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Anthony Vaccarello’s former design director Chemena Kamali is leading a parallel studio at Chloé, with Gabriela Hearst’s future at the Richemont-owned brand unclear, sources said.

PARIS — Chloé has hired Chemena Kamali to lead a parallel design studio as creative director Gabriela Hearst is expected to exit the Paris-based brand, market sources said.

Kamali, who was previously design director for women’s ready-to-wear at Saint Laurent under Anthony Vaccarello, is designing products for Chloé's pipeline as next steps for the brand after Hearst’s September show remain unclear.

Hearst, who joined Richemont-owned Chloé in late 2020, had previously enjoyed the support of the Swiss group’s chairman, Johann Rupert, but tensions have mounted as Chloé's business struggled to keep up with rivals during a post-pandemic surge for many luxury brands. Under Hearst, Chloé has enjoyed momentum selling logo totes, rubber rainboots and knit sneakers, but increasingly struggled to sell the $2,000-plus leather bags that used to anchor its business, according to market sources. (Richemont does not break out sales for individual brands).

On the runway, Hearst’s collections resonated most when taking a craft-inflected bent, including a collaboration with Alabama’s Gee’s Bend quilters for fall-winter 2022. Natural fibres worked into intricate braided, embroidered and fringed pieces aligned with the designer’s environmentally-friendly, socially-responsible message, but often pushed up prices in stores beyond what the brand’s consumer clout could support at scale.

Several sources familiar with the matter said they anticipate Hearst’s September show will be her last.

At a June meeting with staff, however, Chloé CEO Riccardo Bellini insisted no final decision had been taken on Hearst’s future with the brand, though the chief executive confirmed to teams the existence of the parallel studio.

Whether Kamali has been tapped as a consultant or is being onboarded for a long-term role remains unconfirmed. Kamali held an instrumental role supporting Vaccarello during a historic expansion of Kering’s Saint Laurent brand starting in 2016. After initially maintaining momentum by mostly sticking to former designer Hedi Slimane’s template of black-and-white branding and ultra-archival styling, a spate of cinematic, colourful collections with a reinforced daywear offer allowed Vacarello to make his mark on the brand and drive increased fashion buzz.

Kamali joined American label Frame earlier this year with a mission to sharpen the brand’s fashion image. But sources say Kamali and associates quickly returned to Paris to pursue another opportunity.

Obesity treatments are currently limited to injections, but pills could expand the market and lower costs

The Ozempic craze has captured the national imagination, along with that of Wall Street.

The financial potential for drugs that lead to significant weight loss isn’t hard to grasp. If even a small portion of the 40% of Americans who are obese get on these medications, the companies that offer them could be looking at massive blockbusters.

But to target the millions of potential patients, manufacturers need to offer more than just weight-loss data. Things like price, convenience and access are also important. For now, Novo Nordisk’s NVO -0.59%decrease; red down pointing triangle Ozempic and its sister drug, Wegovy, as well as Eli Lilly’s LLY 0.25%increase; green up pointing triangle Mounjaro (which is approved for diabetes but not yet for obesity) are expensive—costing over $10,000 a year—and are only available as injections.

An effective pill could change things by making it easier for doctors to prescribe the medications and for patients to adhere to them. A simpler manufacturing process could also eventually bring the price tag down, though that won’t happen quickly.

In a mid-stage study, the highest dose of an Eli Lilly experimental pill, orforglipron, led to 14.7% weight loss at week 36, according to data published in the New England Journal of Medicine on Friday.

Last month, Novo Nordisk, which makes the medication semaglutide under the brand names Ozempic and Wegovy, said that a pill form of that drug helped adults in a trial lose an average 15.1% of their body weight over 68 weeks in a late-stage study.

The results were comparable to once-weekly Wegovy injections.

Novo now expects to file for regulatory approval in the U.S. and Europe this year, though the launch could take time as the company ramps up its manufacturing capacity and deals with shortages of Ozempic and Wegovy. Meanwhile, Pfizer PFE -1.11%decrease; red down pointing triangle is testing two oral drugs and has said it would move whichever of the two looks the most promising into late-stage studies.

Disha Narang, director of Obesity Medicine at Northwestern Medicine Lake Forest Hospital, says that having an oral agent that is just as effective would be a big deal for some patients who, for whatever reason, are more hesitant to use injectables.

