Securities Industry The Impact of Interest Rates
November 21, 2005; Page R8
As surely as the movements of the moon and the sun rule the ocean tides, trends on Wall Street are driven by the movement of the markets.
So with the Dow Jones Industrial Average having fallen in three of the past five years about flat so far this year compared with 2004, the securities industry is changing. Investors are looking for alternatives to stocks to boost their returns, with some flocking to securities their parents never heard of. Meanwhile, as fees and commissions have declined, Wall Street firms are finding other ways to make money. And stock exchanges are consolidating as customers' expectations evolve along with trading technology. The regulatory environment is changing, too.
THE JOURNAL REPORT
See the full Trends report.But just as it can be difficult, if not impossible, to predict where financial markets are headed, there is risk and uncertainty in many of these changes.
Here's a look at some of the trends on Wall Street.
1 > BONDS TRUMP STOCKS
Ever since the dot-com bubble burst in March 2000, and the broader stock market tanked as well, financial markets have been dominated by fixed-income securities -- in a word, bonds. And that has rearranged the power structure and competitive landscape on Wall Street.
From March 31, 2000, through Sept. 30 of this year, the largest stock-index mutual fund, the Vanguard 500 Index Fund, fell an average of 2.1% a year, while the comparable bond-market fund, the Vanguard Total Bond Market Index Fund, delivered an average annual return of 6.4%, according to fund tracker Morningstar Inc.
Among the top securities firms, executives specializing in bonds have risen in the ranks, while some stock-market veterans have had to pack their bags. And firms with the strongest bond-market franchises have done better than others.
At Goldman Sachs Group Inc., a former bond executive, Lloyd Blankfein, became the firm's president and No. 2 executive in December 2003. At Morgan Stanley, fixed-income chief Zoe Cruz rose to No. 2 as well, while two former stock-division chiefs, Vikram Pandit and John Havens, left the firm during the turmoil that culminated with another bond-market veteran, John Mack, getting the top job in June 2005.
The rocket ride of bonds has been fueled by the series of interest-rate reductions the Federal Reserve made to soften the blow to the economy when the stock-market bubble burst. But now that the Fed has reversed course, raising its target interest rate 12 times since June 2004, the future is uncertain.
--Randall Smith
2 > MORE PRIVATE DEALS
Private-equity firms, flush with cash, are banding together to snap up companies in blockbuster deals, giving them a growing percentage of global merger-and-acquisition activity. These buyout shops also are selling their stakes faster than they did in the past, returning quick profits to investors and delivering huge fees to Wall Street.
Investors -- mainly public and corporate pension funds -- have been putting more money into private equity as an alternative to traditional stocks and bonds in hopes of boosting returns. Earlier this year, Carlyle Group raised a fund in excess of $10 billion, and Warburg Pincus LLC raised an $8 billion fund.
Although buyout shops are taking in more and more money from investors, these firms still supply only a fraction of an acquisition's value in cash; they make up the rest of the purchase price with debt. So to some extent, whether they can continue to pony up for big-ticket deals will rest on the affordability of borrowing. If interest rates climb too high, it could take the wind out of deal activity.
--Kara Scannell
3 > MERGER FEVER
Companies around the world are taking the plunge on big acquisitions of competitors, helping to push the total dollar volume of mergers and acquisitions this year beyond $2 trillion by late October, the highest level since 2000.
France Telecom SA surprised rivals in July by buying Spanish mobile operator Amena. That helped spark similar deals by other carriers, including the agreement by Telefonica SA of Spain to buy U.K. mobile operator O2 PLC for ￡17.7 billion (about $30 billion), unveiled on Oct. 31.
The mining industry also continues to consolidate. Last month, Inco Ltd. agreed to acquire Falconbridge Ltd. for $13.6 billion, which would create the world's largest zinc producer and a substantial player in coal, copper and gold.
