By David Hoffman, Investment News, April 14, 2008
As more companies begin to offer exchange traded notes, it's beginning to look like the small but growing ETN universe could one day be a competitor to mutual funds and exchange traded funds.
"ETNs are definitely a threat," said Jeff Ptak, director of exchange traded securities analysis at Morningstar Inc. of Chicago.
That's a problem for traditional asset managers because unless they partner with an investment bank, they may not be able to offer ETNs, which are actually debt instruments linked to an index.
Consequently, it's easier for an investment bank to bring an ETN to market than it is for a traditional asset manager.
A look at some of the companies offering ETNs illustrates the point.
UBS Investment Bank of New York, a unit of Zurich, Switzerland-based UBS AG, launched eight ETNs earlier this month. The UBS E-TRACS ETNs are the first of many the company hopes to launch before the end of the year, said Kurt Nelson, a managing director and head of ETNs at UBS.
Last month, Morgan Stanley of New York listed its first ETNs, the Market Vectors-Chinese Renminbi/ USD ETN and the Market Vectors-Renminbi/USD ETN.
Lehman Brothers Holdings Inc. of New York stirred things up in February when it launched Opta, an ETN platform, and three Opta exchange traded notes. The launch of Lehman's ETN platform followed the launch of the Elements ETN platform last August.
For David Hoffman's full article, click here.
SPA-2008
Thursday, April 17, 2008
SPA-2008: ETNs Elude Tax Strictures (Investment News)
By Jeff Benjamin April 10, 2008
Despite the best efforts of the Investment Company Institute to convince lawmakers to strip away the tax advantages of exchange traded notes, the structured products industry isn’t losing any sleep over the issue ... yet.
“You are not likely to see anything happen on this in 2008,” said Thomas Humphreys, a partner at Morrison & Foerster LLP in New York.
Speaking today at the Structured Products Association’s annual convention in New York, Mr. Humphreys explained that by zeroing in on ETNs, the mutual funds industry has effectively opened a broader debate over the tax treatment of all investment products.
The Washington-based ICI has been lobbying lawmakers to close a tax loophole that it claims gives ETNs an unfair advantage over mutual funds.
This effort was bolstered in December when Rep. Richard E. Neal, D-Mass., introduced federal legislation that would end the tax deferrals of ETNs.
The Internal Revenue Service has since opened the issue up to public comment until May 15, which Mr. Humphreys interpreted as meaning the IRS “doesn’t really know what to do.”
Part of the challenge of closing the loophole involves the link to a vast universe of other derivative products, according to Keith Styrcula, chairman of the New York-based Structured Products Association.
“The mutual fund industry was hoping for a rifle shot to take out ETNs, but it has instead introduced a wholesale look at all financial products,” he said.
“They’re now essentially faced with the challenge of going after a $500 trillion global derivatives market,” Mr. Styrcula added.
For the original source for this article, click here.
Despite the best efforts of the Investment Company Institute to convince lawmakers to strip away the tax advantages of exchange traded notes, the structured products industry isn’t losing any sleep over the issue ... yet.
“You are not likely to see anything happen on this in 2008,” said Thomas Humphreys, a partner at Morrison & Foerster LLP in New York.
Speaking today at the Structured Products Association’s annual convention in New York, Mr. Humphreys explained that by zeroing in on ETNs, the mutual funds industry has effectively opened a broader debate over the tax treatment of all investment products.
The Washington-based ICI has been lobbying lawmakers to close a tax loophole that it claims gives ETNs an unfair advantage over mutual funds.
This effort was bolstered in December when Rep. Richard E. Neal, D-Mass., introduced federal legislation that would end the tax deferrals of ETNs.
The Internal Revenue Service has since opened the issue up to public comment until May 15, which Mr. Humphreys interpreted as meaning the IRS “doesn’t really know what to do.”
Part of the challenge of closing the loophole involves the link to a vast universe of other derivative products, according to Keith Styrcula, chairman of the New York-based Structured Products Association.