Both the injections and the pills are part of a class of drugs called glucagon-like peptide-1 agonists, which essentially mimic a hormone in the gut, GLP-1, that tells your brain that you are full. The mechanism was initially approved for treating diabetes, but pharma companies are seeking to broaden their use for weight loss.

Novo and Lilly have been conducting long-term studies to test whether the drugs can ultimately reduce other health risks associated with obesity such as sleep apnea, heart failure and kidney disease.

Shares of Eli Lilly and Novo have each more than doubled in the past three years and the two companies are now the top two largest pure-play pharmaceutical companies in the world.

Eli Lilly, the only pure-play drug company whose market capitalization exceeds $400 billion, now trades at 44 times forward earnings. That compares with a multiple of 15 for the NYSE Arca Pharmaceutical Index.

Partly driving these sky-high valuations is a bet that annual revenues from these drugs could eventually exceed $100 billion. Some analysts project Lilly’s Mounjaro alone could reach over $50 billion in annual sales for diabetes and obesity.

The studies for the oral drugs have generated further excitement on Wall Street, where investors see the development as paving the way for broader adoption of obesity treatments at lower cost.

Currently, obesity injections are mainly the realm of endocrinologists and obesity specialists. A daily pill could make it easier for primary-care physicians to prescribe them more widely.

“Oral treatments are going to equip the industry with the ability to approach a broader healthcare population,” says Chris Shibutani, a pharmaceuticals analyst at Goldman Sachs.

Importantly, Shibutani explains that it isn’t just about weight loss. Other factors such as price, convenience and side effects will be at play, meaning there will be room for more than just one or two drugs.

“Not every patient will have the same goal when it comes to the magnitude of weight loss,” he says. “It’s like when you go to buy a car, the amount of horsepower may be important, but not everyone needs to get from zero to 60 at the same speed.”

Pills could also bring the list price down while preserving manufacturers’ margins, explains Will Sevush, a healthcare strategist at Jefferies. Sevush notes that Lilly’s orforglipron is a small molecule while Novo’s oral formulation of semaglutide is an oral peptide, which has fasting restrictions and requires a large amount of active pharmaceutical ingredients to manufacture. Small molecule pills like orforglipron could be as much as 70% cheaper than injectables while still generating similar profits, he says.

Some analysts like Shibutani and Sevush say the treatment of obesity could eventually involve a combination of orals and injections. At first, they posit, patients will be inducted with higher-efficacy injections that bring patients’ weight down significantly. Once the weight comes off, doctors can then move patients on to a maintenance phase, where easier-to-take pills might make more sense, even if they produce less weight loss.

Obesity specialists insist that America’s obesity problem won’t go away until the country has a real reckoning with its unhealthy eating habits. Medications, whether in pill or injection form, could help, but lifestyle changes are needed too.

But that won’t stop pharmaceutical companies and their investors from cashing in on the weight-loss craze in the meantime. The rollout of oral versions of the drugs will only intensify Wall Street’s appetite.

NIO is among Chinese startups burning more cash to compete in world’s largest electric-vehicle market

SINGAPORE—Electric-car startup NIO NIO -5.49%decrease; red down pointing triangle was dubbed China’s “Tesla killer” when it unveiled a sport-utility vehicle in 2017 that offered a sleek design, large-screen panel and voice-command features—all at half the price of a Model X.

One of China’s most vaunted EV startups, NIO is now a symbol of the challenges many automakers face amid a cutthroat price war in the world’s largest electric-vehicle market.

Its sales have slumped in recent months, prompting the carmaker to slash prices, cut back investment and commit to burning more cash.

Chief Executive William Li said this month that New York Stock Exchange-listed NIO has to prudently manage liquidity risks as weak sales in the past two quarters weighed on its operating cash flow.

An Abu Dhabi government-backed entity will invest around $740 million in NIO, the company said last week. Li said he expects sales to start rebounding in June as it recently launched a revamped SUV.

NIO was slower than other automakers to cut prices, and its recent moves show how deeply the competition is hurting automakers’ bottom lines as well as rippling through supply chains. Some startups have been sidelined or killed after burning through cash in China’s crowded market, where the explosive growth of EV sales has slowed this year amid weak consumption and the end of nationwide subsidies for buyers.

Indebted WM Motor earlier this year suspended most of its production, laid off employees and closed stores after running out of cash. The company is backed by Tencent Holdings and HongShan, which was formerly Sequoia Capital China. Letin Auto, famous for its $4,000 electric hatchback, filed for bankruptcy in May after failing to get new funds.

