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Bloomberg Markets Magazine

Bloomberg Markets Magazine July 2016

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United States
Bloomberg Finance LP
Back issues only

in this issue

4 min
esg analysis helped domini steer clear of valeant’s drop

VALEANT PHARMACEUTICALS has taken investors on a wild ride. The drugmaker’s stock price climbed tenfold, to a high of $262 a share last August, before cratering to about $26 on May 19, bringing billions of dollars of losses to investors including hedge funder Bill Ackman. Watching the crash serenely from the sidelines was Tessie Petion, vice president for responsible investment research at Domini Social Investments. Petion was once a fan of Valeant, because its sales of generic drugs and contraceptives in emerging markets had a positive impact on the health of people in the developing world. Then Valeant went on a buying spree. After acquiring more than 100 companies in five years, it slashed research and development of lifesaving drugs. In October 2014, even as Valeant’s price soared, Petion decided the stock…

5 min
a better way to hedge a basket of currency exposures

FROM 1999 TO 2014, many U.S.-based corporations had it easy. The dollar, which weakened for most of those 15 years, made their products more competitive overseas. In addition, revenue earned in other currencies became more valuable over time in dollar terms, making foreign exchange hedging less imperative. Exports account for 33 percent of revenue at large U.S.-listed companies. The total annual value of American exports peaked at $1.6 trillion in 2014. Then the currency trend reversed, and the dollar began to strengthen. From mid-2014 through January 2016, the Bloomberg Dollar Spot Index rose 25 percent. To chart the index, which tracks a basket of currencies that’s rebalanced each year to reflect trade and FX liquidity, go to {BDXY }. THE STRONGER DOLLAR IS forcing many market participants to brush up on their…

2 min
a gender-focused strategy beat the s&p 500 by 141 percent

WOMEN OCCUPY ONLY 20 percent of board seats at companies in the S&P 500. Some studies suggest that having more women in leadership roles at corporations can have a positive impact on performance metrics and share price. So can you profit from a strategy that focuses on gender diversity? A simple backtest suggests the answer is a resounding yes. The strategy is based on screening for the companies that are in the top half of the S&P 500 in terms of women’s representation on their boards, management, and workforce. To set up the screen, go to {EQS }. Enter “SPX” in the field and click on the top match. Type “women” in the field and click on the % Women on Board item in the list of matches that appears. Select Percentile,…

7 min
an algorithm wants your job. now what?

ARE THE HUMANS of finance an endangered species? People are still the lubricant that oils the wheels of finance, toiling at innumerable tasks— executing and settling trades, writing analysis, monitoring risk. That’s about to change. Squeezed by low interest rates, shrinking trading revenue, and nimbler technology-based competitors, banks are racing to remake themselves as digital companies to cut costs and better serve clients. In other words, they’re preparing for the day that machines made by men and women take over more of what used to be the sole province of humans: knowledge work. Call it self-disruption. Consider venerable State Street, a 224-year-old custody bank that predates the steam locomotive and caters to institutional investors such as pensions and mutual funds. In February, State Street executives told analysts that after spending five years upgrading…

14 min
the alchemist

THE MEMO LANDED ON a Sunday in November. It was 2007, and securities backed by subprime mortgages were roiling markets and imperiling banks. Merrill Lynch Chief Executive Officer Stan O’Neal had just resigned under pressure, and Citigroup CEO Chuck Prince was rumored to be on his way out. So the Nov. 4 memo to employees in Citigroup’s markets division seems bold in hindsight. While other banks were looking to unload the toxic securities and Citigroup was taking an $11 billion writedown on its holdings, then-trading chief Jamie Forese and fixedincome head Paco Ybarra had other plans. They announced they’d turn the bank’s souring mortgage debt over to a new team and chart a course for the future. It was, they said, a “great opportunity.” The man they would soon ask to oversee…

24 min
henry kravis: “always worry about what you might lose on the downside”

PRIVATE EQUITY HOLDS trillions of dollars in assets, controls brand-name companies, and invests on behalf of pensions, endowments, and government funds around the world. Back in 1976, it barely existed. That’s when Henry Kravis, his cousin George Roberts, and their boss Jerome Kohlberg Jr. quit Bear Stearns and started their eponymous investment company, KKR, which is celebrating its 40th anniversary. ¶ Kravis and Roberts, co-chief executive officers, have transformed not only how companies are bought and sold, but also how they’re run. They’ve also expanded the firm far beyond leveraged buyouts, diversifying into real estate and hedge funds as well as a few businesses once dominated by big banks. Today, through ownership stakes in more than 100 companies with a combined annual revenue of $200 billion, KKR indirectly employs almost…