Basel Committee moving forward with capital, bond rules

William Coen, secretary-general of the Basel Committee on Banking Supervision, told members of the European Parliament that the panel will continue with its controversial plans to revise bank capital rules, which could bolster capital requirements. The committee is also planning to limit lenders’ holdings of bank bonds as part of its efforts to redistribute the risk.

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P/E Ratios: Friend or Foe?

In a recent Financial Times column[1], Miles Johnson cautioned readers not to rely too heavily on index p/e ratios to gauge buying opportunities in the market. I wholeheartedly agree that investors should avoid over-reliance upon any single metric, but it is important to consider how p/e ratios are calculated, what their limitations are, and what they may convey about market conditions.

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$60 Trillion – Yes, Trillion – Committed to Investing This Way

Index providers often work with large pensions and asset managers, so it’s difficult to surprise us with big numbers.

As the chart shows, the PRI has been a remarkable success by certain measures. Companies managing over $60 trillion have signed the PRI. A full list of signatories can be found here. It’s possible that the company you work for has signed.

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Rieger Report: “Belly of the Curve” Good for Muni & Corporate Bonds

Through October 3rd, the S&P Municipal Bond Index has returned 4.23% year-to-date and the S&P 500 Bond Index has returned 8.97%.  The 7 – 10 year maturity range has outpaced the overall benchmarks in both cases.

The average yield of bonds in the S&P 500 7-10 Year Investment Grade Corporate Bond Index has fallen by 94bps since year end as the yield thirsty market place has hunted yield oriented products.  As a result, the index has seen a year-to-date total return of 9.15%.

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WEBINAR – Timing “Smart Beta”, October 20, 2016 8AM PT | 11AM ET | 4PM GMT

Contrarian timing can add value by emphasizing factors or strategies that are trading at a discount relative to their historical valuations and deemphasizing the more expensive factors or strategies.

Unfortunately, many investors “time” in the wrong direction by chasing performance. This can erode the benefits of factor investing even when diversifying across different factors.Presenter:
Rob Arnott

Chairman & CEO

Rob Arnott is co-founder and chairman of Research Affiliates, portfolio manager on the PIMCO All Asset and All Asset All Authority family of funds and author of more than 100 financial journal articles.

John West

Managing Director, Head of Client Strategies

John West is responsible for maximizing the investor impact of Research Affiliates’ insights and products. Since joining the firm in 2006, John has been actively involved in and led product management, affiliate support, and institutional relations as well as numerous client service initiatives. He is one of the principal external communicators of the firm’s asset allocation and smart beta strategies.

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Webinar : Capturing the Complete China Story – On Shore & Off, 20th October, 10am ET

Historically, foreign investors in China have had restricted access to the onshore market. But the game has changed recently, as various domestic and foreign investment schemes have broadened capital flows between domestic and international markets. As China’s capital markets become increasingly liberalized, demand is growing for investment products and benchmarks that cover the entire China equity market, both onshore and offshore. But where do the opportunities lie?

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Join us to hear industry specialists discuss:

  • Efficient entry strategies for gaining exposure to China
  • The S&P China 500’s role as a comprehensive barometer of the Chinese equity market
  • Sector strategies that align with the sources of China’s economic growth

IMF: Global Trade: What’s behind the Slowdown?

Global Trade: What’s behind the Slowdown?

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Trade growth has slowed since 2012 relative both to its strong historical performance and to overall economic growth. This chapter finds that the overall weakness in economic activity, in particular in investment, has been the primary restraint on trade growth, accounting for up to three-fourths of the slowdown. However, other factors are also weighing on trade. The waning pace of trade liberalization and the recent uptick in protection-ism are holding back trade growth, even though their quantitative impact thus far has been limited. The decline in the growth of global value chains has also played an important part in the observed slowdown. The findings suggest that addressing the general weak-ness in economic activity, especially in investment, will stimulate trade, which in turn could help strengthen productivity and growth. In addition, given the subdued global growth outlook, further trade reforms that lower barriers, coupled with measures to mitigate the cost to those who shoulder the burden of adjustment, would boost the international exchange of goods and services and revive the virtuous cycle of trade and growth.

Webcast : Addressing the liquidity management conundrum, 18th Oct, 230pm GMT

Addressing the liquidity management conundrum:
Practical steps to manage and understand your liquidity requirements

Tuesday 18th October 2016, 2:30pm GMT

Presented by:

– Mark Austin, Head of Relationship Management, Self-managed Asset Owners and Insurance at Northern Trust

– Steve Irwin, Head of Asset Servicing Liquidity Solutions, Product Management at Northern Trust

– Brendan Maton, IPE

Register now >>
Addressing the liquidity management conundrum:
Practical steps to manage and understand your liquidity requirements

Liquidity is starting to become a significant issue for institutional investors.  The impact of a difficult mix of market trends, a sustained low interest rate environment and the unintended consequences of certain regulations are all helping make cash an increasingly problematic asset class to deal with.