XPeng, another popular U.S.-listed EV startup in China, has reported falling sales since September, despite offering more than 10% discounts on several vehicle models starting in January and launching a new model with more advanced self-driving capabilities.

XPeng delivered almost 40% fewer cars so far this year than in the same period a year ago.

The company doesn’t have much time left to turn itself around as its net cash runs low while rivals catch up with its technology, according to a research note by analysts at CMB International, which downgraded the company’s stock in May.

XPeng didn’t respond to requests for comment.

Once the darlings of investors looking for the next Tesla, EV companies globally are grappling with tighter liquidity, operating problems and intensified competition. American companies including Rivian Automotive and Lucid Group are among those facing rougher times as their cash reserves shrink.

China’s EV and hybrid-vehicle sales growth have slipped in recent quarters from the triple-digit percentages commonly seen in 2021 and much of 2022.

Sales rose 41% in the first five months of this year compared with a year earlier, according to the China Passenger Car Association.

“Not everyone can survive in the market,” said Joel Ying, an auto analyst at Nomura. Startups are more vulnerable than legacy carmakers, which typically have the gas-powered vehicle business as cash cows, he added.

Beijing is finalizing a package of stimulus measures to revive the country’s flagging economy and consumption, The Wall Street Journal has reported.

China’s finance ministry last week extended the tax exemption on purchases of EVs and hybrids to the end of 2025.

The country’s auto market is becoming more challenging for foreign brands, which are playing catch-up in the EV arena. Legacy automakers such as Ford Motor have flopped in China’s EV market, and Volkswagen—which dominated in gas-powered vehicles and sells popular EVs in other markets—has yet to have a model rank among the 10 top-selling EVs.

Tesla remains the No. 2 in the Chinese EV market, selling more than 200,000 cars to local buyers in the first five months of this year, data from the passenger-car association showed.

China’s biggest EV maker BYD, backed by Warren Buffett, sold some 900,000 cars, including hybrids, during the period, accounting for 38% of the segment that China classifies as new-energy vehicles.

Li Auto, which produces more expensive hybrids, delivered more than 100,000 vehicles in the same period, emerging as one of China’s strongest rising players.

Since early this year, dozens of carmakers in China have cut prices while dealers offered discounts and incentives to boost sales.

In January, Tesla made steep price cuts in China.

That move was quickly followed by local players, including XPeng and BYD. The latter trimmed prices for its flagship models in March.

NIO, which had resisted cutting prices, saw monthly deliveries in April and May fall to some 6,000 vehicles from more than 10,000 in previous months.

NIO’s problems were compounded by a slow rollout of new models to replace aging inventory that became less attractive to buyers, analysts say.

Declining sales weighed on its profitability, with its margin from new-car sales falling to 5% in the January-March quarter from 18% a year earlier. As of the end of March, NIO’s cash and other short-term liquidity had fallen by a third to $5 billion from a year earlier, while its debts stood at $2 billion.

NIO’s CEO this month said the company now doesn’t expect to break even until at least the end of 2024, a year later than it previously forecast. It also delayed investment in fixed assets and some research and development.

NIO cut sticker prices for all models available in China by $4,200 earlier this month, reflecting the withdrawal of a free battery-swapping service, one of its key selling points.

The Shanghai-based startup had allowed buyers to purchase the cars without batteries—one of the most expensive components of an EV—and sign up for a free program to change batteries in a few minutes at its facilities. By February, 57% of the electricity NIO drivers used to power their cars came from battery swaps, the company said.

New buyers now need to pay for the battery-swap service.

NIO plans to add 1,000 battery-swapping facilities in China this year, taking the total to around 2,400, but the company has said it would need more users before the service can become profitable.

Price cuts should temporarily boost sales, but NIO may have to recalibrate its product and pricing strategy, said Tu Le, managing director of Sino Auto Insights, a research service specializing in China’s auto industry.

In May, NIO rolled out a revamped SUV ES6, which a sample study by Morgan Stanley said has boosted consumer visits at NIO’s stores.

Euphoria sweeps the market for stock options

Everyone wants a piece of the new bull market.

Traders are piling into bullish options bets that would profit if the recent stock rally continues. There has been a flurry of trading tied to continued advances in everything from artificial-intelligence stocks to smaller, economically sensitive companies and regional banks.

