Wednesday, October 9, 2019

Fear Overtakes Greed in IPO Market After WeWork Debacle

It would appear that my question from some months ago, "Is this the beginning of the end?", may be true. For all those who have forgotten the dot com slide, it took over a year to bottom out. Hang on for the ride!   .....Aivars Lode

The IPO market has gone from hot to not.
Shares of newly public companies, earlier this year one of the hottest investments on Wall Street, are now in a slump after investors soured on unprofitable startups from Uber Technologies Inc. to WeWork.
Shares of technology startups and other companies that went public in the U.S. this year are trading roughly 5% above, on average, their prices at their initial public offerings, well short of the 18% gain in the S&P 500 index, according to Dealogic data. That is a reversal from earlier in the year, when IPO shares were big outperformers.
IPO-stock performance is the worst it has been since at least 1995, according to a recent research note from Goldman Sachs, whose analysts measured it relative to a broad stock-market index.
That and recent market gyrations have helped bring IPO activity to a virtual standstill heading into what is traditionally one of the busiest times of year for new issues, as companies planning debuts wait for conditions to improve.
The stall upends expectations that 2019 would be a record year for IPOs by money raised. It also highlights the risks for private investors who have endured long periods of losses funding a crop of companies that are older and bigger than IPO candidates in previous cycles. That could put a chill on a private-funding market that has been red hot and hamper the ability of the next generation of startups to raise seed capital. 

Tuesday, October 8, 2019

Beat Negative Yields By Heeding Australia’s $2 Trillion Pensions

Temasek is doing the same: investing in companies directly, not taking them public, and holding them longer. This eliminates fees paid to investment bankers and other financial institutions like PE / Hedge funds.... Aivars Lode


For years, they’ve been some of the biggest and most profitable risk-takers among global pension funds. Now, as the rest of the world joins them in an increasingly desperate hunt for yield, the Australians are having to find new ways to bolster returns.

Australia’s A$2.9 trillion ($2 trillion) pension pool is the fastest-growing among the seven biggest economies and is projected to almost double in size to A$5.4 trillion in a decade. The rapid growth has largely been driven by a mandatory savings system and the fact that the funds have traditionally had a higher appetite for risk than their counterparts in other advanced economies.
That’s because 86% of their assets are tied to “defined contribution” plans where the savers bear the risk, not the employer. With a limited domestic pool of securities and debt, they have for years sought returns around the world. Australian funds allocated 16% of their investments on average in bonds last year, compared with 60% in Japan and 53% in the U.K., according to data from global risk adviser Willis Towers Watson Plc.
Now, funds globally are grappling with $14 trillion of negative-yielding bonds, with only 1% of the $56 trillion investment-grade bond market yielding more than 5%. As big funds from G-7 nations muscle in on the higher-risk territory in a desperate search for yield, many Australian funds are tapping ever more exotic ways to service their clients.