SemperMacro spin-off breaks up ex-Goldman team

A former Goldman Sachs proprietary trading team has been broken up after failing to perform at Fulcrum Asset Management, a UK hedge fund manager co-founded by ex-BBC chairman Gavyn Davies.


Davies, who in 2004 co-founded Fulcrum Asset Management with Andrew Stevens and Christian Siva-Jothy, all formerly of Goldman Sachs, has split out its SemperMacro fund, which has suffered heavy redemptions after what a client described as "very disappointing performance".

Semper Macro Capital, the name of the spin-off, will now be run by Siva-Jothy. He has taken with him only Hassim Dhoda, Stephen Hull and Stefan Pollman, according to the Financial Services Authority's register. They were all former Goldman Sachs prop traders.

The SemperMacro team had been nine-strong at its height at Fulcrum Asset Management.

Other partners of Fulcrum Asset Management have left the firm, including Akis Karayiannis who left at the end of August, according to Companies House. Partners Tim Fletcher, Patrick Hall, David Kaplan and Gianluca Squassi left Fulcrum Asset Management earlier this year.

SemperMacro recorded an investment loss of 15.7% last year, according to investors in hedge funds. An investor who redeemed from the fund said: “The size of the loss was a big surprise to all of us.”

Hedge fund industry sources said a combination of client redemptions and investment losses had lowered the fund’s assets under management from $1.4bn (€1bn) to $400m at the start of the year. The remaining investors have not disclosed the fund's performance and asset figures since then.
Source: efinancialnews.com

Equity specialist returns to Credit Suisse

Credit Suisse has re-hired an investment banker who left six years ago for NM Rothschild as head of European equity institutional placements to work with corporations looking to raise capital.


Reggie Mills joins the Swiss bank from NM Rothschild, where he spent six years as head of private equity agency practice. Prior to that he worked for nine years in investment banking at Credit Suisse in New York, where he held senior roles in private placements and equity capital markets.

He will report to Thomas Gottstein and Nick Williams, co-heads of European equity capital markets at Credit Suisse. He will also work closely with Anthony de Luise, head of private placements in the US, where Credit Suisse is well-established.

Gottstein said Mills had "extensive" knowledge and experience in raising growth and acquisition capital in the private markets across a broad range of sectors. Williams said Mills had established relationships with private equity investors, hedge funds and mezzanine funds.
Source: efinancialnews.com

Citi cements Turkey foothold after 32 years

Citi has become the latest western bank to launch an equities business in Turkey after buying local broker Opus Menkul Değerler. The bank has had offices in Turkey since 1975 but now will be able to work on local deals without using an intermediary broker.


Merrill Lynch, Credit Suisse, UBS and Morgan Stanley have all bought local brokers in the last 18 months, in order to obtain broking licences.

Citi appointed Savas Divanlioglu as chief operating officer and top-ranked Turkish analyst Akin Tuzun as head of equity research to lead Citi's Turkish equity research product.

Nick Harwood, head of equities for Central and Eastern Europe, the Middle East and Africa at Citi, said the acquisition is an important step in the bank's ongoing investment into emerging markets. "Emerging markets comprise a growing component of our client's investment remit, which underscores Citi's commitment to offering investors direct access to the major international markets. The establishment of our Turkey equity franchise underscores Citi’s longstanding commitment to emerging markets and compliments our well established CEEMEA businesses in the Middle East, Russia, South Africa, and Poland."

Citi will apply to the capital markets board in Turkey to change Opus’s name to Citi Menkul Değerler AŞ after the close of the acquisition. Clients ranging from mutual funds and institutional investment managers to hedge funds will all be able to tap into a full service brokerage offering equity trading and research services.

Steve Bideshi, chairman of Citibank AŞ said: "Turkey’s equity market capitalisation has grown seven fold in the last five years and the depth of the market has increased commensurately. This acquisition provides a fast and efficient route to position ourselves in the market”.

Banks have been flocking to tap into the country's liquid and rapidly growing market. In May, Credit Suisse bought broker Baran Securities, which deals mainly in equities. The purchase gave it a broker-dealer licence on the Istanbul Stock Exchange and it will offer equity sales, trading and research.

