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One scoop to start: Cutting the annual cash Isa allowance could hit mortgage lending and lead to 60,000 fewer home loans a year in a blow to first-time buyers, according to the Building Societies Association.
In today’s newsletter:
Private equity industry faces an exodus
Can Fidelity keep its grip on America’s investments?
Overseas renminbi lending surges
Private equity industry faces an exodus
Private equity professionals are on the lookout for a new home.
Big pension funds are scooping them up as they seek refuge from a downturn in the sector that has restricted the carried interest payments that traditionally made up most of their pay, write Alexandra Heal and Mary McDougall.
Professionals from mid-market buyout groups in particular have been flooding pension plan recruiters with their résumés in a bid to escape the private equity fundraising squeeze.
“We are finding it easier to attract talent — not super easy, but much easier than three or four years ago,” said Ralph Berg, chief investment officer at the Ontario pension fund Omers.
“I suspect a lot of the private equity firms are struggling to hold on to people or maybe they want to manage . . . headcounts too.”
British Columbia Investment Management Corporation, which manages assets for public sector pensions, hired about 20 people in the past two years from buyout firms due to “fundraising issues” at those groups, a person familiar with the matter said. BCI’s private equity team has 70 people in total, according to its website.
The experience of the Canadian pension plans is the latest sign of how a prolonged downturn, initially ushered in by 2022 interest rate increases, is rippling through the financial sector.
The higher cost of borrowing hampered dealmaking and left firms with less cash to return to their institutional backers. This in turn reduced how much money those backers could recycle into new buyout funds.
Private equity groups raised just $592bn in the 12 months to June, their lowest tally for seven years, data from Preqin shows.
Can Fidelity keep its grip on America?
Fidelity Investments might not steal the limelight like some of its listed and higher profile rivals such as BlackRock and Charles Schwab, but it has quietly and relentlessly grown into a sprawling financial behemoth over the decades.
Despite humble roots as a US equity manager in 1946, Fidelity now oversees $16.4tn of customers’ money and directly manages $6.4tn of assets, making it one of the world’s largest asset managers, writes Emma Dunkley.
Its $32.7bn of revenues last year, a 16 per cent increase on 2023, were more than 50 per cent higher than those of BlackRock, the world’s largest listed asset manager.
So how has it evolved from an equity boutique into a financial powerhouse under Abigail “Abby” Johnson and can it remain relevant to younger generations?
“Fidelity’s scale is a major contributor to its success,” says Goshka Folda, global head of research at ISS Market Intelligence. “But the scale itself has long been accompanied by what I perceive to be a clever diversification strategy, from being a product manufacturer to a distribution partner for retail and retirement advisers.”
Under Ned Johnson, who took the reins in 1977, the firm pushed into distribution and running retirement saving schemes for companies and individuals, which gave the company a presence in the lives of millions of Americans that most other asset managers simply cannot match.
But Fidelity must adapt to the investment habits of younger Americans, who may be more interested in racier asset classes such as cryptocurrencies than the mutual funds that backstopped their parents’ retirements. Fidelity International, a smaller business that operates outside the US, has also failed to replicate Fidelity Investments’ success.
Still, as a private, family-controlled company, advocates say management can better focus on longer-term strategy and innovation.
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China’s overseas lending in renminbi is soaring, as Beijing steps up its efforts to expand the currency’s role in international finance and reduce the country’s exposure to the US dollar.
External renminbi loans, deposits and bond investments by Chinese banks quadrupled to more than Rmb3.4tn ($480bn) over the past five years, as policymakers more aggressively pursue their long-term goal of reducing the centrality of the dollar in global financial flows, write William Sandlund and Haohsiang Ko.
As part of this campaign, China is also opening more channels for foreign investors to buy renminbi-denominated bonds.
But officials have focused their efforts on boosting the renminbi’s role in trade, partly as a defence against policies enacted in the US and elsewhere that weaponise the dollar — such as this week’s EU sanctions targeting Chinese banks accused of helping Russia to secure weapons parts overseas.
“From China’s perspective, [settlement in renminbi] is important because it shows that no matter what happens, it can still trade,” said Adam Wolfe, emerging markets economist at Absolute Strategy Research in London.
Recent data from China’s State Administration of Foreign Exchange shows the external fixed-income assets of Chinese banks more than doubling over the past decade to more than $1.5tn, with the share denominated in renminbi expanding rapidly to almost $484bn at the end of June. This includes $360bn of renminbi loans and deposits, up from $110bn in 2020.
Similarly, the Bank for International Settlements estimates that overseas bank lending in renminbi to borrowers in developing countries rose by $373bn in the four years to the end of March.
“The year 2022 marked a turning point away from dollar and euro-denominated credit and towards renminbi-denominated credit” to such borrowers, the BIS said.
Five unmissable stories this week
St James’s Place reported a surge in net inflows of £1.76bn over the third quarter just as the UK’s largest wealth manager overhauled its fees for customers and advisers.
New rules aimed at accelerating the creation of collective defined contribution pension schemes will help increase trust in UK retirement savings, the pensions minister Torsten Bell has said.
Three pension giants including Legal & General have made a fresh £3bn wave of commitments to invest in rental homes, infrastructure and fast-growing companies.
Blackstone has said the era of excess returns in private credit has ended, with a golden age of mid-teens returns on private lending having given way to more muted investment results.
Wealth managers are increasingly seeking to sell semi-liquid funds backing private assets to the mass affluent, raising concerns over retail investors’ understanding of risks.
And finally
Bagrave 2020 © Mark Blower. Courtesy of the Hayward Gallery
The Hayward Gallery is playing host to Gilbert & George’s artistic journey, showcasing new pictures created since the start of the millennium.
The pieces are snappily titled with single words, diving into societal norms and taboos while challenging boundaries of propriety. The exhibition navigates themes of hope, fear, corruption, and death.
The Hayward Gallery at the Southbank Centre, until January 11
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