German banks look to financial investors – economy – UK Parents Lounge

Financial investors, ladies and gentlemen, haven’t paid too much attention to sensitivities: at least not to the fact that Aareal Bank’s new CEO wanted to come first: know the employees, refine the strategy, rethink everything. What you do in the first hundred days, and that’s probably what Jochen Klösges had planned as well, since mid-September he’s been CEO of the aforementioned Aareal bank.

Instead, Klösges had to issue an ad hoc announcement last week – the 17th working day – with big implications: the bank, it was said, confirmed “open discussions with a group of financial investors concerning a majority shareholding ”. Specifically, three US private equity firms, all based in cities far from New York and Boston, have hunted down traditional Aareal bank with the intention of taking it over. If that doesn’t mean anything: Aareal Bank finances real estate around the world, particularly offices and hotels, has 3,000 employees and is one of only three listed German banks. With a balance sheet total of 45 billion euros, that’s significantly less than Commerzbank or Deutsche Bank, but at least it is.

In any case, the stock market deemed the offer plausible, the price jumped more than twenty percent on Friday. And the CEO must now do what corporate law requires, namely control advances, if only for the benefit of its shareholders: investors Centerbridge, Advent and Towerbrook could spend 1.74 billion euros to the bank, depending on the first offer. It would be one of the biggest bank acquisitions in Germany in years.

What does the supervisor think of the “grasshopper model”?

What exactly the three financial investors want remains to be seen. One thing is clear: To meet their expectations of higher returns, they need to come up with something, like splitting up the bank’s IT branch, cutting costs and managing it better. Even though Aareal Bank points out that this is anything but a crisis, Corona has hit the bank.

A strategy refined in January had fizzled out on the stock market and the top spot had been vacant for nearly a year. A militant shareholder had previously tried to shake up the management of the bank.

But there is also a fundamental question behind this: is it acceptable that German banks – and therefore possibly critical infrastructure – fall mainly in the hands of foreign investors? After the financial crisis, many wondered if it was not a mistake to simply hand over some of the zombie banks of the time to financial investors. The example of the American investor Lone Star is well remembered, who about six years ago simply abandoned the Düsseldorf real estate bank after various problems and ceded the remaining risks to the private banking community. The financial supervisory authority Bafin, which must approve such takeovers, has therefore long been skeptical of the “grasshopper” model, in particular vis-à-vis the big banks which, in the event of of doubt, should even be absorbed by taxpayers.

However, a lot has happened since: the American investment firm Cerberus has taken small stakes in Deutsche Bank and Commerzbank. The Americans were also involved in the takeover of the ailing HSH Nordbank, which now operates as Hamburg Commercial Bank. Lone Star has also kept a low profile, at least as owner of the Düsseldorf-based IKB, and a consortium around investor Apollo recently snatched up the Oldenburgische Landesbank. “They have shown they can do it,” said one bank lobbyist. “So why shouldn’t you invest in the German banking market? “

How relaxed politics and oversight is seen in the still struggling Commerzbank. According to Handelsblatt, financial investor Cerberus, which owns 5% of the bank, is interested in buying the state stake. The American investor could imagine resuming the participation of the federal government after the federal election, it is said. Is it true? Not clear. What is striking, however, is the frequency with which Commerzbank officials and senior Cerberus officials have met with the Secretary of State responsible for the Federal Ministry of Finance in recent months.

What’s next at Aareal? It is said that a breakup would not be appreciated in Wiesbaden. And anyway, a bank in Germany has never been taken over against the will of management or supervision. Maybe Klösges will still run his planned 100-day schedule after all.


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Ameriprise Financial: Investors Ignore Loud Week and Focus on Fundamentals

A weekend rally allowed the S&P 500® index to return to its 100-day moving average, relieving some of the anxiety caused by the 5% pullback between September 2sd and the 30e. The index was even lower for the entire week, falling 2.2%, its third weekly decline in the past four. Friday’s rally on the first day of October sparked some optimism that the market may put September’s weakness behind, historically the weakest month of the year. Friday’s rally was led by the sectors most sensitive to the economy.

Anticipation of a move on the fiscal policy front last week fizzled out as Democrats failed to reach agreement on the final size of the social infrastructure package proposed by the 3,500 president. billions of dollars. The negotiations appear to be centered on a smaller package of around $ 1.5 billion to $ 2.0 billion. House leaders were forced to postpone voting on the $ 1 trillion hard infrastructure bill that has already been passed by the Senate, until the end of October, well beyond the end of October. initial objective of September 7. Congress, however, passed a continuing resolution to maintain the federal government. government operating until December 3. No progress has been made on raising the debt ceiling as the Treasury is expected to run out of cash on October 18.

A string of negative headlines made a tough week for the Fed

It wasn’t a good week for the Federal Reserve either. For an institution that relies on the explicit trust of investors and ordinary citizens, the regional Federal Reserve bank chairmen of Boston and Dallas retired on Monday after it was reported that the two had engaged in corporate actions which, although apparently within the framework of the Fed’s ethical guidelines, raised the appearance of impropriety. And on Friday, Bloomberg reported that Fed Vice President Clarida did something similar in 2020, at the start of the Fed’s emergency response to the pandemic. And on Tuesday, Massachusetts Senator Warren called Fed Chairman Powell a dangerous man to lead the Fed due to her record of regulatory oversight of the banking system, saying she would oppose his re-appointment. Powell’s term expires in January.

