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2015 VC unicorn report
<p>PitchBook has published its inaugural VC Unicorn Report, which dives into the terms, conditions and trends affecting VC-backed companies worth $1 billion or more. For highlights from the report, which covers protection terms, liquidation preferences and much more.</p> <p>See charts and full report below:</p> <p>PitchBook_2015_VC_Unicorn_Report (1)<br /> Photo: Adam Selwood</p>
Cliff Asness on Trump: hedge funds getting away with murder
Hedge Funds
<p>Calls to tax Hedge Funds more have long been a staple of the Left and now appear in the tax proposals of several leading republican candidates, either explicitly, or implicitly by equalizing many tax rates. Advocates for this change have long had some fair points but occasionally try to cheat by slipping in some clearly unreasonable ex post wealth grabs along with otherwise reasonable proposals. Now Donald Trump has entered into the long-standing debate with the characteristically specific statement “hedge fund guys are getting away with murder.” He often goes on to mention that he is “friends” with some of the hedge fund managers he’s targeting, presumably to bolster our belief in his courage and honesty – I mean, he’s standing up to friends! We’re also assured, using his now familiar verbal tics, that his still forthcoming tax plan will end this unpunished murder, and do many other wonderful things. He says his plan will be “great” and “huge.” Again, much of this debate, ex-The Donald, is reasonable and it is indeed a difficult issue. But, as usual, The Donald is different, taking it up more than a notch in empty dangerous rhetoric. His amps definitely go to eleven.</p> <p>During his diatribes The Donald often adds in the standard populist canard against “paper pushers” in favor of people who “build things.” This accusation has a many-thousand-year pedigree (the Babylonians building Ziggurats said it about their Assyrian bankers) and has usually been wrong, always exaggerated, and occasionally downright ugly in its tone and targets – though admittedly often effective demagoguery. “Real” vs. “paper” is a topic for another day but I can’t help wondering whether Trump actually still “builds things” or mostly just licenses his name to things, ironically a form of “paper pushing.” Yes, I’m saying to The Donald “you didn’t build that Trump Eau de Toilette.”</p> <p>Of course, like most things The Donald weighs in on, this issue is way more complicated than he lets on. Complication is too often a casualty in the political arena but it’s even less Donald’s forte than most. In fact, with The Donald sometimes you have to struggle to even understand what he’s talking about! We will have to take some educated guesses. The main issue usually debated regarding hedge fund taxation is about what’s called “carried interest.” For the sake of sanity, I’m going to assume this is what he’s referring to, that he thinks the “carried interest loophole” should be closed. If, rather, he’s just using the words “hedge fund manager” as a proxy for rich people and engaging in some type of weird class warfare, things are even farther gone.</p> <p>The “loophole” (not everyone thinks it’s a loophole) is that right now some of a hedge fund manager’s remuneration, that part representing long-term capital gains structured as a carried interest, is taxed at the capital gains rate (people like Trump talk about “hedge funds” even though this is a far bigger issue for private equity funds). Some argue this capital gains treatment is appropriate as money is at risk, and beneficial as it encourages investment, and that it is consistent with taxation of employee incentive stock options and professional partnerships. Some counter that the first argument is bad accounting and the second “voodoo economics.” The third argument only interests tax nerds, because looking for consistency in the tax code is like looking for humility in The Donald.<br /> This is not an op-ed taking either side of this argument. In fact one could take either side particularly on the accounting. That’s exactly what makes this issue hard. As a matter of proper accounting theory (do I still have your attention after that grabber?) it’s not difficult to argue for either case. There are indeed </p>
The fabulous life of DraftKings CEO Jason Robins
<p>Jason Robins, founder of the fantasy sports unicorn DraftKings, seems to be balling so hard, Fortune says he doesn’t even watch the games anymore:<br /> “The atmosphere is electric, and everyone—from the cheerleaders to the beer vendors—seems to be watching the quarterback’s outstretched hands.</p> <p>Except for Jason Robins.</p> <p>The 34-year-old chief executive of DraftKings, the ascendant daily-fantasy-sports startup, is standing in a mammoth luxury suite high above the action. He has a perfect view of the field—but he’s glued to his smartphone.”<br /> To be fair, while the game we’re talking about here is the first of the 2015 NFL season, DraftKings just scored 200,000 sign-ups that day – its most since its 2012 inception.