TheChek News Flow

Telecoms operators MasOrange and Vodafone Spain had anticipated selling a larger stake to an external investor

Singapore’s GIC is set to take a 25 per cent stake in a fibre optic broadband venture between MasOrange and Vodafone Spain in a deal that will give the sovereign wealth fund a foothold in one of Europe’s biggest telecoms markets.

GIC’s investment in the company, which will serve 12mn premises, will be announced as soon as Monday, people familiar with the matter told the Financial Times, with one adding that its stake would be worth about €1.4bn.

The deal, which will create one of the biggest fibre companies in Europe, comes after the two Spanish telecoms providers announced the creation of the joint venture in January.

The two companies had originally planned for an external investor to take a stake of up to 40 per cent, but the share taken by GIC — which manages an estimated $800bn in assets — will be significantly lower.

MasOrange — Spain’s largest mobile network operator, formed by the near-€20bn merger agreed in 2022 between Orange España and MásMóvil — will hold a 58 per cent stake in the venture, according to the people.

Vodafone Spain, which was sold by its eponymous parent to London-listed Zegona Communications in 2024, will have 17 per cent. The two companies had originally expected to complete the deal by the end of June.

MasOrange said in January it would use the proceeds from any deal to reduce its debt, while Vodafone Spain said it would use the funds to cut leverage and return capital to shareholders.

The Spanish telecoms market has been fiercely competitive in recent years, as providers — including Vodafone Spain and MasOrange — have battled for customers with industry heavyweight Telefónica.

The desire to attract customers has seen the groups sign agreements to expand their networks in an effort to grow market share.

Zegona, which paid €5bn for Vodafone Spain, has signed a deal for another fibre joint venture with Telefónica to cover a further 3.5mn premises. Talks to find a minority investor in that deal are also progressing, according to a person with knowledge of the matter.

Zegona, which is led by former Virgin Media executives Eamonn O’Hare and Robert Samuelson, specialises in buying, fixing and selling struggling telecoms assets.

Since its acquisition of Vodafone Spain last year, Zegona has cut 28 per cent of the Spanish operator’s staff and streamlined other costs. Zegona’s share price has risen 170 per cent in the past year.

O’Hare received total pay of £131mn last year, making him the highest paid chief executive of a London-listed business.

Zegona, MasOrange, Vodafone Spain and GIC declined to comment.

Investors today might be too complacent about the risks to earnings from slower growth and higher inflation

Donald Trump sees “tariffs” as the most beautiful word in the dictionary. Investors should not see them so benignly.

US stocks have rallied since the shock of President Trump’s “liberation day” announcement of bigger than expected tariff increases. Initially, this reflected the pause in their implementation. But stocks have continued to rise, even as bilateral deals between the US and its trading partners have confirmed tariff increases. Strong earnings and economic data have lifted sentiment. And investors appear to have reverted to riding the rally led by buoyant tech stocks.

But there are good reasons to be wary of the trend. The headline tariffs emerging out of negotiations might be less than “liberation day” levels but they are still substantially higher than before Trump came to power. Consumers face an overall average effective tariff rate of 18.3 per cent if all the announced increases up to August 1 are brought in, the highest since 1934, according to the running calculations of Yale’s Budget Lab as of last Wednesday. Since then, Trump has announced more tariff increases. Clearly, this is anything but business as usual.

Most economists agree that tariff rises will probably lead to slower US GDP growth and higher inflation. Historically, this combination has seen equity market valuations fall. However, the overall impact on US stocks will depend on the tariff impact on corporate profits.

Current US earnings expectations suggest a sanguine view of that. Upward revisions of earnings forecasts currently dominate cuts to them. And the consensus for projected earnings of the S&P 500 companies over the next 12 months is 11.4 per cent — above the 10 year average of 10.4 per cent.

This optimism on profits appears to reflect three key assumptions, all of which can be questioned: 1) the US is a large domestically driven economy; 2) companies will pass through the tariffs; 3) The Nixon administration raised duties and these had a relatively limited impact on earnings. Let’s look at these in turn.

