The initial public offering of the financial instrument for betting on U.S. home prices has failed because its auction could not generate a balance of investor interest in the product's two linked trusts, according to a filing with the U.S. Securities and Exchange Commission.
MacroMarkets, which could not be reached for comment regarding how or when it might launch the product, stated in its SEC filing that it ultimately rejected all of the auction's bids because there was an "insufficient demand for an equal number of Down and Up shares."
That meant the company had to abandon the auction process because the product can function only if there are an equal number of shares in both the "up" and the "down" trust and if each pair of shares adds up to $50.
If the benchmark index falls, for example, a portion of the up shares' value moves into the down trust and the shares' prices adjust accordingly.
The company had already extended the auction in an effort to attract more and bigger institutional investors and had postponed the start of trading, scheduled for May 11.
MacroMarkets had originally set a minimum closing investment pool of $125 million. Chief Executive Sam Masucci declined to disclose the value of the bids received before the company decided to extend the auction.
Interest from institutional investors was greater than the original minimum, Masucci had said, but the institutions needed more time to understand the product and generate internal support for it.
MacroMarkets solicited investment from such parties as homebuilders or banks who want to hedge their housing exposure and foreigners who want to play in U.S. real estate.
Investors might have struggled to value the shares because doing so requires not only predicting the movement of the underlying 10-city index but also gauging the relationship between the index and home prices, said Dave Johnson, a trader based in Watertown, Connecticut, who focuses on exchange-traded funds, futures and commodities.
"There are other ways to get exposure to housing weakness," Johnson said. "You can play that with the homebuilders, or materials producers."
Johnson admires the theory behind the product but thinks it might not generate enough volume for him to trade in it.
"This could be a great tool if you could educate people on how it would work," he said. "There's a fear of getting involved in something new."
Robert Shiller, the Yale professor of economics who with Karl Case devised the widely watched housing index to which the product is pegged, has encountered this kind of caution on the part of investors already.
A futures market weighted to the 10-city index trades on the Chicago Mercantile Exchange, but thinly, said Shiller, who is also a co-founder of MacroMarkets.
If and when the housing trusts do launch, their shares will trade under the symbols UMM for "up" and DMM for "down" on the NYSE Arca, the New York Stock Exchange's all-electronic U.S. trading platform, according to SEC documents.
US govt to help state housing agencies -adviser
The federal government is set to release a plan to help state housing agencies make low-interest home loans, answering the agencies' recent pleas for assistance, a member of the U.S. Department of Housing and Urban Development will tell Congress on Thursday.
According to testimony from William Apgar, senior adviser to the department's mortgage finance secretary, HUD is working with the White House and Treasury to address the agencies' inability to issue bonds, the lack of liquidity support available to them and their balance sheet stress.
"The sidelining of HFAs could not come at a worse time for our housing and economic recovery," Apgar says. "HFAs are a key source of affordable, flexible mortgage money for lower-income first-time home-buyers."
The housing rescue plan passed in 2008 gave the agencies $11 billion extra in bonding authority.
The agencies issue debt in order to finance mortgages at low interest rates, but for many months they have been frozen out of the market. Investors are nervous about anything related to mortgages and the two large traditional buyers of the debt -- mortgage giants Fannie Mae and Freddie Mac -- have been unable to invest as they face their own troubles.
While Apgar could not give details about the forthcoming plan, said that Fannie Mae and Freddie Mac have consulted with its drafters and that state agencies project they could "issue $33 billion in tax-exempt bonds" should the market begin functioning properly again.
According to testimony from William Apgar, senior adviser to the department's mortgage finance secretary, HUD is working with the White House and Treasury to address the agencies' inability to issue bonds, the lack of liquidity support available to them and their balance sheet stress.
"The sidelining of HFAs could not come at a worse time for our housing and economic recovery," Apgar says. "HFAs are a key source of affordable, flexible mortgage money for lower-income first-time home-buyers."
The housing rescue plan passed in 2008 gave the agencies $11 billion extra in bonding authority.
The agencies issue debt in order to finance mortgages at low interest rates, but for many months they have been frozen out of the market. Investors are nervous about anything related to mortgages and the two large traditional buyers of the debt -- mortgage giants Fannie Mae and Freddie Mac -- have been unable to invest as they face their own troubles.
