U.S. Stock Futures, Treasuries Drop as Gold Gains on Debt Talks | Dow Jones Industrial Average

U.S. Stock Futures, Treasuries Drop as Gold Gains on Debt Talks | Dow Jones Industrial Average

U.S. equity futures and Treasuries dropped while gold rose to a record as President Barack Obama and Congress failed to reach a deal on raising the debt limit, intensifying concern the nation will default. Asian shares fell.

Standard & Poor's 500 Index futures expiring in September lost 0.9 percent to 1,329.40 at 9:19 a.m. in Tokyo, indicating the measure will decline after rising within 1.4 percent of a three-year high. The MSCI Asia Pacific Index of shares in the region slipped 0.6 percent. Yields on 10-year Treasuries gained three basis points. Gold added as much as 1.4 percent to $1,624.30 an ounce. Oil fell 0.8 percent.

House Speaker John Boehner told Republicans that there's no agreement on a plan for raising the ceiling before a default threatened for Aug. 2. A Republican congressional official said Boehner, speaking by telephone to lawmakers, is reporting that discussions are continuing. S&P said last week the impasse has boosted the chance it will cut the U.S. credit rating from AAA within three months to 50 percent.

"Stock markets around the globe will look to price in a greater uncertainty premium on account of political squabbles in the world's largest economy and the increasing risk that it may lose its sacred AAA rating," Mohamed A. El-Erian, chief executive officer and co-chief investment officer at Pacific Investment Management Co., wrote in an e-mail. His firm is the world's biggest manager of bond funds. "A last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable," he said.

Japan, Australia

Japan's Nikkei 225 Stock Average fell 0.8 percent, retreating from its highest level since July 8, and South Korea's Kospi index slumped 0.8 percent. Australia's S&P/ASX 200 Index slipped 0.6 percent.

Oil retreated for the first time in five days in New York, sliding to $99.04 a barrel. Corn futures sank 1.9 percent to $6.7225 a bushel. Wheat fell 1.5 percent to $6.82 a bushel.

"There's a broad risk that it takes down global equities and commodity prices and causes a big selloff in the dollar," Barry Knapp, head of U.S. equity strategy in New York at Barclays Plc, said in a telephone interview. "This is the center of capital markets and the global economic universe, so if we can't get our act together and the market truly does become concerned about our political will, we could get a major global risk event."

Stocks Whipsawed

The S&P 500 closed at 1,345.02 on July 22. When the measure climbed to 1,363.61 on April 29, it was the highest level since June 2008. The Dow Jones Industrial Average slid 0.3 percent on July 22 to 12,681.16, paring its weekly increase to 1.6 percent. Dow futures fell 103 points, or 0.8 percent, to 12,518 today. U.S. equities rallied last week as Europe pledged support for Greece to end the region's debt crisis and companies from Apple Inc. to Morgan Stanley and Advanced Micro Devices Inc. beat earnings projections.

Negotiations in Washington over the nation's debt limit have whipsawed U.S. stocks. The S&P 500 jumped 1.6 percent on July 19, the biggest gain since March, amid optimism Obama and congressional Republicans would agree to raise the ceiling before an Aug. 2 deadline. Stocks fell the next day on concern a Senate plan to help the nation avoid default faced resistance from House Republicans.

Treasuries fell, extending last week's decline, its first in three weeks. Yields on benchmark 10-year notes rose three basis points, or 0.03 percentage point, to 2.99 percent from 2.96 percent on July 22, according to Bloomberg Bond Trader prices. That's below the five-year average of 3.71 percent.

Avoiding Default

"The U.S. should avoid default but may get downgraded by the ratings agencies if the White House and Congressional Republicans are unable to agree on significant medium-term fiscal tightening," Mansoor Mohi-uddin, the Singapore-based chief currency strategist at UBS AG, wrote in a note to clients.

Investors outside the U.S. own $4.51 trillion in U.S. Treasuries, or about 50 percent of the marketable government debt outstanding, according to the Treasury Department.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/07/25/bloomberg1376-LOUZ806JTSE801-5LO5TG592JOLGA9L76G79EPQ3D.DTL

Private equity investments touch $6.3 billion | Private equity

Private equity investments touch $6.3 billion | Private equity

Private equity investments in India touched a whopping $6.3 billion in the first six months of this year, with the IT and ITeS sector attracting the maximum number of deals, a study says.

In the April-June quarter this year $2,916 million was invested across 112 deals, while last quarter saw an infusion of $3,361 million across 91 deals, according to a study by Venture Intelligence, a research service focused on Private Equity and M&A transaction activity in the country.

