TheChek News Flow

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Steve Neff to be replaced by head of global asset management Bart Grenier

The head of Fidelity’s $2.8tn asset management division is retiring from the Boston investment group after just a year in the job, to be replaced by a senior executive from its international arm.

Steve Neff was previously chief technology officer at Fidelity, and his appointment last year as head of its sprawling asset management arm was widely-seen as an indicator of how the investing industry is changing.

However, in a memo sent to Fidelity employees on Tuesday, the company’s chief executive Abigail Johnson said Mr Neff was planning to retire at the end of March. In the memo Ms Johnson said he “will be remembered as a skilled steward for Fidelity’s mutual fund shareholders and institutional clients, as well as an innovative leader of technology development”.

Mr Neff, an avid cyclist and 23-year veteran of the Boston money management giant, will be replaced by Bart Grenier, who is currently global head of asset management at Fidelity International, the company’s global affiliate.

“Bart is the ideal candidate to succeed Steve,” Ms Johnson said in the memo. “The breadth of his experience across investment strategies and asset classes, as well as his strategic insights and spirit of innovation, makes him well suited to lead asset management.”

Asset management profits have been buoyed by the post-crisis market rally, but executives are girding themselves for a leaner environment. Morgan Stanley estimates the global fee pool for active managers will shrink by a third — or about $40bn — over the next five years, and the listed industry’s shares have lagged behind the stock market rally lately.

Over $300bn has seeped out active equity funds this year, extending investors withdrawals over the past five years to north of $2tn, according to EPFR. Many investment groups, including Fidelity, hope that harnessing modern technology such as machine learning and data science will both be able to contain costs and improve performance.

“The investments we are making in technology are centred on two major goals: generating alpha and scale and efficiency,” Mr Neff said in a recent interview with the Financial Times

Former Treasury official David McCormick to take reins as sole chief

Bridgewater’s co-chief executive Eileen Murray is exiting the giant hedge fund, leaving former Treasury official David McCormick in charge of the $160bn investment group founded by Ray Dalio.

Succession planning has proven fraught at Bridgewater, with a rotating cast of senior executives vying to run the Connecticut-based money manager shaped in Mr Dalio’s image.

Ms Murray, a former senior Morgan Stanley and Credit Suisse executive, first took over as co-CEO in 2014, alongside Mr Dalio’s heir-apparent Greg Jensen. But in 2016 Mr Jensen’s co-CEO title was handed to Apple executive Jon Rubinstein, after reports of clashes with his mentor, but he remained as co-chief investment officer alongside Mr Dalio and Bob Prince, a Bridgewater veteran.

Mr Rubinstein lasted less than a year at the famously iconoclastic hedge fund, stepping down in 2017 after “mutually agree(ing) that he is not a cultural fit”, Mr Dalio said at the time. The former Apple executive nicknamed “The Podfather” for his role in launching the iPod was replaced by Mr McCormick, who at the time had been linked with a senior role in the Trump administration.

In that shake-up, Mr Dalio also relinquished many of his management responsibilities to focus on his jobs as co-chairman and co-CIO of the hedge fund. The latest reshuffle will see Ms Murray — who was previously linked to the top Wells Fargo job — leave in the first quarter of 2020, at which time Mr McCormick will be Bridgewater’s sole CEO.

“It is a remarkable thing when a founder who built a company over a number of decades can successfully transition the company to the next generation,” Mr Dalio said in a statement. “Eileen Murray was key to that. Now that we have made that transition, Eileen wants to move on to something new and to make room for others. I can’t possibly express how grateful I am to her for helping us get to this point. I expect that she will always be a close friend.”

Despite a more muddled post-crisis performance, Bridgewater is the best-performing hedge fund of all time, having returned $57.8bn in net gains since its inception, according to LCH Investments, the fund of hedge funds run by the Edmond de Rothschild group. The closest runner-up is George Soros, who has made $43.9bn since 1973.

