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Pimco's Total Return is not the fund it once was
Asset Management
<p>Oh how the mighty have fallen. Data disclosed on Wednesday reveals Pimco’s Total Return Fund has now sunk below the $100 billion mark to $98.5 billion - a third of its size just two years ago.</p> <p>The shriveling titan has now chalked up 28 consecutive months of outflows since April 2013 when it peaked at $293 billion.</p> <p>The departure of co-founder and "Bond King" Bill Gross - who shocked the investment world by shimmying over to rival Janus Capital last year - has not helped.</p> <p>The last time the fund was this small was in 2007 before it attracted mountains of cash from investors clamoring for the safety of bonds in the wake of the financial crisis.</p> <p>On plus side the outflow has slowed. The firm said investors yanked around $1.8 billion in assets from the fund in August, compared to $2.5 billion the previous month.</p> <p>The hemorrhaging is nowhere near as bad as it was in January when the fund had cash withdrawals of $11.6 billion. The fund has also delivered returns of 0.72% so far this year, beating 85% of its category peers, Reuters reports.<br /> Photo: Eli Christman</p>
SAC alums are killing it in 2015
Hedge Funds
<p>Their padrino’s performance may have taken a hit and most of their peers may be deep in the red, but for three SAC Capital veterans, things could not be any better.</p> <p>The New York Times reports that SAC alums Jason Karp, Aaron Cowen, and Gabriel Plotkin are all set to post a banner year for 2015 as Karp’s $2.9 billion Tourbillon Capital Partners returns over 18%, Cowen’s $2 billion Suvretta Capital Management notches up a respectable 7% to 9%, while Plotkin’s $1 billion Melvin Capital posts nearly a whopping 20%.</p> <p>This is in stark contrast to how the activists are doing; Bill Ackman’s Pershing Square is down 9.2% in August, while Barry Rosenstein’s Jana Partners slumped 4.3% in the same period.</p> <p>That might not be a good comparison though. SAC Capital – or Point72 as it’s now called – has always been renowned for its ability to trade large positions tactically, allowing them to dash in and out of positions quickly compared to activists who are typically invested in their targets for a long-ish haul.</p> <p>There’s still three months to go in the year though, so stay tuned. Who knows what the rest 2015 will bring.</p> <p>Photo: Insider Monkey</p>
MBK set to out-bid rivals for Tesco Homeplus
Capital Markets
<p>The battle for Tesco’s loss-making Korean discount retail stores is reaching its climax. Private equity firm MBK is set to ink the $6 billion deal, seeing off rivals KKR, Affinity Equity Partners and Carlyle to complete the biggest-ever private equity buy-out in Korea.</p> <p>Tesco Homeplus insiders leaked the word that the MBK consortium, which includes the state-run National Pension Service, Singapore’s Temasek and the Canadian Pension Plan, is the preferred bidder, according to FinanceAsia.</p> <p>Tesco’s exit follows a disastrous year for its domestic supermarket operations in the UK where it has built a mountainous £21.7 billion ($33.2 billion) of debt and has been forced to make £7 billion of asset writedowns.</p> <p>However, it would be a landmark purchase for MBK after a series of hit-and-miss investments.</p> <p>The leading Korean firm, set up by former-Carlyle manager Michael Byungju Kim, won the auction for ING Life Insurance Korea in 2013 and in the previous decade for gained controlling stakes in Taiwan’s China Network Systems and Japan’s USJ. But it lost a fight with KKR and Affinity for Oriental Brewery in 2009 and it has struggled to make much of its holdings in clothing firm Nepa and cable TV company C&amp;M.</p> <p>Homeplus is Korea’s second biggest discount store chain after Shinsegae’s E-Mart with more than 900 outlets. But MBK faces a harsh environment to make this investment pay off.</p> <p>The country’s sluggish economy and government curbs on weekend opening hours to protect mom-and-pop businesses means it will struggle both to reverse the company’s operating losses and also pay back the chunky loans it has secured to make the acquisition</p> <p>Even more worrying is MBK’s exit strategy. Losses last year by Homeplus tend to confirm that the country is a rather unhappy place for foreign retailers. Walmart and Carrefour pulled out after years of dismal performance.<br /> Photo:</p>
