The Digest
Some of the proposals of the UK’s Independent Commission on Banking are making long-term unsecured funding for banks more uncertain and therefore more expensive. Covered bonds may fill the gap where needed.
Goldman Sachs shutters its Global Alpha fund after its AUM never recovered from the 2007 loss and it posted a negative return this year. Another nail in the coffin for hedge funds internal to banks, generally out of favour due to more restrictive regulations and a higher overall cost of capital.
China is considering allowing banks to securitise their assets to “cope with tighter liquidity and a potential rise in bad loans”. This seems significantly out of step with other policy actions aimed at restraining credit availability.
The World Bank is to invest in a hedge fund that will issue notes designed to offset some of the capital requirements banks will have to meet to lend to developing nations. Reporting on the structure is not very clear but it does sound like an interesting application of structured finance.
FT Alphaville experiments with “Delta None” trading.