It was also not a great week for the Fed in terms of mounting inflationary pressures, which the Fed continues to believe will prove to be transitory. The August PCE core deflator, the Fed’s preferred inflation indicator, has remained at 3.6% over the past twelve months, its highest level in 30 years. The overall rate reached 4.3%, down from 4.2% in July, also the highest in 30 years. Nonetheless, the surge in bond yields that began after the Fed meeting two weeks ago peaked earlier in the week, before moderating. The yield on the ten-year Treasury bill closed on Friday at 1.46%, after hitting 1.56% on Tuesday. Before the Fed meeting, it stood at 1.30%. The two-year note followed a similar path, peaking at 0.29% on Thursday, before ending the week at 0.27%. Before the Fed meeting, it stood at 0.22%. At the start of the session this week, they returned 1.50 and 0.27% respectively.

Economic activity generally appears healthy; Investors await September jobs report this week

Otherwise, it was a generally good week for the economy. Durable goods orders in August beat expectations and September’s ISM manufacturing report rose for the second month in a row, following a moderating trend since the end of the first quarter, although it remained at a low high throughout. Personal spending rebounded in August from a decline in July, and home prices remained firm in July, while pending home sales rose in August. However, all was not firmer. The Conference Board’s consumer confidence survey fell for the third consecutive month in September, although the University of Michigan’s consumer sentiment survey rose for the first month in three, following a sharp drop in August. Motor vehicle sales fell for the fifth consecutive month, leaving them 34% below April’s level. And initial jobless claims rose for the week in a row, albeit modestly.

This week’s economic calendar is headlined by the September Jobs Report. The Bloomberg consensus forecasts the creation of 470,000 new non-farm jobs, double the September total. The unemployment rate is expected to drop slightly to 5.1%. President Powell said the Fed had “almost” reached its target for progress in the labor market. This week’s jobs report will be the last the Fed sees before its November meeting, but a report that is close to consensus would appear to pave the way for the start of tapering.

Important disclosures:
Opinions expressed are as of the date indicated, may change based on market trends or other conditions and may differ from views expressed by other associates or affiliates of Ameriprise Financial. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether on its own behalf or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into account the individual situation of investors.

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed by Ameriprise Financial. They are given for information only and do not constitute a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.
There are risks involved in investing, including the risk of losing capital.

A 10-year Treasury bill is a debt obligation issued by the United States government that matures in 10 years. The 10-year yield is generally used as an indicator of mortgage rates and other measures.

The ISM manufacturing index, also called the purchasing managers index (PMI) is a manufacturing estimate for a country, based on approximately 85% to 90% of total Purchasing Managers Index (PMI) survey responses each month. It is considered a key indicator of the state of the US economy.

The personal consumption expenditure (PCE) Measures of the prices that people living in the United States pay for goods and services. The PCE price index is known to capture inflation (or deflation) across a wide range of consumer spending and to reflect changes in consumer behavior.

The Consumer confidence index (CCI) is a survey that measures the degree of optimism or pessimism of consumers about their expected financial situation. It is based on consumers’ perceptions of current business and employment conditions, as well as their business, employment and income expectations for the next six months.

The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of consumer confidence levels in the United States. It is a statistical measure of the overall health of the economy as determined by consumer opinion. It takes into account people’s feelings about their current financial health, the health of the economy in the short term, and the prospects for long-term economic growth, and is widely regarded as a useful economic indicator.

Past performance is no guarantee of future results.

An index is a statistical composite that is not managed. It is not possible to invest directly in an index.

Definitions of the individual indices mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Information on Ameriprise Research section, or through your Ameriprise financial advisor.

The third-party companies mentioned are not affiliated with Ameriprise Financial, Inc.

The investment products are not insured by the Federal Government or the FDIC, are not deposits or bonds of, or guaranteed by any financial institution, and involve investment risks, including possible loss of principal and fluctuation in value.

Ameriprise Financial Services, LLC. FINRA and SIPC member.


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(Co-) investments of strategists and financial investors in technology companies

With the advancement of digitalization in nearly every world of life and business, the importance of technology M&A transactions has also increased significantly – a trend that is expected to intensify in the years to come. Established business models of traditional industrial companies are challenged by easily scalable digital offerings; and institutional and financial investors, struggling with low or negative interest rates, seek appropriate and lucrative investment opportunities while minimizing risk amid the “money glut”. As a result, companies and financial investors are welcoming emerging start-ups, especially in the IT / software and healthcare sectors: in 2020 alone, according to PitchBook (European Venture Report 2020), European start-ups have raised nearly € 43 billion in investor funds, including nearly € 20 billion from strategic investors – two records that will (most likely) be set again in 2021.

Interest and instruments

In their (co-) investments in start-ups, financial investors mainly seek the highest possible financial return, which they realize in the event of an exit, i.e. a sale or an IPO of the company concerned. Depending on the respective orientation of the industry and the phase of the business, corresponding venture capital funds are set up and invest in selected start-ups over a certain period of time. The motivations of industrial companies, on the other hand, are more complex, but mainly strategic and aim, among other things, at access to new innovative technologies, a strengthening of the innovation pipeline or, in general, “learning effects”. and / or presence in the new emerging sector ecosystem of market players. Companies can cooperate with or participate in start-ups in different ways. Depending on the strategic objective and the sector, the following may be considered: (technological) development and cooperation agreements, licensing agreements, joint ventures, incubation / acceleration programs or investments in start-ups for which companies receive a minority stake in return. Firms generally invest through specially designed investment vehicles (called “enterprise venture capital”), but sometimes also directly “from the balance sheet”. In Germany and in Europe, enterprise risk capital is now an integral part of the (external) innovation strategy of companies.