The US is definitely a more domestically driven economy compared with the OECD average. Exports account for only 11 per cent of US GDP compared with 28 per cent across the OECD. And the US level is much lower than the 31 per cent and 42 per cent respectively in the UK and Germany.

But it also important to remember that the S&P 500 does not represent the US economy, and our estimates suggest that the proportion of revenues of index constituents coming from overseas is now about 41 per cent. Even if US GDP suffers only modestly, growth might be slower outside the country as a result of the new trade regime. And Trump has already made it clear that he expects companies to “eat the tariffs” rather than pass on cost increases.

Some of my clients like to compare the Trump tariffs to what happened in 1971 under Nixon’s tariff regime, when US profits saw no negative impact from the tariffs. However, the Nixon shock saw tariffs of just 10 per cent, and these were removed after four months following an international agreement to end dollar convertibility to gold.

The key risk for investors is that the scale of Trump’s tariffs are, potentially, more akin to the tariff increases seen in the 1920s and 1930s — larger and more open-ended than those under Nixon. Data going back to 1900 collated by Professor Robert Shiller at Yale shows that the only two occasions when earnings fell as much as they did in the Great Financial Crisis were in the early 1920s and 1930s. Whether a coincidence or not, this should certainly be alarming.

The Smoot-Hawley tariffs of 1930 and their role in causing the US depression has been much discussed. Less well known are the 1921 Emergency Tariffs Act (increasing tariffs on farm products), and the 1922 Fordney-McCumber Tariffs (which impacted a broader range of products). As a result of these measures, the average tariff on dutiable goods was 38 per cent. While any causality is hard to prove, S&P earnings fell by 61 per cent in 1921 and US equities dropped by 44 per cent from their peaks of late 1919.

What is also notable from the tariff episodes of the 1920s and 1930s is that global exports as a percentage of global GDP fell sharply — by almost 3 percentage points in the early 1920s and more than 5 per cent in the early 1930s. While the structure of the US economy has clearly changed since the early 20th century, global trade and profit growth are closely linked. Markets today appear to be priced not for “business as usual”, but for perfection.

BP to report on cost cuts as activist investor Elliott steps up pressure

Status update on plan to save $5bn comes as US hedge fund pushes energy major to go even further

BP will reveal on Tuesday its progress on a $5bn cost-cutting plan, as activist investor Elliott Management increases pressure on the energy major to rein in operating expenses more aggressively.

The US hedge fund, which has built a 5 per cent stake in BP, has made operating cost reductions a central focus of its campaign at the UK group, which it is urging to aim for $20bn of free cash flow in 2027.

Elliott wants Murray Auchincloss, BP chief executive, to add another $5bn of cost savings to the target he announced in February of $4bn-$5bn of reductions by 2027 from a 2023 baseline.

The hedge fund has “identified tens of thousands of BP support staff globally” as an example of the company’s bloated cost base, according to one person familiar with Elliott’s thinking. BP declined to comment on the number.

BP has already cut $750mn of costs towards its target in 2024, and Auchincloss has pledged a detailed progress report alongside the company’s half-year results on Tuesday, five months after unveiling a “fundamental reset” to its strategy aimed at reviving its performance.

The company is looking to reach its savings target through a combination of streamlining supply chains, job cuts, exiting parts of the business such as hydrogen, and divestments — including selling BP’s onshore wind assets and spinning off its offshore wind arm.

But Elliott has questioned the credibility of BP’s plan. The hedge fund estimates that the net new cost savings in the plan will be closer to $1bn after divestments and previously realised savings are excluded and new costs from growth are added, and believes BP’s general and administrative expenses are far too high.

Not all investors are aligned with Elliott’s approach. David Cumming, head of UK equities at Newton Investment Management, said “BP still needs to demonstrate better operational improvement overall, but cost control is not the key issue”.

Another major investor said that asking BP for a further $5bn of cuts risked derailing its future growth. “Starving the company of capex and opex in the near term may not be the optimal outcome for the long-term health of the company,” they said. “I would guess there is some upside to BP’s stated target but doubling it to $10bn seems overly aggressive.”

