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Reuters HK – David Bonderman, one of the the most influential figures in the U.S. private equity industry, said on Thursday his firm, buyout giant TPG Capital TPG.UL, wanted to buy debt assets offloaded by troubled hedge funds.
Bonderman, speaking at the Asian Venture Capital Journal (AVCJ) conference, also said a global recession would be deep and prolonged, and the U.S. housing market would probably fall further.
"When people are giving you debt that is grossly mis-priced, you opt to take it," he said at the conference in Hong Kong.
Volatile markets have forced hedge funds to sell off assets and securities to pay back investors who are keen to scale back on risk and hold cash.
But private equity firms typically have long-term investors, with up to 10-year lock-up periods.
West Palm Beach (HedgeCo.net) – The leaders of the world’s 20 biggest economies will hold an historic meeting Saturday in a bid to head off the threat of a protracted global recession and forge a new world financial order. Called together less than two months ago by US President George W Bush, the emergency summit of the Group of 20 (G20) leaders at the Washington National Building Museum comes in the wake of the biggest crisis to engulf the world economy since the Great Depression.
Unleashed by the US mortgage meltdown, the upheaval in the world financial system that emerged in recent months has sent stock exchanges into a tailspin, undercut credit markets and prompted a drive for tighter worldwide regulation of the financial industry.
As the crisis spread from the United States to the wider world, the International Monetary Fund (IMF) last week forecast global growth would slow to 2.2 per cent in 2009, considered a global recession by the organization. Most advanced economies will contract over the same period.
Billed as a Bretton Woods-style gathering, after the 1944 meeting that established the post-Second World War financial system, this week’s summit marks the launch of a process world leaders hope will lead to an overhaul of the rule book for the global financial industry.
While a revision of the capitalist model itself may not be on the horizon, even financial institutions have recognized that more transparency and scrutiny of their business practices is now inevitable.
"We do believe that coming out of all this will be some rather fundamental reforms in the global financial architecture," said Charles Dallara, managing director of the Institute of International Finance (IIF), the world’s top banking lobby.
The IIF has even called for a new global body that could coordinate such reforms, but Dallara added: "I think it would be the height of misguidedness if we concluded that capitalism is dead. I think we do need to fix the things that went wrong."
But many governments have sought to lower expectations for the summit, while others have pushed for a broader agenda that could include climate change and trade policy.
"The summit has not been well prepared," said Heribert Dieter, senior fellow with the German Institute for International and Security Affairs in Berlin. "It is not clear what those attending the summit really want to talk about."
Indeed, a major risk facing the summit is that it could expose deep divisions between the US and other key G20 states, with the Europeans expected to try press for more regulation than the US believes is necessary.
At the same time, major emerging economies such as China, Russia and Brazil are likely to demand a key role in drawing up the blueprint for the new financial system.
Responding to the slew of proposals for the Washington summit, the White House has said world leaders will agree on a set of "principles" for a regulatory overhaul and leave the specifics to a later date.
Those principles could include raising the low capital requirements that precipitated the current credit crisis by allowing banks to take excessive risks and amass mountains of debt. International credit-rating agencies could also face tougher scrutiny, and the summit will likely set in motion moves towards closer co-operation between national bank supervisory bodies.
In addition, there are plans for a crackdown on tax havens as well as financial sectors that have so far managed to evade regulation, such as hedge funds.
One of the more concrete measures likely to result from the G20 meeting is an expansion of the role played by the IMF, a global lender of last resort that has also traditionally been charged with maintaining economic stability.
Governments, central banks and legislatures around the world have already taken a series of unprecedented measures in an effort to stabilize the financial system, including coordinated interest-rate cuts and billion-dollar rescue packages for struggling banks.
Yet governments attending Saturday’s meeting are likely to face calls for the implementation of generous national economic stimulus plans to help the world economy limp through the current uncertainty.
Morris Goldstein of the Peterson Institute for International Economics said investments of 1-2 per cent of gross domestic product should be offered by every G20 member government that can afford it.
In addition to the world’s leading industrialized countries such as the US, Germany, Japan, Canada, Italy, Britain and France, the G20 also includes key emerging economies such as China, India, Russia and Brazil, which have been a major source of global economic growth in recent years.
