TheChek News Flow

Critics call it the return of the robber barons — except these are the hedge fund kind.

And despite the rosy outlook from the industry at its latest SALT confab in Las Vegas earlier this month, the “victims” are often willing accomplices and pure gluttons for punishment on failed gambles for huge market-beating returns, critics say.

Negative returns were reported by some of the biggest hedge fund industry movers and shakers in recent weeks.

Dan Loeb’s Third Point Offshore Fund was down 2.3 percent in the quarter ended March 31.

“The result of all of this was one of the most catastrophic periods of hedge fund performance that we can remember since the inception of this fund,” Loeb said in a quarterly letter.

And as markets showed some gains by the end of April, there was more blood on the Street.

Bridge Pure Alpha Strategy was negative 11 percent, and BlueCrest International was off 2.5 percent, to take two striking examples for the quarter.

Those two shot to fame this month for reasons more to do with compensation: Bridge — part of Bridgewater Associates, the world’s biggest hedge fund, with $150 billion in assets under management — is managed by Ray Dalio, who was awarded $1.4 billion in compensation in 2015, according to an annual survey by Alpha magazine; BlueCrest’s Michael Platt received $260 million for his trouble.

Despite the sizable compensation, these funds lost money for some investors. Bridgewater’s All Weather fund was down 7 percent in 2015; Platt’s bellwether fund lost investors 0.6 percent last year and then was shuttered.

All told, the top 25 hedge fund managers took home $13 billion last year, up 10 percent from the previous year, according to Alpha, with investors typically paying a 2 percent annual management fee and 20 percent on any gains.

“Five guys on the top 25 list lost money for their investors, and still the funds made billions of dollars in fees,” said Michael Kink, a leader at Hedge Clippers, an activist group seeking reform of hedge funds. “The personal excess of some managers is extravagant, with their mansions, yachts, game reserves in Africa, multiple homes and wild spending ways,” he said.

Not surprisingly, Leon Cooperman, founder and Chief Executive of Omega Advisors, says the industry is under “assault.” Assets managed by hedge funds dropped to $2.86 trillion during the first quarter.

Investors yanked a net $15.1 billion, the most since the second quarter of 2009. And major institutional investors may join the exodus as groups like Hedge Clippers step up attacks.

Reshaping human health and changing lives through gene editing

Gene editing is going to fundamentally change our lives and how we traditionally think about health throughout the first half of the 21st century.

Gene editing is going to change the way people are treated by curing the roots of diseases instead of merely treating the symptoms. It’s going to change the way we think about what we put into our bodies, as gene editing will put healthier food on our plates without polluting the planet. This food will not only be safe to eat, it will also meet the environmental challenges related to sustainable growth and climate change.

As a result, people will no longer focus on whether or not we should engage in gene editing from an ethical standpoint. The question isn’t “When will gene editing become a significant reality for the majority of the world?” The truth is, this is neither science fiction nor a prediction — gene editing is happening now, as evidenced by the first cancer patient having been treated by TALEN®-based gene-edited T-cells. Additionally, this fall, fields across the United States will harvest TALEN®-based gene-edited soybeans and potatoes. There are even gene-edited pigs and hornless cows that are currently walking around the barnyard.

The landscape in gene editing is anything but clear, but the recent emergence of new gene-editing technologies, with new players in the space, has led to an inevitable ethical debate.

For example, three early clinical-stage startup companies, all based on CRISPR technology, have struck major alliances with big pharma and biotech companies: Editas Medicine (Juno Therapeutics), CRISPR Therapeutics (Vertex and Celgene) and Intellia Therapeutics (Novartis).

While these alliances are important, the long-term successes of these companies depend upon their ability to deliver on their promises. Turning CRISPR innovations into approved and effective drugs is a core focus, and it will still take years of more hard work before an effective, approved drug will result from these efforts — if at all.

Additionally, Sangamo BioSciences and Precision BioSciences are two other well-established companies that operate in the gene-editing space. Precision Bio, which has so far used its ARCUS gene-editing technology to advance the research efforts of its biotechnology partners, is now aiming to use its technology to develop its own products.

Sangamo is a clinical-stage biopharmaceutical company that is researching ways to commercialize Zinc finger nucleases, which modify a cell’s DNA at a location, thereby correcting or disrupting a specific gene. Its lead therapy, SB-728, is a potential functional cure for HIV/AIDS, and recent published data further support the company’s ongoing progress, which has been described as a major step toward immunological functional control of HIV.

