Morgan Stanley to become top shareholder in China funds venture with stake increase

Morgan Stanley to become top shareholder in China funds venture with stake increase

A sign is displayed on the Morgan Stanley building in New York U.S., July 16, 2018. REUTERS/Lucas Jackson

SHANGHAI/HONG KONG (Reuters) – Morgan Stanley has won an auction to buy an additional 5.5 percent stake in its China mutual funds joint venture, in a deal that will make it the top shareholder of Morgan Stanley Huaxin Fund Management Co.

The Wall Street bank, which currently owns 37.4 percent in Shenzhen-based Morgan Stanley Huaxin, won the bid on March 30 to buy the additional stake for 25.04 million yuan ($3.73 million), according to the auction notice on Taobao.com.

Morgan Stanley is buying the stake from a private shareholder in a court-appointed auction, which will see its stake surpass that of Huaxin Securities, which owns 39.56 percent of the joint venture. The purchase needs to be approved by China’s securities regulators.

Morgan Stanley declined to comment.

Moves by Morgan Stanley to boost ownership in the fund venture comes as China is opening up its financial sector worth trillions of dollars – from insurance to asset management and brokerage – for bigger foreign participation.

    China has in recent months allowed many foreign financial institutions to either set up new businesses onshore or expand their presence through majority ownership in domestic joint ventures.

    Under new rules announced in late 2017, Beijing has also paved the way for foreigners to own up to 51 percent in their local mutual fund ventures.

    Besides the fund management business, Morgan Stanley also has a securities joint venture with Huaxin, in which the Wall Street bank raised its stake to 49 percent in 2017. The bank has previously expressed an interest in raising the stake further.

($1 = 6.7169 Chinese yuan renminbi)

Reporting by Samuel Shen and Sumeet Chatterjee; Editing by Muralikumar Anantharaman

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Huge inflows to U.S. high-yield bond, investment-grade debt funds

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(Reuters) – Investors’ appetite for risk-taking was strong in the latest week, as U.S.-based high-yield junk bond funds attracted more than $2 billion in the week ended Wednesday, marking the group’s fourth consecutive week of inflows, according to Refinitiv’s Lipper research service data.

Additionally, U.S.-based investment-grade corporate bond funds attracted over $2.9 billion in the period, extending their weekly inflow streak since early January, Lipper said.

Investors’ appetite for risk assets and their hunt for yield intensified after the Federal Reserve on March 20 brought its three-year drive to tighten monetary policy to an abrupt end. The Fed abandoned projections for any interest rate hikes this year amid signs of an economic slowdown, and said it would halt the steady decline of its balance sheet in September.

“Bond funds in general took off … when the Federal Reserve announced that it was taking its foot off the brakes – no more rate hikes until inflation warrants it and the balance sheet reduction program would be ending,” said Pat Keon, senior research analyst at Lipper.

In the fourth quarter, high-yield bond funds were the worst performing fixed-income funds peer group – down 4.54% – and the best in the first quarter – up 6.56%, Keon noted.

“The flip in investor sentiment regarding high-yield funds can be seen in the group’s fund-flows results, as they had net outflows of $20.7 billion in Q4 – second worst quarterly net outflow ever – and they have taken in $14.3 billion in net new money in Q1 – the second best quarterly net inflow ever,” Keon said.

Leveraged loan funds have been in a prolonged slump, however. Keon said they have had 20 straight weeks of outflows during which time they have seen over $24 billion in cash withdrawals. “Unlike the rest of the fixed-income universe, it is a negative for loan funds when the Fed holds rates static – or decreases rates,” Keon said. “This is because loans have floating rates that benefit from interest rate hikes.”

U.S.-based stock funds also posted another rough week. U.S. equity funds and domestic equity funds saw cash withdrawals of $3.9 billion and $3.8 billion, respectively. In the previous week, U.S. equity funds and domestic equity funds posted outflows of over $11 billion and $10.23 billion, respectively.

Reporting by Jennifer Ablan; Editing by Dan Grebler and Chris Reese

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Women running the money? Rarely at hedge funds

Women running the money? Rarely at hedge funds

LONDON (Reuters) – Generous salary and juicy bonus? Check. Client meetings at private members’ club? Check. Swanky Mayfair office? Check. Company maternity scheme? Maybe, we’ll get back to you.

