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Black Rock is the largest Asset Manager

June 23, 2009

Analysis of:Barclays accepts BlackRock's BGI bid | uk.reuters.com

Today after bid acceptance Blackrock gets a $1.4 trillion portfolio of ETFs and other successful Barclays products in the UK and Emerging Markets. Barclays ETFs also known as iShares cover Emerging Markets, Infrastructure, Oil and currencies from China to India and Brazil with more focus on ensuring a liquid and consistent index to track for the fund. Many iShares work with MSCI and other indices like the China A-50. $2.8 trillion under the belt of Lawrence Fink means that Blackrock can now position itself as the market leader and grow its funds and its influence on the OTC markets(pink sheets)  as well as the equity capital markets at large. The $6.6 billion in cash cover 0.6% value of the global assets and additionally a similar amount comes as Barclays' stake. Thus the valuation seems comfortable for Barclays and at the same time 50% stock payment makes it cheap for Blackrock. The other bid from CVC preferred to be conservative and none others invited.

New M&A deals too early

June 23, 2009

Analysis of:Reluctant hedge fund managers eye M&A deals | uk.reuters.com

It is too early right now for the Industry to be considering profit accretive deals. Most deals would continue to be vehicles of opportunity for the safer companies to enter aggressive markets with beaten competitors Man Group (EMG.L) and RAB Capital (RAB.L) have both indicated they are in the market for smaller hedge funds, while Cheyne Capital and GLG (GLG.N) have separately announced deals in recent months It seems likely as commented on my blog( http://tr.im/hedges) that these hedge funds have to follow suit because as TARP capital gets returned there is a chance that one may miss the next bull run and with higher TCEs for banks it is better that the underperforming hedge fund industry consolidate itself to grow themselves in size and compete.

Markets don't like Taxes

June 22, 2009

Analysis of:Financial Times | www.ft.com

The tax avoidance by Foreign invested companies in China is in fact something faced in equal measure by India(e.g. Vodafone) and also true for Offshore structures channeling spurious domestic investment back into the country. The lack of taxation benefits brings on real challenges to the valuations and the profit in a deal, however, the huge amounts of money involved would definitely help the starved economies in question.  Tax benefits partaken by investors thru such means are increasingly being questioned because these inflows thru relevant taxation ensure participation of the government involved and bring relief to the local economy. Increasingly, one finds that tax shelters sold by KPMG, PWC, UBS and others are being questioned fairly and squarely for the lack of oversight and their dependence on local and international corruption. each such deal only increases more misconfidence in the market because of the noise on ethical practices and such practices are no longer recommended

The Proactive Market Leader - But Carbon Credits are selling

June 22, 2009

Analysis of:JP Morgan Raising A $1 Billion Fund For Green Investments In Korea (JPM) | www.businessinsider.com

For JPM, surviving the 2008 crisis was probably easier and while other Industry doyens lost face and exited Asia ( probably because they were not clued in and had very few options) JM stayed invested in Asia and is planning to grow in the region as well.  Green funds are not something anyone else has planned probably only because they are busy putting their house in order According to a recent analysis of an Asian Power project, there is big money in Carbon credits as well( http://tr.im/pd3O) In the event that one green project can harness 5-10 million carbon credits at $ 28 ( current prices, likely to go up ) each JPM investment would make $150 - $300 million every year and the benefits would accrue to the green fund as well as to other investors However the question of whether the Korean fund is a good example is still not answered. Primarily, investors are likely to be wary of anything from BRIC and N-11 that stays concentrated on just one out of these 15 countries

BAC's savings in Asia

June 19, 2009

Analysis of:Bank of America Has ‘Considerable’ Savings in Asia | www.bloomberg.com

It is very clear that a couple of months back when all the right sizing and rationalization was attempted at BofA and others, there were not many options available to the bank globally. In that ensuing melee what has happened is that BofA has sold off many profitable businesses from the bank in China and Asia becaue they were the only one getting buyers and also yet, there was no visibility to the Global HQ of any work being done at these businesses in 'far away' asia. Thus these so called savings are also attrition of some good and potentially high market share businesses like China banking and Indian Investment banking footprint. The so called merger was not really smooth and many of the best and the brightest at Merrill in Asia have left for new careers as mentioned. "The biggest U.S. lender has raised almost all of the $33.9 billion demanded by regulators after last month’s stress tests .." Unfortunately, the businesses that have attrited in Asia may be difficult to buy again

Lawrence Fink now runs the largest AMC

June 19, 2009

Analysis of:Barclays accepts BlackRock's BGI bid | uk.reuters.com

For just $6.6 billion in Cash , Black rock owns the world's biggest series' in ETFs - Exchange Traded Funds- From India and Brazil to Oil, Gold and the Dow itself, iShares exist for any and every index in the world. No less known are the indices for Infrastructure that come from the iShares stable, they come in all flavours The purchase, the biggest of a fund manager, creates a company overseeing $2.7 trillion in assets, more than the Federal Reserve. BlackRock will add about $1 trillion in investments that track market indexes State Street at $1.4 trillion is almost half the size of the new Blackrock Global Investors The combined company will have a market value of more than $34 billion, Fink, 56, said on a conference call. The deal will add to per-share cash earnings by 10 percent  Barclays will have a net gain of $8.8 billion from the sale, which will increase its core Tier 1 capital ratio, a measure of financial strength, by 150 basis points to 8 percent as of Dec. 31, 2008

UBS can use the money terms to negotiate with govt

June 16, 2009

Analysis of:UBS Said to Be in Talks About Repaying Swiss State Investment | www.bloomberg.com

US banks have already raised $75 billion after the stress tests by the administration pointed out requirements  for common equity to be strengthened you can read the link here http://tr.im/exitrap (my blog) The market for funds is easy for banks now as the MTM scare for illiquid mortgage secs has been lifted by the temporary govt funds infusion and these funds can be returned. Therefore also to be competitive UBS must return the govt funds.  All terms and conditions are not clear for UBS but givt would still not have given money wthout some restrictions and thus UBS credit lines from the market will suffer unless it participated in the return of money festival. Dirk is right, Govt money will also be a constraint in attracting talent esp as many people from Citi, Barclays will be available and this is a good opportunity for UBS   

Capital One Defaults rising

June 15, 2009

Analysis of:Capital One Looks to Adapt to Credit Card Laws | www.washingtonpost.com

Credit card issuers and specialist providers have to live with reduced incomes per card account. A very simple way to control the related company level portfolio would be to manage defaults and thus manage the card application process so that the same results in a significant reduction in operational losses. Today COF defaults worldwide are increasing and those in the US are well in Double digits. This signifies that there has been a short term deterioration in credit quality because of the market and there is a residual weakness in credit issuance that needs to be addressed.  The new CARD Act of 2009 does not allow much leeway in its terms and conditions and the spirit of the legislation is very clear in direction. The interest is capped at 18%, rate changes have to be notified and rate offers and fees have to be reasonable and valid for a minimum period of six months These are not reductions in income esp to a quality issuer like COF except in low quality, high default grade cards

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