Rajaratnam gets 11-year sentence

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Galleon hedge fund founder Raj Rajaratnam departs Manhattan Federal Court after his sentencing in New York October 13, 2011.

Credit: Reuters/Lucas Jackson

By Grant McCool

NEW YORK | Fri Oct 14, 2011 9:04am BST

NEW YORK (Reuters) - Raj Rajaratnam, a self-made hedge fund tycoon convicted in the biggest Wall Street trading scandal in a generation, was ordered to serve 11 years in prison, the longest sentence ever in an insider-trading case but far less than prosecutors sought.

Thursday's sentencing caps a prosecution, marked by secret wiretaps of Rajaratnam and his associates, that shocked the investment world. The Sri Lanka-born fund manager once stood atop a $7 billion New York hedge fund, but was found guilty of running a network of informants who supplied him with corporate secrets.

The sentence was lighter than the 19-1/2 year minimum term that prosecutors had sought, and was only slightly more than the 10 years handed down recently to a former Rajaratnam employee at the now-shuttered Galleon Group hedge fund.

The judge, in rejecting calls for a tougher sentence, said Rajaratnam, 54, faces "imminent kidney failure" due to advanced diabetes. He referred to a report from the defense describing Rajaratnam's doctors as recommending dialysis soon. The report said the doctors had begun the process for obtaining a kidney transplant.

"Prison creates a more intense form of punishment for critically ill prisoners," U.S. District Judge Richard Holwell said. He added, however, that illness does not provide "a get-out-of-jail-free card."

The judge also cited the multimillionaire's charitable work including helping victims of natural disasters in Sri Lanka, Pakistan and in the United States.

Rajaratnam, standing with his lawyers and looking straight ahead, was expressionless after hearing the sentence. Before the judge announced his ruling, Rajaratnam said "No thank you, Your Honor," when asked if he wanted to make a statement.

Rajaratnam's lawyers, whose client showed no obvious signs of poor health during the 80-minute hearing on Thursday, have said that a long prison term would amount to a death sentence.

MADOFF'S PRISON RECOMMENDED

The judge granted Rajaratnam's request to recommend he be sent to a prison in Butner, North Carolina, best known for housing Ponzi scheme operator Bernard Madoff, who is serving a life term. The prison, whose inmates range from white-collar offenders to child molesters and gang members, has a hospital.

Rajaratnam was the key figure of a sprawling criminal case, unveiled in October 2009, that touched some of America's top companies, including Goldman Sachs Group Inc (GS.N), Intel Corp (INTC.O), IBM (IBM.N) and the elite McKinsey & Co consultancy.

Prosecutors have placed him in a dubious pantheon of Wall Street power players such as takeover specialist Ivan Boesky and junk bond financier Michael Milken, principal figures in a mid-1980s insider-trading case. Both men served about two years in prison.

Rajaratnam's actions were "brazen, pervasive and egregious," Assistant U.S. Attorney Reed Brodsky said in court on Thursday, urging for the maximum punishment.

Holwell also decried Rajaratnam's offenses, saying "the government is absolutely correct that insider trading is an assault on the free markets that are a fundamental element of our democratic society."

Rajaratnam was ordered to surrender on November 28. The judge rejected his request to remain under house arrest at his luxury Manhattan apartment while he pursues an appeal over the legality of the wiretaps.

Federal inmates typically must serve at least 85 percent of their terms before being eligible for release.

Rajaratnam's wife, Asha, who has never attended court in the two years since his arrest, sat in the third row of the courtroom's public seats while the judge imposed sentence.

Rajaratnam was convicted in May on 14 charges of securities fraud and conspiracy. He did not testify in his own defense at his two-month trial, but his voice was heard repeatedly on the 45 recorded phone calls played for the jury.

The judge also fined him $10 million and ordered him to forfeit $53.8 million, which Holwell said approximated the illegal profits and avoided losses from the trading scheme.

The Galleon case sent shock waves through Wall Street and the hedge fund industry, where traders can try to get an edge at all costs. Prosecutors say Rajaratnam and others crossed the line by pumping corporate insiders for corporate earnings or details of mergers that had not yet been announced.

The investigation featured extensive use of secret FBI phone taps. Such tactics usually are reserved for Mafia and drug trafficking investigations.

The case has been a major victory for the Justice Department. Out of 26 people, including traders, lawyers, executives and consultants charged in the case, 25 have pleaded guilty or were convicted at trial of supplying or trading on illicit stock tips. One is at large.

"We can only hope that this case will be the wake-up call we said it should be when Mr. Rajaratnam was arrested," Manhattan U.S. Attorney Preet Bharara said in a statement.

One conspirator caught on the phone taps was Danielle Chiesi, a former high school beauty queen who became a hedge fund trader at New Castle Funds.

"They're gonna guide down," Chiesi told Rajaratnam on a July 24, 2008 recording of them discussing Akamai Technologies Inc's (AKAM.O) full-year outlook. "I just got a call from my guy. I played him like a finely tuned piano."

At the trial, several of Rajaratnam's former friends and associates, including former McKinsey consultant Anil Kumar and former Intel executive Rajiv Goel, testified against him.

Goldman Chief Executive Lloyd Blankfein also testified that disclosure of boardroom talks to Rajaratnam by a Goldman board member went against the bank's confidentiality policies.

Insider-trading defendants often get sentences lower than what is prescribed in federal guidelines, out of the view that their crime is less harmful than other types of misdeeds.

Judges have handed down some tough insider-trading sentences recently. A former Galleon employee, stock trader Zvi Goffer, 34, was sentenced last month to 10 years in prison. In a 2008 case, former Credit Suisse investment banker Hafiz Naseem also was sentenced to 10 years.

Rajaratnam drew only a slightly longer term.

"I think it's a fair sentence," said Thomas Dewey, a defense attorney at law firm Dewey Pegno & Kramarsky. The judge "balanced the seriousness of the crime and the need for deterrence with his medical issues and the good works Raj has done to come out at the right place."

Rajaratnam founded Galleon in 1997 and built it into one of the world's largest hedge funds. Galleon made all of its investors whole when it was wound down after his arrest. (Additional reporting by Basil Katz and Andrew Longstreth in New York; Writing by Martha Graybow; editing by Tim Dobbyn)

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Five buy-out firms to bid for Iceland - sources

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By Victoria Howley and Simon Meads

LONDON | Thu Oct 20, 2011 9:57am BST

LONDON (Reuters) - At least five private equity firms are set to submit first-round non-binding offers for a 77 percent stake in British frozen food retailer Iceland Foods by Wednesday's deadline, four people familiar with the matter said.

Iceland Foods' CEO and key investor Malcolm Walker is thinking about bidding for the company later in the process, with backing from pensions funds and sovereign wealth, three of the people said.

Analysts expect a winning offer to value Iceland at 1.3 billion to 1.5 billion pounds.

BC Partners, Cinven, Blackstone (BX.N), TPG and Bain will square up against supermarket groups Asda, owned by retail giant Wal-Mart (WMT.N), and Wm Morrison (MRW.L) the people said.

The retailers are also expected to bid for the full stake, but would have to sell off some of the stores to satisfy competition authorities.

Walker, who founded Iceland back in 1970 and has a 23 percent stake along with other managers, wants to buy all the company and to make his own bid, the three people said.

Walker has a tactical advantage over his rivals because he has the right to match any offer for Iceland.

Landsbanki's resolution committee will decide if the offers represent enough value for the auction to move into a second round once all the bids are in.

Walker, whose 1 billion pound offer for Iceland was rejected last year, could bid even if all the first round offers are rejected, but there is no guarantee that he will reach the vendors' price expectations either.

He has been putting together his and wants majority control of the bidding vehicle that will be established for his offer, which means he is unlikely to join forces with the private equity firms when he shows his hand, they said.

"There are only two real outcomes here," said one of the people. "Either a grocery retailer buys it and does a deal to dispose of some stores, or Walker buys it with passive investors like pension funds."

Pension and sovereign wealth funds are traditionally passive investors compared to buyout houses that usually want majority control and see themselves as hands-on managers of the businesses that they buy.

Creditors of collapsed Icelandic banks Landsbanki and Glitnir gained control of their 67 percent and 10 percent stakes in Iceland after the demise of investment group Baugur and are now looking to maximize value through a sale.

(Additional reporting by Mark Potter; Editing by Elaine Hardcastle)

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China private equity firm CSM plans new $1 billion fund

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By Sudip Kar-Gupta

LONDON | Thu Oct 20, 2011 9:59am BST

LONDON (Reuters) - Chinese private equity firm China Science & Merchants (CSM) announced a global fund-raising for a new $1 billion (636 million pounds) fund that will be its first one open to non-Chinese investors and is aimed at raising CSM's profile overseas.

EME Capital is the global co-ordinator and advisor on the fund-raising, and the companies said on Thursday that CSM had already received positive feedback from Gulf-based firms over the new fund and would meet European investors in November.

"Whilst CSM is one of the leading private equity firms in China, we have not until now considered approaching international investors for capital," CSM general partner Shan XianShuang said in a statement.

"We are delighted with the quality of the meetings we have had and the strong and positive response we have received from investors," he added.