All of this brings us to the subsequent ethical debate, which centers on the potential threat of gene editing, specifically gene-edited humans.

It’s important to remember that animal transgenesis took place more than 35 years ago through a process that was immediately transposable to humans, and this has not led to any wave of transgenic humans. The same goes for the ability to knock out genes in human embryonic stem cells, cloning humans after Dolly the Sheep technology or using human iPS cells to create new clones. The fear of gene editing — and the concerns around what people could do through gene editing — isn’t based on any kind of rational fact.

People often ask: “What is gene editing? Should I be concerned about this. What happens if ill-intentioned people get their hands on this technology?”

The answer is complicated. Technologies such as cell phones and social media have fundamentally changed global society. For the vast majority, these changes have been for the good, even if bad people misuse them.

Gene editing is similar to this; it is a fundamental change in the way we look at the basic building blocks of life. It provides us with the ability to rethink how we treat diseases, how we grow our food and how we think about ourselves as humans.

The ultimate act of civilization was initially thought of as growing plants and breeding animals, hence genetic selection and cloning. Cloning, or selecting the best breeds, was initially done to improve survival. Since then, humans continued to perfect this technology.

With a population that’s close to reaching more than 9 billion humans on the planet, much of our survival may depend on the strength of gene editing. Furthermore, who cares today if a person is the result of in vitro fertilization? Do you remember the debate on this in the 1970s? This is no longer a debate.

2015 was a pivotal year, and gene editing is now transforming our lives in very real ways. The first leukemic patient — who could not be saved by any other therapy — was injected with a gene-edited CAR T-cell product candidate at the Great Ormond Street Hospital in the United Kingdom. She was the first patient helped by gene editing.

According to experts at the European Medicine Agency, this is the most complex product they have ever seen. It is the result of very sophisticated reprogramming of T-cells — adding some genes while suppressing others — to convert T-cells into a powerful cancer-killing machine.

This product can be produced by the thousands, stored long-term, provided to hospitals around the world and given to any patient who is in medical need. Today, this may be complex to produce, but it is simple to administer to patients. Tomorrow, it has the potential to become a standard in medicine.

2015 was an equally positive year for commercial agriculture, as gene-edited harvests across the United States were abundant, making it conceivable for gene-edited potatoes and soybeans to make it to consumer plates within two years. For the previous 50 years, the focus of plant breeding was increasing yield that resulted in greater productivity but included increased use of herbicides and pesticides. Until recently, the health of consumers was not a focus, resulting in a negative impact of mass agriculture and the rise of organic agriculture.

Today, organic agriculture represents less that 10 percent of current U.S. production. Nevertheless, with a growing population and an ever-diminishing cultivation space (not speaking about global warming, sustainability or equitable growth), a strong demand for healthier products and respect of nature is a paradox that can be solved either by economic shrinkage or technology. This upcoming harvest is the first step to finding an answer to this margin squeeze, and sets the stage for a new route to human expansion and sustainable development.

Again, it is not a question of if or when gene editing will happen; rather, it’s whether or not we would like to be the first to make it happen. As President Obama stated in his most recent State of the Union address: “Let’s make America the country that cures cancer once and for all.” This came one day after the launch of the Cancer MoonShot 2020 effort, led by big pharma and biotech companies. But we don’t have to wait until 2020 to administer a treatment that eliminates cancer cells. We are well on our way with gene editing.

(JP) Japan Fin Min Aso (G7 host): G7 reaffirms the importance of FX stability

Monsanto is a dominant supplier, developing genes and licensing them to rival seed makers, in a multibillion-dollar a year business that has transformed farming in some countries but which faces trade and regulatory challenges.

Bayer approached St. Louis-based Monsanto about a potential takeover, a move that could reorder the pesticide and seed business, the companies said Wednesday. Monsanto’s board is reviewing the merger proposal, but no deal is guaranteed. Some analysts see the $44.4 billion in market value company as a financial stretch for the Leverkusen, Germany-based Bayer.

Bayer and Monsanto declined to comment.

The deal may face a hurdle with Bayer’s investors, many of whom have invested primarily for its larger health-care business and are less familiar with agriculture and genetically modified crops, said Markus Manns, a fund manager at Union Investment, a Bayer shareholder.