The activity suggests the dour outlook with which many investors began the year has softened as the S&P 500 has rallied 13%. The tech-heavy Nasdaq Composite has soared 29% in 2023, on track for its best start to a year since 1983.

Bullish bets on artificial intelligence have boomed. More than 1.3 million call contracts on chip makers Nvidia NVDA -1.90%decrease; red down pointing triangle, Intel INTC 0.89%increase; green up pointing triangleand Advanced Micro Devices AMD -0.62%decrease; red down pointing triangle changed hands on an average day in June, on track for the highest monthly total on record. Those volumes surpass the exuberance seen in November 2021, when the Nasdaq Composite reached its peak. Trading activity has more than doubled since the start of the year, Cboe Global Markets CBOE -1.51%decrease; red down pointing triangle data show.

Calls give the right to buy shares at a specific price, by a specific date.

Puts confer the right to sell.

There has also been record activity tied to S&P 500 index options, with one-day trading in calls surging, according to Cboe Global Markets data. The elevated trading has pushed up prices of such call options to extreme levels, a sign of ebullience.

“Fear of missing out is back,” said Stephen Solaka, a managing partner at Belmont Capital Group, which oversees options-based strategies.

In the coming days, traders will parse data on consumer confidence and inflation to gauge the health of the economy and forecast the trajectory of the market.

To be sure, some of the recent market fervor moderated last week when Federal Reserve officials reiterated their commitment to keep raising interest rates—and worries about commercial real estate began to build.

The S&P 500 fell 1.4%, snapping a five-week winning streak.

Still, the rally to kick off 2023 caught traders flat-footed and burned those who bet against the market.

Many of those investors say the U.S. economy has held up much better than they expected and the jobs market has been less sensitive to rising interest rates than anticipated.

Now, even those who previously took a more cautious stance say they simply don’t want to miss out on the potential for big gains ahead.

“I think the recession got delayed,” said Zhiwei Ren, a portfolio manager at Penn Mutual Asset Management.

Ren said he has been bearish on the U.S. stock market for much of the year but, in recent weeks, decided to ride the momentum in the S&P 500 higher via index call options. That helped him notch quick profits from the ascent in stocks.

So far, that fear of missing out has created a wide gap between the market’s winners and losers, though there are signs that is starting to turn. By one measure, the current stock-market rally has been its most narrow since the dot-com bubble in 2000, with a handful of tech stocks driving the returns, according to Goldman Sachs Group.

Buzz about artificial intelligence has hit a fever pitch. Shares of Amazon and MongoDB recorded large one-day pops on Thursday, for example, as the companies made announcements regarding AI.

The excitement in the options market has sent skew—an options-based measure of pessimism versus optimism—to some of its lowest levels since at least 2019. That qualifies as a sign that traders are loading up on calls rather than puts.

“A lot of people are coming around to the view that the stock market may have already bottomed last fall,” said Amy Wu Silverman, RBC Capital Markets’ head of derivatives strategy.

The enthusiasm has started spreading to other corners of the market, a sign some traders are positioning for this year’s laggards to catch up to hot tech stocks. For example, there has been a jump in call demand tied to small caps, which have underperformed in recent months. Investors are also pouring money into small-cap funds, many of which are dominated by shares of regional banks and other stocks that are sensitive to the health of U.S. consumers.

Ten of the 11 sectors in the S&P 500 have risen in June.

Referring to the flurry of tech options trading, Brent Kochuba, founder of derivatives-data firm SpotGamma, said, “The signal you would expect to see before a blowup is a lot of put buying, traders betting these stocks have huge amounts of downside. That just isn’t happening right now.”

There are other signs investors have a sunnier outlook on stocks than they did just a few months ago. Positioning in U.S. stocks is stretched for the first time in more than two years, a Goldman indicator shows. While the low-volatility environment encouraged quant funds to scoop up stocks early in the year, now discretionary investors are joining in, according to Deutsche Bank.

“If you started the year bearish, you’ve been really underallocated,” Wu Silverman said. “Investors are looking at a market that’s rallied 14% and, almost not by choice, they feel the need to hop on the train.”

French group establishes vehicle designed to capitalise on investors selling stakes in private equity funds early

French group Ardian has amassed more than $20bn to buy stakes in private equity funds from investors, highlighting a corner of finance that is defying the broader slump in fundraising.

The Paris-based company has raised the money for a secondary fund that profits from institutional investors who sometimes have to sell stakes in private equity funds early. Typically, buyout funds lock up investors’ money for more than a decade.

