Early premarket gappers
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Gapping up:
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Gapping down:
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Investors Keep Putting Money Into Private Credit
Key flows of money into private-investment vehicles seem to be stabilizing, boosting shares of managers
Big banks are worried that more lending might migrate away from them in the coming years. Investors big and small are taking notice.
The boom in alternative assets has been a big winner for managers of those funds in recent years, as things such as bespoke corporate lending take share from what has traditionally been the business of banks. However, one recent wrinkle has been a worry that the people supplying money to those funds might not keep pouring in cash as interest rates rise—especially when it comes to wealthy individuals, one of the major sources of growth.
Yet there are indicators the spigot isn’t closing. A jump in redemption requests late last year for the Blackstone Real Estate Income Trust is what initially spooked investors. But Breit has lately reported diminishing redemption requests: August requests of just under $3 billion were the lowest since last October, more than 40% below the January peak and the fourth straight month of slowing requests.
Even if certain funds—including more traditional private-equity buyout funds facing a tough deal-making environment—might not be seeing strong inflows, funds in other assets are making up for some of that. The Blackstone Private Credit Fund said inflows into the nontraded vehicle were $2.4 billion in the third quarter reported so far, up 30% from the prior quarter.
Blue Owl Capital OWL 7.24%increase; green up pointing triangle reported figures for two nontraded private credit funds, Blue Owl Credit Income Corp. and Blue Owl Technology Income Corp., that point toward a net $1 billion-plus inflow for the third quarter, better than the pace of the second quarter, according to estimates by Autonomous Research analyst Patrick Davitt.
Even within real estate, despite concerns about office and other property values, some strategies are still attracting inflows: The Blue Owl Real Estate Net Lease Trust, which is in the expanding market for the sale and lease-back of properties, has reported raising over $1 billion since its launch in 2022.
Money from wealthy individuals has been a growing source of funding for private credit and other “alternatives” to traditional stocks and bonds. Apollo Global Management APO 0.67%increase; green up pointing triangle told analysts last week that it raised $6 billion via retail last year, and is “well on track” to be raising $15 billion-per-year by 2026.
The usual sources of funds—giant institutions—also remain active in key areas. Blue Owl this week said it got a billion-dollar commitment for technology lending from Abu Dhabi sovereign fund Mubadala Investment. Mubadala and Ares ARCC -0.16%decrease; red down pointing triangle Management earlier this year announced a joint venture related to private-credit investments.
All of this is helping rebuild momentum in shares of the managers of these platforms. Apollo, Ares, Blackstone and Blue Owl shares are all up at least 9% so far in the third quarter, well outpacing a less-than-3% gain for S&P 500 financials overall. The inclusion of Blackstone—whose shares are up 22% in this period—in the S&P 500 index likely also boosts the visibility of these firms with individual investors.
Investors who are now in these private-credit funds of course might have other concerns, like how these vehicles’ returns might perform if there were an economic slowdown. But for now, owning shares of their managers is working out better than feared.
Israeli Gov’t Advances Bill for Facial Recognition Surveillance Cameras in Public Spaces
The bill says a police officer of undetermined rank will be able to decide that a camera be placed in a public area. A similar bill was advanced by the 'change government,' with then-Minister Pnina Tamano-Shata as the sole dissenter
A bill permitting the police to place facial recognition cameras in public spaces was approved by the Ministerial Committee for Legislation on Monday.
According to the proposal, submitted by National Security Minister Itamar Ben-Gvir and Justice Minister Yariv Levin, the police will also be able to place portable cameras at events such as protest demonstrations, on the condition that the “human factor” [a police officer] is convinced that the operation of the biometric camera does not amount to an undue invasion of any individual’s privacy.”
The bill is drawing criticism due to concerns of invasion of privacy, and the loose monitoring criteria for the use of such cameras by the police. According to the bill, the placing of the cameras is intended to prevent, thwart, or detect serious crimes, to locate missing persons, and to enforce bans or restraining orders from public venues. To that end, the law will allows the police to receive a “real time alert” from the cameras on the presence of a specific person in the camera’s area of view.