“The mutual fund industry was hoping for a rifle shot to take out ETNs, but it has instead introduced a wholesale look at all financial products,” he said.
“They’re now essentially faced with the challenge of going after a $500 trillion global derivatives market,” Mr. Styrcula added.
For the original source for this article, click here.
Goldman's Golden Duo to Form $1B Hedge Fund (Bloomberg)
April 17 (Bloomberg) -- Josh Birnbaum, one of the traders who led Goldman Sachs Group Inc.'s push into bets against subprime-mortgage bonds, has left the world's biggest securities firm and plans to form a $1 billion hedge fund.
Birnbaum, 35, confirmed his departure and declined to elaborate on his plans. He has told colleagues he expects his new fund will invest in mortgage assets, according to two people familiar with his thinking who declined to be identified.
At least 70 funds have been established during the past year by firms such as New York-based Goldman, Blackstone Group LP and Pacific Investment Management Co. to snap up cheap home-loan debt amid the steepest drop in U.S. home values since the Great Depression. Birnbaum helped Goldman offset losses on mortgage holdings and earn a record $11.6 billion last year.
``The question is really, `What's his encore?''' said Geoff Bobroff, a consultant in East Greenwich, Rhode Island, who advises asset managers.
Birnbaum and Michael Swenson, another structured-products trader, pushed for New York-based Goldman's bets on a subprime collapse with backing from Dan Sparks, its mortgage-department head, the Wall Street Journal reported in December. Michael Duvally, a company spokesman, declined to comment.
Reporting by Bloomberg's Jody Shenn. For the full article, click here.
Birnbaum, 35, confirmed his departure and declined to elaborate on his plans. He has told colleagues he expects his new fund will invest in mortgage assets, according to two people familiar with his thinking who declined to be identified.
At least 70 funds have been established during the past year by firms such as New York-based Goldman, Blackstone Group LP and Pacific Investment Management Co. to snap up cheap home-loan debt amid the steepest drop in U.S. home values since the Great Depression. Birnbaum helped Goldman offset losses on mortgage holdings and earn a record $11.6 billion last year.
``The question is really, `What's his encore?''' said Geoff Bobroff, a consultant in East Greenwich, Rhode Island, who advises asset managers.
Birnbaum and Michael Swenson, another structured-products trader, pushed for New York-based Goldman's bets on a subprime collapse with backing from Dan Sparks, its mortgage-department head, the Wall Street Journal reported in December. Michael Duvally, a company spokesman, declined to comment.
Reporting by Bloomberg's Jody Shenn. For the full article, click here.
Thursday, April 3, 2008
SPA-2008: The Final Agenda for April 9-10, 2008
For a .pdf version of the SPA-2008 Agenda, click here.
THE FOURTH ANNUAL STRUCTURED PRODUCTS ASSOCIATION CONFERENCE
Wednesday, April 9 & Thursday, April 10, 2008
Grand Hyatt Hotel, New York City
Day One (Wed, Apr 9): The Distribution Perspective
8:15 – 9:00 -- REGISTRATION and BREAKFAST
9:00 - 9:45 -- THE DEALERS - The Cause and Effect of the $114 Billion YearJennifer Zogg, E*Trade
Michael Leon, Northern Trust
Michael Prucher , Fidelity Investments
9:45 - 10:30 -- WHOLESALERS and the THIRD-PARTY CHANNELS
Scott Greenwood, JVB Capital
Kevin Mahon, Countrywide
Scott Colyer, FIS-AAM
10:30 – 11:15 -- NEW STRUCTURED PRODUCTS DISTRIBUTORS -- Opportunities and Challenges
Guy Gregoire, Pershing
Mike Forstl , Nuveen Investments
Som Seif, Claymore (Canada)
Jason Hubschman, DWS Scudder
11:15 - 11:45 -- Interactive Segment: SPA-NUMERIX STRUCTURED PRODUCTS IQ CHALLENGE
The audience competes with electonic devices to win an Apple iTouch and other prizes by matching wits and being fastest on the draw to answer brainteasers on the industry and the investment class from StructuredRetailProducts.com, InCapital and FIS-AAM Securities. Sponsored by NUMERIX.
