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Full stack fintech: Will finance have its Uber moment?
<p>In the world of fintech startups there is an important distinction to be considered: Is a business full stack and partial stack?</p> <p>The distinction is important because the emergence of full-stack startups could be the biggest threat to industry incumbents. Unsurprisingly, banks are so far throwing most of their  support behind partial stack fintech startups.</p> <p>In his blog,  Andreessen Horowitz and general partner Chris Dixon predicts a full-stack movement in the fintech space, similar what has been seen  in other sectors. But so far fintech start-ups are predominantly partial stack: taking new technologies and then selling or licensing them to big banks.</p> <p>The new approach is to offer an end-to-end solution, cutting out existing players. This is full stack. Think about what Uber has done to taxis, Netflix to cable, or what Tesla is on the verge of doing to the motor industry.</p> <p> If a fintech start-up can pull off a full stack solution, it is hard to replace. That said, the barrier to entry is high and the startup would need to be good at many different things - from software and hardware, to marketing and logistics - to make it a success.</p> <p>If there is a movement in this direction though, the banks should be nervous.<br /> Photo: me and the sysop</p>
Liquid alts actually did pretty well last month
Asset Management
<p>Of the asset management industry’s many subsectors, none have been as reviled lately as the burgeoning liquid alts space.</p> <p>They’ve been called “watered down hedge funds” at a time when hedge funds themselves weren’t even doing well, and their promise of daily liquidity seems to stymie any effort to deliver out of the park returns. Even their managers seem to have taken flak as well, with critics asking why would they do it if they were successful hedge fund managers in the first place.</p> <p>Goldman Sachs however, would like to point out how awesome the space did this rocky August:<br /> As Exhibit 1 shows, three of five GSAM Liquid Alternative Investments Peer Groups lost less than 1% over the most volatile stretch of the month, as measured by the S&amp;P 500’s closing price high (Aug. 10) and low (Aug. 25). While the S&amp;P 500 fell a total 11% over this period, the GSAM LAI Relative Value Peer Group, Tactical Trading/Macro Peer Group, and Event Driven Peer Group, lost 0.6%, 0.6% and 1.0%, respectively.</p> <p>Given the steep losses in equity markets, it came as no surprise to us that equity long/short funds were down as well, since, historically, these strategies have been more closely correlated with equity markets than certain other strategies.1 Still, the Equity Long/Short Peer Group lost less than half the S&amp;P 500’s decline (5.2%) – and also beat almost every individual S&amp;P 500 Index sector. (See Exhibit 2). The GSAM LAI Multistrategy Peer Group, meanwhile, comprised of funds incorporating several different alternative investment approaches, fell by less than a quarter the S&amp;P 500’s loss (2.5%).<br /> All five peer groups meanwhile thrashed the traditional “balanced” portfolio’s performance in the same time frame, with the worst-performing group – Equity Long/Short – declining 5.2% in August compared to the 6.59% drop suffered by an “illustrative” 60-40 portfolio.</p> <p>Does this make the case for Liquid Alts then? Goldman seems to think so, especially as drivers in well-diversified investment portfolios. It would’ve been great to see which funds they tracked for the study though.<br /> Photo: Kristian Niemi</p>
BlackRock is setting up a social impact fund. But why Japan?
Asset Management
<p>US asset manager BlackRock is setting up a new social impact fund and has decided to base it in Japan. It will be first fund of its kind in the country.</p> <p>An appetite for social impact funds has been steadily on the rise since the global financial crisis. Investors are seeing the value in seeking long term returns in investments that are based on both social and monetary returns.</p> <p>Many also realize that adopting ESG (environmental, social and governance) standards does not only keep some investors happy, but can also drive value.  </p> <p>In Asia much of this investment activity has, rather unsurprisingly, been focused on emerging economies that stand to benefit the most from ethical investing. Think of microfinance in India, or in agriculture in Indonesia. So it is interesting that BlackRock has decided to set something up in Japan. </p> <p>The so-called Big Impact fund will be offered to retail investors from September 30, reports the Asian Nikkei Review, and BlackRock will use a range of criteria to select 200-800 issues from 3,700 companies in developed economies. </p> <p>When you look at two of the fund’s target industries, pharmaceuticals and energy, the rationale for Japan comes clearer. The country's ageing population, and its ongoing struggle with energy security - born out its unstable dependence on nuclear energy - means the country’s is driving innovation and growth in industries that hold several environmental and social benefits.