A good catch from FundFire, on an offer of reduced fees for 12 months to a client thinking about leaving Pimco.
The fee structure was revealed in an memo to the San Luis Obispo County Pension Trust (SLOCPT) by its consultant Wurts & Associates, which has recommended that clients terminate their relationship with Pimco following the departure of chief investment officer Bill Gross for Janus.
The SLOCPT’s current fee structure includes a 0.5% fee on the first $25 million under management, 0.375% on the next $25 million and 0.25% thereafter. The proposed fee reduction would switch the pension over to a 0.05% (5 bps) base fee and a “15% participation rate for returns that exceed the index return plus the base fee (returns in excess of the index plus 5 bps).” The discount would “revert to current fee terms after 12 months.” PIMCO did not respond to requests for comment.
Interesting. Blackrock has issued an open letter in the spirit of investor
reeducation about its products, no doubt in response to the terrible reporting that’s been going on about its err… recent NAV discounts.
You can read the full open letter (complete with lots of bolding emphasis by Blackrock just to make sure you get the point) but a critical extract we think is the following (Blackrock’s emphasis). Read more
From the New York Times, a Gretchen Morgenson report into an apparently widespread practice of Wall Street analysts giving private equity clients and hedge funds a heads up into their thinking, via the hedgies’ monthly or quarterly “questionnaires”:
The funds say they ask only for public information, but in at least four cases, documents from Barclays Global Investors, now a unit of BlackRock, state the goal is to receive nonpublic information. Two documents state that the surveys allow for front-running analyst recommendations.
Bit of a Volcker Rule/whither market-making talker from the WSJ… BlackRock is back touting post-bank ‘internal’ trading for its clients.
Feels like it’s been building a trading platform since forever actually… Read more
John Paulson, the billionaire investor, has taken public his efforts to get The Hartford Financial Services Group to split into two companies, says the FT. The Hartford, like other insurers, has been under pressure in its life insurance business as interest rates hover near zero, making it difficult to generate the income to cover pay-outs on products like annuities. At the same time, it has participated in an industry-wide increase in pricing in its separate property and casualty business to make up for disaster-related losses last year. Mr Paulson, the largest shareholder in The Hartford with an 8.4 per cent stake, published a letter to the company on Tuesdayblaming its underperformance on the combination of its two businesses. He said it is too complex for analysts to properly value and that most other insurers have chosen to focus on one or the other business. Meanwhile Bloomberg reports Mr Paulson sold his entire stakes in Citigroup and Bank of America in the fourth quarter before the shares rallied. Paulson & Co, which owned $643m worth of Citigroup at the end of the third quarter, had sold its entire 25.1m shares as of December 31, the firm said on Tuesday in a filing with the SEC. He also sold $394m worth of Bank of America, or 64.3m shares. It also sold its 998,900 shares of BlackRock valued at $146m.
Larry Fink, chairman and CEO of BlackRock, reckons he’s found one of the reasons for the world’s troubles.
Comments just in from Wednesday’s Q3 earnings call: Read more
The world’s leading provider of ETFs has backed calls for tougher safeguards for the investment products to deflect the rising tide of regulatory concerns about the systemic risk posed by the fast-growing market, the FT reports. BlackRock, which manages more than $600bn ETFs around the world and about $100bn in Europe through its iShares division, has called for higher standards of disclosure and stronger, more uniform regulation. BlackRock is backing proposals by regulators to impose new curbs on a market that has grown from one fund launched in 1989 to mirror the S&P 500 index to nearly 4,000 exchange traded products managing $1,626bn in assets across the world. It is urging the industry to embrace higher hurdles on reporting and argues that all trades, including over-the-counter deals which are carried out outside exchanges and which make up about two-thirds of ETF transactions in Europe, should be printed and made public, ideally on a daily basis.
Kohlberg Kravis Roberts and BlackRock have expressed interest in buying Axa Private Equity, the French alternative asset manager that has been put up for sale by Axa, the French insurer, the FT says, citing people close to the situation. The two US asset managers are among a handful of potential bidders that have been asked to submit first-round offers for the private equity group early next week. The private equity group’s management and Axa, its parent company, have preselected potential bidders in the past few weeks, they added. Dominique Senequier, the well respected French manager who started Axa Private Equity 15 years ago, is seen as the linchpin for any deal.
The debate over how much copper is being stored ‘off market’ in private inventories — not part of the LME inventory system — has been going on for a while.
The general position taken by investment bank analysts is that supply is tight. There’s not enough inventory to go round and whatever private inventories exist are hardly big enough to offset rising, mega demand from China. Read more
Investor worries over sovereign debt slowed asset inflows into BlackRock, the world’s largest money manager, in the second quarter, reports the FT. BlackRock lifted second-quarter profits 43 per cent from the same period last year as profitable asset inflows offset client redemptions in low-fee products. But the fund manager indicated that recent asset inflows to the core business have slowed in uncertain markets.
