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Finance Magazine - September 2005 Issue

BOI plans to double its domestic corporate business
Bank of Ireland Corporate Banking is ramping up both its domestic and international operations, with plans to grow its property business both at home and abroad.
Yield-enhancers are product of the day
Corporate treasurers are looking to yield-enhancing products such as range accruals and dual-currency accounts, to increase their return from cash deposits, while holding onto liquidity, according to a report in this month’s issue, ‘Cash is King – Cash Instruments for Treasurers and Investors’.
NTMA holds Irish bond auction
On September 15th, the National Treasury Management Association (NTMA) held its first bond auction since June 2004. The auction, which was confined to the NTMA’s nine recognised primary dealers, was for €600 million of the 4.5p.c. Treasury Bond 2020, the NTMA’s bond with the longest maturity.
Action is needed on post-IFSC regime
The Department of Finance needs to address some key issues in the Finance Bill 2006.
VAT on finance on EU agenda
The European Commission put out a tender on August 4th for a study of the economic effects of the value-added tax exemption for financial and insurance services.
Editorial: Traditional Social Partnership would be a far better option than Benchmarking
Social partnership is generally seen as a key positive process within the context of the general equilibrium model that, led by individuals such as Bertie Ahern and Bill Attlee, gave rise to the Celtic Tiger(1). The result was a Laffer Curve(2) effect, whereby everyone gained public sector workers, private sector workers, the Exchequer and the economy.
Increase in pension provision will drive growth in fund management industry
One of the worst bear markets in history has hit fund managers hard, Daniel Broby, chief invstment officer of Denmark’s third largest fund mnager BankInvest, told attendees at a seminar in Dublin on ‘The State of the Fund Management Industry’. However, he added that Europe’s aging population is putting pressure on pension provision, and he expects huge asset flows into the business as a result.
More News...
Awards for stockbrokers, Property derivatives are next major asset class, Pension revamp at An Post, Credit derivatives hit the mainstream....
ISE optimistic on growth prospects for IEX
On April 12th, 2005, the Irish Stock Exchange (ISE) launched its new market, the Irish Enterprise Exchange (IEX), which is designed to meet the needs of small to mid-sized companies.
Leading writer to lead two entry level seminars on securitisation at conference
Finance Dublin will offer an expanded educational programme on 28th November 2005 at The Finance Dublin Securitisation Conference 2005 in the form of ‘Securitisation 100 - Introduction to Securitisation’ and ‘Securitisation 200 - Advanced Securitisation’. These seminars are being chaired by Dr. Moorad Choudhry, Head of Treasury of KBC Financial Products, London, and Visiting Professor, Department of Economics, London Metropolitan University, and Visiting Research Fellow, ISMA Centre, University of Reading.
€3.5 billion ECP programme for IIB
IIB Bank has launched a new €3.5 billion Euro Commercial Paper programme replacing a previous $2.5 billion programme.
CIT chooses Dublin for workforce/tax benefits
CIT Aerospace International, the latest entrant in Ireland’s aviation finance sector, chose Ireland for its employment and corporate tax advantages.
‘Cash is King’ - a Report on corporate liquidity management
With interest rates at historic lows, corporate treasurers are looking to yield-enhancing products such as range accruals to increase their cash management returns.
A question of cash
The cash decision is a richly layered one for investors, both money managers and corporate treasurers alike. Where interest rates are headed not only determines where you want to be along the curve, but is also perhaps the key driver of where you want to be as regards the wider range of other asset classes, equities, bonds, property, alternatives etc. for those who have that flexibility of mandate. In this sense, cash is something of a ‘gateway’ asset, writes Eugene Kiernan.
The risk/reward paradigm - lower ratings or greater risk?
Every corporate treasurer, investment manager and many private individuals have significant cash surpluses to invest. Thanks to the myriad of information services available, people are keenly aware of the comparative returns available to them. Many investors spend significant time in the ‘everlasting search for higher yield’. However, not all investors are aware that each additional basis point of yield brings with it additional risk – namely default risk. John Coffey and Niall Cuddihy examine the different alternatives available to a cash investor, identifying, for each case, the risk/return issues involved.
Decisions need to be based on whether after tax returns from cash management are trading or non-trading?
Most corporates will be involved in cash management activities to some extent. Given the differential between the corporation tax rate applicable to trading and non-trading income, it is important that treasury managers are aware that the returns from their cash management and treasury activities may not necessarily be taxable as trading income, writes Jean O’Sullivan.
Training for corporate treasurers
The Certificate in International Cash Management (Cert ICM) run by the Institute of Bankers is an international qualification which has been specifically developed by the Association of Corporate Treasurers (ACT) for those working in within banks and corporates in Europe, Asia and the United States. Although the deadline for Institute courses is September 9th, the Cert ICM has a deadline of September 30th.
Funds rise in prominence in Europe as treasurers benefit from earning an enhanced yield on surplus cash
Liquidity funds have been a popular investment tool in the US for over 30 years, and the market for this niche treasury product has grown to over $2 trillion. Now, such products are becoming available in Europe, writes John O’Farrell, and are an attractive tool for treasurers looking to earn an enhanced yield on their surplus cash, whilst enjoying same day access to those funds.
The changing face of cash management – from cash investment to portfolio management
The concept of cash management for corporate treasurers has changed significantly in recent years, writes Pat Leavy. Traditionally, corporates saw cash management in terms of surplus cash investment and its main components such as security and liquidity, and the concept of 'portfolio' management related to the construction of investment portfolios. Now however, corporates consider the total cash value chain as the new 'portfolio' and are challenged to maximise value for the company from each element of this chain. In addition, there has also been a strategic shift in the status of cash management within companies, driven by legislation such as Sarbanes Oxley, and it is now high up on the corporate management agenda securing senior management and board attention.
