Page 25 - ATD13Febr2016

BUSINESS A25
Visa discloses its
stake in Dorsey’s
pay firm, Square Double the chaos: Amped funds flourish amid turmoil
KEN SWEET
AP Business Writer
NEW YORK (AP) — Shares
in the mobile payment
services company Square
rose sharply Friday after
Visa disclosed the details
of its ownership stake in the
company.
While Visa’s stake amounts
to about 1 percent of the
company, and the stake
was established at least 5
years ago, investors inter-
preted the announcement
as a major endorsement of
Square by Visa, the world’s
largest payment process-
ing company.
According to a regulatory
filing, Visa owns 4.2 million
of Square’s Class B shares.
While Class B shares are not
traded publicly they could
be converted to 3.5 mil-
lion Class A shares, which
would leave the Visa with
10 percent of that class of
shares.
The disclosure, known by
its regulatory filing name
13G, is how major inves-
tors disclose an existing
stake in a company. Be-
cause Square only went
public three months ago,
this is the first time the pub- ent or even opposite from
lic is getting details about
Visa’s ownership. Visa an-
nounced an investment in
Square in 2011, but at the
time did not disclose the
terms of that transaction.
Other companies have dis-
closed similar details about
their existing ownerships of
Square, including JPMor-
gan Chase.
Class B shares are not typi-
cally converted to Class A
shares unless the owner is
looking to sell the position,
and Visa did not disclose
any plans to do so. Howev-
er, if Visa were to convert
its Class B shares into Class
A shares, it would make
Visa the second-largest
owner in Square behind
the investment manager
Capital Research & Man-
agement’s 12.7 percent
stake.
Visa has been working on
payment services technol-
ogy of its own including
Visa payWave, which al-
lows users to pass a card
over a terminal to record a
payment.q
Of Mutual Interest:
STAN CHOE
AP Business Writer
NEW YORK (AP) — That sec-
ond scoop or slice makes
everything so much better.
So why not double the fun
investing, too?
Investors in search of super-
charged returns are plug-
ging more dollars into in-
vestments that aim to give
double or even triple the
daily returns of boring old
index funds. But even the
companies behind these
investments warn that
they’re not for everyone.
The industry calls these
investments leveraged
funds, and they use futures
contracts and other trad-
ing techniques to amplify
gains — and losses.
“They’re not for mom-and-
pop investors,” says Mi-
chael Sapir, chief execu-
tive of ProShare Advisors,
one of the biggest players
in this niche of investing.
“These are advanced port-
folio tools to incorporate
into an advanced, con-
structed portfolio.”
The main pitfall is that long-
term returns for these thrill- in them is growing. Lever-
ride funds can be differ-
what you’d expect, be-
cause they are built to take
advantage of daily market
moves instead of longer
trends. If the S&P 500 index
is up 10 percent in a month,
a double- or triple-index
fund probably won’t return
20 percent or 30 percent.
It could even lose money
if markets are particularly
volatile, like they are now,
and big losses come early
and are followed by small-
er daily gains.
Leveraged funds still oc-
Deutsche Bank flexes muscles, buys back debt
DAVID McHUGH
AP Business Writer
FRANKFURT, Germany (AP)
— Germany’s Deutsche
Bank is offering to buy back
more than $5 billion worth
of its own bonds in a show
of financial strength after
markets sold off its stock.
The Frankfurt-based bank,
Germany’s biggest, said it
would offer to repurchase
3 billion euros ($3.4 billion) of 6.8 billion euros on Jan.
A morning commuter carries an “I Love NY” umbrella against
light snow on Wall Street, outside the New York Stock Exchange.
Investors in search of supercharged returns are plugging more
dollars into investments that aim to give double or even triple the
daily returns of boring old index funds.
cupy only a small corner
of the investing world, but
their growth is accelerat-
ing.
Altogether, leveraged
funds controlled about
$22 billion at the start of
the year, according to
Morningstar. That’s less
than one-fifteenth the size
of Vanguard’s Total Stock
Market Index fund, the larg-
est mutual fund. But interest
aged mutual funds and
exchange-traded funds
drew $5.3 billion in net in-
vestment last year, more
than technology-stock
funds did. It’s also a step up
from the $819 million that
leveraged funds attracted
a year earlier.
A separate group of funds,
ones that allow investors to
bet against an index and
get double or triple the re-
turn, attracted another $1.3
billion last year. So when
the S&P 500 falls 1 percent
in a day, the ProShares Ul-
traPro Short S&P 500 ETF
aims to return a positive 3
in euro bonds and $2 billion
in dollar bonds.
The bank said in a news re-
lease that its “strong liquid- make payments on com-
ity position” meant it could
make the purchases to re-
duce its outstanding debts
without changing its fund-
ing plans.
Investors had sold off
Deutsche Bank stock af-
ter it reported a yearly loss
Saturday 13 February 2016
(AP Photo/Richard Drew) dends, for example. But the
percent, before fees.
The lure of these funds is
easy to see: They can of-
fer big returns very quickly,
even though they charge
higher fees than traditional
index funds.
The best-performing ETF this
year is the Direxion Daily
S&P Biotech Bear 3x fund,
for example. It tries to give
the opposite daily return
of a biotech stock index,
tripled, before fees and ex-
penses. It has surged nearly
200 percent in 2016.
But the magic of com-
pound interest, such a
friend to buy-and-hold in-
vestors in traditional funds,
can trip up novice investors
in these funds.
Most of these leveraged
funds are built with one day
in mind: They offer double
or triple the daily return of
an index.
That means these lever-
aged funds reset after
each day, and they’re not
trying to offer double or tri-
ple the long-term returns of
an index.
28. The slide continued af-
ter concerns arose about
whether the bank could
plex financial instruments
due April 30.
The bank has said it has the
money for the payments,
and Deutsche Bank co-
CEO John Cryan has said
the bank’s finances are
“rock-solid.”
Confidence in European
If markets are swinging
wildly, the compounding
effect can muddle lon-
ger-term returns. The S&P
500 returned 1.4 percent
last year, including divi-
ProShares UltraPro S&P 500
ETF, which aims to triple the
index’s daily return, lost 5.2
percent last year.
Funds that bet against in-
dexes get caught up in the
same math.
The ProShares UltraPro Short
MidCap, for example, tries
to give the opposite daily
return of a mid-cap stock
index, tripled, before fees.
So when the S&P MidCap
400 index lost 2.2 percent in
2015, a novice investor may
have expected a gain for
the inverse fund. Instead,
the ETF lost 7.6 percent.
Some investors in these
funds, including hedge
funds and individuals, are
looking for a quick, big
score.
Last year many investors
were looking to call the
bottom for oil and then
not only benefit from its re-
bound, but get multiples of
it. ProShares’ most popular
leveraged ETF last year was
its Ultra Bloomberg Crude
Oil fund, which tries to give
double the daily perfor-
mance of an oil index. It
attracted $1.2 billion in net
investment.
Other investors are looking
to buy protection for their
portfolios in case some in-
vestments fall.
ProShares had several ETFs
that drew more than $150
million last year, ones that
rise when prices fall for ev-
erything from the S&P 500
to emerging-market stocks
to high-yield bonds.q
bank shares had eroded
after four shaky Italian
banks were bailed out in
November.
Deutsche Bank’s shares
rose over 8 percent to 14.82
euros in midafternoon trad-
ing Friday in Europe. They
had fallen by 41 percent
since the start of the year
to a low on Tuesday of
13.23 euros.q