Henry Ellenbogen’s venture buys into payment services company Rapyd

Former star T Rowe Price stockpicker Henry Ellenbogen has made his first deal since setting up a company earlier this year, investing about $40m in Rapyd, a service company for the cross-border payments industry.

Mr Ellenbogen left T Rowe Price at the end of March, relinquishing control of its storied $26bn New Horizons fund to set up Durable Capital with several former colleagues. The new venture was backed by the University of Michigan and Allen & Co, the boutique investment bank with deep ties to Silicon Valley.

Under Mr Ellenbogen — dubbed the “boy wonder of Capitol Hill” when he was an administrative assistant to a Florida Congressman at just 20 — New Horizons was one of the best-performing mutual funds in the US. Focused on smaller companies, it was a prominent early investor in private companies such as Twitter and Grubhub. 

Durable Capital is ploughing a similar furrow, with its first investment in a private, fast-growing technology company. Rapyd provides support for payment services and ecommerce merchants around the world, aiming to capture a slice of a market estimated by McKinsey to hit $3tn in the next five years.

“The mobile revolution is real and compliance requirements are going up,” Mr Ellenbogen said. “Rapyd is going to . . . enable the Ubers and Facebooks of the world to conduct ecommerce with people that would normally fall outside of that world.” 

Rapyd raised $100m in October from investors including venture capital companies Oak HC/FT and General Catalyst, hedge funds Tiger Global and Coatue, and Stripe, the digital payments company. 

Durable Capital could not join that “series C” round as its fund had not closed yet, but Rapyd allowed it to make a follow-on investment once it could do so. 

Arik Shtilman, co-founder and chief executive of Rapyd, called Mr Ellenbogen “one of the best technology investors of the century”, adding: “His name means a lot but it’s not just that . . . He and his team have amazing knowledge and networks.”

Durable Capital is set up to invest in both public and private companies, a trend that has grown dramatically among many big mutual fund groups such as T Rowe, Fidelity and Hartford. However, the risks of betting heavily on non-traded companies with unrealistic valuations have become increasingly apparent this year.

Fidelity recently had to mark down the value of its investments in WeWork and ecigarette maker Juul, but the most dramatic example is the downfall of Neil Woodford, whose strategy of loading up on riskier, private companies turned sour when performance spluttered and investors yanked their money out. 

Rapyd is focused on building up its global footprint and is currently lossmaking. Mr Shtilman said there was a change investor tone, in the wake of what he calls “the WeWork incident”, when the company did its latest funding round this autumn.

“It was pricklier,” he said. “We knew we had to show a clear pathway to profitability.”

**Link:

The US appears to be backpedaling in #tradetalks as officials threaten tariff hikes, but that will have zero effect on China's stance because Chinese officials have long prepared for even the worst scenario: Mei Xinyu, an expert close the Chinese Commerce Ministry pic.twitter.com/P7Ai3NYXdO

— Global Times (@globaltimesnews) December 3, 2019

Dynasty’s scion John Elkann tees up takeover of la Repubblica and la Stampa owner

John Elkann, scion of the Agnelli industrial dynasty and chairman of Fiat Chrysler Automobiles, is to acquire Italy’s leading media group after striking a deal with the billionaire De Benedetti family.

Exor, the Agnelli family investment company, agreed late on Monday to buy a 43.7 per cent stake in GEDI for €102.4m from CIR, the holding company of the De Benedetti dynasty, the companies said in a statement.

Once Exor, which already owns 6 per cent of GEDI, has acquired CIR’s 43.7 per cent stake it will launch a public tender offer for the outstanding shares. CIR will retain a 5 per cent stake in GEDI through an investment in a new corporate entity set up by Exor to control the group.

GEDI owns the left-leaning La Repubblica and centrist la Stampa national daily newspapers, a dozen regional and local titles, national investigative weekly magazine L’Espresso and leading national radio station Radio Deejay.

Shares in GEDI, which stands for Gruppo Editoriale Spa, were up 60 per cent in early trading, in line with the offer price.