The CSM team features British entrepreneur and financier Robert Hanson who is also involved in the new fundraising.

CSM was founded in 2000 and the company's website states that it owns stakes in dozens of Chinese firms including SumaVision Technologies 300079.SZ, Spreadtrum Communications (SPRD.O) and Huatai Insurance.

It currently has some $2 billion of assets under management, and the new fund would bring its funds under management up to $3 billion.

CSM, which traditionally targets equity capital stakes of between $20-$100 million for each transaction, will invest the new $1 billion fund in Chinese companies in both the private and public sectors.

(Reporting by Sudip Kar-Gupta; Editing by Myles Neligan)

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Private banker pay stumbles as bonuses dive

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By Chris Vellacott and Martin de Sa'Pinto

LONDON/ZURICH | Mon Oct 17, 2011 10:51am BST

LONDON/ZURICH (Reuters) - The personal bankers to Europe's richest families are taking home much smaller bonuses as their employers tighten the purse strings to meet the costs of broader regulation and a prolonged dip in client revenues.

While bonus awards were once based mainly on individual performance, more banks are now focusing on overall profits, which have been battered by rock-bottom interest rates and low client activity, industry insiders and headhunters say.

"Even if a banker has had a spectacular year but the institution for whom they work has performed badly ... this affects their bonuses significantly," said Sophie De Ferranti, head of private wealth management at London headhunter Valens Goldberg.

Private banks are finding it increasingly hard to turn a profit as more onerous regulation since the financial crisis has lifted costs while ever more cautious clients are sticking to low margin investments and cash.

Bankers' base salaries have remained constant during the last 12 months, De Ferranti said, but performance-linked compensation has dropped "significantly".

Three industry sources said bonuses had dropped to around 20-30 percent of revenues generated from bringing in new clients and selling financial products to them, from up to 50 percent before the crisis.

Base salaries for client advisers are between 130,000 and 150,000 Swiss francs, while a banker at managing director level can expect to earn basic pay of about 250,000 francs, the sources said.

"Total earnings at banks have gone south, and this has impacted bonuses, which are based on individual, team and company performance," said one of the sources.

Earlier this month Alexandre Zeller, head of private banking for Europe, the Middle East and Africa at HSBC (HSBA.L), told the Reuters Wealth Management Summit in Geneva that pay remained the industry's principal cost.

There is less wiggle room on private bankers' pay than for their more flamboyant investment banking peers, others noted.

"Pay was never extreme in private banking; it's not as subject to a correction as in investment banking," Deutsche Bank (DBKGn.DE) global head of private wealth management Pierre de Weck told the Reuters Summit.

Also, as the market of potential clients in developed economies is squeezed by a slowing economy, banks are forced to rely on poaching top talent from each other to ensure healthy growth in their businesses.

Moreover, as competition keeps a lid on growth in developed markets, the fight for top staff is intensifying in higher-growth areas such as Singapore.

De Weck said these factors had pushed the cost of Asian bankers higher than in Switzerland, while in London staff costs are about the same as in Switzerland.

But that has served to make staffing top-heavy, with private banks targeting big client adviser names but spending little to develop less experienced bankers, one industry source said.

"There is a big divide between top and bottom levels, while the middle levels seem to be thinning. The banks are not willing to take bets on junior bankers any more," this person said.

(Editing by Will Waterman)

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UK dividend payouts at post-Lehman quarterly high

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By Simon Jessop

LONDON | Mon Oct 17, 2011 6:39am BST

LONDON (Reuters) - Payouts to shareholders by cash-rich UK firms passed 20 billion pounds in the third quarter, for the first time since the collapse of Lehman Brothers in late 2008, as a weak economy crimped their dealmaking and investment spending.

While the pace of dividend growth is expected to slow towards the end of the year and into 2012, weighed by a hazy growth outlook, the robust nature of many corporate balance sheets should continue to act as support, Capita Registrars, a unit of Capita Group (CPI.L), said in a quarterly report on Monday.

"Investors can at least take comfort that firms are well capitalised, more so than at the time of the last major financial crisis, and are better able to withstand renewed turmoil," Capita Registrars Chief Executive Charles Cryer said.

As a result of the quarterly gain, Capita Registrars, which registers the ownership of shares, raised its full-year payout forecast by 1 billion to 67 billion pounds, up 18 percent and still on course for the best year since 2008.

While the resumption of dividends from oil major BP (BP.L) and other one-off factors had helped drive the gain, even without these, growth was still a "healthy" 11 percent . The nine-month total, meanwhile, is just shy of that for full-year 2010.

"Dividends are growing faster than we expected as UK firms shrug off the worst stock market conditions since 2008 and continue to increase payouts to shareholders," Capita Registrars Chief Executive Charles Cryer said.

The FTSE 100 .FTSE fell 14 percent in the third quarter, weighed by concern that major developed economies were set to slip back into recession, and by fears the euro zone debt crisis would spread.

Dividend growth for stocks in the blue-chip index exceeded that for the mid-caps .FTMC for the first time since the last quarter of 2009, Capita Registrars said, with growth of 17 percent from the FTSE 100 near twice the FTSE 250's 9 percent.

For the first time since Capita began the research, all sectors increased their dividend, with cyclical sectors, up 23 percent, outperforming defensives, up 10 percent.

"The arrival of Glencore on the exchange provided 224 million pounds for its shareholders, but other mining stocks paid an additional 200 million between them too, making miners again one of the best-performing sectors," Capita Registrars said.

A total of 228 companies paid a dividend in the third quarter, compared with 221 in 2010, of which 196 either increased, reinstated or started paying dividends, while 23 cut or cancelled them, Capita Registrars said.

"This means the increases/reinstatements outnumbered the cuts/cancellations by 8.5:1, demonstrating how widely spread the improvement in income distributions is across the stock market," it said.

SPREAD TO BONDS

The sharp third-quarter stock market falls pushed yields on UK equities higher and meant those stocks paying a dividend were attractive relative to low-yielding bonds and against the backdrop of rising inflation.

The prospective equity yield for 2011 is 3.8 percent, up from 3.6 percent in July, Capita Registrars said, with the FTSE 100 set to yield 3.8 percent and contribute 88 percent of the annual total. The FTSE 250 will yield 3.5 percent.

Ten-year gilt yields, meanwhile, plunged 1.1 percentage points in the third quarter, taking equity yields to an unprecedented spread over bonds of 140 basis points, it added, although the outlook for 2012 was unclear.

"A yield this high relative to bonds is very rare indeed, but risks to capital are great, and the market may be judging that earnings, and therefore dividends, are vulnerable to a renewed economic slowdown. The jury is out on whether dividends can sustain this momentum next year," Cryer said.

(Reporting by Simon Jessop; Editing by Erica Billingham)

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Colombia-U.S. trade agreement helps China?

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Hong Kong (CNN) – Colombia’s free trade agreement with the U.S. creates opportunities for Chinese businesses getting squeezed out of the North American market by the ongoing trade disputes between the world’s two largest economies.

For China, this is the opportunity to get goods relabeled as Colombian and enter the U.S. with zero tariffs. And as businessmen think about the new possibilities, many are rushing to rewrite business plans.

“The Chinese have their eyes on Colombia because it is the bridge they need to reach the U.S.,” José Antonio Mutis, Colombian Consul General in Hong Kong, told CNN.

There are still few details on how a final product can be considered South American. For now, officials only have a rough idea.

“With around 35 to 40% of the value of a product added in Colombia, it may be considered Colombian and enter the U.S. tax free,” an official at the trade office of the Colombian Embassy in China told CNN.

Officials are gearing up to bring more jobs to the South American country, and help Chinese companies skip barriers.

“We’re working in, for example, pipes for the gas and oil industry,” the trade office official said. “The U.S. imposed safeguards [on China] in the World Trade Organization to protect its national industry.”

China and the U.S. have been involved in a trade dispute over steel products for more than a decade. Chinese products have to pay import duties that make them uncompetitive, measures which China denounces as heavy handed.

According to the Colombian trade office, an unnamed Chinese company is already looking for land to set up a new pipe facility in Colombia.

There are many steps when ironing out the details of an FTA, after congressional approval by all parties. Mexico has been a pioneer in Latin America, and has had a free trade agreement with Canada and the U.S. since 1994 called NAFTA.

Andrés Peña, former Mexican consul in Hong Kong, said one of the most important aspects of an FTA is around the “rules of origin,” which stipulate the criteria under a product can carry the “Made in...” mark. This is to avoid simple triangulations that would flout the trade rules of an importing economy.

“This doesn’t mean that all of a sudden there will be a flood of products from one country, this is not the success of an FTA,” Peña said. “[It’s a] magnet to attract foreign investment, like many that came to Mexico to re-export, in accordance with rules of origin.”

For the Colombians, the investment magnet has one region in mind. “The president’s priority is the Asia Pacific region,” Mutis said.

On the back of the free trade agreement, one businessman quickly changed business plans. Around half a year ago Luis Guahuna, a Colombian apparel entrepreneur, started negotiations with Erke, a Chinese footwear and sports apparel brand.

He recently obtained the license to sell Erke sportswear in Colombia.

