Gatestone : Cooperate with China or World War 3: Kissinger

WSJ ; BlackRock to Buy Equity-Index Provider Aperio for $1 Billion

BlackRock to Buy Equity-Index Provider Aperio for $1 Billion
The all-cash deal is a move to add more personalization to its offerings

BlackRock Inc. BLK 1.51% is acquiring Aperio Group LLC, a firm that helps build custom portfolios for wealthy individuals, for $1.05 billion, in a push by the world’s largest money manager to add more personalization to its offerings.

In buying Aperio, BlackRock is betting on growing interest by individuals for portfolios tailored to their values. Aperio is part of the so-called direct indexing industry, a small-but-expanding part of the financial space.

Such firms create indexes and portfolios that can be customized to exclude certain stocks or have more exposure to other sectors. Sausalito, Calif.-based Aperio has worked with financial advisers to tailor bespoke client portfolios. For instance, it could build a portfolio without tobacco exposure that has more renewable energy holdings.

These portfolios are created for single investors rather than forcing investors to be stuck with others in a fund. A provider of such separately managed accounts for U.S. wealth managers, BlackRock said the combination will help increase those assets by about 30% to over $160 billion.

BlackRock doesn’t sell products directly to individuals, like brokerages do. Instead, it works through intermediaries. It has been seeking alternative ways to broaden its reach over the wealth management industry business of how individuals’ money is invested. BlackRock has said it has no desire to buy rival firms simply to drive down costs through economies of scale but would look to tactically grow in select areas, including expanding its distribution reach.

With the deal, BlackRock also acquires the company’s experience in the complex task of optimizing after-tax returns.

Aperio, backed by private-equity firm Golden Gate Capital, had been in talks with a number of asset managers over the past year, a person familiar with the matter said. After Morgan Stanley announced plans to buy Eaton Vance—a deal that gives it direct indexing firm Parametric—in October, Aperio’s talks with various firms heated up, a person said.

BlackRock plans to operate Aperio as a separately branded team within its wealth advisory business.

Aperio’s Chief Executive Officer Patrick Geddes will stay in his role as the company’s chief tax strategist and will also become a senior adviser at BlackRock.

WSJ ; Jamie Dinan’s York Capital Management to Largely Wind Down Hedge Fund Oper

Jamie Dinan’s York Capital Management to Largely Wind Down Hedge Fund Operations
York Capital to focus on businesses with longer term capital, according to letter

Billionaire hedge-fund manager Jamie Dinan told employees and investors in York Capital Management Monday that the firm was largely getting out of its struggling hedge-fund business to focus on better-performing units.

Mr. Dinan said he planned to shut down York’s European hedge funds and to turn its flagship U.S. hedge fund into one running mainly internal money. The strategies together manage less than $3 billion after years of weak performance and investor defections.

York still expects to run roughly $9 billion in private equity, private debt and other vehicles that lock up client capital for longer periods.

York’s assets under management have come down significantly from a high of $26 billion in 2015.

Mr. Dinan’s retreat from one of the longest-lived hedge-fund businesses in the industry illustrates the challenges managers who don’t focus on technology investing have faced the last several years.

The firm also has gone through a rocky attempted succession, with Mr. Dinan getting more involved in running the firm early this year after ceding some responsibility. York said in an investor letter Monday that co-investment chief Christophe Aurand was leaving at the end of the year, Mr. Aurand having told the firm he wanted to “take a step back.”

Mr. Dinan described the changes in the client letter as ones that “we believe will position the firm to continue to capture the most attractive investment opportunities globally across the highly dynamic and disrupted financial markets in which we operate.”

Mr. Dinan, who started York in 1991 with $3.6 million, turned the firm into a quiet but steady profit machine investing in troubled and merging companies. He was one of the most prominent investors in the hedge-fund industry by 2010 when he inked a deal with Credit Suisse Group AG , selling a 30% stake in York. The deal was seen as a sign of how institutionalized and profitable hedge funds had become.

Thanks to York, Mr. Dinan went on to buy a piece of the Milwaukee Bucks professional basketball team for $100 million, a private Gulfstream jet, and homes in New York and Miami Beach. He helped get wrestling reinstated in the Olympics; his sons wrestled in school.

But York, along with a raft of other hedge funds, has been challenged in recent years. Mr. Dinan led an intensive effort in 2016 to retain clients and the firm awarded fee cuts to some clients.

