Indonesia to Kick Off $1 Billion Green Investment Fund

January 28, 2010 by · 1 Comment 

By Sunanda Creagh

2010-01-21T131423Z_273409850_GM1E61L1MT401_RTRMADP_3_RICE-INDONESIA

Workers carry sacks of rice at a paddy field in Karawang, in Indonesia’s West Java province January 21, 2009. Indonesian state procurement agency Bulog will release 300,000 tons of rice out of the government stock this week to stabilize domestic prices, its chief said on Thursday.

REUTERS/Beawiharta

JAKARTA, Jan 26 (Reuters) – Indonesia plans a $1 billion green investment fund this year to drive infrastructure developments that aid growth and help cut greenhouse gas emissions, a finance ministry official said on Tuesday.

Indonesia has promised to slash its emissions by at least 26 percent from business as usual levels by 2020 but recently re-elected President Susilo Bambang Yudhoyono has also vowed to boost economic growth to 7 percent or more by 2014.

At global climate talks in Copenhagen last month, Yudhoyono announced a plan to develop the Indonesia Green Investment Fund, which will catalyse infrastructure development that could speed economic growth, boost food and clean water production and also help cut emissions blamed for global warming.

Indonesia’s sovereign wealth fund the Government Investment Unit will put $100 million into the fund and a further $900 million will come from foreign governments including Norway and Australia, plus institutional investors, said Edward Gustely, a senior adviser to the Ministry of Finance.

“We’re in the initial stages but the target is to have this fund operational within this year,” Gustely told Reuters, adding the fund would rival Brazil’s Amazon Fund in size and scope. “There’s no reason why this can’t, in the next five years, scale to $5 billion or more.”

Brazil launched its Amazon Fund last year to promote sustainable development and scientific research in the world’s largest rain forest, with donations from European countries and the first projects unveiled last month.

Indonesia last year became the first country to launch a legal framework for a U.N.-backed scheme called Reducing Emissions from Deforestation and Degradation, allowing polluters to earn tradeable carbon credits by paying developing nations not to chop down their trees.

Catalyst

Indonesia’s green investment fund will not offer loans or grants but rather top-up funding needed for projects where a bank lender is seeking an additional equity injection.

“Many technology providers and project sponsors don’t have the balance sheet to top up the required equity needed to secure financing,” said Gustely. “We would come in and play a catalyst role to ensure good projects with good asset quality, with good expertise and proper management, can be deployed and proceed.”

The Copenhagen talks failed to achieve a legally binding agreement to reduce greenhouse gas emissions but projects like the Indonesia Green Investment Fund were a way for countries to take initiative at home, said Gustely.

“This is driven by how to create more food, water and energy in a sustainable fashion while trying to achieve Indonesia’s growth objectives,” he said.

Fitrian Ardiansyah, climate change programme director for WWF Indonesia, welcomed the fund but said more needed to be done to reduce Indonesia’s greenhouse gas emissions.

“The Indonesian government heavily subsidies fossil fuels, but investment in renewable energy sources is too expensive. The government must help the private sector by making investment in renewable energy sources cheaper, which will address the problem. But at the moment coal plants continue to be built, which does not help,” he said.

(Additional reporting by Pip Freebairn; Editing by Neil Chatterjee)

12-5

Major Donor to Israel Causes Pleads Guilty…

December 10, 2009 by · Leave a Comment 

Philanthropist pleads guilty to bribes

JTA

LOS ANGELES (JTA) — Elliott Broidy, a leading investor in the Israeli economy and major donor and activist in the Los Angeles Jewish community, pleaded guilty Thursday to the felony charge of rewarding official misconduct.

According to New York State Attorney General Andrew Cuomo, Broidy admitted that he made nearly $1 million in payoffs to four senior New York state officials as he pursued an investment from the state public pension fund. He has agreed to forfeit $18 million in management fees and a judge may impose a sentence of up to four years in prison following Broidy’s guilty plea, the Wall Street Journal reported. The development is part of Cuomo’s wide-ranging pay-to-play probe on whether decisions about how to invest retirees’ money in the giant pension fund were wrongly influenced by money and politics.

Cuomo said that Broidy has acknowledged paying at least $75,000 for high-price luxury trips to Italy and Israel for a top official in the New York State Comptroller and his relatives. Several media sources quoted unnamed sources identifying the official as the former comptroller Alan Hevesi; his lawyer reportedly declined to comment.

By raising $800 million, Broidy turned his Markstone Capital Group into the largest private equity fund in Israel, at a time when the intifada was at its height and most investors were shunning the Jewish state. In Los Angeles, Broidy has been a major donor to the United Jewish Fund and Friends of the Israel Defense Forces, a trustee of the University of Southern California and USC Hillel, and has served on the Hebrew Union College board of governors and as a trustee of Wilshire Boulevard Temple.

