News > Financial Services

KKR snaps up stake in Marshall Wace
Asset Management
<p>Its competitors may be shutting down hedge funds right and left, but for private equity luminary KKR, now seems to be the time to get in, and in a big way.</p> <p>The Wall Street Journal reports that the vaunted private equity firm has taken a 24.9% stake in Marshall Wace (MW), the London-based, $22 billion long-short equity hedge fund run by Paul Marshall and Ian Wace.</p> <p>How much KKR valued its stake is currently unclear, though the acquisition was apparently a stock and cash deal with MW partners receiving 7.4 million shares in KKR worth $20 each.</p> <p>It isn’t just a straight-up purchase though; according to the Independent, the sale comes in two stages. The first involves an injection of cash from KKR which will be locked up until 2020, with the aforementioned KKR stock vesting in 2018, and in the next comes a possible 15% increase in KKR’s stake at the firm by 2019, with half of the additional proceeds reinvested in the fund and the other half used to snap up KKR stock until 2022, the time when Marshall, Wace, and Anthony Clarke get to cash out of the deal.</p> <p>None of them seem to be particularly eager to do so however, as Ian Wace told the WSJ:<br /> “We were never interested in a financial deal…This is all about the next 18 years of our life, not the first 18 years of our life.”<br /> The move effectively returns KKR smack bang on the hedge fund map, a place it was initially hesitant to join in and was ultimately unsuccessful at following the closure of its Goldman Sachs Principal Strategies group-manned hedge fund last year.<br /> Photo: Esther Dyson</p>
A multi-billion dollar fight: The insanity of Uber and Didi Kuaidi
Venture Capital
<p>China ride hailing app Didi Kuaidi has just upped the ante in its fight against rival Uber, raising $3 billion from the likes of China Investment Corp, Capital International Private Equity Fund, Ping An Ventures, joining investors Alibaba Group, Tencent Holdings, Temasek and Coatue Management.</p> <p>This is days after Uber China raised $1.2 billion in a round led by Baidu. According to the Financial times, the battle for dominance has already cost both firms over a $1 billion in marketing and incentives for drivers and passengers.</p> <p>Burning obscene amounts of cash can be important for start-ups in a nascent industry for obtaining economies of scale, even more so when you have to beat away competition.</p> <p>But, increasingly it looks like this can only go one way. A recent article in Forbes showed that Didi Kuaidi has a 78.3% market share in China vs Uber's 10%. Its not just in China that Uber is struggling to take market share from local rivals.</p> <p>Will Uber snag enough market share to recoup it losses in China? Looking at Didi Kuaidi dominance - and the fact it has the resources and backers to easily match Uber’s war chest - it is difficult not to feel the US-firm is on a hiding to nothing.<br /> Photo: Gary Paulson</p>
Questions we should be asking about Ackman vs Herbalife
Hedge Funds
<p>Herbalife has launched a second video attacking  short-selling activist investor Bill Ackman. It is the latest salvo in a war that has now rumbled on for three years.</p> <p>Ackman took a massive $1 billion short position on the nutritional supplement firm in 2012 and since then he has been on a crusade to bring down the firm. His firm Pershing Square Capital even launched a website comparing its multilevel marketing (MLM) business model to a giant pyramid scheme.</p> <p>The battle between Ackman and Herbalife is unprecedented in its longevity and scale. It has backfired for Ackman too. Changes brought about by Ackman's activism have ironically helped the company go from strength to strength.</p> <p>It is a case that Fortune predicts will be studied for years to come, and rightly so. It raises a number of questions, not just about Herbalife, but questions like: is the $34.5 billion MLM industry really just a giant pyramind scheme as Ackman suggests? More importantly: do activist investors make for effective regulators?</p> <p>It's clear Ackman is not only shaping the future of Herbalife, but will no doubt - for better or worse - shape how the businesses community will deal with activist investors for years to come.<br /> Photo: UniversityBlogSpot<br /> &nbsp;</p>
Stage set for first mainland ETF liquidation
Asset Management
<p>It’s pretty safe to say that the past few months have not been kind to the U.S. asset management industry. Here’s a story on Carlyle shutting down some of its funds, and here’s another one on hedge funds getting burned on Black Monday. Well, things aren’t so different over in mainland China:<br />  “ChangSheng Fund Management has asked its unitholders for approval to shut down its Shanghai-listed SSE Market Value Top 100 Index ETF. The Beijing-based manager has invited unitholders to attend a meeting in October for them to vote on the ETF liquidation proposal, according to a statement from the manager.”<br /> Apparently, this will be the first ever ETF liquidation in China according to Asia Asset, and it may be the harbinger of more closures to come as several mutual funds – including a QDII status fund – race to close up shop.</p> <p>ChangSheng has yet to receive approval though, and would need at least two-thirds of the fund's holders to vote in favor of liquidation in order to proceed, but given it’s 25% decline in July alone, chances are high that the DBS-backed firm will receive enough votes for it to push through.</p> <p>The fund, which was launched just two years ago, had just $3.2 million in NAV as of the end of June.<br /> Photo: Robert Daly</p>