Intesa Sanpaolo, Italy’s largest retail bank, was reported earlier this year to be preparing a €1.1bn ($1.5bn) offer to buy Turkey’s Oyak Bank, which France’s Crédit Agricole and the UK’s Standard Chartered had been eyeing last year. Merrill Lynch set up operations in the country in February, five months after it bought lender and broker Tat Yatirim Bankasi. Merrill is expanding its Turkish team.

Lehman Brothers is targeting the market, having promoted Uzay Kozak to chief executive of Turkey with a view to setting up a local office. UBS last year agreed to buy broker Ari Menkul Kiymetler.

Morgan Stanley bought broker Arigil Menkul Degerler last November and a month earlier Citigroup acquired a 20% stake in Akbank, Turkey’s largest private bank, for $3.1bn.
Source: efinancialnews.com

BarCap finances restructured Cairn fund

Barclays Capital has completed the restructuring of a $1.8bn (€1.3bn) structured investment vehicle run by UK hedge fund Cairn Capital that ran into funding problems in the face of increasingly tough conditions in the commercial paper market.


Barclays and Cairn said in a statement today they have restructured the Cairn High Grade Funding I vehicle, one of several so-called SIV-lite funds that Barclays helped arrange. SIV-lites rely on short-term commercial paper to fund portfolios of longer-dated securities.

The two companies said the restructuring was made necessary by “the closure of the ABCP market on which Cairn High Grade Funding I had relied for funding”.

The fund has been converted into a cashflow collateralised debt obligation, meaning that it will no longer rely on the asset-backed commercial paper market for funding. The fund’s outstanding asset-backed commercial paper borrowings will be redeemed as they mature, and replaced by longer-term funding.

Barclays is providing the senior debt financing for the restructuring, and the bank said it has hedged that exposure.
Source: efinancialnews.com

Deutsche sells new CDO despite credit crunch

Deutsche Bank has successfully sold a new synthetic collateralised debt obligation referencing the credit derivatives traded on Russian companies, proving investors still have appetite for such risky complex debt instruments despite the turmoil in the credit markets.


The 8.95bn ruble (€257m) CDO, dubbed Vityaz CDO I, closed yesterday some three months after volatility born from the sub-prime mortgage crisis in the US emerged, hitting CDO sales and almost bringing the entire market for the instruments to a standstill.

As delinquencies in US sub-prime mortgages originated last year and this year have risen, so too have concerns surrounding the stability of cash and synthetic CDOs that have used the securities within their collateral pools.

Investors fear that any further deterioration in the sub-prime market could lead to widespread ratings downgrades of CDOs, potentially triggering an unraveling within certain structures, which would in turn lead to heavy losses.

CDOs bring together bonds, loans or other kinds of debt instruments and sell notes that represent different levels of risk in the pool. These run from large triple A-rated tranches, which pay modest returns, to small unrated equity tranches, which bear the risk of the first defaults.

Whereas cash-flow CDOs repackage actual bond and loans, synthetic structures bundle credit derivatives, offering investors a sophisticated way to hedge risk while allowing exposure to credit without buying the underlying asset.

In the Vityaz structure, credit default swaps are pooled on the local currency bonds of a diversified portfolio of Russian companies and financial institutions. The portfolio is managed by Troika Dialog, one of Russia’s leading investment banks.

Yuri Soloviev, first deputy chairman of the board Deutsche Bank in Russia, said: “Vityaz CDO I is a testament to both the growth in non-governmental domestic debt issuance in Russia, and the increased investor appetite for such structured risk.”

Last year saw record global issuance of cash CDOs, at $470bn (€349bn), but there was another $524bn issued in synthetic CDOs, according to the Bank for International Settlements.

Analysts estimate that sales of synthetics in the first quarter were $121bn compared with $92bn the same period a year earlier, according to the BIS.

The Vityaz sale comes a month after Brushfield Capital, the platform created by ABN Amro to sell and manage CDOs, closed a $1.25bn (€900m) CDO backed by asset-backed securities.
Source: efinancialnews.com

Wachovia shifts top real estate banker to Europe

Wachovia Securities has redeployed its top US real estate capital markets banker to London in the latest sign of the US bank’s push to grow its international business.


Bill Green, who was previously head of real estate capital markets in the US, has switched to become head of real estate for Europe as part of a string of changes sparked by Wachovia’s decision in April to combine its real estate financial services, capital markets and investment banking units into a single group.