“We discussed with Erke’s management partnering to build a plant, to manufacture their products in Colombia and distribute them in Latin America and, later, in the U.S. with zero tariffs,” said Guahuna, head of Hong Kong-based Prolinks, a  company manufactures high-end clothing in a joint venture in east China’s Ningbo city.

Guahuna also senses that one market may not be enough as long as the North American economy remains weak. He’s also looking at opportunities for his future venture beyond the giant economy to the north.

“Exporting from China [to Brazil] is becoming a headache due to all the restrictions, tariffs, laws and complications,” Guahuna said.

In footwear, one of the most contentious exports from China and a large proportion of Erke’s business, having goods produced in a different country is an added value for its global operations, Guahuna said.

“Erke needs to create partnerships in Latin America,” he said. Brazil is a huge market as well, Guahuna explained. The South American giant imposes no safeguards on neighboring Colombia’s products.

So Guahuna, and his Chinese partners, are looking to double returns from a single bet.

And he has the U.S.-Columbia free trade deal to thank for that.

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Study: Women ask for raises, but aren’t heard

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(CNN) – A new Catalyst study examining career advancement strategies has debunked the myth that women make less because they don’t ask—they do, they just aren’t being heard.

According to the study, men who employ traditional career advancement strategies—such as making your willingness to put in time and effort known and accepting challenges—are more likely to be rewarded, in the form of promotions or pay raises, than men who don’t.

However, women who adopted these strategies were not much more likely to advance than women who didn’t.

“This study busts the myth that ‘Women don’t ask.’ In fact, they do! But it doesn’t get them very far. Men, by contrast, don’t have to ask. What’s wrong with this picture?” Ilene H. Lang, President and CEO of Catalyst, said in a release.

The study suggests that women are rewarded for consistent performance whereas men are rewarded for potential. Women who changed jobs two or more times after completing their MBA earned $53,472 less than women who rose through promotions at their first organization. Men, on the other hand, made $13,743 more if they switched jobs after completing their MBA than if they stayed.

This translates into a $4,600 salary gap between men and women in their first job after completing an MBA, which balloons to a $31,258 gap mid-career.

While the pay gap between male and female executives was narrowing, at the current rate it would still take 98 years to close the gap in the UK, according to a study last month by the Chartered Management Institute.

A United Nations report entitled “Progress of the World’s Women” notes that worldwide, women are paid 10-30% less than men and 23% less in the U.S. The report cites maternity leave legislation and practices as key in guaranteeing equal opportunity, noting that the U.S. is “the only developed country that does not specify that [maternity] leave must be paid.”

A 2005 World Economic Forum study reports that worldwide, Nordic countries, notably Sweden, perform best in terms of gender equality. The report credits this to their generous maternity leave policies; the UN report shows that Sweden has 480 days of paid maternity leave, as well as paid, mandatory paternity leave.

Women are, not surprisingly, less satisfied with their career advancement than men, Catalyst reports, challenging the notion that women seek slower career tracks.

Perhaps the most important thing Catalyst revealed was that women need to employ different career advancement strategies than men. Women advanced further when they made their achievements known and networked with influential people. Men, while also benefiting from networking, did not see much benefit from making their achievements known, but rather through expressing willingness to work long hours and being aware of opportunities outside their organization, study authors said.

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Inside the Man United Machine

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By Tariq Panja

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In December of 2009 an unexpected package arrived at the headquarters of Concha y Toro, the 127-year-old winemaker in Santiago, Chile. Inside was an ornate box lined with black silk and holding a leather football. The Concha y Toro insignia was stenciled on the ball, next to that of the sender’s: Manchester United. Accompanying the gift was a book explaining the financial benefits of a partnership between the football club and the winemaker. Within 36 hours, United executives were on the phone with their counterparts at Concha y Toro, working on the outlines of a deal that was signed on May 17, 2010. An official ceremony was held four months later at Old Trafford, Man U’s stadium, where the club introduced the Chilean company as its first global wine partner. Under the arrangement, luxury boxes and lounges in Old Trafford serve only Concha y Toro’s Casillero del Diablo wines and the company’s ads appear on the digital “billboards” seen on broadcasts of United home games.

The courting of Concha y Toro epitomizes the acumen and aggressiveness that have made Manchester United among the most valuable brands in sports. A 2007 survey conducted by TNS Sport found that the team has 333 million supporters around the world. Last season, when United won its fourth English Premier League title in five years and made it to the finals of the European Cup, a cumulative audience of 4.2 billion watched its matches on television—the equivalent of a Super Bowl every week, according to Futures Sport & Entertainment. So lucrative is the United brand that Than Shwe, until March the head of Myanmar’s military government, once considered making a $1 billion bid to buy the club, according to a U.S. diplomatic cable released in 2010 by WikiLeaks. Go anywhere in the world and you’ll meet someone who knows about Manchester United.

The club’s visibility has allowed it to assemble a roster of more than 30 global corporate partners ranging from Aon, the Chicago-based insurer that pays £20 million ($31.5 million) a year to put its logo on the team’s jerseys; to Nike, which is in the final two years of a 13-year, £303 million agreement to produce all team apparel; to Mister Potato, the Malaysian brand that inked a deal in September to become Man U’s official “savoury snack partner.” “What’s the pitch?” asks Pierre Pang, deputy general manager for sales and marketing at Mamee-Double Decker, which owns Mister Potato. “Three hundred and thirty-three million fans globally, with close to two-thirds coming from Asia. That’s basically along the lines of where our strategy is: The vision of being Asian No.?1 for the potato snack segment.”

Last June, Manchester United announced revenue of £331.4 million for the 2010-11 season, a club record and by far the most among English football clubs—though about £95 million less than Spain’s Real Madrid, which is soccer’s biggest moneymaker. Unlike U.S. sports, where salary caps and revenue-sharing agreements constrain the ability of rich teams to dominate, in soccer cash is still king. Chelsea, Manchester City, and others have catapulted themselves into the European elite thanks to billionaire owners willing to spend any amount to win (Russian oligarch Roman Abramovich at Chelsea; Sheikh Mansour bin Zayed Al Nahayan of Abu Dhabi at Manchester City).

The influence of money has prompted calls for reform. European soccer’s governing body says beginning in 2014 it will consider banning teams that spend significantly more than they make from the Champions League tournament. That would strengthen the position of those clubs with the most revenue—such as Manchester United, Real Madrid, and Barcelona—which could use it to buy the best talent. The league’s proposed fix could end up locking in the status quo for years.

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EXCLUSIVE-TPG Capital prepares $4-5 billion Asia fund

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By Stephen Aldred

HONG KONG | Fri Oct 14, 2011 10:47am BST

HONG KONG (Reuters) - Global private equity firm TPG Capital is preparing to launch a $4-5 billion fund in mid October to invest in Asia, which would be the largest fund focused on the region since the global downturn, two sources said.

TPG, a U.S.-based firm founded in 1992, currently invests in Asia from a $19.8 billion global fund and its $4.25 billion regional fund TPG Capital Partners V, which both raised their investment capital in 2008.

The news suggests investors have told TPG they have the appetite to invest in Asia, and equally that the private equity firm feels it can place those funds in the region over the typical five-year stretch taken to put capital to work.

It also suggests investors are willing to make longer-term investments in Asia at a time when financial markets are in turmoil over the euro zone's debt crisis and concern that the United States could be slipping into a recession.

Thomson Reuters data shows there is already around $70 billion of dry powder, or unused capital, allocated for private equity investments in Asia.

The sources have knowledge of the matter but declined to be identified because they are not authorised to talk to the media. TPG's external public relations advisers were unable to provide immediate comment.

The TPG Capital Partners V fund is around 75 percent invested, one of the sources said, which has encouraged TPG to start the new fund . The TPG Capital Partners V fund's limited partner investors include California Public Employees' Retirement System, Thomson Reuters data shows.

Current Asia investments by the firm, which has more than $48 billion in assets under management globally, include Comtec Solar (0712.HK) and Wumart Stores (1025.HK) in China, Shriram Transport Finance Co (SRTR.NS) and Lilliput Kidswear in India, and United Test & Assembly Centre in Singapore.

TPG's existing Asia fund is among the largest ever raised by private equity firms for the region, along with a $4.12 billion fund raised by CVC Capital Partners Asia in 2008, and Kohlberg Kravis Roberts' (KKR.N) $4 billion fund raised in 2007, data provider Preqin says.

RIVALLING EUROPE

Private equity firms around the world have found it tougher to raise money since the global economic downturn in 2008, but CVC, KKR and TPG have been able to invest from their existing funds.

The largest regional fund raised since 2008 is Baring Private Equity Asia's $2.46 billion Fund V. That fund was raised in just five months and closed earlier this year, underlining the strength of limited partner appetite for investment in Asia.

Twenty-two percent of private equity funds currently raising investment capital globally have Asia Pacific as their primary focus, compared with just 9 percent in 2008, Preqin said in a recent report.

Asia now rivals Europe for investor dollars -- Europe accounts for 23 percent of funds raising capital.

Other funds are also set to test investor appetite for private equity investments in Asia.

Morgan Stanley Asia Private Equity is preparing to launch a new fund, which will be around the same size as its current $1.5 billion fund, two other sources told Reuters.