</p> <p>But its not just that. Corporate Japan's progress on governance and social responsibility is also big factor for BlackRock. The new corporate governance code adopted by the Tokyo Stock Exchange in June aims to strengthen management through outside director appointments and  urges companies to be more pro-active towards ESG value.</p> <p>It's early days, but BlackRock is not alone. Private Equity firm KKR has also eyed ESG opportunities in Japan. This year is inducted its recent healthcare acquisition Panasonic Healthcare Holdings in its Green Portfolio Program (GPP), an operational improvement platform that uses ESG  benchmarks for KKR’s portfolio management activities.<br /> Photo: Mr Hicks46</p>
Daily Scan: Chinese equities return to earth; Japan holds gains
Capital Markets
<p>Updated throughout the day</p> <p>September 17</p> <p>Good evening everyone. After heading for the stratosphere throughout the day, mainland shares began experiencing problems in the last hour trading and eventually wiped out all its gains. The SHCOMP finished the day down 2.1% while the SZCOMP ended the session down 1.48%. Hong Kong’s Hang Seng Index unfortunately fell victim to the selloff as well, though the H-shares Index – surprisingly – managed to hold on to its gains:</p> <p> Hang Seng Index: -0.53%<br /> H-shares Index: +0.65%<br /> Nikkei 225: +1.43%<br /> Topix: +1.31%</p> <p>Over in Europe, stock indices are beginning to dip lower with T-minus nine hours remaining until the Fed decision. The U.K.’s FTSE 100 is down 0.2%, Germany’s DAX slipped 0.1%, while France’s CAC dipped 0.2%. Here’s what else you need to know:</p> <p>Japan upper house OKs defence bills amid chaos. A panel in Japan's upper house on Thursday approved legislation for a security policy shift that would allow troops to fight abroad for the first time since World War Two, a ruling party lawmaker said.Opposition lawmakers tried to physically prevent the vote in a chaotic scene carried live on national television. The legislation has sparked huge protests from ordinary voters. Channel News Asia</p> <p>Another “coup”in Burkina Faso. Presidential guard officers in Burkina Faso have announced the dissolution of the transitional government. A new "national democratic council" has taken control, an officer said on state television. Interim parliament speaker Cheriff Sy said the move was "clearly a coup". BBC</p> <p>Singapore’s non-oil exports tumble 8.4% year-on-year. The decline in NODX (non-oil domestic exports) is due to a contraction in the export of both electronic and non-electronic products.  Electronic and non-electronic domestic exports fell 2.7% and 10.6% in August, respectively. Channel News Asia</p> <p>Chile coast rocked by 8.3 magnitude quake. At least five people were killed and 1 million evacuated from affected areas, when a powerful 8.3-magnitude earthquake struck Chile Wednesday. CNN</p> <p>Desperate migrants clash with police in Hungary. Hungarian riot police responded to one of the worst bursts of violence that this tense refugee summer has seen. Agitated migrants at the border crossing were pelted with water cannons, head-cracking batons and both tear gas and pepper spray. New York Times (paywall)</p> <p>Japan debates its pacifist policy - with a round of fisticuffs. Scuffles broke out in Japan's upper house today ahead of a vote on a controversial move by the government to expand the role of the armed forces. The bills would amend Japan's pacifist constitution to allow it to defend its allies overseas even when it is not under attack. BBC</p> <p>U.S. CPI falls for first time since January. In a massive stumbling block for Yellen et cie, America’s consumer price index contracted 0.1% in August while on a year on year basis, August CPI climbed just 0.2%, essentially unched from July. </p>
Daily Scan: Stocks rally before Fed announcement
Capital Markets
<p>&nbsp;</p> <p>Updated throughout the day</p> <p>September 16</p> <p>Good evening,</p> <p>The Federal Reserve began its two-day policy meeting on interest rates Wednesday. Everyone is wondering whether the Fed will raise interest rates for the first time in nine years. Over at Quartz, Matt Phillips asks a more basic question: Does the central bank have the firepower to make it happen? The world of finance has changed dramatically since the 2008 crisis -- in part because of Fed moves. Many of its traditional tools are no longer likely pack the same wallop. What's a central bank to do? U.S. stock futures were muted ahead of the rate decision, to be announced Thursday. Stocks rose Wednesday, riding off gains from energy. The Dow was up 0.8%, the Nasdaq gained 0.6%, and the S&amp;P 500 rose 0.9%. Oil jumped more than 5%, closing