- Legal & General (LGI TH) +2.8%
- Aviva, Legal & General Lead £40 Billion Bulk-Annuity Market
- Rio Tinto (RIO1 TH) +2.8%
- Pound Crashes to All-Time Low With UK Markets ‘Under Siege’
- Rio rocked by sex attack charges at Pilbara mine
- Vodafone (VODI TH) +2.8%
- Pound Crashes to All-Time Low With UK Markets ‘Under Siege’
- Anglo American (NGLB TH) +2.6%
- Watch European Miners, Oil Stocks as USD Rally Drags Commodities
- GSK (GS71 TH) +1.2%
- GSK CFO Iain MacKay to Retire, Julie Brown Named as Successor
- UniCredit (CRIN TH) -1.9%
- Watch Italian Stocks as Meloni’s Right-Wing Bloc Set for Big Win
- Evotec SE (EVT TH) -2%
- Grifols (OZTA TH) -2%
- Adyen (1N8 TH) -2%
- Shell (R6C0 TH) -2%
- Puma (PUM TH) -2.1%
- Eni (ENI TH) -2.2%
- Nibe (NJB TH) -2.5%
- Naturgy (GAN TH) -2.5%
- Symrise (SY1 TH) -3.2%
- Givaudan Has Superior Outlook to Symrise, Morgan Stanley Says
The dollar rallied, bond yields climbed and Asian shares slid amid unrelenting pressure on risk-sensitive assets as fears of faster inflation and global recession continued to rise. The pound led declines among major currencies Monday, slumping as much as 4.7% to a record low as the UK Chancellor vowed to press on with tax cuts that threaten to stoke inflation. The euro fell as investors weighed the prospects of Italy under the most right-wing government since World War II. Shares dropped in Japan, Australia and South Korea while an index of global stocks traded near the lowest since 2020. US and European stock futures fell. Hong Kong equities fluctuated. “We’re in a period of global gloom, with pessimism blanketing different countries for different reasons,” said Ed Yardeni, president of his eponymous research firm, who warned of growing storm clouds for the US economy. “The latest data jibe with our growth recession scenario, but the risks of a full-blown recession are obviously increasing,” he wrote in a note Monday.
A dollar gauge rose to a record high. The yen weakened through 144 to the greenback while remaining short of the point last week that drew intervention from Japanese authorities. The yuan edged close to the weak end of its trading band even as China brought back a tool to make it more expensive to bet against the currency via onshore derivatives.
A dollar gauge rose to a record high. The yen weakened through 144 to the greenback while remaining short of the point last week that drew intervention from Japanese authorities. The yuan edged close to the weak end of its trading band even as China brought back a tool to make it more expensive to bet against the currency via onshore derivatives. Oil fell again as mounting recessionary concerns threatened global demand. West Texas Intermediate sank toward $78 a barrel, adding to a 7% slump last week. Gold fell toward the lowest since April 2020 on the surging dollar while Bitcoin stayed below $19,000.