Labor MK Gilad Kariv said, in response to the approval of the bill, that it is an "extreme bill not suitable for any progressive democracy. This is doubly true in relation to a country that has not updated its privacy protection laws in 40 years, and whose police is undergoing a political takeover by nationalist forces." Kariv added, "This bill cannot be separated from the judicial coup, and we will oppose it with the same strength we oppose the other laws of the coup."
The concern of harm to privacy is mentioned several times in the bill, with the qualifier being that such harm shall be done “to a degree not exceeding that necessary.” According to the bill, “these are photographic systems which include processing capabilities which enable the capturing of the image of individuals and comparing them to identified information uploaded to the system in their regard.”
The police claim that the cameras will enable the organization “to track the identity and location of suspects in the commission of crimes, and therefore constitute an effective tool for the detection and prevention of crimes and the execution of the police’s duties in the maintaining of public order and the protection of public safety and security.”
The bill is based on another bill, yet to be passed, which is intended to arrange the use of cameras in another system operated by the police – “Ein Hanetz” (“Hawkeye.”) The bill is awaiting a second and third vote, with the cameras meanwhile operating without legislative regulation. Both laws are meant to allow access to biometric photographs to a host of enforcement agencies, including the army, various prosecutorial authorities, the Police Investigations Unit, Shin Bet security service, the Witness Protection Authority, and any other public entity designated by the justice minister, with the approval of the Knesset’s National Security Committee
Despite the broad access allowed to photographs by the law, there is little oversight of the police’s use of the cameras, as defined in both bills. The laws allow for a situation in which no agency other than the police oversees the operation of the cameras, except for an annual report on their use to be submitted to the attorney general and the Knesset. At the same time, the “authorized officer” in the bill is required to reconfirm the placing of the camera in its permanent place once a year.
A first taste at The Cocochine – the restaurant rewriting Mayfair dining rules
What happens when you combine one of the world’s most powerful gallerists with one of its greatest chefs?
A new restaurant is opening in Mayfair that promises to rewrite the rules on restaurants in Mayfair. Behind it are two of London’s most distinguished tastemakers. Tim Jefferies runs the photography gallery Hamiltons, whose artists include Richard Avedon, Daidō Moriyama and Don McCullin. His business partner, Sri Lankan born Larry Jayasekara, is former head chef at Gordon Ramsay’s Pétrus, which he left in 2018 after being named National Chef of the Year.
Their restaurant The Cocochine, which takes its name from a diminutive that Jefferies used for his daughter, is spread across four floors at 27 Bruton Place. The dining room on the ground floor contains only eight tables, with 28 covers each for lunch and dinner and one sitting per table per meal. For practical and economic reasons, this might lead one to expect a set menu with a minimum spend. But the menu is à la carte and you can order as little or as much you want.
On the first floor, there are seven additional seats at the chef’s counter. These are first-come first-served. But do come first, because the 920sq ft kitchen is worth seeing. Its specs include a temperature-controlled bread cabinet, meat and fish dry-ageing units and metal washable ceilings, which I wouldn’t have thought to admire if Jayasekara hadn’t pointed them out. Jefferies apparently agreed to all his partner’s hi-spec requests, no matter the expense. “When you get involved with Larry, things have to be done at a level – a level I really appreciate,” Jefferies told me. The wider operation also includes two neighbouring premises, which house a staff canteen/development kitchen and office/rec room with showers – unheard of for standalone restaurants.
The pièce de résistance is the private dining room on the top floor. Conceived by Jefferies in collaboration with Jonathan Reed of Studio Reed, the space brings to mind a bachelor pad, if the bachelor had impeccable taste and spared no expense: world-class art, eclectic bespoke furniture, a dining table that seats 14, a double-height coffered ceiling with gold latticework, skylights and a Saracen fireplace. “Private dining rooms are often an afterthought,” says Jefferies. “Nearly always underground, a room with a door, that’s what makes them private. I’m hoping this will excite people.”