Structuring of (co-) investments

Financial investors and strategic investors who invest in technology companies typically aim for a 10-25% minority stake. Depending on the stage of development or the liquidity needs of the start-up concerned, convertible bonds are issued as an alternative, allowing the investor to become a shareholder of the company during a financing round subsequent to a valuation of capped company (plus any discount). Financial investors are primarily exit oriented in their investments and tend to interfere less in operational issues of management. On the other hand, strategic investors attach particular importance to contractual regulations that allow them to acquire the start-up completely at a later date, or at least grant them a right of veto on the sale to competing companies, as well as a right of veto on the sale to competing companies. active influence and involvement in relevant decision-making processes, which is reflected accordingly in the governance of the start-up. However, the contractual fixing of acquisition rights in favor of strategic investors is a double-edged sword: it limits the start-up to a concrete exit option and can therefore have a negative impact on its valuation (achievable in the event of exit) in the long run.

Particularities of technological investments

The essential value of technology companies lies in the technology they have developed, their know-how and their key employees. Therefore, the “protection” of these critical assets plays a major role in technology investments. This is done, on the one hand, by contractual guarantees with which the respective company (and the founders behind it) ensure that the rights to the software concerned and the source code underlying it belong to the company and that the possible use of “open source” does not oblige the company to disclose its source code (“copy-left” effect). However, such standard guarantees are often not worth much in the case of start-ups (and the corresponding W&I insurance policies are not yet in place). Depending on the size of the specific investment, it may therefore be wise to subject the start-up to in-depth IP / IT due diligence and, for example, to identify the risks associated with the use of open source software by means of back duck due diligence as well as analyzing the existing IT infrastructure (s) and data protection management systems. In order to “lengthen” the risks to a certain extent, financial and strategic investors also invest in technology companies whose technology is still in the early stages of its development and commercialization depending on the achievement of certain technological milestones and / or commercial – and it is only when these milestones are reached that contractually agreed installments of the total investment are due. Finally, creating incentives for founders and other key employees as well as their retention in the company is of particular importance in technology investments. Particular attention must therefore be paid to the appropriate provisions to bind key employees to the start-up as well as to the usual non-competition clauses (and their support by appropriate contractual sanctions) in the event of departure from the company.

Success factors for technology investments

The key structural success factors for investment strategies for technology investments, in particular by industrial companies as part of their corporate venture capital activities, are: well networked within the parent company itself; a clear investment objective aligned with the industrial company’s strategy as well as clear indicators of success by which technological investments in the company are assessed (and, if necessary, terminated); rapid decision-making processes on (follow-up) investments that are not influenced by hierarchical levels; and finally, the establishment of organizational and human “bridges” between the start-up and the company, which on the one hand allow the start-up to access critical resources and company experts, and on the other hand allow the knowledge gained from the technological investment for the company to be used in the best possible way and in the right place in the company.

Outlook

(Co-) investments in technology companies open up great opportunities for financial investors and strategic investors to participate financially and / or strategically in current growth trends. At the same time, the structuring of such investments entails a complexity that should not be underestimated. Due to lowered thresholds (according to the 17th Amendment currently in force to the German Foreign Trade and Payments Ordinance, already from an acquisition of 10% or 20% of the shares) and further expansion in related areas security – in particular technological fields such as artificial intelligence, autonomous driving, robotics or cybersecurity – depending on the origin of the investor, the obstacles of foreign trade law must increasingly be taken into account and treaties in technology investments – a development that is expected to intensify in the coming years in view of the struggle between the United States, China and Europe for global supremacy in key technology industries.


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Net zero commitments, financial vehicles evolving in a context of decarbonization trend

Companies’ commitments to net carbon emissions can be difficult to decipher and measure, which is an issue energy companies must address as the market for linking commitments to finance tools grows, people said. investment and industry experts.

“It’s a real minefield,” said Moody’s vice president for climate solutions Andrew Grant of variations in the wording and scope of companies’ commitments to reduce and offset their gas emissions. Greenhouse effect.

Many companies avoid both the use of binding language in net zero commitments and the inclusion of end-use emissions from Scope 3, Grant said during a series of panels hosted by his credit rating agency on September 23.

Energy companies are taking action to resolve this issue or being offered remedies. Oil and gas supermajors such as Royal Dutch Shell PLC and Eni SpA have gone further than other fossil fuel companies by setting mandatory “targets” instead of “softer targets,” Grant said.

The science-based targets initiative Steps up pressure on companies by changing their net-zero best practice criteria to increase required Scope 3 emission reductions from 67% to 95%, according to Cynthia Cummis, SBTi board member and director of the World Resources Institute . SBTi is a partnership between the global operator of the CDP Disclosure System, the United Nations Global Compact, the World Resources Institute and the World Wide Fund for Nature.

Tackling these emissions “is becoming the biggest problem for businesses,” Cummis said at the virtual event.

Difficult targets

Grant noted that while some fossil fuel exporters take Scope 3 emissions into account, the system of labeling shipments as carbon neutral remains problematic.

“One of the real stories this year was the start of sales of LNG and crude bundled with offsets to be carbon neutral, including Scope 3,” Grant said. “Clearly there are a lot of challenges with this … just because you’ve bought enough offsets to offset your emissions doesn’t mean you’re risk free.”

The distinction between the different types of compensation is critical. “Only 4% of carbon credits ever issued are phase-out credits,” said Richard Manley, director of sustainable investing for the Canada Pension Plan Investment Board. “[Ninety-six percent] of them are avoidance credits, so in terms of building disposal capacity… at the end state of net zero we still have a long way to go. “

Green bonds

Some energy companies go beyond net zero targets by linking measures to frameworks of sustainability obligations. In December 2020, Utility NRG Energy Inc. issued $ 900 million in senior notes in what was North America’s first use of the emerging finance instrument, and Canadian pipeline giant Enbridge Inc. announced in June, a similar vehicle linked to environmental, social and governance performance indicators.

