Money managers have their work cut out in the era of low fees. Their bankers are at full stretch too. Amundi’s advisers had to muster all their eloquence to justify the €825m purchase price for Lyxor announced on Wednesday.
Fund management is a scale game. Paris-based Amundi, which manages €1.7tn, needs to hang on to the title of Europe’s largest asset manager. Vendor Société Générale has done nicely as a result.
Lyxor, with €124bn in client money, ticks the boxes that a big diversified asset manager looks for. Top of that list are its exchange traded assets. These propel Amundi to number two in the segment in Europe, ahead of DWS and behind BlackRock.
Fast growing passive assets will slot neatly into Amundi’s already efficient operations. Lyxor’s funds can be sold to customers across the network of bank branches and joint ventures of Amundi’s owner Crédit Agricole. The deal brings scale to an area where Amundi needs it most.
Payback depends on punchy assumptions. Lyxor’s 75 per cent cost-to-income ratio must be brought closer to Amundi’s 50 per cent. Integration needs to yield annual cost savings of €60m after three years. That equates to 35 per cent of Lyxor’s cost base, in line with the average for recent deals in the sector including Amundi’s acquisition of Sabadell Asset Management last year.
If margins rise as hoped, the purchase price of 21 times Lyxor’s expected net income this year falls to a more reasonable 10 times. That would be roughly where Amundi shares are trading in relation to 2023 expected earnings.
Expected revenue synergies of €30m a year flatter the deal. Lex is always sceptical of these. The injection of ETFs and their ilk will supposedly energise Amundi’s sales networks. Equally, those groovy new index trackers might just encourage switching and cannibalisation of new sales.
Huge state support for markets temporarily eased pressure on asset managers. As this attenuates, expect margin pressure and consolidation to intensify. To survive, participants will have to be either very specialised or very big. Amundi has a head start.
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Get shorty: how Clinuvel Pharmaceuticals beat the hedgies
The acrimonious battle between hedge fund short-sellers and Australian biopharma group Clinuvel Pharmaceuticals appears finally to be drawing to a close.
After a two-year struggle, during which short-sellers have focused on the company’s regulatory hurdles for its drugs and its steep valuation, the hedgies are in retreat.
Frequently the subject of debate on message boards and, improbably, a favourite stock of cigar-smoking German hedge fund manager Florian Homm, $1.1bn Clinuvel provides a treatment for erythropoietic protoporphyria.
EPP is a rare and serious inherited disease that leads to raised levels of a phototoxic molecule. When a patient’s skin is exposed to light the molecule reacts, leading to irritation or a visible burning within minutes. At worst, the pain is so extreme it can cause patients to scream.
Clinuvel, which has been profitable since 2017 after years of losses due to research spending, produces a drug called Scenesse to treat the condition. It has received approvals in the US, EU, and, most recently, in Israel. The company is now looking to expand its use to treat patients with other genetic or skin disorders, for instance vitiligo, a condition whereby a lack of melanin causes pale white skin patches to develop.
The battle with hedge funds started in spring 2019 when the stock, trading in the AS$20s, attracted the attention of short sellers ahead of a key ruling by the US Food and Drug Administration.
In April, short interest was less than 0.5 per cent, but steadily climbed to around 5.8 per cent by the time of the US FDA approval in October, which briefly sent the shares rocketing above A$45.
Undeterred, the short interest continued to grow, reaching nearly 10 per cent by April 2020. Stock out on loan, another way of measuring short selling, peaked at 12 per cent at the end of March, according to IHS Markit, shortly after Clinuvel shares hit an 18-month low during the pandemic-induced market turmoil.
At one point, the stock became the most shorted among 324 biotech and pharmaceutical stocks in Asia last summer, according to Bloomberg.
Most companies are not fans of short-sellers or their tactics, though many choose to ignore them. Clinuvel took a different approach. It began to note the level of short interest at the end of 2019 and into 2020, before ramping up the rhetoric last year.