</p> <p>Robins, #8 in Fortune’s 40 under 40 list, currently has his eye on the fantasy sport world throne, and DraftKings seems to be moving mountains to ensure his ascension.</p> <p>The startup just saw its entry fees climb from $45 million in 2013 to $304 million in 2014, and it spent $20 million on advertising during the NFL’s first week – enough to bump its user base to more than 4.5 million.</p> <p>Still, it faces significant hurdles; Arizona, Iowa, Louisiana, Montana, and Washington are arguing that fantasy sports are games of chance – not skill – and are starting to question the legality of the whole thing. Meanwhile, its closest competitor, FanDuel, is giving DraftKings a serious run for its money.</p> <p>Nevertheless, Robins and the DraftKings crew seem to be unfazed by all this, unfazed enough to continue ignoring the Patriots:<br /> “Back in the DraftKings suite he proudly displays his phone, which is buzzing as some of his 300 employees react to the barrage of new sign-ups. ‘This is nuts,’ writes one. ‘I’ve never seen the lobby light up so much,’ writes another, referencing the homepage of the DraftKings website and app.</p> <p>Robins smiles. He’s confident that DraftKings has a billion-dollar product. He just needs to get it to the millions of people who haven’t yet tried daily fantasy sports—let alone spent money doing it. ‘Once they try it, they like it,’ he says. ‘It’s sticky.’”<br /> Photo: Wiki</p>
Is bigger always best? A closer look at effect of size on hedge funds
Hedge Funds
<p>Is bigger always best? A closer look at effect of size on hedge funds by Preqin<br /> Using Preqin’s new fund size benchmarks on Hedge Fund Analyst, together with the results of our interviews with approximately 300 hedge fund managers, we analyze the effect that fund size has on the overall hedge fund industry by looking at performance, terms and conditions, and the fund sizes institutional investors are looking for.</p> <p>In July, Preqin added a new series of benchmarks to our Hedge Fund Analyst online service. These benchmarks, which assess the performance of Hedge Funds based on the size of the fund, can be used in tandem with our strategy, regional, structural and currency benchmarks. Following the launch of these benchmarks, Preqin has turned its attention to the effect of size on the industry, as we take a look at what size funds institutional investors look for, provide a breakdown of the industry by size and look at how the performance of hedge funds varies by fund size. The results found in this study are based on Preqin’s award-winning Hedge Fund Online service and June interviews with approximately 300 hedge fund managers.</p> <p>Preqin’s Hedge Fund Manager Outlook recently revealed that 66% of capital in the industry today is sourced from institutional investors. As shown in Fig. 1, over four-fifths of institutional capital is invested in hedge funds which have at least $1bn in assets under management (AUM). Although the large majority of institutional capital is concentrated in the largest funds, investors retain an appetite for smaller funds. Fig. 2 shows the breakdown of investors by their minimum AUM requirements of hedge funds before they will consider investing in them. Just 11% of investors will consider investing exclusively in funds with more than $1bn in AUM. Although a relatively small proportion (22%) will consider investing in funds with less than $100mn in AUM, over half (52%) have a minimum requirement that lies between $101mn and $499mn.</p> <p>Looking at the minimum AUM requirements by investor type (Fig. 3), again, excluding funds of hedge funds, it is private wealth organizations or those institutions that have larger or more sophisticated hedge fund portfolios that are most likely to invest in smaller funds. Fifty percent of wealth managers and 38% of both endowments and family offices will consider investment in the smallest funds (those with less than $100mn in AUM). In contrast, only 6% and 7% of private sector pension funds and foundations respectively will consider emerging funds, in terms of minimum AUM.</p>
What we’re reading: Volkswagen, interest rates, and the Pope
<p>From a sticky situation for the Fed to “real news” on Pope Francis, here are some great reads for you this weekend:</p> <p>Financial conditions and a catch-22 for the Fed. Gavin Davies, much like Mohamed El-Erian, is always a great read – even when you don’t agree with him. Here’s his latest take on the Fed. Financial Times (paywall)</p> <p>This is the best time to borrow money. In all of history. Apparently, interest rates are at their lowest level since Napoleon, Genghis Khan, even Hammurabi. And it might stay that way for awhile. Washington Post</p> <p>Just how guilty is Volkswagen? Here’s Tyler Cowen’s take on it. Marginal Revolution</p> <p>“Bankers are the best paid victims. We should hug them, not be angry.” Joris Luyendijk spent four years investigating whether or not bankers were nothing but greedy, psychopathic financial terrorists. Here’s what he found. The Standard</p> <p>Pope Francis reverses position on capitalism after seeing wide variety of American Oreos. The Onion in classic form, ‘nuff said. The Onion<br /> Photo: Marketa</p>