Jeanne-Mey Sun, vice president of sustainable development at NRG, said the bond issue has been underwritten more than four times and the utility has already “surpassed the target” of reducing emissions as defined. as part before issuing a $ 1.1 billion sustainability note in August. .

“We want to be part of the solution,” Sun said. “And our customers want us to do it.”

According to a May 17 memo from Moody’s ESG Solutions Group, global sustainability bond issuance totaled $ 8.5 billion in the first quarter, “already comparable to the annual total from 2020.”

Iinvestment company Nuveen Investments Inc. has seen the market for these alternative financial instruments grow significantly in North America. “On the contrary, we have a lot of untapped potential demands from the United States that haven’t even been fully explored,” said Sarah Wilson, Managing Director of Responsible Investment.


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RedSwan CRE accepts Dogecoin for 2 Multi-Family Real Estate Investment Vehicles – Dogecoin – US Dollar ($ DOGE)

RedSwan CRE, a tokenization platform focused on the leading commercial real estate sector, now accepts Dogecoin (CRYPTO: DOGE) as one of its payment options for investing in two multi-family properties.

What happened: The properties are Lakehouse, a 270-unit luxury multi-family development located on Lake Merritt near downtown Oakland, California, and the 251-unit Apollo Apartments in the Seattle suburb of Edmonds, State. Washington.

“Accredited investors will be able to use Dogecoin to purchase fractional ownership in buildings, which can then be traded like stocks,” the company said on its website. “This will be the first time that a major real estate asset will be available for a specific crypto community.”

Investments in properties start at $ 1,000 each, and the company also accepts US dollar and dollar-indexed stablecoins in addition to Dogecoin.

RedSwan CRE added that the combined fundraising for these two deals is $ 36 million, including $ 20 million for Lakehouse and $ 16 million for Apollo.

Related Link: 10 Actions To Consider For The First Day Of Fall

Why is this important: Despite Dogecoin’s growing popularity as an investment vehicle, trading opportunities for cryptocurrency have been relatively limited.

In March, Mark Cuban’s Dallas Mavericks has started accepting Dogecoin payments, making it the largest US company to adopt the asset. Other companies that also accept Dogecoin is the Latvian carrier AirBaltic, UK based web hosting company HostMeNow and Canadian Internet service provider EasyDNS.

But the vast majority of US businesses are excluding Dogecoin payments from their agenda, although a few have acknowledged the presence of cryptocurrency. This week, AMC Entertainment Holdings, Inc. (NYSE: AMC) CEO Adam Aaron Conducted Poll Asking The Movie Chain To Accept Dogecoin As A Payment Option; The company has excluded Dogecoin from cryptocurrency options it plans to make available for online payments later this year.

Elon Musk, who spent a seemingly endless time tweeting about Dogecoin, conducted a similar poll in May asking if people wanted Dogecoin payment options for buying You’re here (NASDAQ: TSLA). Despite overwhelming public support for the idea, Tesla has yet to accept Dogecoin.

Photo: KNFind from Pixabay.


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Ameriprise Financial: Investors Watching Fiscal Policy Changes Closely

The stimulating federal policy regime that has supported the current bull market so much is changing. The Federal Reserve is about to begin the process of removing monetary stimulus, while fiscal policy is about to refocus. Taken together, these emerging developments create a degree of uncertainty, to the point that some market watchers warn of a period of higher volatility, and perhaps a correction in the stock market. The fact that such uncertainty coincides with a period of seasonal weakness historically makes such warnings all the more troubling. Of course, it remains to be seen whether the markets react unfavorably to these developments.

The Federal Reserve has been preparing the ground for the start of its reduction in its bond buying program for some time. It is not a question of if, but when this process will begin. The Fed is meeting next week and could then present its plan. The weaker-than-expected August employment report could push that decision back to November, although the Federal Open Markets Committee (FOMC) hawks would rather not wait. But how much of a difference a few weeks makes is debatable. Either way, the weakening is coming. The bigger question for investors is how quickly the tapering ends, further setting the stage for the first rate hike of the next tightening cycle. President Powell was careful to point out that the rate cut and the rate hikes must be considered independently. And while this distinction may be important, it’s also likely that rate hikes are unlikely to start until the cut is complete. If the Fed acts faster than expected to end its bond purchases, it would advance the market’s estimate of how quickly rates might rise and how quickly the Fed would get rid of them.

Rising inflation gives the Fed a reason to act quickly; But the employment situation justifies caution

The argument for moving faster down this path is rising inflation. The Fed has stuck to its judgment that much of the increase is due to supply side constraints that will dissipate over time, and therefore a modest concern. But not all FOMC members agree. On Tuesday of this week, the August Consumer Price Index (CPI) report will be released and should show some welcome moderation from the previous month. The headline rate is expected to rise 5.3% year-on-year, down slightly from 5.4% in July, its highest level since 2008. The policy rate is expected to rise 4.2%, from 4%. 3 in July. and 4.5 percent in June.

An uneven recovery in the labor market has been the counter-argument for moving more slowly towards reduction. The Delta variant is partly responsible for this, as is the mismatch between job vacancies and skills. But it is undeniable that jobs are plentiful and working conditions are improving, despite the disappointment of August. Initial jobless claims last week fell to a new recovery low, and the July Job Openings and Workforce Turnover (JOLTS) report showed a record 10, 9 million job openings.