U.S. ETFs/ETPs gathered $2.4 billion in new assets in August
Asset Management
<p>LONDON — September 9, 2015 — After a roller coaster August for investors, ETFs/ETPs listed in the United States gathered just US$2.4 billion in net new assets, according to ETFGI’s preliminary ETF and ETP global insights report for August 2015.</p> <p>In the first eight months of 2015 record levels of net new assets have been gathered by ETFs/ETPs listed globally, with net inflows of US$219.7 Bn marking a 16% increase over the prior record set during the first eight months of 2014. In the United States net inflows reached US$127.5 Bn, which is 19% higher than the prior record set last year, while in Europe year to date (YTD) net inflows climbed to US$59.7 Bn, representing a 17% increase on the record set YTD through end of August 2014. In Japan, YTD net inflows were up 74% on the record set last year, standing at US$28.9 Bn at the end of August 2015.</p> <p>“Worries about China’s stock market, currency and economy mixed with falling commodity prices helped to cause a correction in the US stock market. Investors in the United States are concerned given the uncertainty of when the Fed will raise interest rates. The S&amp;P 500 index ended August down 6%.", according to Deborah Fuhr, managing partner at ETFGI.</p> <p>At the end of August 2015, the US ETF/ETP industry had 1,768 ETFs/ETPs, assets of US$2.03 trillion, from 85 providers listed on 3 exchanges.<br /> U.S. ETFs/ETPs see net inflows of US$2.4 Bn in August<br /> In August 2015, ETFs/ETPs listed in the United States gathered net inflows of US$2.4 Bn.  Fixed income ETFs/ETPs gathered the largest net inflows with US$4.7 Bn, followed by commodity ETFs/ETPs with net inflows of US$822 Mn while equity ETFs/ETPs experienced the largest net outflows with US$6.4 Bn.</p> <p>YTD through end of August 2015, ETFs/ETPs have gathered net inflows of US$127.5 Bn.  Equity ETFs/ETPs gathered the largest net inflows YTD with US$83.9 Bn, followed by fixed income ETFs/ETPs with US$30.1 Bn, and commodity ETFs/ETPs with US$1.5 Bn.</p> <p>Vanguard gathered the largest net ETF/ETP inflows in August with US$3.6 Bn, followed by Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB) x-trackers with US$1.4 Bn, VelocityShares with US$1.3 Bn, ProShares with US$969 Mn and Schwab ETFs with US$812 Mn net inflows.</p> <p>YTD, Vanguard gathered the largest net ETF/ETP inflows with US$49.2 Bn, followed by iShares with US$46.8 Bn, WisdomTree with US$20.8 Bn, Deutsche Bank x-trackers with US$15.9 Bn and First Trust with US$9.2 Bn in net inflows.</p> <p>This article was originally published by ValueWalk. <br /> Photo: GotCredit<br /> &nbsp;</p>
Chanos tells CNBC that Tesla and Solar City are shorts
Hedge Funds
<p>"Amazon is a great business," Jim Chanos tells CNBC Squawk Box. The founder and president of Kynikos founder says, however: "It's a lot less attractive today than it was a few years ago."</p> <p>Also in the interview, Chanos shares his views on the computer hardware business and other of his favorite shorts.</p>
Does Morgan Stanley add value for investors?
Asset Management
<p>&nbsp;</p> <p>&nbsp;</p> <p>In an April 21, 2015 column, New York Times reporter Nathaniel Popper observed that, over the last few years, a growing line of mutual funds created by the likes of Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo have attracted billions of dollars from investors looking to earn a good return.</p> <p>Popper noted that in the latest 10-year period, Morningstar data showed that only 38% of Morgan Stanley’s mutual funds outperformed their analyst-assigned benchmarks. Thus, while the fees these funds have generated are among the few consistent bright spots of growth on Wall Street, there is still a question for investors: Have these banks’ actively managed mutual funds actually been good investment choices?</p> <p>Today, I’ll provide further insights into that question as I continue my series evaluating the performance of the market’s foremost actively managed fund families with an in-depth look at Morgan Stanley Investment Management.</p> <p>According to Morningstar, as of April 30, 2015, Morgan Stanley had over $34 billion in assets under management in mutual funds. The firm’s website states: “Morgan Stanley Investment Management strives to provide outstanding long-term investment performance and best-in-class service to a diverse client base, which includes governments, institutions, corporations and individuals worldwide. Our global structure leverages the breadth, depth and access of the Morgan Stanley franchise to provide our clients a comprehensive suite of investment management solutions.”</p> <p>Does Morgan Stanley deliver on what they strive for? Have its funds been adding value for investors, or was the firm the real beneficiary?