German open ended funds: was there a valuation problem?

In late 2005, a number of German open ended funds suffered significant withdrawals by unit holders. The crisis was precipitated by a long term bear market in German property investment and the fact that these funds offered short term liquidity to unit holders but had low levels of liquidity in the fund. A more controversial suggestion was that the crisis was exacerbated by a perception that the valuations of the fund were too infrequent and inaccurate. As units are priced by reference to these valuations with no secondary market, the valuation process is central to the process. There is no direct evidence that these funds were over-valued but there is circumstantial evidence and this paper examines the indirect evidence of the process to see whether the hypothesis that valuation is an issue for the German funds holds any credibility. It also discusses whether there is a wider issue for other funds of this nature or whether it is a parochial problem confined to Germany. The conclusions are that there is reason to believe that German valuation processes make over-valuation in a recession more likely than in other countries and that more direct research into the German valuation system is required to identify the issues which need to be addressed to make the valuation system more trusted.

Commercial property loan valuations in the UK : the changing landscape of practice and liability

This paper is the first of two which aim to examine the major legal liability implications of changes to the commercial property loan valuation process caused by the recession in the UK property market and to make recommendations to valuers and their professional institutions to improve the quality of the process and the result. This paper identifies the market background to commercial property lending and discusses the implications of the falls in value for lenders and valuers. These include two major strands; first, the outcome of discussions between the representative bodies of these two groups and, second, the increasing litigation caused by lenders suing valuers for professional negligence. The discussions between representative groups have driven a debate on the valuation process leading to a number of reports and guidance notes. This paper discusses the outcomes paying particular attention to the basis of valuation for loan purposes and the provision of additional information in valuation reports. This paper also reviews the legal framework which influences the relationship between the lenders and valuers and discusses the duty of care. The role of instructions in the valuation process, the significance of the identity of the person to be advised and the possibility of a conflict of interest arising are all considered. The paper also addresses the issue of the standards required of a commercial loan valuer, including how this is interpreted by the courts and the legal status of professional guidance notes. The paper concludes by identifying potential areas for dispute within the loan valuation process and raising a number of research questions concerning the operation of this process which are addressed in a following paper.

Commercial property loan valuations in the UK : implications of current trends in practice and liability

This paper is the second of two papers which aim to examine the major legal liability implications of changes to the commercial property loan valuation process caused by the recession in the UK property market and to make recommendations to valuers and their professional institutions to improve the quality of the process and the result. The objectives of this paper are to address a number of the practical implications of changes to the loan valuation process within the context of legal liability. The results of an interview survey of lenders and valuers are reported and analysed. The survey examined the loan valuation process including the selection and instruction of valuers, bases of valuation and valuation reporting. In the selection and instruction process, the findings of the survey reveal two potential problems within the valuer/lender relationship. First, valuers still occasionally accept instructions from borrowers and this could lead to a conflict of interest as lenders may rely on the survey. Second, the occasional lack of formal instructions prior to the delivery of reports casts doubt on the valuer’s ability to correctly identify the needs of clients. Regarding the basis of valuation, it was found that valuers are providing valuations on bases which they do not think are appropriate. Valuers may be legally liable if they do not inform clients of their reservations and this situation must be urgently addressed. The survey also confirms previous research that valuation reports are considered to be light on contextual information concerning markets. The paper concludes by making a number of specific recommendations concerning possible improvements to the commercial property loan valuation process.

Contributory negligence involving overseas European banks in property valuation negligence cases in the UK

This paper examines the phenomenon of cross-border property lending and examines a number of issues regarding lending procedures and decision making processes in the context of the relationship between lender and professional advisor. It commences by placing these procedures and processes in the context of the development of cross border European property investment and finance. The UK has been a popular destination for overseas investors and lenders over the last decade and is therefore used as a case study to examine the additional institutional risk that overseas lenders may face when operating outside of their own country and obtaining advice from home professionals. The UK market was the subject of a boom period during the late 1980s, followed by a recession in the early 1990s. The losses triggered a number of professional negligence actions by lenders against valuers. These include a number of overseas lenders mainly from Europe and these cases have been examined for any particular features which, coupled with other data gained from overseas lenders as part of an interview survey, could be used to isolate any significant problems for European lenders in overseas markets. The research identified a lack of clarity in roles and relationships between lender and advisor, difficulties in communications both internally and between overseas branches and headquarters and failures in provision and interpretation of advice. The paper concludes by identifying the issues which may need to be addressed generally by lenders and their advisors, when the lenders are operating in overseas markets.

