Today's Top Stories Also Noted: Spotlight On... SAC Capital launches insurance unit News From the Fierce Network:
Today's Top News1. Analyst bullish on Wells Fargo
Wells Fargo has picked up a ringing recommendation from Jefferies. "Wells is one of the strongest, most respected U.S. banks, which has led it to be a core portfolio holding for investors," writes analyst Ken Usdin, who has just initiated coverage. "The company enjoys a benevolent combination of offensive (dividend growth/buybacks, market share gains, portfolio acquisitions) and defensive (less exposure to headline/revenue risks vs. bigger bank peers, cost control program) characteristics. While investors have recently flocked to quality names like Wells, we still see directional upside in addition to relative downside support." It makes sense of course to look at Wells Fargo in the context of other massive consumer banks like JPMorgan Chase, Citigroup and Bank of America. TheStreet.com notes that Wells Fargo trades just above tangible book value, while its peer banks are still mired well below that level. In addition, Wells Fargo trades at nine times the consensus 2013 earnings estimate of $3.66 a share, among analysts polled by Thomson Reuters. Again, that multiple is higher that its peers, "reflecting Wells Fargo's stronger and more consistent earnings performance." Second-quarter earnings will be interesting to watch. Wells Fargo remains less encumbered by trading and investment banking activity compared with the others. It's a purer play on consumer banking. As the new leader in consumer mortgagers, it may be best positioned to benefit from strong mortgage refinancing activity in the second quarter. It reports later this week. For more: Related articles: Read more about: Stock Research, Equity Analysts 2. Hedge funds less trusting of prime brokers
Back in the pre-crisis days, the solvency of prime brokers was assumed. But that changed dramatically after the financial crisis. Now hedge funds worry that their prime brokers might run into Lehman Brothers-like troubles, which could easily make their lives a nightmare. This new reality is more than evident when it comes to cash holdings. While hedge fund once used to keep their cash with prime brokers, assuming it was safe, they now feel they have to transfer the cash to safer accounts. These days, endowments and other institutional investors want prime brokerages to sweep any excess cash into the safest of places, including Treasury bills held in custodial accounts, Treasury money market funds and direct deposit accounts at banks. Indeed, Institutional Investor notes that one hedge fund went with a "Federal Deposit Insurance Corp. package strategy," which called for spreading the hedge fund's cash, up to the $250,000 limit guaranteed by the FDIC, among 350 regional banks. The new attitudes toward cash have complicated business for prime brokerages, as they have no choice but to accede to customer wishes. We'll likely see some new cash management options emerge. There are plenty of smaller funds that still keep cash with their primes, and you can bet the primes will move to make sure this doesn't change. For more: Related articles: Read more about: Hedge Funds, prime brokers 3. CFPB simplifying mortgage app forms
Since the early 1970s, lenders have been required to provide two different disclosure forms to consumers applying for a mortgage and two different forms at or shortly before closing on the loan. Two different Federal agencies developed these forms separately, under two Federal statutes: The Truth in Lending Act (Regulation X) and the Real Estate Settlement Procedures Act (Regulation Z). These forms have long been considered confusing for some end customers. The information overlaps and creates an information vacuum that unscrupulous mortgage brokers and real estate agents can easily exploit. At a minimum, the paperwork is a pain for all parties. Pursuant to Dodd Frank, the CFPB has been studying how the process might be simplified and improved, and it has now proposed a concrete alternative. The first new form (the Loan Estimate) is designed "to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage for which they are applying. This form will be provided to consumers within three business days after they submit a loan application." The second form (the Closing Disclosure) is designed "to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction. This form will be provided to consumers three business days before they close on the loan." Both forms effectively consolidate at least five current forms, and purport to use plain language that makes it easier to find key information, such as the interest rate, monthly payments, and costs to close the loan. The forms also provide some analytical information to help consumers decide whether they can afford the loan. Banks can comment on most of the proposal up until November 6. However, comments on the calculation of the finance charge and Annual Percentage Rate (APR) and the delay of certain disclosures required by the Dodd-Frank Act are due on September 7. For more: Related articles: Read more about: disclosure, mortgages 4. Goldman Sachs exits target-date market
Target-date funds have proven quite popular among retail investors, as key holdings in retirement accounts, especially 401k accounts. One might think that the success of these products would attract a wealth of competitors, bent on garnering assets. But that's not necessarily the case. Despite the heady growth in this niche--net inflows to such funds rose more than 15 percent in 2011--some big brands are deciding to throw in the towel. Goldman Sachs, for example, has closed its U.S. target-date funds to new investors and intends to liquidate them upon approval from the funds' board of directors, according to the Financial Times. The publicatoin also notes that the firm is "the third in recent weeks to announce a plan to exit target-date funds. Last month, Columbia Management indicated it would liquidate the eight funds in its Retirement Plus series, which had been closed to new investors since April. OppenheimerFunds filed regulatory documents revealing its plan to merge its Transition Funds into risk-based funds, pending shareholder approval." The niche is dominated by mutual fund platform powers, the likes of Vanguard, Fidelity and T. Rowe Price, which collectively manage 75 percent of target-date funds assets. A proprietary record-keeping platform would appear to be an essential ingredient for success. For more: Read more about: Mutual Funds, Target Date Funds 5. Futures brokerage shut down as customer funds disappear
Could this be another MF Global? Shockingly, it may be happening all over again, this time in even more lurid fashion. The founder of tiny Cedar Falls, Iowa-based PFGBest apparently tried to commit suicide this week. Russell Wasendorf Sr. was found in a car near the company, with a suicide note. He remains in critical condition. The suicide attempt was part of a series of events that led the National Futures Association to shut down the firm, after the brokerage self-reported that roughly $220 million in customer money was missing. The NFA is an SRO for the U.S. futures industry. The brokerage itself was tiny to be sure, with offices in Cedar Falls and Chicago. It dealt with many small farmers and local traders. The company has frozen all funds on hold,and PFGBEST "is in liquidation-only status with our clearing FCM. What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBEST is not authorized to release any funds. We will update you as any new procedures are stipulated and with any further information as it becomes available," the company said. Reuters notes the views of one former employee, who "said he had grown concerned that Wasendorf didn't do more to distance the company from a massive $194 million forex-trading Ponzi scheme run by Trevor Cook in Minnesota, who admitted defrauding more than 700 investors. Cook is serving 25 years in prison. In February, PFGBest, which had acted as Cook's broker, was fined $700,000 by the NFA for failing to notice the scheme. The company was subsequently sued for $48 million by the receiver rounding up the assets from Cook's scheme." As for founder Wasendorf, he was a pillar of the community, which is shocked by this turn of events. The regulatory reverberations will be strong. For more: Read more about: commodities, futures Also NotedSPOTLIGHT ON... SAC Capital launches insurance unit As expected, Steven Cohen's SAC Capital has launched an insurance unit. SAC Re, based in Bermuda will be run by Simon Burton and will have $500 million in capital. It "plans to target a mix of high-margin property catastrophe and low-severity casualty reinsurance," notes Reuters. Other hedge funds have likewise moved in this industry. There's certainly something to be said for stable, predictable revenues over time. Article Company News: And Finally… Amazon phone vs. iPhone. Article
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | |||||||||||||||||||||||||||||
Wednesday, July 11, 2012
| 07.11.12 | Hedge funds less trusting of prime brokers
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment