Brief: EQT AB, the European private equity firm, is considering a takeover of Dutch phone company Royal KPN NV in what would be its largest-ever acquisition, people with knowledge of the matter said. The buyout firm is in the early stages of discussing the feasibility of a deal with potential advisers, the people said, asking not to be identified because the information is private. Shares of KPN have fallen 15% in Amsterdam trading this year, giving the company a market value of about 9.4 billion euros ($11.1 billion). No final decisions have been made, and there’s no certainty that EQT’s deliberations will lead to an offer, the people said. Any suitor would want to win the backing of KPN management and the Dutch government after the former telecom monopoly previously fought off an unwanted takeover. Representatives for EQT and KPN declined to comment. KPN, which is valued at about 16 billion euros including debt, has reported declining revenue for more than a decade. Its shares are trading near an all-time low amid fierce competition from regional giants like Vodafone Group Plc. The company appointed Joost Farwerck as chief executive officer a year ago. He took over a business that was cost cutting and in search of new revenue streams to ease competitive pressures in its home market, where rivals have been merging.
Brief: Wall Street banks are on track for a record year of revenue from trading U.S. government-backed mortgage debt, industry sources told Reuters, amid a surge in demand - from the Federal Reserve in its battle against the pandemic, and from investors hunting yield. Revenue from trading bundles of home loans at the biggest global banks - including JPMorgan, Citi and Goldman Sachs among others - is expected to top $3 billion in 2020, one source with direct knowledge of the banks’ trading revenue said, besting last year’s peak of $2.5 billion. The source declined to be identified because the data isn’t publicly available. “Buying mortgages in March was one of the best trading opportunities in mortgages since the last financial crisis,” said Daniel Hyman, head of agency MBS portfolio management at Pacific Investment Management Company (PIMCO). The surge in demand and activity has also allowed new names to enter the space. Bank of Montreal, which acquired mortgage security broker-dealer KGS-Alpha Capital Markets in 2018, is now actively trading residential mortgage-backed securities or RMBS, according to the source.
Brief: The alternative investment data provider shows that a total of 237 private equity funds closed in the third quarter, which is the lowest quarterly total since at least 2015. Meanwhile, there are 3,968 in the market seeking capital, a record number of funds since 2015. The coronavirus pandemic has changed private equity fundraising dynamics significantly: Most meetings are now conducted virtually, and the public market correction may have stalled fresh capital commitments, according to Preqin. During the first three quarters of 2020, just 39 percent of funds closed in 12 months, according to the data. This is at least six percentage points lower than each of the previous five full-year periods. What’s more, 45 percent of funds took more than 18 months to close — the largest amount since 2015, per Preqin. There are, of course, anomalies. On October 1, for example, European private equity firm Nordic Capital announced that it had closed its tenth fund, which it raised fully remotely, with €6.1 billion (US$7.17 billion) to deploy. Likewise, on September 29, private equity firm Advent International closed a $2 billion fundraise for its seventh Latin American fund. These fund closes are indicative of another trend Preqin pointed out: Despite the pandemic, fundraise sizes grew slightly quarter-over-quarter, to $536 million.
Brief: Hedge funds have suffered their first monthly loss since March, as fears over the growing spread of coronavirus in Europe and the US – combined with the imminent presidential election and uncertainty over the US economy – weighed down on managers of all hues in a decidedly patchy September. New data published by Hedge Fund Research shows that only event driven strategies emerged from September in positive territory, as losses swept through the equity, macro and relative value sub-sectors. The flagship HFRI Fund Weighted Composite Index – an across-the-board snapshot of all strategies - dumped 1.2 per cent last month, its first monthly decline since March, when markets were sent spiralling by the Covid-19 outbreak. The index’s Q2 surge of 9.14 per cent was essentially halved during the following quarter, with the index gaining some 4.06 per cent between July and September. The end of its five-month positive run last month has left the index flat for the year, at 0.5 per cent. The HFRI Equity Hedge (Total) Index – which measures the performance of a broad range of equity-focused managers – gave back 1.53 per cent in September. Only healthcare-focused equity hedge funds were up last month, rising 1.94 per cent, with fundamental equity, multi-strategy, quantitative and energy/materials strategies all registering losses. Overall, HFR’s equity benchmark remains up 2.24 per cent since the start of 2020.
Brief: Two-and-a-half years ago Joseph Payne was ousted from Arcturus Therapeutics Holdings Inc., the biotech company he helped found, by what he calls a “dysfunctional board.” Four months later he was back at the helm and the now $1.2 billion firm is racing to push out a Covid-19 vaccine alongside the world’s leading contenders. The contentious transfer of power came after the previously private Arcturus gained access to the public markets in a reverse merger with Alcobra, a struggling biotech. Today, Arcturus’s goal is to develop a potent low-dose one-shot messenger RNA Covid-19 inoculation. Like other vaccine and drug developers chasing Covid medicines, Payne’s company has picked up steam since mid-March when U.S. states started shutting down. The shares have surged more than fivefold since then and climbed as much as 6.3% in Thursday trading. Hedge funds have taken notice, with actively managed firms making up 20% of the company’s holder base as of Oct. 4. Pure play health fund HealthCor Management LP has a 6.5% stake after adding almost 1.5 million shares in the third quarter, according to data compiled by Bloomberg. Arcturus kicked off a dose-finding study in Singapore in August and has clinched supply deals with the governments of Israel and Singapore. It wasn’t among the few companies singled out for the Trump administration’s Operation Warp Speed and it hasn’t signed any large-scale government contracts. But Payne, the company’s president and chief executive officer, sees this as an advantage.
Brief: The asset management industry has reached a critical period for nurturing gender diversity, industry experts have advised, as investment firms choose how they will adapt to new challenges caused by the coronavirus pandemic. Baroness Helena Morrissey says the investment industry has always been “slow to shift gears” in the face of problems, including gender diversity and transparency over fees. Baroness Morrissey founded the campaign group the 30% Club in 2010, which targeted a minimum 30 per cent female board members, in addition to being the former chief executive of Newton Investment Management and chair of the Investment Association. She now chairs the Diversity Project, which works to improve diversity in all dimensions in the investment and savings industry and serves as a peer in the House of Lords. Recent progress has been “very tentative”, with the share of women in fund management roles reaching 11 per cent in 2020. In 2016, women accounted for 10.3 per cent of fund managers. Citywire estimates that at the current rate of promoting women to senior roles, it will take two centuries before female fund managers achieve parity with their male colleagues. Baroness Morrissey believes that even the slow progress the industry has made to hire and promote more women could slide backwards, if firms fail to make positive efforts now. “It's too soon for it to withstand a body blow in the form of people just taking their eye off the ball at this point,” she says.