Fiscal policy is changing and investors are on the lookout for any surprises

Fiscal policy is also changing. Emergency spending designed to move the economy forward rapidly in the aftermath of the pandemic has been financed primarily through debt. The federal budget deficit for fiscal 2020 was 14.9% of GDP. The 2021 budget deficit, which ends in three weeks, is expected to total 13.4% of GDP. (For those with a nostalgic inclination, the budget was last balanced twenty years ago).

By contrast, the current surge in spending on both physical and social infrastructure is expected to be funded, at least in part, by higher taxes. High income businesses and individuals are in the crosshairs. Developments are moving rapidly, although Democratic Senator Manchin said yesterday that he doubts the September 27 voting deadline can be met. But a glimpse of the proposed tax increases is starting to emerge. A discussion paper released to Congress would call for an increase in statutory corporate income tax to 26.5 percent, from the current 21 percent. That’s lower than the 28 percent preferred by the White House, but higher than the 25 percent rate preferred by moderate Senate Democrats. The top individual bracket would rise to 39.6% and include a surtax on income above $ 5 million. Capital gains would drop from 20% to 25%, excluding the current increase in investment income. The proposal also contains some changes to the inheritance tax regime, although an effort to eliminate the current raised base provision has met strong opposition, even among Democrats.

There is no doubt that politics is changing and investors are on the lookout for any surprises. But it’s also important to remember that the economy remains healthy and that balance sheets, both corporate and personal, are strong. And while some tax code changes are on the way, they will come against the backdrop of yet another round of massive federal spending, even if that spending turns out to be lower than the White House would prefer.

Important disclosures:
Opinions expressed are as of the date indicated, may change based on market trends or other conditions and may differ from views expressed by other associates or affiliates of Ameriprise Financial. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether on its own behalf or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into account the individual situation of investors.

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed by Ameriprise Financial. They are given for information only and do not constitute a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.

There are risks involved in investing, including the risk of losing capital.

The GDP now The forecasting model provides a nowcast of the official GDP estimate prior to its release by estimating GDP growth using a methodology similar to that used by the US Bureau of Economic Analysis. GDPNow is not an official forecast from the Atlanta Fed. It is best viewed as a running estimate of real GDP growth based on the economic data available for the current measured quarter. No subjective adjustment is made to GDPNow – the estimate is based solely on the mathematical results of the model.

The Philadelphia Fed Poll is a survey that tracks regional manufacturing conditions in the Northeastern United States. The aim of the survey is to provide an overview of current manufacturing activity in this region, as well as to provide a short-term forecast of manufacturing conditions in the region, which can provide an indication of conditions in the region. entire United States.

The New York Fed’s Nowcast GDP Model produces a “nowcast” of GDP growth, incorporating a wide range of macroeconomic data. The aim is to read the information flow in real time and assess its effects on current economic conditions.

Past performance is no guarantee of future results.

The third-party companies mentioned are not affiliated with Ameriprise Financial, Inc.

The investment products are not insured by the Federal Government or the FDIC, are not deposits or bonds of, or guaranteed by any financial institution, and involve investment risks, including possible loss of principal and a fluctuation in value.

Ameriprise Financial Services, LLC. FINRA and SIPC member.


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Treasury advice on corporate collective investment vehicles

On August 27, 2021, the Australian Government’s Treasury Department (Treasury) has issued a set of documents comprising an Exposure Draft on Legislation and an Exposure Draft Explanatory Memorandum for Industry Comments on the Regulatory and Tax Components of the Corporate Mutual Fund (CCIV) diet (see here for relevant materials). The Treasury has proposed that a commercially viable form of the CCIV scheme be in place as of July 1, 2022.

In the 2016-2017 federal budget, the government announced that it would introduce regulatory and tax frameworks for two new types of collective investment vehicles, namely a CCIV and a limited partnership collective investment vehicle. Since then, the Treasury has overseen a number of periods of consultation and revisions of the CCIV regime. Johnson Winter & Slattery previously published an article outlining the main features of the CCIV diet during industry consultations in September 2017, which can be accessed. here.

Overview

CCIVs must be structured as an umbrella vehicle or an umbrella fund incorporating one or more compartments. A CCIV is a public limited company, most of its powers, rights, duties and legal characteristics are in accordance with those of a natural or legal person. A compartment, on the other hand, will not have legal personality.

CCIVs constitute an alternative vehicle to that of managed UCITS (MIS) with closer alignment with European-type corporate funds (under the European Undertakings for Collective Investment in Transferable Securities (UCITS) Directive). The latter is a popular vehicle in parts of Asia.

It is also proposed that when CCIVs are considered attribution managed investment funds (AMIT) under section 276 of the Income Tax Assessment Act, 1997 (Cth) (Law of 1997), they will be taxed as AMITs. Otherwise, the general provisions relating to the taxation of trusts will apply to CCIV and, in both cases, each sub-fund will be treated as a separate trust for tax purposes.

Regulatory framework

What is a CCIV?

A CCIV is a company limited by shares and the sole director of which is a public company holding an Australian Financial Services License (AFSL) with the appropriate authorizations to operate a CCIV. A CCIV must have a constitution and at least one compartment which has at least one member.

Like the MIS regime, CCIVs can be retail or wholesale, with a more comprehensive regulatory regime applying to retail CCIVs to protect retail investors. However, unlike the MIS scheme, all CCIVs must be registered as a company with the Australian Securities and Investments Commission.

A CCIV cannot transform into another type of company and another type of company cannot transform into a CCIV.

What is a compartment of a CCIV?

