Larry Fink’s billionaire factory

One scoop to start: Activist investor Palliser Capital has stepped up its campaign to get Rio Tinto to abandon its primary London listing, demanding an independent review of whether the world’s second-largest mining company should unify its corporate structure in Australia.

In today’s newsletter:

• Who got the better BlackRock deal this year?

• Element and Graham Capital’s big November returns

• Ex-Nomura employee charged with attempted murder

BlackRock’s deal spree bestows fortunes across Wall Street

A little more than a year ago, BlackRock founder Larry Fink telegraphed to Wall Street that the world’s largest asset manager was on the hunt for “transformational” deals.

Twelve months on, he has delivered. The asset manager has struck deals worth nearly $30bn this year, reshaping Wall Street and putting BlackRock in direct competition with a new set of powerful rivals.

On Tuesday, the asset manager clinched its latest target: the $12bn acquisition of credit investing powerhouse HPS Investment Partners.

The push has moulded BlackRock — best known for passive equity and debt index products that spurred the demise of scores of traditional active asset management groups — into a new force in private capital.

It’s now in direct competition with Blackstone, Apollo, KKR and Brookfield.

The year of dealmaking started in January, when Fink agreed to buy private investment firm Global Infrastructure Partners. In July, BlackRock paid £2.55bn to acquire private capital data provider Preqin.

Both HPS and GIP are giants, each managing more than $100bn. The acquisitions give BlackRock more than $600bn in private capital assets and the private market data to create new indices.

Fink’s deal spree has also showered enormous wealth across Wall Street.

BlackRock paid $12.5bn in cash and stock to buy GIP, making its founders the asset manager’s second-largest shareholders. Co-founder Adebayo Ogunlesi enjoyed a multibillion-dollar windfall, and he joined BlackRock’s board of directors.

HPS initially planned to go public, but found a hungry potential buyer in BlackRock instead. While HPS’s co-founders — Scott Kapnick, Scot French and Michael Patterson — tried to reach the windfall that GIP’s partners had won months earlier, they came up slightly short.

The HPS acquisition price is a notch below that of GIP and comes with no cash, relying entirely on BlackRock’s stock. The GIP deal was also struck before a 30 per cent run in BlackRock’s shares this year, which has in effect pushed the takeover value towards $15bn.

But HPS is also in line for an additional 1.6mn shares if it meets certain targets within five years of the deal closing, a consideration worth $1.6bn at today’s levels. Add in the $400mn of HPS debt BlackRock may retire, and the total price inches up to roughly $14.4bn.

Advisers to BlackRock have also fared well. Robert Steel at Perella Weinberg, a close friend of Fink and vice-chair of the investment bank, had advisory roles in all three deals.

DD would note that perhaps the biggest winner of all is Mark O’Hare, founder and majority owner of Preqin. The data provider sold for cash, almost all of which went into O’Hare’s pocket, instantly making the former BCG consultant among Britain’s wealthiest people.

Global macro funds roar back to life

Donald Trump’s US presidential election victory has led to huge paydays for some hedge funds.

Some of the biggest winners include Jeffrey Talpins’ Element Capital and Kenneth Tropin’s Graham Capital Management, which were positioned in “Trump trades”, or assets that did well when the president-elect prevailed.

Element gained about 9 per cent in November while Graham’s Proprietary Matrix Fund — which includes strategies run by fund managers and computer-driven ones — made about 3 per cent, two people familiar with the figures told DD’s Amelia Pollard. 

After years of middling returns following the 2008 financial crisis, hedge funds that specialise in trading currencies, commodities, bonds and stocks are back to making big gains from bets on market swings around last month’s presidential election.

Pablo Calderini, the chief investment officer for Graham, said the fund ran “many scenarios” and “stress tests” to ensure the portfolio was well guarded against any shocks that might come its way — especially if the race was so close that it sparked social unrest.

The US dollar has emerged as one of the biggest Trump trades, with the currency up 5.4 per cent against a bunch of other currencies since the start of October.

Still, the going’s good for almost everyone right now. The S&P 500’s also been on a tear, up more than 27 per cent this year.

“None of this is breaking the pound. None of this is a massive bet on the yen,” said Steven Kelly, the associate research director at the Yale Program on Financial Stability.

The real question is how long the good times will last. Kelly added: “If and when Trump blows something up, are the macro hedge funds on the right side of that trade as well?”

A nightmare at Nomura

Bank chief executives have a lot to worry about. There are capital requirements, talent wars and the lull in dealmaking.

But a bank employee allegedly lighting a customer’s house on fire, and attempting to murder and rob them? Not usually on the list.

This week Nomura’s chief executive had to apologise and took a voluntary pay cut after a former wealth management employee was charged with attempted murder, robbery and arson.

The 29-year-old former employee — who worked at Nomura’s wealth management division — allegedly drugged an elderly couple who banked with Nomura in Hiroshima and set their house on fire in an attempt to steal millions of yen in cash.

The couple survived, and the former Nomura employee was charged last month.

Obviously, Nomura’s now in damage control. Nomura chief executive Kentaro Okuda is taking a voluntary three-month pay cut of 30 per cent, and nine senior managers are also taking voluntary pay cuts.

The bank’s also acting to reassure customers following the incident. One such measure: increasing its supervision of visits to clients’ homes.

This is just the latest — and certainly most gruesome — scandal to plague Nomura. The bank was recently fined by Japan’s banking regulator over the manipulation of government bond futures, leading to previous voluntary executive pay cuts.

But as FT’s Lex writes, pay cuts alone are unlikely to repair the company’s image.

“Banks, but in particular wealth management businesses, rely on credibility, trust and an unquestionable focus on their clients,” Lex writes. As a result, “this incident could have long-lasting consequences”.

Job moves

• Exxon has hired Dan Ammann to run its oil and gas production business. He joins from General Motors, where he led the Cruise self-driving unit division.

• Prudential Financial named Andrew Sullivan as its next chief executive. Sullivan will start in the role on March 31. He most recently led international businesses and global investment management at the group.

• Clifford Chance has hired Arnaud Fromion and Frédéric Guilloux for its global financial markets team, in Paris. Both previously worked at Goodwin.

• Francesco Guerrera is set to join UBS as head of communications, replacing Marsha Askins, a source told DD. Guerrera most recently worked at Reuters in London.

Smart reads

Political firestorm Nippon Steel’s plan to buy US Steel is challenging the country’s long-standing policy towards foreign investment, the FT writes. It’s also turned into a fierce grassroots political battle.

Pricey capital With BlackRock’s acquisition of HPS, Lex asks: what will happen to the asset manager’s culture when all these Masters of the Universe converge?

Under-the-radar When major property insurers drop homeowners in states devastated by natural disasters, another type of company smells an opportunity to offer coverage, Bloomberg reports. Enter: lightly-regulated home insurance.

News round-up

Tesla loses bid to restore Elon Musk’s record $56bn pay package (FT)

UK start-up 9fin raises fresh capital for race in credit markets data (FT)

China retaliates against latest US trade restrictions (FT)

Wall Street’s AI-powered rally risks ‘correction’, Vanguard warns (FT)

Thames Water creditors veto use of £3bn loan to pay fines (FT)

Trafigura loses attempt to have star witness struck from bribery trial (FT)

Mastercard reaches agreement in UK to settle claims of overcharging on fees (FT)

British Steel nationalisation one option in search for rescue, admits government (FT)