Tue. Dec 7th, 2021

One transaction to start: FTSE 100 Asset Manager Abbrn is finalize an agreement for sale Interactive investor, the UK’s second largest fund supermarket, for £ 1.5bn, in an effort to deepen its business directly to consumers. This will be the most striking step so far by Abrdn’s CEO Stephen Bird, and will ignore Interactive Investor’s plans for an initial public offering.

This is FT Asset Management, our revamped newsletter on the drivers and shakes behind a multitrillion-dollar global industry. This article is an on-site version of the newsletter. Sign in here to have the newsletter sent straight to your inbox every Monday.

Does the new format, content and tone work for you? Let me know: harriet.agnew@ft.com

But where are the customers’ yachts?

But Where are the customers’ yachts? asked Fred Schwed in his most important 1955 book. In the title anecdote, a visitor to New York admires the yachts of the bankers and brokers, and then wonders aloud where all the clients’ yachts were. Of course, there was not one. The premise of the book – and a constant frustration of investors – is that there is a lot more money in supply financial advice than there is in receive financial advice.

A current recurrence of this is taking place in the private equity industry. My colleague Chris Flood have a must-read report about how private equity managers exploit opaque fees and expenses to boost their own profits. Think about paying investors the bill for everything from private jets to cyber security services, in addition to the already rather expensive “two and 20” fees, and you are on the right track.

This alignment of interests between unsuspecting investors and the private equity executives who accumulate expenses at their own discretion is “completely crooked”, says Ludovic Phalippou, a professor of finance at Oxford University Saïd Business School.

As the private equity industry rises to new highs (do not miss Mark Vandeveldesay deep dive about what private equity looks like to the vast empires it once broke up) and these strategies move further into the mainstream of investment, regulators are finally taking note. Gary Gensler, chairman of the Security and Exchange Commission, is one of those calling for reforms to improve private sector fee disclosure.

But for now, old habits are dying. “At the moment, investing in PE is like stepping into a jungle,” says Phalippou. “All you can hope for is that the lions will be friendly.”

Baillie Gifford’s Anderson: Do Not ‘Give Up on China’

“When the facts change, I change my mind. What are you doing, ma’am? ”

Winston Churchillwords (sometimes also attributed to John Maynard Keynes) should have a certain resonance for foreign investors in China these days. Since the summer, the speed and scope of President Xi Jinping‘s combating sectors, including education, technology and video games, have left investors scratching their heads. Does this mean an end to the decades-long technology-driven China growth story? Are foreign investors still welcome?

In this opinion piece, Alliance economic advisor Mohamed El-Erian investigate whether investors a Yukos moment in China.

Meanwhile, I caught up with the famous China bull James Anderson, who ran Baillie Gifford‘s £ 21.2 billion Scottish Mortgage Investment Trust, to hear what he thinks of China. Baillie Gifford followers will recall that Anderson supported food delivery application Meituan, TikTok owner ByteDance and e-commerce giant Alibaba when they were still private companies, and China is of growing importance to Scottish Mortgage. All this to say that Anderson rides a lot on China.

Baillie Gifford “did not feel any hostility, we did not feel any reluctance on the part of the companies to speak to us directly, although it is obviously a big problem not to be able to be in China at the moment”, he says.

Anderson keeps up his view that China offers a more convincing source of investment opportunities than Silicon Valley. “I do not think it is right to give up on China. I do not think at all the golden goose was killed. . . from the point of view of construction companies. ”

Read the full interview here, including a rare mea culpa on why “we should have seen more of this coming than we did”.

Meanwhile, an unexpected item in the third quarter results of Amundi last week illustrated the risks for asset managers to do business in China. Europe’s largest asset manager said it was hit by a specific one-off outflow of € 11.6 billion from a joint venture with the Agricultural Bank of China after ABC decided to reallocate the money away from the joint venture and manage it internally. This reflects how banks in China have been encouraged to finance more of the national economy and to “re-internalize” their own assets and cash flows.

Tom Mills, an analyst at Jefferies, sounded a warning for the early overseas migrants to the world’s second largest economy (note: BlackRock, Goldman Sachs Asset Management, JPMorgan Asset Management).

“Joint ventures between Chinese banks and Western asset managers have grown very rapidly and are starting to become more profitable. This could lead to a question of whether the local banks want to continue to give up part of the economy to their partner – and whether they want to go it alone. The risk over time is that the Chinese banks will de-emphasize these partnerships. ”

Chart of the week

Bar graph of proportion of S&P 500 ingredients (%) showing that US companies are still performing better than expected

An unexpectedly strong third-quarter earnings season propelled stock markets’ recent boom to record highs, isolating stock investors from the volatility that rocked bond markets. Of the more than 400 companies in the S&P 500 that reported their results by last Thursday, 81 percent of them reported higher earnings than consensus estimates, according to Fact sheet data.

Nine indispensable asset management stories this week

The era of unlimited central bank scope is nearing its end, injecting volatility into bond markets. Laurence Fletcher and Kate Duguid report on how some big name hedge fund managers, including Chris Rokos and Crispin Odey is among those nurses big losses. This is prompted by a sudden reassessment of the way central bankers will aim for the exit.

The pledge made at the COP26 climate conference to commit $ 130tn to degas the global economy presents a challenging task for regulators. Chris Flood examine how financial watchdogs are around the world intensified their investigation of potential “greenwashing” in the investment industry over increasing concern capital is deployed on the basis of misleading claims.

Tabby children reports of another accident of the inflating of the Archegos capital family office. Snow Lake Capital, a Hong Kong-based hedge fund that bought Chinese shares during the wind down from Archegos, liquidating one of its two main funds after the resignation of both its portfolio managers.

In this intriguing indication that the growing size of Tesla has become a torsional force in financial markets, Robin Wigglesworth reports on how the stock market is shrinking Elon Musk‘s electric car maker helped apply the worst month of performance to growth-focused U.S. mutual funds in two decades.

Not deterred by the scandal at his London branch H20 Asset Management, the boss of France Natixis is on the lookout for international asset managers to buy and can list its recent scandal-ridden division to build firepower for a major purchase. “We are clearly the consolidators of this industry,” said CEO Nicolas Namias, adding that “Asia is for sure an area for expansion”.

Another week, another mainstream asset manager delving deeper into the fast-growing alternative business. This time Franklin Templeton buy private equity specialist Lexington Partners for $ 1.75 billion.

Bad news for UK retirement savers: Josephine Cumbo reports on how millions of them will find themselves blocked of action to retain access to their pensions at age 55 amid a dramatic overnight move by the Treasury.

Villain or victim? Read this haunting report on the mysterious Austrian entrepreneur Cevdet Caner. He is the real estate magnate in the midst of a battle with short sellers who claim he is in the middle of “secret, kleptocratic cabal”.

A question for our time. Brokers like Schwab, Robinhood and Faithfulness trapped legions of day traders. But are their applications too easy to use? Madison Darbyshire investigate how regulators are concerned that confetti, emojis and other attention-grabbing tricks can be dangerous.

And finally

Lauren Cuthbertson as Giselle at the Royal Opera House in 2016
Lauren Cuthbertson as Giselle at the Royal Opera House in 2016 © Tristram Kenton / ROH

First ballerina Lauren Cuthbertson returns to the stage at the Royal Opera House after the pandemic to dance the title role Giselle Peter Wright‘s award-winning production of the greatest of all Romantic ballets. Enchanting.

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