Going up

Mid-East equity capital market volumes

A report by EDHEC says funds of hedge funds returned more than 10% in 2007 on average, compared with just 3.53% for the S&P 500 and 4.14% for the Lehman Global US Treasury Bond index. The best-performing strategy last year in single managers was emerging markets. All strategies produced positive returns, although a majority suffered a slight fall-off in performance on 2006.

Egypt’s banking system is undergoing wide-ranging reforms designed to make it more competitive. Have the lessons from the past finally been learnt?

Understanding the mark-to-market meltdown

With no sub-prime problems, real estate bubble or complex credit portfolios to worry about, the country’s banking sector should be a relative safe haven. But while investors remain receptive to their covered bonds, banks are finding liquidity scarce. Peter Koh reports.

Will the long-awaited recovery in the German real estate market be stopped in its tracks by turmoil in the debt markets? Louise Bowman reports.

The effects of the sub-prime crisis are spreading and could cost 2.5% of world GDP. Emerging market economies will not be immune.

Argentina’s asset-backed securities market shows no sign of slowing down but the sub-prime crisis has killed off the country’s nascent mortgage-backed securities market.

Many of the delegates at an industry conference in Nevada seemed blind to the real world beyond the securitization desk.

Distressed seems the right route to take.

From a subsidiary of an English public school to a UAE migrant labour camp: diversification can hardly be said to be lacking at Evolvence Capital. The Dubai-based alternative investment group is reportedly planning to market bonds backed by commercial mortgages worth up to $700 million in order to kick-start a $1 billion Reit. Aside from a migrant labour camp, the Reit, the company’s first, will also contain a warehouse and offices. Evolvence is apparently aiming for the CMBS to be sold in the fourth quarter.

Independent M&A boutiques are sensing an opportunity in Japan as the country’s top corporate names increasingly look to firms not tied to large commercial banks when awarding cross-border mandates.

ABCP conduits suffered a reputational battering as a result of last summer’s liquidity freeze in the commercial paper market. However, if events in Mexico are anything to go by the concept has survived. In late February, Deutsche Bank was poised to launch the first Latin American ABCP conduit in Mexico, a diversified multi-seller vehicle dubbed Aztlan. Named after the mythical place of origin of the Aztec people, Aztlan has been set up to invest in various peso-denominated receivable pools, including trade receivables, future flow receivables, mortgage loans and consumer loans. Crucially, given the problems that this and the structured investment vehicle sector have wrestled with over the past six months, the conduit is supported by a 100% liquidity facility from Deutsche Bank. "I think that one of the most compelling features about this structure, unlike an extendible programme or a SIV programme, is that this conduit is afforded a traditional liquidity facility," says Alberto Santos, a senior director at Fitch Ratings. "The lack of liquidity facilities was at the forefront of the funding issues experienced during the second half of 2007. The structural features within this conduit, including the liquidity agreement, are expected to mitigate market disruption or timing risk for this conduit. Typically, liquidity facilities can be used to pay maturing commercial paper or to cover timing mismatch between assets and liabilities of a multi-seller asset-backed commercial paper conduit."

The California Public Employees’ Retirement System is putting $350 million with smaller managers. The $240 billion fund is putting $150 million with emerging manager fund of funds FIS Group. It is the scheme’s first allocation to emerging long-only managers. FIS Group was set up in 1996, and its emerging manager fund of funds allocates to small investment management entrepreneurs that usually fall below the radar screens of large institutional investors. The maximum assets under management of managers will be $2 billion from around the world. Calpers will also be putting $200 million into Redwood Investment Management.

The precipitous fall in UK and continental European property values – in some cases 20% and higher – in the months since the sub-prime crisis began to bite has put pressure on a handful of commercial mortgage-backed securitizations. Refinancing risk is the greatest spectre in the CMBS market, with some deals facing dire consequences if banks remain tight-fisted with their cash in the next 12 to 18 months.

Marking everything that is complex down to zero, because markets are illiquid, does not seem to be a particularly equitable or sensible way of going about things. And that’s before you even consider the way the marking malaise is contributing to systemic risk.

The internet campaign to raise €5 billion to save the career of rogue trader Jérôme Kerviel, launched on social networking site Facebook, has got off to a slow start, with only 2,095 members so far having pledged €1 each towards the cause.

Banker: "We looked at SG, but the integration would have been very difficult and, in any case, the French don’t like to sell to foreigners"

The record number of ratings downgrades in structured finance has fundamentally altered the market’s dynamic.

The Venezuelan president, Hugo Chávez, sent a calming message to US motorists this month, reassuring them that Venezuela is not about to cut off oil shipments to the US.

The Indian stock market is in free fall, but on the sub-continent that story has had to take second billing to the forthcoming Indian Premier League 20/20 cricket tournament set to take place in April.

"On the day the Jérôme Kerviel story broke, we had two options for the lead story on the main news bulletin: SG, or the official inquiry’s report on the maltreatment of Iraqi prisoners by British soldiers. It had found that the abuses were isolated incidents rather than systematic failures. A bit like SG claimed..."

Chinese banks face a potential corporate defaults crisis for the first time in five years.

Exchange-traded funds backed by physical gold are to be launched on the Tokyo Stock Exchange, following last August’s debut on the Osaka exchange of ETFs backed by bonds linked to the price of the precious metal. Japan’s investors have long had an affinity for gold: it is the only country where buyers of gold-related options contracts frequently exercise their right to delivery, according to Itsuo Toshima, regional representative of the World Gold Council. It is also the only country in which gold accumulation plans, whereby investors gradually acquire small amounts of the metal through diligent monthly payments of as little as ¥3,000 ($30), have succeeded.

The UK government’s actions and intentions remain confused. It is time to end the uncertainty.

Anticipation of the much-discussed but now postponed launch of the European residential mortgage-backed securities index (ERMBX) is behind violent swings in spread levels on single-name credit default swaps on RMBS tranches. Markit, ERMBX’s owner, announced that the index’s debut has been delayed because of market volatility. That volatility, in fact, has been caused by buyers of protection on single-name CDS referencing prime RMBS AAAs, say market participants.

Tough talk by the regulators might bear fruit for the monolines.

Anyone who follows the travails of England’s football, cricket and rugby teams should easily have predicted Northern Rock’s troubles.

Two of the leading banking groups in central and eastern Europe, Austria’s Raiffeisen International and Italy’s UniCredit, have demonstrated that there is continued investor appetite for structured finance assets from the region with the launch of pioneering transactions.