Next year is expected to be an active one for mergers and acquisitions, with shareholders becoming more aggressive and companies continuing to put their cash hoards to work. An overall economic downturn could damp the big spending, but a more likely scenario is that some highly leveraged private-equity deals will go sour when the acquiring companies can't manage the debt payments, making both lenders and the chief executives of companies considering acquisitions more cautious about pursuing new deals.
--Dennis Berman and Jason Singer
4 > STOCK EXCHANGES JOIN FORCES
A new wave of consolidation is under way among stock exchanges around the globe as the markets try to keep up with customers' demands for fast, inexpensive trading of a wide range of stocks and derivatives like options.
The New York Stock Exchange and the Nasdaq Stock Market earlier this year announced they would buy fast-growing electronic competitors. The NYSE talks of future alliances with exchanges in Europe and Asia.
Overseas, markets have been merging across once insurmountable boundaries. Euronext NV -- formed in 2000 when bourses in Amsterdam, Brussels and Paris came together -- has explored the idea of mergers with its peers in Frankfurt and London.
Customers applaud the idea of bigger exchanges that can cut costs through economies of scale, but worry that the new behemoths may innovate less and wield oligopolistic pricing power.
Many exchanges have recently converted to for-profit corporations, adding pressure to grow bigger and more profitable. Some stock exchanges and stock-options exchanges have merged, with many industry observers predicting more such mergers to come. Futures exchanges could be a trickier partner for a stock exchange, though, since futures are regulated not by the Securities and Exchange Commission, as stock markets are, but by the Commodity Futures Trading Commission.
--Aaron Lucchetti
5 > REGULATION EVOLVES
Three years after a wave of financial fraud ushered in the Sarbanes-Oxley corporate-reform act, business interests are pushing regulators to take a less aggressive approach.
While there's no indication that the toughened regulatory climate will disappear, regulators are listening to complaints, and there are some signs that the environment may be easing.
The SEC has agreed to study a controversial -- and expensive -- rule mandated by Sarbanes-Oxley that requires companies to assess controls they have in place to prevent accounting mistakes and fraud and have their external auditors attest to those controls. The SEC recently delayed implementation of the rule for companies with less than $75 million in market capitalization. New SEC Chairman Christopher Cox, in his first public meeting since taking the job in August, proposed easing rules intended to speed up annual and quarterly financial filings by public companies. Mr. Cox also has indicated that he wants to review some of the recently adopted rules to make sure they're working and not having unintended consequences.
Meanwhile, one of the most aggressive securities cops, New York Attorney General Eliot Spitzer, may soon be less focused on Wall Street. Mr. Spitzer, a Democrat, is running for governor of New York in 2006 and is expected to spend more time campaigning and less time holding Wall Street's feet to the fire.
--Deborah Solomon
6 > ETFS TAKE OFF
Just five years ago, few investors had ever heard the term "exchange-traded fund." And that was for good reason. There were only a handful of these mutual funds being offered, and they were the domain of big, sophisticated investors.
Now ETFs, as they are known, hold $259 billion, much of which is money from small investors. These days they're growing rapidly; assets in ETFs are up 15% this year, more than twice the pace of growth in traditional funds. There are now 179 ETFs, designed to track a multitude of stock indexes, from the broadest measures to the tiniest investing niches.
ETFs trade all day on an exchange like a stock, while a traditional mutual fund is priced just once a day. But the real appeal to investors is their low cost: Investors can own them for a fraction of the cost of traditional mutual funds.
So far, the ETF market has been dominated by two big players, Barclays Global Investors and State Street Global Advisors. Vanguard Group, the best-known name in index funds, is a distant third but is beefing up its efforts.
Even fund companies that don't offer ETFs are taking note. One reason Fidelity Investments slashed fees on its index funds was to compete more effectively with ETFs.
--Tom Lauricella
7 > COMMODITIES ARE HOT
As the stock market has stagnated, investment banks, hedge funds and other firms have increased their trading of natural resources, which generally have been rising in price for more than three years.
Brokerage firms Goldman Sachs and Morgan Stanley, for instance, have racked up big profits trading with their own money in markets for crude oil and other energy products.