BP’s distribution and administration expenses, which include payroll, overheads and product distribution, have totalled nearly $69bn over the past five years, $9bn more than Shell, despite the latter generating significantly higher revenues and earnings.

However, a person close to BP suggested the two companies’ numbers could not be compared because of accounting differences.

BP’s employee numbers have risen 58 per cent to 100,500 since 2020, as it absorbed roughly 30,000 workers by acquiring the TravelCenters of America fuel station chain and taking full ownership of Brazilian ethanol business Bunge Bioenergia, compared with a 10 per cent rise in Shell employees in the same period to 96,000.

“They are going in two completely different directions,” said Lydia Rainforth, an analyst at Barclays. “Shell has clearly made more underlying progress on any definition.”

BP has announced 4,700 job cuts this year from its roughly 40,000 office-based staff, and a reduction of 3,000 contractors. Kate Thomson, BP’s chief financial officer, said in April that the company was also assessing a further 3,400 contractor roles.

A number of senior executives have also departed, as BP pivots away from its ambitious energy transition goals back to its core oil and gas business.

Giulia Chierchia, the former head of strategy, and Richard Bartlett, head of electric vehicle charging unit BP Pulse, both left in June. Tracey Clements, who led the European fuel and convenience retail business, departed in January.

Shell said at its second-quarter results last week that it had made $800mn of cost savings in the first half of the year, of which only $300mn came from divestments. Wael Sawan, chief executive, said the company had made $3.9bn of reductions since 2022, “faster than maybe I expected that we were going to get there”.

Other oil majors are also moving to slash costs. Chevron said this year that it planned to cut up to 20 per cent of its workforce and reduce annual costs by $5bn to $7bn by the end of 2028.

Is it still worth buying a flat in London?

It’s the question one buying agent is repeatedly being asked right now. The answer is . . . mixed

Buying a leasehold London flat seems out of fashion. With the Covid rush to houses — which offered more space and a garden — prices surged ahead of flats, which are often associated with high service charges, gnarly legislation and legal hazards. As a buying agent, I’m often asked whether buying a flat in London is still worth it.

Sometimes, yes. If you only need a London pied-à-terre several times a year, a flat still wins hands down for security, maintenance and a concierge. And even for those with big budgets, flats are the only option for many of central London’s coolest neighbourhoods — excepting the odd mews house (in Marylebone, for example). Flats also remain the entry route for many on to the property ladder.

And houses aren’t always the right choice. One client I spoke to recently is lamenting the high maintenance costs, and worries his house is not secure enough when he is abroad. He’s planning to sell it and buy a flat, stumping up at least £1mn in stamp duty; it has been an expensive mistake.

Due diligence on flats has become harder, true. But here are some ways to navigate the path.

Don’t celebrate the Leasehold and Freehold Reform Act 2024 quite yet. It should be a boost for London flats, promising to make lease extensions quicker, cheaper and more likely. But much of it is being challenged in the courts (by London landowners including Cadogan Estates and Grosvenor Estate), a process that could take years to resolve. In the meantime, key pillars — including abolishing the marriage value calculation that increases the cost of shorter leases, caps on annual ground rent and exempting leaseholders from paying freeholder costs — can’t be enforced.

Until the questions are settled, there’s a risk of overpaying for a home with a short lease. There’s no point in snapping up what seems on the face of it to be a good deal, only to find when you add on the cost of extending the lease the resale value is less than you’ve spent. A good surveyor is vital when preparing an offer.

Scrutinise the service charges. Distinguish genuine increases — we’re all paying more for our heating and maintenance — from unjustified ones, by investigating the past three years of accounts which the vendor or managing agent should provide (if you’re buying the home they must, as part of the conveyancing process). Check early that there is a reserve fund to cover future work, and look out for peeling paint, worn carpets, crumbling facades or anything that suggests the building isn’t being looked after. Are the managing agents cagey or do they seem competent?

Be mindful of refurbs. After the Grenfell tragedy the 2022 Building Safety Act (BSA) was passed to protect occupants of tall buildings (more than five storeys or 11 metres — most Victorian terrace flats are shorter). Its major teething problems are well documented.

