Goldman’s $900mn hit

One factor to begin: Ken Griffin, the billionaire founding father of hedge fund Citadel, has signalled that he can be “open to the potential of 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 right now’s e-newsletter:

• Goldman Sachs takes $900mn hit on Northvolt funding

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

• German bond traders 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 traders together with German carmaker Volkswagen, it led a $1bn Collection B funding spherical that enabled Northvolt to construct its first manufacturing facility in northern Sweden, and gas future growth.  

The funding spherical was hailed by Northvolt chief government Peter Carlsson as “an awesome 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 huge battery hope filed for Chapter 11 chapter within the US on Thursday, leaving traders 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 least $896mn in publicity to Northvolt, which they’ll write right down to zero on the finish of the yr, in accordance with letters to traders.

Goldman’s personal fairness enterprise was established in 1986 and sits inside Goldman Sachs Asset Administration, which has greater than $3tn in property below supervision, together with greater than $500bn in various investments resembling personal fairness. The asset and wealth administration division is on the coronary heart of chief government David Solomon’s growth 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 Surroundings and Local weather Options 1, a progress 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 referred to 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, traders mentioned. 

Some traders 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 traders’ need to assist 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 traders, bankers and executives have been gathered for Goldman Sachs’ annual convention for “progressive personal firms”.

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 end result that can return Donald Trump to the White Home has poured gas on the hearth. 

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

All of that is even if 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 hundreds of thousands of unlawful immigrants. Many economists have warned this is able to 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 increase some key questions for merchants and policymakers alike: are fairness traders 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 should stroll again their dire prognoses?

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

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

Chart of the week

Traders 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 period 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 traders’ perception that “a snap election means debt brake reform”, in accordance with 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 optimistic in Germany — in contrast to in different main bond markets the place they’ve usually traded beneath zero — that means traders have been prepared to just 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 your complete euro space and have usually been in brief provide because of the 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 likewise bars Germany’s 16 particular person states from taking over 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 yr.

5 unmissable tales this week

Goldman Sachs’ chief government David Solomon has warned that international traders 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 government Larry Fink, because the UK prime minister seeks to rebuild relations with enterprise leaders after final month’s tax-raising Price range. 

Tikehau, one among Europe’s fastest-growing funding managers, is contemplating moving its listing to New York from Paris, making it the newest in a collection of European and UK firms wanting past the exchanges of their house 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 traders, beginning with an exchange-traded fund that can monitor one among its best-known strategies.

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

And at last

A stirring show of savage, visceral portraits on the Nationwide Portrait Gallery confirms Francis Bacon as Britain’s biggest 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