Wachovia said in a statement Lawrence Gray, the founding head of its real estate investment banking division, and Robert Verrone, head of real estate capital markets for the Americas, will jointly run the integrated real estate business in that region. Rick Abrams will retain his role at the helm of the Asian real estate business.

Tom Wickwire, who runs Wachovia’s structured products division and oversees real estate as part of that brief, said Green’s move to Europe “reinforces our commitment to growth in this important market and adds additional talent to our European real estate business”.

Green’s move comes barely a month after Wachovia hired Maitland Bruce, a former banker at German property lender Eurohypo, as head of European structured finance, reporting to Green.

Wachovia has been on a European growth push in corporate and investment banking since hiring former Dresdner Kleinwort banker Atul Bajpai as chief executive of its business in the region in June last year.
Source: efinancialnews.com

Turkish bank offers Islamic safe-haven

A Turkish sharia-compliant bank has launched a landmark Islamic loan in the hope that it will prove popular as investors seek greater security from non sub-prime issues.


The $100m (€72.5m) Murabaha syndication, one of the biggest of its kind and the biggest from Turkey, was issued by Turkiye Finans Katilim Bankasi.

Humphrey Percy, chief executive of Bank of London and Middle East, a specialist bank advising on the deal, said in a statement: "The completion of this transaction is particularly pertinent given the current climate of economic unease and market turbulence and sends a positive signal about the strength of opportunities available in Islamic finance.”

The Murabaha loan has a two year maturity. HSBC, Standard Chartered and Bank of London and the Middle East led the deal. A source said the pipeline for Islamic deals is healthy, with several more set to launch before the end of the year.

Analysts say the market’s uncertain climate could make Islamic deals more popular. Islamic bonds in particular are increasingly in demand because of their low-risk, high-yield structure and short maturity. On average, the bonds have a maturity of three years, compared with the average European convertible maturity of six years. The average yield on a sukuk, one type of Islamic bond, is 6.6%, compared with 3.5% for a normal convertible coupon.

Murabaha is a common method of finance in Islamic banking. It is a deferred sale of goods at cost plus an agreed profit mark up under which the seller purchases goods at cost price from a supplier, and sells the goods to the buyer at cost price, plus an agreed mark-up.

The first Islamic bank was founded only 32 years ago. However, over the last decade the Islamic banking and finance industry has experienced a period of sustained asset growth at around 10% to 15% per annum, and assets now total in excess of $500bn.

TFKB is the 12th largest private bank in Turkey and the largest in the country in terms of total loans, deposits and branch network, with total assets in excess of $6bn.
Source: efinancialnews.com

Traders switch focus to non-agency mortgages

Bank traders are hoping to profit from what they believe will be a repricing of non-agency mortgage backed securities, believing that a discount caused by the sub-prime fallout is about to be reversed.


Highly-rated non-agency mortgage bonds, issued by banks such as Citi and Wells Fargo, have historically traded in line with their agency counterparts because the quality of the loans is similar.

However, the fallout from the sub-prime mortgage market, where borrowers are defaulting on their payments, has led investors to be more risk-averse. Agency mortgage backed securities have been more appealing because they carry a guarantee of the timely payment of interest and principal. This has caused non-agency loans to trade at a discount.

Laurie Goodman, head of the US securitised products strategy group at UBS in New York said: "Non-agency loans have cheapened dramatically. Our number one trade in the mortgage market right now is to buy super-senior triple-A non-agency securities."

Spreads have remained wide over the past four weeks but mortgage market specialists believe they will narrow, especially as supply will be diminished because fewer new loans are being extended.

"Once this overhang of non-agency paper is cleared up there is nothing behind it. Anything in Alt-A that can go through agency execution, which we estimate is about half the market, will do so. Non-agency super senior mortgage paper without a credit dimension is extremely attractive," said Goodman.

Non-agency bonds have steadily been trading more cheaply since problems in the sub-prime market first emerged in the spring. At the end of March, jumbo Alt-A mortgage bonds with a 6% coupon, which are derived from loans made to borrowers who are typically one notch above sub-prime status, were trading at a price of 32 basis points below comparable agency securities issued by Fannie Mae. By August the discount had widened to 112 basis points, according to data from Deutsche Bank.

Similarly, the discount on prime jumbo mortgage bonds, which are based on loans extended to borrowers with high credit scores, widened from 21 basis points at the end of March to 60 basis points.