Morgan Stanley declined to comment.

TPG's investments span a variety of industries including technology, financial services, travel and entertainment, industrials, retail, consumer, media and communications, and healthcare.

(Reporting by Stephen Aldred; Editing by Jacqueline Wong and Neil Fullick)

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Tweeting farmers bridge gap between farm, table

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When Wayne Black is finished tapping out his latest tweet, he puts his iPad back in the tool box on his tractor or slides it down beside his seat.

The tweeting started after he began using "the toys that made us more mobile." But for the southwestern Ontario farmer, there's nothing flip or fanciful about dashing off a 140-character missive about his corn or soybean harvest.

Like more and more farmers across Canada, Black has found that Twitter has become, among other things, a way to bridge the gap between farm and table, and connect Canadians wanting to know more about where their food comes from with the people who make their living producing it.

"We're able to explain what we do on our farm," says Black, who farms with his father in Huron County, near Goderich.

In one exchange, Black answered questions on pesticide use. In another, he invited a consumer from Ottawa to come and walk in his soybean field.

Black is by no means alone in connecting this way.

At Fox Hill Cheese House in Nova Scotia's Annapolis Valley, Amy Dukeshire keeps her Twitter feed current. She tells followers about the farm business's latest products and whether the cows are out to pasture; and she fields questions on everything from hormones to antibiotic use in the dairy herd.

'It's allowed us to interact with our customers even more.'—Amy Dukeshire. Fox Hill Cheese House

"There's that misconception that there's hormones everywhere throughout the milk, and of course that's definitely not the case," she says. "We're not organic, but we do everything as natural as we can."

Fox Hill Cheese House, part of a sixth-generation family operation, started tweeting last year and has found Twitter to be very effective when it comes to introducing new products.

"It's allowed us to interact with our customers even more," Dukeshire says. "I don't see us stopping using it, that's for sure."

The social gap between farm and table has been growing for decades in Canada. The country's farm population has been in steady decline and fell another 6.2 per cent between 2001 and 2006, according to Statistics Canada.

Eighty years ago, one in every three Canadians lived on a farm. In 2006, it was one in 46. So farmers and consumers are seeking new ways to keep alive the connection to the land.

Andrew Campbell's BlackBerry is always with him on his farm west of London, Ont.

Andrew Campbell, who farms with his wife and parents west of London, Ont., frequently turns to his BlackBerry to send off a tweet about what's going on in their dairy and cash crop operation.

"I think the big thing is you want to make sure that people are comfortable with the processes that you're doing on your farm," says Campbell, who also has a media consulting firm. "The big thing right now is local food and knowing where your food comes from."

He estimates he gains up to five followers each day.

"Hopefully it keeps the customers you've got, and keeps them more comfortable with what you're doing, and also makes people realize it is important to support Canada or Ontario or whatever local is to them."

But social media is more than a way to connect and build trust with food-savvy consumers. For farmers, it is also becoming a key business tool, whether for marketing products, following commodity prices and crop information, or just staying connected with other farmers.

"People still have somewhat of a romantic image of a farmer," says Stewart Skinner, a pork producer who tweets about the "farrow-to-finish" operation he and his family run near Listowel, Ont.

At the end of the day, though, "we're just like any other small business owner, and the world moves at a pretty fast pace."

In other words, time is money. For the farmer, getting an update on crop prices in the U.S. Midwest with a quick glance at a tweet can have a distinct advantage, particularly at planting and harvesting time.

What's more, for the people who want to communicate that information to farmers, Twitter is becoming more and more important.

'We feel that Twitter is going to become the primary way we connect with our growers within a few years.'—Rick Taillieu

The Alberta Canola Producers Commission began sending tweets two years ago, for example.

"We started to see a little bit of activity in Twitter in terms of agriculture and we figured if we're going to jump in, we may as well be first in the pool rather than last in the pool," says Rick Taillieu, the organization's grower relations co-ordinator.

None of this is to say Twitter is revolutionizing farming, or that farmers are setting any records in the Twitter-verse.

Farmers like Campbell, Black and Skinner have Twitter followers in the hundreds or low thousands, nothing in the 13-million-plus territory of teen idol Justin Beiber, as Skinner wryly notes.

Not every farmer has a smartphone. And tweets, by their very nature, offer little opportunity for instant in-depth information sharing — although they can give links to any number of sources.

But for the canola commission's Taillieu and others, Twitter is the trend to watch.

"We feel that Twitter is going to become the primary way we connect with our growers within a few years."

Taillieu estimates about 250 of the 13,000 canola growers in Alberta are now on Twitter, up from about 25 at the start of this year's growing season.

"As more and more farmers get on it, it's going to grow exponentially."

His organization has no plans to drop traditional means of communication with farmers — newsletters, mail, media releases.

But Twitter is the information channel he likes best, whether it's to tell producers about a new disease that's been spotted in a canola field — the sooner it's known, the sooner it can be stamped out — or about meetings that are coming up.

'Farmers don't feel so isolated any more.'—Wayne Black

"There's no easier way to send information out quickly that's storable than a way like this."

For farmers, there is also a social and psychological element to Twitter. Those little bursts of communication, sent from the solitude of the stable or a tractor cab, suddenly connect that person with the outside world.

"Farmers don't feel so isolated any more," says Black.

"Farmers in rural Ontario or rural wherever, they don't have that same social communication with their neighbours or that social interaction like people in the city.

"It can be a struggle on the farms some days .... By using social media, they can vent."

They can also have discussions. In some ways, the Twitter world has become the local coffee shop that farmers would otherwise drive to.

And some of the ideas they share get directly to the politicians who are making agricultural policy decisions. Both Black and Skinner have discovered that Twitter provides a direct link to legislators, who have staffers plugged very firmly into the Twitter world.

After Black tweeted last summer about an issue regarding Ontario's Environmental Farm Plan, he saw the provincial agriculture minister at a meeting. She approached him, mentioned the tweet and suggested further discussion.

Many farmers take care to separate the useful information from the drivel that can crop up in the Twitter-verse — the wheat from the chaff as it were.

"You can't control who follows. For a farm business, it's really important to be professional about everything that goes up there because you don't know who's following you," says Mary Forstbauer, whose family runs an organic farm in Chilliwack, B.C.

But while no one is suggesting Twitter is essential for all farmers, it is becoming harder to ignore.

"You could survive without being on social media, that's for sure," says Black. "[But] is it going to be an advantage to you to be on social media as a farmer? It could be."

For him, "the return is getting the message out there and explaining to consumers what we do in modern agriculture. It's not all the fear-mongering that they're hearing from the activist groups."

Plus, he can say it in less than 140 characters before he puts the iPod back in the tool box and heads back down the soybean field again.

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BlackRock profit rises on ETF demand

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n">(Reuters) - BlackRock, the world's largest asset manager, said its third-quarter profit increased 8 percent as investors sought out the firm's exchange-traded funds despite tough market conditions.

New York-based BlackRock said earnings were $595 million, or $3.23 a share, compared with $551 million, or $2.83 per share, a year earlier.

Excluding some nonoperating income and expenses, BlackRock earned $2.83 a share. On that basis, analysts on average expected $2.63, according to Thomson Reuters I/B/E/S.

While individual investors withdrew money from many mutual fund companies during the third quarter, BlackRock benefited from its market-leading line up of exchange-traded funds, which took in $10.8 billion for the period.

Hit by the quarter's turbulent markets, assets under management totaled $3.345 trillion, down 9 percent during the quarter and 3 percent from a year earlier.

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Alberta dumps millions in big tobacco shares

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Alberta is being lauded by anti-smoking and social investment groups for being the first province to dump its investments in the tobacco industry.

The Alberta Investment Management Corp. has sold $17.5 million in directly managed stock held by public sector pension funds and the Alberta Heritage Savings Trust Fund.

Alberta no longer directly owns shares in cigarette makers like JTI-Macdonald, though it still has some indirect holdings. Courtesy Industry Canada

Leo de Bever, CEO of the Crown corporation, said the province is making the move as it prepares to file a lawsuit against big tobacco to recover health-care costs for smoking-related illnesses.

Holding such shares while fighting the case would look bad, he said.

"We have divested all of the actively managed tobacco stocks. This was across the spectrum and it is because the government is suing the tobacco companies over health care," de Bever said. "We could be seen as directly holding tobacco stocks."

He says the corporation still has some "small" tobacco holdings within indexed investment funds that it does not directly manage.

Groups such as the Social Investment Organization and Physicians for a Smoke-Free Canada said Alberta's move to divest itself of tobacco shares is a first for a Canadian government.

Most provinces have tobacco industry investments, but only a few release detailed information about them, said Cynthia Callard, executive director of Physicians for a Smoke-Free Canada.

The British Columbia Investment Corp. had $346 million in tobacco industry investments as of March 31, 2010, she said. Quebec's Caisse de Dépôt et Placement also has multimillion-dollar tobacco holdings.

The Canada Pension Plan Investment Board had $218 million worth of stock in multinational tobacco companies during the same period. Efforts to have the board divest itself of those investments have not been successful.

