FT : Ontario pension fund takes stake in international private schools group

Ontario pension fund takes stake in international private schools group
Move by Omers’ private equity arm highlights investor interest in education

One of Canada’s largest pension funds has taken a 25 per cent stake in an international schools group, as private equity focuses on education as a new area for growth.

Omers Private Equity, an arm of the eponymous group that invests the pension fund assets of Ontario’s municipal employees, said on Monday it had acquired a holding in International Schools Partnership, a group of 50 international schools in a deal that values it at €1.9bn. 

The move points to growing investor interest in education, as private school chains expand their global reach and companies gain a stronger foothold in public education systems by providing infrastructure and technology. 

“Education is a really resilient market that has strong underlying macro drivers,” said Jonathan Musselwhite, head of Europe at Omers. “There’s a real opportunity for private equity.”

International Schools Partnership was created by Swiss private equity firm Partners Group in 2013. Since then it has grown into a global company, teaching 45,000 students in 13 countries including Canada, Italy, Chile, the UAE and Malaysia.

Chief executive Steve Brown said the group wanted to expand its global network. “We are delighted to now have Omers Private Equity invested alongside us,” he added. “We welcome their long-term approach to value creation, and are confident that with Omers, together with Partners Group, we will be able to continue delivering exceptional outcomes.”

Musselwhite said they would continue to expand through the acquisition of existing schools, as well as building new ones, driven in part by growing demand for high-quality bilingual education. 

Investors have backed establishments offering virtual education and bricks-and-mortar private school chains have also attracted private equity funding in recent years. 

In 2018, Zurich-based investment firm Jacobs Holding agreed to acquire private school chain Cognita from Bregal Investments and US buyout fund KKR in a deal worth £2bn. The following year private equity firm Warburg Pincus joined TA Associates as an investor in Inspired Education, which runs more than 50 schools for at least 50,000 students internationally.

David Layton, co-chief executive at Partners Group, said International Schools Partnership was a “textbook example” of “transformational investing in action”.

“Having invested extensively in the education sector, we saw the potential to create a leading K-12 schools platform supported by growing global demand for high quality education,” he added. “We are pleased to welcome Omers as a shareholder to ISP, which is already one of the largest K-12 school groups globally and still has significant growth potential ahead of it.”

>>> US Gapping down

Gapping down

News:

  • SFT -3.2% (prices offering of $75 mln of convertible senior notes due 2026)
  • BLBD -1% (CFO Jeffery Taylor to resign for personal reasons)
  • VVNT -0.9% (announced founder and CEO Todd Pedersen has decided to step down as CEO effective once the board of directors of the company appoints his successor)
  • VXX -0.9% (dipping lower with US futures modestly stronger)

Analyst comments:

  • DG -1.7% (downgraded to Underperform from Neutral at BofA Securities)
  • CPB -1% (downgraded to Hold from Buy at Jefferies)
  • AINV -0.5% (downgraded to Equal Weight from Overweight at Wells Fargo)

>>> US Gapping up

Gapping up

M&A news:

  • SBBP +16.2% (Xeris Pharmaceuticals (XERS) to acquire Strongbridge Biopharma Plc in stock and CVR transaction)
  • COG +1.6% (Cabot Oil & Gas and Cimarex Energy (XEC) will combine in an all-stock merger of equals) 

Other news:

  • BYND +4.1% (Beyond Meat and Tesco (TSCDY) launch new ready meal range; also upgraded to Outperform from Underperform at Bernstein)
  • VSTM +3.1% (receives Breakthrough Therapy Designation for VS-6766 with Defactinib)
  • BYSI +2.7% (presents phase 1 data on the anti-cancer effect of plinabulin in combination with checkpoint inhibitors in SCLC at the American Society of Clinical Oncology Annual Meeting)
  • ALLK +2.1% (data at Digestive Disease Week 2021)
  • LU +1.7% (authorized $300 mln American depositary shares share repurchase program for the next six months)
  • AMC +1.4% (issues statement regarding Wanda Group's sale of stake)
  • TLC +1.4% (subsidiary highlights encouraging data on ISPM21 and ISPM19)
  • MRNA +1.2% (Moderna and Samsung Biologics agree to fill-finish manufacturing of Moderna's COVID-19 vaccine)
  • USO +1% (in sympathy with crude oil futures)
  • DCRB +1% (Hyzon Motors announces strategic collaboration with Sojitz Machinery Corporation of America)