In 2005 issuance of non-agency mortgage securities overtook agency issuance for the first time, accounting for 55% of the total.

In July non-agency mortgage backed security issuance accounted for 35.6% of total issuance, with the remaining 64.4% in agency deals, according to UBS.

James Grundy, as associate at Standard & Poor's residential mortgage backed securities group, said: "We expect loan quality to improve over time as the effects of tightened underwriting guidelines make their way through the securisation pipeline."
Source: efinancialnews.com

Merrill turns to finance ministry to boost French position

Merrill Lynch has become the latest investment bank to exploit the changing French political landscape with the recruitment of a senior figure from the Ministry of Finance to boost its position in the mergers and acquisitions rankings.


The US bank has hired Luc Remont, deputy chief of staff to former Finance Minister Thierry Breton, as a managing director in its Paris investment banking business with a remit to cover its large French and European clients.

Yesterday, Breton joined independent investment bank Rothschild as a senior adviser.

The appointments follow a shake-up at the French finance ministry after the election of Nicolas Sarkoky as President early this year.

Merrill will be expecting Remont to boost its business. The bank has slipped to 15th in the French M&A rankings after finishing fourth last year according to Thomson Financial, an investment banking data provider.

Remont, 38, is an énarque – a graduate of France’s powerful École Nationale d’Administration, which grooms budding civil servants to take up influential positions in the French finance ministry.

A large number of énarques have joined investment banks after stints at the ministry, providing banks with lucrative M&A advisory mandates on France’s biggest deals.

Last December, Lazard swooped on the French government for a new partner, hiring Jean-Louis Girodolle, the French treasury deputy director in charge of transport.

Lazard has a record of taking government advisers to become top bankers. Mattieu Pigasse, vice-chairman of Lazard's European investment banking business was a former adviser to ex-prime minister Laurent Fabius.

Other recent hires by banks from government include Jacques Chirac's secretary general Augustin de Romanet de Beaune, who joined Crédit Agricole last year as director of the group’s finance and strategy department.

His hire followed that of Pierre Moraillon, former director of international relations in the French finance ministry, who joined Calyon, Agricole’s investment banking arm, as head of its global consumer group
Source: efinancialnews.com

CLO volumes show life left in structured credit

Investment banks successfully sold around $6.5bn (€4.7bn) of corporate collateralised loan obligations last month, proving there is still demand for structured credit products that part bundle leveraged loans despite broad market volatility.


The sale of CLOs, which with hedge funds have been one of the chief buyers of leveraged loans backing private equity buyouts, is a small triumph for a market that has been one of the worst hit by the tumult since June.

Institutional buyers of CLOs have drastically cut back their exposure to the instruments over the last three months amid the turmoil and growing concerns over the quality of the leveraged loans underwritten by banks.

Analysts estimate that there is a $300bn pipeline of leveraged loans in the US that banks have not been able to sell down or syndicate as a result of the plunge in demand from institutional investors, especially CLO funds.

CLOs are sophisticated instruments that pool senior and subordinated loans ahead of being securitised, repackaged and sold on to new investors as bonds backed with the same collateral but with varying risk profiles.

In the last three years at least, managers of CLO funds, such as Alcentra and Babson Capital in London, and hedge funds have dominated the leveraged loan investor base to the detriment of the share of the market once held by banks.

One leveraged finance banker, said: “The return of the CLO bid for leveraged loans is probably the most important element to getting the backlog of financings done.”

Deutsche Bank said in a report today that CLO volumes in August are still below the monthly average level of $7.4bn so far this year, but the sales represent a significant increase from July’s below-average volume of $3.3bn.

In the year to date, some $60bn of corporate CLOs have been sold on the market, an increase of 3.5% on volumes in the same period the year before, according to Thomson Financial.

However, spreads or risk premiums across CLO tranches have risen or widened out as buyers remain reluctant to increase their exposure, Deutsche Bank said in the report.

It added the volume of leveraged loans being underwritten had slowed considerably over the past two months with August volumes hitting $740m – down from $18bn in July and an average of $47bn per month in the first six months of the year.

Anthony Thompson, research analyst at Deutsche Bank in New York, said: “CLO secondary demand has been tainted by the problems of CDOs of asset-backed securities."

He added: "As long as investors continue to lump CDOs of ABS and CLOs together as products with similar risk profile, negative headlines surrounding the former will continue to negatively affect confidence in the CLO product.”