Fitch Ratings conference multimedia - European Credit Outlook 2010 (free with registration)
Compelling indictment of PwC’s conflicted role in AIG affair from @retheauditors
Non-U.S. venture investing in 2009 off 47% from 2008 as Israel financing drops 61% (DJ VentureSource)
Inaugural Kauffman Economic Outlook: survey of leading economics bloggers
History suggests economic recovery is closer than you think, with a new silicon-based global elite at the helm (Booz)
In encouraging sign for economy, US banks stop tightening lending requirements for businesses (WSJ)
Burkle’s Yucaipa fund seeks to increase its18% stake in Barnes & Noble (BKS) (via Alacra Pulse)
Technorati Tags: (AIG), (BKS), accounting, Barnes & Noble, blogs, Burkle, corporate-governance, economy, PwC, venture-capital, Yucaipa
Good roundup of commentary on Obama big bank proposals at The Big Picture
Temp jobs generally lower workers’ employment and income prospects over time (MIT study)
Treasury Weighs Fixes to Foreclosures Program (NYT) … but measures may just prolong foreclosure crisis
ETF assets have grown from near zero to more than $1 Trillion in 10 years (The Economist via @graubart)
VentureSource: VC industry ends 2009 with strong 4Q; Annual investment down 31% from 2008
They’re back: ratings agencies reviewing new private-label jumbo mortgage securities offerings
Listen to Joseph “Freefall” Stiglitz beat up on the big banks for an hour on The Diane Rehm Show
Which governments are really at risk of bankruptcy?
Risky business is back in style: high-yield corporate debt issuance reaches record $11.7 billion in latest week
Commercial real estate investment has risen by more than 40% in Europe in the past quarter
Sign of tougher FDA action: Reversing itself, FDA expresses concerns over health risks from BPA plastic
Technorati Tags: big banks, BPA, commercial-real-estate, ETF, foreclosures, jobs, junk-bonds, mortgage-backed-securities, venture-capital
The average Internal Rate of Return for mature funds (vintage 2005 and older), shows that private equity funds (Buyout, Growth and Restructuring funds, among others) have achieved consistently higher returns than venture capital funds, according to a new report from PitchBook. VC funds, which saw outsized returns during the technology bubble of the 1990’s, have found mixed results in the first decade of the 21st century.
In the decade to come, private equity will be challenged by a large capital overhang and venture capital will need to reevaluate its exit strategies to achieve competitive returns.
The report (free download with registration) provides an in-depth look at the current state of PE fundraising and for the first time also features data on private equity and venture capital fund returns created by PitchBook’s newly-released fund returns data and analysis tools. The economic turbulence and current private equity overhang of $400 billion† combined in 2009 to cause U.S. private equity fundraising to continue its slide from the high-water mark it hit in 2007. Only 85 funds closed during the year with a total of $135 billion in commitments, a 58% drop from 2008 to a level the industry has not seen since before 2005. A notable fundraising trend in 2009 was the continued progression toward larger sized funds, with funds $500 million and above accounting for over 50% of the funds closed and 90% of the capital raised.
The data shows a number of interesting trends, one of which is the consistent outperformance of PE funds compared to VC funds since the burst of the tech bubble. Also worth noting is that, according to the data collected by PitchBook, the best performing funds on average since 1998 are private equity funds over $1 billion, which, for mature vintages (funds more than 5 years old), have outperformed the rest of the industry every year since 1998. Additionally, mega funds (funds over $5 billion) have the highest median IRR at 11.7% for all mature funds and the highest 25th-percentile point at 9.32% (meaning 25% of the funds have an IRR below 9.32% and 75% have a higher IRR).
Technorati Tags: private-equity, venture-capital
The lagging economy is hurting Massachusetts’ vaunted life-sciences industry, and might especially hinder the development of new drugs, according to a report released today by MIT researchers.
While the federal stimulus bill gave a temporary boost to academic scientists in 2009, the recession is taking a major toll on investors in science — including the venture capitalists whose dollars help move promising ideas from universities into the commercial sector. That means start-up biotech firms are now struggling to find funding.
“The generation of ideas still seems to be strong, but the mingling of ideas and people and money just isn’t happening at the same rate,” says Fiona Murray, a professor at the MIT Sloan School of Management, who helped direct the research report, “Analyzing Innovation and Venture Formation in the Massachusetts Life Sciences Cluster.”
The part of Massachusetts’ life-science sector hit hardest by the downturn is the state’s prominent biotech-based drug discovery sector, whose firms pour hundreds of millions of dollars over many years to create new drugs. “It’s a very costly, high-risk business to bring a new molecule all the way from conception into the clinic,” notes Murray, “and investors are looking for less expensive ideas where they can imagine getting a product into the market more quickly.” That means much of the remaining funding is going to firms producing medical devices or research tools: Surgical tools, pacemakers, cardiac stents, and more.
