How a Japanese city re-emerged as hedge fund hub and ifthe stock market predict the next downturn are just some of the topics that have piqued our interest this week. Please note, some of these sites may require a subscription to view the article.
CalPERS not alone on private equity shift
CalPERS, along with a number of prominent public pension funds, is looking to make changes to its private equity investment approach to evolve beyond traditional commingled funds. CalPERS has outlined a four-pillar approach with the aim of boosting returns, reducing costs and gaining more control. The four-pillar approach would enable the pension fund to expand on its private equity portfolio. CIO Yu Ben Meng said they "need private equity to be successful, we need more of it, and we need it sooner rather than later," to the investment committee in March.
Source: Pensions & Investments
Read our recently released Investor Outlook: Alternative Assets, H1 2019 for more about investors’ plans for the next 12 months and beyond.
BlackRock's Larry Fink overhauls leadership ranks in key business units
Blackrock Inc., the world’s largest asset manager, has restructured its senior leadership team with the aim of expanding its alternative assets investment remit. Blackrock Inc.’s Chief Executive, Larry Fink, sees alternative assets as a way to bolster profits; he has put Edwin Conway, previously head of Blackrock’s institutional client business, in charge of Blackrock Alternative Investors.
China tech bubble may burst, says Bain
Results from consultancy firm Bain & Co.’s recent Asia-Pacific private equity report show that two-thirds of Greater China-based private equity investors believe that there is a high risk of a speculative bubble bursting in tech and internet companies in coming years. Private equity firms have been paying record amounts for Greater China-based technology companies, and valuations are twice as high as any other industry in the region which is further fuelling the rumours.
Source: PE News
Short-sellers ramp up bets against Lyft
Short-sellers have extended their bets against Lyft to levels rarely seen for newly listed companies. Lyft shares had hit $88.60 at one stage during their market debut on Friday; however, the stock fell to the point of closing on Wednesday at $70. According to data from S3 Partners, as of Monday, short positions of Lyft share represented 38% of available shares trading on the stock market.
In this tech IPO wave, big investors grab more of the gains
2019 is set to be a year when some of Silicon Valley’s most prominent tech companies file their IPOs. The group of elite investors, like sovereign wealth funds and venture capitalists, are able to generate outsized returns due to their ability to invest in companies while they are still private. With tech companies remaining private for longer, the high-growth prospects of these firms are realized by the early investors with newer investors receiving a smaller share of the winnings.
Source: The New York Times
For all the latest venture capital exit figures, take a look at the 2019 Preqin Global Private Equity & Venture Capital Report.
A long-lost Asian hedge fund hub is emerging from the shadows
Tokyo is re-emerging as a hedge fund hub, with a number of new managers launching vehicles in the city over the past 12 months. These fund launches follow actions taken by Tokyo Governor Yuriko Koike with aim of returning the city to its former glory as a global financial hub, in the form of loosening regulations and promising tax reforms. Japan offers potential for fund managers to raise assets with one of the largest pension pools in the world which is desperate for returns amid near-zero yields and an ageing population.
Hedge fund fee model morphs from ‘2 and 20’ to ‘1 or 30’
The perceived industry fee standard of ‘2 and 20’ is a thing of the past for the hedge fund industry: a recent survey of hedge fund investors by JPMorgan Chase shows that only 5% of respondents paid a management fee of 2% or more last year, and most respondents paid 1.25-1.74%. Performance fees remain high, though, with the majority of respondents paying 15-19.99%.
Why investors keep coming back to hedge funds
The ability to generate alpha is a key reason for investors continuing to allocate to the hedge fund industry, according to a survey by JPMorgan Chase, as well as the prospect of portfolio diversification. However, crowding of trades was listed as a key concern for 82% of allocators who feel that there are too many hedge funds chasing too few alpha-generating opportunities.
Source: Institutional Investor
Read more about the reasons why investors allocate to hedge funds, and other asset classes, in the newly available Preqin Investor Outlook: Alternative Assets, H1 2019.
Has the yield curve predicted the next US downturn?
Paul Samuelson, the Nobel economics laureate, once joked that the notoriously fickle stock market had forecast nine of the past five recessions; an inversion of the yield curve has preceded every downturn since the end of the Second World War. The US yield curve has inverted once again with the 10-year Treasury yield dipping below the three-month T-bill yield for the first time since 2007 on 22 March. The inverted yield curve has stirred fears that the countdown to the next downturn has already begun.