Deloitte - The Dots Luxembourg - Alternative Asset Tokenization
Here’s a shoutout to Wednesday’s Finverse Forum at The Dots Luxembourg! It was a pleasure to sponsor this stellar metaverse event around alternative asset tokenization platforms and technology enablers.
Let’s give a hand to Thibault Chollet, Jean-Paul Scheuren, Gabriel Übleis, CAIA, Dominik Kara, Antonio V., Otto Nino, John Cronin and Florian Le Goff for providing lots of food for thought.
SC Lowy
BEIJING/HONG KONG (Reuters) -China will launch a real estate fund to help property developers resolve a crippling debt crisis, aiming for a warchest of up to 300 billion yuan ($44 billion) in a bid to restore confidence in the industry, according to a state bank official with direct knowledge of the matter.
The move would mark the first major step by the state to rescue the beleaguered property sector since the debt troubles became public last year.
The size of the fund would initially be set at 80 billion yuan through support from the central bank, the People’s Bank of China (PBOC), the person, who declined to be identified due to the sensitivity of the matter, told Reuters.
He said state-owned China Construction Bank (OTC:CICHF) will contribute 50 billion yuan into the 80 billion yuan fund, but the money will come from PBOC’s relending facility.
If the model works, other banks will follow suit with a target to raise up to 200 to 300 billion yuan, he added.
A key pillar of the world’s second-largest economy, China’s property sector has been lurching from one crisis to another, and has been a major drag on growth over the past year. A revolt by homebuyers this month heaped more headache for authorities.
Some analysts said a fund would only provide part of the solution.
“We don’t know details of the fund yet. If just 80 billion it’s not enough to solve the problem,” said Larry Hu, chief China economist at Macquarie. “I believe the fund would be part of the bigger package to solve the current debt and mortgage crisis, because it alone would not solve all the problems … we need a real estate recovery.”
Reuters has reached out for comment from China Construction Bank, the PBOC and China’s cabinet, the State Council.
Global investors are fixated on any twists and turns in China’s property market, which along with related sectors such as construction, accounts for more than a quarter of the country’s gross domestic product (GDP).
The source said the fund will be used to bankroll the purchases of unfinished home projects and complete their construction, and then rent them to individuals as part of the government’s drive to boost rental housing.
Such a move would underline the importance the central government attaches to providing more affordable homes for young people at a time when some local governments have been reluctant to build rental housing because land sales are a major source of income.
Henan-government backed Zhengzhou Real Estate, which set up one of the first local bailout funds in the country last week with state-owned Henan Asset Management amid the mortgage boycott, plans to use 20 billion yuan to acquire 50,000 units and turn them into rental housing, according to a notice by the Zhengzhou authorities this month seen by Reuters.
LatAm Investor
How long can Latin America resist higher inflation and interest rates?
So far this year Latin America's economies have proved surprisingly resilient. Pollyanna De Lima, from S&P Global crunches the latest data and forecasts to explore the economic outlook for the region...
Overview
Latin American nations displayed considerable economic resilience during the second quarter of 2022, according to S&P Global’s PMI data, despite significant global headwinds. The outlook remains cloudy, however, as the war in Ukraine and sanctions imposed on Russia continue to exacerbate price pressures, thereby underpinning monetary policy tightening. Other challenges include ongoing disruptions to supply chains and political uncertainty, while the cost-of-living crisis and rising interest rates are expected to restrict consumption and investment.
In the opening quarter of the year, gross domestic product in Brazil, Colombia and Mexico all expanded by 1.0% from the preceding period, with only Mexico having failed to see a return to pre-pandemic levels. Since then, our timelier indicator — the Purchasing Managers’ Index (PMI) — strengthened and thereby signalled a more robust performance for the second quarter.
Despite a challenging global economic environment, and in line with stronger PMI results for Q2, our full-year forecasts for 2022 have been revised higher. GDP growth is expected to hit 6.2% in Colombia and 1.5% in both Brazil and Mexico. Included in the forecast assumptions are expectations of a slowdown in growth towards the end of the year, as higher borrowing costs and surging inflation dampen consumption and investment. On the monetary policy front, we anticipate year-end policy rates of 13.5%, 8.5% and 9.5% in Brazil, Colombia and Mexico respectively.