Clare Flynn Levy, CEO of Essentia Analytics is seen in this undated handout photo obtained by Reuters March 28, 2019. Clare Flynn Levy/Handout via REUTERS

In the competition for talent, the hedge fund industry still has an edge over many other areas of finance, except, it would seem, when it comes to employing women.

Women are in the minority across the financial industry when it comes to top jobs. A Reuters analysis of regulatory filings shows the proportion is especially low among British hedge funds, most of which are private and not bound by disclosure rules.

Just seven women were hired or promoted last year as investment executives at 20 of Britain’s top private hedge funds, the lowest level in at least a decade, the analysis found. They took on 82 men in that period.

Of all the places to work in hedge funds, the investment team is the most coveted. Portfolio managers or traders decide where to invest client money and are traditionally the highest-paid members of staff. Such roles are a launch pad for star managers to set up their own firms in the future, establishing the next generation of hedge funds.

In Britain, these roles are registered with the Financial Conduct Authority (FCA) under a category known as the ‘CF 30’ function, which also comprises senior marketing jobs.

A Reuters analysis of CF 30 filings for 76 financial firms showed hedge funds registered women at a fraction of the rate of other finance companies.

(For a graphic on British hedge funds lag on diversity of key staff, click tmsnrt.rs/2UNZpml)

For an interactive version of the graphic showing registration rates across financial firms in Britain, click here tmsnrt.rs/2HA0lb3.

Hedge funds say they struggle to find women to work as portfolio managers and point out that women are better represented in other areas, including compliance and legal counsel. These are middle-office or back-office positions, rarely involved in investment calls.

People who work for or in financial services say more female candidates would emerge for trading positions if hedge funds cast the net wider for potential candidates, and offered better maternity packages and mentorships.

“Hedge funds will all say they don’t get female applicants but are they even looking for them? Do they care? The data suggests no they don’t,” said Yasmine Chinwala of think tank New Financial.

Unlike the rest of the financial sector, where large, listed companies are now required to disclose pay gaps between men and women, and are under public pressure to have more women in senior roles, hedge funds can mostly operate below the radar.

Usually privately-owned and run by their founders, they are not the target of government drives to improve female representation in finance.

“Public scrutiny, and more specifically, mandated government-backed scrutiny … delivers results,” said Chinwala. “These sectors have shown they are not going to make significant changes themselves without a big, concerted, external push.”

INVESTING BY NUMBERS

Three of the 20 top British hedge funds covered in the Reuters analysis commented about their record of hiring women.

“We have women represented across all functional areas of the firm as well as in senior management positions which are not covered by CF 30 registrations, which represents a small proportion of our staff,” a spokeswoman for Marshall Wace said.

The firm has registered three women in the CF 30 category since 2009 compared with 40 men over the same period.

“Algebris continues to invest in women’s careers, developing talent and creating the next generation of female leaders in finance,” said a spokesman for the firm, which registered nine women and 24 men as a CF 30 since 2009.

Emso Asset Management said 35 percent of its employees were women and said it paid employees for the first 26 weeks of their 52 week maternity leave. It has registered nine women and 30 men as a CF 30 since 2009.

“Our diversity in employee base reflects the diversity of markets within which we make investments,” Chief Operating Officer Rory McGregor said in an emailed statement.

Emso was the only one of the 20 hedge funds to comment publicly on its maternity pay.

Paid leave after becoming a parent can vary widely between firms. One portfolio manager told Reuters she had to argue her case to get paid while on maternity leave. She declined to be named for fear of damaging her career.

Valerie Kosenko, at recruitment consultant Mondrian Alpha, said maternity pay was an important consideration for a lot of women looking to work in the hedge fund industry.

“I don’t think hedge funds gave a lot of thought to it at all. It’s something that hedge funds can definitely improve.”

The 10 largest U.S. hedge funds with a UK office – including Citadel and Millennium Management – registered slightly more women than their British counterparts, at nearly 13 percent, in 2018, according to the Reuters analysis.

A spokesman for Millennium declined to comment. Citadel did not respond to requests for comment.

CF 30 is an imperfect measure of diversity because firms can have a different interpretation of the FCA guidelines as to who should be registered.

Some firms register investor relations staff as CF 30. Women tend to be well-represented in such jobs, meaning that the CF 30 category may exaggerate the actual number of women hired or promoted to be traders.

In the decade covered by the Reuters analysis, the ratio of women employed under the CF 30 designation by 20 of the top private British hedge funds never went above 23 percent and averaged 16 percent.

WHY TRY?

