EDHEC-Risk Institute Partner News

Private equity:
• Financial Times (17/01/2011)
Big buy-out firms poor performers
“(...) The world’s largest private equity groups deliver
the worst returns for investors, according to analysis
of 7,500 investments over the past 40 years. The
research, conducted by the EDHEC-Risk Institute,
an arm of France’s EDHEC Business School, found
firms that hold a large number of investments
simultaneously “underperform substantially”. The
study, Giants at the Gate, also found returns from
private equity investment in emerging markets are
significantly below those in developed markets,
potentially undermining the industry’s ongoing push
into the fast-growing Asian markets. The report’s key
finding was that “the scale of private equity firms is
a significant and consistent driver of returns. Small
investments outperform large.” EDHEC ranked the
data in terms of the number of investments held
simultaneously, a proxy for the size of a private
equity firm. (...) EDHEC concluded, as private equity
firms become bigger, communication becomes
difficult and senior managers have less time for each
portfolio company. “It is possible that the quality of
the communication and the attention provided to [a
given] investment may be lower, ultimately leading to
poorer performance,” it said. (...)“
Copyright Financial Times Fund Management
Regulation:
(investor protection) objectives were talked about for
(Ucits), but regulators haven’t put their words into
action,” he says. “(Current) regulations have huge
holes in their safety nets.” In the study, available in
our research archive, EDHEC says making risks clearer
to investors would force managers into becoming
more accountable. Mr Sender says the current
reporting requirements under the Ucits regime are
not sufficient to keep investors well informed. (...)”
Copyright Ignites Europe
• Financial Times (30/01/2011)
Insurers gear up for new charges
“(...) New regulations governing the European insurance
industry could lead to a wave of selling of corporate
bonds and equities, commentators believe. (...) The
Solvency II directive, which sets new requirements on
capital adequacy and risk management for insurers,
aims to change investment behaviour by imposing
varying capital charges on assets. Equities will need
to be backed by reserves of 30-40 per cent, while
European sovereign debt is deemed risk free. (...)
Samuel Sender of the EDHEC-Risk Institute added:
“Corporate bonds will not be used really to hedge
liabilities. If you are holding corporate bonds you are
taking an extra risk.” (...) Mr Sender added: “Insurance
companies invest in low risk hedge funds to diversify.
If you have a higher capital charge, regulation almost
prevents you from doing that. You will have a shift
away from less risky investments.” (...)”
Copyright Financial Times Fund Management
• Ignites Europe (19/01/2011)
Ucits framework riddled with danger: study
“(...) The Ucits regime is riddled with dangerous holes
that pose a safety risk to investors, says the author
of a new study on the European fund industry. Ucits
funds have become increasingly sophisticated over
the past few years, and that fact has slipped the
attention of EU policymakers, warns Samuel Sender,
applied research manager at EDHEC-Risk Institute. The
emergence of counterparty, liquidity and sub-custody
risks have not been followed up with adequate rules
to protect investors, Mr Sender believes. “A lot of
• Financial Times (28/03/2011)
Action needed to shield investors from Ucits risk
Article by Samuel Sender, applied research manager at
EDHEC-Risk Institute
“(...) Non-financial risks have been increasing since
Ucits investment funds were first set up, but European
authorities and investment professionals failed to
study the impact of these risks when they facilitated
the evolution of the funds. In recent research
conducted by EDHEC-Risk Institute as part of the “Risk
and Regulation in the European Fund Management
Industry” research chair in partnership with Caceis,
EDHEC-Risk Institute Partner News - Issue nº 5 - April 2011 - 5