“Some market participants see the opportunity fit to distort and short stocks within the gaze of regulatory oversight,” said CEO Philippe Wolgen in a July 2020 shareholder letter pulled from financial data site Sentieo, highlighting “those who disseminate negative and disparaging news on us”. A common tactic of short-sellers was, he said, to “infiltrate” retail shareholder websites and to spread “incorrect and often false rumours”.
Wolgen pointed Australian, German and US authorities towards “these . . . stock bashers and all who distort the Clinuvel narrative openly” and called for regulators to trace individuals involved in this.
Then, in its annual report in October, it devoted a section to attacking short-sellers, noting “an increase in false and misleading comment” in online forums. It also discussed how court orders could be used to force the identification of people posting defamatory comments anonymously.
For good measure, at the AGM in November, chair Willem Blijdorp took aim at “a small group of online investors” trying to influence new shareholders with “years of nonsense information”. “It’s value destruction in the most stupid form I have come across,” he added.
Precisely what exactly had irked Clinuvel management is hard to know for sure, but posts have taken aim at a range of subjects including Wolgen, the price of Scenesse, the company’s focus, the chairman’s independence and so on.
To be fair though, Clinuvel’s previous encounters with hedge funds may explain some of management’s wariness towards the shorties.
The group was a favoured stock of Florian Homm, the rogue financier who ran Absolute Capital and who this year has faced charges from Swiss prosecutors. Homm, described by Wolgen as being “very difficult to deal with”, was an early backer of Clinuvel and had become its biggest shareholder through his hedge fund by the time of the financial crisis.
Homm shocked the financial world by resigning from his hedge fund Absolute Capital in September 2007. With $500,000 stuffed into his underwear, briefcase and cigar box, he boarded his private jet and flew to Colombia, later going into hiding before being arrested at Florence’s Uffizi gallery.
Wolgen recalls Clinuvel’s shares falling in the wake of Homm’s exit and then finding out “a large percentage of our stock was shorted. We could never find out who was short”, he told the FT.
Wolgen added: “I was left with the aftermath, dealing with thousands of shareholders.” Years later, Homm told Wolgen by phone that backing Clinuvel had been one of his great achievements in life. In more recent years Homm has still been posting research on the stock via his website and YouTube channel.
As if that was not enough, in 2014 Clinuvel became a takeover target for Retrophin, the drugmaker set up and headed by Martin Shkreli, the infamous hedge fund manager later jailed for fraud.
This time around, Clinuvel is taking no chances. Wolgen, a former stock analyst who joined the company after writing a negative report and then being invited in by management to discuss it, said the company had hired investigators and lawyers to look into “posts that were blatantly false” on the message boards.
Other actions include “the continuous construct of a legal dossier on false unsubstantiated news, reputational damage, smear and slander campaigns while forensic investigation takes place on the culprits: behind any anonymous poster lies a verum email account”, said Wolgen.
While the GameStop saga may have helped, the decision to fight back aggressively against the short sellers also appears to have been effective: short interest has dropped from nearly 10 per cent a year ago to less than 5 per cent of late. Chairmen Blijdorp recently felt he could declare that “short sellers are exiting their position . . . and the share price is increasing”.
The Reddit-driven frenzy in GameStop demonstrated the power of the message boards. Clinuvel’s story shows that power, perhaps, is not unlimited.
Homm did not respond to a request for comment.
‘Tidying feels like a delicious massage for the mind’
I’m in the middle of a big spring clean and I need help with storage solutions (baskets and boxes), plus nice household tools — brushes and the like. What can you suggest?
Contrary to what some people may believe when they look at images of my home, or when they pay me a visit, I am an organised, tidy person. I have
a lot of stuff, yes, but there is a place for everything. Trinkets are arranged fastidiously, and everyday items are housed in an assortment of jars, boxes and baskets.
