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Business Insider
a day ago
- Business
- Business Insider
Wall Street's rebound is real — but hiring isn't following
Dealmaking is back. Hiring? Not quite. Big banks wowed investors last month when they reported better-than-expected revenues from dealmaking in the second quarter, introducing a wave of cautious optimism across Wall Street. IPOs, including the one from Figma, gave equity capital markets teams reason to celebrate. A new KPMG report on mergers and acquisitions found that second-quarter deal values were up 22% quarter over quarter, amounting to $123 billion in value overall. At private credit giant Apollo, business has been booming: "The team is working as hard as I've ever seen," CEO Marc Rowan said recently, citing a surge in in‑office presence. "It is among the busiest Julys we have ever seen in our business." Yet beneath that bravado lies a more nuanced picture: Sure, dealmaking hasn't bottomed out the way some feared in the spring, but some job cuts are still unfolding behind the scenes, Business Insider has learned. Year-end bonus forecasts appear tepid in sectors like M&A advice and private equity investing. Hiring has yet to ramp up en masse, and executives continue to emphasize the need for "efficiency," pointing to disruptions from artificial intelligence and geopolitical uncertainty. Eric Li, an analyst at the financial services research firm Crisil Coalition Greenwich, expressed surprise at the level of layoffs he's witnessed this summer in his role advising investment banks. "Investment banking numbers actually beat estimates by a long margin, and people are still doing layoffs in July and August," Li said, adding: "It's not really rational if you ask me." "Uncertainty is probably people's biggest concern," he added, saying that jitters sparked by President Trump's tariffs and other geopolitical turmoil haven't abated. "Which means that we'll continue to see corporates holding cash, preparing for the rainy day." From uncertainty to AI At Goldman Sachs, second-quarter investment banking fees jumped 26% with M&A advisory revenue surging more than 70%. Yet the bank saw headcount decline by roughly 2% to 45,900 in the most recent quarter. A New York State WARN notice filed in March says it plans to part ways with an additional 338 NYC-based staffers later this month. The bank said the August job cuts are tied to an annual culling of underperformers it conducted earlier this year — not economic activity. "This is the same annual talent review that was announced months ago. Many of these positions can and will be filled with new people in New York and our other offices," a spokesperson for the bank told Business Insider. Barclays cut several staffers from its Los Angeles-based financial sponsors team in what appears to be a larger reorganization of that team, according to a person familiar with the matter. Some roles are expected to be moved to San Francisco, where the team's new MD is based, this person said. JPMorgan's chief financial officer, Jeremy Barnum, earlier this year said his firm has instructed managers to "resist" hiring and to double down on "their focus on efficiency." One senior dealmaker pointed to the rise of private credit as a factor behind summer cuts at banks. "What traditionally used to be done at some of the larger banks has now moved into some of the larger alternative asset managers and insurance companies," the banker said, speaking on the condition of anonymity to discuss industry practices. "Some of those changes are because of the advent of private credit." Banks are showing some signs of selective onboarding — but those efforts remain measured. Sophia Samadian, an investment banking recruiter at Selby Jennings, said her clients are "still being selective" about who they hire but pouncing on the "strategic" hires more quickly than before — a signal that momentum may be picking up. "Once they identify the right talent," she said, "they're moving faster than we've seen." Indeed, some smaller or boutique firms have been scooping up bankers in anticipation of a busier second half of the year. Jefferies poached several senior tech investment bankers from Guggenheim Partners to bolster its presence in the Bay Area, which Reuters first reported in May. Evercore poached a top JPMorgan industrials banker in July to serve as a senior managing director. Even if M&A surges back to 2021 levels, AI could still dampen hiring, said Chris Connors, a principal at Johnson Associates, who predicted that headcount at banks will "trend lower" over the long term. "I don't think you're going to see gangbusters hiring," Connors concluded. From here on out, "I think it's going to be strategic hiring."
Bloomberg
05-08-2025
- Business
- Bloomberg
Marc Rowan Calls Out Competitors That Won't Trade Private Assets
Apollo Global Management Inc. Chief Executive Officer Marc Rowan said trading private assets has the potential to turn the industry 'on its head' and said those who resist it are generally charging high fees that they don't want revealed. 'In every industry where transparency of pricing and daily price availability has taken place, the industry has grown massively,' Rowan told analysts Tuesday after the firm reported its second-quarter results. 'For those who resist this, it generally means that your fee is above where it's supposed to be and you don't want to shine a light on it.'