Analyst comments:

  • SHLS +3.6% (upgraded to Outperform from Neutral at Credit Suisse)
  • HPQ +2.1% (upgraded to Outperform from Underperform at Bernstein)
  • OLLI +1.6% (upgraded to Equal-Weight from Underweight at Morgan Stanley)
  • NTR +0.9% (upgraded to Buy from Hold at HSBC Securities)

FT : US hedge fund Schonfeld enters macro trading with ex-Citadel hire

US hedge fund Schonfeld enters macro trading with ex-Citadel hire
Inflation fears help sustain investors’ interest in funds that make bets across currencies and bonds

Hedge fund Schonfeld Strategic Advisors has hired the former head of macro strategies at Citadel and his team, after the pandemic transformed making bets on global bonds and currencies into one of the industry’s hottest areas.

New York-based Schonfeld, which manages $7.8bn in assets and trades across a range of different strategies, has recruited Colin Lancaster and 11 people from Matador Investment Management, where Lancaster previously worked.

Lancaster previously headed up macro strategies at Balyasny Asset Management, before moving to take a similar role at Ken Griffin’s Citadel, which he left last year.

Macro managers, who bet on moves in global bonds, currencies and stocks, have often struggled over the past decade as trillions of dollars of central bank stimulus have suppressed market volatility, but Schonfeld’s move to establish a macro team comes after a bumper year for such managers.

Moves by the US Federal Reserve and other central banks to slash interest rates and a rush by investors into perceived havens sent government bond yields tumbling early last year and provided huge gains for funds holding such bets.

Chris Rokos’s Rokos Capital made about 44 per cent, its best year, while Brevan Howard, the firm Rokos previously co-founded, gained about 27 per cent. Andrew Law’s Caxton Associates, meanwhile, told investors in December it would shut its flagship fund to new money after making about 40 per cent, a record year of gains. 

Some managers such as Caxton and Brevan Howard have also been able to profit this year as inflation concerns have driven a rise in bond yields. Bond yields rise as prices fall.

“The Fed has set the stage for tapering [of quantitative easing] and more volatility. The size of the central bank experiment and the need to normalise policy is going to lead to more challenging markets”, which will be good for macro, said Lancaster, who is joining Schonfeld as global head of discretionary macro and fixed income later this summer. His team will be split between New York, London and Miami.

Last year’s strong gains and investor concerns that huge quantities of central bank and government stimulus could stoke inflation are starting to steer investors back to macro funds. Such funds received $900m of net inflows in the first quarter of this year, according to data group HFR, after three years of outflows.

“The fact that a number of large institutions, endowments and sovereign wealth funds are concerned about inflation — we’ve seen some of that flow to macro hedge funds,” said Heinrich Merz, head of hedge funds at Pictet Alternative Advisors. “A number have grown significantly over the past year.”

While Schonfeld already has a small allocation to computer-driven macro trading in its large quantitative business, the hiring of Lancaster and his team represents a new step into macro trading by human fund managers.

“It was very difficult for computers to understand what was happening in markets during the pandemic [last year]. Certain discretionary-type [human-run] strategies are able to understand those events better,” said Schonfeld chief executive Ryan Tolkin.

Large multi-strategy funds such as Schonfeld, which competes with funds including Millennium Management and Citadel, employ teams of traders across a variety of strategies, who run money for the firm’s main fund. Over the past 12 months Schonfeld has added 16 new investment teams globally.

In the first four months of the year, Schonfeld gained 8.1 per cent, after making 10 per cent last year, according to a person familiar with the matter.