He is credited with revitalizing the dormant California-Israel Chamber of Commerce in the mid-1990s, together with Stanley Gold and Stanley Chais. Gold is president and CEO of Shamrock Holdings and outgoing president of the Jewish Federation of Greater Los Angeles. Chais, a large contributor to Israeli and Jewish causes, faces three legal actions as an alleged middleman for Bernard Madoff.

Broidy has also been a GOP heavy hitter, serving as finance chairman of the Republican National Committee and a top fund raiser for the presidential campaigns of President George W. Bush in 2004 Sen. John McCain in 2008.

Gold said that he has known Broidy for some 20 years and worked with him on behalf of the local Jewish federation and Wilshire Boulevard Temple, as well as the California-Israel Chamber of Commerce. “Elliott has given freely of his time and energy to the community, of which he has been an outstanding member,” Gold said. “Our hearts go out to him and his family at this difficult time.”

Gold added, “Elliott is a decent and good man. It is not my style to desert a friend in his hour of need.”

Broidy’s New York attorney Christopher Clark issued a statement saying that his client “regrets the actions that brought about this course of events, but is pleased to have resolved this matter with the New York Attorney General and will be cooperating in the ongoing investigation.”

Clark also said that Broidy has “resigned from all operational, supervisory, and other roles at the firm of Markstone Partners in order to focus his attention on legal matters.”

11-51

Canada: Sharia ETF Poised for Launch

June 18, 2009 by · Leave a Comment 

Proposed ETF from Islamic firm UM Financial and Jovian Capital could be a Canadian first

By Shirley Won, Funds Reporter, Globe and Mail

Islamic financial services company UM Financial Inc. has teamed up with Jovian Capital Corp. JOV-T in a bid to list Canada’s first sharia-compliant exchange-traded fund (ETF).

On Wednesday, Standard & Poor’s launched the S&P/TSX 60 Shariah Index. In compliance with Islamic law, the index avoids firms involved in financial services, alcohol, gambling and pork products.

The proposed product from UM and Jovian would be based on the S&P/TSX 60 Shariah Index so the two firms are in discussions with Standard & Poor’s to get a licence for the new index to start the Islamic ETF later this year. Eventually, “the goal is to launch a family of ETFs,” UM chief executive officer Omar Kalair said yesterday.

The sharia ETF would target Canada’s Muslim population (which numbers about one million), as well as foreign investors, Mr. Kalair said in an interview.

Jovian’s BetaPro Management unit is a provider of leveraged and other ETFs, while its AphaPro Management unit has actively managed ETFs. “Any product launched would come from BetaPro,” Mr. Kalair said.

In recent years, sharia-compliant ETFs have popped up in various countries including Britain, India, Singapore, Dubai, Malaysia and South Africa. In March, a sharia gold ETF was launched in Dubai.

Barclays Canada, which administers the iShares ETFs and is the largest ETF provider in the country, “has no plans to go down this route,” said Oliver McMahon, its director of product development. “It’s not in our existing product pipeline.”

Jasmit Bhandal, a spokeswoman for Standard & Poor’s in Canada, said there have been talks with ETF, mutual fund and structured products providers for use of the S&P/TSX 60 Shariah Index, but nothing is final. But a licence with an ETF provider is typically an exclusive one, she said.

A couple of sharia-compliant mutual funds are sold in Canada, but both have less than $2-million in assets.

A Toronto-based investment firm, frontierAlt Management Ltd., launched Canada’s first sharia-compliant mutual fund, frontierAlt Oasis Canada, in 2007. The firm also later started sharia-compliant funds frontierAlt Oasis World and frontierAlt Global Income funds, but these were closed last fall because it was no longer cost effective to run them, said Taras Hucal, president of frontierAlt Management.

The two Oasis stock funds invested in firms in the Dow Jones Islamic Market Indexes. The income fund invested in sukuk, which is similar to conventional bonds, but pays out a share of revenue from a designated pool of assets or services rather than interest. Islamic principles prohibit receiving interest income.

A problem with selling the Oasis funds is the fact they are no-load funds; they do not pay financial advisers a commission, but rather a 1-per-cent annual trailer fee as long as investors hold them, Mr. Hucal said.

“There has also been a lack of awareness” about products in this niche, and the steep market collapse didn’t help sales, he said.

The frontierAlt Oasis Canada Fund suffered a 42-per-cent loss for the year ended April 30, and an average annual loss of 23 per cent over two years. Funds need a solid three-year return number to attract inflows of money, Mr. Hucal said.

