From crinkly sheds to fashion parks: the role of financial investment in the transformation of retail parks

The retail park is one of the most ubiquitous and significant forms of off-centre retailing in the UK. Originally designed as low-cost accommodation for 'bulky goods', retail parks now include high-rent 'fashion parks' which are eagerly sought by institutional investors for long-term ownership. This paper explains why retail-park ownership, originating in the early 1980s in one-off schemes by locally based property developers, has become the province of major property companies, financial institutions, and asset managers. Growth in rents and capital values has been fuelled by increasing institutional investment, and by fears of a growing scarcity of high-quality developments because of town-planning restrictions. This pressure is now leading to attempts to realize the full capital value of older developments, through processes of 'active management' by the new breed of retail-park owners. In turn, this is leading to increasingly rapid changes of retail occupiers, involving in some cases the expulsion of the original 'bulky goods' retailers for whom retail parks were created. A parallel with the 'Wheel of Retailing' model of institutional change is suggested.     

What Drives ETF Flows?

The value of exchange traded fund (ETF) assets has increased from $66 billion in 2000 to almost a trillion dollars in 2010. We use this massive expansion in ETF assets to study what drives ETF flows. Using a data set of over 500 ETFs from 2001 to 2010, we show that ETF investors chase returns in the same way as mutual fund investors. While there is an active debate about whether return chasing by mutual fund investors represents the pursuit of superior talent, the existence of return chasing in this passively managed environment should not represent a search for skilled managers. We also show that ETF flows increase following high volume, small spreads, and high price/net asset value ratios. Finally, we find little evidence of superior market timing in ETF flows. Our results suggest that return chasing in both mutual funds and ETFs is more likely the result of naïve extrapolation bias on the part of investors that has contributed to the growth of the ETF industry.     

Corporate Insurance Strategy: The Case of British Petroleum

The authors provide a fundamental rethinking of how corporations should evaluate various kinds of risks and risk management solutions—a rethinking that leads to a major shift in British Petroleum's approach to insuring property and casualty losses, product liability suits, and other insurable events. Conventional corporate practice—and until the early 1990s (when this article was written) the longstanding policy of BP and most large oil companies—was to insure against large losses while self‐insuring against smaller ones. In this article, the authors explain why BP has chosen to go against the conventional wisdom and instead buy insurance for mainly smaller losses while self‐insuring larger ones. The BP decision came down to factors affecting the market supply of insurance as well as the corporate demand for it. On the demand side, the authors demonstrate that the primary source of demand for insurance by large public companies is not, as standard insurance textbooks assume, to transfer risk away from the corporation's owners. Because corporate stockholders and bondholders effectively manage the effects of such risks by diversifying their own portfolios, the corporate demand for insurance in BP's case stems from the insurers' comparative advantage in evaluating and monitoring BP's smaller risks and in processing claims. On the supply side, the authors explain why the capacity of insurance companies and markets to underwrite very large or highly specialized exposures—when compared to the industry expertise and financial resources of companies like BP—is quite limited, and likely to remain so. Since premiums would be experience‐rated and prior years' losses simply rolled into the following years' premiums, there would be no effective transfer of risk, and so no gain to BP from buying insurance.     

The characteristics of derivatives users: An analysis of the thrift industry

This paper compares the characteristics of derivatives users and non-users, using data from U.S. savings associations during 1993–1994. Unlike prior studies, the data used in this analysis are market values of assets and liabilities. Market values were obtained from the base case (no interest rate change) in the Office of Thrift Supervision's (OTS) Net Portfolio Value Model. This model calculates the value of all of a thrift's positions to calculate the value at risk. We determine the consistency of theories of derivatives use with the characteristics of derivatives users.