The agreement, the latest in a deal spree by Mr Elkann, comes shortly after Fiat Chrysler and French carmaker Peugeot agreed to combine, a transaction due to complete in the next few weeks. Exor also holds a 43.4 per cent stake in the publisher of UK-based news magazine The Economist.

Mr Elkann, chairman and chief executive of Exor, said the company was “committing to a rigorous entrepreneurial project” and would use its media experience “to accelerate the necessary technological and structural transformation”.

“We’re convinced that quality journalism has a bright future so long as it can combine authority, professionalism and independence with the requirements of its readers, today and in the future,” he added.

The Agnelli dynasty has a history of media ownership — a passion of Mr Elkann’s grandfather, the statesman-industrialist Gianni Agnelli.

The deal will mark the end of the De Benedetti family’s three decades as controlling shareholder of Italy’s largest media group.

La Repubblica has struggled with falling readership in recent years, leading to a public dispute between Carlo De Benedetti and his sons over the management of the media group, a spat that accelerated its sale.

Rodolfo De Benedetti, one of the sons, said the family had decided “to hand over to a shareholder of the highest calibre . . . that understands very well the challenges of the publishing business”.

“Exor’s international experience will add to its ability to support the group in its digital transformation,” he added.

Jean-Dominique Senard insists focus of alliance will be on convergence rather than full combination

Renault chairman Jean-Dominique Senard has said a merger with Nissan is not the “ultimate step” for the carmaking alliance that has come close to collapse since the arrest of former chief executive Carlos Ghosn.

“A merger is probably not the right way to think about it,” he told the Financial Times.

He said that “convergence” between the two carmakers was “absolutely essential,” but that a full combination “probably isn’t the ultimate step” over the medium term.

A merger was discussed as recently as February, Mr Senard said, but had now been shelved because it “was seen in Japan as a real threat to [Nissan’s] independence and to its pride,” he added.

“For me it’s out of my mind, it doesn’t come to my mind I promise one second,” he said.

His comments are the clearest yet about the potential endgame of an alliance, which also includes Mitsubishi and has run for 20 years. The partnership was rocked by the arrest last November in Japan of Mr Ghosn, its totemic former boss, on charges of financial misconduct. Mr Ghosn denies allegations of wrongdoing.

Before his arrest, Mr Ghosn had been pushing for Nissan’s full merger with Renault, stirring up forces within the Japanese carmaker who resented what they saw as a takeover by their French partner.

The Renault chairman stressed that his immediate focus was to prove that the 20-year old alliance with Nissan could deliver “tangible proof” of its worth, with plans to launch more joint projects to foster collaboration that has been lacking.

“The first thing is to deliver. My obsession now is to show some change in 2020.”

Mr Senard was parachuted into Renault in January this year to settle the carmaker and bring some peace to the then-warring alliance.

Since then, he has reorganised the structure of the alliance, instituting a new board, and overseen changes to the leadership of both companies, which people close to the companies admit is critical to repairing the strained relationship.

His comments echoed those of new Nissan chief executive Makoto Uchida, who took the reins on Monday and said that “the priority is in finding how the alliance can contribute to each of the companies in raising their revenue and profits”.

Mr Ghosn’s plan was intended to end years of imbalance within the structure of the business, which was formed in 1999 when Renault and Nissan took stakes in each other.

At present, Renault owns 43 per cent of Nissan as well as having power to name certain directors, while Nissan holds 15 per cent of Renault shares but lacks any voting power.

In addition, the French state owns 15 per cent of Renault but has double voting rights, giving it potential influence over the running of Nissan as well.

On Monday, Nissan’s new chief executive Mr Uchida said the companies had shelved talks on changing the imbalances in the ownership structure in its alliance with Renault, saying the two carmakers would focus on reviving their struggling businesses.

Renault is expected to announce in the coming weeks a successor to chief executive Thierry Bolloré, who was ousted in October. The frontrunner is believed to be Luca de Meo, chief executive of Volkswagen’s Spanish brand Seat, a position that has given him experience in dealing with competing national interests.