Less publicised are the new rules around refurbishments of tired period flats in prime central London. So much of the city has these lovely tall mansion blocks, with flats calling out for renovation. But if they’re more than six stories or 18 metres, they are deemed a “high risk building”, facing tough rules. Any significant work needs approval from a new Building Safety Regulator (BSR), but currently getting these approvals is extremely tricky.

Building safety experts are in short supply, meaning potential delays. The BSR is swamped with requests and frequently asks for more information, further slowing things down. One of our clients is seven months in, tens of thousands of pounds down in consultant and application fees, and still without approval. He hoped to have moved in by now; instead, he is in limbo paying a huge mortgage and service charge every month for a home he can’t live in.

Another obstacle for those planning renovations comes from leases with “absolute prohibition” against works — still common in Mayfair and other parts of Westminster. Historically, landlords got around these, granting permission for alterations in exchange for a fee from the leaseholder. But after a landlord in Maida Vale was successfully sued for this by another leaseholder in the block in 2020, many of the larger landlords in central London are simply saying no.

We still hear of buyers trying their luck — buying a flat then approaching their neighbours informally to persuade them not to object. But this is risky: don’t buy a flat assuming you’ll succeed — especially in a big block with lots of neighbours.

A solicitor will spot the absolute prohibition clause — ensure they have had a chance to, before spending £3,000 on a building survey.

A good planning consultant can be worth their weight in gold. Buying adjacent flats in a building then combining them was once a great way to create a large high-end lateral apartment. But today, councils are desperate not to reduce the number of housing units. Since last July, “amalgamation” has become nearly impossible in Kensington and Chelsea — Westminster has also cracked down. In both boroughs, we often see sellers and selling agents claiming it is still possible.

Restrictions can be circumvented, however, such as when you’re improving the housing supply by creating a family-sized home, or if the units are substandard — badly ventilated, say, or lacking daylight. Where the property is listed and you’re returning it to its original plan, that could work, too. (Meanwhile, if you own adjoining properties with existing permission, or that are combined, your home could be more valuable if it’s in a “high risk building”.)

Be brave, be prepared. Don’t desert the classic London flat. They may well still be the only option to live where you want, and their current unpopularity means there remain real finds out there. Just hold your nerve.

European banks get their meme-stock moment

The region’s sector has been on a rally of late and can still look forward to an earnings boost

A long-suffering company suddenly doubles in value on the back of newfound investor exuberance. Is it the latest revival of meme stock mania, or just another European bank?

Société Générale’s solid second-quarter results last week pushed its year-to-date share price gains briefly above 100 per cent, until Donald Trump’s next salvo of tariff announcements dragged the stock back on Friday.

Admittedly, SocGen has been helped by an especially lousy starting point but, among its rivals, the stock is exceptional only for the extent of the gains, not the direction.

The wider European banking sector has been on such a barnstorming rally this year that even bullish analysts were wary of a pullback as earnings season began at the start of July; instead, the Stoxx 600 banks index of European lenders jumped 7 per cent over the month, bringing its 2025 gains to almost 40 per cent.

If the rally was looking tired before, surely it must be on its last legs after the latest sprint? Not necessarily. The sector is no longer cheap, but most of the companies are in decent shape and there are still some tailwinds that could help boost earnings.

The economic and political uncertainty that dominated the past few months weighed on some areas of growth in the second quarter, but banks did a decent job controlling what they could control. Costs across the sector were lower than expected. Deutsche Bank and BBVA are two that comfortably beat analysts’ cost expectations.

Moreover, while the uncertainty discouraged some activity, there were few signs that clients were in trouble; provisions for bad loans were also lower than feared. NatWest, SocGen and UniCredit were among those that upgraded their full-year earnings forecasts.

Sharp share price drops in reaction to Trump’s latest tariff announcements on Friday highlighted the most obvious risk to the rosy outlook. Should trade-related uncertainty turn into a full-on economic downturn that hits employment levels, banks would suffer. 