In broad outline, publicly-owned biosciences companies have not fared worse than those in other economic sectors. But the money directed at life-sciences start-up companies has diminished, from almost 20 percent of all venture capital in 2007, to under 10 percent in 2009.
And while venture capitalists invest money in early-stage firms in hopes of getting a big payoff, often through an Initial Public Offering (IPO), that route to profit has been closing lately. In 2008, 21 life-sciences firms nationally postponed or withdrew IPO offerings, and only one biotech start up, Bioheart, Inc., which focuses on cardiac therapies, enjoyed a public offering; there were no such IPOs in 2009.
MIT interviews with leaders in the regional biotech ecosystem also indicate that investors now expect small companies to focus on a single core project. Murray regards that as a disconcerting development, since it can be very hard to tell which early-stage research projects will pay off — which molecule being created in a lab, for instance, will become a viable drug. Thus cultivating a variety of research projects makes success more likely, both for companies and the industry as a whole.
Technorati Tags: biotechnology, venture-capital
US 60-day auto delinquency rate will rise to almost 0.90% by year-end (4.65% increase from last year ): TransUnion http://bit.ly/SeqQD
Why we need the FDIC … by FDIC Chief Sheila Bair (OpEd in NYTimes) http://bit.ly/PxRHt
British teenage girls are the drunkest, Turkish teens the biggest bullies , Swiss teens the least active (OECD) http://bit.ly/4r8eMD
Savings from preventive care unlikely to cover much of of cost of health system overhaul (Washington Post) http://bit.ly/1a4xJI
US Defaults of multifamily and commercial real estate loans from banks climbed to their highest rate since at least 2003 http://bit.ly/L1Mkf
RT @KauffmanFDN Regulating Venture Capitalists? Market regulation should be driven by risk and assets, not title. http://bit.ly/Pq60B
RT @alacra1 Securities Analysts? Fuggedaboutem – Analyst about-face has minimal short-term effect on share prices. http://bit.ly/lJhVB
Henry Kaufman wants centralized financial regulation, just not by the Federal Reserve (book review in The Economist) http://bit.ly/17O2Ti
Good Washington Post article on US budget deficits and the inevitability of tax increases http://bit.ly/jUBOf
Effective personal tax rates on $100,000 range from 55% in Slovenia to under 20% in Switzerland (KPMG /The Economist) http://bit.ly/T9nRx
Big Banks Get Bigger: JP Morgan, Bank of America each hold more than 10% of deposits (Washington Post) $JPM $BAC http://bit.ly/15RMpH
Investment in technology could avoid $11 of damage from climate damage for every dollar spent: McGill study via Reuters http://bit.ly/AT1WH
Technorati Tags: analysts, auto loan ABS, banks, budget-deficit, climate-change, commercial-real-estate, Equity Research, FDIC, financial-regulation, venture-capital
RT @RetailTraffic CMBS Deliquencies Drop for First Time in Almost a Year http://bit.ly/125wvs
RT @alacra1 New Post by Integrity Research: Why Does Debt Research Differ from Equity? http://bit.ly/p0NRR
Confidence among UK business professionals sees the biggest rise for two years, suggesting the recession is at an end. http://bit.ly/1Rf7Xk
RT @FTAlphaville Up to five UK building societies could be pushed into mergers over the next couple of years: KPMG http://tinyurl.com/kpya2p
Why venture capital needs more regulation – by Georges van Hoegaerden of the Venture Company (h/t DJ Venture wire) http://bit.ly/45XOIG
Global downward trend in top rates of personal tax about to reverse: KPMG study http://bit.ly/HQpKx
RT @OECDtweet RT @soyroberto: How many weekly hours workers in OECD countries put in. Korea top at 44 vs low at 27 http://bit.ly/26QU1
RT @planetmoney A new kind of Big Mac index – how much time it takes to earn a burger http://bit.ly/X4Fii The Economist via @andyzilch
RT @zerohedge Cash for Clunkers: A welfare program where we borrow from China to buy cars we can’t afford and ship profits to Japan.