Substantive Research LTD
After 5 years of no-action letters and extensions, the SEC has announced that from July 2023 US providers will no longer be able to accept hard dollar payments from asset managers for research (with the exception of those registered as investment advisors)
SEC Staff Pulls Rug Out From Under ‘Hard Dollar’ Research Arrangements
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The Long and Winding Road to Financial Reporting Standards
2022 Review of Shareholder Activism
Mary Ann Deignan is Managing Director; Rich Thomas is Managing Director and Head of European Shareholder Advisory; and Christopher Couvelier is Managing Director at Lazard. This post is based on a Lazard memorandum by Ms. Deignan, Mr. Thomas, Mr. Couvelier, Emel Kayihan, Antonin Deslandes, and Leah Friedman.
Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism (discussed on the Forum here) by Lucian Bebchuk, Alon Brav, and Wei Jiang; Dancing with Activists (discussed on the Forum here) by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch; and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System (discussed on the Forum here) by Leo E. Strine, Jr.
Observations on Global Activism Environment H1 2022
Activity Slows vs. Q1 but Remains Robust
- Despite a challenging investing environment in 2022, activity remains elevated—Q2 was the second most active quarter in the past five quarters
- Global campaign activity for Q2 (53 campaigns) down 27% vs. Q1, in line with Q1/Q2 pattern of recent years
- Regionally, the decline was most acute in the U.S., where activity materially declined by 50%
- By contrast, Europe saw a strong Q2 with a 33% increase over Q1 levels
Technology Repositions as the Most Active Sector
- Technology companies accounted for 1 out of every 4 activist targets in Q2, resulting in Technology being the most targeted sector in H1
- Software, Services and Internet were the most active subsectors
- Primary activist objectives in Technology campaigns are in line with key themes across other sectors, with M&A, strategy and capital allocation dominating the narrative
First Timers Break Records and Diversify the Field
- First time activists accounted for 37% of all activists launching campaigns in H1, the highest level in recent years
- In addition, campaigns were more dispersed across the universe of activists, with the top 5 most prolific activists accounting for 19% of all campaigns in H1, which is below the concentration levels observed over the past 5 years
- The H1 top activists feature a broad range of investor types including established global players, regional and sector focused funds, and increasingly active ESG specialists and occasional activists
Financial Regulation, Corporate Governance, and the Hidden Costs of Clearinghouses
Paolo Saguato is Assistant Professor of Law at George Mason University Antonin Scalia Law School. This post is based on his recent article, published in the Ohio State Law Journal.
Recent financial market events have splashed onto the front pages of newspapers the often-overlooked plumbing found in those markets: the clearinghouses that handle trillions of dollars’ worth of securities and derivatives trades. During the Robinhood and GameStop events, the National Securities Clearing Corporation, a securities clearinghouse, played a critical role when it required Robinhood to provide collateral to guaranty its open positions. And recently, FTX US Derivatives, a cryptocurrency exchange, brought further attention to the clearing business and the critical risk mitigation and containment function it provides to the financial system when it applied to the Commodity Futures Trading Commission to offer clearing services for non-intermediated margined crypto derivatives.
Given the magnitude of the trades crisscrossing clearinghouses every day, these vital market infrastructures warrant more scrutiny than they have received. My article calls for policymakers to focus on the existing governance and financial structure of clearinghouses and urges them to seriously address a critical open issue in their organization: the misaligned incentives across clearinghouses’ main stakeholders—particularly their shareholders and their members—and how that misalignment might affect clearinghouses’ risk profile and financial resilience.
Clearinghouses are, in fact, corporations with a unique financial structure. Clearing members are financial institutions that access clearing services. While such members are the ultimate risk bearers of the business, they lack any formal governance rights over the firm. Instead, clearinghouses are controlled by their shareholders, who are large publicly-listed for-profit financial infrastructure groups. These shareholders retain all governance rights, yet have extremely limited financial skin in the game.
Delaware M&A Developments
Andre Bouchard, Kyle Seifried and Jaren Janghorbani are Partners at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul, Weiss memorandum by Mr. Bouchard, Mr. Seifreid, Ms. Janghorbani, Laura C. Turano, and Ross A. Fieldston, and is part of the Delaware law series; links to other posts in the series are available here.