Recently, bidding was fierce to acquire the regulated commodities- and futures-trading unit of the bankrupt brokerage firm Refco Inc. Stock in the Chicago Mercantile Exchange has soared nearly 11-fold since being offered in late 2002, helped by record volumes in its markets for everything from livestock to futures contracts on the Standard & Poor's 500-stock index. The rival Chicago Board of Trade followed suit with a public offering of its own last month, and its share price already has more than doubled.
--Peter A. McKay
8 > HEDGE-FUND GROWTH SLOWS
Investors' love affair with hedge funds may be cooling.
Hedge funds today manage an estimated $1 trillion, up from just $400 billion five years ago. These loosely regulated private partnerships held up well during the vicious bear market of 2000-02, and some hedge funds have been able to outperform mutual funds and other competition by wide margins over the years.
But the industry's assets grew just 1.6% in the third quarter of this year, according to Tremont Capital Management, which invests in hedge funds and tracks market data. Some investors have started to worry that rising fees, and too many funds chasing the same ideas, are eating into returns. Most funds now charge investors at least 1.5% of the assets invested and 20% or more of any investment gains.
Hedge funds have slightly outperformed the broad stock market so far this year, according to Tremont, but last year their average 9.6% gain was below the almost 11% return on the S&P 500. A big problem: The stock and bond markets have been remarkably placid lately and stocks aren't considered especially cheap or expensive, making it harder for hedge funds to profit from strategies designed to take advantage of market movements and anomalies.
--Gregory Zuckerman
9 > TRADING COMMISSIONS SHRINK
Trading is being increasingly automated and commoditized, and that's putting pressure on commissions.
In a new program with Lehman Brothers Holdings Inc. that became public in October, mutual-fund giant Fidelity Investments cut the amount it pays Lehman in trading commissions to well below the going rate of five cents a share. The program allows Fidelity to pay separately for research it obtains from Lehman.
Historically, the costs of research were bundled into trading commissions, but Fidelity's move separating the two and reducing the cost of commissions shows the squeeze on Wall Street.
Some firms were already bowing out of executing commission trades before Fidelity's move. In August, Wells Fargo & Co. withdrew from stock trading for institutional investors. "The institutional equity business of Wall Street is in trouble," wrote Brad Hintz, an analyst at Sanford Bernstein & Co., in August.
--Randall Smith
10 > RISKING THEIR OWN MONEY
A decade ago, the highest-profile job on Wall Street was offering advice on mergers and acquisitions, or perhaps playing middleman on big stock transactions conducted by clients.
Today, the big money is made by so-called proprietary traders who use their firms' money to make big wagers on stocks, bonds, commodities and currencies. For now, the securities firms have been getting it right, in part because they say their risk controls have improved.
Goldman Sachs, for example, remains a leading adviser on global mergers and acquisitions. But analysts say as much as 35% of the firm's revenue -- perhaps more -- comes from trading related to its own account, up from approximately 25% three years ago. Other firms, like Morgan Stanley, also have been generating much more money from this kind of trading.
An obvious problem with such activities is risk: A bad call on interest rates or the dollar can lead to big-time losses. Skeptics worry that Wall Street is becoming too enamored with this risky business.