11:45- 12:30 -- THE NEXT WAVE, Part 1 - Thinking Outside the Box
Kevin Ireland, ALPS
Ryan Johnson, Foreside Advisors
Steve O'Grady, Kellogg Group
12:30 - 1:45 -- LUNCH -- Click here for menu.
1:45 – 2:15 -- The First Annual SPA LeadingEdge Advisors Awards
co-sponsored by Societe Generale CIB
2:15 – 3:00 -- INVESTMENT ADVISORS - Looking Into The Future of Structured Products
Frederick Wright, Smith & Howard Wealth Mgmt
Steve Braverman, MyCFO Harris Bank
J. Scott Miller, Blue Bell Private Wealth
Tony Proctor, Proctor Financial
Tom Balcom, Financial Planning Association
3:00 - 3:20 -- UPDATE: SIFMA’S GLOBAL PRINCIPALS FOR STRUCTURED PRODUCTS
John Maurello, SIFMA
3:15 – 4:00 -- THE FIRST TRILLION: Structured Products’ Untapped Opportunities
Gerry Nowotny, Long Gray Line Consulting
Jaeson Dubrovay, NorthEast Pension Consultants
George Varinos, HSBC Halbis
Russell Kamp, INVESCO
4:00 – 4:45 -- Interactive Segment: SPA FIRST ANNUAL “ELEVATOR PITCH” COMPETITION
Hosted by John (JT) Tessar
Forget the Final Four, American Idol or the Democratic primaries – SPA-2008 is where the action is. SPA-2008 closes out Day One with your favorite Structured Products Marketers facing-off in an interactive competition to see who has the best 120-second pitch for a structured product. Your vote counts – with interactive touchpads.
5:00 - 6:30 -- SPA-2008 COCKTAIL RECEPTION: co-Sponsored by Barclays Capital
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Day Two (Thur, Apr 10):
The Issuer Perspective
The Issuer Perspective
8:15 – 9:00 -- REGISTRATION and BREAKFAST
8:45 – 9:00 -- DAY 2 OPENING REMARKS9:00 – 10:00 -- DYNAMIC INDEXING & FUND LINKED STRUCTURES
Moderator: Ray Shirazi, Cadwalader
Bill Bamber, Bear Stearns
Adrienne Browning, Deutsche Bank
Laura Burns, Lehman Brothers
Joe O'Connor, Deutsche Bank
Muriel Asmar / Olivier Daguet, Societe Generale (TBD)
10:00 - 10:45 STRUCTURED PRODUCTS and the STATE OF INDEXING: “New and Novel”
David Blitzer, Standard & Poor’s
10:45 – 11:30 -- STRUCTURED PRODUCTS 2008 and Beyond: Experts Roundtable
Philippe el Asmar, Barclays Capital
Stephanie Bosio ,Calyon
Eric Miller, HSBC
Brian Jones, ABN Amro
Raina Mathur, Societe Generale CIB
11:30 – 11:40 -- Special Announcement – SPA and WSJ in Fall 2008
Steve Schwartzkopf, Wall Street Journal
11:40 – 12:30 -- TAXATION: Current Issues
Thomas Humphreys, Morrison & Foerster
John Rogers, U.S. Treasury
Mark Perwien, Goldman Sachs
Chris Pinho, UBS
12:30 - 1:45 -- LUNCH -- Click here for menu.