York earlier this year conducted a round of layoffs and has been planning for additional layoffs toward the end of the year, said people familiar with the firm. Several veteran executives have left and not been replaced. York’s head count has fallen from about 215 in January to about 180 currently, said a person close to the firm. The person said only a “handful” of layoffs were expected in the remainder of this year.

York’s $1.4 billion flagship fund was down 6.6% for the year through September and its largest European hedge fund was down more than 9% for the period. The letter said the flagship fund had averaged an 11.1% return a year since its start.

Mr. Dinan will continue as chairman and chief executive of York, the letter said, with William Vrattos continuing as sole investment chief.

The letter also said York’s Asian hedge fund, led by Masa Yamaguchi, which has performed well in recent years, and “related vehicles” would be spinning out into an independent firm. Mr. Dinan wrote York would keep a sizable investment in the firm.

York earlier this year raised $1.3 billion in a distressed asset fund that locks up client money for a longer period. Mr. Dinan wrote that business was seeing “a broad range of opportunities created by the current challenging economic and banking landscapes.”

WSJ : CFTC Report on Negative Oil Prices Leaves Key Questions Unanswered

CFTC Report on Negative Oil Prices Leaves Key Questions Unanswered
The Commodity Futures Trading Commission looked into why oil prices plummeted into negative territory in April, but its report didn’t single out any likely cause

WASHINGTON—A long-awaited Commodity Futures Trading Commission report into the collapse of crude-oil futures to minus $40 a barrel in April has declined to identify a reason for the crash, prompting criticism from one of the agency’s own commissioners.

The rapid descent into negative territory on April 20 sparked calls from market participants and others for a swift and thorough investigation by federal regulators.

“While some may have hoped for a more definitive analysis, we simply cannot provide that at this time,” CFTC Chairman Heath Tarbert said in a statement Monday.

The CFTC said in the report that a global surplus of crude oil in early 2020, cratering energy demand amid the Covid-19 pandemic, and concerns about storage capacity “coincided with, and may have influenced,” the price spiral. The report also pointed to “a number of technical factors related to market structure,” without singling out any likely cause.

Until this spring, negative oil prices had occurred in a handful of energy-futures markets, but never in West Texas Intermediate—the flagship contract for a commodity that is vital to the global economy. The April 20 price decline immediately raised suspicions of abusive trading, market manipulation or systems glitches—any of which would likely require further action by regulators.

Speaking on CNBC the day after the price crash, Mr. Tarbert said “it does appear to be a fundamental supply-and-demand issue.”

Dan Berkovitz, one of two Democrats on the five-member CFTC, said the report left a number of key questions—some of which the agency is uniquely positioned to investigate using confidential information it can access—unanswered.

The report failed to analyze why oil prices in the futures market diverged from prices in the physical market on April 20, but converged again on April 21, Mr. Berkovitz said. It didn’t provide sufficient analysis of storage capacity at Cushing, Okla., where WTI oil is delivered, he said, nor did it didn’t analyze the role of so-called trade-at-settlement contracts, whereby market participants agree over the course of a trading session to buy or sell a futures contract at the settlement price for that day. And it didn’t provide new insight into why prices fell from $0 to minus $40.32 in a 20-minute span, Mr. Berkovitz said.

“The issuance of an incomplete preliminary Report is a disservice to the public, market participants, and small and large businesses that depend on a reliable crude oil futures benchmark for contract pricing, risk mitigation, and price discovery,” he said.

FT : Private equity groups close in on AA takeover bid

Private equity groups close in on AA takeover bid
Warburg Pincus and TowerBrook offer 35p a share in non-binding proposal for debt-laden company

The AA’s board has told two private equity groups it would be willing to accept a proposed 35p-a-share offer for the heavily indebted roadside recovery group, it said in a statement on Monday.

The group is in last-ditch talks with Warburg Pincus and TowerBrook Capital Partners over the terms of a possible deal, ahead of a Tuesday deadline set by the UK’s Takeover Panel. The proposed 35p offer is not binding.

Both sides were edging closer to an agreement on Monday night, and a recommended deal could be announced as early as Tuesday morning, although people close to the process cautioned that there was no certainty a formal offer would be agreed.

Under the proposed deal, the private equity groups would pay only slightly more than the company’s Friday closing price of 33p a share and would invest about £380m to cut the company’s debt burden by refinancing bonds that are due for repayment in 2022.

