Goldman’s $900mn hit

One factor to start out: Ken Griffin, the billionaire founding father of hedge fund Citadel, has signalled that he could be “open to the potential for selling a minority stake” in his agency for the primary time. Earlier this month we revealed that Citadel’s closest rival, Izzy Englander’s Millennium Administration, was in talks with BlackRock in regards to the sale of a minority stake.

In at this time’s publication:

• Goldman Sachs takes $900mn hit on Northvolt funding

• How lengthy will Trump’s honeymoon with the inventory market final?

• German bond buyers guess on an finish to Berlin’s ‘debt brake’

Goldman Sachs takes $900mn hit on Northvolt funding

Goldman Sachs first invested in Swedish battery maker Northvolt in 2019 when, together with different buyers together with German carmaker Volkswagen, it led a $1bn Sequence B funding spherical that enabled Northvolt to construct its first manufacturing unit in northern Sweden, and gasoline future enlargement.  

The funding spherical was hailed by Northvolt chief govt Peter Carlsson as “an incredible milestone for Northvolt” — then a four-year-old start-up — and “a key second for Europe” in its push to counter Asian dominance of battery making. 

However Europe’s one-time large battery hope filed for Chapter 11 chapter within the US on Thursday, leaving buyers together with Goldman — its second-largest shareholder — VW and Baillie Gifford nursing enormous losses. 

In this scoop, Richard Milne and I reveal that Goldman’s personal fairness funds have at the very least $896mn in publicity to Northvolt, which they’ll write all the way down to zero on the finish of the 12 months, in response to letters to buyers.

Goldman’s personal fairness enterprise was established in 1986 and sits inside Goldman Sachs Asset Administration, which has greater than $3tn in belongings beneath supervision, together with greater than $500bn in different investments reminiscent of personal fairness. The asset and wealth administration division is on the coronary heart of chief govt David Solomon’s enlargement plans for the Wall Avenue financial institution.

Two buyout funds West Avenue Capital Companions VII and West Avenue Capital Companions VIII have $407mn and $346mn invested in Northvolt, respectively. Horizon Atmosphere and Local weather Options 1, a development fairness technique touted as Goldman’s first direct personal markets technique devoted to investing in local weather and environmental options, has $116mn invested in Northvolt; and a fund known as StoneBridge 2020 invested $27mn. 

Goldman’s so-called 1869 fund, a car that provides its community of former companions entry to a number of personal funds managed by the fund’s asset administration division, additionally had a small quantity of publicity to Northvolt, as a result of the fund has dedicated 25 per cent of its capital commitments to West Avenue Capital Companions VIII, buyers mentioned. 

Some buyers have privately complained that Goldman and different funds pushed them arduous to again Northvolt. They’ve additionally mentioned that this, mixed with Northvolt’s chapter, may have an effect on buyers’ need to help the inexperienced transition.

Do you agree? E mail me: harriet.agnew@ft.com

In the meantime don’t miss Richard’s fascinating deep dive into how Northvolt tumbled into chapter 11. 

Trump’s inventory market honeymoon

On the Wynn resort in Las Vegas final week, greater than 800 buyers, bankers and executives had been gathered for Goldman Sachs’ annual convention for “progressive personal corporations”.

The bull case for Trumponomics was on full show.

With rates of interest now trending downward, capital markets specialists had already been getting ready for a restoration in inventory market listings and mergers and acquisitions exercise, however the election outcome that may return Donald Trump to the White Home has poured gasoline on the hearth. 

One hedge fund supervisor in attendance summed up the ambiance. “There are many giddy buyers right here getting enthusiastic about takeout targets,” he says. “M&A is now an actual risk due to the brand new administration. That’s been essentially the most thrilling [element of Trump’s proposals] . . . I feel the temper is healthier than it’s been up to now 4 years.”

All of that is although the president-elect has nominated a string of hardliners to senior positions, signalling his intent to push forward with a radical agenda to enact sweeping tariffs and deport thousands and thousands of unlawful immigrants. Many economists have warned this may trigger inflation and deficits to spiral upward.

On this Big Read, my US colleagues Nicholas Megaw, Harriet Clarfelt and Colby Smith discover how the contrasting alerts elevate some key questions for merchants and policymakers alike: are fairness buyers setting themselves up for a fall by ignoring excessive valuations and potential downsides of Trumponomics, or will they be proved proper as gloomy economists as soon as once more must stroll again their dire prognoses?

“Any time . . . you get to the purpose the place markets are past priced to perfection, it’s important to be involved about complacency”, says Sonal Desai, chief funding officer at Franklin Templeton Fastened Revenue.

However, she provides, “the truth is you additionally have to very actively search for triggers for sell-offs, and proper now . . . I feel the underlying financial system is robust and the insurance policies of the incoming administration are unlikely to maneuver that considerably.”

Chart of the week

Buyers are betting on reform of the “debt brake” enshrined in Germany’s structure as markets brace for a rise in borrowing by Berlin, write Ian Smith and Man Chazan.

A sell-off in Germany’s 10-year debt in current weeks has seen its yield commerce above the speed for euro rate of interest swaps of the identical length for the primary time, a key market indicator that’s delicate to expectations of future bond issuance.

The transfer forward of federal elections in February alerts buyers’ perception that “a snap election means debt brake reform”, in response to Tomasz Wieladek, chief European economist at asset supervisor T Rowe Value. “That in flip would imply extra issuance.”

So-called “swap spreads” have lengthy been constructive in Germany — in contrast to in different main bond markets the place they’ve typically traded beneath zero — that means buyers have been prepared to simply accept a decrease return to carry Berlin’s debt relative to expectations of long-term rates of interest.

This uncommon function of Germany’s bond market has been a operate of the relative shortage of Bunds, which function the benchmark risk-free asset for the whole euro space and have typically been briefly provide as a result of nation’s reluctance to borrow closely.

The debt brake caps new borrowing by the federal authorities at 0.35 per cent of GDP, adjusted for the financial cycle, and in addition bars Germany’s 16 particular person states from taking up any new debt in any respect.

It was written into the German structure in 2009 and took impact in 2016, although it was suspended throughout the Covid-19 pandemic and once more after Russia’s full-scale invasion of Ukraine, earlier than being reinstated this 12 months.

5 unmissable tales this week

Goldman Sachs’ chief govt David Solomon has warned that world buyers are nonetheless “predominantly on the sidelines” over deploying capital in China due to weak client confidence and difficulties getting cash in a foreign country. 

Sir Keir Starmer has held talks in Downing Avenue with BlackRock chief govt Larry Fink, because the UK prime minister seeks to rebuild relations with enterprise leaders after final month’s tax-raising Price range. 

Tikehau, one in all Europe’s fastest-growing funding managers, is contemplating moving its listing to New York from Paris, making it the most recent in a collection of European and UK corporations wanting past the exchanges of their dwelling nations.

Bridgewater, one of many world’s largest hedge funds, is becoming a member of forces with State Avenue’s asset administration arm to faucet retail buyers, beginning with an exchange-traded fund that may observe one in all its best-known strategies.

Abrdn’s new chief govt Jason Windsor has made sweeping leadership changes and has shaped an working committee in a bid to enhance the UK asset supervisor’s funding efficiency after a troublesome interval.

And eventually

A stirring show of savage, visceral portraits on the Nationwide Portrait Gallery confirms Francis Bacon as Britain’s best postwar painter, writes the FT’s chief visible arts critic Jackie Wullschläger.

Nationwide Portrait Gallery to January 19; Fondation Pierre Gianadda, Martigny, February 14-June 8