ETF Inflows Top $1 Trillion for First | Stock Market News Today


A historic surge of cash has swept into exchange-traded funds, spurring asset managers to launch new trading strategies that could be undone by a market downturn. 

This year’s inflows into ETFs world-wide crossed the $1 trillion mark for the first time at the end of November, surpassing last year’s total of $735.7 billion, according to Morningstar Inc. data. That wave of money, along with rising markets, pushed global ETF assets to nearly $9.5 trillion, more than double where the industry stood at the end of 2018.

Most of that money has gone into low-cost U.S. funds that track indexes run by Vanguard Group,

BlackRock Inc.


BLK 0.66%

and

State Street Corp.


STT -0.50%

, which together control more than three-quarters of all U.S. ETF assets. Analysts said rising stock markets, including a 25% lift for the S&P 500 this year, and a lack of high-yielding alternatives have boosted interest in such funds.  

“You have this historical precedent where you have tumultuous equity markets, and more and more investors have made their way to index products,” said

Rich Powers,

head of ETF and index product management at Vanguard.

Asset managers are looking to actively managed funds, some with narrow themes, in search of an unfilled niche not already dominated by the industry’s juggernauts, analysts and executives said. VanEck, for example, earlier this month rolled out an active ETF targeting the food industry. In March, Tuttle Capital Management launched its

FOMO ETF,

which is bullish on stocks popular with individual investors. 

Firms including Dimensional Fund Advisors have converted mutual funds into active ETFs. Meanwhile, bigger firms have rolled out ETFs that mimic popular mutual funds, including Fidelity Investments’ Magellan and Blue Chip Growth funds.

“We should have a broad offering of ETFs that stand alongside a broad offering of mutual funds,” said

Gerard O’Reilly,

Dimensional’s co-chief executive, of his company. “Choose your own adventure.” 

As ETFs, baskets of securities that trade as easily as stocks, have boomed this year, investors poured a record $84 billion into ones that pick combinations of securities in search of outperformance rather than tracking swaths of the stock market. That represents about 10% of all inflows into U.S. ETFs, up from nearly 8% last year, according to Morningstar. 

Asset managers long known for running mutual funds are rushing to take advantage of investors’ interest in active ETFs. More than half of the record 380 ETFs launched in the U.S. this year are actively managed, according to FactSet. Fidelity, Putnam and

T. Rowe Price

are among the firms that have rolled out actively managed ETFs in 2021. Firms new to ETFs have also entered the fray. 

The top 20 fastest-growing ETFs, largely run by Vanguard and BlackRock, this year pulled in nearly 40% of all flows, charged an average fee of less than 0.10 percentage point and tracked benchmarks of some sort. 

Many active ETFs remain comparatively small and charge fees higher than passive funds, putting a swath of new products at risk of closing over the next several years. ETFs usually need between $50 million and $100 million in assets within five years of launching to become profitable, analysts and executives say; funds below those levels have tended to close. 

Of the nearly 600 active ETFs in the U.S., three-fifths have less than $100 million in assets, according to FactSet data. More than half are below $50 million. 

“You’re going to see a lot of those firms take a hard look at their future,” said

Elisabeth Kashner,

FactSet’s director of ETF research.

The stock market’s bull run has helped buoy many ETF providers, Ms. Kashner said, adding that firms have in 2021 closed the fewest number of funds in eight years. But a market pullback, which most stock-market strategists anticipate, could flush out weaker players, she said. 

Vanguard has been a beneficiary of high inflows to funds that track indexes. A statue of founder John C. Bogle.



Photo:

Ryan Collerd for The Wall Street Journal

ETF closures generally climbed over the past decade, and firms closed a record 277 ETFs last year as the coronavirus pulled markets down. Many held few assets. About a third of all active ETFs are marked as having a medium or high risk of closure, according to FactSet data that take into account assets, flows and fund closure history. 

Factors that have helped stoke active launches, analysts and executives said, include rules streamlined by regulators in late 2019 that made ETFs easier to launch. The approval of the first semitransparent active ETFs, which shield some holdings from the public’s eye, followed.

