‘Bond King’ Bill Gross punts against meme stocks

One scoop to start: Venture capital firm Andreessen Horowitz is among the investors that received a windfall this week when billions of dollars worth of tokens were issued to the creators, backers and owners of the Bored Ape Yacht Club digital collectibles.

Three years after Bill Gross folded his tent as an asset manager, the 77-year-old still spends five hours every morning at his Bloomberg terminal, before he heads out to play golf. Lately, the Pimco co-founder tells my colleague Brooke Masters in New York, he’s been using options to short meme stocks. Though he lost money during the frenzied run of GameStop and AMC early last year, he now estimates that he’s up by at least $15mn.

He’s also deeply critical of the US Federal Reserve, blaming the long period of low rates and large fiscal stimulus after Covid for today’s high inflation. Yet he doubts the central bank will be able to raise rates without causing a recession. “I suspect you can’t get above 2.5 to 3 per cent before you crack the economy again,” he says in the interview. “We’ve just gotten used to lower and lower rates and anything much higher will break the housing market.” As a result, he has half his portfolio in cash.

Gross also has a memoir to sell — he was inspired to write when he was contacted for pre-publication fact-checking of a new book about him and realised that he wanted to tell his own story and “set things straight”. I’m Still Standing combines a bit of score settling with personal introspection and some of his best letters to investors over the years. Proceeds will go to charity.

Writing the book has made Gross more reflective about his own shortcomings and the bitter battle with the rest of the Pimco leadership that ended with his forced departure and then a disastrous effort to start a rival fund at Janus Henderson. “I talk too much and I’m too sensitive to anything I perceive as negative,” he admits.

“Does time heal all wounds? No but it does make the scars less red,” he says.

Are ESG specialists the new star stock picker?

The battle for talent has a new frontier: sustainable investing. The competition for ESG specialists has sparked a bidding war by fund managers and is pushing salaries up by half for top hires, report Adrienne Klasa and Brooke Masters in this analysis.

Head hunters and executives told them that current competitive dynamics are so intense that people can find themselves juggling multiple job offers with concerted efforts by current employers to retain them.

ESG specialists “are the stars of the asset management world right now,” says Mark Versey, chief executive of Aviva Investors. “Once upon a time, it was the star equity manager, now it’s the star ESG professional.”

Rather like Groucho Marx refusing to join any club that would have him as a member, another industry executive said that candidates are so hard to come by that if an ESG or sustainability specialist “came to me and offered their services . . . I would question why”.

Assets in sustainable funds grew 53 per cent year-on-year to $2.74tn in 2021, according to Morningstar, and demand for people to manage the explosion of ESG investments has grown alongside. But the pool of qualified candidates is small. In a CFA Institute analysis of 10,000 investment jobs advertised on LinkedIn, 6 per cent required sustainability skills, yet less than 1 per cent of the 1m investment professional profiles included in the study listed these skills on their profiles.

In this struggle to fill vacancies, fund managers are not only poaching staff from rivals, they are also taking the unusual step of looking outside the industry. They’re casting a net everywhere from consultancies, data providers like MSCI and the “Big Four” professional service firms, to government departments, engineering consultancies and NGOs.

Ju-Hon Kwek, a senior partner at McKinsey who leads its North American asset management practice, said:

“The search for skilled senior ESG staff in asset management has become an intense game of musical chairs in reverse, where more chairs are being added in each round. As more managers decide to move sustainability and impact investing to the core of what they do for clients, you could see a world where this gets more intense across multiple fronts.”

WisdomTree vs an activist

Exchange traded funds are often described as “passive,” but the fight unfolding at WisdomTree — the ETF manager which has been touted as a possible takeover target — is anything but.

Jonathan “Jono” Steinberg is under pressure to step down as chief executive from WisdomTree, a business he founded and transformed from a publisher into one of the world’s biggest ETF providers, with $77.7bn in assets under management. The call to resign is coming from the company’s largest shareholder — who also happens to be one of the ETF industry’s founding fathers, as my colleague Chris Flood reports in this story.

Graham Tuckwell, the Australian entrepreneur who was the driving force behind the creation of the world’s first gold exchange ETF, wants Steinberg gone. Tuckwell argues that Steinberg and his management team have destroyed half of WisdomTree’s market value, approximately $400mn.