A prominent Facebook investor and co-founder of PayPal, the online payment system, has accused Wall Street of undervaluing the recent IPO of networking site LinkedIn, contributing to the doubling of its shares on opening day, reports the FT. Peter Thiel, an early Facebook investor and PayPal co-founder, said banks did not understand the full potential of the latest internet companies and warned that the next wave of Silicon Valley stars would negotiate hard as they prepare to go public. LinkedIn was priced at $45 a share by Morgan Stanley, Bank of America Merrill Lynch and JPMorgan Chase, raising $352m. DealBook meanwhile notes that money manager BlackRock has weighed into the debate, accusing banks of overpricing IPOs to gain more fees.
When it comes to physically-replicated Exchange-Traded Funds (ETFs), the key criticism — if any — usually pertains to providers’ tendency to top-up management fees with stock lending revenue.
The theory is that the practice exposes investors to unnecessary counterparty risk, not always easily identified. The justification on the providers’ part, though, is that the funds sit on literally mountains of securities, which are otherwise not being used to their full potential. Read more
The industry’s response to Tuesday’s warning note on Exchange Traded Funds from the Financial Stability Board has begun predictably with a statement from iShares — the world’s largest provider of ETFs.
And it’s a well thought-out response — one which seemingly seizes on the old Chinese adage that crises can be opportunities too. Read more
BlackRock is really making a name for itself in financial crisis-related services — valuing the Fed’s Maiden Lane portfolio and undertaking the Irish banking stress tests too. But Ireland’s central bank also hired Boston Consulting Group (BCG) to supervise the stress testers, so to speak.
So, want to know what Boston Consulting said about BlackRock’s methodology? Read more
Spanish lender Santander, US asset manager BlackRock and the investment group of former Citigroup executive Bob Willumstad are among would-be buyers of Citi’s consumer finance arm, which could fetch about $2bn, reports the FT. Willumstad, who left Citi in 2005 and later became chairman and CEO of insurer AIG, has teamed up with Blackstone and Carlyle, said people close to the matter, as private equity bidders scramble to join the auction. KKR is working with BlackRock on a possible bid for the unit, previously known as CitiFinancial. Bloomberg adds the group is one of at least four competing for the business, which has about $13bn in assets.
US hedge fund manager John Paulson has pared his stakes in Citigroup and Bank of America, both among Paulson & Co’s biggest stock holdings by market value, reports DealJournal, citing the group’s quarterly snapshot of investment holdings as of Dec 31. Paulson reported buying bonds of Alcoa, and shares of BlackRock, Seagate and J. Crew since the end of the 2010 third quarter. Paulson reporting owning 424m shares of Citi at the end of September. On Monday, he disclosed owning nearly 414m shares. In the same period, Paulson’s holding of 138m BofA shares was cut to about 124m; he also holds BofA warrants. Dow Jones adds that Paulson also trimmed back his holdings in Wells Fargo in the period.
Some of the nation’s largest investment firms have been overcharged by banks for currency trades, the Wall Street Journal reports, citing claims by bank insiders and others. BlackRock, the world’s largest fund manager, became concerned at the rates it and its clients were charged for some currency trades by custody banks, according to an internal BlackRock investigation undertaken a year ago, the paper says. The claims may broaden the scope of alleged abuses in the $4,000bn foreign-exchange market.
BlackRock has awarded Larry Fink, its founder and chief executive, $13m in restricted stock and options in a further sign that financial companies are again expanding executive compensation, reports the FT. The stock award, which forms part of Fink’s bonus for 2010, comes after a year spent integrating the $13.5bn purchase of Barclays Global Investors to create the world’s largest money manager by assets. The award, disclosed in a filing on Monday night, consists of 46,031 restricted shares and 18,712 options vesting over three years, more than double the $6m worth of restricted stock Fink received in 2009.
BlackRock, the world’s largest money manager, more than doubled earnings in the fourth quarter as rallying markets lifted assets under management, the FT reports. Boosted by the $13.5bn takeover of Barclays Global Investors in late 2009, BlackRock reported earnings well ahead of Wall Street expectations. Net income jumped from $256m in the fourth quarter of 2009 to $657m in the last three months of 2010 as revenues rose from $1.54bn to $2.49bn. Larry Fink, chairman and chief executive of BlackRock, attributed the improvement in operating margins for the year to a combination of the benefits of the BGI acquisition, improved markets and positive investment performance. “The integration is largely behind us,” he said. Net income, adjusted for non-recurring items such as integration costs, rose 77 per cent to $670m from $379m. Adjusted earnings per share rose from $2.39 to $3.42, well ahead of the $2.89 consensus of analyst forecasts.