A compartment is the vehicle through which the business and operations of the CCIV are to be conducted. When registering CCIV, at least one sub-fund must be established and be identifiable by a unique name and Australian registered fund number (ARFN). Registration of additional compartments after CCIV registration is a separate process.

The securities issued by the CCIV must be attached to a sub-fund. The assets and liabilities of the CCIV must be allocated to a specific compartment. If necessary, the director of the company should convert a single asset that would otherwise be distributed among several compartments into cash or some other form of fungible property to allow separate attribution of the property. Any award made by the director of the company must be “fair and reasonable in the circumstances”. The assets of the CCIV (and each sub-fund) may be held by the CCIV or by another person (such as a custodian) in trust for the CCIV.

What is a corporate director of a CCIV?

The Director General of the CCIV is responsible for the operation and affairs of the CCIV. These functions are attributed to the executive corporate officer by the constitution of the CCIV and the Companies Act 2001 (Cth) (Corporations Act). Since the CCIV itself has no officers or employees who are natural persons, the corporate director is responsible for the conduct of the CCIV. The Law on legal persons imposes a series of statutory obligations incumbent on the director of companies in his capacity as director of the CCIV and on the members of the CCIV.

As indicated above, the company director is required to hold an AFSL with a new type of authorization for the provision of the financial service of “operation and conduct of the affairs of a CCIV”. While a CCIV is expected to provide more than one type of financial service during its operations, the Treasury anticipates that a CCIV will generally provide the financial service of “negotiating a financial product”.

What is a member of a CCIV?

An entity will be a member of a CCIV if it holds one or more shares of the CCIV. As indicated above, each share must be attached to a sub-fund. Each share will have certain rights and obligations. These include in particular voting rights, rights to dividends and distributions of CCIV capital under a sub-fund.

What are the requirements for securities issued by a CCIV?

A CCIV may issue both shares and bonds on the basis that any security issued relates to a single compartment of the CCIV. Subject to its constitution, a CCIV may also buy back redeemable shares, pay dividends to members or reduce the share capital if the sub-fund to which the redeemable shares, dividends or capital relate is solvent immediately before the operation and if the The transaction would not result in the sub-fund becoming insolvent immediately after its closure.

Although they are a form of company, CCIVs are not subject to the disclosure obligations set out in Chapter 6D of the Law on legal persons. Rather, CCIVs must adhere to the product disclosure statement (PDS) disclosure regime contained in Part 7.9 of the Corporations Act as amended by amendments proposed by the Consolidated Revenue Fund. Therefore, CCIVs are required to provide a PDS to retail clients who wish to acquire its securities. This means that retail CCIVs will also be subject to design and distribution obligations under Part 7.8A of the Corporations Act.

Main proposed changes

This section highlights the main changes to the CCIV regime proposed by the Treasury during this last round of consultation.

Depositary requirements

A custodian is a separate company appointed by the CCIV that holds its assets in trust and whose functions include overseeing certain operational activities of the CCIV The Treasury has removed the requirement for retail CCIVs to have an independent custodian on the bank. basis that there should be sufficient flexibility to allow alignment of business models with particular markets and investors as needed.

Cross investment

Cross-investment refers to the practice of a compartment of a CCIV holding one or more shares which are attached to another compartment of the same CCIV. Cross-investing could be used to achieve managerial and operational efficiencies, as well as to enable the possibility of establishing fund-of-fund structures in a single CCIV.

The Treasury declares that cross-investments will allow CCIVs to use fund management structures such as:

  • master-feeder building blocks / structures, which involve the creation of multiple compartments that hold particular asset classes (building block compartments) and other compartments that have different levels of exposure to those building block compartments ; and
  • hedging structures, which involve the creation of a compartment which holds the basic assets of the CCIV and additional compartments which hold shares and hedging instruments in the basic compartment.

Listing on the prescribed financial markets in Australia

The Treasury proposes that retail CCIVs with one compartment can now be included in the official list of a prescribed financial market operating in Australia from July 1, 2022. However, wholesale CCIVs and retail CCIVs with multiple compartments remain. banned from listing in Australia. These prohibitions do not affect the ability of a CCIV to list a security on a financial market such as the ASX Quoted Assets Market, subject to the financial market’s own rules.

Fiscal framework

While the regulatory framework is designed to provide certainty as to the legal status and operation of CCIVs and compartments, the tax framework aims to ensure that members can obtain the attribution and transfer of income and tax treatment. on the income of a CCIV through either the current AMIT regime or the default trust tax regime in section 6 of part III of the Income Tax Assessment Act 1936 (Cth) (Section 6).

The Treasury explained that despite its registration as a company under the Companies Act, the principles of presumption in proposed subsection 195-C of the 1997 Act will have the effect of considering that there is a relationship trust between the CCIV, the company, the assets and commitments of a compartment and its members for the purposes of applying tax laws. This deeming provision will have the following consequences:

  • the assets, liabilities and business relating to a specific sub-fund will be treated as a separate trust;
  • the CCIV will be considered as the trustee of each compartment which will be considered as a separate mutual fund known as the CCIV compartment trust; and
  • CCIV members will be considered as beneficiaries of the CCIV compartment trust fund.

In addition, each sub-fund of a CCIV will be treated as a separate trust for tax purposes with the relevant tax laws that apply to trustees, trusts and beneficiaries applying to the CCIV.

Subject to meeting the AMIT eligibility criteria for a CCIV compartment, a CCIV compartment may allocate amounts of taxable income, exempt income, non-exempt non-taxable income and tax compensation received. or perceived by the CCIV which have a particular character to the members. These amounts will retain their character and will then be taxed as such in the hands of the members as if the member were directly drawing such amounts.