I have the odd cupboard or two that is (much) less organised, but who doesn’t? (Open one of these at your peril: you’ll be hit by a volley of miscellaneous objects: an iron, maybe, a discarded lampshade, a box of jam jars for all that marmalade I definitely did not make.)
I have several drawers that I stuff with receipts, masks, loose change and boring-looking letters I don’t want to open, but we’ll gloss over this . . . It is spring, and we all feel like getting things gorgeously in order in spring, don’t we?
In fact, I find it rather thrilling, shopping for storage solutions. It must be the prospect of things being filed away that makes my head feel lighter, even before I get involved with the act of physical sorting (aka the boring part). Here are my top picks.
Arket is a good source for practical odds and ends for the home: I like its lightweight rattan magazine holder very much. I’m big on magazine holders and I think all sitting rooms benefit from one.
I love nothing more than a lazy Saturday morning, pot of coffee on the go, dog asleep on legs and ensconced in a fortress built from newspaper supplements (it does, after all, go with the job), but I get antsy come Tuesday when I find them all over the house, us having taken them to read in the bath, in bed, over breakfast. Best to keep them in one tidy place.
Pentreath & Hall in Bloomsbury, London, is where I go for all paper-related storage solutions. It does an exceptional line in box and magazine files, covered in papers featuring geometric patterns and marvellous faux wood and stone finishes designed by Bridie Hall. If incorporating one of these into the VAT return won’t spice things up, I’m not sure what will.
Choosing Keeping makes some lovely things too: I’ve been eyeing up its red faux-lacquer storage boxes for storing old notes and postcards. A Fornasetti waste-paper basket is also on my wish list — one to save up for. (Excruciatingly expensive but so beautiful; truly the Rolls-Royce of little bins.)
Now, I love a basket. Leave me alone with an assortment of objects and before long I’ll have conjured a charming little woven number and squirrelled those objects right away.
Most days Duncan will ask me where his secateurs are and my answer is always the same: “But have you checked the gardening tools basket?”, those three words drawn out and said through ever so slightly gritted teeth.
I like the bright green Ivumbu and natural Rahisi baskets made by The Basket Room.
London’s Labour and Wait makes an assortment of useful objects for the home, from bright red cylindrical leather tool bags (apparently also useful for transporting a Thermos flask) to galvanised buckets and towel driers.
Labour and Wait is a firm favourite of mine because its stock is always highly stylish — it sells an American-made aluminium dustpan, for example, that features such chic lines I’d consider having it on display among my tulips and Grand Tour fragments.
As for other useful bits and bobs to help with spring cleaning: take a look at The Oxford Brush Company’s website for the most astounding range
of — you guessed it — brushes. Brushes for things you never imagined you might need a brush for. This company has a great little shop not far from me in the Cotswolds town of Burford and I can never resist popping in for a browse. It’s only after I’ve spent about 10 minutes ogling a beekeeper’s broom I realise that I own no bees. Beautiful object, mind.
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Keeping things in order keeps our minds in check. We all have our special ways and these help us to feel calm and safe. In our mugs cupboard, for example, everyday mugs are kept on one shelf, preferred mugs on another. My bathroom cupboard is divided into “districts”: hair stuff in one bit, skincare in another and so on. I really can’t handle it when these districts get muddled.
What is it they say? Tidy house, tidy mind. There is certainly something in this expression. I find I’m able to concentrate in a much more focused way when my objects are in their rightful place. I expect I will find tidying one of my packed drawers to feel like a kind of delicious massage for the mind.
So, get the proper gear (brushes, boxes, whatever you need), get those districts in order and reap the soothing benefits.
Gyms: adapting to physical demands
Off-road: Why aren’t young people driving?
There is a reason why there are so few great songs about catching the night bus. Similarly, The Beach Boys classic just doesn’t sound the same with the lyrics: “And she’ll have fun, fun, fun till her daddy takes her Uber away.”