证券业－跟著利率走
就像太阳月亮的运动主宰著地球上的潮涨潮落一样，金融市场的动向也决定了华尔街的趋势。
在过去五年中，道琼斯指数有三年是下跌的，而今年到目前为止，道琼斯指数也只是与2004年基本持平，面对这样的股市，华尔街证券行业正悄然发生著变化。为了提振投资回报，投资者们开始寻找股票的替代品，一些人涌向了他们的父辈们从未听说过的证券品种。同时，由于费用和佣金的降低，华尔街公司正开辟著其他生财之道。客户的期望值随著交易技术的发展而不断提高，推动了证券交易所的整合。监管环境也在发生著变化。
不过，正如预测金融市场走势会十分困难一样，在上述变化的发生过程中也存在种种风险和不确定性。
以下就是对华尔街未来趋势的一些分析。
1.债券将强于股票
自从2000年3月互联网泡沫破灭、并拖累整个股市陷入低迷以来，金融市场就一直被固定收入证券所主宰，简而言之就是被债券所统治。这导致华尔街的势力结构和竞争格局发生了改变。
据基金研究公司晨星公司(Morningstar Inc)的数据，从2000年3月31日到今年的9月30日，规模最大的一只股票指数共同基金：Vanguard 500 Index Fund平均每年下跌了2.1%，而与之相应的债券市场基金Vanguard Total Bond Market Index的年平均回报率却达到了6.4%。
在顶级证券公司中，债券部门的管理人士平步青云、步步高升，而股票市场部门的一些元老却不得不卷铺盖走人。同时那些在债券市场优势最强的公司表现也会好于其他同行。
在高盛集团(Goldman Sachs Group Inc.)，曾在债券部门任管理职位的布兰克费恩(Lloyd Blankfein)在2003年12月成了公司总裁和二号管理人物。在摩根士丹利(Morgan Stanley)，固定收入部门主管克鲁(Zoe Cruz)也坐上了公司的第二把交椅，而股票部门前主管潘迪(Vikram Pandit)以及哈文斯(John Havens)则在一片混乱之中黯然离去，债券界元老麦晋桁(John Mack)在2005年6月份出任公司董事长兼首席执行长更是将这一趋势推向了极至。
在股市泡沫破灭后，美国联邦储备委员会(Federal Reserve, 简称：Fed)为保护经济少受冲击而采取了一系列的降息措施，由此点燃了债券市场的火爆行情。然而现在的Fed早已改弦更张，举起了加息的大旗，自2004年6月份以来，Fed已经连续12次调高目标利率，前景到底如何尚不得而知。
2.出现更多的私人资本交易
手握大把现金的私人资本运营公司相互合作，在一个个眩目的交易中竞相吞下大大小小的公司，这让它们在全球并购市场上的占有率得到提升。而这些私人资本运营公司转手出售那些公司股份的速度也较以前更为迅速，在让投资者赚到快钱的同时，也给华尔街带来了巨额的交易佣金。
投资者（主要是公共退休基金和公司退休基金）向私人资本投入了更多的资金，用它来取代传统的股票投资和债券投资，希望能由此获得更多的回报。今年年初，凯雷投资集团(Carlyle Group)推出的一只基金募集到的资金超过了100亿美元，而华平创业投资有限公司(Warburg Pincus LLC)也推出了一只80亿美元的基金。
虽然私人资本运营公司从投资者那里吸引来了越来越多的资金，但这些公司用于收购的资金中只有一小部分是现金，其他很大一部分都来自借贷。因此从某种程度上看，这些公司能否继续完成大规模的收购交易，取决于他们能否承受借贷成本的压力。如果利率上升至过高的水平，并购交易的强劲势头恐怕就要随之消散了。
3.并购的热浪
全球各地的公司都在尝试著花大价钱并购自己的竞争对手，受此推动，今年截至10月底，全球市场的并购金额超过2万亿美元，达到了自2000年以来的最高水平。
法国电信(France Telecom SA)今年7月份收购西班牙移动运营商Amena的举动震惊业界，也吸引了其他同行纷纷效仿，其中包括10月31日宣布的西班牙Telefonica SA斥资177亿英镑（300亿美元）收购英国移动运营商O2 PLC。
