INTERNATIONAL BANKING THE UNIVERSITY OF WARWICK LLM International Economic Law Professor Jorge Guira GROUP REPORT 1. CREDIT DERIVATIVES; 2. HEDGE FUNDS; 3. STRUCTURED FINANCE; 4. PRIVATE EQUITY; METHODOLOGY A) THE STRATEGY INDIVIDUAL RESEARCH AREAS; CROSS CHECKING; FINAL REPORT; B) THE RESOURCES ACADEMIC JOURNALS; PERIODICALS; SPECIALIST WEBSITES; GOVERNAMENTAL AND REGULATORY RESOURCES; MAJOR PLAYERS IN THE MARKET; CREDIT DERIVATIVES Concept: “A financial instrument whose value depends on or is derived from performance of a secondary source such as an underlying bond, currency, or commodity. Also termed derivative instrument.” (Black’s Law Dictionary, 5 ed) “A credit derivative is a contract (derivative) to transfer the risk of the total return on a credit asset falling below an agreed level, without transfer of the underlying asset. This is usually achieved by transferring risk on a credit reference asset. Early forms of credit derivative were financial guarantees. Some common forms of credit derivatives are credit default swap, total return swap and credit linked note.” (Wikipedia) HEDGE FUNDS Concept: “A specialized investment group, usually organized as a limited partnership or off-shore investment company – that offers the possibility of high returns through risky techniques such as selling short or buying derivatives. Most Hedge Funds are not registered with SEC and are therefore restricted in marketing their services to the public.” (Black’s Law Dictionary, 5 ed) “A hedge fund is a private investment fund charging a performance fee and typically open to only a limited number of investors, e.g., those in the United States, hedge funds are largely open to accredited investors only. Hedge Funds have grown in size and influence on the public securities and private investment markets and are not currently subject to any direct regulation by the SEC, the NASD, or other federal regulating commissions, unlike mutual funds, pension funds and insurance companies.” (Wikipedia) Note: There is no exact definition to the term “hedge fund”, it is undefined in federal or state securities laws. STRUCTURED FINANCE Concept: “Makeup of the right-hand side of a company's Balance Sheet which includes all the ways its assets are financed, such as trade accounts payable and short-term borrowings as well as long-term debt and ownership equity. Financial structure is distinguished from Capital Structure which includes only long-term debt and equity. A company's financial structure is influenced by a number of factors, including the growth rate and stability of its sales, its competitive situation (i.e., the stability of its profits), its asset structure, and the attitudes of its management and its lenders. It is the basic frame of reference for analyses concerned with financial leveraging decisions.” (Dictionary answer) “A service offered by many large financial institutions for companies with very unique financing needs.Structured finance generally involves highly complex financial CBOs and syndicated loans are examples of structured finance. transactions.” (Investopedia) PRIVATE EQUITY Concept: “A private placement raises funds by allowing outside private investors to purchase shares in the firm.” (Black’s Law Dictionary, 5 ed) “Private equity is a broad term that refers to any type of equity investment in an asset in which the equity is not freely tradable on a public stock market. Passive institutional investors may invest in private equity funds, which are in turn used by private equity firms for investment in target companies. Categories of private equity investment include leveraged buyout, venture capital, growth capital, angel investing, mezzanine capital and others. Private equity funds typically control management of the companies in which they invest, and often bring in new management teams that focus on making the company more valuable.” (Wikipedia Encyclopedia) TOP WEBSITES Bloomberg http://www.bloomberg.com Lexis Nexis http://global.lexisnexis.com/us US Government official website on the Securities Exchange Commission http://www.sec.gov EU official documents on the Prospectus Directive and related matters. http://ec.europa.eu/internal_market/securities/prospectus/index_en.htm Roubini Global Economics www.rgemonitor.com Social Science Research Network http://www.ssrn.com/ Hedge Fund Association www.thehfa.org Hedge Funds Website http://www.hedgeworld.com/sp_directory/index.cgi?jur=4 Hedge Funds Website http://www.hedgefundsreview.com/public/showPage.html?page=250885 Private Equity website http://www.privateequityinfo.com/?gclid=CLTx7rerrooCFSGQEAod8R_ppg TOP ARTICLES The Decline and Semi-Recovery of The Latin Derivatives Market , By Nina Mehta http://www.derivativesstrategy.com/magazine/archive/1999/0999fea4.asp Viral V Acharya, London Business School (LBS) and CEPR; Timothy C Johnson, London Business School (LBS) and CEPR. http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=5180 Private Equity in Latin America: Strategies for Success, by Alyssa A. Grikscheit (Goodwin Procter) http://220.127.116.11/search?q=cache:mbjuV6Y9e8YJ:www.goodwinprocte r.com/getfile.aspx%3Ffilepath%3D/Files/publications/grikscheit_a_6_05.pdf +private+equity+funds+in+Latin+America&hl=en&ct=clnk&cd=1&gl=uk Understanding AlternativeInvestments: A Primer on Hedge Fund Evaluation http://www.vanguard.com.au/library/pdf/RL_Hedge_Fund_Evaluation_P01% 2005.pdf Optimal Disclosure and Operational Risk: Evidence from Hedge Fund Registration http://papers.ssrn.com/sol3/papers.cfm?abstract_id=918461 Implications of the Growth of Hedge Funds http://www.sec.gov/news/studies/hedgefunds0903.pdf Hedging Your Bets: A Heads Up on Hedge Funds and Funds of Hedge Funds http://www.sec.gov/answers/hedge.htm Securities and Exchange Commission (2007)The role of the hedge funds in the US market http://www.treas.gov/press/releases/js4264.htm The United States Department of the Treasury (2006)SEC Proposes New Rules Affecting Private Equity Sponsors (Weil, Gotshal & Manges) http://www.weil.com/wgm/pages/Controller.jsp?z=r&sz=nl&db=wgm/cwgmpubs.nsf&d =A3C6376D38B4546D8525726700613342&v=Private%20Equity%20Alert&f=a20070 1 The regulation, taxation and distribution of hedge funds in Europe: Changes and challenges (PricewaterhouseCoopers 2006) http://www.pwc.com/extweb/pwcpublications.nsf/dfeb71994ed9bd4d8025714900308 62f/ea8e7a7f4b061fb8802572250040b6e2/$FILE/ATTMS0V6/TheRegulation,Taxatio n,DistributionOfHedgeFunds-2006.pdf Group members Anas Makhdoom Digish Rawal Fernando Locatelli Wei Sun (Henry) Mahesh Kumar Miguel Lacerda Natalie Karytinos Rodrigo C. do Vale Joshua Jun Liao Thank you very much for your attention!