In March, Global Prosperata Funds Inc. launched the sharia-compliant Global Prosperata Iman, a global stock fund that is sold with front- and back-end load commissions. It now has $1.5-million in assets.

“We are expecting another $1-million to $2-million from a number of different investors in the next 30 to 60 days,” said Glenn Moore, vice-president of Toronto-based Prosperata Funds. “There is a lot of pent-up demand.”

11-26

Time to Sell?

April 27, 2006 by · Leave a Comment 

Time to Sell?
So there you are, one of the lucky few who, a couple years ago, spotted the best places to invest and now see some fat gains in your portfolio holdings. Is it so great that you consider scattering your account statements on the floor and rolling around on them? Or is that just me? But then, it might also occur to you that those big gains could be temporary, while selling the big winners could lock in your well deserved gains. So, do you sell? Or do you ride the wave a while longer, hoping to increase your gains?
My first reaction to the question about ‘’taking profits’’ on big gains in emerging markets stocks or funds, or perhaps gold and energy funds, is always the same. ‘’Gee, I don’t know if that’s the smart thing to do.î Comforting, right? But let’s be realistic for a moment, even rational, as all investors think they are.
If I knew for sure when to sell raging winners or strong performers in the Indian or Brazilian markets, that would infer powers of prescience that only CNBC promoters claim to possess, though they know no more than you or I. Such a call would suggest skill at predicting the future, or at least those actions forthcoming from thousands (if not millions) of other investors with different methods and goals.
Let’s be realistic about investing! I’m guessing where to invest now. I always have — and always will. What are the best things to buy now? And the best things to sell? If anyone really knew with any certainty, then investing would be so easy, everyone would know investors who ìcrushî the market regularly. But those ìcrushersî don’t exist, do they? So no one knows for sure what to do. We’re all just making our best guesses.
After accepting that premise, we can consider our choices — with the proper amount of humility to gain favor in the eyes of the market gods, who never stay long with investors claiming great success in the markets. And just as important as humility is accepting, from the start, that making major portfolio changes may cause regret in the future.
You could sell your big winners now — only to watch them rise even higher. So will you be right or wrong? The wrong decision plus a potential ego dent can linger in your memory and affect future decision making, adding an emotional influence that makes investors even less rational. But a decision must be made, and standing pat is also a decision.
So letís look at some decision-making ideas. First, we must admit that the changes we consider are timing decisions. Yet we all know we can’t time the markets, right? Timing is another one of those widely accepted ìdead wrongî investing tenets with the same value as diversification or the concept of ‘’stocks for the long run.’’
But you can consider timing in making your decision, since you always have in the past. And so have I — and most everyone else! You donít believe me? An illustration might help. Perhaps a friend asks you what to do with new money going into his brokerage account. What should he buy? Maybe some shares of the S&P 500 index fund or a good international equity fund? Or some energy stocks balanced by a mellow bond fund?
So when would you tell your friend to buy? In a month? Next March? Or maybe you suggest buying right now, since other things, like technology or gold funds may have already run too far, too fast? Yes, any investing decision involves timing, as in what you buy from all available options.
Yes, gold stocks and funds have had a great run for the past five years! In that time, for example, Fidelityís Select Gold fund has powered about 200% higher than the S&P 500, which sits about where it started then, showing a minimal gain in nominal terms. So this point brings up two more problems. Do you avoid the big winner, the gold sector, since it has done so well and is selling at a high price? And will you re-balance your portfolio, as in selling some gold shares and adding the cash to your S&P fund?
Consider this as you decide whether to sell a high flyer like gold. In 1998, the Russian government was essentially broke and defaulted on bonds issued to foreign investors. The situation looked bleak as the stock market index sat at about 100. Only a fool or high risk taker would have ventured into something looking that bad — or so it seemed.
A couple years later, smart money saw value there and watched that index power higher, going past 300, 400 and then 500. A great time to sell and take profits, right? Surely, you wouldn’t buy into a market that had risen 300% or 400%, right? And just where is that market index now? In late April 2006, the Russian market sits just above the 1,600 level.
For another fine example, look at the Brazilian market. Pounded down in unison with the S&P 500 during the bear market of 2000-2002, it bottomed at about 8,400. But smart money saw value there and watched as that index rose about 20,000 in a little more than a year. Is it time to sell? Maybe not, even with that index hitting a new, all-time high this week, passing the 40,000 level.
Did you hear on CNBC last year that you should sell your energy stocks or funds since oil had more than doubled in price and would soon fall? With oil now costing above $75 a barrel, how smart was that? One thing I have learned the hard way is that trends tend to last longer than you think they will. Selling your best performers seems like a great idea — until you realize that the person buying your winners may hold them and make even more on them.