Last October, when she was Alberta's justice minister, now Premier Alison Redford said the province's lawsuit against big tobacco would be filed within a year. CBC

Callard said Alberta's tobacco holdings were more modest, but hopes other governments will follow the province's example.

"They are the first to do it. This is a very significant step forward," she said from Ottawa.

Les Hagen of the group Action on Smoking and Health also praised the Crown corporation's decision to sell off tobacco industry holdings.

Hagen says it would be completely contradictory for the Alberta government to sue tobacco companies while investing in tobacco stocks.

"This is a momentous decision that will have a ripple effect on other pension-fund managers and institutional investors across the country."

Alberta passed a bill in 2009 to pave the way for its tobacco lawsuit, but the legislation has not yet been proclaimed and a statement of claim has not been filed.

Last October, then justice minister Alison Redford said Alberta's lawsuit against big tobacco would be filed within one year.

Redford, who is now premier, told the legislature last year that the tobacco industry must share the burden of paying to treat costly smoking-related illnesses such as cancer and heart disease.

Justice Department spokesman David Dear would not comment on the tobacco share divestiture, what is delaying proclamation of the lawsuit legislation or when the statement of claim will be filed. He would only say the lawsuit is complex, timing is important and Alberta wants to see how similar cases unfold in other provinces.

Ontario, New Brunswick, British Columbia and Newfoundland have already filed lawsuits against the tobacco industry.

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Madoff book paints son Mark as victim

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The son of disgraced financier Bernard Madoff swallowed a batch of sleeping pills in a failed suicide attempt 14 months before he killed himself on the second anniversary of his father's arrest in the biggest financial fraud in American history, according to a new book by his widow.

"The End of Normal: A Wife's Anguish, A Widow's New Life" gives an intimate account of Mark Madoff's two years of torment over the infamous swindle that wiped out thousands of his investors and — by his wife's account — left him a man broken beyond repair. The book vilifies her father-in-law "Bernie" while calling her husband an innocent bystander and "hero" for turning him in.

"There are people who never knew Mark Madoff, yet who gleefully point to his suicide as proof that he must have known of or participated in his father's epic crime," Stephanie Madoff Mack writes in the book that went on sale Thursday. "Nothing could be further from the truth. His death was proof of his pain."

Police remove Mark Madoff's body from his apartment where he was found dead on December 11, 2010. His widow has written a book on the Madoff scandal which paints him in a sympathetic light. Jessica Rinaldi /Reuters

Stephanie Madoff says she took the name Mack to try to deflect fallout from the scandal.

"I wish I could have changed my birthday as well," she writes. "I share the date with Bernie."

Elsewhere in the book, she writes, "I hated Bernie thoroughly and deeply from the instant Mark told me what he had done."

The elder Madoff, 73, was arrested on Dec. 11, 2008 — the morning after his two sons notified authorities through an attorney that he had confessed to them that his investment business was a multibillion-dollar Ponzi scheme. The following year, he pleaded guilty to securities fraud and other charges and was given a 150-year prison term.

The former Nasdaq chairman has always insisted that his family was in the dark, and Mark Madoff, his brother and uncle — all executives for a broker-dealer operating under the same roof as the crooked private investment firm — have never been charged. But they have come under intense scrutiny by the FBI and by a bank-appointed trustee seeking to recover funds for burned clients.

Before his death, Mark Madoff became increasingly isolated and obsessive about news coverage of the runaway scandal, his wife says. Two weeks after watching a "60 Minutes" segment on the case, he briefly vanished.

He surfaced in a fog at home several hours later. She says he told her he had just woken up after taking 30 sleeping pills inside a hotel room where he left a suicide note reading: "Bernie: Now you know how you have destroyed the lives of your sons by your life of deceit."

When Madoff appeared to stabilize after a hospital stay, she decided to take their daughter to Disney World, she writes. He stayed at home to care for their young son Nick in their Manhattan apartment.

Once away, the couple stayed in touch with a series of texts included in the book. She panicked when she read one with the subject line "Help" and the message, "Please send someone to take care of Nick."

Her stepfather discovered the body hanging from a dog leash the victim had fashioned into a noose.

Madoff "had never known anything but privilege," his widow writes, "and he lacked the basic tools to cope with any adversity, much less a monumental one."

There was no response to a message left with Bernard Madoff's attorney.

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BlackRock keeps expenses in check

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n">(Reuters) - BlackRock's third-quarter profit increased 8 percent as investors sought out the firm's exchange-traded funds despite tough market conditions.

The world's largest asset manager said on Wednesday earnings rose to $595 million, or $3.23 a share, from $551 million, or $2.83 per share, a year earlier.

BlackRock (BLK.N) earned $2.83 a share excluding a tax benefit, costs for exiting leases and some compensation plans. On that basis, analysts on average expected $2.63, according to Thomson Reuters I/B/E/S.

Chief Executive Officer Laurence Fink highlighted the firm's 40.1 percent adjusted profit margin, up from 38.4 percent a year earlier, achieved by keeping expenses in check. While revenue increased 6.4 percent to $2.2 billion, expenses grew 4.5 percent to $1.4 billion.

While individual investors withdrew money from many mutual fund companies during the third quarter, BlackRock benefited from its market-leading line up of exchange-traded funds, which took in $10.8 billion for the period. Overall, customers withdrew a net $10.2 billion, including a single, large withdrawal of $9.1 billion from indexed fixed-income accounts.

Hit by the quarter's turbulent markets, assets under management totaled $3.345 trillion, down 9 percent during the quarter and 3 percent from a year earlier.

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'Margin Call' Sheds Light On Wall Street Meltdown

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Margin Call is based on the financial collapse of 2008. The firm in the movie is so over-committed to risky real estate loans that it owes more money than the company is worth. The cast includes Kevin Spacey, Demi Moore, Jeremy Irons and Stanley Tucci.

Copyright © 2011 National Public Radio®. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

RENEE MONTAGNE, host: The global financial crisis of 2008 has a lot of dramatic potential. It propelled the Oscar-winning documentary "Inside Job" and HBO's movie "Too Big To Fail." Now comes "Margin Call," in theaters this weekend. Kenneth Turan has a review.

KENNETH TURAN: "Margin Call" brings us into the inner sanctum of a top Wall Street investment banking firm in peril. The film opens on what everyone in the firm thinks – erroneously, as it turns out - will be the worst part of their day. A team from human resources arrives intent on terminating folks.

(SOUNDBITE OF MOVIE, "MARGIN CALL")

UNIDENTIFIED WOMAN #1: (As character) Mr. Dale, these are extraordinary times, as you very well must know.

STANLEY TUCCI: (As Eric Dale) I don't understand.

UNIDENTIFIED WOMAN #2: The majority of this floor is being let go today.

TURAN: Among those let go is a risk analyst played by Stanley Tucci. He hands a flash drive full of information to his entry-level assistant.

(SOUNDBITE OF MOVIE, "MARGIN CALL")

UNIDENTIFIED MAN: (As character) Eric, I'm very sorry.

TUCCI: (As Eric Dale) I was working on something, but they wouldn't let me finish it. So take a look at it. Be careful.

TURAN: That warning is necessary. It turns out that the firm is so over-committed to risky real estate loans that it owes more money than the company is worth. That information works its way up the corporate food chain in the dead of night.

Some of the best confrontations are between the CEO, gorgeously played by Jeremy Irons as a combination of genuine charm and complete ruthlessness, and Kevin Spacey as a key executive.

(SOUNDBITE OF MOVIE, "MARGIN CALL")

KEVIN SPACEY: (As Sam Rogers) The real question is, who are we selling this to?

JEREMY IRONS: (As John Tuld) Same people we've been selling it to the last two years. And whoever else will buy it.

SPACEY: And you're selling something that you know has no value.

IRONS: We are selling to willing buyers at the current fair market price.

TURAN: "Margin Call" lets us know that more than greed is involved in these high-level confrontations. There is also loyalty to the firm and even a sense of morality.

Writer-director J.C. Chandor's facility for sharp dialogue, for language that echoes the way talk is talked when doors are closed, was honestly earned. He grew up with a father who worked for Merrill Lynch for close to 40 years. Tucci, Spacey and Irons are a dream team of actors who show it's possible to play hardball without raising your voice. Even if you think you know all there is to know about how Wall Street plays its games, "Margin Call" will open your eyes.

MONTAGNE: Kenneth Turan reviews movies for MORNING EDITION and the Los Angeles Times.

Copyright © 2011 National Public Radio®. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to National Public Radio. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

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PIMCO's Gross admits he struck out on bonds this year

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By Jennifer Ablan

NEW YORK | Mon Oct 17, 2011 10:02am BST

NEW YORK (Reuters) - Bill Gross, manager of the world's largest bond fund, apologized to his investors late Friday for his poor performance, saying "I'm just having a bad year."

In a Special Edition letter posted on PIMCO's website, Gross, who runs the $242 billion PIMCO Total Return portfolio, wrote that he underestimated the contagion effect from the Europe debt crisis and the U.S. debt ceiling debacle.

"As Europe's crisis and the U.S. debt ceiling debacle turned developed economies towards a potential recession, the Total Return Fund had too little risk off and too much risk on," said Gross, who also shares the title of co-chief investment officer at Pacific Investment Management Co. with Mohamed El-Erian.

