Monthly Archives: February 2016

The National Pension Fund of Korea.

South Korea, is one of the most technically advanced nations in the world. It is home to names like Samsung, Hyundai, LG to name just three household names.

It is also home to the 3rd largest pension fund, the National Pension Fund of Korea.

With US $429,794 million under management. That is £301,200 million, which is £301 Billion.

It is the largest investor in Korea, just look at the top ten holdings in Korean Shares:-

Samsung Elec
SK hynix
Hyundai Motors
Shinhan Group
Hyundai Mobis
SK Telecom
Kia Motors

It’s top ten holdings in International companies are:-


It’s top ten holdings on fixed income investments are:-

UNITED KINGDOM 3.250% 01/22/2044
UNITED STATES 3.125% 08/15/2044
UNITED STATES 4.500% 02/15/2016
JAPAN 1.200% 12/20/2020
JAPAN 0.800% 06/20/2023
JAPAN 0.300% 09/20/2018
JAPAN 0.200% 12/20/2017

Yes, it holds UK Gilts, paying 3.25% each year until 2044, that is its top holding in bonds.



SVM UK Emerging Fund plc

The SVM UK Emerging Fund plc in a London listed Investment Trust.

It invest in small and medium companies

A very small investment company, with a market capitalisation of £4m

However the assets of the company per share are worth 88p and the value of the company is worth 67p.

Thus buying shares in this Investment is effectively buying an asset worth 88p for 67p. A nice little discount.

Virgin Money PLC

Virgin Money is a UK Challenger Bank.
It has grown after buying Northern Rock, the bank made famous in 2007 with the famous bank run, under the ill-fated leadership of Adam Applegarth

Interesting to see it has many funding vehicles.

£3,000,000,000 (that is £3bn) to raise cash from investors for its business, such as creating mortgages and loans.

A major securitisation programme where its loans are securitised and then sold on

The shares are traded on the London Stock Exchange

£1.3 Billion is the market capitalisation.

The results are interesting

Mortgage Lending at £5.5 billion
Credit Card lending at £1.4 billion
Retail deposits at £23.7 billion

One can see it is has a small loan base compared to its deposits from savers, this was not the case under the previous leadership.

HSBC’s Debt

The Hong Kong and Shanghai Banking Corporation is a massive banking business.

The annual report is very detailed.

This is a huge bank. The figures are incredible, but what is very interesting is the levels of debt that bank carries.

Debt securities in issue $95,947 million.

The bank has a bond issuance programme

That it uses to raise extra cash to fund its business. That cash from the bond issuance programme can be used to generate loans for businesses or perhaps to fund other operations.

These are all the bonds on issue.

So the bank carries $95,947 million = £67,271 million.
That is £67.2 Billion

At first that seems a lot of debt, but lets keep things in perspective. Entities|All rating agencies|All rating types

Highly creditworthy.

Cash and balances at central banks $129,957 million = £91,116 Million
That’s £91 billion

Customer accounts $1,350,642 = £946,975 Million
That’s £946 Billion.

The bank’s asset base is huge

The 500,000 Barrels of Iranian Oil

So over the weekend of Sun 16th Jan 2016, the nation of Iran has come in from the cold, with UN sanctions being lifted. Iran will start to export 500,000 barrels of crude oil. In a depressed oil market, this will only drive down the current price.

To Iran, what will 500,000 barrels of crude oil do ?

with Crude at $29.50 a barrel

500,000 x $29.50 = $14,750,000 a day

That is £10,341,700 = £10.3 Million a day.

Had currency for a nation that has been badly hit from internation isolation

The Bond Issuance Programmes at Legal and General

Legal and General has become on of the largest fund management groups in the world.
It is the largest money manager in the UK.

Assets Under Management (AUM) is at £717 Billion.

To grow the business Legal and General has a programme to fund its investment by attacting debt investors.
Institutions who are willing to lend (bond buyers) for a safe and stable return from the Legal and General in this case.

This is the bond issuance programme, 8 issues. A total debt outstanding of £2,500 Million. That is £2.5 Billion on a business with £717 Billion of assets under management.

Investments @ Direct Line Insurance

The Direct Line Group is a listed UK insurance company, mad famous by the red telephone and changing the way UK consumers bought insurance.

Insurance is a simple business, collect in premiums to take on risk, invest those premiums and if all things being equal, pay-outs on claims are less than the premiums received.

