Morning News (1/24/11): PE Returns Called Into Question


Every morning the Street of Walls team puts out an update on market levels, today’s top stories, and active M&A deals.

Today’s Top Stories:

  • CS Bonuses in Bond Derivatives: Credit Suisse (CS) just announced that it plans to pay a chunk of its senior employees’ 2011 bonuses in bonds backed by derivatives
  • Portugal Needs a 2nd Bailout: Investors, economists and politicians are increasingly concerned that Portugal will need a second bailout as fears mount that it won’t be able to return to markets for financing next year
  • MS Forced By Regulators on Comp: Fox Business reports that MS was pressured by regulators to cut down on compensation
  • Pension Problems: “Pension funds’ deficits widen as bond yields fall. The cost will be borne by shareholders” (Barron’s)
  • CALPERs returns 1.1% in 2011: the nation’s largest public pension fund returned 1.1% in 2011, well below its estimated average annual return of 7.7%
  • PE returns called into question: a new study wound that ~70% of gross investment performance by PE shops gets eaten up by fees
  • New Blackstone Fund: secured more than $6 billion of pledged capital for a new real estate fund that will buy mainly distressed-property assets – Bloomberg
  • RBS Comp Meeting This Week: will hold meetings Wed to discuss employee compensation for 2011 (DJ)
  • S&P Technical Analysis: “S&P 500 is showing signs of failure ahead of trend resistance at 1330/32. The S&P posted a fresh intraday high yesterday, at 1318, to exceed our initial 1304/10 bull target zone, but with volumes remaining light, and intraday momentum deteriorating, we remain wary of the potential now for profit-taking” (CS)
  • GS FOMC Preview: “We expect the inaugural set of FOMC forecasts for the federal funds rate–or more precisely, the projections of the appropriate level by the 17 meeting participants in the Summary of Economic Projections (SEP)–to be clustered around a median of 0.75% by the end of 2014” (GS)

Economic Calendar:

  • Tuesday: the State of the Union Address (Tue., 9pm EST)
  • Wednesday: Federal Open Market Committee (FOMC) meeting

M&A Watch:

  • Weekly M&A Trends: Announced M&A volumes for the week rose +35% to $25.9 billion.  ECM volumes declined by -61% from a tough comparable last week
  • STI announced the signing of a definitive agreement under which SunTrust will acquire substantially all of the assets of FirstAgain and enhance SunTrust’s capabilities in the direct online lending market
Disclosure: I do not have a position in any stocks mentioned in this article, do not have a plan to initiate a position within the next 72 hours.
Disclaimer:  The information, opinions, material, and any other content provided in this article is for informational purposes only and is not to be used or considered an offer or solicitation to buy or sell securities, investment products, financial instruments, or to participate in any particular investment strategy. The information, opinions, material, and any other content provided in this article does not constitute as a recommendation or as advice to buy or sell securities, investment products,  financial instruments, or to participate in any particular investment strategy.

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