While Apgar could not give details about the forthcoming plan, said that Fannie Mae and Freddie Mac have consulted with its drafters and that state agencies project they could "issue $33 billion in tax-exempt bonds" should the market begin functioning properly again.
Treasury Short Sale Initiative Helps Housing
Treasury Department proposals to streamline the Short Sale process are a
welcomed development by the real estate industry. Cash incentives will now be
offered to lenders and homeowners who successfully complete a Short Sale. The
foreclosure alternative, which could have a beneficial impact on record high
housing inventories, has been a frustration to home sellers, buyers and real
estate agents.
With all its benefits, a combination of challenges has prevented all, but one in
10 Short Sale offers being rejected by lenders, who have been taking an average
of nine weeks to make a decision. As a result, 70% of homeowners facing
foreclosure never even attempt to sell their home. This situation has added more
foreclosures to the record high inventory of homes on the market and has lowered
home values even further.
Under provisions of the newly created "Foreclosure Alternatives Program";
eligible homeowners can be accepted through December 31, 2012, and the Short
Sale process will be streamlined with standardized documentation, cash
incentives to lenders and a moving allowance payment to the homeowner.
Analysts say the housing market can't return to normal as long as prices keep
falling, due to high inventories. Short Sales can play an important role in
reducing the current high inventory levels. RE/MAX International is committed to
creating an awareness of this viable alternative to foreclosure and to training
real estate agents who offer a professional Short Sell service to the consumer.
welcomed development by the real estate industry. Cash incentives will now be
offered to lenders and homeowners who successfully complete a Short Sale. The
foreclosure alternative, which could have a beneficial impact on record high
housing inventories, has been a frustration to home sellers, buyers and real
estate agents.
With all its benefits, a combination of challenges has prevented all, but one in
10 Short Sale offers being rejected by lenders, who have been taking an average
of nine weeks to make a decision. As a result, 70% of homeowners facing
foreclosure never even attempt to sell their home. This situation has added more
foreclosures to the record high inventory of homes on the market and has lowered
home values even further.
Under provisions of the newly created "Foreclosure Alternatives Program";
eligible homeowners can be accepted through December 31, 2012, and the Short
Sale process will be streamlined with standardized documentation, cash
incentives to lenders and a moving allowance payment to the homeowner.
Analysts say the housing market can't return to normal as long as prices keep
falling, due to high inventories. Short Sales can play an important role in
reducing the current high inventory levels. RE/MAX International is committed to
creating an awareness of this viable alternative to foreclosure and to training
real estate agents who offer a professional Short Sell service to the consumer.
U.S. housing starts, permits plumb record lows
New U.S. housing starts and permits dropped to record lows in April, while retail sales fell last week, according to reports on Tuesday that tempered optimism the nation's recession was drawing to a close.
Housing starts fell 12.8 percent to an annual rate of 458,000 units last month, the lowest on records dating to January 1959, the Commerce Department said.
The drop reflected a 46.1 percent plunge in groundbreaking activity for multi-family units and suggested homebuilding remains a drag on the economy. Starts for single-family homes, however, rose 2.8 percent, a second straight gain that showed the worst-hit part of the market was stabilizing.
New building permits, which give a sense of future construction activity, fell 3.3 percent to 494,000 units, the lowest since records started in January 1960. Compared to April last year, building permits plunged 50.2 percent.
Collapsing domestic home prices sparked the global credit crisis and helped throw the U.S. economy into recession in December 2007. Restoring stability to the housing market is a key element to an economic recovery.
Housing starts fell 12.8 percent to an annual rate of 458,000 units last month, the lowest on records dating to January 1959, the Commerce Department said.
The drop reflected a 46.1 percent plunge in groundbreaking activity for multi-family units and suggested homebuilding remains a drag on the economy. Starts for single-family homes, however, rose 2.8 percent, a second straight gain that showed the worst-hit part of the market was stabilizing.
New building permits, which give a sense of future construction activity, fell 3.3 percent to 494,000 units, the lowest since records started in January 1960. Compared to April last year, building permits plunged 50.2 percent.
Collapsing domestic home prices sparked the global credit crisis and helped throw the U.S. economy into recession in December 2007. Restoring stability to the housing market is a key element to an economic recovery.
