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CVC To Buy iShares …
Or Maybe Not
Luxembourg-based CVC Capital
Partners agreed to buy Barclays Global
Investors’ iShares exchange-traded fund
unit for $4.4 billion in April. The deal
did not include iShares’ share-lending
business, an extremely lucrative segment
of the iShares operation.
Under the terms of the CVC deal,
Barclays was to provide the bulk of the
financing, providing loans on reasonably
favorable terms for $3.1 billion of
the $4.4 billion deal.
CVC Capital is a private equity firm
with diversified interests; the iShares
purchase was to be its first foray into
the financial sector.
But no sooner had the ink dried on the
deal documents than rumors of alternate
bidders emerged. As part of the deal,
Barclays had a 45-day window to look for
alternative and superior offers. If it found
one, it would have to pay a $175 million
breakup fee to CVC Capital.
As this issue of the Journal of Indexes
goes to press, reports are circulating
that firms such as Black Rock Capital
may be in the running. Black Rock is
said to be entertaining a $10 billion bid
that would encompass not just iShares,
but the broader BGI business. Also mentioned
as potential bidders are private
equity firms Apax Partners, Hellman &
Friedman and BC Partners.
Management at Barclays owns up to
10 percent of iShares, and will be paid a
cash dividend based on its stakes in the
deal. Barclays CEO Robert Diamond Jr. is
expected to earn upward of $6.9 million
from the deal; he did not participate in the
consideration of the iShares transaction.
Dow Jones Rebrands
Two Index Families
This spring saw the rebranding of two
major Dow Jones indexes product lines.
Perhaps most importantly, the index
provider’s agreement with Wilshire
Associates was terminated on March
31. For several years, the two index
providers jointly marketed an index
family that included the rebranded version
of the well-known Wilshire 5000
Index, which represents nearly all the
listed stocks in the U.S.
Both parties have returned to calculating
their own indexes, with the Dow
Jones Wilshire index family rebranded as
the Dow Jones Total Stock Market index
family and Wilshire Associates’ indexes
once again marketed under its own brand
name. The jointly marketed indexes were
identical as of April 1, but will likely
diverge going forward as the two different
providers interpret rules separately
and modify the methodologies over time,
a Wilshire respresentative said.
More recently, the Dow Jones – AIG
Commodity Index changed its name to
the Dow Jones – UBS Commodity Index
as of May 7, following the acquisition of
some of AIG’s assets by UBS.
The index’s methodology remains
exactly the same, but new suggested
ticker symbols reflecting the name
change have been generated for the
main index and its subindexes. Dow
Jones is publishing parallel sets of indexes
under the new and old ticker symbols
for 30 days before phasing out the old
symbols; the index values for both sets
of symbols are exactly the same.
Grim Results For
Active Managers In 2008
More than 70 percent of all actively
managed U.S. equity mutual funds
trailed their benchmarks for the five
years ending 2008, according to the
2008 Standard & Poor’s Index Versus
Active Fund Scorecard (SPIVA).
The report shows that 71.9 percent of
actively managed large-cap funds trailed
the S&P 500; 75.9 percent of actively
managed mid-cap funds trailed the S&P
MidCap 400; and a stunning 85.5 percent
of actively managed small-cap funds
trailed the S&P SmallCap 600.
S&P says the results were consistent
with the previous five-year cycle, from
1999 to 2003.
Actively managed funds also did
poorly over the one-year period: 54
percent of large-cap funds trailed the
S&P 500; 75 percent of mid-cap funds
trailed the S&P MidCap 400; and 84
percent of small-cap funds trailed the
S&P SmallCap 600.
The single worst category for
active managers in 2008 was small-cap
growth, where a dizzying 96 percent
of managers trailed their benchmark.
The only bright spot was large-cap
value funds, which trounced the S&P
500 Value Index in 2008, with 78 percent
of actively managed funds beating
their benchmark.
But the story turns dismal again for
active managers of international funds.
Sixty-three percent of global funds
trailed the S&P Global 1200 on a fiveyear
basis; 84 percent of international
funds trailed the S&P 700; 59 percent of
international small-cap funds trailed the
S&P Developed Ex-US Small-Cap; and
90 percent of emerging market funds
trailed the S&P/IFCI Composite.
Fixed income is no better. Over five
years, the percentage of fixed-income
funds that outperformed their indexes in
all standard domestic categories is less
than 10 percent. The only exceptions
are in high yield, where 48 percent of
funds beat their benchmark; global fixed
income, where 21 percent beat their
benchmark; and emerging markets debt,
where 38 percent beat their benchmark.
All results are adjusted for survivorship
bias.
MacroMarkets Closes Oil Fund,
Cancels Housing IPO
MacroMarkets LLC has been
encountering some problems with its
MacroShares exchange-traded products.
The firm has a patented meth-
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July/August 2009