Analysts also said the success of ARK Investment Management Chief Executive

Cathie Wood

in 2020 showed how active ETFs can score big returns and pull in substantial sums of money. Several of ARK’s funds doubled last year, and its assets approached $60 billion earlier this year, though many of its bets have slumped in 2021. 

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Most other active managers aren’t doing much better. Two-thirds of large-cap managers of mutual funds have fallen short of benchmarks this year, while roughly 10% of the 371 U.S. active ETFs with full-year performance data are beating the S&P 500. More than a third are flat or negative for 2021. 

“Active management is a zero-sum game,” said FactSet’s Ms. Kashner. “Beating the benchmark quarter after quarter, year after year, is a very difficult task at which active managers have traditionally struggled. The ETF wrapper doesn’t change that calculus.” 

Write to Michael Wursthorn at [email protected]

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Clean Energy ETFs Take a Hit, but Money Keeps Flowing In | Sidnaz Blog


Investors have lost a bundle this year betting on solar-panel and wind-turbine makers. Their response: to double down.

A year ago, green stocks and the funds that track them rallied tremendously in the aftermath of the market’s recovery from a pandemic-induced swoon. Solar-panel and wind-turbine companies were among firms benefiting from a surge of investor- and consumer-driven demand for renewables, despite many being small unprofitable ventures.

This year, returns are trailing the broader stock market. That is thanks, in part, to stocks having run so far and uncertainty around the Federal Reserve’s interest-rate course and how its actions may ultimately affect growth stocks.

Exchange-traded funds that track renewable-energy indexes have posted double-digit declines so far this year.

BlackRock’s

iShares Global Clean Energy ETF

has fallen 18% since December;

Invesco Ltd.

’s popular

Solar ETF

has posted a 17% decline.

Even so, money continues to pour in. Professional money managers and individual traders alike have invested $6.2 billion into green-energy ETFs so far this year, according to data from Refinitiv Lipper. The inflows are on course to eclipse last year’s record $7.2 billion.

Index makers and asset-management firms say that, for now, large pullbacks in share prices don’t reflect investors’ desire to bet on green companies.

“It’s an area where we see continuous demand,” said

Ari Rajendra,

a senior director of strategy and volatility indexes at S&P Dow Jones Indices.

At BlackRock, the world’s largest asset manager, clean energy funds reported $2.7 billion in inflows so far this year and $1 billion into a European clean-energy fund, according to FactSet. Interest was so high that S&P had to broaden its clean-energy benchmark used by BlackRock funds to fix the problem of having too much money in mostly small, hard-to-trade companies.

Such changes don’t happen often, said S&P’s Mr. Rajendra, but intense demand from investors warranted the index’s revamp to 82 stocks from just 30. The firm also lowered the criteria for the inclusion of stocks, among other things.

Ross Gerber,

chief executive of Gerber Kawasaki Wealth and Investment Management, thinks renewable-energy stocks, from solar-panel makers to manufacturers of alternative batteries, will eventually transform transportation and other facets of everyday life.

A solar farm in Maine. With clean energy stocks pricey, they and funds that track them may be more vulnerable to market or political changes.



Photo:

Robert F. Bukaty/Associated Press

Mr. Gerber has put more client cash into Invesco’s clean-energy fund, contributing to the $446 million of total inflows into ETF so far this year. He shuns oil stocks, which are among the stock market’s best performers this year.

“The more speculative the stock, the higher the valuation. But in this market, people care more about fantasy than reality,” said Mr. Gerber. “So with solar, you have a little bit of the fantasy in there, too.”

Invesco’s solar ETF jumped 233% in 2020, while BlackRock’s global clean-energy fund soared 140%—easily the best years ever for both as valuations of green stocks climbed to dizzying heights.

Although both funds have declined in the year to date, valuations are elevated. Invesco’s solar ETF trades at a forward price/earnings ratio of 36, versus 21 for the S&P 500, according to FactSet.