Nikkei -2.52% Hang Seng -0.27% CSI +0.43% Shanghai -0.08% Shenzen +0.44%
Eur$ 0.9630 CNH 7.1692 CNY 7.1654 JPY 144.12 GBP 1.0549 CHF 0.9848 RUB 57.4353 TRY 18.4322 WTI$ 78.27 -0.60% Gold 1,637.40 BTC 18,802 -0.54% ETH 1,294.20 +0.14%
S&P -0.88% Nasdaq -0.94% EuroStoxx -0.69% FTSE +0.11%Dax -0.80% SMI
Macro :
- China’s GDRs in Europe Reach $2.6 Billion, Surpass US Listings
- Watch Italian Stocks as Meloni’s Right-Wing Bloc Set for Big Win
- Meloni Wins Big in Italian Election to Turn Page on Draghi Era
- Private Equity Writedowns Spur Mounting Scrutiny From SEC
- Italy to Reach 90% Gas Storage One Month Early, Snam CEO Says
Keep an eye on :
- AAL LN : Peru Authorities Ask Govt to Annul Quellaveco Mine Water Rights
- ENEL IM : ERG: Italian Antitrust Authority Blocks ERG Power Deal With Enel
- EQNR NO : Equinor Seen as Important Partner for Poland’s New Energy Group
- ERF FP : Eurofins Divests Digital Testing Ops for EU220M
- GSK LN : GSK to Name Burberry Group’s Julie Brown as CFO: Sky
- IBE SM : *IBERDROLA SEEKS TO SELL 49% OF SPAIN SOLAR PORTFOLIO: EXPANSION
- 7244 JP : Motherson to Buy Mirror Business of Japan’s Ichikoh for $36M EV
- INTRUM SS : Intrum Identifies Negative Adjustments After Third-Quarter Audit
- MC FP : London’s Luxury Boutiques Get Boost from Revived VAT Exemption
- MMT FP : *MFE IS SAID TO TEAM UP WITH XAVIER NIEL TO BID FOR STAKE IN M6
- MMT FP : Courbit-Led Group Said to Offer 20 Euros Per Share For M6 Stake
- MDLZ US : Mondelez Could Sell Halls to Ferrero or Perfetti, Corriere Says
- PDG LN : Hedin Group Offers £400 Million for Auto Retailer Pendragon: Sky
- PGE PW : Poland Proposes Windfall Tax Rate of 50%: Minister Sasin
- SEMC SS : Ratos Makes Rival Offer to Buy Semcon for SEK157 per Share
- SCATC NO : Scatec Expands Executive Management, Names CFO Torud as EVP
- STM FP : Italy, Intel Pick Preferred Region for Chip Plant, Reuters Says
- TNET BB : Telenet Increases Stake in Caviar Group to 70% From 49%
- TTE FP : TotalEnergies Invests About $1.5 Billion in Qatari Gas Project
- UN01 GY : German Finance Minister Questions Gas Levy’s Rationale: BamS
- VLA FP : Valneva in Talks for Funding of Second Generation Covid Vaccine
>>> Up
* ASML Raised to Neutral at Grupo Santander; PT 480 euros
* Belimo Raised to Buy at Berenberg; PT 440 Swiss francs
* Carlsberg Raised to Buy at Jefferies; PT 1,110 kroner
* Close Brothers Raised to Buy at Berenberg; PT 1,250 pence
* Computacenter Raised to Buy at Citi; PT 2,450 pence
* Givaudan Raised to Overweight at Morgan Stanley
* Soprano Raised to Reduce at Inderes; PT 82 euro cents
* TotalEnergies Raised to Overweight at JPMorgan; PT 62 euros
* Unilever Raised to Buy at Berenberg
>>> Down
* AB InBev Cut to Hold at Jefferies; PT 55 euros
* AB InBev ADRs Cut to Hold at Jefferies; PT $54
* BP Cut to Neutral at JPMorgan; PT 520 pence
* Countryside Cut to Hold at Jefferies; PT 239 pence
* Golden Ocean Cut to Hold at Jefferies; PT 106.96 kroner
* Norsk Hydro Cut to Sell at Nordea; PT 50 kroner
* NSI NV Cut to Neutral at Oddo BHF; PT 26 euros
* Symrise Cut to Underweight at Morgan Stanley; PT 91 euros
* Varta Cut to Neutral at Goldman; PT 50 euros
* Varta Cut to Neutral at JPMorgan; PT 45 euros
* Vastned Cut to Underperform at Oddo BHF; PT 15 euros
* Wereldhave Cut to Neutral at Oddo BHF; PT 14 euros
>>> Initiation
* Farfetch Rated New Sell at Citi; PT $6
* Moncler Rated New Outperform at Grupo Santander; PT 58 euros
* OSB Group Rated New Buy at Berenberg; PT 750 pence
* Standard Chartered Rated New Buy at Orient Finance
* Virgin Money UK Resumed Hold at Berenberg; PT 170 pence
>>> Call
* Carlsberg Raised, AB InBev Cut at Jefferies; Beer Stocks Cheap
* Computacenter Raised to Buy at Citi With De-Rating Set to Halt
* Givaudan Has Superior Outlook to Symrise, Morgan Stanley Says
* Jefferies Cuts Most EMs in Global Allocation on Fed Tightening
* Unilever Set to Deliver on Growth, Raised to Buy at Berenberg
ETFs with largest inflows underperform rivals, studies show
Prevalence of ‘dumb’ retail money offers ‘bankable’ returns if you invest by going against the flow
Investors in exchange traded funds are a barometer of what not to buy, with excess returns to be made by shorting those with the biggest inflows and going long those with the largest outflows, research suggests.
