26
Jun/10

Institutional real estate portfolios

by admin under CEO, debt consolidation, forex, home equity, shareholders

In the US, there are early examples of house price securities. Financial assets based on real estate include stocks and bonds that began trading on the New York Real Estate Securities Exchange (NYRESE) in 1929. Unfortunately, with the collapse of real estate security prices, and capital markets in general, the SEC decertified the NYRESE as a national market in 1941.

After a long break, property derivatives came into discussion again. The first property swap, linked to the National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index (NPI), was completed in January 1993 (see property indices). Morgan Stanley intermediated the two counterparties. The seller was a large US pension fund that wanted to reallocate assets from property to equity, but did not want to buy or sell any property. The buyer, a medium-sized life insurance company, agreed to pay US$ LIBOR in exchange for income payments generated by properties.

In April 2005, NCREIF has awarded a mandate to Credit Suisse First Boston (CSFB) (renamed Credit Suisse Investment Bank on 1 January 2006) to develop derivative products based on the index. The derivatives were aimed at managers of institutional real estate portfolios, which Credit Suisse sees as a significant untapped opportunity for sophisticated risk-management products.

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19
Jun/10

The increase in housing prices and loan interests

by admin under CEO, business competition, business objectives, currency trading, shareholders, shares

One of the largest potential markets for property derivatives is the United States. In 2007, the Chicago Mercantile Exchange and Global Real Analytics estimate the US property derivatives market to grow to US$ 106 billion in three to five years.

In the past two decades, the US housing market has experienced strong growth. In the early 1980s, the median home value in the US was about US$ 60 000. By the end of 2004, it had grown to US$ 190 000. From 1999 to 2004, house prices on the coast sides more than doubled.

This increase in housing prices was paralleled by declining mortgage rates. In the early 1980s, mortgage rates approached 18 %. Then they gradually decreased to 6%by 2000. Given today’s high prices and the recent increase in mortgage rates, there is much speculation about what lies ahead. However, even if housing bubbles exist and do not burst, minor shifts in value and sales can result in substantial losses for entire sectors of the economy. Such an overheated market attracts both investors that seek a hedge and speculators. The possibility to transfer the market’s risk is thus becoming more important. Actually, the decline in house prices in 2007 that triggered the so-called subprime crisis has brought more attention to the property derivatives market and its hedging possibilities.

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10
Jun/10

A range of structured credit investments

by admin under CEO, currency trading, debt consolidation, forex, funds

First, the Royal Bank of Scotland (RBS) started to link its derivative products to the FTSE UK Commercial Property Index. RBS sold several five-year capital-guaranteed products tied to the FTSE index to high-net-worth individuals, and plans to develop products that will appeal to the retail market in the near future. FTSE and RBS claim that the index is much better suited for retail clients than the IPD index family. According to RBS, the lack of a liquid underlying asset remains a key issue with IPD indices. On the other hand, IPD claims that the FTSE index is not sufficiently accurate and robust, as it is drawn from a single fund. One fund is not going to behave exactly like the rest of the market, particularly when subsectors are considered. The annual IPD index references a portfolio of property that is valued at GB£ 192 billion, about 18 times larger than the FTSEpx reference portfolio.

However, Santander is also working on a range of structured investments based on the FTSE index for both retail and institutional investors. According to MSS Capital, other investment banks have also applied for an FTSE license, to use the index to create property derivatives including swaps and options. Mostly, banks intend to structure products based on the FTSE Commercial Property Index for retail investors. The FTSE brand for distribution of structured products is well known to these investors. There are many vehicles designed for the commercial real estate market, but besides the IPD derivatives market, there is so far no possibility of taking a short position in property. Further, property fund managers are benchmarked against the IPD Index and so will want to engage in derivatives relative to the IPD Index.

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3
Jun/10

A readily available credit hedging solution

by admin under business competition, business objectives, funds, home equity, merger, portfolio

Quotes on the HPI include maturities up to 30 years, i.e. a range much wider than for IPD derivatives. Trades on the HPI often take the form of CFDs with maturities quoted in steps of 12 months. The market uses the monthly, nonseasonally adjusted version of the Halifax HPI. Santander has also provided the seed capital for the FTSEpx fund launched by MSS Capital, an asset manager in the UK, in June 2006. This fund was launched along with the FTSE UK Commercial Property Index Series. The index series is designed to reflect the investment performance of retail, office and industrial property in the UK. The performance data for the index is derived directly from the dedicated FTSEpx open-ended fund. The fund is a Guernsey Property Unit Trust, listed on the Channel Islands Stock Exchange, and was invested in an underlying portfolio with exposure to more than GB£ 10.5 billion across all subsectors by March 2007 according to the FTSE press release, 1 March 2007. FTSE claims its index is an important advance for the market because it offers daily published figures, which should increase liquidity and make the index suitable for short-term trades (see property indices).

