One deal to start: The advisory firm set up by Peter Mandelson, one of the architects of New Labour in the UK, has sold a 20 per cent stake to a US business run by a former aide to Barack Obama in a first step towards a possible full-blown merger.
And a probe to start: Austria’s anti-corruption prosecutors have opened an investigation into property mogul René Benko for allegedly defrauding a bank. It’s the first to personally target the 46-year-old former billionaire, whose Signa luxury property group collapsed at the end of 2023, leaving billions owed to shareholders and creditors across Europe.
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For many years, investing in private equity was a sure way for university endowments to make money. Princeton University was one of those PE believers, averaging an annual return of 10.8 per cent over the past decade — well ahead of its benchmarks — in part by throwing much of its weight into the asset class, which returned more than 18 per cent.
But its private equity and venture capital bets are now proving to be a sore spot in the Ivy League university’s portfolio. Princeton’s chief investment officer Andrew Golden said the endowment was facing the “worst-ever environment” for liquidity in the asset class. The $34bn portfolio suffered a 1.7 per cent loss last year, mainly because of the underperformance of the portfolio. “Until the last few weeks, I have seen very little liquidity coming out of the private equity and venture capital space,” said Golden in an interview with the FT.
The investment chief will retire in June after almost three decades running the endowment. Under Golden, the school’s allocation to private equity including venture capital crept up to 40 per cent, with the overall portfolio growing by almost 10 times since he first arrived.
While private universities lose out on returns, public universities are having a triumphant year , Lex writes. University of California, San Diego , for example, returned a leading 11 per cent in fiscal 2023 by virtue of its nearly one-third allocation to the S&P 500.
For more than two decades, private universities like Princeton have followed the “ Yale model” by ploughing money into illiquid alternative investments. Princeton did so even more than others. By June 2023, its private equity investment was double the average allocation for large US university endowments.
But that over-allocation seems to be coming back to bite it. Private equity could prove to be a test that Ivy League endowments risk failing, according to Lex.
After Russia’s full-scale invasion of Ukraine, Raiffeisen Bank International promised to pull out of the country and sell its business there. Two years on, it sure doesn’t look that way .
An investigation by the FT found that the Austrian bank had posted 2,400 job advertisements in Russia since December, with some 1,500 for sales management and customer service roles. One of the postings said its “key goals are a multiple expansion of the active client base and stable double-digit income growth”.
Raiffeisen has the largest operations in Russia of any western lender, which has opened it up to scrutiny from global agencies. It’s under review by officials at the US Treasury , and the European Central Bank has also mounted pressure for the bank to pull out of Russia.
Raiffeisen itself seemed surprised by the findings. When the FT contacted it for comment, it said the discovery prompted chief executive Johann Strobl to order an immediate inquiry. A senior Raiffeisen executive in Austria said the advertisements were “highly embarrassing”, and had triggered a panicked response to have them taken down and urgently rewritten.
In a report sent to Strobl by the board of the bank’s Russian subsidiary, it said the adverts (erroneously) included boilerplate information about the bank and its ambitions there. The language hadn’t been updated since before the Ukraine invasion began.
Although the bank has shrunk its lending in Russia by 56 per cent since early 2022, its physical presence there has grown. Among the European banks still operating in Russia, Raiffeisen is the only one that has increased local headcount — by 6.6 per cent to 9,942 employees as of December. (The bank says that the increase is mainly due to bulking up its IT department ahead of a potential sale.)
Raiffeisen says its “reduction of the Russian business will continue” this year, and that it’s still working on a potential sale or spin-off.
It’s certainly a delicate balance. The bank needs to maintain enough of a presence there to attract a buyer, while not overtly supporting the Russian wartime economy. Plus, any sale needs the Kremlin’s approval.
US banks are welcoming the return of dealmaking with open arms. On Tuesday, Morgan Stanley chief executive Ted Pick joined other bank executives touting the revival of the bread-and-butter transactions, saying dealmaking was an “existential reality” for companies.
The pick-up in mergers and acquisitions could usher in Wall Street’s long-awaited recovery for investment banking. “I’m feeling good about this being early-to-mid cycle for the classic investment banking, capital markets business around the world,” said Pick, who took over from longtime chief James Gorman in January.
Investment banking fees at the biggest US banks were up across the board in the first quarter, with Goldman Sachs clinching the crown with more than $2bn generated in fees. Citigroup , which is undergoing a restructuring, saw its corporate and investment bank fees jump about 50 per cent from a year ago.
“Where we stand today it’s clear that we’re in the early stages of a reopening of the capital markets,” said Goldman chief David Solomon after the bank’s earnings were announced on Monday.
Although deals show signs of a comeback, first-quarter earnings weren’t all rosy. The largest US banks lent billions of dollars less in the first quarter, in a sign that corporate borrowers are opting to whack down their debt with interest rates still at historic highs. Bank of America , the nation’s second-largest lender, said new loan growth stalled in the quarter, with its chief financial officer Alastair Borthwick calling lending “sluggish”. Citi and Wells Fargo also recorded drops in lending.
The pullback in lending hit JPMorgan Chase particularly hard. Its shares fell by the most in almost four years on Friday as an underwhelming outlook for its lending business overshadowed its profits.
Chief executive Jamie Dimon added some words of caution during the bank’s earnings call: “Looking ahead, we remain alert to a number of significant uncertain forces,” including an “unsettling” global landscape and “a large number of persistent inflationary pressures”.
Bank of America has hired Olof Engelbrekts as head of investment banking in Switzerland. He previously worked for UBS .
KKR has hired Ben van Beurden as a senior adviser for energy transition investments. He previously worked as Shell ’s chief executive, with this being his first corporate role since stepping down.
Simpson Thacher has hired Adam Risell for the firm’s investment funds practice. He previously worked at Cadwalader .
Longacre Square Partners , a strategic communications firm, has appointed Rebecca Kral to chief operating officer, while former Bloomberg activism reporter Scott Deveau and Kate Sylvester have been named partners.
Pricing hell Uber revolutionised how companies charge customers with the advent of “surge pricing”. Now, that model is spreading — and becoming even more convoluted, The Atlantic reveals.
Yellowstone Club The private equity firm behind a Montana resort beloved by billionaires is starting to wield its influence beyond the club’s gates , Harper’s Magazine investigates.
Hidden risks As governments try to de-risk the global financial system, investors are forced to reassess their views of what have historically been considered “safe” assets, the FT writes.
Andreessen Horowitz raises $7.2bn and sets sights on AI start-ups (FT)
German watchdog finds EY’s Wirecard audits grossly negligent (FT)
EU set to fine Oreo maker Mondelez for blocking cross-border sales (FT)
Musk’s Starlink cracks down on growing black market (Wall Street Journal)
International Paper agrees to buy rival DS Smith in £7.8bn deal (FT)
Stellantis chief’s pay package approved by investors despite dissent (FT)
Due Diligence is written by Arash Massoudi , Ivan Levingston , William Louch and Robert Smith in London, James Fontanella-Khan , Ortenca Aliaj , Sujeet Indap , Eric Platt , Mark Vandevelde , Antoine Gara and Amelia Pollard in New York, Kaye Wiggins in Hong Kong, George Hammond and Tabby Kinder in San Francisco, and Javier Espinoza in Brussels. Please send feedback to due.diligence@ft.com
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