Major banks funded U.S, subprime lenders-study
More than twenty of the largest subprime mortgage lenders relied on financing from U.S. banks that are now relying on billions of dollars in rescue funds, a report release on Wednesday concludes.
Most subprime lenders went bust or were acquired when a five-year housing boom ended in 2006 as home values began to decline, inventories swelled and foreclosures hit a record pace.
While most subprime lenders have vanished, their affiliates and parent companies have tapped $700 billion in federal aid more than a year after those risky home loans poisoned world financial markets.
On Thursday, U.S. bank regulators are due to report on how much fresh capital large banks need to weather the current downturn.
"The mega-banks that funded the subprime industry were not victims of an unforeseen financial collapse," said Bill Buzenberg of the Center for Public Integrity.
"These banks were deliberate enablers that bankrolled the type of lending that's now threatening the financial system."
Goldman Sachs (GS - news), Morgan Stanley (MS - news) and Bank of America (BAC - news) all backed New Century Financial Corp. which originated more than $75 billion in high-cost loans between 2005 and 2007, according to the non-partisan group. The center says it specializes in investigative journalism on issues of public concern.
In all, the Congress has cleared $700 billion in taxpayer money to help stabilize markets with Goldman and Morgan Stanley receiving $10 billion each while Bank of America got a $25 billion investment.
While subprime lenders are a thing of the past the rescue funds are going to aid brand name banks who quietly made big subprime bets, the report concludes.
"We are pumping cash into companies that contributed to their own demise," said John Dunbar, a researcher with the center, which combed through investor reports and government data to compile its report.
The authors of the report hope that it will serve as a "primer" for those who hope to better understand the roots of the current financial crisis.
More information on the report can be found at: http://www.publicintegrity.org/investigations/economic_meltdown/ (By Patrick Rucker; Editing by Neil Stempleman)
Reuters news, © 2009 Reuters Limited.
Most subprime lenders went bust or were acquired when a five-year housing boom ended in 2006 as home values began to decline, inventories swelled and foreclosures hit a record pace.
While most subprime lenders have vanished, their affiliates and parent companies have tapped $700 billion in federal aid more than a year after those risky home loans poisoned world financial markets.
On Thursday, U.S. bank regulators are due to report on how much fresh capital large banks need to weather the current downturn.
"The mega-banks that funded the subprime industry were not victims of an unforeseen financial collapse," said Bill Buzenberg of the Center for Public Integrity.
"These banks were deliberate enablers that bankrolled the type of lending that's now threatening the financial system."
Goldman Sachs (GS - news), Morgan Stanley (MS - news) and Bank of America (BAC - news) all backed New Century Financial Corp. which originated more than $75 billion in high-cost loans between 2005 and 2007, according to the non-partisan group. The center says it specializes in investigative journalism on issues of public concern.
In all, the Congress has cleared $700 billion in taxpayer money to help stabilize markets with Goldman and Morgan Stanley receiving $10 billion each while Bank of America got a $25 billion investment.
While subprime lenders are a thing of the past the rescue funds are going to aid brand name banks who quietly made big subprime bets, the report concludes.
"We are pumping cash into companies that contributed to their own demise," said John Dunbar, a researcher with the center, which combed through investor reports and government data to compile its report.
The authors of the report hope that it will serve as a "primer" for those who hope to better understand the roots of the current financial crisis.
More information on the report can be found at: http://www.publicintegrity.org/investigations/economic_meltdown/ (By Patrick Rucker; Editing by Neil Stempleman)
Reuters news, © 2009 Reuters Limited.
Mortgage investment reform wins US House approval
The rules of mortgage finance that held through a five-year housing boom and the current bust would change dramatically under a bill approved on Thursday by the U.S. House of Representatives.
By a 300-114 vote, the House approved a measure that would force mortgage lenders to retain a 5 percent stake in home loans they make, securitize and then sell to investors.
Mortgage brokers would face tighter oversight and lenders would have to prove that homeowners are well-served when they refinance a home loan under the rule. The legislation would also help renters fight eviction when their landlords default on their mortgages.
The House bill's future is uncertain since there is no equivalent Senate legislation. But its passage marks another step by congressional Democrats to overhaul financial regulation and shows bi-partisan support for such reform since 60 Republicans voted in favor of the measure.