Whether seeking to obtain a return on your un-invested cash or liquidity to support investments, the environment is only likely to get more challenging.

The webcast will:

  • Share examples of the different techniques which a range of institutional investors are employing to address this liquidity conundrum
  • Shed light on emerging techniques such as portfolio stress-testing and liquidity budgeting
  • Provide practical insights into how you can ensure a balance of security, liquidity, yield and operating efficiency
Register now >>

Mark Austin

Head of Relationship Management, Self-managed Asset Owners and Insurance, Northern Trust

In his role Mark spends a significant amount of time working with clients across Europe, Middle East and Africa to manage and understand their liquidity requirements.

His background is firmly rooted in the management and administration of retirement assets, having worked at an asset manager with significant pension market share and two asset servicing institutions predominately servicing the European defined benefit and defined contribution markets. Other areas of experience include helping a wide variety of Northern Trust clients with their use of asset pooling structures, as well as the complex aspects of pension de-risking and use of other deficit reduction structures.

Mark is a director of Northern Trust’s Luxembourg management company and a director of its Irish management company, Northern Trust Fund Services Ireland Ltd. as well as a trustee of the Northern Trust Pension Scheme.

Steve Irwin

Head of Asset Servicing Liquidity Solutions, Product Management, Northern Trust

Since joining Northern Trust’s Asset Servicing Product Solutions team in September 2015 as Head of Liquidity Solutions Product Management, Steve’s main focus has been to refine the bank’s liquidity solutions product strategy in line with clients’ evolving liquidity needs. 

In close consultation with a wide variety of Northern Trust clients, Steve is working on the development of an integrated liquidity solution which meets clients’ short-term and long-term requirements, helping them to optimise security, liquidity, yield and operational efficiency.

Steve has over 27 years of banking experience in the cash and liquidity management arena, having previously worked with J.P. Morgan.

Register now for the webcast >>

BIS: An early warning indicator of financial crises

The Bank for International Settlements (BIS) has started publishing a new set of data—credit-to-GDP (gross domestic product) gaps of economies. “It is defined as the difference between the credit-to-GDP ratio and its long-run trend, and it has been found to be a useful early warning indicator of financial crises,” says BIS of this new measure.

Assets may be overvalued, BIS reports

Assets may be overvalued, BIS reports

Global asset prices are too high given their less-than-stable foundations, the Bank for International Settlements warned in its quarterly review. “The apparent dissonance between record low bond yields, on the one hand, and sharply higher stock prices with subdued volatility, on the other, cast a pall over such valuations,” according to the report.


Many asset owners and portfolio managers develop proprietary return forecasting models, but use third-party models to measure risk. While there may be a significant overlap between the factors used in alpha and risk models, at times they may be misaligned. For managers who optimize their portfolios, the optimizer will tend to amplify the component of alpha that is not aligned with the risk model; this may lead to unintended portfolio exposures. In addition, unnecessary trading may result. Both of these unintended consequences may impair portfolio performance.

Please join us for a webinar where we will discuss a practical process for detecting and addressing misalignment in a quantitative portfolio construction setting with BARRA Portfolio Manager (BPM).


50-60 minutes
Session 1
  Register now
Tuesday, Oct 11, 2016, 11:00 p.m. EDT
Session 2
   Register now
Wednesday, Oct 12, 2016, 9:00 a.m. HKT


Demonstrate how to use BARRA Portfolio Manager (BPM) to detect and understand the nature of misalignment between alpha and risk factors
Show how the MSCI US Total Market Equity Model (USTMM) that includes Systematic Equity Strategies often used as alpha factors can improve alignment
Demonstrate implementation of misalignment remedies in BARRA Portfolio Manager (BPM), including a new Rescale Alphas approach


With central banks in the developed world  deploying even more  unconventional monetary easing policy measures – from QE to negative rates in Europe and Japan – the idea of  “helicopter money”  is now being seriously considered by central bankers. But is helicopter money really that different from the tools already employed by central banks? As Toby Nagel from Columbia Threadneedle Investments,  argues in  a recent note, helicopter money is a straightforward and not that different concept  once we understand how money works. To summarise:

How Will BOE’s Corporate Bond Spree Differ From ECB’s?

The start of the Bank of England’s corporate-bond buying program on Tuesday may exacerbate already tight liquidity in the sterling debt market.

