Puerto Rico has a bond debt of $74 billion and pension obligations of $49 billion, while the price of bonds it has issued dropped by as much as 31% after President Donald Trump suggested recently that the US territory's debt should be wiped out. The island's financial uncertainty is a source of concern for hedge funds, which hold about 30% of the bond debt.
A survey by SIX Securities Services shows widespread unease among market participants over the quality and amount of collateral behind over-the-counter derivatives trades. Financial Stability Board Chairman Mark Carney says regulatory changes have led to improvements in collateral, although there are some "remaining legal barriers which are preventing authorities from fully realizing the benefits of trade reporting."
Private capital secondaries funds raised $5.4 billion in the third quarter, setting them up to end the year on a high that exceeds the record set in 2016, Preqin says. Out of 44 funds aiming to raise $31 billion overall this year, 37 are from the private equity secondaries space.
Cryptocurrency hedge funds are increasingly emerging, and Autonomous Next says 75 are currently in existence. Angela Walch, a law professor who specializes in blockchain research, writes that the largely unregulated nature of these funds creates risk as investor appetite surges and they move further into the mainstream.
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A series of bills being discussed by the House Financial Services Committee seeks to make incremental changes to the Dodd-Frank Act, leading analysts to conclude that a full-scale repeal of the legislation is increasingly unlikely. If bipartisan issues that emerged this past week "rack up big margins of support in the House, it doesn't necessarily translate in the Senate," said J.W. Verret, a former congressional staffer who is a scholar at the Mercatus Center at George Mason University.
Changes that the EU might make to delegation, through which asset managers can operate funds in another country, could be detrimental to EU-listed funds, EFAMA says. A European Commission proposal calls for centralized oversight of the asset-management industry.
Industry participants are reportedly urging European regulators to move the starting date of Europe's revised Markets in Financial Instruments Directive to Jan. 8, a Monday, from Jan. 3, a Wednesday. They argue that having a full weekend to test and launch IT systems for the introduction, instead of a brief four-hour window while world markets are closed overnight, will lower the risk of administrative disruption.
The Treasury's recent review of financial regulations recommends that the Federal Deposit Insurance Corp. act as the receiver of a troubled systemically important central counterparty. In testimony before the House Agriculture Committee on Wednesday, Commodity Futures Trading Commission Chairman J. Christopher Giancarlo also said regulators, not bankruptcy court, should manage the recovery and resolution process, saying clearinghouses, "need to be run in an orderly fashion to maintain orderly markets, which could be for a lengthy duration of time, not wound down in an immediate fashion for the benefit of either creditors or debtors, which they don't have."
European Securities and Markets Authority Chairman Steven Maijoor told a European Parliament committee that derivatives market data could be fragmented by Brexit due to a requirement for London-based swaps data repositories to have separate EU entities. "As a direct supervisor of credit rating agencies and trade repositories within the EU, with a number of entities headquartered in London, ESMA requires appropriate contingency plans from individual supervised entities," Maijoor told lawmakers.
The global private credit market is on course to break the $1-trillion-in-assets mark by 2020, according to research by the Alternative Credit Council, the private credit affiliate of AIMA. Global law firm Dechert contributed to and sponsored this year's survey, titled "Financing the Economy 2017: The Role of Private Credit Managers in Supporting Economic Growth." Read the full report.
Portfolios that include managed futures funds perform better with less risk than those without them, according to research by AIMA and Societe Generale. The paper, "Riding the Wave," explains the roles that managed futures funds typically play in investor portfolios and the diverse strategies on offer. The paper also highlights the considerations investors should adopt when investing. Read the paper.