According to people familiar with the matter, Ardian, which manages a total of $150bn, eventually aims to raise $25bn for its secondary fund.

The Abu Dhabi Investment Authority (Adia) has agreed to invest $6bn in the fund and through co-investment in its deals, according to a person familiar with the matter, a sign of the sovereign wealth fund’s increasingly ambitious plans.

Over the past decade investors increased their allocation to less liquid private market assets, including buyout funds and real estate, in the hunt for higher returns. The trend turbocharged the growth of secondary funds that offer the likes of pension funds the chance to exit such investments early if they need to.

They have gained further momentum over the past 12 months from the end of the bull market for US stocks, which has left some investors having to sell their holdings in private market assets, such as private equity funds, to help rebalance their portfolios.

Last year, the value of deals agreed by secondary funds reached $105bn, almost five times more than a decade ago, according to investment bank Raymond James.

The booming market for secondary funds has also led major US private buyout groups such as Blackstone to set them up, as they rush to capitalise on a strategy that is attracting money amid the wider downturn in fundraising.

Earlier this year, Blackstone raised more than $22bn for its secondary fund, the largest of its kind. By contrast, its flagship buyout fund had raised $15.5bn by the end of March. 

Secondary funds raised almost 40 per cent more money in the first quarter compared with the year earlier period, according to PitchBook data, even as other so-called alternative strategies including traditional private equity funds and infrastructure all suffered declines.

Led by Dominique Senequier, Ardian has more than 1,000 staff and 16 offices.

It enjoys close ties with powerful sovereign wealth funds including Abu Dhabi’s Mubadala and Adia.

Its most recent secondary fund raised $19bn in 2020. Since then, Ardian has lost some executives from the team responsible for these sorts of deals. 

Ardian and Adia declined to comment.

There are 29 such funds in the market with $1.3bn in assets, but $1bn is in ETFs targeting the performance of Tesla

There are 29 leveraged and inverse US single-stock ETFs on the market with a combined $1.3bn in assets, but $1bn of those assets are in seven ETFs that target the performance of Tesla, according to data from FactSet.

Nvidia is the second-most popular company for the single-stock ETFs, with a combined $117mn in three ETFs that track the company. ETFs that track the performance of Alibaba, Alphabet, Amazon, Apple, Coinbase, Meta, Microsoft, Nike, PayPal and Pfizer each have less than $100mn in investor assets.

Five firms, AXS, Direxion, YieldMax, GraniteShares and Innovator ETFs, provide all of the single-stock ETFs currently available, while large asset managers have shied away from such products.

AXS launched the first such products last year on July 13, a day after receiving SEC approval. The firm had filed to launch 18 ETFs that track the performance of Tesla, Salesforce, ConocoPhillips, Boeing, Wells Fargo, Pfizer, Nike, Nvidia and PayPal, but only leveraged and inverse ETFs betting on Tesla, Pfizer, Nike, Nvidia and PayPal have come to market.

AXS still planned to launch the remaining single-stock ETFs, the company told Ignites last month.

The firm recently disclosed that it would shutter five of its eight existing products.

Two days after AXS announced the liquidation, RexShares and YieldMax filed to launch a combined 29 single-security ETFs, some of which will track the performance of other ETFs, rather than companies. And early last month, GraniteShares filed for 32 additional single-stock ETFs.

“Participating issuers right now are trying to figure out the types of single-stock ETFs that will sell — including figuring out what investors are looking for,” said Daniil Shapiro, director of product development at Cerulli Associates. “The securities themselves will likely be the ones investors want to place bets on versus hold for the long term.”

Tesla’s stock had risen more than 140 per cent since the beginning of the year by the close on 21 June, from $108.10 to $259.46.

The recent “breakout” by Nvidia helped both leveraged and inverse Nvidia single-stock ETFs attract assets, noted Bryan Armour, director of passive strategies at Morningstar.

“This may just be throwing spaghetti at the wall by these issuers to see what sticks,” Armour said. “It’s likely that they’re attempting to find stocks where investors have strong opinions and want to gamble on their thesis.”

The current batch of US single-stock ETFs were largely tech-focused, because of the high activity in the sector, noted Rich Lee, head of program trading, ETF trading and execution strategy at Baird. That could change, however, if innovative firms highlighted areas of the market that weren’t being addressed, he added.