The FTSEpx offers a readily available hedging solution for derivatives writers. Since the FTSEindex is based on investable funds, replication of the index performance is easier than with the IPD Index. However, there has been very little trading volume in the FTSEpx derivatives so far.

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27
May/10

IPD indices cover the commercial real estate market

by admin under CEO, currency trading, debt consolidation, merger, portfolio, refinancing

IPD indices cover the commercial real estate market. On the side of residential property derivatives, contracts on the Halifax House Price Indices (HPIs) have been around since 1999 (see property indices). City Index Financial Markets and IG Index, two Londonbased spread betting firms, offer bets on UK average house prices on the nearest two quarters.

The bets are based on the Halifax House Price Survey. Goldman Sachs introduced call and put warrants and certificates on the Halifax All Houses, All Buyers and Standardized Average House price indices in 2004. The contracts of this first series expired in June 2006. Unlike the commercial property derivatives market, the residential property derivatives market started not as a brokered market in which counterparties would transact matched deals but was intermediated by a risk-taking institution. By 2007, over GB£ 2 billion of derivative trades based on the Halifax HPI have been executed.

Santander Global Banking & Markets claims to be the number one provider of residential property derivatives in the UK, with over GB£ 1.5 billion traded by 2007.4 The bank deals over-the-counter contracts as well as structured products such as capital guaranteed residential property bonds and warehouses the corresponding risk according to Andrew Fenlon, Head of Property Derivatives at Santander Global Banking & Markets. In conjunction with property agent Knight Frank, it developed a residential property plan, linked to the HPI and targeted at retail clients. Although the main interest and volume of property derivatives is in the commercial sector, i.e. on the IPD indices, several interdealer brokers also intermediate contracts on the HPI. Users of HPI derivatives mainly include mortgage banks and hedge funds.

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20
May/10

Banks and brokers are optimistic about credit

by admin under business competition, debt consolidation, forex, funds, home equity

In contrast to sector trades, contracts on the All Property Index experience good demand. Liquidity seems to have retreated from the sector indices back to the All Property Index. The sector indices would provide a more precise hedge for actual portfolios, but as long as there are only a fewsector trades, investors still prefer the more liquid All Property swaps. As the market develops further, it is hoped that more and more contracts on regional or sectoral indices take place. Moreover, the variety of property derivatives will increase with the further introduction of more contingent claims, i.e. call and put options. UK property derivatives have been traded mostly over-the-counter, but there are indications that a considerable exchange-traded market could emerge.

Banks and brokers are optimistic about market growth. In early 2007, Deutsche Bank estimated the total notional value of outstanding deals to be between GB£ 75 billion and GB£ 100 billion by 2010. For the same horizon, Goldman Sachs is seeing a volume of GB£ 150 billion. Back in 2005, TFS Brokers forecasted a cumulative notional value of GB£ 2 billion for 2006, GB£ 6 billion for 2007, GB£ 30 billion for 2008 and GB£ 240 billion for 2009. Further potential is certainly massive. Certain oil derivatives are said to be 16 times the underlying market.

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12
May/10

End-users are used to deal with payday loans

by admin under CEO, business objectives, funds, investment opportunities, merger

All of the banks that are licensed to trade IPD-based property derivatives are required to report their market participation quarterly on a deal-by-deal basis to IPD. Since January 2004, IPD has published aggregated trading volumes on the IPD indices, where it counts both sides of a deal. The cumulative notional value of executed trades on the IPD UK Index reached GB£ 12.215 billion by the end of the fourth quarter of 2007. The total accumulated number of deals was 923, making an average deal size of about GB£ 13 million. There were 553 new trades reported in 2007, with a total volume of GB£ 7219 billion. The first quarter of 2007 was particularly strong with GB£ 2.927 billion of activity. Although the majority of the trades was referenced to the UK All Property Index, few swaps have also been taken out on the property sector indices, i.e. offices, retail, shopping centers and industrial. End-users are used to deal
with slots between GB£ 10 and GB£ 100 million. The shape of the market has altered since 2004. The early deals were for relatively long periods, few in number and large in size. In 2007, there is a larger number of trades, but on average much smaller sizes and often short maturities. Table 5.2 shows the size of the property derivatives market traded on IPD Indices since January 2004.3 The UK property swap market offers a good liquidity, i.e. daily tradable bids and offer prices, out to five years. In August 2005, the only thing traders considered were three-year total return swaps on the All Property Index. In 2007, maturities range from six months to 15 years, but most trades are still between one to three years maturity. Short-term trades on the next available maturity resemble more an auction on the consensus for the returns of the running year rather than a long-term investment or hedge. UK IPD swaps often take the form of strips that use the monthly IPD index estimate as the initial fixing level and the actual annual index levels for the fixings thereafter.