Gross, known as the "bond king", came under heavy criticism earlier this year when he bet heavily against U.S. Treasuries which have turned out to be one of the biggest outperformers of 2011.

His fund's poor performance led Gross to simply call his open letter to investors, "Mea Culpa."

It is up only 1.06 percent year to date versus the benchmark BarCap U.S. Aggregate Index which is up 3.99 percent.

Gross, who helps manage more than $1.2 trillion at PIMCO, said late Friday the Total Return fund had positions in German bonds and Canadian Treasuries to counter the U.S. underweight position, "but not enough."

He added that minor percentages of emerging market corporate and sovereign debt, effectively denominated in their local non-dollar currencies, did not perform well either.

"The simple fact is that the portfolio at midyear was positioned for what we call a "New Normal" developed world economy - 2.0 percent real growth and 2 percent inflation," Gross said.

That's all changed, of course. Gross said PIMCO's internal growth forecast for developed economies "is now zero percent over the coming several quarters and the portfolio more accurately reflects this posture."

Last week, Reuters reported that Gross ramped up buying of mortgage-backed securities in September, albeit by using leverage, on the likelihood the Federal Reserve's reinvestment program in those securities will boost prices significantly.

Gross increased mortgage debt to 38 percent of assets in September, from 32 percent in August, as the U.S. central bank announced last month that it "will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities."

His move into mortgage-backed securities also comes as the PIMCO Total Return fund's cash equivalents and money-market securities fell to negative 19 percent September, from negative 9.0 percent in August.

In having a so-called negative position in cash equivalents and money-market securities, it is an indication of using derivatives and short-term securities as collateral in order to boost the fund's buying power with leverage.

Gross' move to seek more yield by putting more money into mortgage bonds is yet another bold bet which many will be watching after Gross's call on Treasuries cost his fund's performance. In doing so, he is effectively extending the average duration of his fund's investments, making them potentially more exposed to a rise interest rates.

Clearly, Gross is betting interest rates will remain low for some time as the world economy continues to struggle.

In his "mea culpa" letter, Gross resorted to baseball analogies and metaphors. He closed his letter by saying: "This is big league ball, where your ticket holders come to the park expecting not a circus-Willie Mays-catch but more wins than losses and a year-end performance that places your bond assets near the top of the standings."

He added, "Baseball metaphors aside, we know why PIMCO Total Return is arguably the largest and hopefully the greatest bond fund in the world."

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Ikea Owner to Develop Homes Near Olympics

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October 21, 2011, 7:47 AM EDT By Simon Packard

(Changes headline.)

Oct. 21 (Bloomberg) -- The owner of the Ikea retail franchise said it has “billions” of pounds to spend as it starts an expansion into the U.K.’s homebuilding and real-estate development market.

Inter Ikea Holding SA’s LandProp unit has acquired several hundred hectares near London to build 10,000 homes, Managing Director said in an interview yesterday. The company has also purchased a 50-hectare (124-acre) site in Suffolk for a non- residential project in partnership with the separate Ikea Group retail company.

“Our ambition is to be seen as one of the biggest development players in the U.K. in the coming years,” Mueller said. “We are able to invest huge sums of money -- we are talking about billions instead of millions.”

LandProp said yesterday that it completed the purchase of land to create a 10-hectare site next to the Olympic Park in east London. In January, the unit of Luxembourg-registered Inter Ikea will seek approval to build 1,200 homes, a hotel, offices, shops and restaurants on the land.

Mueller declined to give further details about the land transactions near London and in Suffolk because the information is private and the closely held company is in talks to acquire adjacent sites.

Olympic Park

Inter Ikea’s board approved the U.K. expansion plans two years ago, attracted by prospects of falling land prices and forced sales. One of the first purchases was a 5.5-hectare portion of the site near the Olympic Park in June last year in a foreclosure sale, Mueller said.

The company, which develops various types of property except malls and big box retail outlets, had focused its expansion until now on former Soviet bloc countries such as Poland, Latvia, and Lithuania as well as the Benelux countries.

LandProp doesn’t need to borrow to finance its purchases because of the cash its parent generates in franchise fees paid by the 325 Ikea stores around the world plus other sources of income, Mueller said.

“We are completely equity driven and money isn’t a problem at all,” he said.

Aside from the homes that it plans to build at its “Strand East” project in east London, LandProp will construct shops, restaurants, a 350-bedrooom hotel and 480,000 square feet (44,600 square meters) of offices. It intends to remain as manager of the development, the executive said.

LandProp is in talks to acquire more sites in east London and elsewhere in the U.K., Mueller said.

“We have come in with a strategic view and not just to jump in and jump out,” he said.

--Editors: Jeff St.Onge, Ross Larsen.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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France And Germany: A Love Story

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France and Germany are trying to come up with a bailout plan for Europe. This isn't the first time they've fought over money.

Like any bickering couple, they've spent centuries fighting over finances. In fact, the history of their relationship is so dramatic — so theatrical — it's best to tell it in song.

(Read the lyrics, and see the credits, here.)

Our story begins in 1870.

France and Germany — aka Prussia — were an unlikely couple. France was a glittery homecoming queen; Prussia was a scrappy neighborhood kid.

When they got into an argument about the Spanish throne, France decided to teach Prussia a lesson.

"It was really a war by accident," says historian David Marsh.

 

The Franco-Prussian war lasted just one year. France got crushed.

"France is still trying to get over that humiliation to this day," Marsh says. "Because that did actually mark the birth of a new Germany."

Germany made France pay reparations — five billion gold francs. And even today, if you walk around Berlin — you see that French money everywhere.

Berlin's iconic Victory Column, as well as the Reischtag were built with French money. But most galling of all to the French, according to historian Carl-Ludwig Holtfrerich, was the gold they couldn't see: Money Germany set aside as a war chest.

A war chest!

The Germans took some of the reparations gold, and stored it in a castle. And it just sat there, waiting to be spent if there was another war.

Of course, there was another war. And another after that — World Wars I and II. But this time, Germany lost, and had to pay massive reparations.

After World War II, the pair started thinking. Instead of fighting, maybe we should consider dating. instead of passing all this money back and forth, let's just split the check. They started with their coal and steel industries.

"I think the French knew it wouldn't be possible to keep the Germans down for too long, and indeed, that wasn't the idea," David Marsh says. "The idea was to have a strong, vibrant Germany at the heart of a new Europe."

They still fought about money. France was really pushing for a common currency. Germany was very attached to their deutschemark.

The bickering might have continued forever, but the power dynamics changed. In 1989, the Berlin wall fell, and Germany re-unified. And for France, the old feelings came back.

"Suddenly, France sees this rather troublesome, rather unquiet, Eastern neighbor acquiring 20 million people and appearing to be politically and economically much more dominant," Marsh says.

France sat Germany down and basically said "Look: If you're gonna be the biggest economy in Europe, you have to give up your currency."

So, in 1992, the euro was born.

Now, nearly 20 years later, the euro is in trouble. Tensions are high. But you don't see Germany blaming France for pushing them into the euro.

"It's very much against the modern genetic engineering of the Germans to want to appear to be too overtly dominant in public — particularly vis-a-vis the French," Marsh says. "That makes the whole thing unusually complex, psychologically."

Not to mention all of the legal, political, and financial entaglements. France and Germany can't leave the euro.

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Disability savings plan hits home for Flaherty

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There was an initial attempt to contain the tears. When that failed, there was a brief foray at concealing them from the cameras.

Finally, there was no hiding them or holding them back. The finance minister, who is thought to be one of the tough guys in Stephen Harper's cabinet, wept unabashedly during what might have seemed a routine announcement.

Jim Flaherty was clearly affected Friday while announcing a government review of the Registered Disability Savings Plan. That emotion undoubtedly sprung from a personal connection to the announcement.

The plan, which includes contributions from Ottawa, helps parents of special needs children put savings aside to care for their children after they die.

Flaherty choked up several times while delivering a short prepared text and he was obviously moved while listening to a parent with a disabled child.

Asked about his reaction later, the minister offered no clue to why he appeared upset. One of his triplets, John, has a learning disability and has been involved in the Special Olympics program. It's no secret, but Flaherty wasn't talking about that Friday.

"I'm just happy that the prime minister supported innovation in Canada. This is an initiative that other countries in the world are looking at," he said.

Flaherty and his wife Christine Elliott, a provincial politician, have been actively -- and mostly quietly -- involved in issues dealing with children with disabilities for many years and the minister was instrumental in the creation of the disability savings plan in 2007.

He made clear that the review of the program was not with a view to find savings for the government, which is committed to reduce departmental spending by $4 billion annually.

"This is a very important initiative for our country and I want to make sure we get it right," he said.

With 48,000 accounts in existence, the program is already a tremendous success, he said.

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Cost of Thai floods greater than political unrest

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(CNN) – The floods in Thailand may cost the country more than tumultuous political uprisings did last year, as officials revise GDP growth expectations and maintain interest rates.