The space is modelled on the private entertaining space at Hamiltons. “For me, presentation and ambience are extremely important,” says Jefferies. “Photography is a difficult art form for people to understand when a print costs $800,000 and everyone is a photographer. I created a space where these rare, expensive beautiful works can sing.” When I visit, no artworks have yet been hung either in the private dining room or bar and restaurant spaces, but I’m told that diners should expect photography by, among others, Richard Avedon, Helmut Newton, Irving Penn and Hiro.
But what of the food? Jayasekara is a highly considered chef who commands his brigade with quiet authority. In his cooking, Jayasekara cleaves to the modern European playbook. Many of his dishes, including a deep-fried cauliflower dish I had at a preview, are finished with dots of oil or gel administered with a pipette, as well as tweezered arrangements of flowers.
But none of his flavours is precious. That cauliflower is marinaded for a week in soy sauce, rice vinegar, brown miso, teriyaki sauce and Sri Lankan treacle (which derives from coconut flowers and adds a prune-like depth). You’d find it difficult to parse all those ingredients on the plate, but the combination draws you in like an enigma you want to solve.
His lobster is smoky from having been barbecued in a banana leaf and finished with yuzu gel, crème fraîche, micro-basil and a cardamom-lobster jus, which is glossy, incarnadine and made me feel vampiric as I lapped it up. Green cardamom, which Jayasekera sources from Sri Lanka, is a surprise guest in a lot of dishes.
“I really don’t want to serve things that everyone else serves,” says Jayasekara, whose push for originality never tests your patience. The truffle bao, which is the bread course, is a talking point for its resemblance to a pigtail – or perhaps a brain. The Jerusalem artichokes with roasted chicken fat are superb. The quince-vinegar tart is pure joy. And I’ve never seen canapés loaded with as much caviar as these. Nor in the case of the black-truffle doughnut, a nibble so generously top-loaded I almost had to unhinge my jaw to fit it in. Who needs dainty when it tastes this good?
SocGen’s Slawomir Krupa cuts profit targets and forecasts slower growth
Shares fall after strategic update from bank’s first new chief for 15 years
Société Générale’s chief executive Slawomir Krupa has cut profitability targets and forecast slower growth at the French bank, unveiling what he called a “realistic” new plan after years of restructurings.
Shares in SocGen fell more than 7 per cent in early trading after the strategic update, which followed the bank’s first change of CEO for 15 years this May.
France’s third-biggest bank by market value, said it would target a return on tangible equity of between 9 and 10 per cent by 2026. That compared to a previous target of a 10 per cent return by 2025.
It will also aim for annual revenue growth of between zero and 2 per cent on average between 2022 and 2026, lower than its previous target of 3 per cent growth by 2025.
“It’s a realistic path, in which promises are less important than our ability to deliver them,” Krupa told reporters. “This is the right plan for the bank.”
He added that SocGen would be disciplined about capital, limiting how much it allocates to its range of businesses, and outlined cost savings and moves to simplify the bank’s structure.
The bank went through a number of restructurings under previous chief executive Frédéric Oudéa, while its share price has continued to underperform peers since a 2008 rogue trading scandal and the global financial crisis.
“We believe this is a credible plan that can start the stock’s re-rating,” said Citi analyst Azzurra Guelfi. Jefferies analyst Flora Bocahut, however, said the update included some negative surprises.
“Today’s targets suggest that revenues will only grow by 1 per cent on average to 2026, much below our expectation,” Bocahut said.
Krupa said SocGen would try to slim down its operations and form strategic partnerships with other financial groups to reduce its cost base, but it did not give more details on which units could be sold or trimmed down.
Krupa, who established himself as a viable successor to Oudéa through a five-year stint as head of the bank’s US business, has already set up partnerships with large US financial groups.