Though quarter-on-quarter there has been a decline in PE investments, year-on-year there was a significant jump of 45 per cent as private equity firms had invested $1,988 million through 70 deals in the April-June quarter last year.

The largest PE investment during the second quarter of this year was the Rs 2,250 crore commitment by Apollo Management to various group companies of Welspun Group .

Other top investments reported during the quarter under review include commitments of about $150 million each for thermal power generation firm Diligent Power (by Warburg Pincus), hotel management and investment firm Samhi Hotels (by GTI Group) and airports operator GMR Airport Holdings (by StanChart PE, Old Lane and JM Financial), the report said.

A sector-wise analysis shows that the IT & ITES industry received the most number of investments during the second quarter of this year as this space attracted 34 deals worth $325 million, followed by BFSI (12 deals worth $275 million).

"Led by the Rs 65 crore ($14.4 million) third round of funding for Janalakshmi Financial Services, the Microfinance sector staged a come back of sorts during the period," the report said.

Meanwhile, the second quarter of this year saw 15 exits including one IPO (that of Sequans Communcations).

Reliance Venture exited from France-based 4G chipmaker Sequans Communications via the company's NYSE listing.

Among exits via M&A, the acquisition of BPO firm Intelenet for $632.5 million by Serco provided Blackstone its first exit it in India.

In the June quarter last year there were 25 exits (including 4 IPOs), while there were 16 exits (including 1 IPO) in the first quarter of this year, the study said. Read More

Private Equity: Braits' earnings rise 50% | Private Equity Africa

Private Equity: Braits' earnings rise 50% | Private Equity Africa

Private Equity: South Africa private equity investor Brait has reported a 50% year-on-year rise in attributable earnings, bolstered by its equity and debt investments.

The company saw its earnings reach R115.7 million as at the end of September 2010, 50% higher than the R77.3 million recorded in 2009. Brait, whose businesses include mezzanine, debt and hedge fund investing also recorded a 10% rise in assets under management to R14.9 billion in the period.

“Despite challenging conditions, our private equity portfolio companies continue to achieve strong operating performance while our public markets’ funds are on track to exceed their target returns for the year,” said Antony Ball, Brait’s chief executive officer. Read More

Private Equity: ET Solar Announces US$50 million private equity placement

Private Equity: ET Solar Announces US$50 million private equity placement

Private Equity: ET Solar Group Corp. , a solar power one-stop solution provider, recently announces a US$50 million common equity issuance to an existing investor of ET Solar.Mr. Fischer Chen, Vice President and Chief Financial Officer of ET Solar, commented: “The transaction demonstrates our existing investor’s confidence on ET Solar and the growth prospect of solar industry.

It will strengthen our ability to increase our vertical integration and expand our manufacturing capacity that is a very important factor for our growth and competitiveness going forward.”In total, ET Solar has raised approximately US$ 100 million proceeds through the issuance of preferred and convertible shares and common shares since 2008. Read More

Private Equity: Global private equity on the rise

Private Equity: Global private equity on the rise

Private Equity: Private equity-backed M&A has risen by 51 per cent over the same period last year, with transactions totalling $128.2 billion (£80.4 billion).

The findings from Thomson Reuters also found that buyouts in the healthcare sector reached $12.6 billion, a 58 per cent increase from 2010 levels.

David Silver, co-head of European investment banking at Baird, says that trade buyers that weathered the recession well and emerged with strong balance sheets are now being proactive in approaching high priority targets, leading to healthy competition with private equity buyers.

Silver adds: ‘Private equity firms are now keen to show returns to aid fundraising through exits for businesses that have come out of the recession in good shape.

‘Private equity is now focused on aggressively deploying capital in the absence of trade buyers in certain processes.’

For the year so far in 2011 the UK contributed $10.7 billion of private equity M&A, a fall of 1 per cent, with the bulk of the 51 per cent rise in global figures attributable to the United States which posted an increase of 25 per cent to $53.3 billion.

UK M&A bucked the trend of European M&A improvement by falling 6 per cent, with other nations including Germany, Italy and France posting healthy increases. Read More

Private Equity: 3i shareholders revolt over chief’s pay plans

Private Equity: 3i shareholders revolt over chief’s pay plans

Private Equity: Shareholders’ anger at 3i’s lacklustre share price performance bubbled over, as they launched a protest vote on plans to raise the pay package of Michael Queen, the private equity group’s chief executive.

Only 68 per cent approved an extension of a discretionary share plan, in a warning shot over the proposals on his remuneration.

Shareholders are dismayed at 3i’s share price, which has trailed the FTSE 250 index by 19 per cent since the start of the year.

This week’s vote overshadowed news that 3i will bring in Simon Borrows, chairman of Greenhill International, as chief investment officer, and that it became the first European group to be granted the right to launch a renminbi-denominated fund in China.

