Safeguards against the Introduction of a Dual-Class Shares Structure
As revealed in a survey conducted in Asia Pacific by CFA Institute in March, a majority (60%) of the 450-plus respondents have not had any experience investing in firms with a DCS structure, which signalled the urgency for and need to educate investors and the general public on the implications of DCS structures.
The survey, “Dual-Class Shares and the Demand for Safeguards,” revealed that respondents in the region were divided when asked whether DCS structures should be introduced to the market, with 53% opposing the introduction and 47% in favour. Regardless of their position on DCS, almost all (97%) respondents considered it necessary to enact additional safeguards if DCS structures are permitted.
Among different possible safeguards, more than 90% of respondents considered it appropriate to implement enhanced mandatory corporate governance measures as well as time- and event-based sunset provisions, such as automatic conversion of shares with super voting rights to ordinary voting rights. Specifically, 94% of respondents considered it appropriate to introduce a time-based sunset provision; among which, 91% of such respondents considered it appropriate to convert shares with super voting rights to ordinary shares within 10 years. Separately, 93% of respondents considered introducing a maximum voting differential appropriate; 63% of these respondents found a 2:1 maximum voting differential optimal.
Despite the popularity of multi-asset strategies, especially after the global financial crisis in 2008, very few books have been written about the topic. The few books available, with their heavy use of mathematical formulas, are intended mostly for quants. There appears to be a void in terms of a multi-asset investing book for the majority of investors. This book is our attempt to fill that void.
When we first discussed this project with Paul Smith, CFA, president and CEO of CFA Institute, Paul’s advice was that we should aim to produce the book on the subject, not just a book. This is our first attempt at achieving that goal.
We focused on three features in putting this book together: (1) concise: each chapter is short enough to be read in 15–20 minutes, (2) accessible: the book is written in plain English and is entirely formula-free, and (3) authoritative: we have engaged the help of some of the brightest minds in this area from around the world. If our readers think we have succeeded in these three endeavors, we shall be quite content.
This book is about both concepts and practices in multi-asset investing. Part I focuses on two important concepts. Part II includes a few institutional case studies.
Chapter 1 sets the stage for the entire book. It explains the types of products under the multi-asset umbrella, highlighting how (properly managed) multi-asset-strategy products are different from the more traditional balanced funds and funds of funds.
In Chapter 2, Jason Hsu and Phillip Wool discuss how risk factor allocation can add value for investors who use asset classes in their asset allocation analysis. Although quants may find talking about this concept challenging without formulas, the two authors do just that. For the more quantitatively inclined, references to the more advanced papers are included.
In Chapter 3, Brian Singer, CFA, examines the role of both dynamic asset allocation (DAA) and tactical asset allocation using his overall investment taxonomy. DAA is a challenging topic, and a significant number of investors confuse it with market timing. Brian disputes that misperception, citing authorities ranging from John Maynard Keynes to Gary Brinson.
We dedicate Chapter 4 to risk parity, given its popularity among investors. Greg Allen analyzes both the theory and the historical performance of risk parity and provides a balanced and convincing assessment of the strategy.
Risk factor allocation has long been the domain of academics and quants. The Morningstar Style Box is an intuitive illustration of how average investors can put the concept to use in their daily investing. In Chapter 5, Jeff Ptak looks under the hood and gives readers an overview of both the methodology and the application of this useful tool for retail investors.
The last three chapters focus on real-life investor stories: A prominent Asian sovereign wealth manager and two veteran portfolio managers share their experiences in managing multi-asset portfolios.
A key theme that we try to convey is that all roads lead to Rome. There is no single “best” or even “right” way to manage multi-asset strategies. And getting started does not require that you possess all the needed skills (of course, the more edge you have, the more likely you are to succeed).
In Chapter 6, three GIC senior executives present GIC’s well-structured approach. GIC’s focus on the long term is an important feature and is appropriate given the long-term nature of its portfolio. GIC’s risk-and-return targets clearly reflect its emphasis on growing purchasing power over the long run.
Chapter 7 consists of an interview with Dennis Stattman, CFA, a veteran portfolio manager at BlackRock. Dennis started managing global asset allocation funds as early as 1989 and is a true pioneer in the field. He goes into the details of how he manages the products as well as how he has performed over the years. We believe the conversation to be deeply rewarding and hope our readers agree.
The book’s final chapter comprises a conversation with Ben Inker, CFA, a longtime portfolio manager at GMO who took over asset allocation products from Jeremy Grantham, the famed founder of the firm. Ben has a rather unique approach to investing, in general, and multi-asset strategies, in particular, that is rooted in both economic analysis and fundamental analysis and is implemented with a quantitative flair.
MANIPULATION IN SINGAPORE EQUITIES
AROUND COMPANY ANNOUNCEMENTS
WHAT IS MARKET MANIPULATION?
