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One scoop to begin: Blackstone Group has put First Eagle Investment Management up on the market for greater than $4bn in an try to offload a big stake that the US private equity group has owned for a decade.
And one event: I’ll be in Abu Dhabi this week for our inaugural Way forward for Asset Management Middle East conference. Hope to see you there.
In today’s newsletter:
Activist Elliott shakes BP from its strategic slump
How Vanguard plans to play disruptor again
US egg prices soar as avian flu rips across farms
Pirates of the ‘Gulf of America’
A yr ago Elliott Management questioned whether calling for an oil major to reduce its green spending would risk a backlash from environmentalists and even the media.
How times have modified. Last week it emerged that Elliott has change into BP’s third-largest shareholder — behind only BlackRock and Vanguard — after constructing a near 5 per cent stake within the UK oil major price almost £3.8bn.
The activist hedge fund’s energy team at its Latest York headquarters now have T-shirts with “Gulf of America” printed on them, including one with an image of Donald Trump as a pirate, in honour of the president’s preferred name for the Gulf of Mexico.
As shares in BP sank to a two-year low last November, Elliott was already busy constructing its stake within the troubled company.
The move has began to repay. Shares in BP have risen greater than 26 per cent from that low, with Trump’s rallying cry of “drill, baby, drill” lifting the mood around oil and gas firms and putting greater concentrate on their core business of selling fossil fuels.
The activist’s arrival sets up a vital test for BP chief executive Murray Auchincloss at its capital markets day on February 26. Amid frustration on the group’s lack of direction, Auchincloss has promised to “fundamentally reset” his predecessor’s strategy, which involved ramping up capital expenditure on energy transition businesses and constructing a portfolio including wind, solar, biofuels and hydrogen.
Elliott’s view is that BP must make significant divestments including in its green energy businesses, based on an individual aware of the hedge fund’s pondering. A break-up or a sale weren’t currently on the activist’s agenda, they said.
What was needed was “an aggressive chair leading an engaged board, with a chief executive that bought into the strategy”, the person added. The formula for BP was straightforward: “It is powerful capital allocation, right sizing their costs, a divestiture plan and resetting the strategy. It’s ensuring that shareholders who’ve stuck with the corporate are rewarded. It’s a fundamental pivot.”
Dive into the within story of how Elliott shook BP from its strategic slump.
How Vanguard plans to play disruptor again
Vanguard has fundamentally reshaped equity investing. Its relentless emphasis on low costs and straightforward products that track indices moderately than pick stocks has helped it change into the world’s second-largest money manager, with a $10.1tn pile of assets under management and a client base of greater than 9mn direct investors.
For much of its history, Vanguard catered mostly to do-it-yourself investors and employee-directed retirement plans. Though its online offerings were clunky compared with rivals, and its customer support lines had limited hours, investors were rewarded with low fees that led to superior returns.
Having forced rival asset managers to slash fees and rethink business models built around stockpicking, Vanguard is now taking aim at other parts of the financial services industry.
Salim Ramji, a former BlackRock executive who last summer became the primary outsider to steer the group, is spearheading pushes into investment advice, actively managed bond funds and money accounts. The strategy seeks to make Vanguard the financial destination for a brand new generation of investors and enable it to compete more assertively for purchasers outside its US heartland.
“They’ve taken the indexing thing about so far as they will,” says Dan Wiener, who founded an investment advisory business and newsletter focused on the corporate’s funds.
However the shift comes as many rival asset managers at the moment are matching it on fees, while fintech upstarts similar to Robinhood and Betterment have been wooing younger investors with sleek apps, free stock trading and algorithm-driven online advice. Vanguard could have to lift its own offering whether it is to compete.
Venturing into financial advice defies the instincts of its late founder Jack Bogle, who spent a lifetime urging investors to “minimise the croupier’s take”.
“It’s really an issue of size,” says Dan Sotiroff, a senior analyst at Morningstar who follows Vanguard. “They’re getting so big that they must deliver what they promise to clients.”
Don’t miss this Big Read, through which Brooke Masters visits Vanguard’s headquarters in suburban Pennsylvania to inform the story of how the firm built a passive investing powerhouse — and why it needs to enhance its tech and repair whether it is to play disruptor again.
Chart of the week
US egg prices are soaring to record highs as farmers are forced to slaughter tens of millions of chickens in an try to halt the spread of bird flu, which has ripped through the nation’s poultry barns in recent months.
A dozen eggs reached greater than $8 in wholesale markets this week, greater than double the value of a yr ago and the very best ever recorded, based on Expana, a commodity price information service. Grocers including Walmart and Kroger have begun to ration purchases in certain cases. The Waffle House chain — a staple within the US south and Midwest — has tacked a surcharge of fifty cents an egg on to its dishes.
Supplies of fresh eggs are falling short as farmers cull tens of millions of hens to manage a variant of avian influenza that first emerged in a US industrial flock three years ago.
Like petrol prices, eggs are a visual, if volatile, signpost of inflation to consumers. The buyer price index increased by 3 per cent yr on yr in January, with an index for eggs climbing greater than 50 per cent, the Bureau of Labor Statistics reported on Wednesday. The typical US resident will eat about 270 eggs this yr, the US Department of Agriculture forecasts.
Egg prices even have political resonance and were an attack line in last yr’s campaign for the White House. Then US vice-presidential candidate JD Vance in September stood before a supermarket egg case to criticise the economic policies of his predecessor Kamala Harris, when the US city average price of enormous Grade A eggs was $3.82 a dozen, based on the Bureau of Labor Statistics. The worth was $4.95 in January.
Democrats have now seized on the difficulty. “We went to get some eggs, and we are able to see the costs of those eggs had now jumped to about $8. But there have been no eggs,” Ted Lieu, a Democratic representative from California, said last week of a recent trip to the food market.
Five unmissable stories this week
BlackRock has awarded chief executive Larry Fink a carried interest sweetener for the primary time, underlining the increasing importance of personal markets to the world’s largest asset manager.
Ken Griffin’s hedge fund Citadel has made a £305mn bet against drugmaker GSK, the most important short position against the corporate in greater than a decade.
“Trump trade” bets on a stronger dollar and better bond yields have backfired this yr as investors take a more bearish view on the economic fallout from the brand new US administration’s global trade war.
Goldman Sachs Asset Management is aiming to change into a “leading provider” of lively exchange traded funds in Europe as UK investment houses Schroders and Jupiter prepare to enter this a part of the market.
Institutional investors with $1.5tn in funds, including Scottish Widows, the People’s Partnership and Brunel Pension Partnership, have told asset managers to step up on climate motion or risk being dumped.
And at last
I agree with every word of this glorious love letter to Hampstead Heath by Rebecca Rose, editor of FT Globetrotter. The experience of swimming within the silty, silky waters of the ponds is beautifully captured in On the Pond: Swimming on the Hampstead Ladies’ Pond, a set of contemporary essays.
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