CNBC
13-07-2025
- Business
- CNBC
Coming to a 401(k) near you: Private market assets
Apollo Global Management CEO Marc Rowan told attendees at an investor conference last month that the day will soon come when private assets are accessible in Americans' retirement accounts. "I would expect at some point, in this administration's history or in the future, to be able to sell private markets into the 401(k) system," Rowan said on stage at the Morningstar Investment Conference in Chicago, Illinois, where the convergence of private and public markets was a major theme. Those comments come as no surprise from the billionaire CEO, who has long stressed the growing importance of private markets in investing. However, the idea is reaching a tipping point. Private market exposure in 401(k) plans was considered permissible in 2020, when the Department of Labor under the Trump administration issued an information letter indicating it could be appropriate for defined contribution plans under certain conditions. The guidance was later affirmed by the Biden-directed agency. But its presence is starting to expand. Asset managers and plan sponsors have created products for retirement vehicles in which Americans collectively hold roughly $8.7 trillion in assets, according to data on 401(k)s at the end of the first quarter of 2025 from the Investment Company Institute . In June, BlackRock, the world's largest asset manager, said it's launching a 401(k) target date fund in the first half of 2026 that will include a 5% to 20% allocation to private investments. In May, Empower, the country's second-largest retirement plan provider, said it's joining asset managers such as Apollo to start allowing private assets in some accounts later this year. Those developments come amid a broader push under Trump's second term in office to expand the definition of "accredited investors" to allow more people to invest in private markets through their 401(k)s. Within the retirement plan industry itself, the conversation is reaching a fever pitch. Bonnie Treichel, chief solutions officer at Endeavor Retirement, said, "If you're at retirement plan-related conferences right now, this topic is all the rage, so to speak." Similarly, Fred Reish, a partner at law firm Faegre Drinker said: "It's not just out there somewhere on the horizon, I would say that's in the immediate future." How it works The strategies created for 401(k)s thus far will be coming in the form of pooled investments such as collective trusts, or managed accounts overseen by professional investors, instead of standalone investments assessed by individual employees. Adding private assets to target date funds, which automatically adjust allocations based on a retirement date, is one option that's growing in popularity in the industry. The structure of those investments are meant to address some of the regulatory concerns around the assets, which have traditionally been excluded from 401(k)s even as they were embraced by pension funds and university endowments. The treatment stems from the perception that private investments have risks such as a lack of transparency, which raises predatory concerns, as well as higher fees and long lockup periods. The 2020 Labor Department information letter also attempted to address those concerns, outlining that investments into private assets made within 401(k)s must be done with prudence, or held to the standard of a person who is "familiar with such matters," without which a company or an asset manager can open themselves up to legal ramifications. "If fiduciaries make a bad investment, not bad an outcome, but bad both in outcome and bad in that they didn't really vet it properly, they can be sued, and they can be personally liable for damages," said Reish, who specializes in the Employee Retirement Income Security Act of 1974 (ERISA) that governs employee retirement plans. "So, not just the company, but also each individual member of the plan committee. Each of those officers and managers that serves on the plan committee can be personally liable. That's frightening." Intel, for example, had a lawsuit dismissed earlier this year by a federal appeals court in San Francisco after a yearslong dispute over its use of alternative assets in its retirement plans. Additionally, what that could also mean is that larger plan sponsors, which have the internal capabilities to vet private investments, could move faster to integrate privates into a 401(k) plan, rather than smaller companies. The case for privates Still, there are several reasons for the excitement around private assets in 401(k) plans. Proponents point out that the investable universe has shrunk over the last three decades, roughly halving to about 4,000 companies from more than 8,000 back in the 1990s, according to the Center for Research in Security Prices. At the same time, the dominance of the largest public companies grows increasingly pronounced with each passing year. CRSP found that the market cap of the top 10 companies accounted for 35% of the total market in 2024, more than double what it was before 2020. Meanwhile, more companies are staying private for longer. The decision helps executives build their businesses away from the glare of regulatory scrutiny or responsibilities to shareholders, but also makes it harder for investors to get in on the ground floor of the next Microsoft or Apple. Thus, the argument goes, private assets will give investors exposure to a market that looks markedly different from what it had in the past — even if it requires locking up capital for longer periods of time at greater cost and greater risk. Still, there are many who worry the risks far outweigh any benefits, calling private investments far too opaque for plan sponsors to do appropriate due diligence. "Being private does not make it better. It makes it less liquid," Apollo's Rowan told investors at the Chicago conference. "Our job is to deliver excess return."
