TheChek News Flow

Founder Kenneth Tropin seeks to attract ‘talented people’ in the city as firm marks 30th year

Graham Capital Management is planning to expand to New York after decades as a Connecticut-based hedge fund, in a vote on the future of America’s financial capital following an exodus of investment firms since the Covid-19 pandemic.

“We are looking at spaces literally as we speak,” Kenneth Tropin, founder and chair of the $20bn investment firm, said in an interview with the Financial Times.

He added that the New York office will accommodate a staff of at least 30, led by portfolio managers. Graham, which this week marked its 30th year of operations, has workforce of about 210 in offices in Connecticut, Florida and London.

While not a large number, the dozens that Graham aims to employ in New York will come as welcome news to a city whose office buildings have remained underused since working from home became common during the pandemic. Since 2020, more than 100 investment companies ranging from Elliott Management to Ark Investment moved their headquarters out of New York.

Even though office occupancy rates remain well below pre-pandemic levels, the exodus appears to have slowed. An index compiled by VTS, a real estate technology company, shows New York is leading a recovery in office demand across the US. Ken Griffin, founder of hedge fund giant Citadel, and two developers this month filed plans to build a 62-storey office tower in New York, where his firm will become the anchor tenant.

Tropin said his firm needs to have a presence in New York as the city remains a magnet. 

“We recognise that there are a lot of talented people who would prefer to work in New York for a number of reasons,” he said. “Portfolio managers may want to have meetings that are easier to have in New York than they are in Connecticut.” A New York location might also be more convenient for some clients, which range from pension funds to family offices, he said.

While Manhattan’s office rent more than doubles that of Norwalk, the city that is home to Graham Capital’s headquarters, Tropin is not deterred. 

“It’s not inexpensive, but I don’t see a reason not to do it.”

Graham Capital has outlasted many peers. Its flagship Proprietary Matrix fund reported 523 per cent in total returns between 2000 and 2023, according to an investor who has read its performance report. That compared with an increase of 228 per cent for the S&P 500 index over the same period.

Tropin said Graham had benefited from a focus on macro trading, which navigates market swings often driven by geopolitical and policy uncertainties.

“There were 60 25-basis-point rate changes in the last two years compared to 13 25-basis-point rate changes over 10 years between the Fed, [European Central Bank] and [Bank of England], so if you’re a macro trader, there’s significantly more to work with. And you may not always get it right, but there’s a much more interesting set of opportunities to work with.”

He added that his firm had hired consultants to understand the Middle East situation as “what’s going on in crisis zones is as impactful as domestic politics”.

WASHINGTON, May 1 (Reuters) - President Joe Biden on Wednesday announced the approval of more than $6.1 billion in student loan debt relief for nearly 317,000 borrowers who were enrolled at any Art Institute campus from January 2004 until October 2017.

The Art Institutes was a private-for-profit system of art schools in the United States that faced a host of legal issues and closed last September.

The Education Department found that The Art Institutes and its parent company, Education Management Corporation, made "pervasive and substantial misrepresentations to prospective students about postgraduation employment rates, salaries, and career services during that time."

The measure brings the total amount of student loan debt relief put in place by the Biden administration to nearly $160 billion for nearly 4.6 million borrowers.

Progressive voters, whom Biden, a Democrat, hopes will support him against Republican challenger Donald Trump in the November election, have pushed the White House to address student loan debt.

Biden last year pledged to find other avenues for tackling debt relief after the Supreme Court in June blocked his broader plan to cancel $430 billion in student loan debt.

As of June 2023, approximately 43.4 million student loan recipients had $1.63 trillion in outstanding loans, according to the Federal Student Aid website.

Industrial power demand may improve if prices stay low but without a significant uptick, expect companies to start trimming capex budgets

All parties must end eventually. For European utilities, however, the end of historically high energy prices has arrived much earlier than expected.

European gas and electricity prices returned to pre-Ukraine war levels this year, helped by high imports of liquefied natural gas, a warm winter and still subdued industrial demand. Hedging means much of the earnings hit will be delayed until after next year.

Many European power companies have sold forward 50-100 per cent of their anticipated production for this year and 25-60 per cent for 2025, often at prices above €100/MWh, according to a Moody’s analysis. Across Europe, wholesale power prices are below this level, even if they have improved since hitting lows in February.

Differences in these hedging strategies explain the crooked response in utilities’ share prices this year. Generally, those companies more reliant on “baseload” or “flexible” technologies such as nuclear, biomass, gas and coal are more exposed to near-term market prices. Renewables generators use fixed price government contracts, or sales agreements direct with corporates, to cover a large proportion of their expected output in advance.

RWE — which generates higher earnings from its flexible power generation business than renewables — blamed the lower price environment when it cautioned in March that its adjusted earnings this year would probably be at the lower end of its €5.2bn-€5.8bn guidance range.

It said profits from its flexible power unit were expected to average €1.4bn for 2024-26. Previously it had guided to earnings of €1.5bn-plus. In 2023, when market prices were still high, earnings from its hydro, gas and biomass power stations exceeded €3.1bn.

Industrial power demand may improve this year if prices remain low. But unless there is a significant uptick, expect companies to start trimming capital expenditure budgets for 2025-26 — or selling off more assets to fund newer projects. If prices remain subdued beyond 2025, Moody’s estimates the sector could need to reduce capital expenditure by 15-20 per cent relative to current plans to maintain ebitda/capex ratios, which have ranged between 1.2x and 1.4x in the past five to six years.

Even before this year’s wholesale price drops, diversified utilities were already devoting a higher proportion of their capex budgets to regulated assets such as electricity grids — which offer stable, predictable returns. Grid-owning companies like Iberdrola, SSE and Enel have suffered less severe share price falls this year.

Expect the return of power prices to earth to accelerate that trend.