And re-balancing is a stupid idea for several reasons. The worst of them are that all asset classes will, at some point, have their day in the sun and that selling your winners at a high price and buying more of your losers at low prices will ensure success over the long term. For a useful illustration on how that could fail to work, consider the investor in Japan who diversified into the S&P 500 in the early 1990s.
As his home market tanked, with the Nikkei average falling from 39,000 to about 8,000 in 13 years, he would have re-balanced annually, selling some of his winning S&P shares and moving the cash into a market that continued to fall every year! Each year he added to his losers and reduced the impact of holdings in a winning category.
So how about a couple ideas that seem better to me? If you have big winners in your portfolio that are making you nervous, consider selling a portion of them over time. If the fear of losing your big gains outweighs the fear of selling too soon, go ahead and sell. But my compromise solution allows hedging your decision somewhat and reducing the chance of being glaringly wrong. You are only a little wrong, regardless of what happens.
Another idea is doing a fresh fundamental analysis on why your best performers are doing so well and whether they will continue. Recently, I overheard a conversation at a local office of a big mutual fund company catering to individual investors. The investor asked the nice lady about her interest in buying into the companyís Latin American sector fund, a recent big winner. The lady commented that recent performance was impressive, indeed, but wondered how long those big returns could continue. If you, like this lady, have no idea about your holdingsí recent performance, you need to do some fundamental research, rather than just walking away from what seems too good to be true.
Brazilian stocks, a major portion of any high-flying Latin America fund, still look as good as ever! In fact, they look better now than three years ago when that market began its current bull market. And the market is still quoted as selling at about 13 times earnings, on average, while the country enjoys a trade surplus and its government, a small budget surplus.
Adding to these factors is a recent development regarding energy. Brazilís domestic oil production now sufficiently satisfies domestic demand, lessened by a long-running project to produce substantial amounts of sugar-based ethanol. Sharply rising energy prices have little effect on the economy. And while concerns are warranted, based on past events, that the currency could lose value sharply, Brazil sits on billions of dollars, enough to intervene on behalf of the real.
Similar conditions now exist in Russia, though they did not when that market began its huge bull trend. Awash in foreign currency reserves, the country, as a major world supplier of ever more costly energy, now runs budget surpluses. When Russiaís bull market ensued, oil sales were barely profitable. Fundamentals have clearly improved, right along with rising stock prices, which are much higher now. And valuations have risen right along with them.
The best of all fundamentals may be found in gold. When gold began its huge move higher, our federal government was running deficits so small that co-mingling excess Social Security withholdings as part of general operating funds (during Clinton’s second term), appeared to be a small federal budget surplus. Since then, the Bush regime has splashed red ink everywhere, and America’s unfunded liabilities for retirement programs like Social Security and Medicare have shot higher, from about $20 trillion in 2000 to over $50 trillion, with some estimates even higher.
And since Americans are not saving, all government funds must be borrowed. Of course, all the money left in the world wonít buy that many bonds, since countries with money to spend, like China, Russia, etc., have domestic investment needs. Our leaders will, no doubt, print whatever money is needed, and that amount grows shockingly higher — much higher than anyone thought possible when the Bush team took charge five years ago. So rising inflation makes our bonds really bad deals and makes borrowing even harder. The dollar printing press will run for the foreseeable future, so the fundamental case for gold improves along with its valuation.
With energy, today’s supply-and-demand problem was not as evident in investor thinking four or five years ago. The Iraq war has decreased oil production there, something not factored into the thinking of pre-war energy investors. And didn’t we all assume that oil production would increase after the invasion?
And as the Bush administration continues to anger eight other oil suppliers, such as Iran, Saudi Arabia, Venezuela and Russia, the potential use of energy as an economic weapon is higher now than when Bush, early in his first term, looked into Vladimir’s eyes and felt his honest soul. So again, fundamentals rise along with prices.
The best reason to sell or, better, scale out of your biggest winners is when the holdings just become too large in your overall portfolio. If you intended to maintain a 10% allocation in gold shares or funds, (which one really doesn’t matter, since they’ll rise together) and your gold holdings have risen to 15% or 20% of your portfolio, reduce your exposure. The added volatility resulting from such a large asset class position only increases the chance of your making an irrational decision later.
Of course, keeping your shares in a rising market like gold increases your chance of winning big, too, so factor that in as well. And when you sell some of your big winners, you must find something else with solid fundamentals to buy. And how many opportunities like that are available now?
So don’t sell just because something has done well. And don’t re-balance annually either, by taking money from sectors or asset classes in the middle of wonderfully profitable secular bull markets and adding hard-earned gains into something like the S&P 500, clearly in the early stages of a secular bear market.
Have a great week.
Bob