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Apollo and fintech-focused private-equity firm Motive Partners are leading the investment that values CAIS at more than $1 billion

Apollo Global Management Inc. APO -0.88% is investing in CAIS, a platform that gives independent financial advisers access to alternative investment products, the latest in a string of moves by the private-equity giant aimed at reaching wealthy individuals.

Apollo and fintech-focused private-equity firm Motive Partners are leading a $225 million investment that values CAIS at more than $1 billion, officials at the companies said. Franklin Templeton BEN -0.68% parent Franklin Resources Inc. is also participating in the round.

The three will join Eldridge Industries LLC, a private-investment firm run by Guggenheim Partners LLC veteran Todd Boehly, which invested $50 million in CAIS in November 2020.

Unlike private-wealth powerhouses such as JPMorgan Chase & Co. and Morgan Stanley, independent financial advisers typically work for small firms that lack significant technology budgets.

New York-based CAIS, which was founded in 2009 and is formally known as Capital Integration Systems LLC, offers a tool that gives those advisers access to a broad selection of investment strategies that are less liquid than publicly traded stocks and bonds. Its offerings include hedge funds, private-equity funds, private credit and real estate, many managed by the likes of Apollo and its peers. Apollo invested in CAIS because it wants to learn from the company about strategies for reaching independent investors.

For Apollo, which has become a $481 billion behemoth primarily by catering to institutions, the deal is the latest in a series of transactions aimed at reaching the universe of individual investors known as the mass affluent. In October, the firm set a target of raising more than $50 billion for its global wealth business over the next five years, one of the key growth initiatives laid out by new Chief Executive Marc Rowan.

“We think we know how to reach these retail high-net worth customers, but anyone who says they have it all figured out is not telling the truth,” Mr. Rowan said.

Clients of independent advisers have 1% to 2% of their portfolios allocated to alternative assets, compared with 15% or greater for big banks’ private-wealth clients and 30% to 40% for institutional investors such as pension funds, said CAIS Chief Executive Matt Brown, who founded the company after working in wealth management.

In July, Apollo agreed to take a stake of up to 24.9% in Motive and become an investor in its funds in exchange for help with beefing up its own technology. Last month Apollo agreed to buy the U.S. wealth-distribution and asset-management businesses of Griffin Capital Co., an investment firm focused on distributing private credit and real estate products to wealthy individuals. It also invested in iCapital Network Inc., a technology platform that caters to big wealth-management firms.

Sequoia Capital’s and Paradigm’s $1.15 billion investment values the electronic-trading firm at around $22 billion

Citadel Securities is set to receive its first outside investment in a deal valuing the electronic-trading firm majority owned by hedge fund billionaire Ken Griffin at around $22 billion.

Venture-capital firm Sequoia Capital and cryptocurrency investor Paradigm have agreed to invest $1.15 billion in the Chicago-based firm, the company told The Wall Street Journal. Sequoia partner Alfred Lin will also join Citadel Securities’ board.

Citadel Securities is managed separately from Citadel, the $43 billion hedge fund on which Mr. Griffin built his fortune, estimated by Forbes at $21.3 billion. Founded in 2002, Citadel Securities has grown into a global giant that trades equities, options, futures, bonds and other assets, handling about 27% of the shares that change hands in the U.S. stock market each day, according to its website. Much of that volume comes from processing trades for online brokerages such as Robinhood Markets Inc.

The deal will give Citadel Securities capital to continue expanding globally, the company said, and could be a precursor to an initial public offering for the business. There is no guarantee the firm will go ahead with a listing and there are no plans to launch one imminently.

The explosion in trading volumes and volatility across financial markets during the coronavirus pandemic boosted Citadel Securities’ revenue. In 2020, net trading revenue was $6.7 billion, almost double the previous high in 2018. Net trading revenue in 2021 was even higher, according to a person familiar with the matter. Citadel Securities has been led by Chief Executive Peng Zhao since 2017.

Last year’s Reddit-fueled trading frenzy in GameStop Corp. and other so-called meme stocks drew attention to Citadel Securities’ relationship with online brokerages.

Some small investors active on social media have accused Citadel Securities of masterminding the Jan. 28, 2021, trading restrictions in which brokerages limited customers’ ability to buy GameStop and a number of other stocks. Citadel Securities has denied any role in the trading restrictions, which punctured a huge rally in meme stocks.

