Asset Management: Pimco’s Manny Roman: ‘I call that generational luck’

One thing to start: The dramatic spikes in oil and mineral prices after Russia’s invasion of Ukraine have distracted investors from the long-lasting and more dangerous impact of food inflation, BlackRock founder Larry Fink has warned.

Fink blamed an investment climate “not seen in decades” for its second-quarter results, which fell short of sharply reduced expectations. Falling markets and a rising dollar drove assets under management at the largest money manager down to $8.5tn.

The ‘big existential threat’ for markets is the US

Six years ago Emmanuel “Manny” Roman upped sticks from London to the West Coast, to take over as chief executive of Pimco, the giant fund manager with some $2tn of assets under management.

It was quite the change of scene for the cosmopolitan French financier and legendarily literary patron of the arts, who pre-2008 might have been dubbed a “Master of the Universe”. And not just because his social life is more limited, his wine cellar is in storage and he has to watch his beloved Arsenal on television at unreasonable hours.

FT Weekend Editor Alec Russell recently sat down for a Lunch with the FT with Roman at Marinos, an old Italian family restaurant in Hollywood, to hear how his two worlds intersect: the world of trading and the world of ideas.

“They totally come together,” says Roman.

“I think markets are a very complicated impressionist painting. Different pieces contribute to the story . . . By thinking through the various sectors, stories and people you meet you get a much more holistic picture of what is happening in the economy. Some of it is by data, some of it is by anecdotal stories, some it is by lateral thinking. They are all part of the picture.”

Roman’s career has been a case study in impeccable timing.

After an 18-year stint at Goldman Sachs, he joined the swashbuckling hedge fund GLG Partners in 2005, just as markets were reaching a peak, and then helped to prime it for a listing two years later, just before the crash of 2008. Two years later he orchestrated its sale to Man Group, which was later dubbed a “reverse takeover” by GLG.

Roman’s career has also coincided with years of loose monetary policy, ultra-low interest rates and quantitative easing, which have allowed firms such as Pimco to prosper despite the financial crisis and the pandemic.

“The post-Volcker years have been very good for financial markets and for our generation,” he says, referring to Paul Volcker, the Federal Reserve chair from 1979-1987 who was credited with ending high levels of inflation. “I call that generational luck.”

But now the decades-long bull run of the bond market which has served Pimco so well has been declared at an end.

For Roman, it is inflation that keeps him up at night.

“The big existential risk for all fund managers is that something goes very wrong in the US. Because all of a sudden it’s not a small position. It’s a very big position. So housing for example is a near existential risk for everyone because it’s just so big and there are so many ramifications, the banks, the financial system and so on.”

Alec’s wide-ranging interview covers everything from Roman’s childhood in bohemian Paris and the “great sins” of fund managers to the “Manny myth” — that he reads a new book a week. Read the full story here 

Alan Howard’s growing crypto empire

Alan Howard is one of the most influential figures in the hedge fund industry. He is best known for the success of Brevan Howard Asset Management, the $23bn global macro firm he co-founded 20 years ago.

But behind the scenes, he has been slowly relinquishing some of his roles at Brevan Howard to become a major force in crypto venture capital in both Europe and the US. (A person close to Howard insists he remains “heavily involved” in initiatives across Brevan.)

In this analysis, my colleagues Joshua Oliver and Laurence Fletcher reveal how cryptocurrency-based trivia games, horseracing NFTs and so-called privacy coin groups are among a large and growing digital assets empire that the media-shy hedge fund billionaire has been quietly building.

The FT has compiled a list of 43 investments in crypto companies and projects made by Howard over the past five years — ranging from well-known businesses like exchange FTX to smaller NFT and decentralised finance projects — based on information from venture capital databases Crunchbase, PitchBook and Dealroom and public announcements.

Howard, who declined to be interviewed for the article, has maintained a lower profile than other major crypto investors such as Galaxy Digital’s Mike Novogratz. However he has invested alongside Galaxy on projects including the exchange Bullish Global and Derby Stars, which describes itself as “a horseracing metaverse game where players can breed, grow, build and trade”. He has also invested alongside big private equity players such as Tiger Global, SoftBank and Peter Thiel.

In an email interview with crypto news website The Block in May, Howard said that crypto is “an important macro trend.” But because digital assets are still rather a new asset class, he cautioned that “it’s most prudent to invest across the entire crypto ecosystem in a highly diversified manner”.

Does the current market sell-off represent an opportunity to double down on the crypto industry? Email me: harriet.agnew@ft.com

Chart of the week

Expectations for US and European corporate profits have not fully adjusted to take into account the worsening economic outlook, according to a clutch of investors who say earnings season could be a disappointment.

10 unmissable stories this week

A whiff of Woodford: how Jupiter Asset Management’s Chrysalis came unstuck with bets on unlisted companies like Klarna and THG. Shortly after paying a £117mn performance fee, the value of the trust has plummeted.

Investors need to prepare for stagflation, writes Bob Prince, the co-chief investment officer of hedge fund Bridgewater Associates. A different world looms from the one that has buoyed most portfolios in recent decades. Another name for this new era might be the Great Exasperation, writes markets editor Katie Martin.

Emerging markets specialist Ashmore suffered a $14.3bn drop in assets under management in the three months to June because of a combination of investment losses and client outflows. Meanwhile Sri Lanka’s debt default and political implosion have reignited fears that other emerging market countries could be heading into similar trouble.

Celsius Network has filed for bankruptcy. Here’s the inside story of how one of the world’s largest cryptocurrency lenders ground to a halt. Former employees and internal documents suggest a reckless pursuit of high returns put the company in a poor position to ride out this year’s market turbulence.

New retail trading and betting products blur the lines between gambling and investing, writes Brooke Masters in this column. She worries that the increasing “gamblification” of financial markets encourages retail investors to put it all on red rather than save for retirement.

Another sign that the market for special purpose acquisition companies is cooling: Pershing Square Capital Management founder Bill Ackman is returning to investors the $4bn he raised for his record-breaking blank-cheque company after failing to find a target.

Activist investors waged a record number of campaigns against European companies in the first half of the year, according to investment bank Lazard, with British companies proving especially vulnerable to restive shareholders. Here’s Lex on how a UK activist is holding up an unflattering mirror for Nelson Peltz at his listed vehicle Trian Investors 1.

The credibility of the ESG approach is under siege, writes Sarah Gordon, chief executive of the Impact Investing Institute. To bring the necessary rigour to ESG investing in the future, impact investing standards need to become the norm.

Hedge funds including Transtrend and Capital Fund Management have cut back positions in some markets that they fear could suddenly become difficult to transact in, following the London Metal Exchange’s decision to void thousands of nickel trades.

Merger arbitrage hedge funds aiming to profit from the uncertainty over whether corporate takeovers that have been agreed will ultimately be completed say the US stock market now offers more compelling targets than when the eruption of the coronavirus pandemic threatened to torpedo every deal.

And finally

The Cosmic House in Holland Park is one of the key landmarks in the development of Post-Modernist architecture. Charles and Maggie Jencks began work on the house in 1978, with architect Sir Terry Farrell. Their designs played with the formal early Victorian villa architecture of Holland Park and its conventions and motifs and remodelled the interior. If you want to venture further afield, I highly recommend a visit to Crawick Multiverse, an amazing land art installation designed by Jencks, located near Sanquhar in southern Scotland.

The cryptocurrency industry is at a critical juncture and the FT is here to guide you through the deepening crisis. Premium subscribers can sign up to a new weekly email written by digital assets correspondent Scott Chipolina and sent every Friday. Register here