Single-stock ETFs can act as something of a proxy for larger sectors, noted GraniteShares founder and chief executive Will Rhind. Investors betting on the Chinese tech industry, for example, might trade Alibaba-focused ETFs, while the recent Nvidia surge had been reflective of growing interest in artificial intelligence, he noted.

Rhind advised against day trading with single-stock ETFs but also noted that they were not “buy-and-hold” products. Instead, investors should actively focus on market fluctuations, he added.

“Shorting securities can subject an investor to a short squeeze including hefty borrowing costs and unlimited liability if the position moves against them, but purchasing a short ETF does not create such a risk [as] the loss is limited to the investment made,” Shapiro said. “Beyond additional leverage offered by some of the products, the shorting element can also become a draw.”

Overall, the borrowing costs to short large-cap stocks was relatively low compared to small-caps, Armour noted, adding that it was unclear whether there would come a point when shorting via an “expensive” single-stock ETF comes at a lower cost than shorting the underlying security.

The largest ETF issuers have steered clear of single-stock ETFs, in part because they run counter to the low-cost, core exposure ETFs that financial advisers were looking for, Shapiro noted. Single-stock ETFs were competing for a smaller market in a risk-oriented environment, but it’s “still possible” that they could be useful to investors as a trading or risk management tool, he added.

“It seems like everyone wants to make sense of these products, but they don’t have much purpose besides short-term gambling,” Armour said.

Researchers studying the killer whales have varying theories on why some persist in making contact with vessels

Iberian orcas that interfere with boats off the coast of Spain might just be having a whale of a good time.

Researchers trying to understand why a group of orcas around the Strait of Gibraltar have developed a taste for bumping, pushing and redirecting vessels—sometimes tearing the rudders—suspect it could be a new fad among young whales. It could also be a sign of stress from prior contact with boats, according to scientists.

“Orcas are incredibly curious animals and highly intelligent and tactile,” said Deborah Giles, science and research director for the nonprofit Wild Orca. “They like to interact with things in their environment.”

“They pick up fads, or a behavior that passes through the population, and then they move on,” she said. “We’re waiting for that part to come now when the whales lose interest.”

Two sailboats competing in a long-haul sailing competition ran into a trio of frisky orcas Thursday in the Atlantic Ocean west of Gibraltar. The black and white whales pushed at the boats and nudged the rudders underneath. One rammed a boat, but caused no damage, the crew said.

The skipper of one sailboat said the orcas came straight at the vessel and aimed for its rudders. Video of the interaction shows three killer whales in the water.

“It’s very impressive to see those wonderful animals appear all of a sudden and be so close to them,” the skipper told Ocean Race organizers after the encounter. “At the same time, it’s also somewhat frightening.”

The crew stopped the boat—inconvenient for a racing competition—and waited for the orcas to become bored, the skipper said.

Researchers have noted a surge in contact between Iberian orcas and boats off the coasts of Spain and Portugal in the past three years, sometimes resulting in damaged vessels and sunken sailboats. The Iberian killer whales, which can reach up to 20 feet as adults, can also suffer lacerations and other injuries.

Since July 2020, Portuguese and Spanish researchers with the Atlantic Orca Working Group, or GTOA, have counted roughly 536 Iberian killer whale interactions with boats around the Strait of Gibraltar. In some cases, the orcas approached the vessels but didn’t touch them. Approximately 20% of the interactions ended with a vessel damaged to the point where it could no longer navigate, according to Alfredo López, a biologist and killer- whale specialist who is part of GTOA.

Three sailboats sank after killer whales damaged rudders and caused serious water leaks, López said.

In 2023, there have been 80 Iberian killer-whale interactions in the Strait of Gibraltar. Fourteen caused enough damage that the boats were towed to shore, said López. No one has been injured in the interactions, the scientists said. Wild killer whales aren’t known to attack humans.

There are fewer than 50 Iberian killer whales that swim in Atlantic waters around the Strait of Gibraltar, according to the most recent count by GTOA. Researchers have identified a total of 39, of which 18 are adults and the rest are juveniles.

López and other scientists with GTOA have been unable to pinpoint a definitive motive for the surge in Iberian orca interest in vessels. They do know some of the culprits, however. Roughly 15 orcas have been documented interacting with boats, “each with their own interests,” said López.

Scientists have two hypotheses on the motive. Young Iberian orcas who like the tactile sensations of rubbing and pushing against a vessel are teaching each other the new behavior.