Yahoo
04-07-2025
- Business
- Yahoo
Advisors Start Cramming to Meet Growing Private Market Demand
Time to hit the books. Private markets have the potential for great returns, and they have historically outperformed public ones. Many advisors steer clear of them, however, partially because of limited knowledge about how they actually work. It's an information gap many will have to address sooner rather than later. Apollo Global Management CEO Marc Rowan believes that allocations to private equity and private credit will make up a third of client portfolios in the near future. 'The vast majority of financial advisors may not go to private markets directly, [but] they will buy products that give them access to public and private markets,' he said during a Q&A at the Morningstar Investment Conference last week. If advisors are to stay competitive in Rowan's vision of the future, many are going to need a private markets crash course. READ ALSO: Trump's 'Big, Beautiful Bill' Is a 'Mixed Bag' for Advisors and Advisor Teams Are Getting Bigger. Here's Why Right now, advisors allocate an average of just 5% of clients' portfolios to alternatives, compared with 25% by institutions, according to Fidelity. Part of the gap is due to limited access, since private markets are typically restricted to accredited investors. But unfamiliarity also plays a big role. Private markets are complicated territory. 'You can't just enter a ticker on a platform and execute transactions,' said Laura Lutton, head of manager research at Morningstar, adding that private market investments often require separate investment platforms and client agreements. 'It creates a structural friction that keeps advisors reluctant to get involved,' she told Advisor Upside. Private markets also come with lower liquidity, less transparency, and complex fee structures — challenges that can be difficult to explain to clients. 'It sounds simple, but it's really not,' Lutton said. Morningstar is working to make those conversations easier by expanding its Medalist Rating framework later this year to include semiliquid funds, offering more transparency and helping identify strategies likely to outperform certain benchmarks. While, private markets may seem daunting, but advisors don't have to go it alone: One way advisors can become more familiar with private equity and private credit is through sponsors themselves. Major firms like BlackRock, KKR, iCapital and more offer CE credits through alternative investing courses. The CFA Institute also offers multiple courses and certifications on private markets. Do Your Homework. Some advisors are taking the independent study approach, like Alex Caswell of Wealth Script Advisors, who's been reading books and scholarly articles published in the CFA Institute's Financial Analysts Journal to understand whether the investments would be right for his clients. So far, he's not sold on them, especially private credit. 'PC has swallowed up a lot of the fast-and-loose loan and debt origination that was done by banks pre-2008,' he told Advisor Upside. 'Now, these PC funds are being shoved into portfolios left and right, and it comes with a lot of unevaluated risks that people aren't realizing.' This post first appeared on The Daily Upside. To receive financial advisor news, market insights, and practice management essentials, subscribe to our free Advisor Upside newsletter.
Mint
04-07-2025
- Business
- Mint
The risky world of private assets opens up to retail investors
This was supposed to be the year when initial public offerings (IPOs) came roaring back. Late in 2024 stockmarkets were hitting all-time highs and a cluster of privately owned superstars, with valuations in the tens or hundreds of billions of dollars, were preparing to go public. But now the market is frozen. As the world's trading system disintegrates before bosses' eyes, deals of all sorts, whether IPOs or mergers, have ground to a halt. The pause is robbing private-market investors—typically deep-pocketed institutions, or uber-rich individuals—of a big payout. It is also robbing smaller investors of a chance to invest in some of the world's most successful companies, such as Stripe, a payments firm, and Elon Musk's SpaceX. That is making an existing problem worse. Measured against the value of all stocks, the monthly value of equity issued on stockmarkets globally has crumbled in recent years (see chart). That has made private markets the most exciting corner of the investing universe, with trillions of dollars flowing into private equity (PE), venture capital and private debt. Private assets under management, which also include infrastructure and property funds, have surged to $24trn, from $10trn a decade ago. Now private-markets firms are dreaming of getting even bigger—by luring in the investing masses. Marc Rowan, who runs Apollo, a private-credit giant, says the savings of ordinary Americans are his company's biggest opportunity. Larry Fink, the boss of BlackRock, the world's largest asset manager, focused his latest missive to shareholders on the subject. New products aimed at a broader cohort of investors are multiplying. This 'democratisation" could benefit millions of investors. But, because private assets are less liquid, more opaque and much less regulated than their listed peers, it also creates new risks. There are good reasons why private assets have long been the preserve of a select few. At its inception, the typical private-equity fund secures commitments from a small club of pension schemes, endowments and other institutions to provide a sum of capital, usually in the tens of millions of dollars. The money is then called on in instalments whenever the fund's manager finds a company to buy. At the end of the fund's life, which can extend to a decade or more, the manager sells or floats the company before returning money to investors. Such conditions are a poor fit for the mass market. Smaller investors are less likely to tolerate the unpredictability of cashflows coming out and back. They are also ill-equipped to handle the mountains of paperwork managers would send their way. Those wanting their money back before the end of the