But Friday’s response was muted compared with the panic that accompanied the first wave of announcements in April. If markets continue to rebound and recent trade agreements lead to less unpredictability over the medium-term, investment banks in particular could benefit — Barclays, UBS, Deutsche and BNP Paribas all highlighted strong pipelines of clients keen to push ahead with deals.

Even without that, banks continue to benefit from moves in the yield curve — the difference between short and long-term bond yields. A wider gap — known as a steeper curve — increases profitability for banks, since their basic model is to borrow short and lend long. BNP and Spain’s CaixaBank both highlighted the benefits from steepening this quarter, and the trend should continue as European governments increase long-term borrowing to fund infrastructure and defence spending. Bank investors had to wait a long time for this moment; they deserve to enjoy it a little longer yet.

Natixis owner’s plans for ‘new European player’ at mercy of Giorgia Meloni

Chief of French bank BPCE has been on year-long acquisition spree, but asset management deal with Generali remains stuck

The chief of Natixis-owner BPCE wants to turn the French bank into a “new European player . . . in the financing of the European economy” — but a key element of his plan is at the mercy of Rome.

Nicolas Namias has been on a pan-European acquisition spree, agreeing a €6.4bn takeover of Portuguese retail bank Novo Banco, buying Société Générale’s German-based equipment leasing business and striking a deal to merge Natixis Investment Managers with Generali’s asset management business, all in the space of a year.

Namias said Europe needed financiers able to back the initiatives outlined in recent reports by Mario Draghi and Enrico Letta, which set out ways for the EU to bolster its internal market and improve its competitiveness.

“There’s a lot of talk about the Draghi report or the Letta report, which is good. But now we need players who can enact these initiatives and governments to support them,” he said.

But Namias has run into opposition from Prime Minister Giorgia Meloni’s government in Italy. While US private equity group Lone Star’s sale of Novo Banco to BPCE for €6.4bn was welcomed by the Portuguese government, Namias has faced more difficulty obtaining support for the Generali deal.

People familiar with the tie-up said concerns from the Italian government and machinations in the country’s banking sector — where Generali is caught in a wider dealmaking battle that has pitted the Italian government’s allies against the financial establishment — meant it was at risk of failing.

BPCE had hoped to complete the transaction, which would create Europe’s largest asset manager by revenues, by the end of the summer but Namias signalled that this could slip due to factors outside its control. Completing the merger was “dependent on the current environment in Italy” and the timetable was not “in the hands” of BPCE, he said.

Generali is the largest buyer of Italian government bonds, and domestic opponents have claimed a deal could threaten the country’s public debt — a point rejected by BPCE and Generali.

“I understand that a government pays close attention to its financial sovereignty, but I’m convinced that our project reinforces the financial sovereignty of Italy, France and Europe,” added Namias, who declined to comment further on discussions with the Italian government.

BPCE, which was formed in 2009 from the combination of Banque Populaire and Caisse d’Epargne, is the second-largest lender in France and derives around 80 per cent of its revenue there.

The deal spree offers few synergies but will help the bank reduce its reliance on the French economy, which left it exposed when domestic regulation curbed its ability to pass on higher interest rates to borrowers when the European Central Bank started raising rates.

While Novo Banco’s contribution to BPCE’s earnings will be small, it would increase its portfolio of variable-rate loans, diversifying its balance sheet.

Namias dismissed concerns about weak growth in France and Europe hurting BPCE. Speaking shortly after the deal between the US and European Union that will impose 15 per cent tariffs on most European exports to the US, he added: “Regional sovereignty is taking on even more importance than it has had before”.

He also declined to comment on what BPCE would do if it failed to complete the Generali joint venture. “Talking about plan B means giving up on plan A.”

Germany’s biggest sports retailer considers moving production into China

Intersport eyes spare Chinese manufacturing capacity as Nike and Adidas back away from the country amid trade war

One of the world’s largest sporting goods retailers is considering shifting production into China, just as brands including Nike and Adidas move production out of the country in response to US tariffs.

Intersport International’s new chief executive Tom Foley told the Financial Times that the group is considering sourcing a greater proportion of its private label goods — which accounted for about €1.4bn of revenues last year — from China.