1:45 – 2:15 -- INNOVATIVE INDEXING – Going After the Mutual Fund Assets
Richard Ciuba, Dow Jones Indexes
Matthew O’Connor, Lehman Brothers
Serge Troyanovsky, BNP Paribas
2:15 – 3:15 -- CHALLENGES & SOLUTIONS: The Experts Speak
= EDUCATION: Allen Ferrell, Harvard Law School
= CREDIT: Martine Mills Hagen, Eksportfinans
= TECHNOLOGY: Mirko Filippi, Bloomberg
= RESEARCH: Tim Mortimer, Future Value Consultants
3:15 – 4:00 -- THE MARKET – Latest Reports on the Industry
Andy Awad, Greenwich Research
Joe Burris, Structured Retail Products, Arete Consulting
4:00 – 4:15 -- CLOSING THOUGHTS
Friday, March 28, 2008
Wednesday, March 26, 2008
WSJ on Reverse Convertibles: "Risky Strategy Offer Lucrative Payouts, But Could Cause Steep Losses"
Risky Strategy Lures Investors Seeking Yield
Popular 'Reverse Convertibles' Offer Lucrative Payouts But Could Cause Steep Losses
By ELEANOR LAISE
Wall Street Journal
March 26, 2008; Page D1
Wall Street is luring income-hungry investors with complex securities that come with big risks as well as extravagant yields.
The products -- called "reverse convertibles" -- are typically linked to the performance of a single stock like Apple Inc. or AT&T Inc. and often offer yields ranging from 7% to as high as 25% or more. Sales on these notes have been soaring as yields on many fixed-income investments have been sinking. Small U.S. investors snapped up $8.5 billion worth of reverse convertibles in 2007, up 81% from 2006, according to Arete Consulting LLC, which tracks the products.
At Incapital LLC, a distributor of reverse convertibles, sales doubled in 2007 from a year earlier, says Chief Executive Tom Ricketts. The notes are issued by firms such as Morgan Stanley, Barclays PLC and ABN Amro Holding NV. The companies whose share prices are linked to reverse convertibles have no involvement in the products.
For small investors, reverse convertibles offer a high level of income for a low minimum investment. But investors typically don't participate in any gains in the underlying stock, and if the stock falls sharply, they can lose much of their investment. Regulators have grown increasingly concerned about how complex "structured products" such as reverse convertibles are marketed to small investors, and they're pushing issuers to closely monitor their sales practices.
For full article, click here.
Popular 'Reverse Convertibles' Offer Lucrative Payouts But Could Cause Steep Losses
By ELEANOR LAISE
Wall Street Journal
March 26, 2008; Page D1
Wall Street is luring income-hungry investors with complex securities that come with big risks as well as extravagant yields.
The products -- called "reverse convertibles" -- are typically linked to the performance of a single stock like Apple Inc. or AT&T Inc. and often offer yields ranging from 7% to as high as 25% or more. Sales on these notes have been soaring as yields on many fixed-income investments have been sinking. Small U.S. investors snapped up $8.5 billion worth of reverse convertibles in 2007, up 81% from 2006, according to Arete Consulting LLC, which tracks the products.
At Incapital LLC, a distributor of reverse convertibles, sales doubled in 2007 from a year earlier, says Chief Executive Tom Ricketts. The notes are issued by firms such as Morgan Stanley, Barclays PLC and ABN Amro Holding NV. The companies whose share prices are linked to reverse convertibles have no involvement in the products.
For small investors, reverse convertibles offer a high level of income for a low minimum investment. But investors typically don't participate in any gains in the underlying stock, and if the stock falls sharply, they can lose much of their investment. Regulators have grown increasingly concerned about how complex "structured products" such as reverse convertibles are marketed to small investors, and they're pushing issuers to closely monitor their sales practices.
For full article, click here.
Sunday, March 23, 2008
Fund industry's ETN challenge may backfire (Investment News)
Leading House Republican questions attacks on deferred tax status of exchange traded notes
By Sara Hansard
Investment News
WASHINGTON (March 17, 2008) - The mutual fund industry's push for raising taxes on exchange-traded notes may come back to hurt the industry when it asks Congress to defer taxes on mutual funds, the ranking minority member of a House Ways and Means subcommittee said.
The Investment Company Institute should "articulate a tax policy beyond simply arguing for a level playing field," Pennsylvania Rep. Phil English told InvestmentNews.
Mr. English is the ranking Republican member of the Ways and Means select revenue measures subcommittee, which held a hearing March 5 on legislation introduced by subcommittee chairman Richard Neal, D-Mass., which would end tax deferrals for ETNs and other prepaid forward contracts and tax them at ordinary income tax rates. Currently, many ETNs are taxed at lower capital gains rates.