“Having considered carefully the viability of a range of alternative potential debt and equity refinancing options . . . [the AA’s board] has indicated to the consortium that it would be willing to recommend” such an offer, the AA’s statement said. “The company is engaged in advanced discussions with the consortium in relation to the possible offer.”

The AA has been speaking to potential bidders since the summer, as it seeks to bring in cash ahead of repayment deadlines on a large portion of its £2.6bn debt. 

An offer pitched only slightly above the AA’s 33p-a-share price stands to disappoint some AA shareholders, who have previously demanded a higher bid. 

Drew Dickson, the founder of Albert Bridge, the AA’s largest shareholder, told the Financial Times in August that an offer of £200m for the company’s equity would be a “somewhat opportunistic” move by private equity companies. An offer at the current share price would value the company’s equity only slightly higher, at £209m.

However, the bidders argue that their approach amounts to a rescue deal, a person close to the matter said on Sunday. About £913m of its debt falls due for repayment in the next two years. It made £107m in pre-tax profits in the year to January 31.

The deal would include the refinancing of £541m in bonds maturing in July 2022, and a further £372m in bonds maturing in January 2022, the AA’s statement said.

The private equity groups’ proposal would allow some AA shareholders to keep a stake in the company once it is taken private, the AA added. 

The AA, known for its yellow breakdown vans, is weighed down by debt, a legacy of previous private equity ownership. Its interest payments alone in the year to January totalled £128m, more than half of its market value.


One main sticking point in the talks has been the announcement by the UK’s Financial Conduct Authority in September of a new ban on charging existing insurance customers more than new clients for home and motor cover. That would hit the AA’s insurance business, which it operates alongside its roadside recovery operations. 

The AA’s shares were trading at 25p the day before the company announced in August that it was in talks with buyout groups.

Warburg Pincus and TowerBrook declined to comment. 

FT : CFTC report into negative oil price stops short of naming culprits

CFTC report into negative oil price stops short of naming culprits
US regulator says plunge below $0 in April is ‘not a super-simple story’

The US futures market regulator declined to point fingers in crude oil’s collapse below $0 seven months ago, on Monday publishing a report on the shocking move that immediately disappointed critics. 

West Texas Intermediate oil futures settled at minus $37.63 a barrel on April 20, the first and only instance of negative crude prices since launching in 1983. The Commodity Futures Trading Commission began a review days afterwards.

CFTC staff published an “interim” report on their findings, but backed away from conclusive findings.

“There is not a super-simple story of what people were doing in the market that day,” said Scott Mixon, the agency’s acting chief economist. 

The 37-page report discussed fundamental factors in the global oil market, such as weak demand in the early days of the coronavirus pandemic and rapidly filling storage tanks at Cushing, Oklahoma, the place where traders must deliver under WTI futures contracts they have not unwound. 

It also presented aggregated data from the electronic markets operated by CME Group, whose New York Mercantile Exchange lists benchmark WTI futures. Notably, the report pointed out that open interest in WTI for May delivery had peaked at almost 635m barrels equivalent of oil, well above the average for expiring contracts worth about 430m barrels.

As futures crashed almost $58 a barrel to a low of minus $40 in the afternoon, CME’s price circuit breakers were triggered more than 30 times, temporarily halting but not stopping the slide, the study said.

However, the report did not answer why oil prices fell below zero.

“While some may have hoped for a more definitive analysis, we simply cannot provide that at this time — just as we cannot confirm or deny media reports of investigations tied to these events,” said Heath Tarbert, CFTC chairman.

Mr Tarbert, a Republican, in April said the crude oil plunge had appeared to be “a fundamental supply and demand issue”. CME chief executive Terry Duffy told CNBC at the time that “the futures market worked to perfection”. CME declined to comment on Monday.

Oil stocks at Cushing eventually topped out at only 65.5m barrels in early May, well below previous peak levels, suggesting that factors other than supply and demand were also at play in April. 

In mid-November, oil stocks at Cushing had again climbed to almost 62m barrels, according to the Energy Information Administration. However, WTI settled at $43.06 a barrel, almost $80 higher than its low in April.


Dan Berkovitz, a Democrat commissioner on the five-member CFTC, said that the report fell short.

“I’ve said since April the CFTC should determine what caused this historic price collapse on April 20. This doesn’t do that,” he said.

Mr Tarbert is expected to step down as chairman after the inauguration of Democratic president-elect Joe Biden. A new leader of the CFTC could initiate a different analysis of the events of April 20. 