Last week, SocGen announced a €10bn private credit fund with Brookfield Asset Management. The bank has also formed an equities joint venture with AllianceBernstein.
Krupa said on Monday that alliances could be agreed in other parts of SocGen’s businesses. The bank would have to be “inventive” in its search for growth, he added, as it became more conservative about where it allocates capital outside its French online bank Boursorama and its car-leasing operations.
It has already pulled back on risk taking at its investment bank in recent years, and Krupa said he wanted to build up the deals advisory side of the business.
SocGen also said on Monday that it would aim to cut its cost-to-income ratio to below 60 per cent by 2026, involving €1.7bn of savings.
It outlined a goal to have capital tier one ratio at 13 per cent, in line with tougher regulatory requirements, and it outlined a dividend payout ratio of between 40 and 50 per cent of profits from this year, a lower target than domestic rivals.
Before Monday’s announcement, SocGen shares were up 9.4 per cent this year, compared with 12.2 per cent for the wider European bank sector, though they have gained 34 per cent since late March when investors speculated about the bank’s financial health following the rescue of Credit Suisse.
SocGen is one of the cheapest large banks in Europe, with a price to tangible book value of 0.3, less than half that of rival BNP Paribas.
New York Regulator to Require Higher Standards for Coin Listings and Delistings
New expectations and procedures are spelled out for crypto firms in evaluating a crypto coin before adoption and removal
New York’s financial regulator wants cryptocurrency companies regulated in the state to be more transparent about how they list and delist crypto coins.
The New York State Department of Financial Services, in proposed guidance to be published Monday, spells out its expectations for how crypto firms evaluate a coin offering before adoption, based on a prior version of the framework. The regulator also describes its expectations of the steps and criteria a crypto firm must consider before delisting a coin.
The proposed framework is meant to guide firms on how to draft firm-specific coin listing and delisting policies.
NYDFS Superintendent Adrienne Harris said the guidance was needed to make standards around coin offerings more robust, and that the updates came from deficiencies found through examinations. She also said the new guidance will be the first one about delisting.
“When we know that a coin that someone once thought was OK, when we see that new risks have emerged or the coin is being misused, we want our entities to have a way to delist the coin in a way that’s still protective of consumers and protects safety and soundness as well,” she said.
As part of the proposal, the NYDFS is asking virtual currency companies registered in the state to submit new coin-listing and delisting policies. The proposed legislation is open for public comment until Oct. 20.
An original framework guidance issued in 2020 asked crypto companies regulated by NYDFS to submit a firm-specific coin listing policy and to seek the regulator’s approval before listing or offering custody for a coin, unless the coin is on a so-called “greenlist” of coins already approved by the regulator. The listing policy must be tailored to a company’s business model, operations and customers, among other things.
After receiving approval for its coin-listing policy from the regulator, a firm can self-certify a listing—attesting a coin meets the firm’s standards without seeking approval from NYDFS. But the firm must still provide written notice to NYDFS before using a coin and must keep the regulator informed of all coins it offers or uses.
The new framework asks crypto firms to draft their coin-listing policy in three areas: governance for the coin-listing process; risk assessments of coins; and procedures to monitor coins.
The proposed delisting framework asks firms to detail how they decide to delist a coin, including the type of events that could prompt a removal, and execution plans, such as giving customers advance notice and drawing up an impact analysis.
The proposed frameworks come as Harris marks two years on the job as New York’s top financial regulator. NYDFS has been looking to use the state’s standing as a leader in regulating the insurance and banking sectors to help set the regulatory agenda nationwide for crypto.
Under her leadership, NYDFS has levied $132 million in fines against crypto companies, including exchange Coinbase and online trading platform Robinhood’s crypto unit.
The agency also oversaw the closure of Signature Bank in March amid turmoil in the crypto market. Signature Bank had about $4 billion of deposits related to its digital assets banking business, according to a March 20 statement from the Federal Deposit Insurance Corp.