fund's life—in the event of a stockmarket correction, for instance—cannot easily sell their stakes. Enforcing capital calls on legions of individuals would also be impractical. But pioneering products have arrived. In 2017 Blackstone's Real Estate Income Trust (BREIT) was launched to invest in property, which is typically unlisted. The fund has a minimum buy-in of $2,500, a 'perpetual" lifespan and monthly windows during which investors can sell out. BREIT limits the total amount of shares it will repurchase from investors to 5% of its net asset value (NAV) in any quarter. It has boomed in size, to a NAV of $54bn. The Blackstone Private Credit Fund (BCRED), launched in 2021, has done the same for private debt. It is the largest of a growing array of vehicles, dubbed business development companies (BDCs), offering retail investors exposure to private investments. On April 29th Capital Group, an investment firm, and KKR, a private-markets giant, jointly launched two funds blending public and private assets. The vehicles will have a minimum investment of $1,000 and annual fees below 0.9%, much lower than most private funds. Such products 'only scratch the surface of what we can offer", say the sponsors. Assets held by BDCs have more than tripled over the past five years, to $438bn at the end of December. Barbarians at the garden gate Whether such products fly or flop depends on their ability to solve three problems. First is the murky nature of the assets themselves. Public data on private markets are scarce. Whatever are available are hard to interpret. Firms are often accused of massaging the valuations of their holdings to flatter returns. The measures they use are hard to compare with public-market benchmarks. Sporadic reporting allows them to smooth out bad periods. There has been some progress. Last year MSCI, an index provider, unveiled private-market benchmarks that crunch the cashflow data for 14,000 funds since their inception. The new benchmarks also track funds' performance using figures gathered from investors. These should allow funds to be more rigorously compared with other offerings. Another barrier to democratisation is law and regulation. Private-markets firms eye America's vast retirement system. Huge defined-benefit pension schemes, such as the California Public Employees' Retirement System (CalPERS), have invested heavily in private markets for decades. But individually managed retirement accounts, and defined-contribution 401(k) schemes run by employers, which together hold $26trn in assets, have almost no exposure to private markets. A law from 1974, which spells out pension-plan providers' fiduciary duties, makes it possible they could be sued if they invest in private assets because of their lower liquidity and the high fees charged by fund managers. Here too, change may come soon. Daniel Aronowitz, Mr Trump's nominee to run the Employee Benefits Security Administration at the Department of Labour, has complained about frivolous lawsuits against corporate-pension providers. In 2023 Mr Aronowitz called some criticisms of pe in pension portfolios 'naive and uninformed," noting that exposure could offer both diversification and returns. With narrow Republican majorities in both houses of Congress, private-fund managers are hopeful that they will finally get their foot in the door. The most fundamental difficulty is that private assets are largely illiquid. Whereas stocks and bonds are traded all day long, stakes in private funds change hands only very rarely. Would-be buyers are scarce; working out a price is hard. Transactions, when they do happen, are not public so history can hardly serve as a guide. All this means retail investors cannot simply pile in and out of private assets at will, as they might with other parts of their portfolios. This is a problem new products are finding hard to solve. In November 2022, amid market ructions, many investors in BREIT tried to withdraw their money. The trust could return only 43% of the capital it was asked for; more than a year later it was still limiting withdrawals. Private-equity products could face even bigger liquidity problems, notes Jerry Pascucci of UBS, a bank. Whereas credit and property generate steady streams of cash, equity funds must keep a hefty cash balance or draw on loans, both of which reduce returns, if they are to permit regular withdrawals. To offer punters more liquidity, a few firms have started to offer exchange-traded funds (ETFs) containing private assets. The first was launched jointly in February by Apollo and State Street Global Advisers, a giant ETF provider, with the ticker PRIV. To ensure the minute-by-minute liquidity an ETF requires, however, the fund's private holdings will normally be limited to 35% of its total assets. Its largest holdings currently are mortgage-backed securities and Treasury bonds, which are very liquid. The idea of a liquid vehicle for private assets comes with its own problems. When investors want to transact shares in an ETF, the fund manager must buy or sell shares in the underlying assets to match the changing exposure. Were investors to want to sell their stakes in large volumes, the ETF managers may struggle to find buyers for the illiquid equity and debt inside them. That could cause the funds to seize up. The Securities and Exchange Commission has expressed concerns that priv may not be sufficiently liquid and could struggle to comply with valuation rules. Its warnings appear to have deterred rival firms from launching copycat products. For a long time the democratisation of private markets, though much talked about, remained elusive. Now at last the winds of financial innovation and regulatory change are blowing in the right direction. But as they entice more retail savers, private-fund managers will come under greater scrutiny. Working around the illiquidity of the asset class is hard, and it may even be dangerous to try. In the event that new products disappoint or trap people's savings, a backlash could ensue. The potential prize is huge. But catering for the investing masses is a risky business, too. For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter.
