CIIF and AEFIN hosted the 17th Finance Forum, where international educators and experts from the financial sector debated the latest trends on issues such as: the impact of the banking crisis on the concentration and regulation of the sector, the freezing of the money market and insurance on deposits, the role of agreements in public and private debt, consumer risks and the profitability of government bonds.
Through its series of parallel sessions, the event featured a total of 92 presentations. Invited speakers included professors Alexander Ljungqvist of New York University’s Stern School of Business and Denis Gromb of INSEAD.

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The International Center for Financial Research (CIIF) at IESE, in collaboration with Ernst & Young, has created a new index that measures countries’ attractiveness for venture capital investments in limited liability companies in 66 countries around the world. According to the inaugural edition, the United States, Canada and the United Kingdom are on top of the list of preferred destinations for capital investment. Conversely, Kuwait, Latvia and Oman are the countries whose investment attractiveness has most declined in recent years.
The Global Venture Capital and Private Equity Country Attractiveness Index is led by IESE Profs. Heinrich Liechtenstein and Alexander Groh. The index reveals the contrast of opportunities and the diversity of challenges faced by international venture capital in the current economic stage of exit from recession.

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Once we understand the causes of the crisis and realize which reforms are needed on a global level, the next step is to take aim at the major issues. This was the argument underlying the 16th CIIF Annual Symposium. Professors Juan José Toribio, Heinrich Liechtenstein, Javier Estrada and Pablo Fernández focused their proposals on the health of venture capital, the profitability of pension funds and reliable methods for risk measurement.

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By Javier Díaz Giménez, Professor at IESE

Some may be surprised by my emphatic answer. Others will likely call it arguable. Yet one certainty is that, like it or not, the pension systems of many developed countries—Spain’s included—constitute recipes for bankruptcy. An aging population and financial uncertainty are jeopardizing the future of Spaniards’ pensions.

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IESE Insight Review, Fourth Quarter 2009
Arruñada, B

Confidence indicators in Spain are at an all-time low. The reason is not so much the economic crisis as the country’s failure to introduce structural reform. The author discusses two partly complementary hypotheses, identifying the problem as one either of institutions or of values. The institutional hypothesis suggests that the political system fails to translate citizens’ preferences into effective reform. According to the values hypothesis, many citizens reject any reform that will require them to work harder or consume less. Based on the reforms carried out over the last half-century and the characteristics of Spain’s most successful companies and individuals, the author argues that what is needed to rebuild confidence and overcome the economic crisis is an injection of competition and responsibility.

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Fernández, P.

Confusion abounds these days in relation to market risk premium, due to the fact that the term has four different meanings: historical, expected, required and implicit. Textbooks are not shedding any light on the subject either.
In this paper, Pablo Fernández studies the various recommendations on risk premium appearing in 150 books on corporate finance and valuation published between 1979 and 2009. Of those books, 51 use different meanings of risk premium on different pages.
In the author’s opinion, books on finance and valuation should clarify the concept of risk premium by adding nuances that help distinguish between the four meanings and convey a clearer message in that regard.

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Meerkatt, H., Liechtenstein, H.

They predicted a major restructuring in the private equity sector following the financial and economic crisis of 2008. Now, Heino Meerkatt and Heinrich Liechtenstein have more news for us. There is still capital available and most investors will honor their commitments. However, there will also clearly be more victims: primary investors with financial woes may drag their firms down with them. But by gaining more power, investors will bring about the necessary evolution of the sector.

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By Carles Vergara, Professor at IESE

The real-estate market represents a substantial part of the current economy and the financial system. Nevertheless, there is scant scientific research on the economic decisions made regarding real-estate markets. Traditionally, this type of research has been based on classic theories that fail to account for important differences between real-estate assets and other kind of economic assets.
Carles Vergara, assistant professor at the IESE, is putting the final touches on two studies on investment decisions in the real-estate markets. The first study analyzes the influence of high transaction costs and perceived predictability of housing prices on decision making regarding portfolio optimization. The second study examines the limitations of financing in the residential sector and seeks to answer the question of whether if it is best for you to sell a part of your house.

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By Juan Palacios, Professor at IESE

The deep financial crisis that has hit the banking sector has made banks and savings banks sharpen their wits to come up with new funding methods. The year 2009 saw the introduction of a product aimed at the small investor: preferred shares.
A few months after its launch, this product was already the subject of much debate. Financiers, academics, sector professionals, the CNMV (the Spanish Stock Exchange Commission) and the Bank of Spain are all voicing their opinions and issuing warnings regarding the advantages and disadvantages of this financial instrument.
Juan Palacios, professor at CIIF-IESE, sets out clearly and concisely everything that small investors must bear in mind before investing their savings in preferred shares.

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Madrid, January 28, 2010
 
The recent commotion in the financial markets has set off heavy activity in the value of institutional investors’ assets. Many of these constitute the challenges of asset management that have become evident today.

IESE Professor of Finance José Luis Suárez, along with Elsa Galindo, IPD; Emilio Colomina, Mutua Inmobiliaria; Luis Eugena, Mutualidad General de la Abogacía; and Carlos Moreno, Fonditel, will analyze the role of real-estate assets in the portfolios of insurance companies and pension funds, the attitude of these institutional investors toward real-estate investment, which tools they use for making decisions on asset allocation, and what they require from an investment of those characteristics.

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