Unlike managed investment funds qualified as AMIT which may choose to be taxed as AMIT, CCIV sub-funds qualified as AMIT will be compulsorily taxed as AMIT. The CCIV compartments will have no choice.

In cases where a CCIV does not meet the eligibility criteria for the AMIT regime in connection with a specific sub-fund for a particular tax year, the tax treatment will by default be that of the general tax framework for trusts in section 6. .

Johnson Winter & Slattery intends to prepare a new tax analysis of the proposed CCIV model in the coming weeks.

Conclusion

Submissions on this public consultation can be made until September 24, 2021. Please contact us if you would like more information on the regulatory or tax implications of the proposed CCIV regime.


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More and more financial investors are getting into Icon

While there are still two weeks before any indicative offers arrive for cancer care provider Icon Group, there are early signs that it could turn into the hottest private equity shootout in the world. ‘year.

Street Talk brought down a bunch of serious suitors – Morrison & Co, Ontario Teachers’ Pension Plan, EQT Infrastructure, QIC Ltd Infrastructure Team, Stonepeak Infrastructure – and now we can add a few more to the list.

Icon Group owns 45 cancer care centers around the world and makes 80% of its profits in Australa, according to a pitch to potential buyers. AFR

There’s Baring Private Equity Asia, which is supposed to be working on the briefing memorandum, as well as Singapore’s Keppel, which is scratching a lot of Australian assets.

There are also a bunch of national pension funds that have discussed co-investment with their third-party infrastructure and PE managers.

As we said, it is still early days. Auctioneers Goldman Sachs and Jefferies are calling for first-round bids on September 7.

Goldman Sachs and Jefferies are leading the auction on behalf of the majority owners of Icon, including the Goldman Sachs core investment team, QIC’s private equity unit, and Chinese firm Pagoda Investments. Other investors include the company’s doctors and co-founders Cathie Reid and Stuart Giles.

A sales flyer sent to potential buyers earlier indicated that Icon has over 30 years of private cancer care experience, owns 45 centers around the world, and operates with an EBITDA margin of over 20%. The flyer said eighty percent of the group’s business was in Australia, in terms of revenue, while cancer care made up half of its revenue and the rest was split between membership (30 percent) and the pharmacy (20 percent).


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Fair Financial investors claim SoftBank drove startup into the ground so they could take full control of bankruptcy

SoftBank CEO Masayoshi Son.
  • SoftBank and its Vision fund have invested more than $ 300 million in Fair Financial, a car rental startup.
  • Fair is considering filing for bankruptcy, Bloomberg reported this week.
  • Some Fair investors blame SoftBank and say the Japanese giant is trying to take control.
  • See more stories on the Insider business page.

Investors in Fair Financial Corp., a struggling car rental startup once valued at over $ 1 billion, are exploring legal options to tackle SoftBank, which they say has deliberately pushed the company in the ground so that it can take full control and eliminate other shareholders.

“There was a calculated effort to drive the company into insolvency so that it could take over the business completely,” an investor told Insider. “SoftBank is guilty of putting the company in a difficult position.” Investors have asked not to be identified to discuss sensitive private matters. The current CEO of Fair and someone familiar with the matter disputed this description of Fair’s problems.

The startup was founded in 2016 by entrepreneur Scott Painter with the ambition to disrupt the $ 120 billion used car industry. SoftBank and its giant Vision fund have invested at least $ 300 million in the company, while other investors have invested around $ 170 million.

The company is now considering a bankruptcy filing that would eliminate shareholders, Bloomberg reported Thursday.

SoftBank has built up a significant position in Fair’s debt in recent years, in part by purchasing assets from lender Greensill, investors said. Greensill, also backed by SoftBank, filed for bankruptcy earlier this year.

SoftBank now hopes to use its senior credit position to come out of a bankruptcy reorganization of Fair as the startup’s new equity owner, investors said. They spoke to Insider in an attempt to thwart this plan by arguing that SoftBank is not looking after Fair’s best interests and is acting more like a lender seeking control rather than a typical shareholder.

Fair had around $ 800 million in assets on the books in 2019, mostly from the more than 50,000 vehicles he owned. In late 2019, investors said SoftBank had started selling those assets and using the cash to run the business and pay off some of the debt it held.

Investors also said that in 2019, SoftBank kicked Painter out and replaced him with its own executive, Adam Hieber. SoftBank also kicked out Painter’s brother, Tyler Painter, and cut 40% of Fair’s staff.

Under SoftBank’s new leadership, Fair appeared to abandon growing the business, investors said. The startup has increased the upfront fees it charged, which is similar to down payments. Those start-up costs went from several hundred dollars to several thousand, and new customers evaporated. Fair also ended its insurance coverage, which infuriated existing customers and led to a wave of vehicle returns, according to investors.

Now, with most of Fair’s vehicles sold, its assets have fallen far below its debt, most of which is owned by SoftBank, investors said.

“SoftBank had a clear objective: to liquidate the fleet to generate revenue,” said one of the investors.

SoftBank declined to comment, but someone familiar with the matter said Painter was responsible for Fair’s mismanagement. Employees told Insider in 2019 that Fair’s unconstrained growth was its downfall, and some criticized Painter’s leadership.

“The Vision Fund does not control its businesses; this is not their model, ”said the person familiar with the matter. “In fact, Scott had total control. He spent recklessly thinking that the Vision Fund would always be there to bail him out. Eventually it became clear that he needed to be replaced, just as he was in his old business. Painter, who is still the chairman of Fair, declined to comment.