Under ‘U’ in the Panglossary (our happily optimistic reference portmanteau) one must surely find “upside risk”.
On Tuesday, Bob Doll, BlackRock’s bullish Chief Equity Strategist, showcased his predictions for the year ahead. Read more
Mizuho Financial Group, Japan’s third-biggest bank, agreed to buy a 2% stake in BlackRock for $500m, including shares sold by Bank of America, reports Bloomberg. Mizuho will buy 2.45m shares of the world’s largest asset manager directly from Bank of America. It also purchased shares in a secondary offering earlier this week. After the transaction, Tokyo-based Mizuho will help distribute BlackRock’s funds to Japanese investors, said a person close to the matter. The deal comes as Japan’s biggest banks are accelerating asset purchases in Europe, North America and Asia as growth in borrowing slows at home. Mizuho’s accord follows MUFG’s negotiations unveiled last week with Royal Bank of Scotland to buy project-finance assets.
When Bank of America received a much-hyped letter from bondholders two weeks ago, we didn’t say much (though others did) about how awkward it was for the bank ostensibly to be facing the threat of legal action from one of its own holdings.
And the day after the letter was sent, BlackRock chief Larry Fink said to Bloomberg TV that the press had blown things out of proportion: Read more
Bank of America and PNC Financial Services have moved to reduce their stakes in BlackRock, unveiling plans to sell 42m shares through a secondary offering of the US investment manager’s stock, reports the FT. The sale could reap billions of dollars for the two US lenders as the banking industry moves to meet higher capital standards. It comes as BofA seeks to offload divisions and assets outside its core corporate, investment and consumer banking businesses. A BofA spokesman emphasised the bank’s overall strategy of focusing on its three core customer groups: consumers, companies and institutional investors.
BlackRock, the world’s largest asset manager, on Wednesday said strong client fund inflows drove a higher-than-expected rise in 3Q profits and that the integration of Barclays Global Investors was ahead of schedule, reports the FT. Larry Fink, chief executive and chairman, said BlackRock’s $13.5bn acquisition of BGI had proved a “big success” in less than a year, despite outflows of $34bn relating to the deal. Fink said total outflows relating to the merger of BGI $89.1bn – less than 5% of the acquired assets – were “not a big issue”. BlackRock’s total assets under management reached $3,450bn in the quarter, up 9% from 2Q. Of the merger-related outflows of $34.4bn, Fink said about $17bn came from one pension fund. DealBook notes that investors have been seeking an indication that BlackRock is more than a “tired behemoth”.
Strong client fund inflows helped BlackRock to a higher-than-expected rise in third-quarter profits on Wednesday, as the world’s largest asset manager declared that the integration of Barclays Global Investors was ahead of schedule, reports the FT. Larry Fink, chief executive and chairman, said BlackRock’s $13.5bn acquisition of BGI had proved a “big success” in less than a year, in spite of suffering outflows of $34bn relating to the deal. Mr Fink said total outflows relating to the merger of BGI at $89.1bn – less than 5 per cent of the acquired assets – were “not a big issue”. BlackRock’s total assets under management reached $3,450bn in the third quarter, up 9 per cent compared with the previous three months. Of the merger-related outflows of $34.4bn, Mr Fink said that about $17bn came from one pension fund.
Blackrock, the world’s largest asset manager — with $3,450bn under management according to figures released on Wednesday — puts out a regular quarterly review of the ETF industry.
And as usual, it presents some interesting factoids on all matters exchange-traded fund — be they product, currency or commodity. Blackrock itself, of course, is a leading player in the ETF market through its ownership of iShares and currently — according to its own report — has some $534.6bn in ETF assets under management. Read more
So… since FT Alphaville was working on a special RMBS supplement;
We spoke with Scott Simon, head of MBS at Pimco last week — who gave us this quote: Read more
Some top institutional investors have joined forces with the Federal Reserve Bank of New York to recover losses on more than $47bn in mortgage-backed securities issued by Countrywide Financial, the consumer lender acquired by Bank of America, reports the FT. The eight boldholders, including BlackRock, Pimco and MetLife, own more than 25% of the voting rights on the securities. The New York Fed inherited its stake in the bonds in the financial crisis. The bondholders argue that BofA violated elements of its servicing agreements, and aim to put back loans that fell short of the underwriting standards stated in the 115 deals. Separately, the FT reports that BofA sought to reassure investors after reporting better-than-expected Q3 results on Tuesday.
No sooner does Bank of America announce earnings than it gets hit with a significant threat of legal action from mortgage bond holders – including the New York Fed. From Bloomberg:
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said. Read more