At the same time, however, Mr. English said he sympathizes with the Washington-based ICI. "I think ICI is genuinely conflicted on this, and has been forced into a position of having to weigh some truly unsatisfactory alternatives."
"The obvious answer is to basically create a deferral for people who are involved with mutual funds," Mr. English said. Legislation known as the Generate Retirement Ownership Through Long-Term Holding (Growth) Act of 2007, which was introduced by Rep. Paul Ryan, R-Wis., would allow investors in taxable mutual funds to defer capital gains taxes until their shares are sold.
However, Mr. English said, "I don't believe the current majority in Congress has the ideological flexibility to consider doing that." The legislation introduced by Mr. Neal is being driven by "the majority's hunger for revenue," he said. "What they're doing is [looking for ways to raise money] rather than coming up with the best strategy for dealing with these sorts of investments."
Indeed, a Democratic tax counsel on the Ways and Means Committee, who declined to speak for direct attribution, agreed that the Growth Act is not a bill "that the Democratic members have been very interested in the past."
For the full article, click here.
By Sara Hansard
Investment News
WASHINGTON (March 17, 2008) - The mutual fund industry's push for raising taxes on exchange-traded notes may come back to hurt the industry when it asks Congress to defer taxes on mutual funds, the ranking minority member of a House Ways and Means subcommittee said.
The Investment Company Institute should "articulate a tax policy beyond simply arguing for a level playing field," Pennsylvania Rep. Phil English told InvestmentNews.
Mr. English is the ranking Republican member of the Ways and Means select revenue measures subcommittee, which held a hearing March 5 on legislation introduced by subcommittee chairman Richard Neal, D-Mass., which would end tax deferrals for ETNs and other prepaid forward contracts and tax them at ordinary income tax rates. Currently, many ETNs are taxed at lower capital gains rates.
At the same time, however, Mr. English said he sympathizes with the Washington-based ICI. "I think ICI is genuinely conflicted on this, and has been forced into a position of having to weigh some truly unsatisfactory alternatives."
"The obvious answer is to basically create a deferral for people who are involved with mutual funds," Mr. English said. Legislation known as the Generate Retirement Ownership Through Long-Term Holding (Growth) Act of 2007, which was introduced by Rep. Paul Ryan, R-Wis., would allow investors in taxable mutual funds to defer capital gains taxes until their shares are sold.
However, Mr. English said, "I don't believe the current majority in Congress has the ideological flexibility to consider doing that." The legislation introduced by Mr. Neal is being driven by "the majority's hunger for revenue," he said. "What they're doing is [looking for ways to raise money] rather than coming up with the best strategy for dealing with these sorts of investments."
Indeed, a Democratic tax counsel on the Ways and Means Committee, who declined to speak for direct attribution, agreed that the Growth Act is not a bill "that the Democratic members have been very interested in the past."
For the full article, click here.
Friday, March 14, 2008
Nominate an Advisor Now for the SPA-2008 LeadingEdge Advisors Awards
Click here for the form to nominate an advisor for the SPA-2008 LeadingEdge Awards.
Submit your nominations of the most innovative investment advisors for the First Annual Structured Products Association (SPA) LeadingEdge Five Awards co-sponsored by Societe Generale.
Submit your nominations of the most innovative investment advisors for the First Annual Structured Products Association (SPA) LeadingEdge Five Awards co-sponsored by Societe Generale.
The Structured Products Association's first-ever LeadingEdge awards are given to five investment professionals who have at least $100 million under management and are committed to using Structured Products in optimizing portfolio diversification and management of clients' assets.The awards will be given on the basis of the nominees' leading edge use of structured investments to achieve clients' investment objectives.Co-sponsored by SG Americas (www.equityderivatives.com), the awards will be presented at a lunch ceremony at SPA-2008 -- the Structured Products Association's 4th Annual Conference -- held at New York's Grand Hyatt Hotel on April 9-10, 2008.
