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Startups eager for sky-high valuations should heed this cautionary tale
Venture Capital
<p>As the IPO market tanks and startups continue to seek absurdly high valuations, they would do well to remember the 2013 listing of textbook rental service Chegg and its ill-fated use of the IPO "ratchet."</p> <p>Wall Street Journal's Venture Capital Dispatch recalls how Chegg sought to secure a higher valuation during its pre-IPO funding rounds by promising investors their share price would double by time the company went public – a term known as a "ratchet." It backfired. Massively. As early Chegg investor Oren Zeev explained in a conference this year:<br /> “While it turned out that the top line was great, the fundamentals of the business, or the assumptions we were making about the business, were a stretch. It was far less clear it was a great business.”<br /> The upshot was that the business sunk below its IPO valuation after going public and could not deliver on what it promised, and Chegg was forced to issue additional shares to Insight Venture Partners, the VC with which it had the covenant. Companies like Box Inc. and Kayak Software Corp. have also had to pay a painful price for the same reason. </p> <p>One has to wonder how many  of our newly-born unicorns managed to achieve such lofty valuations, and how they will cope when it's time to go public.<br /> Photo: Jellaluna</p>
$1.4 billion in losses don’t scare Bill Ackman
Hedge Funds
<p>In Ackman’s world, cutting losses is for fools:<br /> “Hedge fund manager Bill Ackman said Wednesday that he purchased an additional 2 million shares of Valeant Pharmaceuticals as the stock plunged following the release of an explosive note from Citron Research that alleges the drugmaker is channel stuffing.</p> <p>Ackman told CNBC that he believes in the company despite Citron claims. His firm, Pershing Square, was already one of the largest holders of Valeant stock.”<br /> Pershing Square has so far lost $1.4 billion on Valeant, with Reuters estimating his Wednesday loss at $500 million.<br /> Photo: Insider Monkey</p>
Goldman dumps Indian asset management unit
Asset Management
<p>It's a quiet breakup, but Goldman Sachs is dumping its Indian fund management unit and Reliance Capital Asset Management is picking it up.</p> <p>Goldman's $37.5 million cash deal is the sixth exit of an asset management from India since 2013, reports the International Business Times. Morgan Stanley, Deutsche Bank, PineBridge, ING, and Daiwa Capital Markets have left the Indian mutual fund sector as the cost of acquiring assets has gone up, cutting into profits.</p> <p>Goldman employees in the ETF business will be offered employment opportunities at Reliance Capital. The deal makes Reliance Capital the sole provider for the government's central public sector enterprises ETFs, reports Live Mint. Goldman's existing ETFs will be rebranded as Reliance Capital's. Goldman says it will remain invested in Indian securities through regional and global funds.</p> <p>Goldman managed about $1.1 billion in India at the end of September. Reliance Capital had about $23.5 billion in assets under management at the same time, and ranks as the third largest fund house in India. The Indian mutual fund industry is worth about $202 billion.<br /> Photo: Kirill Tropin<br /> &nbsp;</p>
Snapchat execs are disappearing
Venture Capital
<p>Blink and they're gone. Snapchat's executives are disappearing like their photos, with eight upper-level execs leaving in the last year.</p> <p>It's not unusual to see leadership shuffles in startups as competition is high for talented staff, reports Business Insider. But it may be a bit concerning that Snapchat can't keep execs on board. Only one of the eight now-departed leaders lasted longer than eight months.</p> <p>Is the super-young CEO Evan Spiegel to blame, or is this just the tech world we live in?<br /> Photo: AdamPrzezdziek</p>
Nailed It: This leveraged ETF is on fire
Asset Management
<p>Homebuilder stocks and exchange traded funds have recently been buoyed by a spate of encouraging data. Data out Monday show the National Association of Home Builders/Wells Fargo housing market index jump three points to 64, its highest reading in a decade.</p> <p>On Tuesday, it was revealed that September housing starts surged 6.5 percent, well ahead of the 1.4 percent increase expected by economists. Predictably, those data points and other are boosting homebuilder stocks and ETFs. For example, the $2.1 billion iShares U.S. Home Construction ETF (NYSE: ITB) is up 7.7 percent this year and resides at its highest levels in over eight years.</p> <p>Gains for homebuilders and stocks would be even more impressive if not for a slump that started in August and lasted well into September, but the aforementioned data points ...</p> <p>Full story available on Benzinga.com</p> <p>Photo: istock/PhilAugustavo</p>
Hedge funds post largest asset declines since ‘08
Hedge Funds
<p>Investors may have kind been to hedge funds during the third quarter, but apparently, the market was just too much for them:<br /> “Total global hedge fund capital posted the largest decline since the Financial Crisis in the third quarter, as global financial market volatility surged on uncertainty over US interest rates, China and M&amp;A transactions. Estimated hedge fund capital declined by $95 billion across all strategy areas to end the quarter at $2.87 trillion, as new investor capital inflows only partially offset performance-based declines.”<br /> The quarterly asset decline is supposedly the first since the second quarter of 2012 and the largest since fourth quarter of 2008, according to HFR. Inflows remained strong though, with three of the four main hedge fund strategies boasting net capital inflows for the quarter. Event-driven funds for example saw $5.4 billion in inflows while relative value funds punched in $2.9 billion. Macro funds however experienced $5.1 billion in outflows, largely due to the Fed cooking the emerging markets and China's slowdown hurting commodities.<br /> Photo: Lucas Stanley</p>
