Brief : Investors are still headed for the exits at Renaissance Technologies, pulling $11 billion from the quant giant in seven months. Disgruntled by subpar returns, clients have now redeemed -- or asked to redeem -- more than a quarter of the capital that Renaissance manages in hedge funds with outside money, according to investor documents seen by Bloomberg. The firm now is mostly managing its own internal capital, a person with knowledge of the matter said. The exodus marks a setback for legendary investor Jim Simons, the military codebreaker and mathematician who started Renaissance and turned it into one of the industry’s most successful hedge fund firms. It’s also put the spotlight on a discrepancy not lost on clients: They’ve been losing money on struggling funds while Renaissance insiders have been reaping fat returns, with Simon himself making billions of dollars last year alone. From December to February, clients pulled, or asked to pull, about $5 billion from the funds, Bloomberg reported. That was followed by about $6 billion more through June, the documents show. While redemptions peaked in April, they slowed in May and June.
Brief: Global GDP is likely to recover to pre-pandemic levels in the first half of 2022, an expert has said. Speaking at Federated Hermes’ outlook roundtable yesterday (June 17), Eoin Murray, head of investment at the investment manager, said recovery of global GDP will be "at some point within the first half of 2022". He added there are certain signs indicating whether economies will see long-term scarring. “There also appears to be an expectation that longer term economic scarring will most likely be down to, first of all, an incomplete recovery in the labor market. And secondly, bankruptcies,” he said. Murray expects the bankruptcies to be in zombie companies (a company that needs bailouts in order to operate) which have been created by quantitative easing. “We all know that the rate of bankruptcies has fallen during the pandemic, on the back of huge monetary support, contrary to my predictions of solvency problems at the beginning of the pandemic.
Brief: Middle-market private equity firms have bounced back from Covid-19 pandemic-related lows, with dealmaking, exit activity, and fundraising showing signs of continued strength. In PitchBook’s U.S. PE middle-market report published Wednesday, author and PitchBook analyst Rebecca Springer cited “robust” dealmaking in the first quarter of 2021 as one element of the sector’s success. According to the report, deal count and value in the first quarter of 2021 “easily exceeded” numbers in the first quarter of 2020. In 2021, U.S. PE firms closed 776 deals and spent a total of $119.5 billion, an amount the report deems the “second highest quarterly deal value figure” since the fourth quarter of 2020. PitchBook credits the successful dealmaking to increased vaccinations, the Federal Reserve, and an “ample supply” of cheap debt. “In Q4 2020, we saw a backlog from the pandemic, so deals that would’ve been done earlier but were delayed,” Springer told Institutional Investor. “In Q1, we saw a continuation of that.” As for the near future of deal activity in the middle markets, Springer expects the upward momentum to continue for the rest of the year. In the report, Springer lists the $1.9 trillion American Rescue Plan and subsequent increased consumer and business spending as reasons for increased activity.
Brief :The Autorité des marchés financiers (AMF) today published its Enforcement Report for the 2020-2021 fiscal year. The report presents the highlights of the AMF’s enforcement activities and results for the past year. “Despite the unprecedented public health crisis caused by the pandemic, the AMF showed agility and resilience by continuing its operations remotely and reacting quickly to protect consumers and ensure market efficiency,” said Louis Morisset, AMF President and CEO. “Our inspection, investigation and prosecution teams were very proactive and able to maintain their operations, resulting in a large number of prosecutions and in important rulings that sent a deterrent message,” said Jean-François Fortin, Executive Director, Enforcement. In addition to providing a comprehensive picture of the past year’s enforcement activities, the report describes major technological advances to detect potential violations and more efficiently manage investigation matters and prosecutions, as well as the AMF’s continuing offensive on the crypto asset front. The report also touches on the teams’ efforts to integrate mortgage brokerage into its inspection activities while supervising the clienteles regulated by the AMF, including in order to assess the impacts of the pandemic on their activities. The Autorité des marchés financiers is the regulatory and oversight body for Québec’s financial sector.
Brief: Europe’s private equity patrons are piling debt onto the books of their companies to support dividend payouts, a move which could threaten these firms’ prospects when the fiscal and monetary stimulus of the pandemic era starts to wind down. Just under 13 billion euros ($16 billion) of leveraged loan deals linked to dividend recapitalizations took place by early June -- the highest level in 14 years -- according to S&P Global Market Intelligence’s Leveraged Commentary & Data unit. That’s only 4 billion euros shy of the total for the same period in 2007, on the eve of the great financial crisis. The stimulus deployed since March last year has kept many companies afloat amid ruinous lockdowns. Some private equity owners have seized the chance to issue more debt from their companies, potentially jeopardizing how quickly they can bounce back as economies start to open up and policymakers mull tapering. “A dividend recap isn’t a positive credit scenario for any company,” said BlackRock Inc.’s Head of European Leveraged Finance James Turner. “But whether or not we decide to support them is dependent on each individual case.” German buildings material maker Xella International GmbH, for instance, was downgraded after it sought to borrow 1.95 billion euros in March this year, with nearly a third of that amount slated to go to private equity sponsor Lone Star Funds.