"Things have changed. I think this will have momentum in the Senate," said Representative Barney Frank, chairman of the House Financial Services Committee.
Before the housing market started to dive in 2006, Wall Street routinely bought and bundled risky subprime mortgages, shifting 100 percent of the risk onto investors. The 5-percent "skin in the game" rule in the House bill is meant to end that.
Advocates for the risk-sharing provision say it will force banks to "eat their own cooking." But the bill also expands consumer protections.
Mortgage companies will have to prove that the homeowner derives a "net tangible benefit" from a refinancing. Consumer advocates have accused mortgage lenders of duping homeowners into refinancing their home for a quick cash fix that ended up costing the borrower much more in the long run.
Frank, a Democrat from Massachusetts, said that provision was still a bit unclear but its meaning would be found in the application of the law.
"Is it vague? To some extent, but that's what you do with the law and then they are defined by practice," he said. "In terms of net tangible benefit I would say to the person doing the loan, 'Would you tell your mother to do it?'"
The bill would also make sure that renters are notified when their landlord is in default and would give tenants ample time to find a new home.
On Wednesday, the Senate ratified the renter's rights provision, so that portion of the bill could move on a faster track than the rest of the legislation.
The Senate bill would let renters retain their original lease even if a bank has reclaimed the property.
By a 300-114 vote, the House approved a measure that would force mortgage lenders to retain a 5 percent stake in home loans they make, securitize and then sell to investors.
Mortgage brokers would face tighter oversight and lenders would have to prove that homeowners are well-served when they refinance a home loan under the rule. The legislation would also help renters fight eviction when their landlords default on their mortgages.
The House bill's future is uncertain since there is no equivalent Senate legislation. But its passage marks another step by congressional Democrats to overhaul financial regulation and shows bi-partisan support for such reform since 60 Republicans voted in favor of the measure.
"Things have changed. I think this will have momentum in the Senate," said Representative Barney Frank, chairman of the House Financial Services Committee.
Before the housing market started to dive in 2006, Wall Street routinely bought and bundled risky subprime mortgages, shifting 100 percent of the risk onto investors. The 5-percent "skin in the game" rule in the House bill is meant to end that.
Advocates for the risk-sharing provision say it will force banks to "eat their own cooking." But the bill also expands consumer protections.
Mortgage companies will have to prove that the homeowner derives a "net tangible benefit" from a refinancing. Consumer advocates have accused mortgage lenders of duping homeowners into refinancing their home for a quick cash fix that ended up costing the borrower much more in the long run.
Frank, a Democrat from Massachusetts, said that provision was still a bit unclear but its meaning would be found in the application of the law.
"Is it vague? To some extent, but that's what you do with the law and then they are defined by practice," he said. "In terms of net tangible benefit I would say to the person doing the loan, 'Would you tell your mother to do it?'"
The bill would also make sure that renters are notified when their landlord is in default and would give tenants ample time to find a new home.
On Wednesday, the Senate ratified the renter's rights provision, so that portion of the bill could move on a faster track than the rest of the legislation.
The Senate bill would let renters retain their original lease even if a bank has reclaimed the property.
Meltdown 101: How do foreign tax havens work?
BY MATTHEW PERRONE
Associated Press
WASHINGTON -- President Barack Obama's proposals to crack down on foreign tax shelters target obscure, complex financial practices that help some of the nation's biggest corporations hold on to billions of dollars.
Here are some questions and answers about tax shelters:
Q: What are foreign tax shelters?
A: Tax shelters are countries with corporate tax rates much lower than those of the United States, which make them popular for U.S. businesses looking to lower their tax bills.
Whereas the U.S. corporate tax rate is 35 percent, Iceland's is 15 percent and Switzerland's is just 8.5 percent. Many countries in the Caribbean don't tax corporations at all. Companies shift profits to subsidiaries in such low-tax countries to avoid paying the Internal Revenue Service.
Q: How do companies use tax shelters to save money?
A: One of the most popular tactics involves setting up multiple overseas subsidiaries to move profits from high-tax countries to low-tax countries. Under so-called ''check the box'' rules, companies can register their subsidiaries as separate units that aren't subject to U.S. tax rules.
