LONGSHORTREPORT ISSUE 2

MAY 2010
The latest news, blogs and commentary about people, events and companies in the securities financing industry: www.longshortreport.com

Will Duff Gordon 25th May

The man from Pru
We are always keen to announced. Peer Aviva sees 24% of their
ARTICLES shine a light on the shares in the hands of big asset managers
facts when it comes to and this is little changed. It will be
BREVAN HOWARD’S highly publicized interesting to see if institutional investors
NEW $200 MILLION
COMMODITIES HEDGE M&A activity. UK continue to sell their holdings in PRU as
FUND OPENS TO NEW listed Prudential's events unfold.
INVESTORS attempted takeover of
Brevan Howard Asset AIG's Asian Mark Faulkner 20th May
Management LLP has begun insurance arm is in This is politics, not
raising assets from outside the news constantly. New news is that economics
investors for its new Brevan they have listed shares in Hong Kong There is tangible fear in
Howard Commodities Strategies and Singapore very recently. So what are the markets that has
Master Fund Ltd. ... read more the facts and what is going on from a been created by the
about Brevan Howard online short interest perspective? German
  announcement of short
DEUTSCHE BANK HIRES The short base in PRU in London is sale bans and
PRIME FINANCE RISK 11.5% which is an increase of 60% on exacerbated by the
MANAGE where it was a week ago. 3 possible possibility of a pan
Last month, for example,
European application.
Deutsche Bank hired risk
As I write the markets across Europe
specialist Richard Newman from
are down over 2% and the CNBC
JP Morgan to become its senior
banner reads “ European Shares Tank on
risk manager for global prime
Shorting ban fears”
finance. ... read more about
 
Deutsche Bank online
Playing to the German political
grandstand is not a good way to establish
CITI LAUNCHES a coherent economic policy.
COLLATERAL reasons for this large increase: 1.
 
MANAGEMENT SERVICE Speculation that this deal is harmful to
Rajen M. Shah was replaced as I never thought I’d hear myself say
PRU and will lower its share price over
global head of custody at JP this BUT I agree with French Economy
the medium term (does this explain
Morgan at the end of 2009 by Minister Christine Lagarde, who has
Lansdowne's publicly disclosed short
Nick Rudenstine, global securities spoken out against the German move
position?). 2. Are sub underwriting banks
lending product head. ... read and confirmed that “France would not be
shorting shares in the PRU to hedge
more about Nick Rudenstine following a German move to ban the
themselves should the right issue not be
online naked short-selling of sovereign debt.” -
fully subscribed and the shares to fall
She is talking a great deal of sense.
below the rights issue discount? 3. Will
 
U.S. STOCKS DROP ON the issue of shares on other exchanges
LENDING RATES; S&P 500 Having spent two days with
lead to some arbitrage opportunities
AT SIX-MONTH LOW European regulators last week trying to
between them if the price on one lags the
Transatlantic Holdings Inc., filed a explain the benefits of the practice – his
others?
demand for arbitration against the frustration was obvious in remarks he
 
company tied to losses of more made at a recent Boston conference.”No
Meanwhile Institutions who lend
than $350 million from securities matter how much you want to impart
their shares own 21.7% of the PRU
lending. ... read more online logic to these people, they’re mired in
which compares with a comparative
figure of 24% before the deal was

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 LONGSHORTREPORT ISSUE 2
their views of the past about the roles of
speculators”.
 
The Germans are mistaken in their
backward looking and outdated
perspective on this problem.
Blaming the speculators is missing
the point. There are greater forces at
work.
The Germans are playing politics
when sound economics is what is called
for.
The markets not the speculators are
telling them what they think of their
misguided intervention.  investors usually put a premium on real
Naked short selling in the equity
markets is a smoke screen and banning it
will make no difference.
Reducing liquidity in the European
Government Bond markets now may be
like screaming ”feuer” in a crowded
nightclub.
 
I hope not – but I fear so. ... read
more online
David Carruthers 21st May
How to save money
Money is in short supply at the
moment.  The recent Australian decision
to tax their gold mining companies has
led to nervousness about a similar move
from the Canadian Government.  The
troubles in Thailand have hit the tourist
industry hard, with revenues expected to
be down by 20% this year.  The German
announcement of
curbs on naked CDS
purchases can be
seen as an attempt to
keep the Eurozone
cost of capital down.
The travails of the
Euro have focused
attention on
currencies as an asset class.  By defintion
they are a zero sum game - they can't all
depreciate.  But which are most likely to
provide profits for short sellers?  Rumours
of Japan being downgraded one day are
THE LATEST NEWS AND COMMENTARY FOR THE SECURITIES FINANCING INDUSTRY www.longshortreport.com
replaced by nerves about Sterling the
next; both follow on the heels of IMF
warnings about US fiscal woes.  In the
international game of pass the debt
parcel, markets cannot decide who will be
the biggest loser.
Austerity is looming; rising taxes and
cuts in spending are likely to check the
recovery in a number of economies. But
'quantitative easing' liquidity is still
slopping around the system somewhere -
UK headline inflation is currently more
than 5%.  So one scenario for the market
to worry about is stagflation, where
assets - such as housing, equities in
'boring' (ie safe) companies, gold, and
index linked stocks - where these are
issued by Governments with a secure
credit rating.... read more online
Andrew Dyson 21st May
Where people really
count
There is no
doubt that the
securities lending
industry draws on
considerable
expertise and
experience as it
contemplates the challenges that it is
facing today. When a beneficial owner or
hedge fund client looks across the table at
a potential provider of either agency or
prime brokerage services, one of the key
questions that they have to ask themselves
is ‘can the people over the table sort things
out when they don’t go as planned?’.
Notwithstanding the power of many
organizations in terms of balance sheet
and operational capabilities this market is
still a ‘people’ business where experience
and specific knowledge is at a premium.
The second thing that I believe is that
most businesses in this sector have been
remarkably well designed to withstand the
sort of shocks that we saw around the
demise of Lehman Brothers.
MAY 2010
PEOPLE
Bradley Pattelli
Angelo Gordon's managing
director and a member of its
leveraged loan team, Bradley
Pattelli, has quit from his current
role... read more online
Steven Kandarian, MetLife
“We have a securities lending
business that performed above
plan for 2009, and that certainly
helped our results” ... read more
online
Robert Munro
Religare Capital Markets appoints
Robert Munro as COO … read
more
Mahmood Noorani
Has joined Citi Capital Advisors
from Bluecrest Capital
Management .. read more
Helia Ebrahimi
Man Group adds brawn to GLG's
brain with $1.6bn… read more
Pauline Modjeski
Hedge Funds are using social
media platforms like Blogger,
Facebook, Twitter and LinkedIn,
despite oft-cited concerns over
running afoul of FINRA
regulations over allowable
communications ... read more
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