“We’re continuing to supervise the risk-based analysis of our entities, make sure those examinations are going well, make sure the entities are remediating in a timely manner. We will, of course, continue to bring enforcement actions where necessary,” Harris said.
She noted her agency’s crypto unit now has about 60 staff, almost tripling its size from two years ago.
Three US growth ‘potholes’
But don’t blame the auto workers
Goldman Sachs says the United Auto Workers strike is just one — and possibly the smallest — of three nasty “potholes” that US economic growth faces next quarter.
In a recent note (which you can read in full here!), the bank’s economists estimate that the largest drag on 4Q growth will come from the resumption of student-debt payments. They predict that will trim approximately 0.5 per cent off of the US’s 4Q annualised growth rate.
Quick reminder: All of the bank’s predictions are expressed as annualised rates, but they only reflect one quarter of GDP. (The UAW strike’s effects will technically start in 3Q, since it started Sept 15. And while student loans started accruing interest again in September, payments won’t be due until October.)
In any event, the next-biggest effect could be a government shutdown, if one occurs. GS expects a shutdown to shave 0.2 percentage points off of Q4’s growth for each week it continues.
And finally, the economists expect the UAW strike to weigh down Q4 growth by 0.05 to 0.1 percentage point for each week it continues.
These strike estimates are tricky, however, and not a great guide for what’s happening now.
Here’s why: GS says they assume auto production will fall to “roughly zero” at every company where workers go on strike. But the UAW has only gone on limited strike so far, with workers walking out of three factories. This has the benefit of helping them preserve their strike fund. It also makes it more difficult to come up with projections for economic impact.
While the UAW is striking at plants that assemble profitable vehicles, this walkout isn’t as “punitive” as it could be, argues John Murphy, Bank of America’s analyst covering auto manufacturers. In a Sept 15 note, he wrote that the affected factories:
. . . are all final assembly plants so far. This is less punitive than if the UAW had opted to strike key component plants (ie, engine or transmission plants). Nonetheless, the UAW is striking at assembly plants that produce some of the most profitable vehicles sold by the Detroit Three . . .Given these specified plants, we estimate the daily cost of a strike for the companies in EBIT terms is about $16mm for General Motors, $20mm for Ford and $33mm for Stellantis. On a per share basis, the daily impact is around $0.01 for each company.
Murphy includes make-level details as well:
For GM, the UAW will strike at the Wentzville Assembly Center that builds the Chevrolet Colorado and GMC Canyon midsize trucks as well as the Chevrolet Express and GMC Savana vans. At Ford, the UAW will strike at the Michigan Assembly Plant on the assembly and paint lines only. This plant makes the Ford Bronco and Ford Ranger. At Stellantis, the UAW is striking at the Toledo Assembly Complex in Toledo, OH that makes the Jeep Wrangler.
This list should be interesting to a much broader audience than gear heads — notably, we don’t see Ford’s F-series trucks on it.
Murphy expects the ultimate result will be a 25-per-cent to 30-per-cent increase in wages over the next four years.
Although there will be some volatility as production is taken down, it appears the ultimate increase in labour costs will probably be close to our expectations in January for a 25%-30% cumulative increase over four years . . . In isolation, this would be about a 400-500bp headwind to operating margins.
While that’s not great for automakers’ operating margins, it also isn’t expected to do much for inflation, which is the alleged macro trade-off for higher wages. In a Sept 12 note, Murphy downplays any potential economic effects of big UAW raises, or even a broader Union Girl Autumn across the labour force:
In our view, the resolution of the strike [would mean] little for the rest of the labour market. While there has been an uptick in work stoppages since the pandemic and several high profile labour negotiations, only 6% of private sector employment is represented by a union. Therefore, most of the workforce does not negotiate for wage increases through collective bargaining. Instead, we expect aggregate wage inflation to continue to moderate given the ongoing decline in the quits rate.