Brad Stewart, the current CEO of Fair who joined the company last year after a career in private equity, said any suggestion that SoftBank sabotaged the company is false.

“I saw them working really hard to save and keep the business going even though it cost them substantial capital that they didn’t have to invest,” said Stewart. “The point is, the company had an extremely negative unity economy and poorly developed risk controls that were hidden from the board and investors. These missteps led to a series of credit defaults starting in mid-2019 that forced someone to step in and save the business. “

The aggrieved investors said Stewart was a puppet of SoftBank and, exceptionally, had no capital in the startup he was hired for.

Stewart told Insider he was initially given shares when he took over as CEO, but the board blocked him from getting shares. In any case, he said the shares would have been worthless.

“It doesn’t really matter because the company’s debt was greater than its enterprise value when I started, so any grant was worth zero,” said Stewart.


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How the UN Goals Guide New ESG Blockchain Investment Vehicles

Demand for environmental, social and governance (ESG) investments is accelerating and several key trends are emerging, from climate change to social unrest. The coronavirus pandemic, in particular, appears to have intensified discussions about the interdependence of sustainability and the financial system.

Blockchain has become a powerful and transformative technology in the 4th industrial revolution and is used in an ever-widening range of industries, but its energy footprint has been deemed unsustainable at the current rate. As a result, many ESG-focused investors are still reluctant to participate in this new technology, despite the potential benefits.

2021 is the year ESG investing propelled the biggest shift in capital allocation, and ESG considerations are guiding business decisions in ways that have never been seen. The company’s one-stop bottom line, profit at all costs, is becoming a “triple bottom line” focused on people, planet and profit.

“When investors arrive, they look for an opportunity to invest in an ESG-compliant company before they allocate funds to a specific proposal, project, opportunity, company or business,” said Stefan Rust, CEO and co-founder of Sonic Capital and HydrogenX. , in an interview with Forkast.News.

According to the latest Bloomberg Intelligence ESG Mid-year 2021 outlook report, ESG assets are on track to exceed $ 53 trillion by 2025, which represents more than a third of the $ 140.5 trillion in global assets under management forecast. Bloomberg Intelligence also reported that the S&P 500 ESG Index has outperformed the S&P 500 Index since the start of the year by around 15%.

Despite the bad press, blockchain-based technology and business solutions show significant potential to positively impact society and the environment, and products are hitting the market for the ESG-focused investor.

Blockchain for the planet

The 17 United Nations Sustainable Development Goals (SDGs) aim to address the most pressing global challenges. Climate action is one of them, and the UN target demands a strict reduction in greenhouse gas emissions as well as climate adaptation action or take steps to prepare for the effects of climate change and expected impacts in the future.

Together with Zurich-based Tavis Digital, Sonic Capital launched Sphere, a new investment product that uses the United Nations Sustainable Development Goals framework as a guide while applying ESG investment criteria.

According to Rust of Sonic Capital, a green blockchain industry is evolving. While the market is still nascent, Sphere sees an endless capacity for growth. Its potential is becoming increasingly evident with the rise of blue chip companies entering the space and their desire for a more fluid, efficient and transparent market.

“We break down ESG into three compartments: energy, carbon and other, and if you combine all of these ESG activities, you see a significant movement of companies and businesses into these categories, from all the big tech companies to the multinationals, as well. than local governments trying to move this forward and align this with the 17 SDG goals that the UN has stipulated, ”said Rust.

In Asia in particular, Rust sees sustainable investing largely driven by government support and an effort to foster greater inclusion of groups traditionally under-represented in markets.

“In China, it’s a big mandate. It’s huge. In Korea, the premium for being ESG or SDG compliant is very high, higher than anywhere in the world, ”said Rust. “The more developed markets are very optimistic about this and are taking proactive steps in this direction.”

Through Sphere, investors can capitalize on growing opportunities in the sustainable economy and technology sector by identifying blockchain protocols with positive environmental impact.

“We truly believe in the potential and future of blockchain technology applications impacting impact and their ability to generate positive impact on society and the environment,” said Christian Speckhardt, Partner at Tavis Digital and veteran of impact investing in an email to Forkast.News.

Blockchain is poorly understood

Bitcoin’s blockchain carbon footprint has become a growing concern for environmentally conscious investors. In fact, the recent crypto market crash began in mid-May, when Elon Musk suddenly said Tesla would no longer accept Bitcoin as a form of payment due to environmental concerns.

Blockchains like Bitcoin operate on proof of work algorithms, which must be solved by computers through cryptographic calculations in order to mine BTC tokens. The energy required by miners for these calculations results in high energy consumption.

However, Sphere will focus on investing in the proof of stake blockchain. Staking is estimated to use 99.9% less energy than existing proof-of-work systems. This allows investors to profit while helping the industry move towards greener solutions.

Despite the emphasis on proof of stake, Rust argued that there was actually a lot of misconception in the industry regarding proof of work.

“About 60-70% of the electricity consumed by proof-of-work networks actually comes from renewable energy sources or even wasted electricity that won’t be pumped into the grid,” Rust said. “Essentially, Proof of Work is a lot more environmentally friendly than a lot of people think. “

Sphere is an actively managed certificate (AMC), which are bank securities that can be purchased through a Swiss International Securities Identification Number (ISIN). Investors will be able to participate in impact-related blockchain technologies through their respective crypto assets, which offers the potential for price appreciation in addition to stake rewards, according to Sonic Capital.

The AMC also removes the intricacies of the crypto world for new investors and provides a fixed ramp. By providing the bank with Sphere’s ISIN, investors can subscribe directly through an existing bank account, which is comparable to buying traditional stocks.


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