The severity of the plunge triggered widespread losses, from retail investors in China to Interactive Brokers in the US, which reported losing $104m as it compensated customers. 

Oil prices have since gained as Opec and allied oil exporters succeed in constricting supplies, while oil consumption has slowly rebounded with the easing of restrictions on travel during the pandemic.

FT : Special Report : The Future of Telecommunications

Special Report : The Future of Telecommunications
‘Project Triffid’ is unleashed on the internet of things; smart ambulances offer a faster route to treating health emergencies; how retailers can break into telecoms; plus the new technology job opportunities emerging in the pandemic.


  • FT : Arm unleashes ‘Project Triffid’ to help deliver internet of things
The chip designer has developed battery-less sensors that have the potential to be embedded in billions of products

  • FT : Smart ambulances and wearables offer route to speedier treatments
Service that improves treatment for patients on way to hospital to be introduced across UK after successful trial

  • FT : Tech jobs spring up as companies adapt to new world of work
The pandemic has transformed working practices and wreaked huge change on some sectors. Here are five posts created as employers seek new skills

  • FT : Rakuten pioneers new retail route into telecoms
The Japanese ecommerce group hopes to succeed where other groups in the sector have failed by building and running its own mobile phone network

FT : UK bosses rush to sell stakes over capital gains tax fears

UK bosses rush to sell stakes over capital gains tax fears
Brokers and accountants swamped with calls as Sunak considers CGT increases

UK company bosses and senior executives are preparing to sell down stakes in businesses ahead of a potential increase in capital gains tax next year.

A review commissioned by Rishi Sunak, the chancellor, has recommended increasing capital gains tax rates to bring them in line with income tax rates, which could effectively double the cost of selling shares in companies. 

City brokers and accountants said they had been swamped with calls from senior executives with long term shareholdings as well as company founders that have retained large stakes in their businesses and who fear being caught by higher taxes.

“Quite a few companies are asking us to find them a window to sell before March,” said one senior City financier, who added that some were worried about being tied by closed periods running up to results in the spring. 

“Another founder owner has asked to complete the sale of his business before March. It makes a difference in the price.”

If enacted, the changes would mean higher taxes on share sales for business owners and senior executives — many of whom receive remuneration in shares.

Heather Self, partner at accountancy firm Blick Rothenberg, said many of her clients who had already been thinking about selling were bringing forward plans since the report last week.

“If you were planning to do something in two years but by doing it now you can save 20% [plus] in tax you’re going to start moving,” she said.

The report by the Office of Tax Simplification suggested changes to align CGT with income tax as the Treasury searches for ways to plug the vast gap in public finances. Other proposals suggested taxing some employee share schemes as income rather than as capital gains, and also taxing earnings retained in companies by owner-managers as income.

CGT is charged on gains at 10 per cent for basic rate taxpayers and 20 per cent for higher and additional rate taxpayers. Income tax is charged at a basic rate of 20 per cent, rising to 40 per cent and 45 per cent for higher and additional taxpayers.

The review also questioned the effectiveness of entrepreneur’s relief — recently renamed “business asset disposal relief”. The policy allows business founders selling their company to pay CGT at a lower rate of 10 per cent up to a lifetime limit of £1m — which was reduced from £10m in March.

Arun Birla, tax partner at Paul Hastings, a law firm, said clients had been in contact to discuss selling businesses on the back of the report. “If future changes are announced, then there is likely to be a flurry of M&A activity before they come into force, as inventors seek to maximise their returns,” he said.

City bankers told the Financial Times the potential changes would mean that IPOs in which founders intend to sell some of their stake were also more likely to happen before April.

“If they are beginning to think about selling their business next year then they want to get it done before April,” said one head of broking at a City bank.

Colin McLean, managing director of Edinburgh-based SVM Asset Management, which invests in small and mid-cap UK listed companies, said: “We’re seeing more placing activity for directors than we usually would at this time of year.” 

He added that “share prices have been very strong for smaller companies through this year and people suddenly have a huge amount of value wrapped up in their companies and there’s more to lose on the tax”.

Tim Stovold, partner at Moore Kingston Smith, an accountancy firm, calculated that an entrepreneur selling a business worth £5m at current CGT rates would pay £900,000 in tax — 10 per cent CGT rate on the first £1m and 20 per cent on the remaining £4m.

However, if CGT and income tax rates were aligned and business asset disposal relief scrapped, an additional rate income taxpayer would pay CGT at 45 per cent on the £5m business — a total of £2.25m.