There are no comparable figures on hedge funds’ portfolio manager hires in the United States, but data on U.S. firms founded in the last few years show the industry remains dominated by men. Women-led firms managed only about 3 percent of the assets in new funds launched between 2013 and 2017, according to figures from Hedge Fund Intelligence.

Jane Buchan, who spent nearly 20 years allocating money as chief executive of PAAMCO, one of the world’s biggest investors in hedge funds, says female money managers have to work harder to get investors to trust them.

“Women need to outperform significantly in order to have the same asset levels as men who perform worse,” said Buchan, who now runs her own fund, Martlet Asset Management.

“With this sort of outcome, which can be shown in academic studies and what many women perceive from their own interactions with investors, why try?”

Man Group, one of the few listed hedge funds, is the only UK hedge fund firm to sign up to the British government’s Women in Finance Charter, which sets targets to increase female representation in the upper echelons of the City.

The London-headquartered firm is targeting 25 percent female representation in senior management roles by the end of 2020 from 22 percent last year and has introduced a number of measures to improve gender diversity, including a returners program for women who left the industry.

It offers 18 weeks paid leave globally for new parents, male or female.

Man Group registered five women as a CF 30 last year, but that represented a re-categorization to comply with European rules rather than new hires.

“We have concentrated on making sure internal people can meet their potential, introduced a lot of mentoring, ensured that we always consider a female candidate and looked at things that have historically slowed down hiring women,” said Man’s chief executive officer, Luke Ellis.

Women held 13 percent of investment management roles at Man Group globally in 2018, up from 11 percent in 2017 and 8 percent in 2013, a source familiar with the matter told Reuters.

THE SLEAZY BITS

Interviews with nine women who work or worked as portfolio managers in Britain and the United States, said hedge funds could be a tough sector for female investment managers. Some of them had experienced disparaging comments about their appearance or their investment abilities.

Male colleagues making unwelcome advances at female co-workers on nights-out was not an unusual occurrence, according to seven women who worked in a variety of different roles for hedge funds, including as traders.

One hedge fund reassigned the female toilet on the trading floor as a men’s toilet, meaning women on the investment team had to walk to another part of the building, two of the women said.

None of the women, who requested anonymity to avoid damaging their careers, worked at the hedge funds named in this story.

Clare Flynn Levy, a former hedge fund portfolio manager who now runs her own behavioral analytics company, said women might put up with a toxic work culture for a while but ultimately they tended to leave.

“In retrospect, I think I used a combination of working very hard, laughing off the sleazy bits and occasionally putting my foot down if I felt someone had crossed a line,” she said.

Slideshow (3 Images)

Kosenko, the recruitment consultant, said she has had a hard time convincing women to join hedge funds where they might be the first female on the trading floor.

But with investors increasingly considering diversity when deciding where to put their money, some hedge funds are looking to shake up their ranks. Last year, Kosenko had five meetings with hedge fund clients about hiring women. In the first few months of this year, she has had four.

“I think in general the big trend is let’s grow the talent and let’s go outside of what we are used to — white males from Goldman Sachs,” she said.

Additional reporting by Svea Herbst in Boston and Carolyn Cohn and Kirstin Ridley in London. Editing by Carmel Crimmins

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Equity funds see biggest weekly inflows in a year: BAML

BlueMountain names slate for PG&E board

LONDON (Reuters) – Investors plowed $14.2 billion into global equity funds this week, the largest amount in a year as investors jumped on to 2019’s stock market rally, Bank of America Merrill Lynch said on Friday, citing flow data provider EPFR.

An index of global stocks is up more than 16 percent since the end of 2018 as falling market volatility and a renewed dovishness from global central banks, led by the U.S. Federal Reserve has boosted risk appetite across the board.

BAML said most of the inflows went into exchange traded funds while mutual funds saw net outflows.

U.S. equity funds were the biggest beneficiaries with net inflows of $25.5 billion while emerging markets saw net outflows.

European funds also saw $4.6 billion of outflows after the European Central Bank slashed its growth forecasts and signaled a cautious economic outlook at its latest policy meeting.

The appetite for risk spilled over into bond markets as well with investment grade debt notching up the eighth consecutive week of inflows.

Reporting by Saikat Chatterjee; Editing by Tommy Wilkes

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Mutual funds start to put their mouth where their money is

Mutual funds start to put their mouth where their money is

(Reuters) – Corporate America’s biggest shareholders have traditionally been content with sharing their views on a company’s strategy privately with management.

