Investment
Management
The SBU Investment Management SBU manages the asset management joint ventures and a number of NIBCapital’s warehousing portfolios. The SBU was set up in 2003 to separate the bank’s asset management function from its origination business units. This created a truly arm’s length portfolio management business that assesses the risks and financial potential of each investment independently of the bank’s Corporate Finance and Financial Markets SBUs.

STRATEGY AND MARKETS
The strategy of Investment Management centres around the following goals:

The financial markets are seeing a growing demand for diversified portfolios and absolute return products. For instance, the demand for collateralised debt investments is increasing rapidly and will continue to grow among both institutional and private investors. Asset securitisation has become an increasingly popular financing technique for European corporates and institutionals.

TRANSACTION: BELLE HAVEN
In December 2004, NIBC Credit Management Inc (NCMI) in the US launched the “Belle Haven” transaction. This created a strong foundation for the launching of future CDOs and investment funds, backed by different portfolios of structured and single-name credits. Belle Haven ABS CDO, Ltd. involves a $1 billion managed cash flow CDO of high grade US structured finance securities. It is one of the first CDOs incorporating a sophisticated new deal feature using a supersenior Commercial Paper class as par t of its capital structure. This structure significantly lowered the average funding costs to the deal. The equity was placed with investors that cover almost the full spectrum of potential equity buyers: high net wor th individuals, pension funds, insurance companies, hedge funds and CDO equity funds. The key to the sale of the equity and other tranches was NCMI’s ability to create a high level of investor comfort with its por tfolio selection rationale, the investment process and its ongoing portfolio surveillance process. This transaction was structured and sold in close cooperation with the Mortgage Finance & Asset Securitisation and Client Marketing & Trading teams.

The strong increase of both operating income, number of staff and Assets under Management, confirms the growing importance of this SBU within the NIBCapital business model. The successful launch of the second securitisation of an acquisition finance portfolio (‘North Westerly II´) as well as the $ 1 billion CDO of US residential mortgage-backed securities (Belle Haven) were important milestones in 2004. Furthermore, Harcourt Investment Consulting realised an increase of Assets under Management of 71%. Harcourt Investment Consulting (59% ownership) and NIBC Wealth Management (60% ownership) have been fully consolidated in this SBU. The increase in staff was mainly within these two partnerships.

OUTLOOK 2005
The Investment Management SBU expects demand for its alternative asset management products and services to increase further in 2005. Our focus on absolute return products and diversified portfolios should make us a preferred asset manager for our selected clients. The collateralised debt market and hedge fund market is growing rapidly as the demand for this type of investment increases among institutional and private investors.We expect to increase our Assets under Management substantially this year.
Investment Management is also in the process of setting up a number of long-short investment funds, with leverage and hedging to protect against or even take advantage of market volatility. This will add to our range of alternative and diversified investments, with professional and active management adding the value investors demand and making this type of fund a growth segment.
Hedge funds are still increasing in popularity, with growing interest from pension funds, institutional investors, private banks and insurers. The added value of our integrated service approach created a platform to further increase Harcourt’s Assets under Management.