“I’m not sure we would appreciate this shift from pharma,” Mr. Manns said.

Acquiring Monsanto, the world’s top seed company by sales, would make agriculture products nearly half of Bayer’s total sales, analysts said.

Genetically modified crops—typically enhanced with genes to allow plants to survive weed-killing sprays or produce bug-repelling proteins—rank among the most rapidly adopted technologies in history, analysts say.

Introduced 20 years ago, such plants now blanket more than 90% of U.S. corn, soybean and cotton fields, and are deeply embedded in South American breadbaskets like Brazil’s Mato Grosso region.

The U.S. Food and Drug Administration, World Health Organization and European Commission have concluded that genetically modified crops are as safe to eat as conventional kinds. A recent report from the National Academies of Sciences, Engineering and Medicine found them safe and generally unharmful to the environment.

But global sales growth for biotech crops has slowed in recent years, and world-wide acreage last year declined for the first time since Monsanto sold the first genetically modified organism, or GMO, seeds in 1996.

Environmental groups have challenged the use of genetically modified crops, arguing they can damage the environment. The GMO seeds face lengthy regulatory reviews and intellectual property challenges in developing countries pose growing problems for biotech crop developers.

Seed companies “are accessing markets that haven’t really wrapped their heads around these technologies or adopted methods to protect the intellectual property,” said Brett Wong, an analyst with Piper Jaffray. “You’re now seeing pushback.”

The purchase of Monsanto would bring Bayer a host of new challenges.

In India, Monsanto is fighting the country’s agriculture ministry in court over how much companies like Monsanto can charge for insect-repellent crop genes, which saturate India’s cotton fields.

In Argentina, Monsanto this week canceled plans to begin selling new biotech soybeans for the coming planting season after Argentina’s government questioned a testing system that Monsanto set up to ensure farmers pay for biotech genes.

In the U.S., Monsanto’s biggest market, the company is in talks with major grain traders after some, including Archer Daniels Midland Co. and Bunge Ltd., said they would not buy soybeans grown from new Monsanto seeds.

Those seeds, which Monsanto began selling this year, have yet to secure import approval in the European Union—a top market for U.S. soybeans. Grain firms fear they could lose sales if unapproved biotech crops slip onto ships bound for Europe, and are rejected by import authorities.

“This is a real problem and will continue to be a problem for this technology, because countries will continue to review things for safety at different paces,” said Greg Jaffe, director of biotechnology for the Center for Science in the Public Interest, a Washington, D.C.,-based nonprofit focused on food and science policy.

Biotech crops remain controversial among some consumers.

Public opposition in Europe, where Bayer once attempted to introduce GMO crops but gave up, means only one variety of biotech corn is allowed to be grown there, and only in very limited quantities.

In the U.S., where genetically modified crops are widely cultivated, critics have mounted state-by-state efforts to label foods made from GMOs. Vermont is set to implement the first such law in July, forcing some large food companies to apply GMO labels nationally.

Monsanto’s role in pioneering biotech crops and its initial reluctance to engage critics publicly has fostered some public distrust of the company, which regularly sits near the bottom in the Harris Poll’s reputation ranking of 100 U.S. corporations. On Saturday, protesters gathered in cities around the world for an annual “March Against Monsanto,” including in eight German locations.

Bayer is unlikely to try to reintroduce GMOs in the European market again, even if it were to ultimately acquire Monsanto, experts say.

Peter Spengler, an analyst at Germany’s DZ Bank, said that the German public at large would likely oppose Bayer acquiring Monsanto, a company he said has a “very negative image” in Germany, though a deal likely would hurt Bayer’s image only in the short term.

“Usually people’s attention spans are short,” he said.

Iliad and Sky consider Italian mobile tie-up

CK Hutchison and VimpelCom are in talks with Iliad and Sky among other companies in a bid to address regulatory concerns over the €20bn merger between their local businesses.

The two groups are looking to address worries over competition after an effort by Hutchison to merge Three, its UK business, with rival operator O2 was blocked by the European Commission, according to people familiar with the matter. Regulators argued that the deal would lead to higher prices and to reduced choice for consumers.

A merger between 3 Italia and Wind would create the largest mobile-only operator in Italy with about a third of all sales. That would only put it narrowly ahead of former incumbent Telecom Italia.

Iliad and Sky have both spoken to Hutchison and VimpelCom about potentially creating a fourth operator, according to people with knowledge of the situation.