The deliberations come as US sports brands shift production away from China to countries in south-east Asia, where tariff rates are lower. Chinese manufacturing activity contracted for the fourth straight month in July.

The moves away from the country, Foley added, “might put pressure on production capacities in markets that ordinarily would not have that”.

Intersport — which operates 5,500 stores across 42 countries — is a Switzerland-based co-operative owned and managed by national organisations. It is particularly prevalent in Europe and is the largest sports retailer in Germany.

The group, which generated €14bn revenue last year, sells its own private label goods as well as those made by brands including Nike and Adidas. The company does not disclose its profits.

It is now encountering increased competition for factory space in countries such as Vietnam and Bangladesh, even as surplus capacity remains available in China.

“It’s not a situation now that we have to move from Bangladesh to China — but we could do it,” said Foley, who took over as chief executive in July. Intersport’s main sourcing markets include China, Bangladesh, Vietnam and Cambodia.

Long running US-China trade tensions have spurred sporting goods brands to move production out of China in recent years.

Adidas sourced 27 per cent of its products from Vietnam last year, 19 per cent from Indonesia and only 16 per cent from China — primarily for its sales in the country itself.

Meanwhile, Nike currently produces 16 per cent of its footwear in China and told analysts in June that it wants to reduce that to a high single-digit percentage within the next 12 months.

Foley said the balance of power in the industry more broadly was shifting from the likes of Nike and Adidas back towards retailers like Intersport.

“Certainly their dependency on us . . . has increased,” he said, noting that many major brands had failed to scale their direct-to-consumer businesses to the levels they had hoped for. The power dynamics “have shifted back to where they were eight or nine years ago,” he added.

Foley wants sales of Intersport’s private label products to comprise as much as 20 per cent of the group’s annual revenue within five years, up from 10 per cent today, with the ultimate goal of boosting profitability. “For a strong and sustainable business, we need a higher margin,” he said.

Currency swings sap spending power of American and Chinese travellers overseas

Sharp declines in tourist spending on luxury goods in Japan and Europe are dragging on industry sales, adding to the challenges for a sector grappling with the end of a multiyear boom and the fallout from US tariffs.

Second quarter sales at Bernard Arnault’s luxury goods powerhouse LVMH, as well as at Prada and Moncler, were hit by lower spending from American tourists in Europe and by Chinese tourists in Japan.

Last year, waning luxury sales were boosted by a springtime surge in demand in Japan after Chinese consumers flocked to the country to load up on designer bags and shoes, taking advantage of the weakness of the yen, which had fallen to its lowest level for over 30 years.

Meanwhile, American tourists were spending freely in European boutiques as a strong dollar bolstered their purchasing power abroad.

But those tailwinds have disappeared this year as the yen recovers and the dollar declines in value, in effect removing a cushion for the industry as it contends with subdued demand in the US and China — the twin engines of luxury growth.

LVMH chief financial officer Cécile Cabanis cited changes in tourist spending patterns as the main reason why sales at its key fashion and leather goods division declined by 9 per cent organically in the second quarter.

Spending by American tourists slowed down “very strongly”, Cabanis told the Financial Times last month, adding that increased spending from locals in Asia was not sufficient to offset the declines LVMH suffered in Japan.

In the second quarter of last year, sales in Japan jumped by 57 per cent at the group behind Louis Vuitton and Dior, and by 27 per cent at Gucci owner Kering.

At its earnings report last month Italian outerwear brand Moncler blamed a 2 per cent organic sales decline on weaker spending by Americans in Europe and by Chinese shoppers in Japan.

At Prada, where tourists contribute 30 per cent of sales globally, management also attributed a 2 per cent decline in first half sales at its namesake brand on the same factors.

The US dollar has fallen by more than 10 per cent against the euro in the first half of 2025 as concerns over inflation, related to US President Donald Trump’s tariffs, caused a sell-off of US assets.

That has diminished the incentive for US travellers to live out their ‘Emily in Paris’ fantasies with spending sprees in the continent’s luxury boutiques.