Still, the episode fueled regulatory scrutiny of the firm and its business practices. Securities and Exchange Commission Chairman Gary Gensler has floated the idea of banning payment for order flow, the practice in which trading firms pay brokerages such as Robinhood and TD Ameritrade for handling their customers’ orders. Citadel Securities paid more than $1.1 billion for order flow during the first nine months of 2021, making it the biggest source of such payments, Bloomberg Intelligence data shows.

Sequoia, one of the country’s largest venture firms with roughly $80 billion under management, has backed companies including Airbnb Inc. and Google before they were publicly traded. Paradigm is focused on crypto and Web3, a reimagining of the internet, areas Citadel Securities is likely to incorporate in the future as they become more regulated. To date, Mr. Griffin has been a crypto skeptic and avoided trading digital currencies in his businesses.

Mr. Griffin has considered deal making previously. The Journal reported in 2015 that the hedge-fund firm was considering going public, a move it had also weighed before the financial crisis. The Journal in 2019 reported Blackstone had been in talks to buy a stake in both Citadel Securities and Citadel, with firm executives estimating at the time the hedge fund had a value of between $5 billion and $7 billion.

Investors are pouring money into ‘instant’ delivery of staples, but making money on them may not be so basic

In business, one plus one should equal three. So why are venture capitalists pouring billions into rapid-food-delivery startups that yield negative numbers?

Like so many investors these days, they are after the pot of gold at the end of the rainbow. DoorDash pegs the addressable market in convenience at $200 billion to $250 billion and grocery at $800 billion to $1 trillion, according to a December report by Gordon Haskett. Buyk, a rapid-grocery-delivery startup, has said its addressable market is $500 billion in just the U.S.

Coresight Research estimates the quick-commerce space generated roughly $20 billion to $25 billion in U.S. retail sales last year, including services from companies like DoorDash, Instacart and Uber Eats. Gopuff, the largest rapid-delivery startup, was valued at $15 billion as of July, and is said to be considering a public offering as early as this year. Investors are betting the convenience of having goods delivered during the pandemic will stick even after we settle into a new normal. The question is whether the economics necessary to support the promise of rapid delivery will ever bring sustainable returns.

The history of rapid delivery has itself been fast and furious, accelerated by the pandemic. First we had platforms like Postmates (since bought by Uber Technologies ) and Instacart delivering third-party food to your doorstep the same day. Soon after, Gopuff vertically integrated the concept, delivering goods through its own fulfillment centers. Having all orders coming from a central hub cut delivery times.

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DoorDash introduced DashMarts in 2020, enabling it to deliver convenience and food items from stores it owns, operates and curates. Most recently, it added one such location in New York City so that it can deliver hyper-locally in 10 to 15 minutes. The company says more such locations are expected over the next few months.

In the “instant” delivery space, DoorDash and Gopuff are hardly alone. Recent platforms delivering in New York City also included JOKR, Getir, Buyk, Gorillas, Fridge No More and 1520 (which is already “no more” after exhausting its funding). Those companies have collectively raised nearly $7.6 billion, according to PitchBook, with Gopuff getting more than half of it.

So far, the unit economics look underwhelming. JOKR was losing $159 per order in the U.S. as of last August, according to a recent report from The Information citing internal data sent to investors, though JOKR says its first cities have become “operationally profitable.” Even Gopuff, coming off a year of significant expansion, isn’t profitable on the basis of earnings before interest, taxes, depreciation or amortization, though it says it is “contribution profit positive.”

Ironically, JOKR is now weighing longer delivery times to reduce losses, according to The Information, while it and other companies like Gopuff are working toward introducing private-label products to boost margins. Buyk says it already sells proprietary products and has more coming soon.

Sustainable profits for some of these platforms could one day hinge upon opting for their private labels like Gopuff’s planned “Basically Amazing.” But that reduces costs by only so much. To ensure speed, most rapid-delivery platforms today use employees rather than contractors, even including DoorDash at its Chelsea location in New York City. Most charge delivery fees under $2—even zero—with no service fees, according to Gordon Haskett.