above $47/barrel. </p> <p>&nbsp;</p> <p>Here is what else you need to know:</p> <p>Texas teen arrested for making a clock. Ahmed Mohamed, a 14-year-old high school student, found himself in handcuffs after bringing a digital clock that he'd made from a pencil case to school. The school and local police accused him of creating a hoax bomb. The police say Mohamed should have told them more than the fact that the item in question was just a clock. On the upside, the attention from the arrest got Mohamed an invitation to the White House from President Obama. CNN</p> <p>GM close to settlement with Justice Department over faulty ignition switch. The Justice Department is expected announce a criminal settlement with General Motors this week that will likely force GM to pay millions in fines. GM is in trouble for failing to recall millions of cars with a defective ignition and then covering it up. Wall Street Journal</p> <p>GOP debate, part deux. Carla Fiorina joins 10 male candidates who will hash out the key issue of the day: How in the world did Donald Trump become the No. 1 Republican candidate? Tune in at 8 p.m. ET</p> <p>FedEx earnings disappoint as freight demand drops. The global carrier got hit by a slowdown in trade. FedEx lowered the outlook for the year, to $10.40 to $10.90/share for the year ending next May, down from previous guidance of $10.60 to $11.10/share. Also hurting profits: Higher costs on its relatively new ground delivery business. MarketWatch</p> <p>Gold surges as consumer price index weakens. The metal is on pace for its biggest one-day gain in a month, up 1.5%. The consumer price index in August fell 0.1%, well short of the Fed's target of annualized inflation of 2%. The news good convince the FOMC members who are meeting Wednesday and Thursday to think twice before raising interest rates. MarketWatch</p> <p>No pay raises for middle income earners in 2014. The median household income was a smidgeon higher at$53,657 from 2013 when the number stood at $54,462, the U.S. Census Bureau reported. The number of Americans living at the poverty level was also unchanged at 14.8% at 46.7 million vs 46.3 million a yea</p>
Kyle Bass cautions about mounting bad debts In China
Hedge Funds
<p>Kyle Bass, Hayman Capital Management founder and managing partner, sounded alarm bells on Tuesday, saying that Chinese banks will likely experience losses that may impact the country's economy as a whole.</p> <p>In his interview on CNBC’s “Squawk on the Street” on Tuesday, Bass said other Asian countries like Malaysia were also facing the same issue.</p> <p>&nbsp;<br /> Kyle Bass: China’s bank assets $31 trillion vs GDP of $10 trillion<br /> During his interview on CNBC, Kyle Bass said Chinese bank assets are up close to 400% since 2007, and now represent about $31 trillion against an economy with a gross domestic product of $10 trillion.</p> <p>Striking a cautionary tone, Bass said: “When you run a bank expansion that aggressively, that quickly, you’re going to have some losses”. He added: “the scary thing about that is a likely 10% asset loss in the banking sector would amount to $3 trillion."</p> <p>Elaborating further on the impact of such huge losses, Bass indicated that such huge losses would force China to use much of its foreign exchange reserves (which stand at about $3.6 trillion) and sell bonds to recapitalize the banking system.</p> <p>Bass indicated that when banks expand so aggressively, they’re entering the non-performing loans cycle in Asia. Touching upon the impact on other Asian countries, he said Malaysia is also facing the same issue, and as a result investors in emerging markets should carefully monitor the size of emerging market countries’ banking systems.<br /> Emerging markets account for 42% of global GDP<br /> Bass said the huge asset losses in the banking sectors are mirrored in many emerging markets, especially those in Asia, and could hence ultimately impact global GDP. He argues the ripples of an emerging market downturn could draw U.S. GDP lower than estimated, but countries like South Africa could be seriously impacted.</p> <p>He noted his investment group is closely watching nations that run twin deficits, and those that may have to devalue their currency "in order to come back to some level of competitiveness with the rest of the world."</p> <p>Striking a cautionary tone for the next two years, Bass said as the loan cycle forces emerging market banks to see steep losses, “the next two years are going to be tough”.</p> <p>Bass highlighted that Asian banks are experiencing a sustained period of increased loan losses, and that global gross domestic product growth would slow more than expected as a result.</p> <p>Underscoring the importance of emerging markets, Bass said emerging markets comprise 42% of global GDP. He reckons global GDP will slow more than people anticipate.</p> <p>Highlighting the forex outflow from emerging markets, Bass said that while money has flowed into emerging markets over the past decade, there was currently a “huge FX reserve drain”. Earlier, David Tepper of </p>