RT @StructuredFin Rating Agencies Look to Make Ratings More Transparent with New Tool http://bit.ly/L8Q4V
U, V or W for recovery: The world economy has stopped shrinking. That’s the end of the good news (The Economist) http://bit.ly/pkzlC
Philly Fed survey points to manufacturing rebound (via CreditWritedowns) http://bit.ly/G0JqD
RT @FTAlphaville The shape of things to come is probably not ‘V’: So say Bank of America Merrill Lynch economists http://tinyurl.com/lxejdg
The Blatant Opacity of Banks’ Balance Sheets (The Motley Fool) $BAC $WFC $RF $STI $KEY http://shar.es/FVby
Technorati Tags: banks, building societies, business confidence, CMBS, economic indicators, investment-research, recession, tax-policy, venture-capital
Moody’s Identifies Industry Sectors Likely to Be Upgraded: Excerpted from Looking for Signs of Change http://bit.ly/bI6ZL
McKinsey: Banks should industrialize carbon market, finance and invest in the low-carbon economy, and drive innovation. http://bit.ly/6iwBA
Deloitte Consumer Spending Index rose 2.15% in July, after an upwardly revised gain of 1.85% a month earlier http://bit.ly/9974M
2nd Quarter US Existing-Home Sales Rise from Q1 in Most States, As Median Price Falls Record 15.6% YOY http://bit.ly/4AvqXo
RT @abnormalreturns Michael Kahn: I believe in tech analysis but if I were starting in the business today I would quit. http://bit.ly/2jYSUR
Commercial Loan Losses Cast Shadow Over Regional Banks: Excerpted from Rising Commercial Loan Losses Cast A Long Shadow. http://bit.ly/xjDRF
Insiders Sell Prior to Goodwill Impairment Disclosure: Excerpted from Harvard Business School Working Paper http://bit.ly/2RdRr4
US Venture Capital 1Yr Return Down 17.9%, 2-Yr Down 4.6%, But Better Than S&P, Dow etc (NVCA) http://bit.ly/8Zjd7
Technorati Tags: Consumer-spending, housing, insider-selling, Twitter, venture-capital
Venture capital firms in VC hubs such as Northern California tend to deliver superior performance, but that does not appear to derive from locally-based investments, according to a new working paper published by Harvard Business School.
More than half of the 1,000 venture capital offices listed in Pratt’s Guide to Private Equity and Venture Capital Sources are located in just three metropolitan areas – San Francisco, Boston, and New York, the paper notes. More than 49% of the U.S.-based companies financed by venture capital firms are located in these same three cities.
“Surprisingly, much of the VC outperformance in these venture capital centers arises from their non-local investments. This finding is counterintuitive, since venture capitalists might be expected to be the most involved and add the most value to the geographically closest companies. We observe this outperformance of non-local companies in both early- and latestage investments. ”
“One potential explanation for this higher return to non-local deals is that venture capitalists have a higher hurdle rate (i.e., require a higher expected rate of return) for investments that have a higher monitoring cost. This higher hurdle rate may reflect the imputed (personal) cost of traveling to remote locations.”
Outperformance of non-local investments suggests that policy makers in regions without local venture capitalists might want to mitigate costs associated with established venture capitalists investing in their geographies rather than encouraging the establishment of new venture capital firms.
Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion
Henry Chen, Paul Gompers, Anna Kovner, Josh Lerner
Technorati Tags: venture-capital
Globalization of the venture capital industry will intensify in coming years, posing significant competitive questions for the United States, and opportunities for emerging markets such as China, accoding to a new survey from Deloitte.
Apparently, among venture capitalists, there’s China and there’s everyone else. That was clearly demonstrated in response to earlier questions about where VCs plan to increase their investments.
Additional findings include the following:
- The clean tech sector is poised to become the leading investment category.
- Investment levels are more likely to increase in countries outside the United States.
- Governments of all countries have a crucial role to play in fostering competitiveness and innovation.
- Just over half of VCs surveyed remain optimistic that it is a terrific time to invest in promising entrepreneurial companies.
For details see 2009 Global Trends in Venture Capital.
Technorati Tags: china, cleantech, entrepreneur, venture-capital
Paul Kedrosky, wearing his Kauffman Foundation hat, argues that the venture capital industry needs to shrink to about half its current size.
In a short new paper, he notes that “venture capital returns have deteriorated immensely, predating the current economic downturn and traceable to the rapid expansion in venture capital assets under management in the United States in the late 1990s, a figure that has fallen less speedily than one would expect, in part because of the long duration of funds and the general illiquidity of venture capital investments.”
“It seems inevitable that venture capital must shrink considerably,” Kedrosky concludes.”While there is no question that venture capital can facilitate some forms of high-growth entrepreneurial firms, its poor returns make the asset class uncompetitive and at risk of very large declines in capital commitments as investors flee this underperforming asset”
While any estimate is subject to much uncertainty, it seems reasonable—based on returns, GDP, and exits—to expect the pace of investing to shrink by half in the coming years.
“We should also expect a continuing sharp decline in the amount of money invested ininformation technology, a maturing sector with declining capital requirements in its remaining innovative segments. Capital will continue to grow in other areas, including clean technology, but the sector must shrink its way back to health if venture capital is to provide competitive returns and secure its own future as a credible asset class and economic force.”
Technorati Tags: venture-capital