This is the nomination form for the LeadingEdge awards. The committee will consider self-nominations as well as thrid-party nominations. All eligible advisors, asset managers and financial consultants who enter may be eligible to attend SPA-2008 as a guest of the Association.
The first deadline for early nominations is March 30, 2008. The LeadingEdge Awards committee will consider additional nominations through April 5, 2008, but preference will be given to early nominees. The process of nomination should take less than 10 minutes.
Click here for the form to nominate an advisor for the SPA-2008 LeadingEdge Awards.
Thursday, March 13, 2008
SPA-2008: 1st Structured Products Distribution Summit NYC - Apr 9-10, 2008
UPDATE (13-March-2008) -- Registrations are now being accepted for the SPA-2008 Conference for the discounted "first-mover advantage" rate, which expires on Friday, March 21. To access the discounted registration page -- click here. For those without a PayPal account, click on the link at the bottom left that says continue, and enter your information on the next screen.The SPA-2008 brochure is available here.
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Nearly 300 structured products professionals attended last year’s highly successful Structured Products Association annual conference in New York, and the SPA is taking North America’s longest-running and most highly attended structured investments event to the next level.
Focus on Distribution: In addition, the theme of this year’s conference is The Last Mile: the Future of Structured Products Distribution. The SPA Conference Committee has invited over fifty speakers from the distribution side to speak on the challenges they face in marketing, distribution, regulation, compliance and resources. Accordingly, SPA-2008 is focused primarily on bridging the needs of the distribution side – and providing a unique opportunity for the buy-side and sell-side to come together.
Awards Recognition for the Sell-Side: For the first time, SPA-2008 will present awards to some of the most innovative brokers and advisors using structured products in their clients’ portfolios. The recognition will be amplified in trade publications to encourage scores of other advisors to consider utilizing structured investments in portfolios.
New Location: The conference will move to the Grand Hyatt Hotel in New York’s Grand Central in the center of the city, offering a highly accessible location to accommodate the growth in attendees.
Your participation in SPA events permits the Association to continue its successful efforts to position structured investments as a compelling new alternative in optimal asset allocation, and to remain out in front of legal, regulatory, tax and legislative issues. With a record $114 billion year in structured products sales in 2007, the SPA’s role in building the industry has been essential -- and it will become more ever more prominent.
SPA-2008 Participants from the Buy-Side (Confirmed or Invitees)
AG Edwards ALPS Ameriprise Blue Bell Claymore Countrywide Credit Suisse DWS Scudder E*Trade Eksportfinans Fidelity First Trust FIS-AAM Foreside Wholesaling Greenwich Research Hartford Life Incapital Invesco JPMorgan Private Bank JVB Kellogg LPL MyCFO Harris Bank Northeast Pension Consultants Northern Trust Nuveen Pershing Raymond James Raymond Jones Schwab Susquehanna UBS Wachovia Wealth 2k . . . and 20 more independent advisory firms and regional broker-dealers.
Topics for SPA-2008 (Some Speaking Roles Still Available)
MARKET GROWTH: What Distributors Need from Issuers to Double the Business in Two Years
EDUCATION: The Buzzword for the Future of Structured Products, But the Industry Needs to Do More
NEW MARKETS: Pensions Retirement Foundations Insurance Mutual Funds
REGULATORY: How the Industry Is in Front of Efforts from the SEC, Treasury, CFTC and Congress
NEW PRODUCTS: The Best of the New Generation of Structured Investments
INNOVATIVE INDEXING: 130-30 Strategies, Dynamic Indexes, Synthetic Hedge Funds
RETAIL’S FUTURE: Hear Directly from the Collective Crystal Ball of 50 Speakers on the Distribution Side
INDUSTRY CHALLENGES: How the Industry Responds to Anti-Competitive Efforts
Discounted "first mover advantage" registration for SPA-2008: $1,775
After Friday, March 21 the SPA-2008 single badge rate will be $1,975.
Contact structured.products.events@gmail.com for team discounts on 3-badge and 5-badge packages.
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