In Totta v. CCSB Financial Corp., the Delaware Court of Chancery, in an opinion by Chancellor McCormick, held that a charter provision that gave the board “conclusive and binding” authority to construe the charter’s terms did not alter the standard of review applicable to fiduciary duty claims related to those board decisions. The applicable charter provision prohibited a stockholder from exercising more than 10% of the company’s voting power. In the face of a proxy contest, the board adopted a new interpretation of that voting limitation allowing the board to aggregate the holdings of multiple stockholders that the board determined to be acting in concert. Relying on that new interpretation, the board instructed the inspector of elections not to count any votes above the 10% limit submitted by the insurgent, its affiliates or its nominees. This instruction was outcome determinative and the insurgents brought suit to invalidate the board’s instruction to the inspector of elections. The company argued that the court was required to uphold the instruction based on the board’s “conclusive and binding” interpretation of the charter provision. The court rejected that argument, reasoning that a corporate charter (unlike an alternative entity’s organizational documents) cannot modify the standards by which director actions are reviewed, and that the board’s self-serving and new interpretation of the voting limitation in the face of a live proxy contest was inequitable because the board did not have a “compelling justification” under the Blasius standard of review for their interference with the election. Because the board’s actions were inequitable, the court ordered the inspector of elections to disregard the board’s instruction and count the insurgent’s votes that had previously been excluded.
ESG Investing
WEBINAR | CFA ESG Exam Tips and Strategies
A Short Introduction to GRI Standards
The foundation of sustainability reporting is for an organization to identify and prioritize its impacts on the economy, environment, and people - to be transparent about their impacts.
https://www.globalreporting.org/media/wtaf14tw/a-short-introduction-to-the-gri-standards.pdf
Financial Times
Britain’s asset management industry is pushing the government to establish a new class of fund employing blockchain technology, highlighting how financial firms are tapping the architecture that underlies the crypto market. The Investment Association, the trade body representing the UK’s asset management industry that oversees close to £10tn for clients worldwide, will call on Thursday for the government and City regulator to work “at pace” to approve blockchain-traded funds that will issue digital tokens to investors instead of traditional shares or fund units. Significant cost savings for end investors could be achieved by using the digital ledgers known as blockchain, to drive multiple efficiency improvements in the existing laborious processes involved in buying and selling mutual funds, according to the Investment Association. The group will also propose the creation of a new task force to examine how distributed ledger technology could accelerate the creation of new products and services as well as allowing more investors to customise their portfolios with holdings in private companies and cryptocurrencies.
Climate & Capital Media
“Standards setters are not competing with each other, they are competing with technology. But they don’t realize it.”
The following article originally appeared on GreenBiz.com as part of our partnership with GreenBiz Group, a media and events company that accelerates the just transition to a clean economy.
Whatever your take was on COP26, a key takeaway at the intersection of capital markets and climate was the formation of the International Sustainability Standards Board (ISSB). During the initial days in Glasgow, the IFRS Foundation announced the formation of the new board, an organization meant to develop a global baseline of sustainability disclosures for financial markets.
The formation has been widely celebrated in the sustainable finance community — a community that has grown substantially in the past decade and has swelled in the past year.
So what does the formation of the ISSB mean for the evolution and efficacy of ESG reporting? To answer that, I checked in with those who I thought would know better than most: Jean Rogers, founder of the Sustainability Accounting Standards Board (SASB) and, as of this month, global head of ESG at Blackstone; and Robert Eccles, founding chairman of SASB, professor of management practice at Oxford and a founder of the International Integrated Reporting Council (IIRC).
I found their insights on the ISSB to be unique and invaluable; promising, concerning and exciting alike. I think you’ll find their takes illuminating as well.
The following has been edited for clarity and length.
What most excites you about the newly formed ISSB and its ability to shift capital markets and the real economy to one that is clean and just?
Jean Rogers: Consolidation and maturing of the industry are essential. The opportunity to align global markets on an approach to ESG, while allowing jurisdictions to tailor standards to their priorities and point of view. For example, diversity in India is often interpreted as differing abilities rather than skin color. Decarbonization has a different meaning in Malaysia than in Canada.
Bob Eccles: Financial accounting standards and reporting requirements have created the deep and liquid capital markets we have today which have generated substantial wealth. But the information shaping these markets is now too narrow and too short-term for the capital markets to contribute to a sustainable society. Resource allocation decisions by companies and investors need to change, and the standards developed by the ISSB will give both the information they need to do so.
Read more below...
https://lnkd.in/e2BR-v2V