WisdomTree’s share price has halved in the past five years since it struck a 2017 deal to buy the European arm of Steinberg’s business, ETF Securities. The deal has not delivered the success that either side had hoped for.

Tuckwell has now teamed up with an activist hedge fund, Lion Point, to demand that several new directors are appointed to Wisdom Tree’s board and for Steinberg to step down.

WisdomTree, for its part, has devised an elaborate “poison pill” defence to try and block Tuckwell and Lion Point. Shareholders will have their chance to express their views at the company’s annual meeting in June.

Some readers may recall that Steinberg is the son of one of Wall Street’s most notorious corporate raiders, Saul Steinberg. The elder Steinberg made a fortune and spent part of it on a palatial apartment on Park Avenue in New York which he stuffed with antiques and old master paintings — as per this riveting 2001 Vanity Fair profile.

Jono Steinberg was always known as “Saul’s son” when he was growing up, but he surely learned some valuable lessons from his extraordinary father’s successes and failures in business. Let the sparring begin.

Chart of the week

Investors are no longer paying so much to insulate themselves from the kinds of tremors they have witnessed over the past month, with market gauges showing some of the extreme trepidation has passed, writes Eric Platt in New York. Traders in US stock and derivatives markets have been closely watching the price of futures on the Cboe’s Vix index, often referred to as Wall Street’s fear gauge.

Last month, on the cusp of Russia’s invasion of Ukraine, the price of March Vix futures rose above the value of those that expire between April and November, a sign many investors had hedged against an immediate drop in the market. That move, a so-called inversion of the Vix futures curve, is relatively unusual. And in recent days it has reversed, with the price of March Vix futures contracts dipping back below those that expire later this year. Traders said it indicated that some of the extreme unease about how far financial markets could lurch lower had dissipated.

10 unmissable stories this week

Three horsemen of the apocalypse have arrived: war in Europe, pestilence in Asia and interest rate rises in the US. The market response: shrug and keep on buying the risky stuff, writes markets editor Katie Martin in this column.

Foreign investors have dumped Chinese stocks at a record pace in the first three months of 2022 on concerns over coronavirus outbreaks and the threat western countries will sanction Beijing if it supports Russia’s war in Ukraine.

Almost two dozen UK crypto firms are still waiting for a decision from the Financial Conduct Authority on their registration applications. After the end of this month the companies could be forced to close or move overseas.

Binance, the world’s largest cryptocurrency exchange, is putting down roots in the Gulf — securing licences from Dubai and Bahrain — as it moves away from portraying itself as a “decentralised” organisation and seeks a more conventional structure.

The FCA is consulting with asset managers like Schroders, Abrdn and Liontrust on measures to help limit the damage to investors from Russia’s invasion of Ukraine by segregating Russian and Belarusian assets in funds.

Europe’s energy industry federation — whose members include oil majors BP and Shell and commodity traders Vitol and Trafigura — has called on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets.

Almost three years after star stock picker Neil Woodford’s flagship fund collapsed, fund administrator Link Group warned investors that they may have to wait until 2023 or beyond to see the final payouts from the wind down.

Andrew Bailey, who will be in the hot seat when the Woodford report finally lands, was in trouble this week for falling asleep during a meeting about another scandal, involving British Steel pensions.

Hedge funds have beat a retreat from the US stock market after sharp swings pummelled big money managers’ returns and strategists warn that 2022 has “become a ‘nowhere to hide’ market “.

Gareth Penny’s dual role as chair of UK-listed Ninety One and of ​​Russia’s Norilsk Nickel is a governance failure for the City asset manager, which touts its ESG credentials, argues columnist Helen Thomas. In another must-read column, she digs deeper into how the horror of Russia’s invasion of Ukraine shows the difficulties of nuance in responsible investing.

And finally

At the Tristan Hoare Gallery in Fitzrovia, an exhibition by French artist Nicolas Lefebvre has just opened. Inspired by the Arte Povera movement in Italy in the late 1960s and early 1970s, Lefebvre’s Objets Montés uses materials beyond traditional oil paint on canvas, bronze or carved marble. The artist’s work consists of gathering objects made from different materials, from a variety of cultures and time periods to create new artworks which celebrate our global common roots. His “ready-made” are heavily inspired by the Surrealists and Dadaists such as Marcel Duchamp.