The idea that orcas could also be amusing themselves with the boats is rooted in long-term study of the marine mammals, which have been observed playing with each other and with objects in their environment.

Orcas are cetaceans of the dolphin family, and like their smaller relatives sometimes like to cruise alongside a fast-moving boat.

Other Iberian orcas might have had prior negative experiences with boats and make contact to stop the vessels and avoid the repeat of an unhappy event, said López. That theory is aligned more closely with adult behavior.

The negative experiences might be related to environmental pressures such as prey depletion, related in part to longline fisheries in the Strait of Gibraltar, the scientists said. The orcas scour the waters for fishing boats that have hooked bluefin tuna, the whales’ primary food source, and try to eat them before crews reel in the lines.

Iberian orcas in the past have suffered injuries from fishing gear and lines and a fishing boat hooked one of them a few years ago, according to López.

“All of this had to make us reflect on the fact that human activities, even in an indirect way, are at the origin of this behavior,” he said.

The interactions with boats off Iberian peninsula have been limited to the Iberian killer whale population, a small subspecies, or ecotype, within the approximately 50,000 known killer whales that inhabit the world’s oceans.

Within the killer whale species, ecotypes exist as distinct cultures and groupings, even when they inhabit the same territories as other killer whale subspecies. Each distinct culture speaks its own language and often pursues distinct food types. The groups don’t interact, and they don’t mate with each other.

Investors are often getting greater protections in the form of collateral

Low-rated companies are learning to live with higher interest rates, finding ways to tap bond markets while minimizing the hit to their borrowing costs.

So far this year, companies such as American Airlines and Six Flags have issued $91 billion of speculative-grade bonds, according to PitchBook LCD, up 35% from the year-earlier period, when rapidly rising rates cut junk-bond issuance to a trickle.

But those bonds look different than during the borrowing boom of recent years. A full 62% of them have been secured—backed by collateral—offering investors greater protections if the company defaults. That is easily the highest percentage in records going back to 2005.

The average maturity of the junk debt has also shrunk to 6.1 years, down from an average of 7.4 years over the previous decade, giving companies a shorter leash than the historical norm.

Investors are thinking, “ ‘I want to be a little more defensive in an uncertain environment,’ so they’re buying this secured paper,” said Randy Parrish, head of public credit at the asset manager Voya Investment Management.

Wall Street tracks borrowing by speculative-grade companies—those with riskier profiles or larger debt loads that land them with sub-triple-B credit ratings—because those companies’ ability to pay back debt and avoid bankruptcy is important to the economy.

Since the failure of Silicon Valley Bank in early March, investors and economists have debated whether the U.S. could experience a credit crunch, with banks pulling back from lending due to concerns about the stability of their deposits.

In the U.S., however, a majority of corporate borrowing happens through public markets rather than banks, meaning a healthy bond market can do much to offset any reduction in bank lending.

One factor helping businesses right now is that many were able to issue long-term bonds at extremely low rates in the early years of the Covid-19 pandemic. Thanks to what some have called the Great Refinancing of 2020 and 2021, companies in the aggregate don’t face substantial speculative-grade-bond maturities until 2025. Many can therefore afford to wait to issue bonds in the hope that rates will drop from current levels.

Some companies, though, are pressing ahead now—in many cases, to pay back loans that are poised to mature in the near future, according to investors and analysts.

A few factors explain the surge in secured-bond issuance and the shortening of bond maturities this year. For one thing, both moves help to minimize the cost of debt, since investors will accept lower rates on bonds that are backed by collateral or will be paid back sooner.

In addition, bonds that mature in five years can typically be redeemed by the borrower at minimal extra cost in as little as two years. This is an attractive proposition for chief financial officers who believe that rates will fall within that time and who want the option of replacing their new, higher-cost bonds as soon as possible.

Speculative-grade companies that have issued bonds in recent months include the privately owned equipment-rental business EquipmentShare, which sold $640 million of five-year secured bonds to pay down loans. Issued at a 10.5% initial yield, the bonds nonetheless will lower the company’s cost of borrowing and minimize its exposure to future interest-rate increases by replacing floating-rate debt with fixed-rate debt, said Amy Susan, EquipmentShare’s director of public relations and communications.

The bonds traded with a roughly 10.3% yield Friday, according to MarketAxess.

A more familiar name to investors, the trucking company XPO, also issued five-year secured bonds in May as part of a larger refinancing package that included longer-term unsecured bonds and the extension of part of a loan.

