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Feb 16, 2023

The week in investor relations: BlackRock pulls the plug on Japan, activist investments rise and SEC tightens grip on crypto rules

Our pick of the IR stories from around the web you might have missed this week

– BlackRock, the world’s largest asset manager, cut Japanese stocks to ‘underweight’ as Japan is set to appoint a new governor to lead its central bank. According to CNBC, the change in leadership could lead to a hawkish pivot for the Bank of Japan, which has maintained an ultra-dovish stance while its global peers turned to steep rate hikes to tame surging inflation. ‘We downgrade Japanese stocks on policy uncertainty and a worsening economic environment,’ said BlackRock’s research arm earlier this week, before the government submitted its central bank picks to parliament. It also said the possibility that the central bank could scrap its yield-curve control program will push global yields higher and reduce risk appetite.

Bloomberg (paywall) reported that activist investing is at an all-time high and large companies are particularly vulnerable to packs of agitators that may not even have the same agenda, according to one of Goldman Sachs’ top dealmakers. ‘We used to refer to this as a wolfpack [but] wolfpack implies some kind of co-ordination,’ said Avinash Mehrotra, global head of activism defense and shareholder advisory at the New York-based bank, in an interview on Bloomberg TV. ‘You’ve got an environment right now where you are seeing more of a swarm at large-cap companies. Some of these activists are pushing companies in different directions.’

– The Financial Times (paywall) reported that the SEC has proposed toughening safeguards around investors’ assets after the collapse of several high-profile crypto companies last year revealed that customer funds were not as safe as had been advertised. Earlier this week the SEC agreed to propose rules that would force investment advisers to secure all the client assets they manage, including so-called alternatives, such as cryptocurrencies and art, with qualified custodians. The mooted crackdown on custody follows a series of failures in digital asset markets. Companies promoted funds as segregated and separate, only for consumers to discover in a bankruptcy that their holdings were treated as unsecured assets and part of the estate of the collapsed company.

– In more tech news, Wired reported that a group of activist shareholders in the world’s largest Bitcoin investment trust, GBTC, is plotting a coup. The unlikely patchwork of hedge funds, asset managers and amateur investors is trying to unseat Grayscale Investments, the steward of the trust whose management they claim has cost them billions of dollars. Since 2015, GBTC has been marketed as a simple way for regular people to invest in Bitcoin without having to deal with an exchange, send crypto between wallets or figure out how to store it safely. The value of GBTC shares is linked to the price of Bitcoin: for every new share created, a fraction of a Bitcoin is added to a pot, anchoring its value.

– Meanwhile, Finextra reported that total UK fintech investment fell by more than 50 percent in 2022. According to the latest report from KPMG, the fall was due to a combination of higher interest rates and inflation, alongside downward pressure on valuations, which dampened investor appetite. But the UK was far from alone in seeing a drop and remains the center of European fintech investment, with firms attracting more funding than their counterparts in the rest of Europe, the Middle East and Africa combined.

– Republican ‘woke wars’ are intensifying on some fronts, wrote Politico in a report. Florida Governor Ron DeSantis wants to pull state money out of financial institutions engaging in ESG investing and US entrepreneur Vivek Ramaswamy is trying to parlay his anti-ESG crusade into a presidential bid. But if you look more closely, there’s a quiet, conservative backlash going on in some unexpected corners. Bills to prohibit state support of ESG investing are sputtering out in deep-red states like Mississippi, North Dakota and Montana. One common thread is the opposition of state-level banking groups, which are bristling at efforts to restrict their activities — and finding receptive ears in statehouses.

 

Staff Writers

The staff writers on IR magazine are from our team of highly experienced journalists.