Barclays becomes the first bank to accept Bitcoin
<p>Barclays broke new ground this week by becoming the first bank to accept bitcoin. But don’t get too excited, the UK bank is only taking baby steps.</p> <p>Under a pilot scheme, people will only be allowed to use the crypto currency to make donations. The Wall Street Journal reports that Barclays is teaming up with bitcoin startup Safello to build a program that allows charities to accept bitcoin.</p> <p>Barclays is keeping the details close to its chest for now, but this move is a big boon to bitcoin’s legitimacy. It also galvanizes Barclay's reputation as a fintech pioneer.</p> <p>The bank was one of the first  financial institutions to launch its own fintech accelerator, with the first iteration of the Tech Star-powered platform being rolled out  in 2013. Safello, which has raised $1 million in seed-funding to date, is one its alumni.</p> <p>This is also a feather in the cap for London, where Barclays is headquartered, which is very quickly becoming recognized as the fintech capital of the world, and for good reason.<br /> Photo: Antana</p>
Can Apple Pay turn it around? It's adding banks faster than users
<p>This week Apple Pay added 18 more US banks to its roster of Apple Pay card issuers. This is the best bit of news the infant digital payments platform has had since early last month when it was revealed Apple Pay adoption rates had suffered despite strong iPhone6 sales.</p> <p>The survey – conducted by InfoScout and – revealed that the number of eligible Apple Pay users trying the service had dropped from 15.1% in March to 13.1% in June. Ouch.</p> <p>Needless to say Apple has been hard at work to ratchet up these numbers. This is the second batch of 18 bank partners Apple has revealed inside a month, bulking up its partnership count by 36 over the past four weeks.</p> <p>We can expect more announcements on September 9 when Apple holds its press event. According to AppleInsider, several changes to iOS 9 have already been confirmed , such as the Passbook app being renamed Wallet, and support for loyalty and reward cards being added to the platform. Here is full list of its recent bank additions:</p> <p> AltaOne Federal Credit Union<br /> American Bank of Commerce<br /> Capital Bank, N.A.<br /> Cardinal Community Credit Union<br /> Del-One Federal Credit Union<br /> Enterprise Bank and Trust Co.<br /> Envision Credit Union<br /> First Commonwealth Bank<br /> First National Bank and Trust<br /> First South Financial Credit Union<br /> FirstMerit Bank<br /> Fort Worth City Credit Union<br /> Leominster Credit Union<br /> Magnolia Federal Credit Union<br /> Monticello Banking Company<br /> Northfield Bank<br /> Southern States Bank<br /> Spire Credit Union</p> <p>Apple is also expected to announce more bank partnerships in the UK where the contactless pay limit was recently upped to 30 pounds (about $46). With a November Canada launch also in the offing, Apple Pay may amaze us yet.<br /> Photo: TheTruthAbout</p>
Shanghai Chaos Investment loses millions on…Shanghai chaos
Asset Management
<p>Shanghai Chaos Investment, arguably one of the coolest-named asset managers currently out there, ironically got caught in Shanghai’s chaos the past few months.</p> <p>According to Reuters, two of firm’s funds posted serious losses since the Shanghai Composite’s mid-June peak. Chaos Value 1, the firm’s $17.3 million 20-year fund, lost a staggering 63% during that time frame, while Chaos Value 2, an open-ended, $440 million fund, lost a whopping 33%. Reuters does add however, that the former is still up 50% since its July 2014 launch.</p> <p>The funds apparently took a beating when commodity prices – as well as stock index futures – plummeted alongside the Chinese equity markets.</p> <p>The firm does seem upbeat on their prospects though:<br /> “Excessive panic after the market slump is a huge risk, just like excessive optimism was during the market surge," Chaos said in the letter. "We have opportunities to buy those equities that match our values at low prices.”<br /> Photo: John Koetsier</p>
Is "New Normal" Enough to Grow China's Economy?