CDs as a tool for cash management and funding
Since a rule change in the Finance Act 2003, which made it possible for Irish resident financial institutions to issue certificates of deposit (CD) to Irish investors, a number of Irish based financial institutions have availed of the opportunity to issue including EBS, Depfa Bank and UniCredito Italiano Bank (Ireland) plc. In this, our annual update on CDs, we present a Questions & Answers session, where key industry players – Mark Whelan, Caroline O’Connor and John Whelan of EBS; John O’Farrell of UniCredito Italiano Bank (Ireland) plc; Hugh Beattie of McCann Fitzgerald; Christopher Amott of JP Morgan and Damien O’Donoghue of Bank of New York, discuss the main issues in the market, including CDs as a cash management tool, and new types of product emerging.
Careers in Finance & Financial Services: fund administration
Dublin is the best location in the world in which to develop a career in fund administration, says Harley Murphy, newly appointed country manager of Mellon Ireland. He first entered the industry in 1999 when he joined Mellon Fund Administration Dublin as managing director, and advises those looking to get ahead in the industry, to see how the industry is changing and then, ‘get as much experience as you can in those areas that are developing within the industry’.
Careers in funds offer continuous salary progression
Entry level salaries in the funds industry start at around €23,000, but for those at manager level, salaries can reach up to €90,000, with those working on the risk side getting paid considerably more than those in fund administration/accounting.
Majority of staff are graduates, but on-the-job training is also a way into industry
While a degree is not essential to pursue a career in funds, the majority of people (83p.c.) working in the Irish industry do. The other route into the industry is to get on-the-job training at entry-level, says Deirdre Norris.
Investors turn to CFDs for gearing
Irish investors are turning to Contracts for Difference (CFDs) in increasing numbers for leverage, writes Martin Cass, as these instruments offer investors the opportunity to get anywhere between 5 and 10 times gearing at very attractive funding rates. Another advantage of trading CFDs is that they allow the investor to go 'short' on stocks, as well as enabling them to do a ‘pairs trade'.
Pressure to open up retail hedge fund markets will persist says new report
Europe is slowly coming around to the idea of retail hedge funds. In Luxembourg, retail investors now have access to hedge funds, provided the funds are approved by the local regulator, and last year, the Irish regulator abolished its minimum investment limits for Irish retail investors in fund of hedge funds. France is also easing access to retail investors with a minimum investment threshold of �10,000 for fund-of-hedge-funds. Ken Owens provides an overview of these and other regulatory and fiscal developments around Europe, drawing on PwC's new white paper, 'The Regulation and Distribution of Hedge Funds in Europe'.
Action is needed on post-IFSC regime
The end of 2005 will see the international financial services companies move out of the IFSC tax regime into the normal Irish tax regime. Many of the features of our normal tax system which will apply post-2005 need to be amended to ensure our tax system firstly remains attractive, in particular to the group finance, treasury and asset financing sectors, and secondly doesn’t fall foul of EU anti-discrimination provisions.
Pension Threat?
Two separate reviews of the tax treatment of pension provision are under way. The ‘tax cost’ of the tax treatment of pensions may be misunderstood. The real problem may be under provision of pensions.
The origins of mutual funds
Oxford University Press has just published a brilliantly illustrated book ‘The Origins of Value: The Financial Innovations That Created Modern Capital Markets’, written by some of the world’s leading writers on finance history and the history of economic thought. In this extract we relate the very beginnings of mutual funds, (which are now the basis of a €500 billion plus industry in Dublin) in an abridged extract of an article by K.Geert Rouwenhorst, one of the editors of the book.
A Day in the Life: Julia Hoggett, global head of capital markets, DEPFA Bank
Running the long-term funding team for a bank such as DEPFA is an extremely varied job for Julia Hoggett, global head of capital markets. With a funding requirement of around €30 billion per year, DEPFA utilises a wide range of different capital markets, requiring day-to-day monitoring of the fixed income markets, an understanding of new structured products and an extremely active marketing effort. With a team of six people in Dublin and others about to join the team in Frankfurt, the aim is to raise these funds as efficiently and cost-effectively as possible.
Books to get you back on track
With days spent lying by the pool reading ‘The Da Vinci Code’ now just a distant memory, this month, to help you ease back into working mode, we take a look at some of the top business books on the shelves at the moment, including FT columnist Lucy Kellaway’s hilarious look at today’s office workers, ‘Martin Lukes: Who Moved My Blackberry?’, which almost qualifies as a pool-side read. This month’s reviewers: Gavin Hickie and Fiona Reddan.
Who’s who in Finance: Jim Murphy, Director, Life Strategies Limited
Date for your diary - 28th-29th November 2005, The Burlington Hotel, Dublin
The Finance Dublin Securitisation Conference 2005 Investment and Issuance: Debt, ABS and Credit.
Going global from Dublin – with a little help from the locals
The arrival of PI Investment Management Limited (PIIML), a subsidiary of Australian fund manager Perpeutal Trustees Australia Limited (Perpetual), caused quite a stir when it announced last September that it would be setting up a global equities business in Dublin - and poaching a number of senior fund managers from Bank of Ireland Asset Management to run it. A year down the line, the furore surrounding the move has disappeared, and the team are getting on with what they know best – managing money. Head of the Irish business, Rory MacIntyre, tells Fiona Reddan why Perpetual came to Dublin, and what they hope to achieve there.
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