One of the big benefits of instant-delivery platforms is that they don’t initially need large infrastructure. As they expand, though, that might change. Gopuff recently acquired BevMo and Liquor Barn. Its website says it has “hundreds of facilities,” opening new ones “all the time.” The downside to small dark-store locations is limited inventory. Gordon Haskett’s December report shows an average of just over 2,000 products per dark store across select platforms versus 15,000 to 60,000 for traditional grocers. Low selection could limit the use case of such dark stores, according to analyst Robert Mollins.

Another open question is whether any of these startups can compete in rapid delivery with a behemoth like DoorDash should it choose to expand. It won’t have to pay for customer acquisition, already having over nine million loyal DashPass members at its fingertips. On the other hand, its strategic advantage in suburban food delivery isn’t likely to translate well to rapid delivery, where dark stores must be localized.

Even with lengthier lead times and contracted workers, food delivery hasn’t lately proved to be a highly profitable business. Investors might be chasing a mirage.

Strong run for Absolute Return fund bolsters hopes that ‘quant winter’ is thawing

A computer-powered investment fund run by AQR posted double-digit gains in the opening days of 2022, building on a strong performance last year that has bolstered industry hopes that the long “quant winter” has finally passed.

AQR Capital Management’s Absolute Return fund, which combines a broad array of its investment strategies, last week notched up gains of 10.4 per cent net of fees. Its strongest ever five-day period since its inception 23 years ago, according to people familiar with the matter.

AQR’s co-founder Clifford Asness described the week as “epic” on Twitter. Absolute Return’s gains come after returning 16.8 per cent to investors in 2021.

The strong run for AQR, which was one of the victims of a years-long period of lacklustre returns produced by traders that use fast computers and mathematical models to place bets, comes as the broader industry is also showing signs of recovery.

The average quant equity fund tracked by Bank of America returned 27.8 per cent last year, compared with the US stock market’s 26.5 per cent returns and the average 24 per cent gains of traditional stockpickers.

“It looks like 2020 was more of a bump in the road than something fundamental,” said Isabelle Bourcier, head of quantitative investing at BNP Paribas Asset Management. “The recovery in 2021 has been quite good and I’m confident for 2022.”

Many of the bigger market signals exploited by quantitative investors have struggled in recent years, with the outbreak of the Covid-19 pandemic proving to be particularly rough on some strategies. This had sparked a debate over whether quant investing was merely suffering a bad spell or had become obsolete.

However, last year’s performance indicates a strong turnround. About 70 per cent of large quant funds outperformed their benchmarks in 2021, according to BofA, compared to just 40 per cent for stockpickers. Quant funds focused on smaller stocks did even better last year, with all but one of the 15 funds monitored by BofA outperforming the Russell 2000 index of smaller listed companies and outperforming by 12 percentage points on average.

“We are encouraged by the exceptional performance across our strategies to start 2022, especially following a strong year for many of them in 2021,” Asness said in an email. “​​While timing is always uncertain, and it won’t be a straight line, we believe this positions AQR for one of the most robust recoveries for factor investing since the tech bubble of 1999.”

Quantitative investment strategies vary greatly, from the complex and expensive — typically run by big hedge funds in London, New York or Hong Kong — to simpler forms that can be packaged up and sold to ordinary investors through mutual funds or even exchange traded funds.

The latter often involves seeking to take advantage of longstanding market patterns known as “factors” or “risk premia”, such as the tendency of unglamorous or steady stocks to outperform the broader market in the long run, or that past winners often keep outperforming past losers.

One of the biggest challenges confronting more mainstream quant strategies was the long stretch of miserable performances suffered by the “value” factor — systematically buying low-valued stocks and avoiding or betting against expensive ones. Despite a century of data indicating that they tend to do well in the long run, value strategies suffered a barren decade before the pain was compounded by the pandemic.

However, value stocks enjoyed a renaissance last year, with long-shunned areas such as energy and banks rediscovering their vim and topping the table of the best-performing sectors in 2021. US energy equities alone returned about 46 per cent last year — their biggest gain in at least two decades.

“This showed typical signs of a post-recession recovery with investors taking on more risk as fiscal stimulus and dovish monetary policy encouraged the markets to look past the pandemic,” Hal Reynolds, chief investment officer of Los Angeles Capital, a quantitative asset manager, said in the firm’s year-end review.