The Thai economy is now expected to grow less than 3% this year, down from previous estimates that put growth at around 4%, according to the Governor of the Bank of Thailand, Prasarn Trairatvorakul. This translates into shrinking 1.1% in the fourth quarter from a year earlier, Finance Minister Thirachai Phuvanatnaranubala told Reuters. Interest rates will remain unchanged at 3.5%, the first time rates were not increased since 2006.

In 2010, when “red shirt” antigovernment protesters clashed with the military in violent uprisings, the GDP grew 7.8%, according to an IMF report, despite concerns that the chaos would scare away tourists and investors.

While tourism is important to Thailand – accounting for about 7% of total economic output – manufacturing and agriculture are the most important sectors of the Thai economy, and both are bearing the brunt of floods.

The flooding in Bangkok has had severe consequences for industry, with many factories shut down due to flooding. Richard Han of Hana Microelectronics says the economic impact of the floods in Thailand may be greater than the impact of the March tsunami in Japan.

Western Digital Corporation, which supplies computer hardware to Hewlett-Packard and Dell, may be dealing with a drop of up to 40%, or $2.6 billion, in Thai exports this year, Industry Minister Wannarat Channukul told reporters.

Western Digital Chief Executive John Coyne called the flooding “a disaster of unprecedented scale,” according to the Wall Street Journal’s Marketwatch. Many shares of companies in the technology sector fell yesterday, with Dell falling 5.4%.

Sony, another company hard hit by the flooding, has been forced to postpone the launch of a new camera and headphones due to production suspension in two of its three factories in Thailand.

“Sony is shifting production to its Chonburi factory that normally makes car audio products, and aiming to start production as soon as possible,” said a Sony spokesperson, Yasuhiro Okada.

Automobile factories have also been affected, with Honda reporting stalled production in Thailand. Hoping to spare one of its motorcycle factories the same fate, Honda has enlisted 200 soldiers to build a levy around the Bangkok factory, Bloomberg reported.

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Southern European Banks Scramble for Savers

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October 20, 2011, 6:23 PM EDT By Charles Penty and Sonia Sirletti

Oct. 21 (Bloomberg) -- Spanish fireman Antonio Casado kept 80,000 euros ($110,000) in cash at Banco Popular Espanol SA for a year and was looking for a place to put it. He had no shortage of offers.

The Popular branch manager in Madrid tried to sell him a 10-year subordinated bond paying 8.25 percent, Casado, 41, said in an interview. Other options include commercial paper sold by Bankia SA or two-year Spanish government notes that pay about 4 percent.

“There are so many offers on savings in the market now,” said Casado, who added he would shun products sold by banks and instead invest in Telefonica SA shares, which offer a dividend yield approaching 10 percent. “It’s probably a good idea not to have your money tied up for too long.”

Banks in Portugal, Italy and Spain, countries on Europe’s southern periphery that have been pummeled by the debt crisis, are competing to raise funds from savers such as Casado in a process that risks eroding the margins of lenders and lumbering economies with higher borrowing costs that will further slow growth.

The average interest rates on new retail deposits for up to one year have jumped almost 60 percent in Portugal and 72 percent in Italy this year, a sign of how Europe’s debt crisis is driving up the cost of capturing savings.

Deposit Rates Rise

“Everyone is chasing your money now, from the banks to the government,” said Javier Santoma, a professor of financial management at IESE business school in Barcelona. “The only way this can really stop is when the underlying problem is addressed and public finances are put in order.”

The rate paid on new bank deposits for up to a year has climbed in Portugal to 4 percent from 2.56 percent in December and in Italy to 2.41 percent from 1.40 percent, according to data from the European Central Bank. Banco Espirito Santo SA, Portugal’s biggest publicly traded bank, is offering a 4.83 percent average annual return on three-year deposits of more than 1,000 euros.

In September, Intesa Sanpaolo SpA, Italy’s second-largest bank, sold two-year bonds yielding 4.5 percent to customers transferring cash from competitors.

Spain Checks Rates

In Spain, the government acted in May to penalize banks that offered what it deemed to be overly aggressive deposit rates by requiring them to make extra contributions to deposit guarantee funds. Average rates for new bank deposits have held steady this year in Spain at about 2.6 percent.

That hasn’t stopped banks from competing to lure savings with products such as the commercial paper that Bankia is selling to retail clients to raise 1 billion euros. Governments, both national and regional, are in on the act after states including Catalonia and Andalusia offered bonds for sale.

“Competition for retail deposits for Spanish banks is probably tougher now than they envisaged it would be six months ago,” said Daragh Quinn, an analyst at Nomura International in Madrid.

The higher retail funding costs of banks are a symptom of a lock-down in wholesale debt markets that has stoked competition for customer savings as lenders shrink their balance sheets to show investors their funding bases are secure.

Wholesale Funding

The five largest banks in Italy, Spain and Portugal combined have more than 200 billion euros in medium- and long- term debt maturing before 2013, according to data compiled by Bloomberg.

The last time a Portuguese bank tapped wholesale debt markets was in March 2010, while Banco Santander SA’s 1 billion- euro sale of bonds in June was the most recent by a Spanish lender. UniCredit SpA, Italy’s largest bank, paid a record spread for Italian covered bonds in August when it raised 1 billion euros from a sale of 10-year notes that yielded 215 basis points more than the benchmark mid-swap rate.

Banco Espirito said in August that it trimmed lending by 3.1 percent from a year earlier and boosted customer funds by 23 percent to bring its loan-to-deposit ratio down to 155 percent from 198 percent a year earlier. A lower loan-to-deposit ratio is a sign the bank is less reliant on sources of funding such as bond sales to fund its business.

Santander expects lending at its Spanish branch network to shrink 3 percent a year through 2013 after it brought down the loan-to-deposit ratio at the unit to 134 percent from 159 percent in 2009.

‘Banks Are Suffering’

“Regarding the increasing rates by Portuguese banks on deposits, the situation is difficult, but it has an easy explanation: no bank has been able to go to the wholesale debt markets since spring last year,” said Andre Rodrigues, an analyst at Caixa-Banco de Investimento SA in Lisbon. “It’s a sign of how the banks are suffering.”

The economies of the three countries are bearing the brunt of the rising financing costs as the banks pass them to customers by increasing interest rates on loans.

The average interest rate on new loans in Portugal of up to 1 million euros to companies jumped to 7.23 percent in August from 5.9 percent in December, according to ECB data, while in Spain it climbed to 4.6 percent from 3.8 percent. In Italy, they increased to about 4.1 percent from 3.2 percent.

Credit Drying Up

“The banks are re-pricing massively and all this is also having a negative impact on lending volumes,” said Ronny Rehn, a banking analyst at Keefe Bruyette & Woods Ltd. in London. “It’s going to be another factor that will help drag Italy into recession next year.”

In Spain, deposits of euro-area residents fell 0.4 percent from a year ago, according to ECB data. In Portugal, deposits rose 5.7 percent and 4.3 percent in Italy, the ECB said.

For Casado, the Spanish fireman, banks competing for his savings mean more choice of products, not necessarily greater peace of mind.

“I have doubts about the health of the Spanish banks,” he said. “There could be some negative surprises in the months to come.”

--Editors: Steve Bailey, Frank Connelly.

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net; Sonia Sirletti in Milan at ssirletti@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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Metro Bank to build private banking team

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LONDON | Wed Oct 19, 2011 11:41am BST

LONDON (Reuters) - Metro Bank, which launched a year ago as Britain's first new high-street lender in more than 100 years, announced plans to build up a private banking team, as it takes aim at bigger rivals hit by the financial crisis.

Metro Bank said on Wednesday that it had hired Kirsty MacArthur as its new private banking head.

MacArthur, who joins from Heartwood Wealth Management and has also worked at Switzerland's UBS (UBSN.VX) and private bank Coutts, has been given a brief to develop Metro's services for high-net-worth individuals.

"In the last 16 months, customers have joined Metro Bank from other high street banks, and 'High Net Worth' banks as well," Chief Executive Craig Donaldson said in a statement.

"We wanted to offer them the additional expertise and knowledge that they require for their individual needs, which is why we have decided to develop the private banking proposition and hire Kirsty to head this up," he added.

Metro Bank is one of several new entrants seeking to break into a UK banking sector dominated by the "Big Four" of Barclays (BARC.L), HSBC (HSBA.L) and part-nationalised lenders Royal Bank of Scotland (RBS.L) and Lloyds (LLOY.L).

Its launch last July attracted much publicity, partly due to marketing gimmicks such as offering free biscuits for customers' dogs. It has also sought to stand out by making its branches open seven days a week.

Metro Bank, whose investors include fund management company Fidelity and property investors the Reuben brothers, has said it might consider a stock market listing in 2013 and also hopes to break even by then.

(Reporting by Sudip Kar-Gupta; Editing by Will Waterman)

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TSX holds early gains

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Higher commodity prices and a strong inflation report accompanied a triple-digit gain on the Toronto Stock Exchange on Friday.

The S&P/TSX composite index closed up 119 points, or one per cent, to 11,949. It had earlier been roughly 150 points higher earlier in the day.

The main data on Friday was a Statistics Canada report released at 7 a.m. ET that showed consumer prices increased at an annual pace of 3.2 per cent over the 12 months ended in September.