FT : Stanhope merges with FWM to create $24.2bn wealth manager

Stanhope merges with FWM to create $24.2bn wealth manager
Deal comes amid growing competition to service the ranks of the world’s super-rich

Stanhope Capital and FWM Holdings, the investment company that oversees the Forbes’ family fortune, have agreed to merge in a deal that creates one of the world’s largest independent wealth management groups with $24.2bn in assets under management.

The tie-up comes amid increased competition to provide financial advice and services to the world’s growing ranks of wealthy individuals, and as a period of prolonged low interest rates and rising regulatory costs forces consolidation among wealth managers.

The enlarged group aims to compete with established private banks, and offer clients access to private equity, real estate and hedge funds, as well as capital preservation strategies. Terms of the deal, which is expected to close in the first quarter of 2021, were not disclosed.

London-based Stanhope was set up in 2004 by Daniel Pinto and Julien Sevaux, who left three years ago to set up his own private investment firm. FWM was founded in 2009 by Keith Bloomfield to manage the wealth of the Forbes family, which built its fortune during the 19th century through trading tea and opium with China and investments in US railroads.

Mr Pinto, a former UBS Warburg banker, will be the chairman and chief executive of the combined group. He said that the fact that it is independently owned and not tied to any in-house products contrasts with many established private banks that were “overwhelmed with conflicts of interest” because of the pressure to sell their own products to clients.

“Stanhope Capital and FWM share the same DNA,” said Mr Pinto. “Together we offer an alignment of interests between clients and our professionals who invest their personal wealth alongside them. This is crucial to our clients but it is a rare thing in our industry today.”

London-based Stanhope runs $13bn in assets under management and oversees the investments of the Duchy of Lancaster, the £538m portfolio of property and financial assets owned by the Queen.

FWM, which now oversees $11.2bn for other wealthy families, foundations and endowments, will continue to operate under its own name.

“The merger will enhance our investment capabilities in both public and private markets,” said Mr Bloomfield, who becomes vice-chairman of the enlarged group.

He added that the greater firepower of the enlarged group would help it to “secure a seat at the table” with hard-to-access fund managers, and said it would be better equipped to negotiate lower fees on behalf of clients.

“Size matters in wealth management,” said Mr Bloomfield.

As part of the deal Wealth Partners Capital, a Palm Beach-based private equity group, which invested in FWM in early 2018, has sold its stake for an undisclosed cash amount. The investment by Wealth Partners helped FWM to accelerate its expansion through the acquisitions last year of Optima, a $2bn fund of hedge funds manager, and LGL Partners, another multifamily office.

Thomas H Lee, an early pioneer of leveraged buyouts and the founder of two investment managers, Thomas H Lee Partners and Lee Equity Partners, has also joined Stanhope’s board. Other members of the wealth manager’s advisory board include advertising tycoon Sir Martin Sorrell; the former UK chancellor Lord Lamont of Lerwick; and Lord Browne of Madingley, the former head of the BP oil group.

>>> US After Hours Summary: NTNX +7.1%, MSP +5.7%, AMBA +5.5% up on earnings; A

After Hours Summary: NTNX +7.1%, MSP +5.7%, AMBA +5.5% up on earnings; A -2.4%, URBN -1.1% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: CANG +27.8%, NTNX +7.1%, MSP +5.7%, AMBA +5.5%

Companies trading higher in after hours in reaction to news: STIM +4.9% (receives FDA clearance for TouchStar treatment), TNDM +1.3% (TNDM announces new development and commercialization agreements with DXCM), EV +0.6% (declares special dividend of $4.25/share), IONS +0.5% (AZN licenses ION455 for development as potential NASH treatment), ONTO +0.2% (approves $100 mln share repurchase authorization), AZN +0.2% (AZN licenses ION455 for development as potential NASH treatment), OFC +0.1% (new COO)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: ENTA -4.9% (also provides clinical update), A -2.4%, URBN -1.1%, CBT -0.9%

Companies trading lower in after hours in reaction to news: BLDP -7% (announces bought deal offering of $250 mln of common shares), CLGX -2.1% (CNNE and Senator Investment Group initiate process to replace CLGX directors), BILL -1.8% (convertible notes offering), VER -1% (files for $8 bln mixed securities shelf offering), CBAT -1% (files for $200 mln mixed securities shelf offering), BLK -0.1% (to acquire Aperio for $1.05 bln in cash)