Many in the quant industry expect the resurgence of value stocks to continue — given how cheap several remain compared to the broader stock market — and hope this will entrench the recovery and attract investors back to quant strategies. The first trading days of 2022 have been exceptionally good for value and painful for previously high-flying “growth” stocks.

But it may not be plain sailing, according to some quant analysts. Eric Sorensen, a veteran of the industry who led a pioneering quant research desk at Salomon Brothers in the 1980s, is optimistic that the coming year will prove to be fertile for many strategies. But he argued that some rivals were not evolving enough.

“I think there’s still a lot of quantitative firms who go the easy route and say: ‘Well, this stuff is working again. I’m just going to go back and use what has been shown to work in the past’,” said Sorensen, the chief executive of quant asset manager PanAgora. “I don’t believe you can do that. I think you have to stay ahead of the curve.”

Moreover, the financial environment is becoming more treacherous. Reynolds at Los Angeles Capital cautioned that the cross-currents of 2022 — a stubborn pandemic, economies in flux and central banks tightening monetary policy — could shake things up.

“The accelerated rollout of vaccines globally suggests we are on a strong path to recovering from the economic crisis, but the effectiveness of the vaccines against new strains and the extent to which health policy can remain ahead of the virus path will be important risk factors,” he said.

Nicole Kidman and Keanu Reeves have been wearing looks by the Italian luxury brand, but Brunello Cucinelli contends the company's values are also key in attracting A-listers.

MILAN — Throughout her career, Nicole Kidman has never shied away from making bold sartorial choices. One of her latest fashion statements shined the light on Brunello Cucinelli, whose brand has been gradually and steadily garnering red carpet visibility.

In December, Kidman made a guest appearance on “The Tonight Show Starring Jimmy Fallon” to discuss her role as Lucille Ball in “Being the Ricardos,” and the Academy Award-winning actress once again made an impression, shimmering in a Brunello Cucinelli spring 2022 tailored pantsuit. In a honey-taupe color lit up by a cascade of sequins, the end effect was one of a glamorous yet highly sophisticated look, and appropriate for the occasion.

Also in December, at the San Francisco premiere of “The Matrix Resurrections,” Keanu Reeves wore a classic dark suit over a white shirt and a regimental tie — nodding perhaps to a potential return of that recently neglected accessory — all by Brunello Cucinelli.

Having become the go-to luxury fashion resource for tech titans ranging from Jack Dorsey, formerly of Twitter, to Jeff Bezos (including a much criticized look the Amazon founder wore on New Year’s Eve), Cucinelli now aims to gain the same high profile on the Hollywood red carpet. In fact, the company took its collection to Los Angeles in December to show to stylists and stars in advance of the upcoming round of awards shows and movie premieres — many of which have now, unfortunately, been postponed or canceled due to the Omicron variant. The brand, more widely known for its men’s wear, also aims to boost its profile in women’s going forward, which will be helped by the likes of Kidman wearing its clothes.

“I am very happy to see these young women and men wearing our clothes, but especially because they are attracted by our style and our taste and because they watch our company and how it behaves — they are not under contract,” said Cucinelli of his Hollywood fans. “They wear our designs with pleasure because they know how our products have been made and how we behave, in harmony with the universe, and how we value manual craftsmanship and quality.”

Cucinelli spoke about his conversations with “the exceptional” Angelina Jolie, who wears his clothes “privately.”

“She does so much for children and she was asking us about the Brunello Cucinelli for Humanity project. We can do things together,” he said, referring to his new label, launched in 2020, in the midst of the first wave of the coronavirus pandemic. Cucinelli takes unsold, out-of-season merchandise and, rather than mark it down to generate some revenues or ship it off to a discounter, instead it is simply given away.

Similarly, Sharon Stone, who is also active in several charity projects, approached Cucinelli to collaborate on donations.

Human sustainability and humanistic capitalism have long been the foundations of his company, which translate into “working and living in harmony with creation,” and the entrepreneur made a reference to the invitation he received from Italian Prime Minister Mario Draghi to speak at the G20 meeting in Rome in October on these issues. “People put all this together and are drawn by the way we behave,” he contended.