The companies declined to comment.

Fastweb, which is owned by Swisscom, is another potential partner, according to those close to the talks.

Brussels has said that every deal would be assessed on its own merits, but telecoms executives believe the regulator is reluctant to allow the reduction from four to three mobile operators in a single market.

In the UK, Hutchison had considered creating another mobile group to restore competition, but was unable to free enough spectrum for interested parties such as Virgin Media, TalkTalk and Iliad.

The Italian market is seen as a more likely country in which to create a fourth network, given that the combined business of Wind and 3 Italia could offer more spectrum to enable the creation of a rival group.

A move into Italy for Iliad would follow at least two failed attempts to break into new markets: in 2014 when it made a bid for a majority stake in T-Mobile US, the US telecoms business controlled by Deutsche Telekom, and more recently when it looked at the UK on the back of the proposed O2 acquisition.

But competing in Italy would also bring the low-cost operator into direct competition with Vivendi, the Paris-based media group which has spent €7bn in the past year to become Telecom Italia’s biggest shareholder.

Such a move would also raise questions about what Xavier Niel, Iliad’s billionaire founder, would do with his potential stake in Telecom Italia after he bought stock options late last year equivalent to more than 15 per cent of the company.

In a note last week, analyst Moody’s said that Hutchison and VimpelCom “may be willing to accept tougher remedies in Italy, because their standalone businesses face structural challenges”.

3 Italia is the only business among Hutchison’s European telecoms operations that makes a loss when taking capital expenditure from core earnings. “At the same time, Wind has a highly levered balance sheet and generates little free cash flow to reduce debt,” Moody’s added. “The combination should allow them to improve margins and generate stronger cash flows.”

Listed hedge funds in the UK have been “decimated” by investor outflows and fund closures since the financial crisis, causing their combined assets to fall by two-thirds since 2008.

At its peak in 2008, the listed hedge fund sector had more than £9bn in assets spread across 80 funds. That figure has fallen dramatically to just £3bn across 17 funds, according to new research from Winterflood Securities, the brokerage firm.

The concern among analysts is that further outflows and closures are imminent for the remaining companies in the listed hedge fund sector, which includes prominent investment managers such as Brevan Howard, Third Point and Highbridge.

Winterflood said: “The past few years have been dreadful for the listed hedge fund sector, which has been decimated, both in terms of assets and number of funds.”

The brokerage blamed the problems affecting the sector on listed hedge funds’ reputation for high fees, poor performance and limited transparency.

Yogi Dewan, chief executive of Hassium, a wealth management boutique, said many listed hedge funds closed down “as they have been unable to generate the same levels of returns as they did historically”.

Matthew Hose, an analyst at Jefferies, the investment bank, in London, added that “significant challenges” remain for those that have survived because they are “out of favour” with investors.

“Hedge fund fees often do not leave enough [returns] on the table for investors in a low-return environment. A lack of yield is also likely to temper investor enthusiasm for [listed hedge] funds,” he said.

Brevan Howard runs two of the largest remaining listed hedge funds, BH Macro and BH Global. Both have delivered mediocre returns since 2011, which has reduced investor demand.

Brevan Howard’s management has bought back significant numbers of the shares of both funds in an effort to boost returns and to stave off the threat of an investor vote on whether the funds should continue operating.

Kieran Drake, an analyst at Winterflood, said this tactic will only offer temporary relief. “History has shown that such buyback activity is unsustainable over the longer term in the listed hedge fund sector. Ultimately, performance needs to improve in order to renew investor interest,” he said.

The listed hedge fund sector developed to enable hedge fund managers to raise capital from wealth managers and retail clients who are unable to meet the high minimum investment threshold required for buying hedge funds.

But during the financial crisis large discrepancies emerged between the share prices of many listed hedge funds and the valuation estimates for the assets they held.

Funds that were stressed were required to hold a vote to determine whether their investors wanted them to continue operating or to wind up and return their cash.

Peter Sleep, senior portfolio manager at 7IM, the UK wealth manager, said his company no longer buys listed hedge funds as a result of these liquidity issues.

“One of the eye-opening things for us has been how illiquid some of the assets of the hedge funds have been. There are one or two cases where we are still waiting for the final assets to be sold,” he said.