FILE PHOTO: Logo of global biopharmaceutical company Bristol-Myers Squibb is pictured at the headquarters in Le Passage, near Agen, France March 29, 2018. REUTERS/Regis Duvignau/File Photo

But now some mutual funds are beginning to rethink their stance, amid pressure from investors for them to justify the fees they charge and a push to boost the performance of their holdings.

Wellington Management Company LLP’s decision last month to speak out against drug maker Bristol-Myers Squibb Co’s proposed $74 billion acquisition of Celgene Corp, calling what would be the largest-ever pharmaceutical takeover too risky and expensive, sent ripples across the investment world.

This is because these tactics have typically been the purview of activist hedge funds like Starboard Value LP and Elliott Management Corp, not a large institutional money manager like Wellington, with $1 trillion in assets under management.

But in the case of Bristol-Myers, Starboard spoke out publicly against the deal one day after Wellington unveiled its stance publicly.

Wellington’s vocal opposition to the deal is the culmination of some mutual funds gradually feeling more emboldened to publicly challenge a company’s strategy, asset management executives and corporate governance experts say.

“There has been a growing chorus among investors who want these firms to speak up. With Wellington speaking up, it is going to put pressure on the others to do the same,” said Lawrence Glazer, managing partner at Mayflower Advisors, which invests with Wellington funds.

In January, chemicals company Ashland Global Holdings Inc agreed to changes to its board after pressure from asset manager Neuberger Berman Group LLC, which has about $300 billion in assets under management.

T. Rowe Price Group Inc, which manages close to $1 trillion in assets, has opposed several acquisitions, including Michael Dell’s offer to take his eponymous computer maker private, because it felt the proposed deal undervalued the company.

Spurring on these funds to challenge companies publicly is the need to show their worth as so-called active money managers, picking stocks rather than just betting on indexes.

At a time their performance has been lackluster and many have struggled to keep up with their benchmark index, they are under pressure from index-tracking funds who are gaining more market share in asset management. These “passive” money managers charge investors far less, in part because they do not need the army of analysts and portfolio managers to make investments.

“More funds are willing to agitate in search of returns,” Mark Shafir, Citigroup Inc’s co-head of global mergers and acquisitions, said on Thursday at the corporate law institute conference organized in New Orleans by the Tulane School of Law.

RAMPING UP PRESSURE

Despite their deep pockets, taking a public stance on corporate strategy does not come easily to many of these funds, in part because they are unaccustomed to readying the kind of presentations aimed at swaying other shareholders.

For example, Wellington’s statement on Bristol-Myers Squibb’s Celgene deal was just four sentences long. By contrast, Bristol-Myers published a 46-page document defending its deal.

The world’s biggest active mutual fund managers, including Fidelity Investments and Capital Group, have preferred to use their influence discretely, taking advantage of their access to management to gain insight into a company’s strategy and offer feedback behind closed doors.

To stay on good terms with corporate management, large mutual funds have often been happy letting activist hedge funds agitate over a company’s perceived problems.

To be sure, even passive investors have started to pressure companies behind the scenes, especially on social, governance or climate change issues that a younger generation of investors cares more about.

For example, BlackRock Inc and Vanguard Group voted against management at oil major Exxon Mobil Corp in 2017 over its reluctance to disclose the risks it faced from climate change, and pressured weapons manufacturer Sturm Ruger last year over its refusal to publish a report about the safety of its products.

“Corporate America had better take note because the folks who actually pick stocks have finally decided to flex their muscles,” wrote Don Bilson, head of Event Driven Research at Gordon Haskett Research Advisors.

Reporting by Svea Herbst-Bayliss in New Orleans; Additional reporting by Ross Kerber in Boston and Mike Erman in New York; Editing by Greg Roumeliotis and Matthew Lewis

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BB&T agrees to return funds to investors to settle SEC charges

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WASHINGTON (Reuters) – The top U.S. securities regulator said on Tuesday that BB&T Securities has agreed to return more than $5 million to retail investors and pay a $500,000 penalty to settle charges that a firm it acquired misled clients about the cost of advisory services.

BB&T agreed to pay the amounts without admitting or denying the findings, the Securities and Exchange Commission said. The firm, Valley Forge Asset Management, allegedly lied to customers and provided inadequate disclosures about its brokerage services and prices to convince customers to choose it over less expensive options that were available externally, according to the SEC.

Reporting by Lisa Lambert;Editing by Leslie Adler

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