Accelerated loss of alpine glaciers in the Kodar Mountains, south-eastern Siberia

The recession of mountain glaciers around the world has been linked to anthropogenic climate change and small glaciers (e.g. < 2 km2) are thought to be particularly vulnerable, with reports of their disappearance from several regions. However, the response of small glaciers to climate change can be modulated by non-climatic factors such as topography and debris cover and there remain a number of regions where their recent change has evaded scrutiny. This paper presents results of the first multi-year remote sensing survey of glaciers in the Kodar Mountains, the only glaciers in SE Siberia, which we compare to previous glacier inventories from this continental setting that reported total glacier areas of 18.8 km2 in ca. 1963 (12.6 km2 of exposed ice) and 15.5 km2 in 1974 (12 km2 of exposed ice). Mapping their debris-covered termini is difficult but delineation of debris-free ice on Landsat imagery reveals 34 glaciers with a total area of 11.72 ± 0.72 km2 in 1995, followed by a reduction to 9.53 ± 0.29 km2 in 2001 and 7.01 ± 0.23 km2 in 2010. This represents a ~ 44% decrease in exposed glacier ice between ca. 1963 and 2010, but with 40% lost since 1995 and with individual glaciers losing as much as 93% of their exposed ice. Thus, although continental glaciers are generally thought to be less sensitive than their maritime counterparts, a recent acceleration in shrinkage of exposed ice has taken place and we note its coincidence with a strong summer warming trend in the region initiated at the start of the 1980s. Whilst smaller and shorter glaciers have, proportionally, tended to shrink more rapidly, we find no statistically significant relationship between shrinkage and elevation characteristics, aspect or solar radiation. This is probably due to the small sample size, limited elevation range, and topographic setting of the glaciers in deep valleys-heads. Furthermore, many of the glaciers possess debris-covered termini and it is likely that the ablation of buried ice is lagging the shrinkage of exposed ice, such that a growth in the proportion of debris cover is occurring, as observed elsewhere. If recent trends continue, we hypothesise that glaciers could evolve into a type of rock glacier within the next few decades, introducing additional complexity in their response and delaying their potential demise.

Standard cost model: three different paths and their common problems

Red tape is not desirable as it impedes business growth. Relief from the administrative burdens that businesses face due to legislation can benefit the whole economy, especially at times of recession. However, recent governmental initiatives aimed at reducing administrative burdens have encountered some success, but also failures. This article compares three national initiatives - in the Netherlands, UK and Italy - aimed at cutting red tape by using the Standard Cost Model. Findings highlight the factors affecting the outcomes of measurement and reduction plans and ways to improve the Standard Cost Model methodology.

Successful strategy making in Bupa not-for-profit provident: a case study and interview with Mr Ray King, chief executive of Bupa

Purpose – The focus of extant strategy literature is on for-profit organisations and within these group public organisations. There are other forms of organisations and following the deep recession of 2008 there is greater interest in other forms of organisation. In this case study and interview the aim is to examine strategy, strategic decisions and strategic management of a not-for-profit provident. Design/methodology/approach – The paper draws on documentary evidence and a semi-structured interview with Ray King, chief executive of Bupa. The perspective of CEO is key in strategy and such perspectives are relatively rarer. Findings – Bupa invests its surplus to provide better healthcare. Free from the pressures of quarterly reporting and shareholders it can pursue long-term value creation for members rather than short-term surpluses. Research limitations/implications – The case study and interview offers a unique insight into strategy-making within a successful mutual provident that has grown organically and externally becoming an international leader in health insurance. Originality/value – This case study sheds light on strategy-making within a not-for-profit provident that has diversified and grown significantly over the past six decades. Furthermore, very few case studies offer insight into the thinking of a chief executive who has successfully managed a business in a turbulent environment.

Credit and liquidity components of corporate CDS spreads

This paper investigates the role of credit and liquidity factors in explaining corporate CDS price changes during normal and crisis periods. We find that liquidity risk is more important than firm-specific credit risk regardless of market conditions. Moreover, in the period prior to the recent “Great Recession��� credit risk plays no role in explaining CDS price changes. The dominance of liquidity effects casts serious doubts on the relevance of CDS price changes as an indicator of default risk dynamics. Our results show how multiple liquidity factors including firm specific and aggregate liquidity proxies as well as an asymmetric information measure are critical determinants of CDS price variations. In particular, the impact of informed traders on the CDS price increases when markets are characterised by higher uncertainty, which supports concerns of insider trading during the crisis.