In an interview with WSJ’s Timothy Puko, U.S. special climate envoy John Kerry explains the roles he’d like to see the private sector and countries play in fighting climate change. Photo: Rob Alcaraz/The Wall Street Journal

Meanwhile, clean-energy companies trade at a 70% premium to traditional energy companies based on a ratio of enterprise value to earnings before interest, taxes, depreciation and amortization, a standard valuation yardstick, strategists at

Bank of America

said. They noted this valuation was down from highs earlier this year but still well above the five-year average.

With stocks pricey, they and funds that track them may be more vulnerable to market or political changes. Their allure may dim, for example, if the Fed begins to raise interest rates earlier than expected, taking some of the shine off growth stocks.

Or volatility could increase if there are hiccups for a $1 trillion infrastructure plan agreed to by President

Biden

and some U.S. senators. Green stocks rallied last year after Mr. Biden won November’s presidential election, as investors bet the new administration would hasten the U.S.’s transition toward wind and solar energy and away from fossil fuels.

Investors already are experiencing some of that volatility. Clean energy stocks have rallied alongside growth stocks in recent weeks. Invesco’s solar fund is up nearly 11% over the past month, while BlackRock’s ETF has added 2.2%.

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The willingness of investors to continue pouring money into this part of the market shows they are positioning for a potential longer-term readjustment of the energy sector and economy.

Rene Reyna,

head of thematic and specialty product strategy at Invesco, said expectations are premised on a belief that technology will eventually bring the cost of batteries, solar panels and other green efforts down enough to garner wider adoption—and big profits. In that sense, clean energy is the “hope trade,” he said.

Construction at a wind farm in New Mexico last year. Clean energy companies trade at a 70% premium to traditional energy companies.



Photo:

Cate Dingley/Bloomberg News

Write to Michael Wursthorn at [email protected]

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J.P. Morgan Asset Management Acquires Timberland Investment Firm | Sidnaz Blog


One of the biggest names on Wall Street is getting into the timber business, and a big part of its plan to make money involves less logging.

J.P. Morgan Asset Management said Monday that it has acquired Campbell Global LLC, a Portland, Ore., firm that manages $5.3 billion worth of timberland on behalf of institutional investors, such as pensions and insurance companies.

The deal gives the $2.5 trillion asset manager a position in the booming market for forest-carbon offsets, tradable assets that are created by paying landowners to not cut down trees and leave them standing to sponge carbon from the atmosphere. Offsets are used by companies to scrub emissions from their internal carbon ledgers, which track progress toward pollution-reduction goals.

Terms of the deal with Campbell’s seller,

BrightSphere Investment Group Inc.,

weren’t disclosed.

Many of the world’s largest companies, including

Apple Inc.,

Microsoft Corp.

and

Royal Dutch Shell

PLC, have promised investors they will reduce their carbon footprints. Many emissions are unavoidable for global businesses, which has made standing timber a hot commodity.

J.P. Morgan


JPM 1.51%

is betting that carbon markets will add value to timberlands beyond the income they generate as a source for building products, said

Anton Pil,

the firm’s head of alternatives.

“We wanted to play an active role in carbon-offset markets as they’re developed,” Mr. Pil said. “We want to be viewed as a global leader in the carbon-sequestration market.”

Other big names are angling for similar status.

BP

PLC last year bought a controlling stake in Finite Carbon, the country’s largest forest-offset producer.

Salesforce.com Inc.

Chief Executive

Marc Benioff,

Microsoft and others recently invested in NCX, a firm that matches offset buyers with timberland owners willing to defer harvests for a fee.

Campbell Global oversees about 1.7 million acres of forestland in the U.S., New Zealand, Australia and Chile. About two-thirds of its 150 employees are involved in managing the forests, while the others are investment professionals, said

John Gilleland,

the firm’s chief executive.

Campbell Global for more than three decades has managed timberland to produce logs for lumber and pulp mills, but has moved into carbon markets in recent years.



Photo:

Campbell Global

Campbell for more than three decades has managed timberland to produce logs for lumber and pulp mills. In recent years, it has moved into carbon markets, selling offsets in California’s regulated cap-and-trade market as well as in the unregulated voluntary markets that have boomed with the rise of green investing.

“We do believe this is the future for this asset,” Mr. Gilleland said.