Solidarity . . . forever? [emoji shedding a single tear]
>>> Up
* Advanced Medical Raised to Buy at HSBC; PT 250 pence (+)
* AFC Energy Raised to Buy at Panmure Gordon; PT 50 pence (+)
* Axactor Raised to Buy at Nordea; PT 8.70 kroner
* BioPharma Credit Raised to Buy at Jefferies
* Continental Raised to Neutral at Goldman; PT 70 euros
* Energean Raised to Buy at Jefferies; PT 1,500 pence
* Fevertree Drinks Raised to Sector Perform at RBC; PT 1,300 pence
* IDS Raised to Overweight at JPMorgan; PT 310 pence
* Paradox Interactive Raised to Buy at ABG; PT 300 kronor
* Unibail Raised to Overweight at Barclays; PT 58 euros
* Unibail Raised to Overweight at Barclays; PT 58 euros
* Vestas Raised to Buy at Jyske Bank; PT 185 kroner
* Volvo Raised to Buy at DNB Markets; PT 275 kronor
>>> Down
>>> Down
* 2020 Bulkers Cut to Hold at Cleaves Securities; PT 85 kroner
* Brown-Forman Cut to Underperform at Evercore ISI; PT $68
* Dof Group Rated New Buy at Fearnley; PT 75 kroner (+)
* Golden Ocean Cut to Hold at Cleaves Securities; PT 76.44 kroner
* Golden Ocean Cut to Hold at Cleaves Securities; PT 76.44 kroner
* Maersk Cut to Neutral at JPMorgan; PT 13,000 kroner
* S4 Capital Cut to Add at Peel Hunt; PT 110 pence (+)
* Valeo SE Cut to Sell at Goldman; PT 17 euros
>>> Initiation
* Baltic Classifieds Group Rated New Buy at Numis; PT 266 pence
>>> Initiation
* Baltic Classifieds Group Rated New Buy at Numis; PT 266 pence
* Disney Rated New Outperform at Raymond James; PT $97 (+)
* Entain Resumed Overweight at Morgan Stanley; PT 1,740 pence (+)
* Hansa Investment Rated New Hold at Jefferies; PT 200 pence
* Jubilee Metals Group Rated New Buy at Canaccord; PT 13 pence (+)
* Lululemon Rated New Buy at HSBC; PT $500
* Ocean Wilsons Rated New Buy at Jefferies; PT 1,600 pence
* PRISA Rated New Buy at Jefferies; PT 50 euro cents
* Warner Bros Discovery Rated New Outperform at Raymond James (+)
>>> Call
* JPM Strategists See More Underperformance for Euro-Area Stocks (+)
>>> Call
* JPM Strategists See More Underperformance for Euro-Area Stocks (+)
- Aker BP (ARC TH) +1.9%
- Continental (CON TH) +1.5%
- Continental Raised to Neutral at Goldman; PT 70 euros
- Nel (D7G TH) +1.1%
- Rio Tinto (RIO1 TH) +0.9%
- Iron Ore Eases From Five-Month High as China Demand Signals Eyed
- Vodafone (VODI TH) +0.8%
- Equinor (DNQ TH) +0.8%
- Energy Shares Look Cheap Given Oil’s Recent Surge: Taking Stock
- Siemens Healthineers (SHL TH) +0.8%
- Rolls-Royce (RRU TH) +0.7%
- Orsted (D2G TH) +0.6%
- KPN (KPN TH) -0.8%
- Sartorius (SRT3 TH) -0.9%
- Sanofi (SNW TH) -1%
- Hochtief (HOT TH) -1%
- Kerry Group (KRZ TH) -1.1%
- Maersk (DP4B TH) -1.2%
- Verbund (OEWA TH) -1.4%
- Siemens Energy (ENR TH) -1.5%
- H&M (HMSB TH) -1.8%
- SocGen (SGE TH) -2.5%
- SocGen’s Krupa Targets Costs, Capital to Win Back Investors (1)