Coming less than two weeks after Barack Obama’s election and within a few months of Bush’s departure from the White House, the process will ultimately give the new president the chance to help reshape the global financial structure.
Obama will not attend the summit, stressing last week that the US only has "one president at a time," but the White House has said his team of economic advisors will be regularly informed on its progress.
Indeed, the scale of the changes that are to be considered are expected to take several months to implement and consequently form a key part of Obama’s early period in office.
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Reuters – David Bonderman, one of the the most influential figures in the U.S. private equity industry, said on Thursday his firm, buyout giant TPG Capital , wanted to buy debt assets offloaded by troubled hedge funds.
Bonderman, speaking at the Asian Venture Capital Journal (AVCJ) conference, also said a global recession would be deep and prolonged, and the U.S. housing market would probably fall further.
"When people are giving you debt that is grossly mis-priced, you opt to take it," he said at the conference in Hong Kong.
Volatile markets have forced hedge funds to sell off assets and securities to pay back investors who are keen to scale back on risk and hold cash.
But private equity firms typically have long-term investors, with up to 10-year lock-up periods.
"Since a lot of hedge funds have a side pocket with a two- to three- to four-year lock-up period, that means that liquid assets are under great pressure," Bonderman said. "And guys like us who have the capital should be buying them."
Asia would emerge from the global downturn earlier than elsewhere and was well-positioned for recovery, said Bonderman, TPG’s founding partner.
Hamilton Spectator – North American stock markets chalked up huge rallies late in the afternoon yesterday, resulting in one of the biggest one-day gains ever for the Dow Jones industrial average and a big bounce in Toronto.
Toronto’s S&P/TSX composite index rose 614.29 points or 7.2 per cent to close at 9,151.63. That mended a good chunk of the 757-point hole dug on Monday, when growing worries about the length and depth of a global recession pushed down Canada’s main index by eight per cent.
In New York, the Dow gained 889.35 points yesterday to rise almost 11 per cent to 9,065.12 — the second-biggest percentage gain on record for the world’s most-watched stock-market indicator
Bloomberg – Bank of England Deputy Governor John Gieve said investors are still facing “acute” stress as market declines force hedge funds to sell assets.
“The financial system remains under acute strain,” Gieve said in a speech in London today. “The falls in equity markets, corporate bond prices and the prices for leveraged loans is hitting both long-term institutional investors and leveraged investors, including hedge funds.”
The Bank of England said in a semi-annual report that $2.8 trillion in banking losses and the threat of a global recession are increasing risks to financial stability. Meanwhile, Prime Minister Gordon Brown yesterday suggested he may scrap decade- old fiscal rules to prop up the banking system as the nation faces its first recession since 1991.
Investment losses at hedge funds and insurers pose further risks to the system, the central bank’s report said, as insurers may fall short of capital requirements and face credit rating downgrades, while hedge funds may be forced to sell assets.
Reuters HK – Share prices were sharply lower at mid-morning, with the key index briefly slipping below the 12,000 level, on global recession fears and worries about hedge fund redemptions.
Dealers noted concerns that the Japanese yen’s surge against the US dollar will force more unwinding of positions by some funds as they seek to repay yen-denominated loans.
China banks were sharply lower after China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC) reported disappointing third-quarter results.
Commodity firms slumped on ongoing worries that a global economic downturn will reduce demand for energy and raw materials.
Reuters – Nations from Europe to Australia rushed out plans on Sunday to shore up their banks, trying to halt a markets crash with pledges to back lending, buy stakes in financial institutions and take other emergency steps.if(window.yzq_d==null)window.yzq_d=new Object(); window.yzq_d['Yl9NCdG_Rvc-']=’&U=13fiorehq%2fN%3dYl9NCdG_Rvc-%2fC%3d632663.12996380.13209191.6227634%2fD%3dLREC%2fB%3d4577807%2fV%3d1′;
European leaders meeting in Paris said their line of attack would help halt the chaos that has frozen credit markets, the lifeblood of the financial system, redrawn the world’s financial industry and threatened a global recession.
"I believe that we will see over the coming few days worldwide action that will make people see that confidence in the banking system can be restored," British Prime Minister Gordon Brown told reporters.