(ZH) "The Fed Has Lost Control" - John Williams Warns Of Hyperinflation In 2022

"The Fed Has Lost Control" - John Williams Warns Of Hyperinflation In 2022

Via Greg Hunter’s USAWatchdog.com,
Economist John Williams, founder of ShadowStats.com, says the Federal Reserve has painted itself into such a tight corner with the economy it really has only two choices. Williams says it comes down to “Inflation or Implosion.”
What would happen to the financial system if the Fed stopped printing massive amounts of money for stimulus and debt service? Williams explains,
“You could see financial implosion by preventing liquidity being put into the system. The system needs liquidity (freshly created dollars) to function. Without that liquidity, you would see more of an economic implosion than you have already seen. In fact, I will contend that the headline pandemic numbers have actually been a lot worse than they have been reporting. It also means we are not recovering quite as quickly. The Fed needs to keep the banking system afloat. They want to keep the economy afloat. All that requires a tremendous influx of liquidity in these difficult times.”
So, is the choice inflation or implosion? Williams says, “That’s the choice, and I think we are going to have a combination of both of them..."
" I think we are eventually headed into a hyperinflationary economic collapse. It’s not that we haven’t been in an economic collapse already, we are coming back some now. . . . The Fed has been creating money at a pace that has never been seen before. You are basically up 75% (in money creation) year over year. This is unprecedented. Normally, it might be up 1% or 2% year over year. The exploding money supply will lead to inflation. I am not saying we are going to get to 75% inflation—yet, but you are getting up to the 4% or 5% range, and you are soon going to be seeing 10% range year over year. . . . The Fed has lost control of inflation.”
And remember, when the Fed has to admit the official inflation rate is 10%, John Williams says, “When they have to admit the inflation rate is 10%, my number is going to be up to around 15% or higher. My number rides on top of their number.”
Right now, the Shadowstat.com inflation rate is above 11%. That’s if it were calculated the way it was before 1980 when the government started using accounting gimmicks to make inflation look less than it really is. The Shadowstats.com number cuts out all the accounting gimmicks and is the true inflation rate that most Americans are seeing right now, not the “official” 4.25% recently reported.
Williams says the best way to fight the inflation that is already here is to buy tangible assets. Williams says,
“Canned food is a tangible asset, and you can use it for barter if you have to. . . . Physical gold and silver is the best way to protect your buying power over time.”
Gold may be a bit expensive for most, but silver is still relatively cheap. Williams says, “Everything is going to go up in price.”
When will the worst inflation be hitting America? Williams predicts,
“I am looking down the road, and in early 2022, I am looking for something close to a hyperinflationary circumstance and effectively a collapsed economy.”

FT : UK proposals on Big Tech M&A risk stifling competition

UK proposals on Big Tech M&A risk stifling competition
Regulator wants to drastically lower the burden of proof needed to block deals

The UK’s competition regulator has proposed lowering the burden of proof needed to block acquisitions by Big Tech companies such as Google and Facebook. But, perversely, the Competition and Markets Authority’s proposals may end up stopping deals that increase competition, making life harder for British start-ups.

The measure would apply to tech companies with “strategic market status”, a new designation for those with an entrenched, powerful position in a digital market. Initially, this will include Google, for its search and online advertising businesses, and Facebook, for its position in social media. In time, companies like Amazon, Apple and Uber could be included too, if they are deemed to have SMS. 

Right now, an acquisition will be blocked if a CMA panel judges it more likely than not to weaken competition, for example by increasing prices or stifling innovation. But the agency fears existing law misses deals where one company buys a smaller one that may be a future threat. This is, for example, what some believe motivated Facebook’s acquisition of Instagram, given leaked emails on the purchase in which Mark Zuckerberg argued that Instagram “can hurt us”.

The CMA wants to lower the burden of proof to block any acquisition by an SMS company with a “realistic prospect” of reducing competition, described as a “greater than fanciful, but below 50 per cent” chance.

This remarkably low standard goes well beyond previous proposals. It would probably have blocked deals the CMA has approved in the past, like Amazon’s investment in Deliveroo. It would apply to acquisitions even in markets where these companies have not been deemed to have “strategic market status”, so they would find it harder to enter other markets.

What the proposals miss is that Big Tech’s biggest competitors are often other Big Tech companies, and acquisitions can drive competition between them. Google’s purchase of Android helped it build a competitor to Apple’s iPhone; Apple’s acquisition of Beats helped it build Apple Music, which competes with Spotify and YouTube. 

Instagram may have been bought to help Facebook compete better with Twitter and Google. And it succeeded in part because of investment and good management decisions by Facebook, like copying Stories from Snapchat when it posed a threat. Most recently, Google bought Fitbit to compete with Apple on smartwatches. Acquisitions have enabled entry and increased competition in cloud computing and video streaming, too.