Instead, it brought to the fore discontent among shareholders and some investors in its private equity funds over perceived management weaknesses.

While most seem to accept the strategy to diversify into debt and infrastructure to level out the volatility of the private equity business, some question Mr Queen’s timing and management. Read More

Private Equity: U.K. Private Banks Are Looking at Riskier Assets, FT Reports

Private Equity: U.K. Private Banks Are Looking at Riskier Assets, FT Reports

Private Equity: Britain’s private banks have 17 percent of clients’ cash in hedge funds, private equity, commodities and real estate, up from 7 percent at the end of 2009, the Financial Times reported, citing a study by Scorpio Partnership, a firm of wealth-management consultants.

This indicates that wealth managers are overcoming the aversion to so-called alternative assets that resulted from the financial crisis and are ready to contemplate more risk, the newspaper said. Read More

Private Equity: Private banks seeking out riskier assets

Private Equity: Private banks seeking out riskier assets

Private Equity: Private banks have overcome their post-crisis aversion to private equity and hedge funds and are ploughing client money back into alternative assets in search of higher returns, according to a new study.

Client portfolios across some of the UK’s largest wealth management firms now have 17 per cent on average in so-called alternatives – hedge funds, private equity, commodities and real estate – up from 7 per cent at the end of 2009, according to a study by Scorpio Partnership, the wealth management consultants.

Wealth managers are taking on more risk in search of higher returns as equity markets look increasingly volatile, fixed-income returns fade and rates on cash remain low.

“It’s the endless quest for something that is not correlated with traditional equity markets,” said Rob Burgeman, a director at Brewin Dolphin, the wealth manager.

The amount of client portfolios held in cash has fallen from 11 per cent to 4 per cent since the end of 2009, while fixed-income holdings also decreased slightly from 33 to 30 per cent.

Wealth managers have been taking a fresh look at how they assess risk in the wake of the financial crisis. Client portfolios are far more likely to undergo stress-testing for unexpected scenarios than before the downturn, when managers still relied on historical performance and volatility when making decisions.

Many have updated their asset allocation models as a result. Before last year, Barclays Wealth, the private banking arm of Barclays, had no exposure to alternatives at all in its model portfolios. Read More

Private Equity: Wealth managers turn to private equity for high returns

Private Equity: Wealth managers turn to private equity for high returns

Private Equity: A survey of 22 senior wealth professionals, with around $5.7 trillion of assets under management, found that half were planning to increase their private equity allocation over the next 12 months.

The research, which was conducted by wealth consultancy Scorpio Partnership and LPEQ, the industry association of listed private equity investment companies, between April and June, found that nearly 40% of respondents planned to invest in listed private equity vehicles in the next year.

More than half of those surveyed said that liquidity – the ability to access and exit on demand – made private equity an attractive asset class. Other reasons given included the ability to control allocation, diversification and getting exposure to private equity at discounted prices.

Cath Tillotson, managing partner at Scorpio, said that wealth managers were embracing private equity as a way of beating inflation and volatility.

Andrea Lowe, executive director at LPEQ, added that increased allocation of the asset class did not signal renewed confidence among wealth managers but the desire to “chase returns”.

Despite this, hedge funds continued to dominate alternative investments in wealth managers’ portfolios, accounting for an average weighting of 58% compared to 11% in private equity. Read More

Private Equity: Banks 'returning to private equity'

Private Equity: Banks 'returning to private equity'

Private Equity: UK banks are showing an increasing interest in alternative assets including private equity, according to new data.

A new study has suggested Britain's banks are showing an increasing interest in risky assets such as private equity and hedge funds, with confidence returning to the sector after the uncertainty which followed the financial crisis.

The Financial Times reports that data compiled by wealth management consultant Scorpio Partnership found that an average of 17 per cent of wealth management firms' portfolios was concentrated in alternative assets.

"Private banks are by nature cautious with their clients' money," said Scorpio managing partner Catherine Tillotson. "The whole alternative industry has looked to get its house in order."

Barclays Wealth, which had no exposure to equity investment at all until last year, now has 16 per cent in alternatives. However, wider holdings remain some way below the peak reached during the first quarter of 2009, when they stood at 24 per cent.

Last week, the newspaper revealed a Mergermarket study indicated a resurgence in the global private equity industry, with first-half deals worth more than £80 billion taking place. Read More

Private Equity: PTC India mulls two private equity funds

Private Equity: PTC India mulls two private equity funds

Private Equity: Leading power trading solutions provider, PTC India, is mulling floating two private equity funds as part of efforts to strengthen its financing capabilities.