The contrarian nature of ETF flows is particularly strong for leveraged funds, thanks to the prevalence of “dumb” retail money, the academic findings show.
“ETFs with large inflows predictably earn lower future returns than ETFs with large outflows,” said Shaun William Davies, one of the authors.
Moreover flows to and from leveraged ETFs, which provide magnified short-term exposure to an underlying market, such as the S&P 500, are “always contrarian”, he added.
“When markets are going down, we see a big rise in long leveraged [flows] and vice versa. [Buyers] are betting against a shock and preventing stocks from getting to their fundamental value. They are catching a falling knife.”
One paper, ETF Arbitrage, Non-Fundamental Demand, and Return Predictability, co-authored by Davies, found that a portfolio that is short high-flow ETFs and long low-flow ETFs earned an excess return of between 1.1 per cent and 2 per cent a month for US equity ETFs during the nine-year sample period.
A follow-up paper, Speculation Sentiment, written by Davies, found similarly large predictive power in flows to and from leveraged ETFs. Specifically, a one standard deviation increase in net flows — a commonly used statistical measurement — is associated with a 1.14 per cent to 1.67 per cent decline in broad market stock indices during the following month.
The findings were no surprise to some.
“It is an open secret within the financial industry that certain portions of the retail investor community make bankably poor investment decisions, ie they buy at the top of the market and sell at the bottom,” said Kenneth Lamont, senior fund analyst for passive strategies at Morningstar.
“The short-term, high octane returns promised by leveraged products makes them especially attractive to this subset.”
Vitali Kalesnik, director of research for Europe at Research Affiliates, a Californian investment house, agreed that leveraged ETFs “are associated with less sophisticated investors [as] more sophisticated traders have cheaper and more efficient ways” to gain similar exposures.
Overall, what the researchers are finding is “mean reversion”, Kalesnik said. “The dumb money flows in. If these large flows are unrelated to fundamentals then ultimately there is mean reversion.”
The authors believe their findings result from ETF flows representing “non-fundamental” demand, which they define as “beliefs that are uncorrelated with fundamental news” as well as “over and under-reaction to fundamental news”.
They argue this non-fundamental demand “distorts asset prices away from fundamental values”, leading to an inevitable correction at a later point.
Davies argued there was “nothing nefarious about ETFs themselves”, which he described as “one of the most incredible innovations in the financial space”.
Instead, the authors argue that ETFs provide a “really clean way to observe mispricing” because of the trading mechanism that whirrs away behind the scenes to keep them fairly priced, at least in normal market conditions.
If an ETF sees meaningful net inflows, the price of the ETF’s shares will rise above the value of its underlying holdings. At this point, arbitrageurs or “authorised participants” step in, buying a basket of securities and swapping these with the ETF’s provider for newly created ETF shares. The AP then sells these shares, locking in the price differential and bringing the price of the ETF and its underlying securities back into line.
This creation process runs in reverse at times of net outflows, with ETF shares being redeemed.
“Any time we see arbitrageurs or APs step in to create or redeem shares we know that either the share price or the underlying assets are experiencing excess demand,” Davies said.
He argued that this “must be down to something non-fundamental” since the ETF and the underlyings “have access to the same cash flows”.
The team’s data crunching suggests that ETF share creations tend to be an indicator of sub-market returns in the subsequent months, as the mispricing driven by non-fundamental demand corrects. Conversely, redemptions presage above-market returns.
“That suggests that ETF shares are relatively more sensitive to non-fundamental demand shocks than the underlying is,” Davies said.
The analysis did not find such a strong relationship for fixed income ETFs, suggesting that “a lot of the non-fundamental demand is in the bonds themselves: a lot of the price discovery is in the ETFs,” Davies added.