The performance of the luxury industry depends on the vigour of the global economy and the success of people who want to buy upmarket products. Aspirational consumers of luxury goods have done relatively well almost everywhere. But the growth of the world economy is disappointing. The performance of the global luxury sector — worth €250bn a year, according to a Bain study — will depend on how the balance between these two elements works out.

Yet again, the International Monetary Fund has downgraded its economic forecasts in its latest world economic outlook, released last month. The baseline projection for this year is for 3.2 per cent growth of the world economy, measured at purchasing power parity. This is much the same as last year, 0.2 percentage points lower than was forecast as recently as January and 0.4 percentage points lower than was forecast last October.

This level is surely no disaster, but the consistent downgrading of growth rates is a worry.

At least as important, the world economy is confronting a swath of political and economic risks. Most will come to nothing. But the cumulative danger of something going badly wrong looks high.

For high-income countries, the forecast growth this year is a modest 1.9 per cent, as it was in 2015. Christine Lagarde, managing director of the IMF, has rightly described this as a “new mediocre”.

But the attractive feature of the forecast is the expectation of at least some growth in all significant high-income economies: 2.4 per cent in the US, 1.9 per cent in the UK, 1.5 per cent in the eurozone, and a modest, but still positive, 0.5 per cent in Japan.

The performance and prospects of emerging economies are also mediocre, at least by their relatively dynamic past standards. In 2015, these economies grew 4 per cent. This year, their growth is forecast to reach 4.1 per cent, with a rise to 4.6 per cent for 2017. China and India are forecast to grow by 6.5 per cent and 7.5 per cent, respectively, in 2016. But falling prices have hit commodity exporters hard, with prolonged and deep recessions under way in Brazil and Russia.

The emerging economies survived the financial crisis of 2007-09 relatively unscathed, the leading exceptions being in central and eastern Europe. Emerging economies’ past dynamism, especially China’s, had a dramatic effect on the global market for luxury products. According to Bain, China’s demand grew from a mere 1 per cent of the luxury market in 2000 to more than 30 per cent in 2015. Meanwhile, the shares of Japan, America and Europe all dropped. Moreover, the Chinese buy 80 per cent of their luxury goods abroad, so their demand has had a huge effect on the global industry.

Now, however, the Chinese economy has slowed towards what President Xi Jinping has labelled “the new normal”. This is an important negative factor for the luxury industry. But China’s slowdown is affecting other economies. One effect is the end of the boom in commodity prices.

Key for many emerging economies has been a slowdown in net capital flows. This, argues the IMF, is largely due to “the narrowing differential in growth prospects between emerging market and advanced economies”. Yet even more important has been the failure to maintain the pace of structural reforms in too many emerging countries.

The new mediocrity may be disappointing — but it means sustained growth. Unfortunately, one can also see significant downside risks. Some reflect economics, such as divergent monetary policies; the impact of negative interest rates on confidence; low commodity prices; instability in capital flows; and the possibility of renewed turbulence in financial markets.

Others are political. These include instability in the Middle East; mass migration; populism in high-income countries; the possibility of Britain leaving the EU; and friction among great powers.

The growth in prosperity of the world’s aspiring and achieving classes is good for the business of luxury. But populism is growing too, as the many who are outside the charmed circle of the relatively successful become disillusioned, even despairing. How will this end? The answer is likely to play a big part in the global economic story over the next decade.

“Why can’t capitalism be contemporary too?” asks Brunello Cucinelli, founder of the cashmere fashion brand which bears his name, as he sits in Solomeo, the Italian hilltop village where his factory is located.

It is not an empty question: Mr Cucinelli, 62, grew up watching his father work in a factory, abandoning the family farm to earn a better wage. “I have seen my father humiliated, offended, and with little money,” he says. He now tries to restore to the workers in his factory the dignity stripped from his family.

Mr Cucinelli runs his company, which is worth €1.2bn and whose jumpers can sell for upwards of €1,000, according to his philosophy of “humane capitalism”, and it has borne results. Founded in 1978, its shares rose 124 per cent to a peak after listing on Milan’s stock exchange five years ago; they are now up 50 per cent. It trades at multiples similar to those of Hermès, the €34bn French luxury leather goods house founded in 1837.

Mr Cucinelli, in blue blazer and white shirt, seated in his sleek white offices, applies his principle beyond his donations for the restoration of ancient buildings in Solomeo. “For me, it is not sustainable to give €5m to a charity and have your products made by children.”