Analysts at Citi noted that even Switzerland-based Richemont, where jewellery sales at Cartier and Van Cleef & Arpels underpinned another quarter of double-digit revenue growth, will come under pressure from weaker tourist spending in Japan and Europe over the next year.

Tourist spending is slowing as prospects for local spending in luxury’s two most important markets remain uncertain. Chinese consumer confidence, shaken by a decline in local asset values in the wake of the pandemic, remains stuck at record lows.

And demand in the US, luxury’s biggest market by sales, appears fragile as Trump’s tariffs threaten to usher in another wave of price inflation on goods manufactured overseas.

Bernstein forecasts a 2 per cent decline in global luxury revenues in 2025, reversing its previous prediction of 5 per cent growth because of the increased likelihood of a global recession.

The decline in tourist shopping is linked to deeper questions facing the industry, which cashed in on years of buoyant demand by pushing through above inflation price increases, according to Bernstein analyst Luca Solca.

“Luxury consumers are still looking for value — Chinese tourists are not in Japan because they want to go see Mount Fuji,” said Solca. 

“This is an indirect indication that too many luxury brands pushed too many price increases, and that they need to do some homework in order to appeal to consumers — particularly middle classes — again.”

Tax breaks could lead UK pensions into domestic stocks, says exchange chief

The UK is struggling to attract companies to list on the London Stock Exchange, with fundraising from new listings falling to a 30-year low.

Part of the problem is the diminishing pool of capital in Britain, as pension funds have retreated over the past couple of decades. Some investors have clamoured to mandate UK pensions to invest in domestic stocks.

But forcing UK pensions is not the solution, according to David Schwimmer, chief executive of the London Stock Exchange Group. “We are not pushing for mandation,” he said.

Instead, he reckons tax breaks should be used to encourage domestic flows into UK public markets, writes Nikou Asgari.

“It’s very important to take a look at the fact that the pension funds get about £49bn a year in tax incentives,” he added. 

Making those tax benefits conditional on pension funds putting a minimum percentage of their assets into UK investments “would seem to be very, very reasonable”, Schwimmer said.

Although LSEG makes most of its revenues from its data and analytics business, the group remains at the heart of the City and is a barometer for the health of the UK’s capital markets. 

“The London market has had a number of very positive, healthy reforms over the last few years,” Schwimmer said, adding that multiple companies were lining up to float in London soon. 

Business bank Shawbrook is planning to list in the UK, while insurer CFC is also weighing an IPO.

But companies are still leaving or have been snapped up. Last week Brookfield struck a £2.4bn deal to acquire life insurer Just Group while Wise shareholders voted to shift the fintech’s primary listing from London to New York.

The return of stockpicking hedge funds

The market turbulence of the past few months has rattled many investors, but it has been a boon for at least one cohort: stockpicking hedge funds, write Costas Mourselas and Amelia Pollard.

So-called equity long-short funds, which try to buy stocks they think will do well and bet against companies they think will underperform, took in $10bn from investors in the first half of the year, according to data from Hedge Fund Research.

This trend has marked a reversal of fortunes, as the sector had suffered more than $120bn of withdrawals since 2016.

Some of the industry’s biggest names did particularly well, with Chris Hohn’s TCI and John Armitage’s Egerton among them.

“The stock picker’s market is back,” said Zlata Gleason, partner and head of client advisory at Indus Capital. “If you look at the volatility underneath, it’s like a rollercoaster. And that’s where stockpickers can really benefit.”

As one of the oldest and best known sectors of the industry, long-short hedge funds have had a tough ride in recent years and been overshadowed by giant “multi-manager” funds, which spread clients’ money over a variety of strategies.

But stockpickers have come roaring back in the face of market volatility, stoked by US President Donald Trump’s “liberation day” tariff salvo in April. The long-short strategy has been among the best performers in the hedge fund industry so far this year, returning 3.5 per cent in June and 9.2 per cent in the first half of the year, according to data from PivotalPath.

“Liberation day was a bit of a wake-up call for people,” said Charles Lemonides, the founder of hedge fund ValueWorks. “The volatility around that moment caught their attention . . . You don’t want to have just naked exposure to markets that swing that violently.”