Differing views on China’s investment landscape
One thing to start: Thousands of people descended on the city of Omaha in Nebraska this weekend to Berkshire Hathawaythe annual meeting of. It was the first time shareholders had heard from the group’s billionaire founder in person warren buffet since the pandemic. Read all about it here
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China’s two contradictory directions for investors
China’s appetite for global finance increasingly seems to be pulling in two contradictory directions, reports my colleague Striped cat in Hong Kong. On the one hand, policy reforms over the past five years have provided unprecedented access to global businesses. Just last month, China announced it would launch a formal private pension scheme that aims to push more of the country’s huge household savings into the financial market.
International investors like black rock, Goldman Sachs, JP Morgan and Amundi have all expanded their presence in China over the past two years. Now they are positioning themselves to grab some of a potentially huge new business, as we report in this analysis.
China’s recent capitulation to the United States over access to Chinese companies’ audit records suggests that Beijing is open to new foreign investment and better international cooperation in finance. China wants Shanghai to be an international financial center with “major global influence” by 2035. Things seem to be moving in the right direction.
But on the other hand, Beijing has spent a year interfering in the markets and issuing a series of regulatory edicts so harsh on Chinese companies that billions of dollars have been dumped by its biggest companies. Last month, JPMorgan called China’s once-growth-engine internet sector “uninvestable.” Many large investors headed for the exits. This week we revealed that Weijian Shan, the chair of CAPa $50 billion fund and one of Asia’s largest investors, has diversified outside of China.
In a video of a meeting seen by the Financial Times, in which he compared China to “the United States and Europe in 2008”, he said:
“We believe the Chinese economy is currently in the worst situation in 30 years. Market sentiment towards Chinese equities is also at a 30-year low. I also believe that popular discontent in China is at its most high level for 30 years.
It was a tussle of priorities that ultimately led to stasis. The growth of the Chinese economy has slowed down. Strict adherence to Covid-19 elimination means it is virtually impossible to enter. Shanghai literally came to a standstill, with some districts entering their fifth week of lockdown in which some people were even locked in their buildings. Any concept of Shanghai as an international financial center or destination has been abandoned for more than two years. Chinese stocks fell sharply. An expected boon for Hong Kong as mainland China makes it harder for its companies to register in the United States has not materialized.
It’s a worst-case scenario for investors that continues to darken. Much hinges on whether Beijing will be placed in the same lockdown scenario as Shanghai.
“The number of Covid cases in China has moderated, but the general sentiment has worsened further,” says Lu Tingeconomist at nomura. “We believe the worst is yet to come.”
In the meantime, read Tabby’s profile on PAG’s Shan here
Funds, fees and equity
Capital of Melvin made one of the quickest U-turns in hedge fund history when it backtracked on controversial plans to start charging performance fees to clients again.
The New York-based company, the most publicized victim of the GameStop last year’s frenzy, had attempted to remove so-called high waters – investor protections that ensure clients don’t have to pay performance fees before being reinstated again on losses.
Within days, the founder Gabe Plotkina protege of Point72 Asset Management billionaire Steve Cohenhad written a creeping apology, admitting that after some “candid” comments from investors he had been “deaf”.
From ultra-fee-conscious Australian pension funds to private wealth managers happy to pay the pass-through costs of huge multi-manager platforms, hedge fund fees are a topic that never fails to cause controversy.
Plotkin’s move was seen by many in the industry as particularly egregious, with the idea that a wealthy hedge fund manager could effectively be pleading poverty when it comes to paying his traders, sparking little sympathy. So what would be a fair structure for investors and managers?
My colleagues Brooke Masters and Laurence Flecher address this delicate subject in this analysis, exploring models such as the one adopted by Peter Krausformer CEO of AllianceBernsteinwhich is experimenting with the abandonment of high seas leashes in favor of a recovery structure.
However, there are no easy answers. Patrick Ghalico-founder of a hedge fund advisory firm Sussex Partners, says he saw structures “so complicated that even after spending hours there, we still did not understand what was going to be paid for and when”. Don’t expect this problem to go away anytime soon.
Chart of the week
Like vampires Freddy Kruger and goldbugs posting dual-axis charts of the US M2 overlaid on the S&P 500 on Twitter, the Bloomberg terminal refuses to die. The hunt for the “Bloomberg Killer” has been going on for Mike Bloomberg’The clumsy but addictive crack terminal first conquered the world of financial data. It seems no one is getting close, writes FT Alphaville editor Robin Wigglesworth. The latest data from Burton-Taylor highlights how hugely profitable and surprisingly resilient Bloomberg is. In the industry that sells financial data and analysis to banks and investment managers, he remains the orange-tinged champion. Despite a cavalcade of start-ups and industry giants that have tried to undermine it over the years, the company’s market share apparently remains rock-solid at around a third of current 35, $6 billion in financial data and analytics (up 7.4% from 2020). ). It stayed at about a third for eons. Because let’s face it, no one has ever done wedding cake in the form of an Eikon terminal.
10 stories not to miss this week
High-growth tech stocks that shone in the coronavirus crisis have entered bearish territory, hurting investors such as Ark Invest, world tiger and Baillie Gifford who have had one of the most lucrative jobs in recent years.
Inside the UK’s Race to Court the Crypto Industry. Global investment in the sector topped $30 billion in 2021, but critics say the government’s plan to attract some of that money lacks detail.
HSBC is under increasing pressure to separate after its main shareholder, the Chinese insurer Pinganasked the bank to split its Asian and Western operations, calling for a dual purpose that has endured for more than a century.
Bill Hwangfounder of the collapsed family office Archegos Capital Management, was arrested by US authorities and charged with racketeering, fraud and market manipulation. So how did Wall Street’s so-called risk controls allow him to lend billions of dollars to the alleged fraudster?
Should warren buffetit is Berkshire Hathaway be broken when it backs off? This opinion piece argues that splitting the conglomerate would allow for greater scrutiny and allay some investors’ concerns.
People who live in glass houses. . . Schröders is considering scrapping an ‘anachronistic’ ownership structure that has stripped some shareholders of voting rights, as one of the UK’s biggest asset managers tries to restore its corporate governance credentials. Here are the Lex column’s thoughts on the move.
John Foley retires as chief executive of UK savings and investment group M&Gwhich has struggled to find its bearings since its split from the insurer Prudential in 2019.
Investors in UK companies can expect higher-than-expected dividends this year as higher oil and commodity prices improve prospects for shareholder payouts, the fund group says Link.
Grayscale Investmentsthe world’s largest investment vehicle for cryptocurrencies, is scouring major European financial centers to launch an expansion beyond its North American base.
Billionaire financier Leon Black gave his ex-mistress £2million for a UK golden visa and introduced her to a lawyer to discuss her claim, hoping to facilitate a transatlantic move for the former model.
Colnaghi London recently opened a new exhibition devoted to female still life, the highlight of which is a still life rediscovered by the Mannerist artist Fede Galizia (1578-1630). Forbidden fruit: female still life includes other rare works by Giovanna Garzonipainter at Medici and one of the first women to practice the art of still life, as well as the only known painting of Catherine Angela Pierozziprotected from Grand Duchess Vittoria della Rovere. The exhibition also presents the latest painting by the famous Dutch botanical artist,Rachel Ruysch.