Watch out Silicon Valley, Asia’s VC space has you in its sights
Venture Capital
<p>Silicon Valley may have Apple, Google, and Facebook but as far as venture capital investments are concerned, Asia’s beginning to give it a serious run for its money.<br /> “The venture capital industry in Asia has seen strong growth over the past year, and in Q3 the aggregate value of deals was comparable to the total value of deals in North America. India and China, the largest part of the Asian industry, marked 709 financings in the quarter, worth a combined $16.9bn. There were 932 venture capital deals in North America in the same period, worth an aggregate $17.5bn.”<br /> Preqin adds that total Q1 to Q3 venture capital investments in China and India have surged to $36.2 billion – an over 180% climb from 2014’s $19.9 billion total – bringing Asian VC investments just $17 billion shy of North America’s $53.5 billion for the same time period.</p> <p>Nine of the ten largest venture capital deals in the third quarter were based in Asia as well, with Didi Kuaidi’s two recent rounds bagging the top two spots.</p> <p>However, North America may still have a chance to stretch their lead. While deal numbers in the west has fallen, deal sizes continue to climb with some late stage and debt financing deals reaching “record levels.”</p> <p>Deal numbers in Asia are still climbing though, as Preqin’s Christopher Elvin notes:<br /> “The venture capital industry is developing in two different directions between emerging and mature markets. In emerging markets, particularly in Asia, rapidly developing economies like China and India are providing increasing numbers of opportunities for investors and fund managers. While average deal size is increasing slightly, the key driver of growth is the increasing number of deals.”<br /> Photo: brefoto</p>
Bridgewater’s All-Weather Fund down 6% for the year
Hedge Funds
<p>Guess it couldn’t weather this stormy 2015.<br /> “The $70 billion Bridgewater All Weather Fund, managed by hedge fund titan Ray Dalio, was down 1.9 percent in September and is down 6 percent through the first nine months of the year, three people familiar with the fund's performance said on Tuesday.</p> <p>The All Weather Fund is one of two big portfolios managed by Bridgewater Associates and uses a so-called ‘risk parity’ strategy that is supposed to make money for investors if bonds or stocks sell off, though not simultaneously.”<br /> Reuters does add that it’s up 3.7% for October, though unfortunately for them, spoos has climbed 5.8% in the same time period. As for Dalio’s Pure Alpha II Fund, it did slightly better with a 3.9% year to date return.<br /> Photo: Fadil Basymeleh</p>
Rothman: No hard landing for China
Asset Management
<p>While half of the world debates the veracity of China’s GDP growth data, Matthews Asia’s strategist Andy Rothman would rather that people focus on something much more important – the nation’s apparent shift from exports to consumption:<br /> “The figure is just a tad below the 7% pace of GDP growth for the first two quarters of this year, and is 0.3 percentage points slower than the 3Q14 pace of 7.2%—which was 0.6 percentage points slower than the 7.9% rate in 3Q13. This is the inevitable deceleration of China’s growth due to changes in demographics, slower growth in construction activity and the base effect. The financial media will likely be able to write headlines about the slowest GDP growth rates since the Tang Dynasty for many quarters to come. But is that really the most important part of the story?</p> <p>We are pleased to see that the rebalancing of China’s economy toward consumption and away from exports and investments continues to make significant progress. This rebalancing is key to our investment strategy. For the first time ever, services and consumption (the tertiary* part of the economy) accounted for more than half of China’s GDP, at 51.4%, up from 41.4% a decade ago. This mitigates weakness in manufacturing and construction (the secondary* part), and, if this rebalancing continues, it should mean that macro deceleration will be gradual.”<br /> That would be great, but unfortunately, his argument does have a few holes in it. For one thing, there was just no way services put on a good show in the third quarter. As the always astute Christopher Balding pointed out following the GDP release:<br /> “Service growth was boosted enormously in Q2 by the enormous increase in financial services from the stock market bubble. Given the collapse in the Chinese stock market in Q3, by almost any measure such as price level, margin lending, or trading volume, it seems shall we say puzzling that service growth remained so robust.”<br /> Consumer data meanwhile seems to be a little murky. Clothing and electronic outputs have not been great, which doesn’t seem simpatico with the supposed 10.9% climb in retail sales.</p> <p>Nevertheless, given how Matthews’ funds are doing – the Matthews China Dividend Fund returned 8.45% YTD compared to the MSCI China’s negative 3.44% – chances are these guys know a thing or two about what they're doing. Stay tuned.<br /> Photo: Jim Winstead</p>
Charles Schwab continues ETF ascent
Asset Management
<p>Charles Schwab Corp. (NYSE: SCHW) was a late entrant to the exchange traded funds business, debuting its first ETFs six years ago, but the California-based brokerage giant is making up for lost time.</p> <p>At the end of the third quarter, ETF assets custodied at Schwab climbed 10 percent on a year-over-year basis to $237 billion, according to Schwab Third-Quarter Snapshot. Bond funds have been prolific asset gatherers this year with fixed income ETFs listed around the world now home to combined $500 billion in assets under management. Schwab is getting a piece of that action as more than half of the company's third-quarter ETF inflows went into bond funds with a third going into U.S. equity products, according to Schwab data.</p> <p>“RIA Clients captured 49% of the 12-month ETF flows, up from ...</p> <p>Full story available on Benzinga.com<br /> Photo: Got Credit</p>