采矿行业的并购浪潮也在持续。上个月，Inco Ltd同意以136亿美元收购Falconbridge Ltd.，由此可能将缔造出全球最大的锌生产商和煤炭、铜、金领域一个强有力的竞争者。
明年预计也将会是并购活动颇为活跃的一年，公司股东变得更为积极，公司会继续让它们的现金储备发挥作用。虽然经济的整体滑坡有可能会抑制企业的大规模支出行为，不过更可能出现的情况是，当收购方无法管理好自己的债务负担时，高杠杆效应的私人资本交易将难以达成，借贷方和公司管理层由此将会对收购交易持更为谨慎的态度。
4.股票交易所通力合作
为了尽量满足客户对快速、经济地交易各类股票和期权等衍生品的要求，全球各地的股票交易所正在酝酿著新一轮的并购活动。
纽约证券交易所(New York Stock Exchange)和那斯达克股票市场(Nasdaq Stock Market)今年年初曾宣布，将收购增长势头迅猛的电子交易对手。纽约证券交易所还表示未来将与欧洲和亚洲的交易所展开合作。
在美国之外，交易所之间跨越了曾被认为不可逾越的界限实现了合并。Euronext NV通过与法兰克福和伦敦同行的合并对这样的思路进行了探索，而Euronext自己就是在2000年由阿姆斯特丹、布鲁塞尔和巴黎的几家交易所合并而成的。
客户们对于组建大型交易所的想法表示欢迎，因为这样可以获得规模经济效应，降低成本。不过让他们担心的是，新的交易所巨头可能会减少创新，并且获得垄断性的定价优势。
近来许多交易所都变成了以盈利为目的的公司，在增大公司规模、增加盈利方面的压力随之增大。一些股票交易所和股票期权交易所相互进行了合并，行业观察人士预计未来还将有更多的此类合并。期货交易所可能会成为股票交易所一个较难对付的合作者，因为期货交易的监管机构并非美国证券交易委员会(Securities and Exchange Commission, 简称SEC)，而是期货交易委员会(Commodity Futures Trading Commission)。
5.监管问题
在一连串金融欺诈案催生出萨班斯－奥克斯利法案(Sarbanes-Oxley)的三年之后，企业方面正促使监管者减少采取激进的措施。
虽然没有迹象表明严格监管的氛围会消失，但监管者开始倾听企业的意见，并且出现了一些监管环境正在放松的信号。
SEC已经同意研究萨班斯－奥克斯利法案中一条备受争议（也颇为昂贵）的规定，该规定要求公司评估其对防止会计失误和会计欺诈的控制能力，并让其外部审计师对此能力进行认证。SEC近期推迟了在市值低于7,500万美元的公司中实施该规定的时间。SEC新任主席考克斯(Christopher Cox)在8月份上任后的首次公开会议上提议，放松有关规定，加快上市公司提交年度和季度业绩报告的速度。考克斯还表示，他希望能够评估近期施行的一些规定，以确认这些规定发挥了应有的作用，而没有产生意料之外的结果。
同时，最严厉的证券界“警察”、纽约州司法部长斯皮策(Eliot Spitzer)可能很快就会将他的关注点从华尔街转开。他将参加2006年纽约州州长的竞选，届时预计他将会花费更多的时间在竞选工作上，减少对华尔街的关注。
6. ETF起飞
仅仅就在5年前，鲜有投资者知道上市交易基金(exchange-traded fund, ETF)是什么东西。不过这也很正常，因为当时此类共同基金的数量还很少，只有那些大投资者和经验丰富的投资者才会涉足这个领域。
如今ETF持有的资金总量达到2,590亿美元，其中许多资金还是来自于小投资者。近期ETF的增速更是迅猛：今年ETF持有的资产已经增长了15%，增幅是传统基金的两倍多。现在市场上共有179只ETF，它们追踪各类股票指数，从最小的分类指数到总体市场指数不一而足。
ETF和股票一样在交易所进行全天交易，而传统的共同基金每天只报价一次。不过，真正吸引投资者的是ETF成本较低，持有ETF的成本只有持有传统共同基金的几分之一。
到目前为止，ETF市场一直被两大巨头所主导：Barclays Global Investors和State Street Global Advisors。而最知名的指数基金Vanguard Group虽然排名第三，但与它们还有很大的差距，目前正在奋力追赶。
