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January 2007

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  • Better guide to risk than VaR. According to some hedge fund industry participants, stress testing is becoming a more widely used measure of risk among prime brokers and managers.
  • “Hedge funds have trailed equities on a relative basis in 2006 because of the unusually consistent strength in the equity markets”
  • It is traditional around year-end for awards to be received for deeds performed during the previous 12 months. We hereby announce Euromoney magazine’s inaugural awards for high-quality press relations. We did not ask for submissions as we are constantly bombarded with incidents from which to choose.
  • Sterling market opened in the Middle East and CIS.
  • January is the month to purge the excesses of Christmas and New Year from the system. Detoxing won’t be so easy for the markets.
  • Has anyone seen this man?
  • Alongside the announcement that it was raising its key interest rates by 25 basis points last month, the European Central Bank released the latest set of growth and inflation forecasts prepared jointly by the staff of the ECB and the euro area national central banks. ECB president Jean-Claude Trichet is always at pains to emphasize that these “projections” – which are shown as ranges, rather than point estimates, to reflect the uncertainties associated with past forecasting errors – are published on the responsibility of the staff and are not formally endorsed by the ECB’s executive board or its governing council.
  • Volume and profits in the FX market have grown more consistently than in any other part of the financial markets. New entrants and existing users still cannot resist the promise of diversification and excess return.
  • In its financial stability review in December, the European Central Bank suggested the introduction of an international register containing information on the exposure of firms to highly leveraged institutions, such as hedge funds and prime broker banks. The register would provide prime brokers with frequent and aggregated risk information on the whole portfolio of an individual hedge fund, says the report. However, the report adds, it’s a little bit complicated and might be best left to some of the existing market products that collect reporting and flow information.
  • Big strategic acquisitions might be an exciting diversion for banks’ senior managers. But it is shareholders that pay for them.
  • The wonderful world of financial PR
  • When it comes to hedge fund regulation 2006 is a year to be forgotten. It began with regulation by the SEC, only for it to be withdrawn later after an adverse court ruling. And no country seemed willing or able to decide what to do about international regulation. A pessimist would suggest that things won’t change much in 2007.
  • Dresdner Bank’s EUR medium-risk portfolio is one of six risk profiles the bank runs for high-net-worth investors looking for a balanced portfolio and accepting exposure to global markets.
  • Another record year for financial institutions suggests no end to the boom in financial markets. But a correction in the global imbalances that have so far sustained the boom threatens economic growth and could have painful consequences for global capital markets. Are we on the cusp of a downturn?
  • "We’ve reduced equity market exposure by 10% – from Asia, Europe and the UK – but still view equities as the best asset class."
  • Farouk Ramzan has joined Lloyds TSB as head of debt origination reporting to Mark Grant, head of DCM. Ramzan was a long-standing member of SG’s debt team where he was head of UK corporate DCM.
  • At the start of December, Ford Motor Co grabbed a liquidity lifeline with its first ever secured loan facility. All manufacturing and auto assets, plus some or all of its subsidiaries, are included. The move structurally subordinates unsecured debt holders, particularly in FMC, prompting one-notch downgrades to triple Caa1 for FMC from Moody’s, and to B from Fitch and a two-notch move from S&P to CCC+. Ford Motor Credit remains in Single B territory.
  • The SEC has proposed increasing the minimum net worth for an investor in hedge funds to $2.5 million from $1 million in 2007. The $2.5 million net worth minimum is to include only liquid assets. Analysts doubt that the move will have much effect.
  • Investment bankers in Japan are confident that a hybrid securities market will be established this year, despite fears that the lack of a sizeable standout deal thus far is contributing to investor and issuer caution about the structure. The sector was extremely active in the US as 2006 came to a close, with overwhelming levels of investor demand for deals from Axa and Washington Mutual, and bankers in Japan say that treasurers and CFOs there are looking closely at how their counterparts in the US use the instruments to fund acquisitions and improve capital structure.
  • Is it really likely that DK will now be able to persuade better-quality individuals to join the firm? It might be struggling to retain the ones that are left.
  • New FX indices have been separately launched by the International Index Company (IIC), the company behind the successful iBoxx bond and iTraxx credit derivative indices, and JPMorgan.
  • 18,000,000,000 the dollar volume of ECM deals that was expected to be executed in December 2006 in the EMEA region, according to Dealogic. $244 billion was raised in the first 11 months of the year, up 9% on full-year 2005, making the amount of money raised in ECM deals in 2006 the highest on record.
  • Abuse of information prompts worries about integrity in credit markets.
  • Lombard Odier Darier Hentsch’s US dollar, low-risk portfolio caters to high-net-worth clients who want to preserve their money over the long term but are also looking for performance.
  • The first of several credit derivative product company (CDPC) launches widely rumoured to be in the works emerged just before the year-end.
  • Surprise suggestion to take Stansted out of the regulated asset base.
  • Roger James reports on why the market might finally be ready for takeoff.
  • Marina Bay Residences: Singapore’s “first Über Penthouse”
  • The best agency players make attractive acquisition targets.
  • After some considerable time in development, Eurex plans to launch the world’s first exchange traded credit derivatives contract on March 27. The contract will be based on the iTraxx Europe five year series and – dependent on market demand and sufficient market maker support – Eurex might also list futures contracts on the HiVol and Crossover indices on the same date. The contracts will be cash settled.