In one scenario, a U.S. company could use operations in the Virgin Islands to avoid paying taxes on investments in Sweden. The company does this by setting up three new corporations: a subsidiary in Sweden, a holding company in the Virgin Islands as well as another subsidiary owned by the holding company.
The Virgin Islands subsidiary makes a loan to the Sweden subsidiary for a new facility there. The interest on the loan would be income for the subsidiary in the Virgin Islands and a tax deduction for the Swedish subsidiary.
Q: What happens to money stored in tax havens?
A: In most cases it stays there. Companies can avoid paying taxes on overseas profits indefinitely, as long as they don't bring it back to the U.S.
Q: How would the Obama proposal change the way companies operate overseas?
A: The proposal outlined today would not force companies to return profits from overseas to the U.S., a worst-case scenario for many company executives. Instead Obama would stop companies from deducting expenses in the U.S. that help support their operations overseas. This would have the effect of increasing their tax burden, since companies are generally able to deduct the vast majority of their expenses.
Associated Press
WASHINGTON -- President Barack Obama's proposals to crack down on foreign tax shelters target obscure, complex financial practices that help some of the nation's biggest corporations hold on to billions of dollars.
Here are some questions and answers about tax shelters:
Q: What are foreign tax shelters?
A: Tax shelters are countries with corporate tax rates much lower than those of the United States, which make them popular for U.S. businesses looking to lower their tax bills.
Whereas the U.S. corporate tax rate is 35 percent, Iceland's is 15 percent and Switzerland's is just 8.5 percent. Many countries in the Caribbean don't tax corporations at all. Companies shift profits to subsidiaries in such low-tax countries to avoid paying the Internal Revenue Service.
Q: How do companies use tax shelters to save money?
A: One of the most popular tactics involves setting up multiple overseas subsidiaries to move profits from high-tax countries to low-tax countries. Under so-called ''check the box'' rules, companies can register their subsidiaries as separate units that aren't subject to U.S. tax rules.
In one scenario, a U.S. company could use operations in the Virgin Islands to avoid paying taxes on investments in Sweden. The company does this by setting up three new corporations: a subsidiary in Sweden, a holding company in the Virgin Islands as well as another subsidiary owned by the holding company.
The Virgin Islands subsidiary makes a loan to the Sweden subsidiary for a new facility there. The interest on the loan would be income for the subsidiary in the Virgin Islands and a tax deduction for the Swedish subsidiary.
Q: What happens to money stored in tax havens?
A: In most cases it stays there. Companies can avoid paying taxes on overseas profits indefinitely, as long as they don't bring it back to the U.S.
Q: How would the Obama proposal change the way companies operate overseas?
A: The proposal outlined today would not force companies to return profits from overseas to the U.S., a worst-case scenario for many company executives. Instead Obama would stop companies from deducting expenses in the U.S. that help support their operations overseas. This would have the effect of increasing their tax burden, since companies are generally able to deduct the vast majority of their expenses.
Australia fund sees growth in property developments
A $5 billion Australian pension fund is looking at property development projects in Asia that it believes will allow it to capture future growth when an economic recovery kicks in, its chief executive said on Monday.
Hostplus, a pension fund for hospitality industry employees, has made investments in projects in Singapore and is considering others elsewhere in Asia, betting that developments rather than fully-leased properties will give it an advantage when demand for offices and retail space picks up.
"In Malaysia, we are looking at a retail opportunity with one of our investment partners. We have a number of opportunities that are presenting themselves in Japan in the commercial sense, in the industrial area," Hostplus Chief Executive Officer David Elia told Reuters in an interview.
Hostplus seeks an internal rate of return (IRR) of 12-15 percent for property development projects, Elia said.
Elia said the worst may be over for Singapore's economy.
"It's probably the first country that's probably been hardest hit in terms of the Asian region. We suspect that it's probably the first country to come out of it as well," he said.
"We would like to think that once the economy recovers ... we will be well positioned to take advantage of all that."
Elia noted that the supply of new buildings worldwide was limited due to tight lending, and construction costs have come down substantially, pointing to good opportunities for investing.
Australian pension funds have been hit hard by writedowns on unlisted property holdings as property value continues to fall, and Elia said Hostplus had had to write down some of its assets.