即便是那些不发行ETF的基金公司也注意到了这一趋势。Fidelity Investments近期削减了其指数基金的费用，原因之一就是要更有效地与ETF展开竞争。
7.火热的商品市场
由于股票市场止步不前，投资银行、对冲基金等公司增加了自然资源方面的交易业务，三年多来，自然资源的价格一直在普遍上扬。
比如高盛(Goldman Sachs)和摩根士丹利(Morgan Stanley)就在原油和其他能源市场用自有资金进行交易，而且收益颇丰。
最近，在经纪公司瑞富公司(Refco Inc)宣布破产后，对其相关商品和期货交易部门的收购大战硝烟四起。自芝加哥商品交易所(Chicago Mercantile Exchange)于2002年末上市以来，其股价已经上涨了将近10倍，主要就是因为在该交易所交易的各种商品：从牲畜到标准普尔500指数的期货合约等的交易量都达到了创纪录的水平。其竞争对手芝加哥交易所(Chicago Board of Trade)也步其后尘于上个月公开上市，如今其股价已经飙升了一倍有余。
8.对冲基金增长放缓
投资者对于对冲基金的热爱可能正在降温。
目前对冲基金管理的资金估计达到了1万亿美元，大大超过了5年前的4,000亿美元。在2000年至2002年的股市低迷期，这些处于宽松监管下的对冲基金维持了不错的业绩。一些对冲基金多年来还把共同基金等其他基金远远地抛在了后面。
然而根据Tremont Capital Management的数据，今年第三季度，对冲基金行业的资产只略微增加了1.6%。Tremont Capital Management是一家投资对冲基金并且跟踪市场数据的公司。部分投资者开始担心，不断提高的费用、以及越来越多追逐同样投资概念的基金会侵蚀该行业的投资回报。目前多数对冲基金向投资者收取的费用至少是其投资额的1.5%、另外再加上投资收益的至少20%。
根据Tremont的数据，今年到目前为止，对冲基金的表现仅仅略微好于股市大盘，而去年它们的平均回报为9.6%，也低于标准普尔500接近11%的回报率水平。它们面临的一大问题是：由于近来股市和债市如一潭死水波澜不惊，特别是股价既不是特别高也不是特别低，这让最擅长从市场波动和股价异动中获利的对冲基金束手无策。
9.交易佣金下跌
市场交易正日益变得自动化和大宗化，交易佣金面临的压力也越来越大。
在今年10月公布的一个与雷曼兄弟控股公司(Lehman Brothers Holdings Inc.)有关的新项目中，共同基金巨头Fidelity Investments支付给雷曼兄弟的交易佣金标准远远低于现行的每股5美分。这个项目允许Fidelity为从雷曼兄弟获得的研究报告单独支付费用。
以往，研究报告成本都是纳入交易佣金中，而此次Fidelity将两者的费用分开计算，由此降低了交易佣金成本，这也表明华尔街的佣金收入正在受到挤压。
而在Fidelity之前，一些公司已经退出了经纪业务。今年8月份，富国银行(Wells Fargo & Co.)取消了针对机构投资者的股票交易业务，“华尔街的机构股票业务正面临困境”，Sanford Bernstein & Co.分析师欣茨(Brad Hintz)在8月份曾这样写道。
10.用自己的钱冒险
10年前，华尔街最风光的工作就是为并购交易提供咨询，或者是在客户进行大宗股票交易时充当中间人。
如今，所谓的自营交易员(proprietary trader)为公司赚回了大笔的钞票，他们利用公司自有的资金在股票、债券、商品以及货币市场上进行交易。眼下证券公司这方面的境况还算不错，部分原因就是它们的风险控制水平有所提高。
比如，高盛目前在全球并购咨询业务上依然处于领先地位。但分析师称，该公司收入的35%、甚至更多都来自于自有帐户的交易，而三年前这一比例为25%。摩根士丹利等其他公司从此类交易中获得的收入也在不断增加。
这其中存在的一个明显问题就是风险：一旦出现了有关利率或美元的负面消息，就有可能带来巨额的亏损。持怀疑意见的人士担心，华尔街可能在这种危险的业务上正越陷越深。