Capital Markets
<p>While the news headlines continue reminding us of China’s stock market woes, investors should dig deeper to understand the economic underpinnings that can spark growth in China—and, in turn, present opportunities for growth seekers.</p> <p>The Chinese economy recently entered a slowdown period, with reported economic growth rates falling to around 7% and as low as 5.3%, according to some economists’ calculations. While this may seem robust from a developed markets perspective, it is a far cry from the years of double-digit growth rates China had previously enjoyed. Slowing growth is problematic for the nation, as high rates of economic activity are needed to absorb the influx of labor into the country’s burgeoning cities and to use the massive production capacity China installed over the past decade.</p> <p>The Beijing government is acutely aware of the problem. When new leadership took over in 2013, it adopted the term New Normal to reflect the nation’s current economic reality and rejected calls for further stimulus measures. However, since late 2014, the slowdown of economic activities has intensified. The question for now seems to be, is New Normal enough? And if not, what are the long-term solutions for reigniting China’s economy?</p> <p>Assessing China’s short-term economic fixes—supportive, but not enough</p> <p>In recent months, Chinese policymakers have dramatically stepped up efforts to support the economy:</p> <p> The People’s Bank of China slashed the reserve requirement ratio for banks twice and cut interest rates several times.<br /> The central government injected fresh capital into the country’s three policy banks to support lending for infrastructure projects, trade, and agriculture.<br /> The Ministry of Finance launched a local-government debt swap program to replace high-cost bank borrowings with local-government bonds.<br /> In addition, housing policies were relaxed to support the slumping property market.</p> <p>Despite the Chinese government’s best efforts, the results of its policies are mixed. Economic growth continued to slow in early 2015. Major macroeconomic indicators, such as the Purchasing Managers’ Index, retail sales, and fixed investment, remained sluggish.</p> <p>Government officials also implemented a number of policies aimed at supporting the stock market, including the Shanghai–Hong Kong Stock Connect program, which expands foreign investors’ access to the domestic market and domestic investors’ access to Hong Kong–listed securities. It appears the government has been trying to use the stock market as a stimulus to channel savings into the corporate sector, and direct financing through the stock market was encouraged over indirect financing through the banks. This drove a massive rally in Chinese stocks through May 2015. But even then, the rally was due, in part, to a buying frenzy among local Chinese investors, and the stock market’s absence of fundamental drivers suggests that a substantial speculative element was at play.</p> <p>Today—without fundamental growth drivers in place—China’s markets have collapsed into bear-market territory, exposing the fragile foundations on which the recent bull market was built. Investors who follow China are likely to see a tug-of-war between speculative fervor and tepid fundamentals for some time.</p> <p>China’s long-term economic solution—focusing on the middle class</p> <p>The root cause for China’s slower growth is a decline in investment activity, primarily in infrastructure and property. Unsold apartments are piling up across the country, and municipalities have indigestion from a decades-long, debt-fueled spending binge in anticipation of growth that neve</p>
Daily Scan: Asia recovers without China, Europe rallies
Capital Markets
<p>Updated throughout the day</p> <p>September 3</p> <p>It appears calm was restored to Asia today as China focused on marching bands and rolling tanks, allowing investors to focus on upbeat US data. Tokyo ended 0.48% higher and Seoul ended up 0.02%. There were also comfortable gains for Singapore and Taipei.</p> <p>European stocks are also rallying as future data points to Wall Street holding on to its gains from the previous day. The market will no doubt be encouraged by a report by Automatic Data Processing and Moody’s Analytics that shows private payrolls in the US increased by 190,000 jobs last month. That said US shares still sit 8.5% their record high touched in May. So we have a ways to go.</p> <p>Here’s what else you need to know:</p> <p>Didi Kuaidi driver faces staggering 100,000 yuan fine. Beijing’s recent crackdown on car-hailing apps hit a new low this week as a Guandong-based Didi Kuaidi driver got slapped with a tremendous 100,000 yuan fine for allegedly “engaging in illegal transport activities and reaping illicit profits.” South China Morning Post </p> <p>U.K. services PMI falls to 27-month low. While that definitely sounds bad, it’s not. The U.K.’s highly-important services sector growth came in at 55.6 in August – its lowest reading since April 2013 – but well above the threshold separating growth from contraction. However, if you couple it with last month’s manufacturing data, things start looking a bit disconcerting, as Markit’s Chris Williamson said: “the three PMI surveys collectively are pointing to the weakest monthly expansion since May 2013.” Markit</p> <p>Eurozone PMI climbs to 54.3. Despite all the fragility and nastiness surrounding it, the Eurozone economy proved to be more than resilient to the storms of summer. Business activity in the region surged at its fastest pace in over four years, taking the final Markit Eurozone PMI from 53.9 in July, to 54.3 in August. Surprisingly, Spain was the largest contributor of economic growth, posting its second-highest expansion reading for the past eight and a half