The relationship was, though, very strong for leveraged ETFs. Davies attributed this to these funds being traded primarily by retail investors (“dumb” money), while the derivatives that underlie leveraged ETFs are traded by professionals (“smart” money).
Davies believed a long/short strategy based on the findings could be viable, given that ETFs tend to be easy and cheap to short compared with individual stocks, especially smaller companies.
He said he was working with a hedge fund that is attempting to construct a vehicle that would consistently beat the S&P 500 by a few basis points and is using Davies’s leveraged ETF metric as one of the signals as to when to go long or short the market.
Private’s equity’s biggest problem
The industry is not a pyramid scheme but it might be operating in an alternate reality
Is the private equity industry constructing a giant pyramid scheme that could be bad for business? A number of influential investment managers in Europe seem to believe that.
Mikkel Svenstrup, chief investment officer at ATP, Denmark’s largest pension fund, warned that the increasingly common practice of private equity groups selling companies to each other, including to newer funds controlled by the same buyout firm, is concerning.
Amundi Asset Management’s chief investment officer Vincent Mortier said more or less the same in June: “Some parts of private equity look like a pyramid scheme in a way . . . You know you can sell to another private equity firm for 20 or 30 times earnings . . . It’s a circular thing.”
Such criticism has risen on the back of the private equity industry’s boom in so-called continuation funds, a new level of “creative” and lucrative financial engineering even for a sector run by top financial wizards.
This is where a buyout group sells an asset it has owned for several years to a new fund it has more recently raised. It is an evolution of the pass-the-parcel deals where one private equity group sold an asset to another in the secondary market.
The traditional image of buyout firms may have once been all about taking poorly performing listed companies private, loading them up with debt and carrying out brutal restructurings before making a profit around five years later by selling them — either to public markets or a corporate buyer. Or possibly rolling a series of acquisitions of companies up into bigger entities capable of dominating a single industry.
Those strategies still exist but industry pioneers like KKR, Blackstone and Apollo have grown into much more diversified businesses that resemble more of an asset manager than a traditional buyout group. For these publicly traded, private equity players, the name of the game is adding assets under management.
The more assets they gather, the more fees they take from their investors. Shareholders in the listed groups certainly value the consistency of such management fees far higher than the more sporadic performance fee-based profits earned from deals.
So the private equity groups look to hold on to assets for longer. Hence the incentives for continuation deals. Why give up a great company offering a steady cash flow to sell to a competitor? A particular fund nearing the end of a finite life might have to divest, but another managed by the same private equity group might benefit. It is also a way for private equity groups to deploy some of the rivers of cash that have been committed to the sector in recent years.
The conflicts of interest involved in this should make fund investors nervous — ie is the acquiring fund paying too much, flattering the seller? Or is the old fund offloading a poor quality asset, already milked by the private equity machine? But does all this make the industry a pyramid or a Ponzi scheme?
Well some perspective. Some $65bn worth of deals were carried out this way last year, according to Raymond James’ Cebile Capital unit. So continuation deals are a rising part of the industry. However those levels compare with $656bn of overall deals carried out by private equity year to date.
The bigger problem for private equity might be that it is operating in an alternate reality.
For more than a decade buyout groups binged on cheap debt, allowing them to buy up a tonne of assets while also raising huge sums of cash from investors desperate to boost returns. With interest rates rising, the problem is that a lot of what they now own may be worth less than what they paid for it. Given the private nature of these assets, it’s hard to tell how bad the losses might be.
What we do know is that since the start of the year, public markets have fallen sharply with the S&P 500 index down around 20 per cent and the Nasdaq about 30 per cent. Private equity groups have been more cagey about their performance, but some portfolios at large buyout funds have been marked down by less than 10 per cent.
Some private equity groups might have outperformed but it is hard not to believe a crunch is coming — even for an industry traditionally insulated from the immediate accountability of public market valuation swings.
This will be painful for the many investors in private equity funds, like Sevenstrup’s ATP which has invested $119bn across 147 buyout funds, according to PitchBook. Perhaps what private equity investors, like pension funds, should be thinking about is whether their decision in recent years to pump billions of dollars and euros into the industry was actually the right call in the first place given the lack of transparency in the sector.