It allocates 18 percent of its funds to property, 4 percent of which is in overseas markets.
"Because we have strong liquidity coming in, it does put us in a privileged position to negotiate tremendous outcomes. There are fantastic opportunities for our members to going forward," he said.
Hostplus, a pension fund for hospitality industry employees, has made investments in projects in Singapore and is considering others elsewhere in Asia, betting that developments rather than fully-leased properties will give it an advantage when demand for offices and retail space picks up.
"In Malaysia, we are looking at a retail opportunity with one of our investment partners. We have a number of opportunities that are presenting themselves in Japan in the commercial sense, in the industrial area," Hostplus Chief Executive Officer David Elia told Reuters in an interview.
Hostplus seeks an internal rate of return (IRR) of 12-15 percent for property development projects, Elia said.
Elia said the worst may be over for Singapore's economy.
"It's probably the first country that's probably been hardest hit in terms of the Asian region. We suspect that it's probably the first country to come out of it as well," he said.
"We would like to think that once the economy recovers ... we will be well positioned to take advantage of all that."
Elia noted that the supply of new buildings worldwide was limited due to tight lending, and construction costs have come down substantially, pointing to good opportunities for investing.
Australian pension funds have been hit hard by writedowns on unlisted property holdings as property value continues to fall, and Elia said Hostplus had had to write down some of its assets.
It allocates 18 percent of its funds to property, 4 percent of which is in overseas markets.
"Because we have strong liquidity coming in, it does put us in a privileged position to negotiate tremendous outcomes. There are fantastic opportunities for our members to going forward," he said.
BlackRock says small caps to lead recovery
Small and mid caps, which are geared to economic growth, will lead the UK stockmarket as it recovers, said Richard Plackett, manager of BlackRock UK Special Situations Fund.
With the bear market "effectively over", he said, small and mid caps should outperform the broader UK stockmarket, as they did in 2003 when they rose 43 percent, compared with the wider FTSE All-Share market, which rose 20.9 percent.
Plackett told a news conference he had reduced the proportion of large caps in the fund, to the mid-30s percent from mid-40s last year.
The Fund has at least 50 percent in small/midcaps at any time: the proportion is currently 65 percent.
He said small caps do disproportionately well during periods of recovery.
However, he stressed the importance of having the flexibility to have large caps in the 544 million pound fund, and that this had helped last year, when smallcaps (defined by the Hoare Govett Smaller Companies Index plus AIM, ex investment trusts) fell 47.7 percent, and the FTSE All Share fell 30 percent.
But he said: "Look what happened to smallcaps when they came out of the last recession in 2003."
There are good reasons why small caps outperform at such times, he said, pointing to their higher fixed cost bases and higher operational gearing.
He also pointed to the recovery of certain companies, now small caps, "which started off as large caps".
He mentioned companies such as Persimmon PSN.L , Punch Taverns PUB.L , Barratt Developments BDEV.L , until recently in the FTSE 100. But now their recovery is helping the small cap index, rather than the FTSE 100.
However, the biggest holdings are in large caps: BG Group
BG.L , at 6.2 percent, Royal Dutch Shell RDSA.L , at 5.3 percent, BHP Billiton BLT.L , 4.3 percent.
Plackett said he looked for certain key attributes in companies: strong management, strong balance sheets, and cash generation.
He holds stakes in Micro Focus MCRO.L , a software provider, and Rotork ROR.L , which makes valve actuators.
"All valve actuation is is switches that turn valves on and off. They have concentrated in one narrow area, and have become world leaders in their field.".
"We like companies who stick to what they are good at," he said.
He said he was optimistic that the stock market rally would continue, and the markets "were becoming more relaxed about the economic environment" due to the "unparalleled policy response".
The BlackRock Special Situations Fund, launched in 1981, lost 29.6 percent in the year to March, but was in the first quartile in its benchmark.
The fund is usually invested in 50 to 60 companies.
The UK small caps index .FTSC is up more than 40 percent from its March 9 low. The FTSE 100 .FTSE is up 27.8 percent.
With the bear market "effectively over", he said, small and mid caps should outperform the broader UK stockmarket, as they did in 2003 when they rose 43 percent, compared with the wider FTSE All-Share market, which rose 20.9 percent.