His workers certainly benefit from this outlook. They come in at 8am and leave by 5.30pm. He does not allow emails to be sent outside those hours.

There is a 90-minute break at 1pm and in a subsidised canteen, workers pay €3 for their lunch. On this Tuesday, that is abundant helpings of rice salad from white porcelain bowls set out on wooden tables, followed by peppers stuffed with meat and courgettes. Apple cake and fruit are available for those who want dessert. Wine accompanies the meals, with coffee to finish.

On the light-filled factory floor, where workers dress in neutral colours straight out of a Cucinelli lookbook, every room has large windows looking out across the Umbrian hills.

Mr Cucinelli’s vision has translated into profit — but not everyone is a true believer. He is an outlier in the luxury industry for rejecting the pursuit of growth at all costs, insisting that the firm intends to achieve only “elegant growth”, which equals around 10 per cent a year.

Analysts are more sceptical. The share price reached its height in January 2014 and Mr Cucinelli admits consultants have urged him to ramp up production — perhaps shifting some outside of Italy — to drive up the company’s profit margins. He is adamant he will not do it.

“I would like a situation where all the people who work with me, the investors, the banks, the suppliers, all earn a just amount. Otherwise the annual report comes out and when people read it, they say: ‘You are thieves.’”

He rejects the idea he should pursue an aggressive policy of opening stores, the number of which now stands at 120: “You eat the earth,” he says flatly of this style of expansion. “Very shortly you find there is nowhere else to go.”

Mr Cucinelli and his family own 60 per cent of his company’s shares. Fidelity, the global fund manager, is the second-largest investor with 6 per cent, followed by the Zegna family, who are behind luxury menswear group Ermenegildo Zegna, with 3 per cent. Analysts think ultimately he may sell a significant stake to LVMH, although Mr Cucinelli says he intends to keep the company in family hands.

As with Armani, where the founder remains in command in his 80s, investors pose questions about governance at Cucinelli. Recently he appointed co-chief executives, who are in their 40s.

For his success, Mr Cucinelli has become an admired figure in Italy, a new entrepreneur in a country keen for success stories as it returns to economic growth after a decade of stagnation.

On the day of our interview, Technogym, which was founded within five years of Cucinelli and makes fitness equipment, launched on Milan’s stock exchange; its shares rose 11 per cent.

For Mr Cucinelli, such “manufacturing start-ups” are Italy’s future. “I am super-positive on Italy. There is a rebirth. The country is different from two years ago. There is new air.”

At the centre of Milan’s premier luxury shopping district — the Quadrilatero D’Oro, or Golden Grid — is a new opening that highlights how the luxury goods industry is responding to economic pressures.

MonteNapoleone VIP Lounge, in a palazzo between the Céline and Valentino stores, draws on nearly 150 luxury brands to tackle the problem of declining footfall. It offers private fitting services and a concierge able to obtain hard-to-find tickets. “If you want to see every red dress in a size 38 in the Quadrilatero we can bring it to the lounge for you,” says Guglielmo Miani, chief executive of fashion brand Larusmiani and boss of the Quadrilatero industry association.

Five years ago such perks were nice to have. But today, as luxury goods companies face another difficult year, they have become must-haves as brands, stores and luxury centres like Milan, London, New York and Paris fight for shoppers, Mr Miani says.

These are testing times for the luxury goods industry, worth €250bn in 2015, according to a Bain & Company study. Companies’ expectations of solid growth from emerging markets are being undermined and are embarrassing their current strategies for expansion, while developed markets look pallid and hesitant.

The LVMH conglomerate has blamed terror attacks in Paris and Brussels for weighing on sales in Europe, while the strong dollar and weakening consumer sentiment are hurting luxury sales generally in the US. Falling demand in China and Hong Kong is causing brands to rethink their tactics there.

Sales growth of personal luxury goods — from handbags and shoes to prêt-à-porter — slowed to 1-2 per cent in 2015 from 7 per cent in 2013 at constant currency rates, according to Bain.

Thomas Chauvet, luxury analyst at Citi, argues that for a few years companies were “in denial” about the “reset” of the luxury goods industry triggered by the collapse of demand in China from 2013 onwards. Prada was among the brands whose sales began to slow then.

“In 2015 and at the start of 2016, they have realised it is a different story,” says Mr Chauvet. In response, the industry is adjusting to lower expectations with a variety of tactics.

