Mon. Dec 6th, 2021

Welcome back to FT Asset Management, our revamped newsletter on the movers and shakes behind a multi-trillion-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.

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A scoop to get you started: Legal and General Investment Management, the UK’s largest asset manager, will stop giving almost all direct feedback to companies about their executive salary, after finding that its answers have been ignored most of the time. Read the full story here

McKinsey: a culture of crises

Works for American opioid manufacturers, insider trading by one of its top executives and the costly consequences of a government corruption scandal in South Africa. These are just a few of the reputation beats on Mckinsey over the past few years. This has led to concerns about the influential consulting firm’s culture of crises – and has led to global managing partner Kevin Sneader being voted out.

On Friday, McKinsey was administered another blow. The USA Security and Exchange Commission imposed a $ 18 million fine on an in-house McKinsey fund that invests the wealth of its top consultants. It allegedly had inadequate controls to prevent the firm’s partners from abusing inside information they obtained through work for clients.

The intriguing case is about an affiliate, MY Partners, which has invested hundreds of millions of dollars in companies that McKinsey advised, the SEC said. Some of the McKinsey partners who oversaw its investments “also had access to material non-public information as a result of their McKinsey consulting work”, according to the regulator.

The SEC fine follows revelations The Financial Times reported in 2016 that McKinsey operates a mysterious internal investment fund that has raised questions about how information obtained from consulting influences investment decisions.

I recommend to a again deep dive what I wrote at the time, with Miles Johnson and Patrick Jenkins, in McKinsey’s private hedge fund – now the subject of the SEC fine.

Bond Kings sound the alarm

There are not many (any?) People who have more combined bond market experience than Bill Gross and Dan Fuss – two investment legends even in an industry where the term is more devalued than the Argentine peso.

Gross established Pimco in 1971 and has a reputation as the “Bond King, ”Before he was notoriously expelled in 2014. Fuss’s career is even longer. He started trading bonds while Gross was just a teenager in San Francisco, and since 1976 Loomis Saylesstar bond fund manager. He finally retired from money management in the front line at the age of 87 this year.

The fact that both mortgagees are now sounding the alarm about wild risk-taking in financial markets is remarkable. Gross, who now only manages William, Jeff and Jennifer Gross Family Foundation, warned my colleague Robin Wigglesworth that investors are soothed in a “dreamland”By central banks. Meanwhile, Fuss told Robin it scares him to see how portfolio managers have given up.natural caution and caution”.

Neither of them were particularly worried that inflation would accelerate sharply from today’s already rising level, but they both predicted that it would continue to run warmer than many thought comfortable. And the duo were skeptical that the Federal Reserve monetary policy could intensify sharply in the coming years, given the danger that too aggressive moves could cause carnage in markets and jeopardize the real economy.

Fuss reckons that the more solid corners of the bond market – such as investment-grade corporate debt – are unattractive, but not particularly dangerous. On the other hand, he largely worries about excesses in the junk bond market, where he believes the search for returns is the fiercest he has seen in his six-decade career.

Crypto fever: FOMO seizes wealth managers

JPMorgan Chase‘s decision to give its wealth management clients access to cryptocurrency funds came as a bit of a shock to many in the industry. The bank’s boss, Jamie Dimon, is an outspoken crypto-critic.

“I personally think bitcoin is worthless,” Dimon said at a conference in October. “I do not think you should smoke cigarettes too.”

But the JPMorgan CEO is nothing if not pragmatic.

“Our customers are adults. They do not agree. If they want access to buy or sell bitcoin – we can not keep it – but we can give them legal, as clean as possible. ”

JPMorgan’s move reflects a shift across the wealth management industry, as both clients and their advisers are gripped by the fear of missing out on what – for now – is one of the most lucrative money-making opportunities in years.

“You have your friends at the golf club. They claim right or wrong that they made a fortune [in crypto], said Michael Bolliger, chief investment officer, emerging markets, at UBS Global Wealth Management. “You do not want to be the last person in line.”

Do not miss this report for FT Money, where Joshua Oliver delves into some of the issues facing the wealth management industry and its customers amid the noise for crypto.

Six indispensable asset management stories this week

Inflation: is it now time to worry? Policymakers is divided about whether rising prices are temporary or permanent. An incorrect response can hamper the recovery.

Kaye Wiggins reports of the SuperReturn Conference in Berlin, where private equity chiefs are wondering about their own success – while others express concern about a “state of collective error”.

Trian Partners, the activist fund raised by Nelson Peltz, recently increased its stake in Janus Henderson up to 15 percent. Now Dick Weil will retire as CEO of the $ 419 billion underperforming global asset manager.

As a week of New York art auctions come to an end, Eric Platt look at the Andy Warhol be for the U.S. stock market, where the spread in returns is a symptom of uncertainty about prospects.

The Spac machine splashes back to life after a dramatic collapse. But critics of the market for blank check companies say insiders are still the big winners.

Ken Griffin emerged as the buyer from a rare first print of the U.S. Constitution to a bidding war with crypto traders. The Citadel founder pays $ 43.2m for the document, which he will display in a museum built by an heir to the Walmart fortune.

Chart of the week

Line chart, rebased to 100, showing that bank shares far outperformed a broader benchmark of companies

World Bank shares are on track to record their best year since the aftermath of the financial crisis, benefited from expectations of higher borrowing costs as ratepayers fight widespread inflation.

And finally

Fraud, collapse and bankruptcy are on the agenda in this play by Italian novelist and playwright Stefano Massini

I’m currently in New York and there’s a program on Broadway that’s the talk of the town: The Lehman trilogy. The biggest financial crisis in history is a three-part operation, directed by Sam Mendes.

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