years. Markit</p> <p>S&amp;P cuts Glencore outlook to negative. As if things weren’t bad enough for the once-mighty Glencore, the ratings agency Standard &amp; Poor’s decided to slash its credit outlook rating from stable to negative. The current and continuing slump in commodity prices, seemed to be the main driver behind the move. Financial Times </p> <p>Japan services PMI surges to 22-month high. “Delicate” may been a favorite word to describe Japan’s economy but you’d never think that just by looking at their services sector. The Nikkei Japan Services PMI came in at 53.7 in August, more than two points higher than its July reading and at its highest level in nearly two years. New service provider growth apparently climbed at a robust pace, while business sentiment strengthened once again to reach a two-year high. Markit</p> <p>Australian retail sales surprise to the downside. After climbing 0.6% in June, retail sales down under fell 0.1% in July, notching up its first fall since June 2014 and surprising analysts </p>
Daily Scan: Beige book suggests economy strengthening; stocks end on positive note
Capital Markets
<p>Updated throughout the day</p> <p>September 2</p> <p>The stock market clawed back some of its losses Wednesday after the royal rout on Tuesday. Both the Dow Jones Industrials and the S&amp;P 500 ended about 1.8% higher; the Nasdaq jumped 2.5%. Helping clinch the day's returns: The Federal Reserve's Beige Book -- a survey of local districts -- pointed to expansion, including "wage pressures" in several areas.  That report overshadowed the initial ADP jobs numbers, up only 190,000 jobs in August, falling short of the 215,000 expected in the private sector. Factory orders were up for the second straight month, boosting manufacturing 0.4%. Crude oil inventories grew by 4.7 million barrels last week. U.S. crude imports were up by 656,000 barrels/day. The supply numbers weren't as bearish as some had expected, plus the Beige Book report helped lift crude prices to $46.</p> <p>Here’s what else you need to know:</p> <p>Chinese naval ships off Alaskan coast. Three Chinese combat ships, a replenishment vessel, and an amphibious ship moving toward the Aleutian Islands. It's the first time Chinese ships have been spotted in the area. Wall Street Journal</p> <p>Hillz wins Puerto Rican support. New York City Council Speaker Melissa Mark-Viverito has endorsed Clinton for president, ahead of Clinton's first trip to Puerto Rico this weekend. Clinton supports the island declaring bankruptcy and restructuring its $58 million debt. CNN</p> <p>Obama winning Iran deal. Maryland Democratic Senator Barbara Mikulski is backing President Obama's nuclear deal with Iran. Mikulski is the 34th vote, making it impossible for the GOP to kill the deal in Congress. Politico</p> <p>Lego is world's biggest toy maker. The Danish Lego had a 23% sales increase for the first half of 2015, while Mattel was hit with a 5% drop. "The Lego Movie" as well as special sets for Star Wars, Jurassic Park, and others have boosted the toy maker to world domination. Financial Times (paywall)</p> <p>Trouble ahead? China cracks down on "grey market" margin lending. Beijing is putting the kibosh on the non-bank market, estimated to be 1 trillion yuan ($160 billion). The goal may be to stop stock manipulation but the result could be a liquidity crisis. Reuters (h/t Quartz)</p> <p>Beijing wouldn't let the stock market rain on its parade. That parade, of course, has long been in the making to mark the end of World War II. A stock market slump just wouldn't do. So Beijing worked its magic, turning a 4.7% collase on the Shanghai Composite into a 0.2% barely-there loss. Ditto the more volatile Shenzhen Composite, which trimmed its 4.8% drop to down 1.98%. Hong Kong’s Hang Seng Index and Japan’s Nikkei Average meanwhile, slipped 1.18% and 0.39% respectively.</p> <p>China sharpens the competition to the World Bank. Sources say the Asian Infrastructure Investment Bank will not ask borrowers to privatize or deregulate -- unlike the World Bank. The </p>
Ex-Merrill president leads dining revolution
<p>Ahmass Fakahany once led board rooms and managed billions of dollars, now he oversees the restaurants his former peers frequent.</p> <p>Fakahany, who left Merrill Lynch in 2007, and chef Michael White own the Altamarea Group of restaurants, reports Business Insider. In Altamarea's flagship Italian restaurant Marea on Central Park South one can spot hedge funder Dan Loeb, or Bill Ackman, or Goldman Sach's Lloyd Blankfein. The model for Marea is clean and simple; class without the frills; quality without being ostentatious. Post-financial crisis, if you will.</p> <p>That simple sophistication has been a success, so much so that Altamarea just opened its biggest location yet on the Upper East Side of Manhattan. The French Vaucluse serves up escargots, duck and pork terrine, and plenty of truffles. The company now has a total 16 restaurants around the world. Annual revenue has grown from about $3 million in 2008 to more than $50 million. Writes Business Insider:<br /> “Well, he’s certainly mastered Italian, so I’m anxious to see what Michael can do with French cuisine," said Jim Chanos, founder of short-biased hedge fund Kynikos Associates.<br /> The Egyptian-born Fakahany dreamed of a hospitality career while working for Merrill around the world. He started the Merrill Lynch wine collection, and set the entertainment standards for the bank's meetings and dinners. Fakahany met White while dining with clients at the former Soho restaurant Fiamma, and the two hit it off. Since then, the team has hired other reformed-Wall Streeters for their team, such as CFO Arthur Li, who previously worked at J.P. Morgan and in private equity at Wasserstein &amp; Co. It doesn't hurt to be be able to identify with the clients.<br /> Photo: Krista</p>