Even if these deals increased competition, they may still have created a “greater than fanciful” possibility that they could do the opposite. Under the proposals, even a deal with a 90 per cent chance of improving competition should be blocked because of the 10 per cent risk that it might reduce competition. Our goal should be to encourage deals that are likely to promote competition, not block them because of a remote chance that they do not.

Moreover, start-ups depend on acquisitions. Along with an initial public offering, being bought is the main way entrepreneurs and venture capital investors can “exit” the firms they have built. The harder it is to sell your company, the harder it is to make a return. Fifty per cent of US start-up executives said that being acquired was a long-term goal, and 90 per cent of US start-up exits in 2008-18 happened thanks to acquisitions. 

Empirical evidence suggests investment in start-ups is sensitive to rules on acquisitions. One paper found venture capital activity grows by about 40-50 per cent in countries that enact pro-takeover laws, and US states that introduced anti-takeover laws saw a 27 per cent decline in VC investment deals compared with those that did not. 

Some founders in the UK have already complained that the existing rules hurt them. And if the US does not follow the CMA, many start-ups may simply set up there instead of in Britain.

The CMA dismisses the risks of over-enforcement, spending just 150-odd words in its 15,000-word proposal on it. But it is already taking a more aggressive stance on M&A. Since the start of 2019, 81 per cent of deals it has referred for in-depth scrutiny have been blocked, abandoned or required remedies, compared with some 50 per cent between 2003 and 2017.

These proposals threaten to go even further, and run the risk of causing significant harms that the CMA has ignored. It’s now up to the government whether the agency gets these powers. It should stand up for dynamic, competitive markets by saying no.

WSJ : China’s Latest Crackdown on Bitcoin, Other Cryptocurrencies Shakes Market

China’s Latest Crackdown on Bitcoin, Other Cryptocurrencies Shakes Market
Major digital-currency exchanges suspend some activities that targeted users in China

China’s efforts to restrain cryptocurrency trading and mining are adding to the wild moves in bitcoin and other markets.

Already down hard from records set this year, bitcoin and other digital currencies sold off sharply last week after Chinese authorities renewed pressure on the country’s banks and payment companies to curb cryptocurrency-related transactions. Markets stumbled again after a powerful superregulator chaired by Vice Premier Liu He pledged to crack down on bitcoin mining and trading. The price of bitcoin fell below $32,000 early Monday, down from over $44,000 a week earlier.


China is trying to rein in cryptocurrency activities even as the country has embraced the technology underlying bitcoin and has plans to roll out its own digital yuan that will be controlled by its central bank. Beijing also wants to shut down cryptocurrency-mining activities because they consume massive amounts of electricity, often from coal-fired power plants, while the country pledged to manage its carbon emissions.

“The Chinese government does not like the highly volatile, speculative nature of the cryptocurrency market,” said Fan Long, a co-founder of Conflux, a government-backed public blockchain network in China. He said the authorities could take further action to restrict or eliminate ways for Chinese citizens to exchange yuan into cryptocurrencies in the over-the-counter market.

On Sunday, Huobi, a major cryptocurrency exchange, said it would stop selling mining machines and related services to new users in mainland China. It will also suspend futures contracts, exchange-traded products and leveraged investment products to new users in a few countries and regions. OKEx, another popular digital-currency exchange, on Monday said its own token, OKB, can no longer be traded with the Chinese yuan.

Spokespeople for the Seychelles-based OKEx and Huobi said they strive to be in regulatory compliance in the jurisdictions they operate, and are committed to serving and protecting their customers’ interests and assets. Both exchanges have operations in multiple countries.

“Crypto-related activities have posed two serious issues in China,” namely financial stability and energy consumption, said Shen Wenhao, a Beijing-based partner at JunZeJun Law Offices. He said it was the first time the cabinet-level financial regulator had mentioned bitcoin mining publicly and linked it to financial stability. The recent messages from regulators “could signal the beginning of a series of new movements taken by the Chinese government to crack down on crypto-related activities from multiple angles,” he said.

