October 24, 2021

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FirstFT: Treacherous markets fuel boom in outsourcing investment teams

World updates

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The market for outsourced investment teams is “red-hot” thanks to the darkening outlook for future returns, with allocators of capital increasingly delegating entire multibillion-dollar mandates to outside money managers.

Small entities lacking the scale to employ expensive internal investment teams often outsource management to investment consultants such as Mercer or asset managers such as BlackRock, which have specialist “outsourced chief investment officers”, or OCIOs.

The OCIO industry is growing in size and scope, as larger companies and institutions outsource pools of money to specialists given the increasingly treacherous investment landscape. There was about $2tn of global assets managed fully or partially by OCIOs by the end of March 2020, according to an annual survey by Pension & Investments.

“It’s red-hot,” said Michelle Seitz, chief executive of Russell Investments, an asset manager with a big OCIO business. “There’s a lot of activity. It’s one of the fastest, if not the fastest, growing spaces in the industry.”

Five more stories in the news

1. US Senate passes $1tn infrastructure package The Senate has passed the sweeping bill that will provide hundreds of billions of dollars to upgrade crumbling transport systems, in a victory for Joe Biden and the Democrats. What is in the infrastructure plan? Read our explainer here.

There’s more: the Senate moves on to its next order of business, a budget bill with an estimated price tag of $3.5tn, on which Democrats plan to go it alone.

The Infrastructure Bill passed 69-30 in the US Senate as 19 Republicans including Mitch McConnell voted Yea alongside the Democrats

2. Tory chair failed to disclose donor ties with Middle East envoys Ben Elliot, the Conservative party co-chair, discussed a plan with foreign ambassadors to grant a Tory donor a sensitive role in the UK ruling party’s Middle East relations without disclosing that the donor was also his paying client.

3. Andrew Cuomo resigns after sexual harassment report New York’s governor stepped down following allegations that shredded his reputation and engulfed his administration. His resignation will become effective in 14 days, after which Kathy Hochul, the state’s lieutenant-governor, will become New York’s first female governor.

4. Hackers siphon $600m in digital tokens A decentralised financial network said hackers absconded with about $600m worth of cryptocurrencies, a heist that would rank among the largest to target the rapidly growing digital asset industry.

5. Amazon to pay customers up to $1,000 in damages The ecommerce giant will start offering compensation for personal injury or property damage on products sold by independent sellers as it faces pressure over the safety of goods on its site. More than half of the products sold on Amazon come from third parties and are not vetted by the company.

Coronavirus digest

In the UK, more than three-quarters of adults have received both doses of a Covid-19 vaccine. The NHS has urged school leavers to sign up for a career in healthcare; a £15m package aims to bring in 5,000 workers.

Demand for London office spaces is starting to rebound, according to Derwent London and IWG, but newer buildings and shorter leases are in favour.

Israel is weighing lockdowns and extending access to booster shots after infections surged to the highest level since February.

Germany will end free Covid testing for the unvaccinated this autumn.

Japanese parents are sending relatives rice bags to replicate the feeling of hugging their newborns during the pandemic. (FT, BI)

Sign up for our Coronavirus Business Update newsletter and follow our live blog for the latest.

The day ahead

Inflation data Germany’s harmonised index of consumer prices for July is out today. The US labour department also release monthly consumer price index figures, which are expected to show inflation has continued to increase, albeit at a slower pace.

Opinion: there are signs we will soon have to worry about rising prices despite reassuring central bank forecasts, writes Chris Giles.

Messi’s Barcelona exit Paris Saint-Germain will hold a press conference a day after Lionel Messi signed a two-year contract with the Qatari-owned club. The Argentine footballer landed in Paris yesterday, after a tearful farewell to FC Barcelona. 

Earnings Among the companies reporting earnings are Deliveroo, eBay, Duolingo, Admiral Group, and ABN Amro. Read the full list here.

What else we’re reading

How to reach the unvaccinated Carrot or stick? As the Delta variant spreads around the world, governments are facing the delicate issue of how to convince hesitant citizens to take the jab. Their solutions often involve a combination of incentives and coercion. Should governments enforce the use of vaccine passports? Vote in our latest poll.

How A-level top grades reached a record The number of A and A* grades given reached 44.8 per cent in England, Wales and Northern Ireland — up from 25.5 per cent in 2019. For many, it was cause for celebration. But the results squeezed university places and raised the question of how inflated grades will return to normal after the pandemic. The FT View is that partly to blame is a reliance on teachers’ assessments.

Robinhood’s ‘fun money’ problem Stable, long-term investors are sceptical of the broker’s future revenue growth. But analysts and rivals say it has a long way to go: customers told the FT that Robinhood was where they play around, while holding larger and less actively traded investments elsewhere.

Investors should beware Beijing’s unpredictability The structure of Chinese IPOs can lull the unwary into thinking that investing in the country is no different than putting money in developed markets. That is a terrible mistake, writes Brooke Masters. Shareholders are buying into an arbitrary system where the rules can and do change overnight.

Brooke Masters: ‘Many of the uncertainties were apparent even when Alibaba listed, but enthusiastic investors opted to discount them’
Brooke Masters: ‘Many of the uncertainties were apparent even when Alibaba listed, but enthusiastic investors opted to discount them’ © Ellie Foreman-Peck

Global leaders’ dangerous climate roulette Given that the imperative to act today is no different from eight years ago, why the paralysis, asks Anjana Ahuja. The drive for certainty is the enemy of action in the climate emergency.

Travel

Living like a king in Versailles Simon Kuper spent a night at Le Grand Contrôle, a newly opened lavish retreat within the Parisian Château’s grounds, where guests are greeted by staff dressed as 18th-century servants.

The Necker Suite, the former apartment of Jacques Necker, who served as general controller of finances under Louis XVI © Renée Kemps
The Necker Suite, the former apartment of Jacques Necker, who served as general controller of finances under Louis XVI © Renée Kemps

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