I’m not saying there are no good songs about public transport. The Jam’s “Down in the Tube Station at Midnight” is a fine track but the fact that it is about a man getting beaten senseless may explain why it has not featured heavily in Transport for London’s advertising campaigns. There is also, to be fair, Bad Manners’ very danceable “Night Bus to Dalston”, but the absence of lyrics beyond the song’s title may suggest the group were struggling to capture the journey’s innate poetry.
By contrast, rock music is full of songs about cars, and they almost all symbolise some form of freedom, even if it is the freedom to tell Laura you love her. Bruce Springsteen would still be a great artist even without the internal combustion engine, but his canon would be much depleted.
More than moving out, more even than losing your virginity, getting a car was for generations the beginning of life, a definitive step to independence and adulthood. In many cases, getting a car was, in fact, a precondition for losing your virginity, since the girls you wanted to date did not in general look kindly on rounding off the evening waiting for the last train to Colindale.
Perhaps it was a function of where I lived that a car seemed especially necessary but, hell, it was also fun. I still remember the day my best friend arrived with a surprisingly nippy old car and we sped along the North Circular far too fast with the windows down and The Velvet Underground’s “I Can’t Stand It” blaring out the speakers. Never before or since has a Vauxhall Viva seemed so cool.
Naturally, therefore, when the spawn turned 17, we braced for the demands for driving lessons and an advance towards some old banger that cost more than our mortgage to insure. And yet it didn’t happen. It is true that the provisional licences were secured but only so they could get served in pubs.
Both are clear they intend to drive at some point but, living either in London or in university accommodation, they simply do not feel a pressing need for a motor. When lockdown hit, it seemed like the extra unfilled hours offered the perfect moment to take them out for a few basic lessons. This was even truer as my beat-up and soon-to-be-replaced VW was there as a prize for whoever passed their test first. But the long days went by and there was always something better to do, even if that something was actually nothing.
Were this just a tale of the eccentricities of my own offspring I would pay it little heed, but it is clear they are not unusual. The young are not rushing to drive in anything like the numbers they once did.
A UK report noted that in the 1990s, 80 per cent of people were driving by age 30 but by 2018 that level was not reached until the age of 45. The number of driving licences held by those aged between 21 and 29 had fallen by 12 per cent. Among the spawn’s friends, there are some early drivers but a significant minority who are in no rush to learn.
Clearly, this is not a universal phenomenon. Those closer to city centres find it far easier to manage without a car than those in areas with poor public transport. In some cases, this may be down to environmentalism. In others, it is the cost or the increased nuisance of taking your car anywhere. Ubers, e-bikes and electric scooters all seem more appealing — even more freeing.
In the end, the exigencies of life will still get all but the most determined autophobes. But this remains one of the most striking of the emerging generational divides. It is too much to say the young have turned against the car. But hard though it is to believe, there is a generation coming which thinks there’s more to life than a blaring stereo and a Vauxhall Viva.
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April frosts are a bitter blow to Europe’s vineyards
Emilie Faucheron repeatedly brushed away the tears but occasionally broke into sobs as she made a hoarse six-minute video last week reporting on the devastating effect of the spring frosts on Domaine de la Grande Canague, her 60ha wine estate west of Béziers in the Languedoc. She and her husband Benjamin, fourth-generation vignerons, were upset to have lost five hectares of production in the notorious French frosts of 2017, but this year she fears that 50ha of their vines may not make any wine to speak of.
In the video, one of a series she posts on YouTube, she treads the vines trying to process the damage — under a clear blue sky. Which, of course, is the problem: a lack of cloud cover at night invites Jack Frost to do his worst. Faucheron clearly finds it hard to believe that on the night of April 7/8, in the far south of France, temperatures fell as low as minus 6C.