China, the world’s most populous nation, has been a hotbed for cryptocurrency trading and mining. In 2017, concerns about capital flight led Beijing to impose bans on Chinese cryptocurrency exchanges and digital-currency fundraisings known as initial coin offerings.

Authorities subsequently instructed Chinese platforms and financial institutions to stop providing virtual-currency trading services. They also ordered the closing of operations that produce—or “mine—cryptocurrencies, even though industry participants say mining still takes place in parts of the country, such as the southwestern regions. Last week, authorities in Inner Mongolia, a Chinese border region, sought help from the public to report on cryptocurrency-mining activities.

Cryptocurrency exchanges that operate offshore can be accessed by people in China using virtual private networks that help them bypass the country’s internet restrictions. Some of the exchanges have been facilitating bitcoin and other digital-currency trades with China’s domestic currency, the yuan.

Such transactions typically take place over the counter in what is known as the peer-to-peer market. They have proved challenging for Chinese regulators, banks and payment companies to track and curb, because they involve direct fund transfers between individuals.

In essence, a person who wants to buy bitcoin using yuan can be matched with another individual who is looking to sell the digital currency and receive yuan. The buyer sends yuan directly to the seller using a mobile payment app or an online bank transfer, and the seller authorizes the exchange to release the bitcoin to the buyer after confirming the payment.

Records on multiple cryptocurrency platforms last week showed hundreds of people eager to buy and sell cryptocurrencies including bitcoin, tether and dogecoin using their yuan-denominated accounts at banks and the popular Chinese mobile payment apps WeChat Pay and Alipay in peer-to-peer transactions.

Lennix Lai, a director at OKEx, said that while China has disallowed cryptocurrency exchanges and ICOs within its borders, it hasn’t outlawed the owning of digital currencies by its citizens. “People are allowed to mine bitcoins, they can transfer bitcoins to others and settle their trade in renminbi,” Mr. Lai said, using another name for the Chinese currency, adding that “there are a lot of bitcoin natives and believers in China.”

In response to a Journal query, a spokesman for Ant Group Co., which owns Alipay, pointed to a statement it issued in 2019. “Alipay closely monitors over-the-counter transactions to identify irregular behavior and ensure compliance with relevant regulations.” Any transactions on the platform that are identified as being related to bitcoin or other virtual currencies will result in a stoppage of payment services, the statement said.

“We take our compliance obligations seriously, and will continue to take action against any illegal transactions,” said a spokesperson at Tencent Holdings Ltd., which owns WeChat Pay.

Some Chinese banks have also warned their customers against using their accounts for cryptocurrency transactions. China Citic Bank Corp. , for instance, said in an April statement that no institution or person may use the bank for transactions related to assets such as bitcoin and litecoin.

“China is clearly uneasy about the volatility of crypto markets,” said Claire Wilson, a partner at law firm Holland & Marie in Singapore. “In theory, it would be possible for a State to issue a total ban on crypto. However, on a practical level, such a ban would be extremely difficult to enforce,” she said.

As far back as 2013, a consortium of Chinese government agencies and regulators issued warnings about the anonymity, borderless and unregulated nature of bitcoin and told domestic financial and payment institutions not to carry out bitcoin-related activities. The authorities said they wanted to protect the legal currency status of the yuan, prevent money laundering and maintain financial stability.

Last Tuesday, three Chinese self-regulatory groups issued a similar notice and said financial institutions need to increase their monitoring activities and terminate and report virtual-currency-related transactions that violate the country’s laws. The trio—the National Internet Finance Association of China, the China Banking Association, and the Payment & Clearing Association of China—also warned of sanctions for firms that didn’t comply.

The recent warning “probably is the harbinger of more formal crypto regulations,” said Winston Ma, adjunct professor at New York University’s School of Law and a former managing director of China Investment Corp., the country’s sovereign-wealth fund. He said China has also emphasized the need to regulate financial technology since the suspension of Ant’s IPO in November.

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • TLC +4.2%, MRNA +2.2%, LU +1.7%, USO +1.6%, AMC +1.4%, QQQ +0.6%, TAK +0.5%, SPY +0.5%, IWM +0.5%, DIA +0.4%
  • Gapping down:
    • VXX -1.3%, LLY -1.1%, BLBD -1%, VVNT -0.9%, KALV -0.5%