Princeton's Golden Expands Diversity Efforts: Bloomberg Invest
Princeton led the eight-school Ivy League in returns for the year ended June 2018, the most recent data available.
(Bloomberg) -- Princeton University’s endowment chief is stepping up his efforts to bring more women and minorities into a money management industry dominated by men.
Andrew Golden, who has run Princeton’s now $25.9 billion endowment for a quarter century, plans to begin a one-year pilot program next month to mentor women and minorities interested in asset management. He is starting the program to help fix structural challenges that keep them out of Princeton’s pipeline for new managers.
“We will have a better chance of having a more diverse roster if the industry is more diverse,’’ Golden, 60, said at the Bloomberg Invest New York conference on Wednesday.
Princeton, which uses more than 70 outside outside managers, has been expanding its diversity efforts. The school added three external managers in this academic year, including a venture capital firm managed by a woman and a venture fund run by two African-American men. Firms owned by women and minorities manage just 1.3% of assets in the $69 trillion investment industry, according to a Knight Foundation study published in January.
Golden will provide mentoring to at least 50 people over the next school year. Candidates for the program may range from those as young as high school students to investment professionals thinking of starting new funds.
Princeton has joined other institutions in flocking to private equity. The Ivy League school raised its target allocation to the asset class to 30% from 27%, but its actual allocation is 39%, Golden said.
Princeton led the eight-school Ivy League in returns for the year ended June 2018, the most recent data available, with a 14.2% gain.
Chinese Firms Aim for U.S. IPO Despite Dispute (1:47 p.m.)
Chinese companies are still keen to tap U.S. capital markets for funds even amid an escalating trade war between the world’s two largest economies.
Chinese tech companies in particular continue to want to come to the U.S. for initial public offerings, Samardh Kumar, global head of Citigroup Inc.’s software investment banking practice, said Wednesday at the Bloomberg Invest conference New York.
“They’re still looking at the U.S. exchanges as the place to get out there and have their story heard by probably the most sophisticated investor base,” Kumar said.
Read why General Atlantic’s CEO doubts a Chinese firm will IPO in the U.S.
Kristin DeClark, Barclays Plc’s co-head of U.S. equity capital markets, said she expects Chinese tech listings to continue to be a big focus for the next couple of years, regardless of where companies choose to sell shares.
“Investors can invest across different exchanges, so it doesn’t limit the investor base,” she said. “It doesn’t limit U.S. institutions from investing in a company listed in Hong Kong.”
Alibaba Group Holding Ltd. is considering raising $20 billion via a second listing in Hong Kong, five years after making its U.S. public market debut, Bloomberg News reported last week.
The e-commerce giant’s decision is a result of the Chinese government’s efforts to make a local listing easier and more appealing to domestic companies, Citi’s Kumar said.
Activists Trade Frontal Assault for Dialogue (1:01 p.m.)
Shareholder activists are increasingly avoiding noisy public brawls in favor of attempts at constructive dialog in their initial engagement with companies.
“I believe that activists over the years have come to the realization that you catch more flies with honey,” David Rosewater, Morgan Stanley’s global head of shareholder activism, said at the Bloomberg Invest New York conference Wednesday.
If talking with executives doesn’t work, activists remain willing to ultimately pursue a more aggressive campaign, he said.
“A proxy contest is really just one tool in the toolkit,” said Ellen Holloman, a partner at Cadwalader Wickersham & Taft.
Bob Marese, managing director at MacKenzie Partners, said the growth of passive investing has heightened the role of activists, who have more frequently deployed a “stick to the facts” approach.
“The amount of passive ownership drives active managers to be more responsible to insure there is appropriate governance,” Marese said.
Dealmakers downplay market risk of leveraged loans (12:23 p.m.)
The leveraged loan market is more resilient than it was before the financial crisis and banks are less exposed to riskier corporate loans, according to financiers from KKR & Co., EQT Partners and Goldman Sachs Group Inc., downplaying warnings by the head of one of the largest banks in the U.S.
“The market is in a much different place than it was pre-crisis,” Adam Smith, head of capital markets at KKR, said at the Bloomberg Invest conference Wednesday. “There’s still a level of responsibility and prudence in what people are doing. We’re in a pretty good place compared to a decade ago.”
Collateralized loan obligations that package and sell the debt as interest paying bonds are resilient structures, though deals that invest in smaller, less liquid loans could run into trouble, Smith said.
Bank of America Corp.’s Chief Executive Officer Brian Moynihan said on Tuesday that leveraged loans -- a business the bank has dominated for a decade -- could be a potential trouble spot amid weakening protections that safeguard investors from losses. He joins a growing pool of financial watchdogs and money managers that have expressed concern that the market’s rapid growth has led to deteriorating standards, which could amplify a downturn.