Forecast encompassing tests and probability forecasts

We consider tests of forecast encompassing for probability forecasts, for both quadratic and logarithmic scoring rules. We propose test statistics for the null of forecast encompassing, present the limiting distributions of the test statistics, and investigate the impact of estimating the forecasting models' parameters on these distributions. The small-sample performance is investigated, in terms of small numbers of forecasts and model estimation sample sizes. We show the usefulness of the tests for the evaluation of recession probability forecasts from logit models with different leading indicators as explanatory variables, and for evaluating survey-based probability forecasts.

Combining probability forecasts

We consider different methods for combining probability forecasts. In empirical exercises, the data generating process of the forecasts and the event being forecast is not known, and therefore the optimal form of combination will also be unknown. We consider the properties of various combination schemes for a number of plausible data generating processes, and indicate which types of combinations are likely to be useful. We also show that whether forecast encompassing is found to hold between two rival sets of forecasts or not may depend on the type of combination adopted. The relative performances of the different combination methods are illustrated, with an application to predicting recession probabilities using leading indicators.

The role of UK retailing in urban regeneration

This research examines the role of retailing in urban regeneration nationally and locally in the UK. The research uses data at a national level and local shopping centre case studies to examine the employment and property impacts of retailing. Focusing on schemes built during the first part of the 1990s it shows that retail can bring employment and economic benefits to town centres, but that the impact on the inner city should not be overlooked. Valuable lessons can be learned from the experience of centres built during this period of recession, and new challenges such as eCommerce now face these centres and others being developed today. The research examines the multiplier effect of retail regeneration schemes nationally using National Accounts data, and the local property and employment impacts of shopping centre schemes in the case study towns of Aberdeen, Bristol, Norwich, Bromley, Worcester and Leicester. The report includes valuable statistical sources, a full literature and policy review and will be of interest to those involved in property investment, regeneration and planning. The research was funded by the Office of Science & Technology and the Harold Samuel Educational Trust.

Antarctic Peninsula ice sheet evolution during the Cenozoic Era

The Antarctic Peninsula region is currently undergoing rapid environmental change, resulting in the thinning, acceleration and recession of glaciers and the sequential collapse of ice shelves. It is important to view these changes in the context of long-term palaeoenvironmental complexity and to understand the key processes controlling ice sheet growth and recession. In addition, numerical ice sheet models require detailed geological data for tuning and testing. Therefore, this paper systematically and holistically reviews published geological evidence for Antarctic Peninsula Ice Sheet variability for each key locality throughout the Cenozoic, and brings together the prevailing consensus of the extent, character and behaviour of the glaciations of the Antarctic Peninsula region. Major contributions include a downloadable database of 186 terrestrial and marine calibrated dates; an original reconstruction of the LGM ice sheet; and a new series of isochrones detailing ice sheet retreat following the LGM. Glaciation of Antarctica was initiated around the Eocene/Oligocene transition in East Antarctica. Palaeogene records of Antarctic Peninsula glaciation are primarily restricted to King George Island, where glacigenic sediments provide a record of early East Antarctic glaciations, but with modification of far-travelled erratics by local South Shetland Island ice caps. Evidence for Neogene glaciation is derived primarily from King George Island and James Ross Island, where glaciovolcanic strata indicate that ice thicknesses reached 500–850 m during glacials. This suggests that the Antarctic Peninsula Ice Sheet draped, rather than drowned, the topography. Marine geophysical investigations indicate multiple ice sheet advances during this time. Seismic profiling of continental shelf-slope deposits indicates up to ten large advances of the Antarctic Peninsula Ice Sheet during the Early Pleistocene, when the ice sheet was dominated by 40 kyr cycles. Glacials became more pronounced, reaching the continental shelf edge, and of longer duration during the Middle Pleistocene. During the Late Pleistocene, repeated glacials reached the shelf edge, but ice shelves inhibited iceberg rafting. The Last Glacial Maximum (LGM) occurred at 18 ka BP, after which transitional glaciomarine sediments on the continental shelf indicate ice-sheet retreat. The continental shelf contains large bathymetric troughs, which were repeatedly occupied by large ice streams during Pleistocene glaciations. Retreat after the LGM was episodic in the Weddell Sea, with multiple readvances and changes in ice-flow direction, but rapid in the Bellingshausen Sea. The late Holocene Epoch was characterised by repeated fluctuations in palaeoenvironmental conditions, with associated glacial readvances. However, this has been subsumed by rapid warming and ice-shelf collapse during the twentieth century.

