A eurobond is a debt security handled internationally by syndicates, groups of bankers and/or brokers who underwrite and distribute new issues of securities or large blocks of outstanding issues. It is typically in bearer (non-registered form) and is issued outside the country of the currency in which it is denominated.
Borrowers and lenders are spread around the world, while the intermediaries are spread across Europe, with the majority of business being done from London. The market was founded in the early 1960s and has provided a competitive source of funding for borrowers who can tap discreet but important sources of finance. Japanese banks, pension funds and insurance companies have become important lenders in recent years and there are still plenty of wealthy individuals who prefer the anonymity offered by bearer securities. The eurobond market is the world’s second largest securities market after the US bond market in terms of trading volume and the third largest after the US and Japanese bond markets in terms of debt outstanding. Read the rest of this entry »
Underlying the policy debate about merits of institutional activism is the empirical question: Does such activism have a significant impact on corporations that are the target of that activism? The short answer is that it’s unclear.
In an attempt to provide an intermediate-level answer, let us review a few points that emerge from this debate on the impact of institutional activism. To begin, the studies do not usually include proxy fights or takeover bids since these are rare events for institutional investors. In addition, these studies are all premised on the efficient markets theory, so they assume that the impact from shareholder activism can be measured by looking at a change in stock price after a specific event, such as a pension fund’s submission of a stockholder proposal.
These economic studies tend to show no or little positive price effects from proposals to change general governance procedures, such as the introduction of confidential voting or the appointment of an external board chairman (separate from the CEO). Read the rest of this entry »
The SEC heavily regulates mutual funds and their advisers with respect to most aspects of their business. In their role as investors, mutual funds are subject to a variety of restrictions on how much stock of a particular company or industry they may own and how liquid their aggregate holdings must be. Every fund must disclose its complete holdings twice a year in reports to fund stockholders, and any fund adviser managing more than $100 million in the aggregate from all accounts must disclose quarterly a total list of equity securities owned by the funds and other accounts managed by the adviser. In addition, if the funds and other accounts managed by the investment adviser hold more than 5% of the voting securities of a publicly traded company, the adviser must file periodic disclosure reports with the SEC on such holdings. These filings are a source of valuable information on mutual fund holdings for participants in takeovers and proxy fights. Read the rest of this entry »
The SEC heavily regulates mutual funds and their advisers with respect to most aspects of their business. In their role as investors, mutual funds are subject to a variety of restrictions on how much stock of a particular company or industry they may own and how liquid their aggregate holdings must be. Every fund must disclose its complete holdings twice a year in reports to fund stockholders, and any fund adviser managing more than $100 million in the aggregate from all accounts must disclose quarterly a total list of equity securities owned by the funds and other accounts managed by the adviser. Read the rest of this entry »
As mentioned above, one group of activists has social rather than primarily financial agendas for U.S. companies. In the view of these activists, U.S. companies should help achieve social goals such as saving animals, protecting wilderness or alleviating poverty. Let’s consider whether these social goals are appropriate for most mutual funds and then for the subset of funds specifically geared to socially responsible investing.
Social activists who attempt to change corporate policies or challenge corporate practices take many different tacks in pursuit of their goals, but all are motivated by one fundamental principle: corporations shouldn’t be solely profit-maximizing entities; rather, they have an obligation to take into account their impact on social issues. Activists seek to influence companies through a variety of means—including litigation, picketing and public relations offensives—in an effort to encourage a company to alter its social policies in some fashion. Read the rest of this entry »