Cucinelli — who spoke before the company’s preliminary year-end results were reported on Monday — underscored the importance of “a healthy and sustainable balance between profit and giving back, which, with reconciling work and human privacy, and the desire to repair and reuse, are core values of our Casa di Moda and we have always tried to direct our activity following these high and noble principles.”

This may very well be, but it is also true that Cucinelli has never fully abandoned the production of tailored looks, even at the height of the sportswear trend and this is serving him well, as people are eager to return to dressing up for events, he opined.

“After this latest wave, in two or three months, there will be many more events and everyone will want to dress well,” he said. “It can be done in a fresher way, pairing a sneaker with a sartorial or made-to-measure look, for example.”

While looking ahead to more carefree times, the Omicron variant has put the brakes on Cucinelli’s participation at Pitti Uomo, scheduled to be held in Florence Tuesday through Thursday, as reported. This was characterized as “a difficult decision, but one that is believed to be indispensable.” However, the brand will be on the international men’s wear trade show’s digital platform, Pitti Connect.

The brand’s men’s fall 2022 sales campaign will take place as planned, with the help of a medical station that will test clients and collaborators at the Brunello Cucinelli showrooms in Milan, New York and Shanghai. Cucinelli will show the brand’s men’s fall collection in Milan on Saturday, as part of the city’s men’s fashion week.

“We believe this is a decision based on a healthy understanding of the current situation Italy and the whole world are experiencing,” said Cucinelli. “We also believe it is a choice made with the same sense of responsibility felt over the past few months and that we hope will lead to a return of a normalcy of life and human relations. I believe in hope, also accepting what we can’t change, as Thomas More said. At the end of the year, we’ve had time to pause, think and reflect. The pandemic is about to pass and we’ve had time to look up at the sky.”

Cucinelli, who holds the role of executive chairman and creative director of his publicly listed company, said he has “solid expectations for the next two years, where we confirm our expectations of a nice, healthy and balanced growth of around 10 percent in both 2022 and 2023,” based on the orders for the spring 2022 collection and the “very positive sales trend” of the fall 2021 season.

VW sells 10,000 fewer electric cars in China as chip crisis hits deliveries

German carmaker faces fierce competition from homegrown brands

Volkswagen sold 10,000 fewer electric cars in China than expected last year, as deliveries to customers in its biggest market were hit by semiconductor shortages amid fierce competition from domestic brands.

The German marque sold 70,000 of its five flagship ID models, most of which were launched during the past year, having targeted sales of between 80,000 to 100,000 cars for 2021.

As a whole the VW group, which includes Audi and Porsche, delivered 3.3m cars in China last year, 14 per cent fewer than in 2020.

“2021 has been one of the most challenging years in our history in China,” said Stephan Wöllenstein, the group’s longstanding boss in the country, who is due to step aside later this year.

“Whilst our order books are well filled, we were unable to match production to demand over a lack of semiconductors, with the situation further intensified by factory shutdowns — both on our side and supplier side — due to Covid-19 cases.”

Volkswagen’s two joint ventures in China, with FAW and SAIC, have been the engine of the group’s growth for decades, and the country remains VW’s single largest and most profitable market.

However, earnings in China have been declining drastically over the past few years, as the carmaker’s mass market offerings face competition from younger domestic brands such as BYD and Great Wall Motors.

VW’s five new ID models have not sold as well as hoped, and company executives told the Financial Times that Chinese buyers were gravitating towards fresher electric brands, not associated with traditional carmakers.

As a result, VW is setting up showrooms that emphasise the ID brand, and expanding its online sales offering in the hope of selling at least 140,000 ID models this year.

However, Wöllenstein told journalists in a briefing on Tuesday that the number targeted “is not currently secured by the semiconductor supplies that we currently see”, although he remains confident of hitting it.

He added: “Looking ahead for this year, the chip supply situation will remain volatile for the first half, however, we expect a progressive recovery, with production stabilising over the course of the year.”

While VW’s electric sales have slumped, luxury brands Porsche, Bentley and Lamborghini set new annual records in 2021, with annual growth of 7.5 per cent, 40 per cent and 55 per cent respectively.

Porsche’s electric Taycan model outsold its popular 911 model, with more than 7,000 units delivered, compared with 4,000 of the 911.

* Atlantia Raised to Buy at Equita; PT 19.70 euros (+)