Susie Scher, co-head of the global financing group at Goldman Sachs Group Inc., acknowledged that there will be defaults, but said the damage will probably be limited to markets where investors accept higher risks and would not spill over into the broader financial system. The amount of loans on banks’ books is now just 10% to 20% of what it was pre-crisis, she said on the panel Wednesday.
“There will be loans that default when the economy slows massively and companies make less money,” she said. “But that will be a small proportion of the market.”
Dealmaking Faces Trade War, Slowdown Threats (10:52 a.m.)
The Trump administration’s escalating trade dispute with China and Mexico and the slowdown in the global economy are a growing threat to mergers and acquisitions.
“We are at risk of a downturn in the M&A market because we’re at risk of a downturn in the overall global economy,” Stefan Selig, founder of BridgePark Advisors, said at the Bloomberg Invest New York conference Wednesday. “There’s certainly going to be more volatility.”
Global M&A has fallen 16% this year through Wednesday to about $1.2 trillion in announced deals, according to data compiled by Bloomberg. Concerns about global trade, geopolitical turmoil and volatile equity markets are making companies nervous about doing deals, despite ample access to cheap financing and large amounts of cash on their balance sheets.
The increasing prospects of regulators blocking an acquisition has also cast a cloud over dealmaking, particularly cross-border actions, which are at a record low, said Mark Shafir, Citigroup Inc.’s global co-head of M&A. And smaller deals worth $1 billion to $5 billion have been scarce.
That’s changed the way advisers work with companies looking for a tie-up with another firm.
Anu Aiyengar, head of North American M&A at JPMorgan Chase & Co., said more preparatory work needs to be done before saying “do I pursue this or not.” The regulatory environment in relation to anti-trust issues also has forced boards to think about valuations in a more nuanced way. Lastly, she said, a company has to consider mitigating the risks in order to hold itself together when the outcome of a deal is uncertain.
“More simplistic solutions may no longer be enough,” Aiyengar said.
Companies have continued to do deals, thanks in part to resorting to stock-based transactions, she said. Dealmaking has also held up better than it did after previous peaks in 2008 and in the early 2000s, Shafir said.
“Even though we’re down about 20% it’s still the fourth-fastest start ever," he said, referring to deals in 2019. “There are a lot of headwinds, obviously. But it’s too early to call this a cyclical end."
One thing is certain: dealmaking is not as straight-forward as it used to be.
“Everything is incredibly complicated,” said Joele Frank, managing partner at Joele Frank, Wilkinson Brimmer Katcher, a corporate communications firm that works with companies on mergers. “Even the smaller deals have hair all over them.”
Taubman Says Giant M&A Faces Growing Obstacles (9:30 a.m.)
Wall Street veteran Paul J. Taubman says when it comes to the biggest mergers, just trying may no longer be enough for shareholders.
Companies that have attempted bold deals and failed to complete them have still received the support of their investors in recent years, making other corporate boards more ambitious, Taubman said Wednesday at the Bloomberg Invest New York conference. That tide may turn as big deals face more obstacles from regulators and governments.
“Probability of success is declining because you have so many potential interveners, you have Department of Justice, you have FCC,” Taubman, founder and chief executive officer of investment bank PJT Partners Inc., said, referring to two U.S. government agencies that have been scrutinizing big mergers. “Investors have stood behind management teams for trying, even if they don’t succeed. It’s not clear to me that those conditions will remain forever.”
PJT is working on T-Mobile US Inc.’s deal to combine with Sprint Corp. The wireless carriers have spent more than a year trying to appease the Justice Department, which has been concerned that the combination would hinder competition.
Taubman, 58, founded his firm in 2013 after a three-decade career at Morgan Stanley. PJT Partners went public in 2015 as it merged with the advisory business of Blackstone Group LP. PJT has gained more than 30% since it began trading, generating riches for its founder.
PJT and rivals including Lazard Ltd. and Evercore Inc. are pushing to expand beyond mergers and acquisitions advice to brace for a slowdown in corporate dealmaking. PJT acquired CamberView Partners last year, extending its reach in activism defense. Taubman said last year that he is in recruiting mode 365 days a year, and has announced the hiring of a roster of bankers in recent months.
--With assistance from Sonali Basak, Matthew Monks, Sally Bakewell, Davide Scigliuzzo, Michael Hytha and Elizabeth Fournier.
To contact the reporter on this story: Janet Lorin in New York at jlorin@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Vincent Bielski, Melissa Karsh
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