The loonie gained almost half a cent immediately following the news, and stayed at that level through the day. The Canadian dollar was worth 99.34 cents US late in the afternoon, up 0.82 cents.

Despite the strong inflation showing, analysts noted that price pressures are moderating, because gas and food prices were the main driver of the CPI uptick.

"With the gradual deceleration in gasoline price inflation that began in the summer likely to continue, the headline rate is forecast to fall in the fourth quarter," RBC assistant chief economist Dawn Desjardins said.

"Additionally, the economy's slower-than-expected second-quarter performance will limit price pressures in the near term."

Investors are now turning their attention back to European debt worries. German, French and EU officials will hold a key meeting over the weekend aimed at presenting a united front against the crisis.

In addition to Sunday's summit of eurozone leaders, a second meeting will be held by Wednesday at the latest.

Europe's two biggest economies are at loggerheads over how to make best use of the bailout fund, the so-called European Financial Stability Facility, or EFSF. While France is proposing to turn it into a bank that would have access to unlimited credit from the European Central Bank, Germany appears reluctant to sanction such a move.

ScotiaMcleod wealth adviser Chris Kuflik said markets would be trending higher were it not for the persistent gloom over Europe. "I don't know if they get how grave the situation is if they don't do anything," he said.

Commodities were also higher, with oil rising $1.43 to $87.49 US a barrel and gold gaining nearly $20 an ounce to trade at $1,642 US.

New York markets were also higher, with the Dow Jones industrial average up 267 points, or 2.3 per cent, to 11,809. The broader S&P 500 was up 23 points, or 1.9 per cent, to 1,238.

With files from The Canadian Press

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'Miscommunication' led to Heartland mix-up

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The province now says only two major electrical transmission line projects will be put on hold, not three as initially announced Friday.

In a letter to the Alberta Utilities Commission, Energy Minister Ted Morton stated that the government "is reviewing its approach" to the projects.

The projects under review are the Western Alberta Transmission Line through the Calgary-Edmonton corridor, and the Eastern Alberta Transmission Line from northeast of Edmonton to Brooks.

Information released by the province earlier in the day Friday said that the decision on whether to build the Heartland Transmission line, which would run from Fort Saskatchewan to south of Edmonton, would not go ahead Monday as planned.

Later in the day, Premier Alison Redford told reporters in Calgary that was a "miscommunication."

"We will be reversing our request to the AUC to delay the releasing of the decision with respect to the Heartland."

The province's electrical operator argues all three lines are necessary to keep up with growing demands for power. Farmers and landowners living near the proposed sites have been concerned about possible health effects and argued the consultations were not open to opposing views.

Opposition to the proposed power lines has been vocal. In September 2009, hundreds packed a church in west Edmonton to demand the Heartland line be put underground. CBCArmed guards were hired to watch over two sets of public hearings for the Heartland line, a move the government said was necessary.

The province has not said how long its review of the projects will last or when public hearings will proceed.

Public hearings on the Western line were scheduled to begin next month, and for the Eastern line in January.

Jim Law, spokesperson for the Alberta Utilities Commission, said he hopes the government review will proceed as quickly as possible.

"I think that everybody is appreciative of the amount of time and effort that's been invested [in these projects]."

During her race for the Progressive Conservative party leadership, Premier Alison Redford questioned whether two additional transmission lines between Calgary and Edmonton would actually be necessary for the province's electricity needs.

She said the Heartland project was necessary, a position she reiterated Friday.

Premier Alison Redford committed during her campaign for the PC leadership to review transmission line projects. CBCShe committed to change electrical transmission and landholder legislation to make public consultations on electrical projects mandatory, and to change the way landowners are compensated when lines run through their property.

The New Democrat and Wildrose parties reacted swiftly to the news Friday by calling on the government to scrap Bill 50, legislation passed in 2009 that was designed to make transmission line approvals quicker, but blasted by critics for eliminating the need for public hearings.

"Return this decision-making back to the hands of of an independent agency, do a proper a needs assessment, and give the security to ratepayers that they're not going to be stuck paying for electricity transmission that we simply don't need," Wildrose leader Danielle Smith told CBC News.

"Bill 50 has left the public with little proof these lines are needed, or what purpose they're truly meant to serve," Alberta NDP leader Brian Mason added in a release.

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BlackRock profit rises on ETF demand

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n">(Reuters) - BlackRock, the world's largest asset manager, said its third-quarter profit increased 8 percent as investors sought out the firm's exchange-traded funds despite tough market conditions.

New York-based BlackRock said earnings were $595 million, or $3.23 a share, compared with $551 million, or $2.83 per share, a year earlier.

Excluding some nonoperating income and expenses, BlackRock earned $2.83 a share. On that basis, analysts on average expected $2.63, according to Thomson Reuters I/B/E/S.

While individual investors withdrew money from many mutual fund companies during the third quarter, BlackRock benefited from its market-leading line up of exchange-traded funds, which took in $10.8 billion for the period.

Hit by the quarter's turbulent markets, assets under management totaled $3.345 trillion, down 9 percent during the quarter and 3 percent from a year earlier.

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A Bid To Bring Foreign Buyers To The Housing Market

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Enlarge Elaine Thompson/AP

A home in Seattle is advertised for sale in January. A housing boom 140 miles north in Vancouver, British Columbia, is being fueled by buyers from India and China, while building remains at a standstill in Seattle, one housing expert says.

Elaine Thompson/AP

A home in Seattle is advertised for sale in January. A housing boom 140 miles north in Vancouver, British Columbia, is being fueled by buyers from India and China, while building remains at a standstill in Seattle, one housing expert says.

Existing home sales and home prices declined last month, indicating the market remains in a slump. Now there's a proposal in Congress to try to change that. Sens. Mike Lee, R-Utah, and Charles Schumer, D-N.Y., introduced a bill Thursday that would grant U.S. tourist visas to foreign homebuyers paying with cash.

The hope is that this will encourage more wealthy people abroad to spend their money here. The senators' legislation would expedite tourist visas and grant longer stays to Canadian senior citizens. It would also give those foreign homebuyers a visa to be in the U.S. at least six months out of the year — but only if they buy with cash and not a mortgage.

The proposed legislation is like an invitation addressed to the rest of the world to a very exclusive party. Who's invited?

"If you are a person of means and you can live in the United States for more than six months [out] of the year, and you can write a cash check to a homeowner ... in excess of $500,000, then we certainly welcome that," explains Brian Phillips, Lee's communications director.

The bill requires the buyer to spend at least $250,000 on one home he would live in, while the rest of the $500,000 could be spent on separate properties to rent.

"There are people out there who can't sell their homes [and] there are folks here in the United States who can't purchase a home at that rate," Phillips says. "So we want to try to link up people who would like to sell their homes, who are trying to sell their homes, with folks who can afford it."

Broad Base Of Support

In other words, this invitation is open only to those willing to pay the high price of admission. People who can afford to buy homes with cash also presumably would buy furniture, carpets and other goods while in the U.S.

Phillips notes that under this bill, these homeowners would get tourist visas, not work visas. And there's no possibility of foreclosure because they'd buy the properties outright.

When property values sag and this is a desirable place to live, one of the simplest solutions is just to let more people in so they can buy the homes.

- Glenn Kelman, CEO of online brokerage company Redfin

The concept appears to have broad support. Billionaire Warren Buffett endorsed it as an effective way of getting rid of excess housing inventory in an August interview with Charlie Rose.

"If you wanted to change [the] immigration policy so that you let 500,000 families in, but they'd have to have significant net worth and everything, you'd solve things very quickly," Buffett said.

Glenn Kelman, chief executive officer of Redfin, an online brokerage with operations all around the country, also supports the plan. "When property values sag and this is a desirable place to live, one of the simplest solutions is just to let more people in so they can buy the homes," he says.

Attractive To Foreign Buyers

Kelman lives in Seattle. He says that just 140 miles north of him, Vancouver, British Columbia, is almost like his hometown's mirror image. The difference is that buyers from India and China are fueling a housing boom there. Meanwhile, building is at a standstill in Seattle.

"You just drive across that bridge into Vancouver and you feel like you've entered the twilight zone. ... The place is just hopping; it's like 2006 all over again and it's never stopped," he says.

Foreign buyers have been snapping up lots of properties in the U.S., too. According to the National Association of Realtors, foreign buyers made up 3 percent of national sales in September. They tend to buy pricier homes — more than 40 percent above the average national sales price.

Walter Molony, a spokesman for the Realtors group, says buyers come from all over the world; their top places of origin are Canada, China, Mexico, the U.K. and India, he says.

Molony says U.S. homes are attractive because they're relatively inexpensive, especially in high foreclosure states like Florida and Arizona. There are also few legal obstacles to transferring titles.

Visas can pose problems for some would-be buyers, Molony says, so it's possible that the house-for-visa trade would make a difference for some. But how many buyers will take the U.S. up on this deal, if it comes to pass, is not knowable, he says.

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Senators propose giving foreigners a tourist visa if they spend $500,000 in cash on homes.

Sales fell 3 percent in September and are on pace to match last year's dismal figures.

Housing starts grew at the fastest pace in 17 months, a hopeful sign for the housing market.

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