Direct Line invests the premium income, and it is interesting to see what investments it holds:-

Corporate Bonds £4,048.6 Million
Derivatives £143.1 Million
Local government debt £103.8 Million
Securitised debt £314.5 Million
Sovereign debt £503.8 Million
Infrastructure debt £301.0 Million
Cash and cash equivalents £1,105.2 Million
Investment property £340.1 Million

Total £6,860.1 Million

That is £6.8601 Billion

Based on the premium income, they have “put the money to work” to buy investments. that in itself generated Investment income of £41.5 Million, and those investments also increased in value by £152.4 million.

Insurance premiums create investment opportunities.

The Lending Club

The growth of Financial Technology companies (FinTech) is changing the dynamics and dominance of traditional banking organisations.

The largest Peer to Peer lender in the USA is The Lending Club.

With $13 billion worth of loans created,  The Lending Club has created a vehicle that offers a simple, low cost, convenient and beneficial alternative to both borrowers and investors who want access to better savings rates and lower borrowing rates.

HM Government Borrowings: Jan 2016

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In January 2016, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 4 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office ( to raise cash for HM Treasury :-
20-Jan-2016 1½% Treasury Gilt 2021 £4,000 Million
12-Jan-2016 0 1/8% Index-linked Treasury Gilt 2046 £989.9770 Million
07-Jan-2016 4% Treasury Gilt 2060 £1,500 Million
05-Jan-2016 2% Treasury Gilt 2025 £3,000 Million
When you add the cash raised:-

∑(£4,000 Million + £989.9770 Million + £1,500 Million £3,000 Million) =  £9,489.977 Million

£9,489.977 Million= £9.489 Billion

On another way of looking at it, is in the 31 days in January, HM Government borrowed:-

£306 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2021, 2025, 2046 and 2060. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…

Morrisons PLC No long term debt

Morrisons PLC

The UK food retailing sector is in huge flux. The established large players of Sainsburys, Tesco’s, ASDA and Morrison’s are struggling against the new entrants like Aldi and Lidl.

What is interesting is to see to understand the finances of the established players.

Morrisons PLC has grown from a northern regional supermarket to a large UK player after the acquisition of Safeway.

A share price under pressure and a dividend that can not be maintained due to the stiff competition.

However when one looks at the balance sheet, one can some really powerful facts:


Current liabilities = £2,316m
Creditors = £1m
Short Term Borrowings £16m
Current tax liabilities £42m

Total = 2,375m = £2.375 billion

So it carries no long term debt. Such as bonds. The only money it owes are effectively its suppliers which means it has to pay them in 90 days, and perhaps short term overdraft facilities. It does not have the onerous payments to make to bond holders.

So while the cash tills keep ringing, cash flow is available to meet payment obligations. Also Morrisons PLC owns all its own land.

BT’s Listed Bonds.

British Telecommunications PLC, a flagship member of the FTSE-100.

It is by far the world’s most dynamic telecommunications corporation. It has a funding programme based on a bond issuance programme.

This attracts investors who are looking for an income, such as pension funds, income funds such as unit trusts and insurance companies.

What is obvious to see, is BT’s debt reduction programme.

The current outstanding debt that is maintained by BT is:-

UK Sterling: £2,600 Million
UK Sterling Index Linked: £250 Million
US Dollar: $5,670 = £3904 Million
Euro: €1,000 = £752 Million

That is:

(£2600 + £250 + £3904 + £752) Million = £7,506 Million

Fixed income investors are benefitting from lending money to the world’s most pioneering and market leading carrier.

Financing of Tesco PLC

Tesco PLC, is the largest UK supermarket retailer, that is in the middle of fixing it’s finances, after accounting issues. It has huge assets, for example sold 14 sites a few months ago and raised £250m

Tesco finances its operations through a combination of retained profits, long and medium term debt capital market issues, commercial paper, bank borrowings and leases, with the objective of ensuring continuity of funding.

Tesco’s principal medium to long term funding is through its £15bn Euro Note Programme.
When you look at the bond issues one can see the debt it is carrying:-

EUR 5.389
GBP 3.097
US$ 2.5

In total of a facility of £15bn is has issued:

£4.05 + £3.097 +£1.72 = £8.867 Billion

This has tapped over 50% of its funding programme. Every little helps.