The Latest Headlines From Across The Wealth & Asset Management Sector - March

2023-04-03 |  Prince Naruka & Natalija Reeves

Welcome to our latest newsletter, where we share the top wealth and asset management stories that have caught our eye. With the first quarter of the year now under our belts, there are certainly some significant sector shifts of interest coming in this second quarter.

We’ll be taking a closer look at how investor confidence is shaping up amidst industry changes, sharing the latest on UBS’s acquisition of Credit Suisse and delving into the unpromising results from the FCAs recent ESG benchmarking review.

We’ll also be tracking the fallout from the recent collapse of Silicon Valley Bank, exploring the launch of the first long-term asset fund, highlighting the challenges females face in the investment industry and looking ahead to key future ETF trends to watch out for as this year marks 30 years since the SPDR exchange-traded fund launched.

1. Credit Suisse ‘CoCo’ holders look to sue; investors ‘severely shaken’, says TwentyFour

Central Banks are distancing themselves from Switzerland’s decision to impose $17bn (£13.9bn) losses on the AT1 bonds, rather than government or taxpayers. Lawyers are now in talks with CS AT1 bondholders about possible legal action. Whilst investors understood the risk to capital in the AT1 structure, they are upset that they were wiped out, whereas equity investors were not, due to the £2.7bn sale of CS to UBS.

In short, Credit Suisse trading at an 89% loss in the last year is better than the 100% loss the AT1 suffered. It is important to mention this is an unusual structure for AT1 bonds that CS and UBS both share, whilst many European Banks covert their AT1 bond to common equity in similar situations. Regulators in Europe will be keen to emphasise the difference in approach for AT1s to their Swiss counterparts.

2. UBS to acquire Credit Suisse in ‘emergency rescue’

UBS has agreed to acquire Credit Suisse for $3.25bn, in a move that would create a $5tn business. The merger was requested by FINMA, the Swiss National Bank, and the Swiss Federated Department of Finance, and can be implemented without shareholder approval of either bank, as per an emergency ordinance which is being issued by the Swiss Federal Council.

3. FCA warns on greenwashing after ESG benchmark review

ESG benchmarks are often used to demonstrate how a fund is meeting non-financial targets, such as holding companies that are contributing to net-zero emissions goals. In a recent preliminary review of the market, the FCA found that all assessed benchmark administrators failed to provide adequate information on data sources and standards for their ESG scores. It also highlighted ‘a lack of detail in benchmark methodologies’ that could potentially confuse investors.

4. Wall Street’s big banks rescue First Republic with $30bn of deposits

An effort led by Janet Yellen and Jamie Dimon resulted in $30bn deposits being made from eleven banks to aid First Republic after the recent collapse of Silicon Valley Bank. In a joint statement, the banks reiterated their confidence in the country’s banking system by deploying their financial strength and liquidity to where it is needed most. Although First Bank assured investors it had more than $70bn in available liquidity, the stock hasn’t recovered as the lender announced it would be suspending its dividends.

5. Schroders gets FCA approval for first UK LTAF

Schroders has received regulatory approval from the Financial Conduct Authority (FCA) to launch the first long-term asset fund (LTAF). LTAFs are open-ended vehicles designed to give broader access to illiquid and private assets. The vehicle is currently open only to sophisticated investors. However, last year, the FCA ran a consultation on whether it should be broadened to retail investors. The industry is in two minds about the news, some think closed-end investment trusts already do the job, whilst others wonder if the LTAFs would be able to address the liquidity mismatch as it’s still untested territory.

6. Maxime Carmignac: Inequality issues female investors face need to be addressed

Maxime Carmignac, the Managing Director of Carmignac UK, has detailed her ambitions for the family management company, highlighted the unspoken issues female clients face, and given advice to young women thinking about working in the investment industry. She referenced a Mckinsey study which found at the junior level of asset managers the gender is split 50/50, whilst at the management level there are only 14% women compared to 86% men, something she is aiming to address through the Diversity Project.

7. 30 years of ETFs and five key trends to watch next

January 2023 marked 30 years since the SPDR exchange-traded fund (ETF) launched. The ETFs of tomorrow will be shaped by the changing needs of investors and the transformative effects of technology on virtually all aspects of our lives. The article details the five key trends to watch; looking beyond the active/passive debate towards strategy-tailored products, the continuing rise of thematic ETFs, the energy transition, Tokenisation changing financial markets, and liquid alternative strategies.

Thanks for reading. If you’d like to discuss any issues relating to the newsletter that are specific to you or your company, do get in touch.

Don't forget to sign up to the Wealth and Asset Managment newsletter to get the latest headlines straight to your inbox.