China, Oil, and Greek Elections: Deutsche Bank Looks Forward (and Back)

Deutsche Bank has ranked the best and worst investments of 2014—and has a warning for the first hurdle of 2015.

A strong rally from the Chinese equity market helped it take top slot as the best-performing investment in 2014.

In a research note from Deutsche Bank, China’s Shanghai Composite index was shown to have gained 58% over the course of the year in dollar terms, largely due to double-digit gains in November and December.

Spanish, Italian, and UK government bonds all posted returns of 15% to 16% for 2014, outperforming the S&P 500’s 14% gain despite the benchmark hitting record highs during the year. Jim Reid, strategist at Deutsche Bank, said the performance of peripheral European bonds was driven largely by the prospect of the ECB introducing quantitative easing in 2015.

Oil and other commodities were among the worst investments in 2014, with the price of Brent crude oil collapsing 48% during 2014.

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Deutsche Bank - 2014 Asset Class Performance Looking ahead, Reid highlighted Greece as an important issue for investors at the start of the year. With a general election at the end of January, German newspaper reports have suggested that Greece is very likely to exit the Eurozone if the left wing Syriza party gains power, Reid wrote—although the German government has said it wants Greece to remain part of the currency bloc.

While German Chancellor Angela Merkel has stated that the Eurozone can cope with a Greek exit, Reid’s colleague George Saravelos, analyst, warned of “significant political and financial uncertainty” ahead of the election and a looming deadline for Greece’s current financing programme, which expires at the end of February.

Related Content:‘Good Chance’ of QE in Europe to Prevent Deflation, Says PIMCO & The Year That Wasn’t

Towers Watson Faces Lawsuit over ‘Negligent Advice’

The UK’s Coal Pension fund is taking legal action to recover millions it claims to have lost through a currency hedge.

Global consulting firm Towers Watson is being sued by one of the UK’s largest pension funds for more than £47 million ($72 million).

The UK’s British Coal Staff Superannuation Scheme has filed a lawsuit in the US against the consultant alleging “negligent investment consulting advice” relating to a currency hedge.

The trustees of the £8.7 billion pension issued Towers Watson a letter of claim in September, according to a 10Q filing made to the US Securities and Exchange Commission (SEC) on November 5. The lawsuit relates to a currency hedge on a £250 million investment in a local currency emerging market debt fund, which was made in August 2008. The advice was provided by Watson Wyatt, which merged with Towers Perrin to create Towers Watson in 2010.

According to the regulatory filing, the claim alleges that the currency hedge caused a “substantial loss” to the pension fund between August 2008 and October 2012. The loss was valued at £47.5 million by the pension fund.

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A spokesperson for Towers Watson told CIO that the firm “disputes the allegations brought by the British Coal Staff Superannuation Scheme and intends to defend the matter vigorously.”

The SEC filing stated: “Based on all of the information to date, and given the stage of the matter, [Towers Watson] is currently unable to provide an estimate of the reasonably possible loss or range of loss.”

The consultant was set to have issued a letter on the matter to the pension fund on or before December 23, 2014, the filing said.

The British Coal Staff Superannuation Scheme declined to comment.

Related Content: Is Your Consultant Breaking the Law?

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