator considers allowing foreign exchanges to operate in the US without registering and rules to make it easier for foreign issuers.

We asked leading debt market officials what products they thought would be hot in 2008.

The Depository Trust & Clearing Corporation and CLS Bank International have launched a central settlement service for over-the-counter credit derivatives transactions. The service is an automated solution for the calculation, netting and issuing of payments between counterparties to bilateral contracts.

Icap is determined to boost the position of its spot trading platform, but mutually owned venues are at a disadvantage.

Neal Neilinger is the new global head of credit at Calyon. He is responsible for trading, sales and syndicate in the debt and credit markets product line. He reports to his former boss and colleague Jim Siracusa, global head of debt and credit markets.

According to prime brokers in New York and London, funds of hedge funds are reducing the number of new managers they are taking on their books, and, in some instances, are reducing their existing portfolios of managers. One prime broker says that some funds of hedge funds have reduced their books of managers by 10% to 20% over the past two quarters.

Japanese ECM issuance fell 177% in 2007 to just $25.5 billion and 266 deals. Japanese companies raised just $6 billion in IPOs, a decrease of 68% from 2006 when they raised $18.9 billion.

Former chairman of the Federal Reserve Alan Greenspan has joined Paulson & Co as a member of its advisory board. He will provide advice to Paulson’s investment management team on financial markets in an exclusive arrangement. John Paulson, founder of the event-driven hedge fund, saw assets balloon from $7 billion to $28 billion last year because of correct calls on the sub-prime market.

As the probability of a US recession rises, the best- and worst-performing credits of 2007 reveal the state of play in global economies. Jethro Wookey reports.

Put off by past experience, but the consensus is that its time has come.

Bolsa de Mercadorias & Futuros, the Brazilian derivatives exchange, has announced that it will introduce a new electronic platform to trade spot US dollar/Brazilian real. The venture is a joint initiative with the Brazilian Federation of Banks and the Banco Central do Brasil. BM&F says it is currently responsible for the registration and settlement of about 95% of transactions in the domestic dollar/real market. About 85% of this is traded OTC. The exchange says the addition of transparency and easier access to the market will improve efficiency and facilitate the execution of arbitrage and hedge strategies. The platform is scheduled to go live in the second quarter of 2008.

CFTC and NFA are being inconsistent with the rules for futures and forex traders.

Our annual poll shows which banks are best positioned to benefit from any upturn in the credit market's fortunes.

"Sudan is probably the richest country in the region. It has the best commodity in the world: water. It also has oil, minerals, cattle, fertile land and human resources. If it can resolve its problems, Sudan has the potential to be a perfect economy." Such is the view of Ahmed Abbas, CEO of Liquidity Management Centre, a Bahraini Islamic investment firm. And if the capital markets are anything to go by, says Abbas, the biggest country in Africa might already have begun its recovery.

During the course of 2007 launching deals went from being the ­easiest in history to perhaps as tough as it has ever been. But the finance industry continued to show it could produce the goods whatever the market’s conditions. These are the deals where issuers and advisers got their timing and structure just right.

Fund of hedge funds group Financial Risk Management (FRM) has launched a new business to provide seed capital to early-stage hedge fund managers. Group chairman Blaine Tomlinson cites the need for managers to reach critical mass through partner ventures as the reason for the creation of the new platform. The business, FRM Capital, will also provide investment opportunities for existing fund of hedge funds clients. Industry participants say that the number of seeding funds is increasing as entering managers find it harder to attract capital, and as firms such as FRM seek to diversify their business.

Aureos Capital’s Aureos Latin America Fund has held its first closing, with $140 million in committed capital. The fund is expected to close at $300 million in June and will focus on investments of between $2 million and $10 million in Mexico, central America, Colombia and Peru.

The Republic of Turkey, emerging Europe’s most prolific issuer in the international debt markets, made a strong start to 2008 with the reopening of its 2018 6.75% dollar Eurobond for $1 billion.

Fitch Ratings has placed Sigma Finance’s senior note programme on negative watch, in a move affecting $31.6 billion of medium-term notes rated triple A and some $2.3 billion of F1 rated CP.

But lack of legislation might deter traditional investors.

Net inflows into hedge funds in 2007 were higher than 2006 levels in spite of turbulent markets.