Timberland investing became popular in the 1980s after the tax code was made more favorable to owners of income-producing real estate, Congress allowed pensions to diversify beyond stocks and bonds and Wall Street analysts convinced forest-products companies to sell off their timberlands.

Investors reasoned that trees would grow, and thus gain value, no matter what the stock market did. Timberland was viewed as a good hedge against inflation.

Demand for lumber has skyrocketed during the pandemic, sending prices to all-time highs. This video explains what’s driving the lumber boom, who’s profiting, and why those growing the trees aren’t reaping the benefits. Illustration: Liz Ornitz/WSJ

But it hasn’t always been a good investment: At the same time timberland investing was gaining momentum, the federal government was paying landowners in the South to plant pine trees on worn-out farmland to boost crop prices. Decades later, the resulting surfeit of pine has pushed log prices to their lowest levels in decades even as the resurgent housing market has lifted prices for lumber and other wood products to records.

Investors such as the California Public Employees’ Retirement System have suffered big losses on southern timberland in recent years. Though log prices in the West still move in unison with those of lumber, timberland there is threatened by fires and wood-boring beetles. In the North, mills have closed and rendered many wood lots uneconomical to log and worth more leased to companies as carbon sinks.

Write to Ryan Dezember at [email protected]

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JPMorgan Buys Nutmeg to Bolster Digital Banking Push in U.K. | Sidnaz Blog


JPMorgan Chase is entering a crowded digital banking marketplace in the U.K.



Photo:

johannes eisele/Agence France-Presse/Getty Images

JPMorgan Chase


JPM 0.61%

& Co. agreed to buy digital wealth manager Nutmeg Saving and Investment Ltd., part of a push to establish a retail banking presence in the U.K.

Nutmeg, founded in 2012, has more than 140,000 customers and £3.5 billion under management, the equivalent of around $5 billion. A price for the acquisition wasn’t disclosed but people familiar with the transaction said it was between £500 million and £1 billion.

JPMorgan said in January it would launch a new digital bank in the U.K., offering consumer banking services there for the first time. Called Chase, it is currently being tested internally with JPMorgan employees ahead of a public launch later this year.

Nutmeg’s savings and investment products won’t initially be offered through the retail banking project, the bank said.

JPMorgan is entering a crowded digital banking marketplace in the U.K. Regulators encouraged new startups, including Starling Bank Ltd. and Monzo Bank Ltd., to boost competition in the wake of the last global financial crisis. These so-called challenger banks have forced traditional lenders to improve their digital offerings but have struggled to earn profits.

JPMorgan last year considered making a bid for Starling Bank, founded by

Anne Boden

in 2014, according to people familiar with the situation.

JPMorgan previously tried to launch a digital bank in U.S. cities and markets where it didn’t have Chase branches, but closed the product, called Finn, in June 2019 after slow pickup. Bank executives have said they learned lessons from that program, including that the Chase brand resonated better than a new name.

Write to Simon Clark at [email protected]

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Hedge-Fund Manager Who ‘Came Undone’ Is Headed to Prison | Sidnaz Blog


On a summer Friday afternoon last year, hedge-fund manager

Dan Kamensky

broke bankruptcy laws. That evening on a recorded line, he pleaded with a banker to say the whole thing was a misunderstanding.

“Maybe I should go to jail,” Mr. Kamensky said on the call.

Mr. Kamensky reports to federal prison on June 18. His hedge fund is in the process of closing, and a career that included stints at white-shoe law firm Simpson Thacher & Bartlett and storied hedge fund Paulson & Co. has been wrecked.

“He came undone,” U.S. District Judge

Denise Cote

said during a court hearing on May 7.

Mr. Kamensky, 48 years old, worked in the high-stakes, high-conflict world of distressed investing, which aims to profit from companies teetering on the brink of or in bankruptcy. He launched his hedge fund, Marble Ridge, in 2015 with $20 million and was managing nearly $1 billion a few years later.