Crypto industry is not as ethical as private equity, says buyout billionaire
Orlando Bravo has personally championed bitcoin while his firm Thoma Bravo has a stake in FTX
Orlando Bravo, the billionaire co-founder of Thoma Bravo and bitcoin enthusiast, has said he was disappointed to find that ethical standards in parts of the crypto industry are not as high as in private equity.
Bravo, whose buyout group invested about $150mn in Sam Bankman-Fried’s cryptocurrency exchange FTX last year and has stakes in four other businesses in the sector, said in an interview with the Financial Times that his firm is pausing investments in other crypto companies.
The private equity executive said he was happy with the deals Thoma Bravo had done so far but he had come across problems in the wider industry.
“I’ve gotten to know that world a little bit more, and some of the business practices don’t rise to the level of ethics that we’re all used to in private equity with your investors and your customers and your community, and that has been a bit disappointing,” he said.
Bravo, who has said he personally owns bitcoin, criticised the crypto market for what he called a “disturbing” lack of transparency. But he stressed that he was still bullish about bitcoin and believed the industry was “just young” and ethical problems would “get fixed over time”.
Miami-based Bravo’s profile has rocketed as his private equity firm has grown from a niche player to a $122bn giant in recent years, ploughing tens of billions of dollars of investors’ cash into leveraged buyouts of enterprise software companies just as valuations surged. Its companies include UK-based Sophos and Stamps.com.
He has been a vocal proponent of bitcoin, tweeting about his bullishness and speaking at a bitcoin conference in Miami. In January he wrote on Twitter that the cryptocurrency “stands tall as the ultimate store of value”.
This year the price of bitcoin has fallen 50 per cent and the crypto industry has been rocked by a series of crises. TerraUSD, a token designed to track the dollar, has collapsed, crypto lending platform Celsius fell into bankruptcy and stablecoin provider Tether has faced scrutiny over the nature of its reserves.
As well as FTX, Thoma Bravo has taken minority stakes in the crypto companies Anchorage Digital, FalconX, Figment and TRM Labs, using a growth fund it raised last year. The fund has $1.5bn to deploy in total, according to PitchBook figures.
Asked whether he would do more crypto deals in the current climate, he said: “We do more of what has been very, very successful and if something is not successful yet, we don’t rush to do 10 other things . . . We’re really happy with what we have and we want to see that grow and be successful before we can do a lot more.”
However, he said, the firm would “certainly look at” putting more money into FTX if it held another funding round. The Bahamas-based crypto company was going to be “a big winner”, he said, describing 30-year-old Bankman-Fried as “one of the best entrepreneurs” he had come across.
Bravo’s comments came as he and other dealmakers from around the world gathered for the IPEM private equity conference in Cannes and as the economic conditions that propelled a decade-long boom in the industry go into reverse.
Thoma Bravo considered providing equity for Elon Musk’s bid to buy Twitter earlier this year, which would have been a departure from its model of buying enterprise software companies. “It looked like an enterprise software deal in terms of all the metrics”, Bravo said.
Twitter relies on advertising for much of its revenue, in contrast to many enterprise software companies that have steady, stickier revenues from corporate clients paying to use their products. Asked whether the two were really comparable, he said: “You have a very, very good point . . . you have to be pretty creative if you want to do the newer things in software.
“Can you see other companies as [having] recurring revenue streams by looking at them a little differently? Sometimes you can, sometimes you can’t.”
Bravo, whose firm rushed into the booming market for special purpose acquisition companies, or Spacs, said the model should be made more like private equity. Spacs have been criticised for enriching the so-called “sponsors” who set up the cash shells, even if the target company loses value after going public.
Thoma Bravo’s Spac merged with Israeli software company IronSource last year. IronSource’s shares have fallen from a peak above $13 to $3.56.
“The market was on fire and we took a shot,” he said. “There just has to be better alignment, and if people could just copy the private equity model into a Spac, it would be much better . . . Have the Spac sponsor only make money if the stock goes up”.
He said software investment was “the perfect place to deal with inflation, no question” because with a $100,000 software product, a company “could take out 50 people or do a lot more with the labour that you have”.
