NEWSLETTER of May 21, 2021

The following content has been added at finexpert:

PwC
GLOBAL TOP 100 COMPANIES BY MARKET CAPITALISATION
The market capitalization of the world's 100 most valuable public companies (PLCs) has increased by $10.3 trillion (48 percent) in just one year. At the end of March 2021, it stood at $31.7 trillion - a new record. This is one of the core findings of the latest "Global Top 100" ranking published annually by the accounting and consulting firm PricewaterhouseCoopers (PwC). The analysis compares the total value of the world's 100 most valuable companies on March 31, 2021, with the value on March 31, 2020, and also presents the changes by industry and region. >more

Baker McKenzie
REASSESSING THE LANDSCAPE FOR CHINESE INVESTMENT IN NORTH AMERICA AND EUROPE
COVID-19 has slowed China’s global deal making as the pace of outbound FDI has decelerated. In 2020, completed Chinese outbound mergers and acquisitions (M&A) totaled just USD 29 billion, down 45% from USD 53 billion in 2019 — reaching the lowest level in a decade. However, commercial incentives for Chinese companies to invest in European and North America markets remain strong, and several variables are moving in a direction that is supportive of greater outbound deal making in 2021. >more

BlackRock
A BETTER WAY TO BUILD PRIVATE MARKET PORTFOLIOS
With their potential to enhance returns and help mitigate risk through diversification, private assets play an increasingly important role in institutional portfolios.  Maximizing their desired benefits can be a challenge, however, as illiquidity, opaque valuations, limited data and implementation hurdles make portfolio construction harder than it is with public-market assets.  We have developed a framework that addresses these complexities through a three-step process. >more

Scope Rating
EUROPEAN HOUSE PRICES: TIME FOR REGULATORS TO HIT THE BRAKES?
Growth in house prices across Europe was stronger in 2020 than it has been at any time in the last decade, even though European economies spent much of the year in lockdown and unemployment increased. The economic outlook and pressure on housing affordability and profitability point to a moderation in growth. That said, with ultra-low interest rates, housing shortages in metropolitan areas and high-income mid agers (so far) being spared income losses, growth could even accelerate. This may be the right time for regulators to become proactive and introduce stricter macroprudential measures, else banks and borrowers might be caught on the wrong foot when the tide turns. >more

Deutsche Bank Research
STAATSFINANZIERUNG DURCH HEIMISCHE BANKEN - WAS TUN?
The pandemic and the rise in sovereign debt highlight the need for reform in the regulation of sovereign risk for banks. Such a reform would also strengthen the stability of the banking union. Euro area banks hold claims on their home sovereigns amounting to EUR 2.1 trillion, or 6.2% of their total assets, in the form of bonds and loans. Among the largest countries, banks in Italy are the most exposed relative to equity (194%), followed by Spain (105%). In Germany (67%) and France (60%), this ratio is significantly lower. >more

GLOBAL BOARD REFORMS AND THE PRICING OF IPOS
Yangyang Chen, Abhinav Goyal, and Leon Zolotoy
2021
We document that global board reforms are associated with a significant reduction in IPO underpricing. The effect is amplified for IPOs with greater agency problems and mitigated for IPOs certified by reputable intermediaries, IPOs with greater disclosure specificity, and IPOs in countries with better shareholder protection and stringent financial reporting regulations. Furthermore, global board reforms have led to an improvement in the long-term market performance, proceeds, and subscription level of IPOs, and have enhanced board independence in the issuing firms. Our findings suggest that global board reforms have strengthened board oversight in the issuing firms, leading to less underpriced IPOs. >more

DIVERSIFYING PRIVATE EQUITY
Oleg Gredil, Yan Liu, and Berk A. Sensoy
2021
Most institutional investors in private equity (PE) invest in just one or two PE funds per year. For these investors, it is overly optimistic to judge the value of PE as an asset class by its average performance, as prior literature does, because it does not adjust for idiosyncratic risk. This paper proposes a new framework for private equity performance evaluation that permits a fund selection scheme to capture diversification constraints, allows for high-moment characteristics in fund returns, and can be adapted to a variety of utility functions. We use the framework to evaluate the utility costs to imperfectly diversified PE investors relative to a fully diversified benchmark. When calibrated to the data on institutional allocations to PE and plausible risk aversion, our analysis reveals that certainty equivalent returns in PE fund investing are 2-to-8% lower than if inferred from average fund performance levels. Funds-of-funds are generally worth their fees-on-fees for small, constrained investors that would otherwise bear substantial idiosyncratic risk from small numbers of PE funds. Chasing managers with high past performance increases idiosyncratic risk which for most investors outweighs the incremental improvement in returns. >more