Cost cutting — from ending product lines and closing stores to removing well paid designers — is significant. Though not all moves were solely driven by reducing cost, several top designers have left their brands in the past year: Hedi Slimane from Yves Saint Laurent, Raf Simons from Christian Dior, Alexander Wang from Balenciaga and Alber Elbaz from Lanvin.

Instead, brands are introducing features such as concierge services, pop-up shops and art installations in stores as the lines between shopping and entertainment blur and brands compete with consumer groups.

One of the few remaining areas of bullish growth in luxury is ecommerce, which Bain estimates grew to 7 per cent of market share in 2015, from 1 per cent in 2005, with Chinese etailers making inroads.

“Our sector is in a period of accelerated evolution,” says Armando Branchini, vice-chairman of Italian industry lobby Fondazione Altagamma. He sees three main drivers of that change: “Millennials, digitalisation and the behaviour of Chinese consumers.”

Crucially, while this upheaval wrongfoots the industry, a recent survey from consultants BCG found consumers felt a quarter of luxury brands were losing their exclusivity or were at risk of losing it. Furthermore, around a third of consumers said they were saturated with personal luxury products.

Complicating the outlook are millennials, the sought-after 18-to-34-year olds. BCG defines these as global consumers, highly digital, optimistic, sensitive to sustainability — and sceptical. They are not attracted by the simple façade of the brand, says Antonio Achille, managing director at BCG.

These tensions are pushing the industry to be evermore innovative to keep shoppers interested, says Desirée Bollier, chief executive of Value Retail, which runs 11 outlet villages in Europe and China.

Ms Bollier this month presided over a special event at Value Retail’s Fidenza Village in Italy, a pop-up store called the Creative Spot that will showcase products by Milan’s hottest young designers — at cut prices. “You are adding that layer of experience to what has now become a very banal thing: shopping,” says Ms Bollier.

Asset management insiders believe blockchain, the nascent technology behind bitcoin, the controversial digital currency, will cause huge disruption to how the fund industry operates, prompting significant changes to its business model.

Blockchain, which is a giant, online public ledger, was developed to keep track of who owns bitcoins and who owned them in the past. But now the fund industry is examining how it could use the technology.

Proponents say blockchain will revoluntise the finance industry. They believe it could eradicate the need for clearing and settlement, the long-standing process whereby ownership of a security is moved from one investor to another. This could mean fund managers and banks would need fewer staff for some roles, while investors would probably benefit from lower fees.

Asset managers, including a cohort of UK managers, are also looking into employing the technology to trade directly with each other, cutting out traditional middlemen such as brokers and bringing their costs down in the process.

According to a survey of 125 asset management professionals across fund houses, custodian banks and consultancies, blockchain is expected to be a very disruptive force within the fund industry.

Asked which areas of financial technology will have the biggest impact on the fund industry, 42 per cent of those polled listed blockchain, while 43 per cent nominated big-data analytics, where large sets of information are analysed to uncover market trends or other useful information.

In contrast, only a fifth listed robo-advisers, which provide automated online investment services.

Keith Hale, executive vice-president for client and business development at Multifonds, the software provider that carried out the survey, says the possibility of blockchain disrupting so many different parts of the asset management industry has left many concerned.

“There is quite a lot of the fear of the unknown with blockchain,” he says.

Michelle Seitz, head of William Blair Investment Management, the $64.7bn US asset manager, says: “I do believe that [blockchain] has the power to disrupt the plumbing of the asset management industry, and if it does, it will speed the service and the delivery of what we do for the client, and cut out costs.

“It could be a massive disrupter to the industry, but in a good way.”

The fund industry is still trying to get to grips with the impact blockchain could have. Experts say it is difficult to understand the wider implications of the technology.

Olivia Vinden, principal at Alpha FMC, the consultancy, says that as well as having the potential to eradicate the traditional settlement process, blockchain could also be used across other functions in the fund industry.

This could include providing a new way for asset managers to interact with regulators or helping to prevent money laundering by making it easier for asset managers to keep track of their investors.

“Blockchain could be totally transformative for the [fund] industry, both in how it operates and in terms of costs,” says Ms Vinden.

Richard Hinton, a partner at KPMG, the professional services firm, says it is likely to take some time before blockchain’s impact is seen in the fund industry.

“There is a still a lot of work to be done before it is adopted in a widespread fashion,” he adds.