The central bank plans to purchase 10 billion pounds ($13 billion) of sterling investment-grade corporate debt over 18 months, heightening competition in a relatively small market that is dominated by investors who favor sterling assets, such as U.K. pension funds. It also adds to a wider debt-market pinch, partly caused by the start of a similar European Central Bank corporate-bond buying program in June. Read more

China’s Big Debt Worries George Soros. Should It Worry You?

BEIJING — The global economy is full of risks right now. Growth is sluggish, and central banks seem powerless to fix it. Europe faces persistent challenges and division. In America, the election looms. But some say the biggest danger of all may be on the other side of the world, in China.

China is in the midst of one of the biggest borrowing binges in recent history. Its debt load reached $26.6 trillion in 2015 — about five times what it was a decade ago, and more than two and a half times the size of the country’s entire economy. That huge increase has prompted some economists and even the prominent investor George Soros to compare China to the United States before the 2008 financial crisis.

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DSCR Ratio – Debt Service Coverage Ratio | Complete Guide

Debt Service Coverage Ratio or DSCR Ratio – Ratio analysis is one of the pillars of financial statement analysis. This method establishes important relationships between the financial numbers stated in the financial statements of a company. These numbers are individually not as much revealing as their ratios with each other. Financial ratios give an idea about the profitability, efficiency, liquidity, solvency as well as the risk associated with the company.

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The Private Debt Crisis

Why does the IMF keep badly missing its global growth forecast? And what does that have to do with the 2016 presidential election?

In the years since the 2008 global crisis, when the world’s growth rates tumbled, the IMF has dutifully printed forecast after forecast predicting rebounding growth rates. But in reality, rates have fallen well short of these predictions, as seen in Chart 1.

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Capital pours into emerging-market debt funds

Capital pours into emerging-market debt funds

Fixed-income investors put $4.2 billion into emerging-market debt funds from June 30 to Aug. 31, and the investment flood is boosting returns, Morningstar said. For the year, the funds are up an average 12.37% when reinvested dividends are included in the calculation.

Webcast : Emerging Market Debt: Diversification and Yield Tuesday 4th October, 14:00 UK/15:00 CET

Emerging Market Debt: Diversification and Yield

Tuesday 4th October, 14:00 UK/15:00 CET

Presented by:

– Nicholas Hardingham, CFA, Emerging Market Debt Portfolio Manager and Analyst, Franklin Templeton Fixed Income

– Brendan Maton, IPE

Register now >>
Emerging Market Debt: Diversification and Yield

In the search for yield outside traditional government bonds, Emerging Market Debt (EMD) has been a significant beneficiary of this reallocation.

Much of this capital has been placed into more traditional EM issuers which in itself concentrates investors’ risks. Given the significant difference in correlation of hard, local and corporate EMD versus traditional fixed income, an active and blended approach could provide investors with diversification from core fixed income holdings whilst capturing the higher yields on offer.

Register now >>
Nicholas Hardingham, CFA, Emerging Market Debt Portfolio Manager and Analyst, Franklin Templeton Fixed Income
Nicholas Hardingham is a portfolio manager and analyst within the EMD Opportunities strategy group, based in London. Previously Mr. Hardingham worked as quantitative research analyst within the Global Fixed Income Group.

Prior to joining Franklin Templeton in 2002, Mr. Hardingham worked as a performance analyst at T. Rowe Price International.

Mr. Hardingham is a Chartered Financial Analyst (CFA) charterholder and earned a B.Sc. in pure mathematics from Imperial College, London.

Rising Rates Revisited

The prospect for and ramifications of rising interest rates have surfaced time and again in recent years. Whether and when the Fed will raise rates next is anyone’s guess. But as we’ve noted before, the correlation between higher interest rates and equity declines has grown tenuous in recent history.  Since 1991, the S&P 500 has Read more


WHAT: Live Q&A: Negative Rates
DATE: Wednesday, September 28
TIME: 11am (ET) | 8am (PT) | 4pm (BST)



Once thought to be impossible, negative interest rates are now common in many European currencies.

This presents a challenge for pricing and risk managing some rates derivatives and bonds with models that assume non-negative rate dynamics. Russell Goyder, Director of Quantitative Research and Development at FINCAD discusses the context for negative rates and the best approaches to modeling them and understanding their business impact, including:

  • Model requirements for negative rates
  • Building curves in a negative interest rate environment
  • Modeling swaptions: vol cube and SABR modeling, pros and cons Interest rate modeling beyond swaptions


Russell Goyder

Director of Quantitative Research and Development at FINCAD

Mark Gibbs

Chief Software Architect at FINCAD

John Hull

Professor of Finance
Co-Director of the Rotman Master of Finance Program
University of Toronto, Rotman School of Management