"We are planning to have private equity funds... One for general purposes and another focused on renewable energy sector. Plans are at an initial stage," a top official in the know of plans told PTI.

According to the official, the private equity fund focused on renewable energy would be floated by PTC India Financial Services while the other one would be done by PTC India.

PTC India Financial Services (PFS) is promoted by PTC India (PTC) as a special purpose investment vehicle.

"We are planning joint ventures (for private equity funds) and are looking for foreign or domestic partners," the official noted.

PTC India, which is mainly into power trading, raked in a profit after tax of Rs 139.20 crore in the last fiscal.

The entity's trading volumes jumped 34 per cent to 24,481 million units in 2010-11 as compared to 18,236 million units in the previous fiscal.

In May, 2010, PTC India had launched an infrastructure fund in a joint venture with specialist emerging markets asset manager Ashmore. The fund was to provide equity financing to power projects.

At the end of last fiscal, PTC India had inked power purchase agreements for capacity of 15,220 MW, including cross border trade. Read More

Private Equity: IT and ITeS sector attract maximum deals in first six months of 2011

Private Equity: IT and ITeS sector attract maximum deals in first six months of 2011

Private equity investments in India touched a whopping $6.3 billion in the first six months of this year, with the IT and ITeS sector attracting the maximum number of deals, a study says.

In the April-June quarter this year $2,916 million was invested across 112 deals, while last quarter saw an infusion of $3,361 million across 91 deals, according to a study by Venture Intelligence, a research service focused on Private Equity and M&A transaction activity in the country.

Though quarter-on-quarter there has been a decline in PE investments, year-on-year there was a significant jump of 45 per cent as private equity firms had invested $1,988 million through 70 deals in the April-June quarter last year.

The largest PE investment during the second quarter of this year was the Rs 2,250 crore commitment by Apollo Management to various group companies of Welspun Group .

Other top investments reported during the quarter under review include commitments of about $150 million each for thermal power generation firm Diligent Power (by Warburg Pincus), hotel management and investment firm Samhi Hotels (by GTI Group) and airports operator GMR Airport Holdings (by StanChart PE, Old Lane and JM Financial), the report said.

A sector-wise analysis shows that the IT & ITES industry received the most number of investments during the second quarter of this year as this space attracted 34 deals worth $325 million, followed by BFSI (12 deals worth $275 million).

"Led by the Rs 65 crore ($14.4 million) third round of funding for Janalakshmi Financial Services, the Microfinance sector staged a come back of sorts during the period," the report said. Read More

Private Equity: India sees PE deals worth $5.8 bn in first six months of 2011

Private Equity: India sees PE deals worth $5.8 bn in first six months of 2011

Private equity investments jumped to USD 5.8 billion in the first six months of 2011, driven by higher number of large-size transactions as well as increased activities in the infrastructure space, says E&Y.

With capital markets remaining sluggish, more and more investors seem to be preferring the PE route to raise funds. According to global consultancy Ernst & Young , PE deal value in the six months ended June climbed 34 per cent to USD 5.8 billion as compared to same period a year ago.

"The increase in aggregate deal value was largely driven by greater number of large deals (deals over USD 100 million).

"Top 10 deals in H1 '11 aggregated USD 2.7 billion compared to USD 1.75 billion in H2 '10 and USD 2 billion in H1 '10," E&Y Partner (Private Equity) Mayank Rastogi told PTI.

The first six months of this year saw 211 PE deals, much higher than 154 transactions witnessed in first half of 2010.

Infrastructure attracted highest PE investments in 2011 first half, accounting for over USD 1.35 billion of the total deal value.

"This trend of infrastructure sector attracting the most PE investments has continued from H1 '10 and H2 '10, where it recorded 27 per cent (USD 1.16 billion) and 36 per cent (USD 1.36 billion) of aggregate PE investments, respectively," Rastogi said.

In terms of deal count, retail and consumer products was on top with 29 transactions in the first six months of 2011, followed by infrastructure (28) and technology (23).

Among the top 10 PE investments in first half of 2011 are GIC and Bain Capital pumping in USD 850 million into Hero Investment Private Ltd.

Other major transactions include Apollo Management LP investing USD 350 million in Welspun Corp and Apax Partners infusing USD 330 million in iGate Patni.

As per E&Y, India-focused PE funds mopped up as much as USD 2.8 billion in the first half of 2011.

On the other hand, exit activities of PE players remained sluggish during this period due to weak capital market conditions.

"The volatile capital markets have been a significant factor for such decline in exit activity during H1 '11," E&Y noted.

Rastogi had earlier said that sluggish stock markets have in a way helped the PE investment activity as "a number of companies which had filed for IPOs or were looking to raise money on public markets are now actively looking to raise money from PE". Read More