• Market Manipulation is defined as the deliberate creation of a false market in publicly traded securities with the aim of profiteering
• The study did not segregate types of manipulation; it is all-encompassing including illicit activities such as insider trading and ‘front-running’
• No evidence of broad-based manipulation around company announcements on Singapore Exchange (SGX) between Jan 2011 and Dec 2016
• Observed potential instances of manipulation around company announcements on SGX are standalone events and not part of a broader phenomenon
• Demonstrates that regulatory measures have been effective in preventing broad-based market manipulation
• Recommend certain announcement categories and sectors in which regulators may wish to strengthen oversight
This paper tackles the role inclusive businesses play in our economic growth. We shall also be tackling specific companies and their programs geared towards inclusive business and poverty alleviation. Lastly, we shall seek means on promoting this business model so that more would participate in this initiative.
We develop a theoretical model that shows that in the near future, the monetary policies of some key central banks in advanced economies (AEs) will have two dimensions—changes in short-term policy rates and balance sheet adjustments. This will affect emerging market economies (EMs), especially those with a pegged exchange rate, as these EMs primarily use a single monetary policy tool, i.e., the short-term policy rate. We show that changes in policy rates and balance sheet adjustments in AEs may differ in their respective financial spillovers to pegged EMs. Thus, it will be difficult for EMs to mitigate different types of spillovers with a single monetary policy tool. In that context, we use the model to show how EMs might use additional tools—capital controls and/or macro-prudential policy—to complement their monetary policy and financial stability toolkit. We also discuss how balance sheet adjustments that affect long-term interest rates may percolate to influence short-term interest rates via financial plumbing.
|In the latest issue (Issue 13 – August 2017), it covers the stories of:|
|Financial Crime Risk : Anti-Money Laundering Practices in Banking
To understand anti-money laundering, we have to understand what money laundering is. Money Laundering is the process of converting illegal funds into seemingly legitimate assets with the purpose of concealing the ownership or original source of these funds. This makes it difficult for the authorities to trace the origins of the funds. To counter this, the banking sector has established a set of internal regulations and system known as anti-money laundering. These are legal controls taken by financial institutions to investigate suspicious transactions to help prevent money laundering activities within the banking sector.
|The Rise of Text Mining in Financial Markets
The world is awash in data. Financial markets are awash in data. We are generating around 2.5 quintillion (2.5×1018) bytes of information every day, and there is an average of 4,000 brokerage reports a day comprising around 36,000 pages in 53 languages. As market participants try to maximize their competitive edge from the growing mountain of information, the nancial world increasingly feels there is a need to harness the power of big data and it has been shaping the way they acquire, analyze and utilize data. The recent development is the rapid expansion of text mining. Hence, this article will focus on the development of Text Mining technology as well as Text Mining technique.
MSCI ESG Research's latest Corporate Governance Country Report focuses on Corporate Governance in India. Our research finds concentrated ownership, related party transactions & succession planning represent key governance risks in India.
MSCI ESG Research products and services are provided by MSCI ESG Research LLC, and are designed to provide in-depth research, ratings and analysis of environmental, social and governance-related business practices to companies worldwide. ESG ratings, data and analysis from MSCI ESG Research LLC are also used in the construction of the MSCI ESG Indexes. MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc.
Financial Technology (FinTech) is here – sweeping through finance and, if some are to be believed, threatening traditional edifices that have stood for centuries.
This great surge is being fronted by a host of new start-ups taking their lead from the big tech innovators. Their maverick approach is helping to push the FinTech industry into new territory across the financial services landscape, raising billions of dollars and worrying the incumbents.
So what are the main trends and driving forces shaping FinTech today? Fintech – transforming finance explores the features of this new landscape, highlighting the many ways in which this revolution is taking place.
For professional accountants, this new terrain will provide many opportunities as it permeates deeper and deeper into the fabric of society. From the promise of blockchain, to the demands of valuation in a digital era, finance more than ever needs an experienced, knowledgeable guide to make the most of the opportunities ahead.
During the 2015 stock market crash, the Chinese government conducted an opaque bailout by injecting over ¥1.25 trillion ($200 billion) into the stock market. Sixty-three out of 1,406 government-purchased companies actively announced their bailout status in August 2015. The other government-purchased companies passively disclosed their bailout status through earnings reports in October 2015. We find a significantly positive market response to the first wave of active announcements of government bailout. Following the second wave of passive disclosure, the positive response deteriorated and eventually disappeared. Finally, retail investors reacted slowly and eventually overreacted to the bailout news, whereas institutional investors reacted promptly to profit from the opportunity.
Valuation Insights is a quarterly e-newsletter that provides you with the latest news from Duff & Phelps and the trends and changes in valuation and accounting that could affect your business transactions in Asia.
In this edition, our top stories cover the Financial Accounting Standards Board issuing an Accounting Standards Update, robust fair value measurement, the International Valuation Standards Council releasing the 2017 edition of its International Valuation Standards, and a recent Duff & Phelps study about fairness opinions.
We will also look at important Duff & Phelps reports and articles, including a recorded forum presentation by Professor Damodaran and the Duff & Phelps Global Regulatory Outlook 2017.