Earlier at the conference, Mikkel Svenstrup, chief investment officer at Denmark’s largest pension fund ATP, had compared private equity to a pyramid scheme, saying firms sold too many companies either to other buyout groups or to their own funds. Bravo disagreed with the comments.
“We’ve sold so many companies into private equity and they have done so well with them,” Bravo said. “They may have a thousand ideas that you don’t have over your five years of ownership and they crush it, and good for them”.
“People don’t say . . . that the public markets are a pyramid scheme,” he added. “Fidelity’s buying from Capital Group who’s buying from a hedge fund . . . you’re just looking to do the best trade.”
Moncler Celebrates 70th Anniversary With Grand Performance in Milan
The performance on Saturday evening was opened by the prima ballerina of Teatro alla
MILAN — Moncler’s takeover of Milan’s landmark Piazza del Duomo was quite the spectacle on Saturday evening.
The symbolic and unprecedented event to mark the brand’s 70th anniversary kicked off a 70-day program of global celebrations.
The performance was opened by the prima ballerina of Teatro alla Scala di Milano Virna Toppi and comprised 1,952 artists — representing the founding year of Moncler — and all wearing a white Moncler Maya 70 jacket.
The show was orchestrated by choreographer Sadeck Berrabah (Sadeck Waff) and the artists sang and danced in the square with a highly visual and physical performance that explored the power of repetition.
“Last night in Piazza del Duomo, I witnessed the perfect portrait of the future of Moncler,” said chairman and chief executive officer Remo Ruffini. “Tradition and innovation, key cornerstones of the brand, were united by the iconic Maya jacket — a design that keeps evolving in style and materials, thus, always remaining contemporary. We saw vigor in the execution and the uniqueness of an unprecedented performance exploring new territories in dance. There was a wave of emotion as we lived this experience together, and that moment was shared across the world through digital channels. And finally, what I am most proud of is that we gathered together all generations, and felt the strong energy coming from our communities. It is with them that we want to build our next 70 years. At Moncler we dream together, not alone.”
Ruffini has long touted the importance of connecting and engaging communities and the event was open to the public, who flocked to the square despite the rain. Spectators totaled a maximum-capacity of 18,000, watching the performance from the main square, as well as from the surrounding balconies and terraces.
The cast comprised 700 dancers, 200 musicians, 100 choir members and 952 models and the performance included a chorister, who began to sing acapella as Toppi appeared onstage, dancing solo.
Moments later, she was joined by Sadeck Waff as the whole Voci Bianche choir began to sing.
The choir came to a silence as a Milanese orchestra, with participating musicians from Teatro alla Scala, began to play “Carmina Burana.” The crowd then enjoyed a performance by Waff and a troupe of dancers with geometric movements. The music then transitioned from live orchestral to electronic music, performed by DJ Lorenzo Senni.
The vast 1,952 person cast, moving as one, formed a final tableau showered by confetti.
Ruffini was joined in the square by friends of the brand that included Hiroshi Fujiwara, Anne Hathaway, Elsa Hosk, Minhyun Hwang, Carmen Jordá, Maria Sharapova, Pharrell Williams, Shailene Woodley and Na Ying, to name a few.
As part of the anniversary celebrations, as reported, Moncler will stage the “Extraordinary Expedition” multicity event, running in New York, London, Tokyo and Seoul and there will also be a Chinese leg starting Oct. 20 that will be entirely virtual, available on personal WeChat profiles.
The Maya jacket has been tweaked in a limited edition with 13 special colors and each, except for a platinum version, is crafted in Moncler’s new, lightweight, washed and lacquered nylon. The silhouette in a boxier fit offers even more freedom of movement with an enlarged hood, while poppers replace the front zip.
The “Extraordinary Forever anniversary” logo adorns the left sleeve pocket, where an infinity loop twins the original logo with the 70th anniversary mountain emblem.
Also, Ruffini has asked seven designers to revisit the Moncler Maya jacket, to be launched on a weekly basis from Oct. 15. They are Francesco Ragazzi of Palm Angels; Thom Browne; Fujiwara of Frgmt; Rick Owens; Giambattista Valli; Pierpaolo Piccioli, and Pharrell Williams.
This month, Moncler is launching the “Extraordinary Forever” campaign.