Plackett told a news conference he had reduced the proportion of large caps in the fund, to the mid-30s percent from mid-40s last year.
The Fund has at least 50 percent in small/midcaps at any time: the proportion is currently 65 percent.
He said small caps do disproportionately well during periods of recovery.
However, he stressed the importance of having the flexibility to have large caps in the 544 million pound fund, and that this had helped last year, when smallcaps (defined by the Hoare Govett Smaller Companies Index plus AIM, ex investment trusts) fell 47.7 percent, and the FTSE All Share fell 30 percent.
But he said: "Look what happened to smallcaps when they came out of the last recession in 2003."
There are good reasons why small caps outperform at such times, he said, pointing to their higher fixed cost bases and higher operational gearing.
He also pointed to the recovery of certain companies, now small caps, "which started off as large caps".
He mentioned companies such as Persimmon PSN.L , Punch Taverns PUB.L , Barratt Developments BDEV.L , until recently in the FTSE 100. But now their recovery is helping the small cap index, rather than the FTSE 100.
However, the biggest holdings are in large caps: BG Group
BG.L , at 6.2 percent, Royal Dutch Shell RDSA.L , at 5.3 percent, BHP Billiton BLT.L , 4.3 percent.
Plackett said he looked for certain key attributes in companies: strong management, strong balance sheets, and cash generation.
He holds stakes in Micro Focus MCRO.L , a software provider, and Rotork ROR.L , which makes valve actuators.
"All valve actuation is is switches that turn valves on and off. They have concentrated in one narrow area, and have become world leaders in their field.".
"We like companies who stick to what they are good at," he said.
He said he was optimistic that the stock market rally would continue, and the markets "were becoming more relaxed about the economic environment" due to the "unparalleled policy response".
The BlackRock Special Situations Fund, launched in 1981, lost 29.6 percent in the year to March, but was in the first quartile in its benchmark.
The fund is usually invested in 50 to 60 companies.
The UK small caps index .FTSC is up more than 40 percent from its March 9 low. The FTSE 100 .FTSE is up 27.8 percent.
Foundation Source Launches Mortgage Assistance Program; Enables Private Foundations to Issue No-Interest Loans to Families in Need
First-of-Its-Kind Program Extends the Scope of Private Foundation Philanthropy by Providing Immediate Financial Assistance to Families in Danger of Foreclosure FAIRFIELD, Conn.--(Business Wire)-- Foundation Source, the nation`s leading provider of support services for private foundations, today announced an innovative, new program for private foundations, designed to provide immediate financial assistance to homeowners under the threat of foreclosure. Through the Foundation Source Mortgage Assistance Program, private foundations can now make unsecured, no-interest loans to individuals and families who are struggling to pay their mortgages due to job loss, reduced income or other events related to the current economic downturn. The program taps into the generous spirit of the company`s nearly 900 private foundation clients who have expressed a strong desire to extend the scope of their family philanthropy to include both traditional charities as well as individuals and families in need. The Mortgage Assistance Program, as conceived by Foundation Source, provides assistance as no-interest loans, known as program-related investments, not outright grants. As such, funds will be repaid to the foundation and will then be available for other charitable purposes. Foundation Source worked closely with legal counsel at Adler & Colvin (www.adlercolvin.com) to review and give final shape to the program. Adler & Colvin is a San Francisco law firm that represents nonprofit organizations and their donors and has substantial experience in representing private foundations that offer program related investments. Other details of the program include:
* Mortgage Assistance Program loans count toward the foundation`s annual 5% minimum distribution requirement in the year the loan funds are advanced. In future years, the minimum distribution requirement will be increased by the amount of the loan(s) repaid. * Funds are paid directly to the financial institution holding the mortgage, either in a lump sum, in monthly payments (full or partial) or in a combination of the two. * Loans are repaid in monthly installments for up to five years. * Due to IRS rules governing self-dealing, foundation officers, directors, trustees and substantial contributors, and their respective family members, are not eligible to participate in the program.