Carl Anderson, XPO’s chief financial officer, said his team appreciated that the secured bond could be redeemed in as little as two years, which could help as the company seeks investment-grade ratings and considers reducing its debt. Eager to refinance a loan due in early 2025 before it came within a year of maturing, the company decided to “pull the trigger earlier in the process” partly because it was coming off a solid quarterly earnings report and thought it was possible that markets could become more volatile later in the year.

Some investors and analysts have cautioned against getting too excited by the uptick in speculative-grade-bond issuance this year. For the most part, they point out, the companies issuing bonds have been among the better businesses with low ratings.

Increased bond issuance can also be explained to some degree by weakness in the market for speculative-grade loans, where an important source of demand—pools of securitized loans known as collateralized loan obligations—has faltered in part due to rising financing costs.

Last month, the trailing 12-month, speculative-grade default rate was 3.07%, according to Moody’s Investors Service, still below the 4.5% level just before the pandemic started in early 2020 but marking a steady climb from the recent low of 1.22% in early 2022.

“Default rates are going up,” said Voya’s Parrish.

Companies, he said, have generally benefited from elevated inflation because they have been able to sell their products at higher prices. Next, though, they are likely to enter a period in which their pricing power diminishes but they still face higher financing costs, making it harder to service their debt.

There are also drawbacks to the recent borrowing trends. Companies that issue more secured bonds can be hindered from selling assets or issuing more secured debt in the future, when the need might be even greater. Issuing shorter-term bonds also means that companies will be forced to repay debt sooner.

“The more companies pledge collateral and issue short, the less flexibility they give themselves later on down the road,” said Michael Anderson, head of U.S. credit strategy at Citigroup.

GLG scales back in China as Beijing zeroes in on due diligence firms

US expert network consultant is latest to lay off staff in the country as scrutiny intensifies on national security grounds

Expert network consulting company Gerson Lehrman Group has become the latest due diligence firm to cut jobs in China as Beijing intensifies scrutiny of the sector on national security grounds.

US-based GLG, which maintains a network of specialists that global investors can tap to do due diligence on transactions, began laying off China staff last month, said several people familiar with the matter.

The lay-offs come as Beijing cracks down on foreign consultancies this year, alarming international investors at a time of growing tensions between the US and China. The campaign has made operating in China more difficult for foreign companies, which depend on the consultants to help navigate the world’s second-largest economy.

GLG declined to comment. But a source close to the company said that in May, GLG instituted global workforce cuts of about 3.5 per cent to better align its business with client needs, increase efficiency, and accelerate its investments in other areas.

The company announced last week it had replaced its former chief executive officer Paul Todd with Gemma Postlethwaite, the former chief executive of business information company Arizent.

The source close to the company said the workforce reduction in China was in line with the global reduction.

However, GLG had initially planned to expand in China early this year, with the firm moving staff in Shanghai to a new office and hiring new employees, said one person with knowledge of the situation.

“GLG was bullish in March, and said business was booming. They were hiring and had just moved into bigger offices,” the person said.

GLG had stepped up compliance checks in recent weeks after the raids, said the person, adding that clients were increasingly nervous about using China-based experts.

Expert network groups and other consultants conducting due diligence for foreign companies have been under pressure in China after state media revealed in May that police had raided multiple offices of Capvision, a company with extensive operations in China, for national security reasons.

Capvision was accused of tapping people in government to provide sensitive information to overseas clients, including military-related data, according to Chinese state media. 

The Capvision raid was part of a series of investigations this year on foreign consultancies in China, which also included Bain & Company and due diligence group Mintz, whose five local employees were detained in March. 

The Financial Times reported last month that US tech-focused group Forrester Research was cutting jobs in response to growing restrictions on foreign businesses operating in China. The firm said it was closing its China office as part of a previously announced global restructuring.

Investors and foreign multinationals say the crackdown makes it difficult to do due diligence for investments and procurement contracts with Chinese partners and suppliers.

GLG said in a prospectus for an initial public offering filed in the US in 2021 that its “Greater China Business Unit”, which included mainland China, Hong Kong and Taiwan, accounted for 6.8 per cent of its total revenue in the first half of that year. It later withdrew from the IPO.

It warned in the prospectus that “the Chinese government may intervene or influence our operations at any time, which could result in a material change in our operations”.

“The rules and regulations and the enforcement thereof in China can change quickly with little advance notice” it said in the IPO prospectus.