Weekend Scan: US GDP growth beats estimates; Consumer sentiment rips higher
<p>Good morning everyone. J-Yell’s recent speech did a lot of good for the European markets. The FTSE closed 2.5% higher, the DAX climbed 2.8%, while the CAC, aided by an upbeat consumer confidence index reading, surged 3.1%. The U.S. didn’t do as well though; while the Dow spiked 0.7%, a huge selloff in biotech and healthcare shares dragged the S&amp;P 500 and the Nasdaq down 0.1% and 1% respectively. Nevertheless, the world’s largest economy still had a lot of good news to chew on:</p> <p>U.S. GDP growth beats estimates. America’s final Q2 GDP growth rate was revised higher to 3.9% - beating analysts’ expectations of 3.7% rise and besting the previous quarter’s 3.7% climb. New York Times</p> <p>U.S. consumer sentiment rips higher. The University of Michigan’s highly-watched consumer confidence index climbed to 87.2 in September, well above the 85.7 “flash” reading and even better than the expected 86.7 jump. It’s still below August’s 91.9 final reading though. Forex Live</p> <p>Pope Francis visits NYC. After visiting Washington, DC, Pope Francis is in New York, visiting the World Trade Center memorial, St. Patrick’s Cathedral, Central Park, and the U.N. Speaking to world leaders at the U.N., the pope voiced concerns about the state of the environment, as well as the “poorest of the poor” that suffer the most. New York Times (paywall)</p> <p>Porsche exec takes over VW. Matthias Müller, Porsche AG’s chief executive since 2010, has been confirmed as the new chief of the embattled German carmaker, Volkswagen. The VW vet is reportedly a straight-shooter, and interim VW chair Berthold Huber calls him “a person of great strategic, entrepreneurial and social competence.” Financial Times (paywall)</p> <p>John Boehner to retire. The Republican Speaker of the House announced that he will retire at the end of October. During an emotional press conference, Boehner said he decided Friday morning to step down. Boehner said that after bringing the pope to the Capitol he had nothing left to accomplish. Boehner’s retirement comes in the wake of inner-party turmoil for the GOP, as the more conservative parts of the party haven’t been happy with Boehner. Politico</p> <p>Putin and Obama to meet in NYC. The embattled world leaders will discuss the tensions regarding Syria and Ukraine, while the leaders are in New York for the U.N. General Assembly. Wall Street Journal</p> <p>Sepp Blatter faces probe in Switzerland. The president of FIFA will be investigated by the Swiss attorney general’s office for corruption. The U.S. is also conducting an investigation of the soccer governing body. Wall Street Journal</p> <p>Blatter’s not the only soccer guy in trouble. Brazilian star Neymar has had almost $50 million in assets frozen by a Brazilian court due to allegations of tax evasion.</p>
Why the next recession is coming sooner than you think
<p>&nbsp;</p> <p> Societe Generale’s Albert Edwards believes that the United States could soon set negative interest rates for the first time.<br /> Edwards argued that the United States is currently in a worse economic position than Japan was prior to its lost decade.<br /> He presented data that China’s slumping GDP numbers are actually much worse than they look.</p> <p>A new report by Societe Generale analyst Albert Edwards has the financial world buzzing, and not in a good way.</p> <p>Edwards argued that the United States is much closer to its next recession than most investors believe. Additionally, the current near-zero interest rate environment has laid the groundwork for a negative Fed funds rate for the first time in history.<br /> The Zero Lower Bound<br /> Most investors operate under the assumption that zero is the lower bound for interest rates and that the current near-zero rates in the United States indicate that the economy is still near the low point in its current cycle.</p> <p>However, Edwards pointed out that, in reality, while below-zero rates may be unprecedented in the United States, they are certainly not unprecedented globally.</p> <p>In fact, Sweden currently has a -0.35 percent policy rate in place. Even with interest rates at zero, Sweden had been unable to stimulate any significant inflation since the end of 2012, so it reduced rates to -0.25 percent in early 2015 and further to -0.35 percent this summer.</p> <p>Edwards believes that Sweden’s measures demonstrate that the zero rate bound is not a true limit on rates. “If -0.35 percent is possible, why not -3.5 percent or less?” he asked in his report.</p> <p>Read more at Benzinga, here.<br /> Photo: ¿Es realmente necesario?</p>
Chart of the week: Chinese construction & land acquisition falling