</p> <p>Active versus passive</p> <p>As is my practice, I’ll compare the performance of Morgan Stanley’s actively managed equity funds to similar fund offerings from two prominent providers of passively managed funds, Dimensional Fund Advisors (DFA) and Vanguard. (Full disclosure: My firm, Buckingham, recommends DFA funds in constructing client portfolios.)</p> <p>To keep the list to a manageable number of funds, and to make sure I examine long-term results through full economic cycles, the period covered will be the 15 years from April 2000 through March 2015. I’ll use the lowest-cost shares when more than one class of fund is available for the full period. In cases where Morgan Stanley has more than one fund in an asset class, I’ll use the average return of its funds in the comparison. The table below shows the performance of 13 of Morgan Stanley’s mutual funds covering seven asset classes – five domestic funds and eight international funds.</p> <p>April 2000 - March 2015</p> <p>Fund<br /> Symbol<br /> Annualized Return (%)<br /> Expense Ratio (%)</p> <p>U.S. Large Growth</p> <p>Morgan Stanley Multi-Cap Growth<br /> CPODX<br /> 0.2<br /> 0.92</p> <p>Morgan Stanley Institutional Opportunity<br /> MGELX<br /> 3.0<br /> 1.67</p> <p>Morgan Stanley Institutional Growth<br /> MSEGX<br /> 4.0<br /> 0.96</p> <p>Consulting Group Large Cap Growth<br /> TLGUX<br /> 1.9<br /> 0.67</p> <p>Morgan Stanley Average</p> <p>2.3<br /> 1.06</p> <p>Vanguard Growth Index</p>
Friendly fire helped to blow up ETFs on Black Monday
Asset Management
<p>ETFs traded like drunken sailors on Black Monday, practically throwing themselves overboard.</p> <p>Recall on August 24, some ETFs traded at a 50% discount to the underlying baskets of stocks that they reference.</p> <p>Is that anyway for a $2 trillion-plus market to act, even if the Dow Jones Industrials tumbles 10% at the open?</p> <p>No. It is not. Credit Suisse estimates that 42 cents of every dollar traded on U.S. exchanges is for an ETF.  A lot of industry insiders have said some self-serving stuff. Or retail investors shouldn't set market orders. Thanks for the advice.</p> <p>Barron's takes a deep dive into what happend on August 24 and comes up with some pretty interesting observations. Observation numero uno: New regulations put in place after the June 2010 flash crash made things much worse. Namely: 327 ETFs were forced to halt trading for five minutes; some were halted more than 10 times.</p> <p>What would you do if suddenly you had no idea how much the ETFs you were trading were worth? Or more important, what would a market maker do? Widen the hell out of the spread. And then you get iShares Core S&amp;P 500 tumbling 26%, more than 20 percentage points below the underlying stocks for the $65 billion ETF. This is the stuff of panic.<br /> “Aug. 24 highlighted the fragility of ETFs in a stressed market,” says James Angel, a professor at Georgetown University who specializes in the functioning of the stock market. “The characteristics of the products aren’t going to change, so we need to contain that fragility.”<br /> Later this month, the SEC's equity market structure committee is holding a meeting. Let's hope ETF structure is top of the agenda.</p> <p>Read the entire analysis at Barron's here. It's very good stuff.<br /> Photo: Official U.S. Navy Page</p>
September swoon for ETFs could continue in the week ahead
Asset Management
<p>U.S. stocks ended last week in miserable fashion as all three major U.S. indexes slumped more than 1 percent on Friday. For the week, the S&amp;P 500, Dow Jones Industrial Average and the Nasdaq Composite each lost at least 2.6 percent.</p> <p>With those dismal numbers in mind, perhaps it is a good thing that the week ahead will be shortened by the Labor Day holiday because while the bull market is still in tact, investors' enthusiasm for riskier assets is clearly waning. Emerging markets stocks and exchange traded funds continue to confirm as much.</p> <p>Read more at Benzinga.<br /> Photo: Rich Herrmann</p>
The best (and worst) hedge funds so far in 2015
Hedge Funds
<p>Julian Robertson’s cubs may have been roarin’ so far this year but as good as their performance was, it wasn’t good enough for them to crack into the top five.</p> <p>Zero Hedge has just released a 20 best (and worst) performing hedge funds for 2015 list and surprisingly, none of the usual suspects – save for John Burbank’s Passport Capital – were on it.</p> <p>Burbank’s Passport Special Opportunities Fund came in third this year with a huge 29.18% return through July 31, while Simon Sadler’s Segantii Asia-Pacific Equity Multi-Strategy Fund came in second with an eye-popping 32.19% return through August 28. Topping them all though is Joseph Edelman’s Perceptive Life Sciences Offshore Fund, which boasts a Druckemiller-esque 35.34% return through August 21. Here’s the rest of the top five:</p> <p>Place<br /> Fund name<br /> Return<br /> Date</p> <p>4th<br /> Lucerne Capital Fund<br /> 23.33%<br /> July 31</p> <p>5th<br /> Alcentra Global Special Situations Fund<br /> 22.79%<br /> July 31</p> <p>And here are the bottom three:</p> <p>Fund name<br /> Return<br /> Date</p> <p>Dorset Energy Fund<br /> -24.54%<br /> August 28</p> <p>Elm Ridge Capital Partners<br /> -18.04%<br /> August 31</p> <p>Tulip Trend Fund<br /> -16.73%<br /> August 31</p> <p>Forever haters, Zero Hedge would like to point out that John Paulson has stopped publishing his performance figures entirely.<br /> Photo: Damon Green</p>