Her vineyards outside the village of Montady are on a pancake-flat plain and therefore perfect targets for frost, which fatally freezes young buds. Whereas in hillside vineyards gravity can pull the dense, cold air downhill, here the coldest air settles straight down on to the vines, though this year higher sites have also been frosted.
The French wine-trade news site Vitisphere reported sub-zero temperatures in much of France for three nights in a row from April 6, with temperatures as low as minus 9C in some regions. And in northern and central Italy, vine growers have been pacing their vineyards just like Faucheron. Their green buds and leaves, which had been pushing forth as heralds of the 2021 wine harvest, are now brownish-grey, shrivelled and lifeless.
These unseasonably Arctic nights in Europe were particularly poorly timed because they followed a period of warm weather when the vines started budding two weeks earlier than the traditional norm. (I hesitate to say “usual” when the climate is increasingly unpredictable.) In some devastated regions, such as Burgundy and Champagne, the extremely cold nights are forecast to continue.
This problem of shorter and shorter winters and earlier and earlier budbreak is leaving young vines vulnerable to frost damage. Many growers are now postponing the winter pruning of the vines as long as possible into spring in order to delay the growing season — particularly for varieties such as Chardonnay that can sprout early.
It is too early to be precise about just how much of the 2021 crop is lost. Growers will have to monitor the extent to which the vines are able to shoot forth second-generation growth, but this is rarely as fruitful and will ripen later than what has been frozen. It seems clear, however, that these 2021 frosts will be at least as severe as those of 2017 and 1991 in France and 2003 in parts of Italy.
Many European vignerons were already on their knees, what with drought, hail, the pandemic and the period between October 2019 and March 2021, during which the US imposed additional 25 per cent tariffs on a range of wine imports from the EU. French producers have benefited from some state support but they are already demanding another tranche.
In Bordeaux, the best-known wine producers are just about to launch their 2020s in their annual en primeur campaign. The severe frost is not likely to encourage them to moderate their prices. Entre-deux-Mers resident and Master of Wine James Lawther emailed me on April 8 about the frost: “It hit just about everywhere last night and the night before, with temperatures down to minus 4C, buds in advance and very dry conditions. Reports are that it was particularly bad in parts of Margaux, Listrac and Moulis . . . Barsac and southern Graves and low-lying areas of St-Émilion. Vines near me took a hit and according to the viticultrice [local winegrower] had been bien cramées [really screwed up].”
In northern Italy, the vines of the Veneto were basking in temperatures of 27C just two weeks ago but suddenly saw temperatures of minus 5C on the nights of April 7 and 8. In La Morra in Piemonte, Barolo producer Alberto Cordero reported on the likely long-term damage inflicted on his vines, all too visible in images he shared. “It depends a lot on the weather over the next 20-25 days. But it’s part of our life. We have to accept it and I do,” he wrote. Yet his wines sell for many multiples of Emilie Faucheron’s.
Faucheron and other southern French vignerons were defenceless against the frost because it is — or at least has been — so rare in their part of the world. Jean-Marc Astruc in Fitou says he has lost 70 per cent of the 2021 crop from his 14ha domaine.
In Burgundy’s Côte d’Or, however, spring frosts have become common, prompting growers to light special burners and anti-frost candles — expensive and none too good for the environment. Some growers also set fire to carefully positioned bales of straw in a bid to disperse the freezing air.
Frost has been so common in Burgundy’s northern outpost of Chablis that some growers have installed spray systems to warm the soil and the vines and then protect them with a layer of ice. This would be far too expensive for vignerons such as the Faucherons.
The same is true of the wind machines that prevent cold air settling in the Napa Valley and in Marlborough, New Zealand. Helicopters have occasionally been hired to protect vines by keeping air moving, while another costly ploy is to heat the wires along which most vines are trained. Such measures are not exactly energy-efficient.
Tradition has it that it is well into May before vine growers can sleep easy without worrying about the risk of further frost damage.
Follow Jancis on Twitter @JancisRobinson
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