"The Mortgage Assistance Program is yet another innovation from Foundation Source designed to allow our clients to directly assist individuals and families in need," said Andrew C. Bangser, Foundation Source president. "This program joins other pioneering initiatives from Foundation Source that leverage a private foundation`s unique ability to grant philanthropic funds directly to individuals for hardship, emergency and medical purposes." Added Jeffrey D. Haskell, executive vice president, Tax & Legal Affairs, "While making grants directly to individuals in need can be an extremely rewarding form of philanthropy, it is avoided by most foundations due to complicated IRS regulations and requirements. Foundation Source has streamlined this process, so our clients can focus their foundation activities on assisting those who so desperately need help." Rob Wexler and David Levitt, principals with Adler & Colvin, noted, "Program-related investments are an invaluable tool that private foundations can employ to help out in tough economic times. Typically, program-related investment loans are made to organizations. This program is innovative because it enables foundations to make loans directly to benefit individuals in immediate need." About Foundation Source (www.foundationsource.com) Foundation Source is the nation`s leading provider of support services for private foundations. The company`s back-office, online and support services ease the burden, freeing foundations to focus more on mission, strategy and family priorities and less on back-office administration and compliance tasks. The result: better run foundations with greater social impact. Foundation Source was recently named Philanthropic Group of the Year by the editors of Private Asset Management. Today, Foundation Source provides its full range of award-winning services to nearly 900 private foundations coast-to-coast representing over $3.2 billion in foundation assets. Foundation Source provides its services through partnerships with the nation`s leading private wealth management firms, trust and estate attorneys and CPAs. The company is headquartered in Fairfield, CT with regional offices in Atlanta, Boston, Chicago, Denver, New York City, Philadelphia, Salt Lake City, San Francisco and Seattle. Foundation Source is a registered trademark of Foundation Source Philanthropic Services Inc. Foundation Source Chris Infurchia, 203-319-3704 cinfurchia@foundationsource.com Copyright Business Wire 2009
* Mortgage Assistance Program loans count toward the foundation`s annual 5% minimum distribution requirement in the year the loan funds are advanced. In future years, the minimum distribution requirement will be increased by the amount of the loan(s) repaid. * Funds are paid directly to the financial institution holding the mortgage, either in a lump sum, in monthly payments (full or partial) or in a combination of the two. * Loans are repaid in monthly installments for up to five years. * Due to IRS rules governing self-dealing, foundation officers, directors, trustees and substantial contributors, and their respective family members, are not eligible to participate in the program.
"The Mortgage Assistance Program is yet another innovation from Foundation Source designed to allow our clients to directly assist individuals and families in need," said Andrew C. Bangser, Foundation Source president. "This program joins other pioneering initiatives from Foundation Source that leverage a private foundation`s unique ability to grant philanthropic funds directly to individuals for hardship, emergency and medical purposes." Added Jeffrey D. Haskell, executive vice president, Tax & Legal Affairs, "While making grants directly to individuals in need can be an extremely rewarding form of philanthropy, it is avoided by most foundations due to complicated IRS regulations and requirements. Foundation Source has streamlined this process, so our clients can focus their foundation activities on assisting those who so desperately need help." Rob Wexler and David Levitt, principals with Adler & Colvin, noted, "Program-related investments are an invaluable tool that private foundations can employ to help out in tough economic times. Typically, program-related investment loans are made to organizations. This program is innovative because it enables foundations to make loans directly to benefit individuals in immediate need." About Foundation Source (www.foundationsource.com) Foundation Source is the nation`s leading provider of support services for private foundations. The company`s back-office, online and support services ease the burden, freeing foundations to focus more on mission, strategy and family priorities and less on back-office administration and compliance tasks. The result: better run foundations with greater social impact. Foundation Source was recently named Philanthropic Group of the Year by the editors of Private Asset Management. Today, Foundation Source provides its full range of award-winning services to nearly 900 private foundations coast-to-coast representing over $3.2 billion in foundation assets. Foundation Source provides its services through partnerships with the nation`s leading private wealth management firms, trust and estate attorneys and CPAs. The company is headquartered in Fairfield, CT with regional offices in Atlanta, Boston, Chicago, Denver, New York City, Philadelphia, Salt Lake City, San Francisco and Seattle. Foundation Source is a registered trademark of Foundation Source Philanthropic Services Inc. Foundation Source Chris Infurchia, 203-319-3704 cinfurchia@foundationsource.com Copyright Business Wire 2009
Subscribe to:
Posts (Atom)
