Inveslogic.com Daily Blog Report: Pensions love private equity, supply shortage driving gold price,China broker worth 40 billion

This is a selection of today’s most popular blog articles from Inveslogic.com where you will find the highest-rated stock market and investment blogs, videos and podcasts on the web.

More pension cash for private equity

The New York Times Dealbook, a business blog edited by Andrew Russ Sorkin, has revealed data from a new survey by Citigroup stating that many pension managers plan to substantially increase their amount of private equity investments in the coming years. According to the survey, “nearly three-fourths of pension managers plan to increase the funds they earmark for private equity investments in the next three years.”

The preferred fund was Blackstone, followed closely by the Carlyle Group. The post also reports that Goldman Sachs, Apollo Investments, Kohlberg Kravis Davis and Fortress Investments rounded out the top private equity funds for pension managers. 

The data also reported that, on average, four percent of a fund manager’s capital is allocated to private equity investments- less than alternative investments like hedge funds and real estate. The post was adamant that this is about to change. “Based on the responses, Citi estimated that amount would rise to about 6.3 percent by 2010, surpassing hedge funds and real estate. That may seem like a small change, but the universe of pension-related assets is huge.” Citigroup declared that they expect over $400 billion in new funds to flow into the private equity market within the next three years. Dealbook reports that the sum is “nearly 20 times the size of the biggest single fund ever raised by a private equity firm.”

China’s Citic Securities valued at $41 billion

China’s largest brokerage firm, which has been in existence for less than 12 years, is now reported to be larger than Lehman Brothers, Bear Stearns and Charles Schwab. According to a post from Seeking Alpha’s China Stock blog, Citic Securities now ranks as “the fourth-largest among brokerages in the world behind Goldman Sachs, Morgan Stanley and Merrill Lynch.” This year alone, Citic’s share-price has tripled resulting in a market valuation of $40.7 billion.

The post, written by the column’s editor Steven Towns, says that Citic’s performance has significantly upstaged its US counterparts who have “struggled due to the sub-prime mess. The latest earnings releases for Morgan, Lehman and Bear all showed declines in profit, with only Goldman outperforming.”

Towns was sure to note, however, that many US-based analysts don’t consider Citic’s incredible growth to be sustainable. According to the post “Some analysts are concerned about Citic's valuation at 34x forward earnings, compared to 8.8x for securities firms in the S&P 500 Index.” The post quotes a Hong Kong-based asset manager who states that she “is not worried, because Citic has the best chance of overseas growth among peers.” She also noted that the brokerage was growing “at a 300% clip- growth Morgan Stanley can’t give you.” Towns also quotes another asset manager who argues that “Citic is a proxy for China and deserves the premium.”

Supply shortage also driving gold price



Resource Investor, an expert blog chronicling the mining and drilling sectors, has declared that the surge in gold prices cannot be tied solely to the sagging US dollar. The post, written by Jane Louis, contained several recent comments from Dr. Paul Walker- the chief executive officer at precious metals consultancy GFMS. During an appearance at the Denver Gold Forum, Walker addressed the issue of whether “the physical markets have mattered in this rally?” The answer, according to Resource Investor, is a resounding yes.

Walker was adamant that “Gold has both monetary and commodity characteristics. There are different forces in the gold market that drive it besides the dollar.” He pointed to record-setting demand in India during the second quarter as an excellent example. He declared “there was no way that did not affect the price of gold.”

Additionally, Walker stated his belief that the price of gold will rise above $800 and he reiterated that the US dollar will not be the only reason. Dr. Walker pointed to a looming drop in production that will occur during the entire second half of this year. He declared “global production in the second half, however, is expected to post a modest drop, especially if Indonesia experiences its forecasted decrease in output. Latin America and Africa have recorded losses in output this year compared to last year.”

US Cleantech industry worth $1 trillion/year

A recent post in the SmartCool blog, an expert blog focusing on the energy efficiency market, declared that America’s cleantech industry is moving beyond “hype” and is now expected to deliver tangible results for investors. The post refers to a recent MSNBC article that stated “cleantech is entering a new and challenging phase, where the emphasis is less on exciting investors and attracting dollars, but facing up to the very real challenges of pushing from concept to prototype to production.”

The post reports that the renewable-energy and energy-efficiency industries have generated nearly $1 trillion in revenues within the past year. Additionally, the sector now employs some 8.5 million workers according to recent data by Management Information Services, a Washington, D.C-based consultancy. Nicholas Parker, chairman of the Cleantech Network, is also quoted in the post saying that “through the first half of 2007, venture capitalists poured $1.9 billion into U.S. and European start-ups.” This represents an increase of 10% compared to the same period last year- a new record.

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