What next for children's services? Can policy at a local or national level have any significant impact on the outcomes for children and their families?

In England at both strategic and operational levels, policy-makers in the public sector have undertaken considerable work on implementing the findings of the Every Child Matters report and subsequently through the Children's Act 2004. Legislation has resulted in many local authorities seeking to implement more holistic approaches to the delivery of children's services. At a strategic level this is demonstrated by the creation of integrated directorate structures providing for a range of services, from education to children's social care. Such services were generally under the management of the Director of Children's Services, holding statutory responsibilities for the delivery of services formally divided into the three sectors of education, health and social services. At a national level, more fundamental policy developments have sought to establish a framework through which policy-makers can address the underlying causes of deprivation, vulnerability and inequality. The Child Poverty Act, 2010, which gained Royal Assent in 2010, provides for a clear intention to reduce the number of children in poverty, acknowledging that ‘the best way to eradicate child poverty is to address the causes of poverty, rather than only treat the symptoms’. However, whilst the policy objectives of both pieces of legislation hold positive aspirations for children and young people, a change of policy direction through a change of government in May 2010 seems to be in direct contrast to the intended focus of these aims. This paper explores the impact of new government policy on the future direction of children's services both at the national and local levels. At the national level, we question the ability of the government to deliver the aspirations of the Child Poverty Act, 2010, given the broad range of influences and factors that can determine the circumstances in which a child may experience poverty. We argue that poverty is not simply an issue of the pressure of financial deprivation, but that economic recession and cuts in government spending will further increase the number of children living in poverty.

Robust approaches to forecasting

We investigate alternative robust approaches to forecasting, using a new class of robust devices, contrasted with equilibrium-correction models. Their forecasting properties are derived facing a range of likely empirical problems at the forecast origin, including measurement errors, impulses, omitted variables, unanticipated location shifts and incorrectly included variables that experience a shift. We derive the resulting forecast biases and error variances, and indicate when the methods are likely to perform well. The robust methods are applied to forecasting US GDP using autoregressive models, and also to autoregressive models with factors extracted from a large dataset of macroeconomic variables. We consider forecasting performance over the Great Recession, and over an earlier more quiescent period.

Deglaciation of the Caucasus Mountains, Russia/Georgia, in the 21st century observed with ASTER satellite imagery and aerial photograpy

Changes in the map area of 498 glaciers located on the Main Caucasus ridge (MCR) and on Mt. Elbrus in the Greater Caucasus Mountains (Russia and Georgia) were assessed using multispectral ASTER and panchromatic Landsat imagery with 15 m spatial resolution in 1999/2001 and 2010/2012. Changes in recession rates of glacier snouts between 1987–2001 and 2001–2010 were investigated using aerial photography and ASTER imagery for a sub-sample of 44 glaciers. In total, glacier area decreased by 4.7 ± 2.1% or 19.2 ± 8.7 km2 from 407.3 ± 5.4 km2 to 388.1 ± 5.2 km2. Glaciers located in the central and western MCR lost 13.4 ± 7.3 km2 (4.7 ± 2.5%) in total or 8.5 km2 (5.0 ± 2.4%) and 4.9 km2 (4.1 ± 2.7%) respectively. Glaciers on Mt. Elbrus, although located at higher elevations, lost 5.8 ± 1.4 km2 (4.9 ± 1.2%) of their total area. The recession rates of valley glacier termini increased between 1987–2000/01 and 2000/01–2010 (2000 for the western MCR and 2001 for the central MCR and Mt.~Elbrus) from 3.8 ± 0.8, 3.2 ± 0.9 and 8.3 ± 0.8 m yr−1 to 11.9 ± 1.1, 8.7 ± 1.1 and 14.1 ± 1.1 m yr−1 in the central and western MCR and on Mt. Elbrus respectively. The highest rate of increase in glacier termini retreat was registered on the southern slope of the central MCR where it has tripled. A positive trend in summer temperatures forced glacier recession, and strong positive temperature anomalies in 1998, 2006, and 2010 contributed to the enhanced loss of ice. An increase in accumulation season precipitation observed in the northern MCR since the mid-1980s has not compensated for the effects of summer warming while the negative precipitation anomalies, observed on the southern slope of the central MCR in the 1990s, resulted in stronger glacier wastage.