What traders do while waiting for the Fed to come out with its interest rate decision
Lifestyle, 4:01
<p>What did traders do before emojis?<br /> If Janet Yellen keeps rates low into 2016, we made this Bitmoji for you. Yellen be like. $SPY $TLT</p> <p>— StockTwits (@StockTwits) Sep. 16 at 11:51 AM</p>
Blackstone is 2016’s best bank to work for
Lifestyle, 4:01
<p>If you’re a banker, it’s pretty likely you spend a lot of time at the office, so it’s important to choose the right bank. This year, Blackstone, Goldman Sachs, and Morgan Stanley topped’s ratings, Finbuzz reports.</p> <p>The ranking and review website has published their annual ranking of the best banks.</p> <p>Blackstone, Goldman Sachs, and Morgan Stanley maintained their top three positions, and boutique banks like Evercore, Centerview Partners, Houlihan Lokey, and Greenhill &amp; Co. came in fourth, fifth, sixth. J.P. Morgan followed in eighth place, slipping from fourth in last year’s ranking.</p> <p>The only European-based bank to break into the top ten was Credit Suisse.</p> <p>The Vault banking 50 is compiled after interviewing banking professionals and using a weighted formula that is 40 percent based on prestige, 20 percent firm culture, 10 percent compensation, 10 percent business outlook, 10 percent overall satisfaction, 5 percent work/life balance, and 5 percent training.</p> <p>2016 Rank<br /> 2015 Rank<br /> Company</p> <p>1<br /> 1<br /> Blackstone</p> <p>2<br /> 2<br /> Goldman Sachs &amp; Co.</p> <p>3<br /> 3<br /> Morgan Stanley</p> <p>4<br /> 6<br /> Evercore</p> <p>5<br /> 5<br /> Centerview Partners</p> <p>6<br /> 7<br /> Houlihan Lokey</p> <p>7<br /> 8<br /> Greenhill &amp; Co., Inc.</p> <p>8<br /> 4<br /> J.P. Morgan</p> <p>9<br /> 9<br /> Perella Weinberg Partners</p> <p>10<br /> 10<br /> Credit Suisse</p> <p>11<br /> 22<br /> Bank of America Corp.</p> <p>12<br /> 11<br /> Peter J. Solomon Company</p> <p>13<br /> 13<br /> William Blair</p> <p>14<br /> 41<br /> Robert W. Baird &amp; Co. (Baird)</p> <p>15<br /> 19<br /> UBS</p> <p>16<br /> 12<br /> Moelis &amp; Company</p> <p>17<br /> 46<br /> Cowen Group, Inc.</p> <p>18<br /> 15<br /> RBC Capital Markets</p> <p>19<br /> 16<br /> Citi Institutional Clients Group</p> <p>20<br /> 14<br /> Lazard</p> <p>21<br /> 21<br /> Barclays (Investment Banking)</p> <p>22<br /> 20<br /> Deutsche Bank AG</p> <p>23<br /> 24<br /> Guggenheim Securities, LLC</p> <p>24<br /> 23<br /> Jefferies &amp; Company, Inc.</p> <p>25<br /> 25<br /> Rothschild</p> <p>26<br /> 26<br /> Wells Fargo &amp; Company</p> <p>27<br /> 27<br /> Allen &amp; Company LLC</p> <p>28<br /> 28<br /> Qatalyst Partners</p> <p>29<br /> 29<br /> Oppenheimer &amp; Co.</p> <p>30<br /> 31<br /> HSBC North America Holdings</p> <p>31<br /> 32<br /> Nomura Holdings, Inc.</p> <p>32<br /> 30<br /> Macquarie Group (U.S.)</p> <p>33<br /> 34<br /> BMO Capital Markets</p> <p>34<br /> 35<br /> Piper Jaffray Companies</p> <p>35<br /> 33<br /> BNP Paribas USA</p> <p>36<br /> 36</p>
Opportunity with emerging Asia ETFs
Asset Management
<p>With the MSCI Emerging Markets Index down about 14 percent this year, positioning the widely followed emerging markets benchmark for its third consecutive annual loss and fourth in five years, getting excited about developing world equities and exchange traded funds is increasingly difficult.</p> <p>Focusing on various regions of the developing world can cloud investors' mood even more. For example, the iShares S&amp;P Latin America 40 Index (ETF) (NYSE: ILF), thanks in large part to struggling Brazilian stocks, has tumbled about 25 percent year-to-date.<br /> Emerging Asian Markets<br /> ILF's Asia equivalent, the iShares MSCI Emerging Markets Asia ETF (iShares Inc. (NYSE:EEMA)), has been less bad with a year-to-date loss of 13 percent. No investor should be excited by a 13 percent slide in less than nine months, but Emerging Asia could be the one corner of ...</p> <p>Full story available on</p> <p>Photo:<br /> Photo: AK Rockefeller<br /> &nbsp;</p>
Apple looks to new markets for customers -- but does it fit?
Capital Markets
<p>The launch of Apple Inc. (NASDAQ: AAPL)'s latest array of products has raised many questions about whether or not The Fruit has bitten off more than it can chew. Its souped-up iPad Pro has been designed to fill the needs of businesses while new versions of the Apple Watch are expected to tap in to the luxury market.</p> <p>As Apple has always had mass appeal to the general public, some are questioning whether the firm can reach into these new spaces and still retain its primary customer base.<br /> Luxury Watch<br /> Apple's watches have been accepted enthusiastically as an improvement over previous wearable technology. However, some expect that its $1,500 luxury ...</p> <p>Read more at Benzinga.<br /> Photo: Niall Kennedy</p>