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4
May/10

Confidence in the reliability and liquidity of loans

by admin under portfolio, refinancing, revenue, shareholders, shares

The convergence of a number of factors is creating the conditions for a significant and lasting market to take hold. The recent increase in demand for UK property investment is supported by a shift in UK institutional portfolio allocation towards property and by increased demand from a number of overseas sources. The increased turnover in the investment market and growth in the invested property stock improves confidence in both valuations and liquidity, which in turn support confidence in the reliability and liquidity of derivatives. Also, the recent high performance of commercial property and today’s uncertainty about future returns has stimulated interest from new investor types, including hedge funds, private equity and private investors. There is a larger variety of views and positions on the direction of the property market, which is creating both sellers and buyers of risk. The rapid growth of debt finance for
commercial real estate has brought a variety of participants, particularly the banks, into the property market. Derivatives are an obvious extension of the suite of tools used to access and manage risk in both the debt and equity spheres.

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16
Apr/10

Only a small interdealer market for credit

by admin under business competition, business objectives, debt consolidation, funds, home equity

Several brokers have joined forces with property agents to work as intermediaries, which is an example of how the physical property world and the financial world are converging. The alliance between the commercial property firm Cushman and Wakefield Finance and the interdealer broker BGC Partners is called Cushman andWakefield BGC (CW BGC), and draws on a client base that owns more than half of the GB£ 330 billion in theUKinstitutional property market. Similarly, as already mentioned, the real estate firm CB Richard Ellis (CBRE) joined forces with the interdealer broker GFI Group. Also, the property service provider DTZ, as well as Tullet Prebon, Cantor Fitzgerald, ICAP, Vyapar Capital Market Partners and OTC broker Traditional Financial Services (TFS) started brokering property derivatives. In March 2007, TFS has agreed a cooperation with theUKproperty group Strutt and Parker on theUKproperty derivative business. TFS has also formed a partnership with Property Investment Market, a platform that allows property investments to be exchanged. Combining the strengths in property with those in derivatives could help to educate potential users of property derivatives, including both banking and property clients.

By February 2008, there were 22 investment banks that are licensed to market derivatives on the IPD indices, but only a few of these are also prepared to warehouse risk. This means that there is so far only a small interdealer market. Some investment banks make available firm prices to their clients on a weekly or even daily basis, which will enable the investor to either value their position or to close it out early.

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18
Mar/10

Payday loan with a substantial amount of market risk

by admin under CEO, business competition, business objectives, currency trading, debt consolidation

ABN Amro, Goldman Sachs, Merrill Lynch and the Royal Bank of Scotland were among the most active from 2005 to 2007. Starting in 2006, Goldman Sachs offered property swaps and promised full liquidity; i.e. the bank was ready to warehouse a substantial amount of market risk. ABN Amro and Merrill Lynch also started to warehouse risk to an undisclosed limit. Some trades had a milestone character for the UK property derivatives market.

ABNAmro and Merrill Lynch claim to be the first banks that traded a sector-specific property derivative in November 2005, a 15-month swap based equally on the All Property Index on one hand and the Retail Sector Index on the other hand. The notional was GB£ 30 million for each transaction leg. The deal was brokered by a joint venture between the London property adviser CB Richard Ellis (CBRE) and interdealer broker GFI, set up to handle property derivatives transactions.

It was followed by the first subsector deal in August 2006, a GB£ 10 million total return sw p linked to the IPD Shopping Centre Index, again between ABN Amro and Merrill Lynch. It was also brokered by the CBRE–GFI joint venture at an undisclosed price. Merrill Lynch brought structured notes on this index to the market the same year.

In August 2006, Goldman Sachs launched the first London Stock Exchange-listed certificate linked to the IPD All Property Index. The denomination of such a certificate is as small as GB£ 10 and it has a maturity of five years. The investor receives a one-for-one exposure to the performance of the index return, subject to the fixed annual index adjustment of 2.8 %. Goldman Sachs marketed the product to both institutional and private investors.

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    Hello and welcome to my website! My name is Daniel Clarke. I am a certified business advisor currently employed by a major American firm as well as a professor at the University of Chicago. With as much as 16 years of experience in advising people about their money I prepared this blog as a comprehensible source of information on pay day loans with answers to most common questions about them and solutions to frequent problems and mistakes.

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