<p>Over the last 10 years, the Chinese economy was drugged into growth through excessive amounts of investment. At its peak, capital expenditure made up 48% of GDP, an unprecedented level, and in my view, represented a massive misallocation of capital. Slowing levels of investment (mostly construction) have driven declines in related areas, including commodities, machinery and cement production.</p> <p>While housing sales in Tier 1 cities like Beijing and Shanghai have grown in the last few months, and prices there are up, they represent only about 12% of the Chinese housing market. They don’t reflect the overall construction pace in the economy, which is moribund. There is still excess housing inventory, lackluster pricing and slowing sales throughout the vast majority of the economy.</p> <p>The Chinese economy has not stabilized; it is still slowing and the latest round of rate cuts and liquidity injections by the People’s Bank of China (PBoC) will have only a marginal impact. Working through that misallocation and deleveraging the debt will be a multi-year task.</p> <p>These themes are explored further in a new paper, “China: Have We Reached Bottom Yet?”</p> <p>MALR013918</p> <p>This blog post is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Loomis, Sayles &amp; Company, L.P. This information is subject to change at any time without notice.</p> <p>© Loomis Sayles</p> <p>This story originally appeared in Advisor Perspectives.<br /> Photo: kris krüg</p>
Daily Scan: Stocks post mixed day; Boehner retires amid GOP turmoil
<p>&nbsp;</p> <p>Updated throughout the day</p> <p>September 25</p> <p>U.S. stocks slid late Friday after posing early gains. The Dow ended up gaining 0.7%, but the S&amp;P 500 lost 0.1% and the Nasdaq fell 1%. Oil was up, reaching above $45/barrel before the weekend. Asia saw choppy trade over persistent fears of an economic slowdown in China, but a more upbeat market sentiment prevailed in Europe where investors reacted positively to greater clarity on US monetary policy. The Hong Kong markets will be closed Monday for the holiday.</p> <p>Here is what else you  need to know:</p> <p>Pope Francis visits NYC. After visiting Washington, DC, Pope Francis is in New York, visiting the World Trade Center memorial, St. Patrick's Cathedral, Central Park, and the U.N. Speaking to world leaders at the U.N., the pope voiced concerns about the state of the environment, as well as the "poorest of the poor" that suffer the most. New York Times (paywall)</p> <p>John Boehner to retire. The Republican Speaker of the House announced that he will retire at the end of October. During an emotional press conference, Boehner said he decided Friday morning to step down. Boehner said that after bringing the pope to the Capitol he had nothing left to accomplish. Boehner's retirement comes in the wake of inner-party turmoil for the GOP, as the more conservative parts of the party haven't been happy with Boehner. Politico</p> <p>Sepp Blatter faces probe in Switzerland. The president of FIFA will be investigated by the Swiss attorney general's office for corruption. The U.S. is also conducting an investigation of the soccer governing body. Wall Street Journal</p> <p>Blatter's not the only soccer guy in trouble. Brazilian star Neymar has had almost $50 million in assets frozen by a Brazilian court due to allegations of tax evasion. Bleacher Report</p> <p>JP Morgan still knows how to make money. Its metals storage and commodity businesses posted a loss last year but that doesn’t mean JP Morgan doesn’t know how to make money out of it. Filings show that just before it sold loss-making commodities unit, Jamie Dimon’s port in the storm managed to grab a one-time $150 million dividend. Reuters</p> <p>Yellen receives medical attention. After struggling to finish the last few lines on her speech on inflation, Federal Reserve Chair Janet Yellen was seen by the medical staff at UMass Amherst for possible dehydration. She’s feeling much better now though, and appears ready to let rates rock. Reuters</p> <p>GOP to opt against Planned Parenthood shutdown. House GOP leaders have summoned their divided conference for a make-or-break discussion on how to fight taxpayer funding of Planned Parenthood without having the battle lead to a government shutdown next week. </p>
Goldman Sachs' startups to watch
<p>Goldman Sachs is edging its way into the hearts and minds of startups looking for funding and support, particularly the unicorns. The investment firm examined some of the up-and-coming firms for a list of the top 10 startups to watch, reports Business Insider.</p> <p> Appear Here- $9.4 million, London- finds pop-up shop storefronts to rent, much like booking a hotel room.<br /> EquipmentShare- $2.2 million, Missouri- allows contractors to rent and lend construction equipment.<br /> Getaround- $43 million, California- lets you rent your car in advance or on demand.<br /> Mast Mobile- $5.4 million, New York- combines your business and personal mobiles into one device.<br /> Narrative Science- $32.4 million, Illinois- automates simple reports and journalistic stories.<br /> Nutmeg- $37.3 million, London- customized financial portfolios to replace traditional advisors.<br /> Plated- $56.4 million, New York- food delivery services that provides the exact ingredients and recipes needed to cook.<br /> TradeBlock- $2.8 million, New York- bitcoin data provider.<br /> Vestorly- $2 million, New York- automated content marketing for businesses and leveraged use of online connections.<br /> Yhat- $2.6 million, New York- tool to make big data implementation more efficient.</p> <p>Photo: George Redgrave</p>