September 27, 2022

StuffStrife

Enduring Values

Asset Management: Julian Robertson’s life and times

Welcome back to FT Asset Management. I hope you had a wonderful summer and are refreshed for the autumn term, sharpened pencils at the ready. Which themes and topics would you like to see us address in the weeks ahead? Email me: [email protected]

This is our weekly newsletter on the movers and shakers behind the multitrillion-dollar global investment industry. This article is an on-site version of the newsletter. Sign up here to get it sent straight to your inbox every Monday.

Tiger! Tiger! burning bright

Farewell to Julian Robertson, the founder of hedge fund Tiger Management, who spawned and mentored a dynasty of “Tiger cubs”.

“He was a charmer in a southern way, a networker in a New York way; and far from being coldly in control, his mood could swing alarmingly,” writes Sebastian Mallaby in his very enjoyable history of the hedge fund industry More Money Than God. “Tall, confident, and athletic of build, he was a guy’s guy, a jock’s jock, and he hired in his own image.” 

Don’t miss our obituary of the legendary investor and five lessons we can learn from him. Meanwhile here’s the story of how one of the most prominent Tiger cubs — Chase Coleman’s Tiger Global — withdrew its claws when the tech bubble burst.

In case you missed it . . . 10 stories to get you up to speed

1.

The campaign against environmental, social and governance investing in Republican-led US states is escalating. Texas has declared that BlackRock and nine listed European financial groups “boycott” the fossil fuel industry, a designation that could lead state pension funds with billions of dollars under management to divest shares held in the groups.

BlackRock came out fighting against the decision, calling the state’s targeting of it “opportunistic”, “anti-competitive” and “bad for business”. Financial groups included on the blacklist of companies, which included Credit Suisse, UBS and BNP Paribas, attacked the process as politicised and arbitrary. Stuart Kirk, the former head of responsible investment at HSBC Asset Management, argues that for ESG to progress, it must be split in two.

2.

High inflation, slowing economic growth and a long summer of political squabbles are making it hard for global investors to love beaten-down UK assets. Investors are betting against UK government bonds on rising inflation fears, while in August sterling posted its worst monthly fall since the wake of the 2016 Brexit referendum.

3.

Capital Group’s collaborative culture, low fees and dedication to active stock picking make it a well-respected outlier in an increasingly cut-throat world of asset management. But now on the cusp of its second century, the $2.1tn Los Angeles-based group with an idiosyncratic culture and decades of success behind it is facing a profound challenge.

4.

Turmoil at the top of Carlyle Group, one of the world’s largest private equity firms. Its chief executive Kewsong Lee asked for a pay package worth up to $300mn over five years and resigned from the US company after its co-founders refused to even discuss the deal. Here’s a profile of Lee, Carlyle’s ejected dealmaker-in-chief. The shenanigans come as the influence of buyout groups on American industry has never been greater, sparking closer scrutiny of the business by antitrust regulators. Find out why Joe Biden is taking on private equity. The industry was founded by mercenary dealmakers who bludgeoned opponents. But now corporate raiders have become teams of rivals.

5.

Brace, brace. Fund managers including BlackRock, State Street, T Rowe Price and Jupiter Asset Management are reducing pay packages and delaying hiring decisions in an attempt to curb costs, as pressure mounts from customer withdrawals and falling global stock markets.

6.

These pressures are leading big-name money managers to stampede into digital assets, finding new ways to pursue profits and monetise investor interest even as trading volumes and prices for bitcoin and other cryptocurrencies have slumped. Abrdn, BlackRock and Charles Schwab are among those who have recently announced deals or launched products tied to digital assets. What could possibly go wrong? The fortunes of Canada’s second-largest pension fund ought to sound a note of caution: Caisse de dépôt et placement du Québec has written off its $150mn investment in crypto lending platform Celsius Network and conceded it went into crypto “too soon”.

7.

The imminent appointment of a new chief executive at M&G is set to reignite a vexed question: is it time to break up the underperforming FTSE 100 savings and investment group? Here’s Lex on why investors should wait for results of a leadership change before pursuing a further demerger.

8.

Oxford university’s £6bn endowment fund has lost half of its investment staff over the past 18 months, marking a rare period of turbulence at the institution just as global markets sour. The exodus has rattled investors in Oxford University Endowment Management and highlighted concerns over the management style of Sandra Robertson, its chief executive and chief investment officer.

9.

The head of the world’s largest sovereign wealth fund has warned investors against complacency and said they face difficult years ahead, as Norway’s oil fund swung to its biggest ever dollar loss in the first half of 2022. “There is a risk that we haven’t seen the worst yet,” said Nicolai Tangen, chief executive of the fund, which is managed by Norges Bank Investment Management. Cyber security has eclipsed tumultuous financial markets as the fund’s biggest concern, as it faces an average of three “serious” cyber attacks each day.

10.

And finally, one of the summer’s more bizarre stories. A 20-year-old university student made a roughly $110mn gain by selling a stake in struggling retailer Bed Bath & Beyond after its stock price soared during a month of frenzied trading reminiscent of last year’s meme stock boom. Here’s the story of how Jake Freeman, an applied mathematics and economics major at the University of Southern California, raised $25mn from friends and family and rode the meme stock wave to riches. Is Freeman a lucky gambler or a conviction investor? Meanwhile, investors are rallying behind Ryan Cohen, who through his social media savvy and his portfolio has become a baron of the meme-stock realm.

Best of the rest

Quant funds snap up shares in Warren Buffett’s Berkshire Hathaway

Hedge funds build biggest bet against Italian debt since 2008

Activist Nelson Peltz forced to shut London investment company

AMG chief slams asset management industry deal wave

Volatility investor warns of false dawn for US equities market

US fund manager under fire over sponsorship of climate sceptics

Robinhood suffers harshest hangover after pandemic stock trading boom

Mark Carney to become chair of Brookfield’s asset management spin-off

Fund manager Abrdn poised to drop out of FTSE 100

Blue Whale co-founder: ‘Most active fund managers should quit’

Chart of the week

Risky US corporate borrowers are facing a renewed jump in borrowing costs as concerns that further sharp Federal Reserve rate rises will weigh heavily on the world’s biggest economy grip markets, write Adam Samson and Harriet Clarfelt. Yields on US junk bonds have jumped to almost 8.6 per cent from a mid-August low of 7.4 per cent, according to an Ice Data Services index. The rise reflects a significant decline in the price of the debt. The fresh selling in high-yield bonds comes after a brief summer respite, in which most risky assets recovered somewhat from a dismal first half of 2022. Traders had hoped the US Federal Reserve would take a softer approach to rate rises, but concerns that the central bank will step up its fight against inflation have shattered the calm.

And finally

A full view of the ‘La Commedia Umana’ chandelier © Francesco Allegretto

To Venice, where Chinese dissident artist Ai Weiwei has a new solo show in the Church of San Giorgio Maggiore. The centrepiece is a nine-metre “chandelier” that casts no light. Entitled “La Commedia Umana”, it has been assembled from more than 2,000 pieces of black Murano glass fashioned to replicate bones, organs and surveillance cameras.

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