Running his own firm became stressful for Mr. Kamensky. He was anxious, had difficulty sleeping, lost weight and had trouble concentrating at the office or at home, he says. His fund, while it grew quickly, was still a relatively small player in the distressed market, which is dominated by giant private-equity companies, hedge funds and major law firms.

In 2017, Mr. Kamensky began working with a psychologist and a sleep specialist. He also consulted an executive coach, while in the middle of the day he would head to a meditation studio. He began to feel healthier and more relaxed, he says. He enjoyed family time again, playing games like Scrabble and doing crossword puzzles.

His efforts to control his emotions began to unravel in a bitter fight over struggling luxury-goods retailer Neiman Marcus Group Ltd. Things got worse in the coronavirus pandemic, which removed the support system of coaches and therapists that Mr. Kamensky had erected to help deal with his pressures.

Mr. Kamensky began buying bonds of the department-store chain in 2018 for about 60 cents on the dollar. Neiman was owned by private-equity firm

Ares Management Corp.


ARES 1.30%

, which made an ill-fated bet that the chain could thrive despite an onslaught from online competitors. Neiman had one hidden gem; under Ares ownership it had acquired a thriving German online site called MyTheresa.

Interviews with Mr. Kamensky and court documents and transcripts show how the fight over MyTheresa led to Mr. Kamensky’s downfall.

Seeing the value of MyTheresa, Ares decided to separate it from Neiman, giving itself full control of the online site and leaving the bondholders with just the company’s bricks-and-mortar stores. The move borrowed from classic private-equity tactics, but still came as a surprise to Mr. Kamensky, who said he thought Ares had gone too far by taking a company’s crown-jewel asset for nothing in return.

“It’s like someone takes your wallet out of your back pocket on the subway and stares you right in the face while doing it,” he said. A spokesperson for Ares declined to comment.

Dan Kamensky’s fund began buying bonds of Neiman Marcus a few years before the department-store chain filed for bankruptcy.



Photo:

Richard B. Levine/Zuma Press

In press releases that revealed his private letters to Ares’s board, Mr. Kamensky accused the private-equity firm of “lining its pockets” and “looting” Neiman. He said Ares broke the law by moving assets out of an insolvent company and had conflicts of interest. Word got out that he would sue to stop the deal.

Then Ares and Neiman fought back.

James Sprayregen,

a lawyer representing Neiman, warned that if Mr. Kamensky sued, “we’re going to come down on you like a pile of bricks,” Mr. Kamensky later testified. Mr. Sprayregen, a bankruptcy lawyer at Kirkland & Ellis LLP, didn’t return calls seeking comment.

Mr. Kamensky’s fund did file suit in 2019. Neiman responded, stepping up the fight by suing Marble Ridge for defamation, alleging that Mr. Kamensky’s lawsuit hurt the retailer’s business position. “A defamation suit is unheard of,” he says. While litigation is common in the world of distressed debt and restructuring, a defamation suit is unusual.

Neiman eventually agreed to restore nearly half of MyTheresa to its creditors. Almost all of the creditors went along, but Mr. Kamensky thought it was a bad deal and continued to push Ares to give more of MyTheresa to Neiman’s creditors. “It felt like I was tilting at windmills,” says Mr. Kamensky, a reference to the novel “Don Quixote,” which he loved as a youth.

With the battle over MyTheresa already joined, Covid-19 hit and Neiman filed for bankruptcy. Mr. Kamensky’s fund fell 12%, adding to his pressures.


‘There was a fuse exploding. I lost it.’


— Dan Kamensky

Staying at his Long Island home because of the pandemic, he worked in a cramped bedroom that he had converted into an office. A puppy once relieved himself on Mr. Kamensky’s foot during a business call. Sometimes, after working late into the night, Mr. Kamensky slept in the same room.

It became difficult to work with his coach and consult with colleagues. “Everything became more ad hoc,” he says.

As one of the few Neiman bondholders opposing the chain’s restructuring plan, Mr. Kamensky took a seat on Neiman’s creditors’ committee, which was tasked with advocating for the rights of investors during bankruptcy proceedings. He had to act in the interest of all creditors, rather than push for things that would benefit only his firm.

Once again a deal was reached on MyTheresa but Mr. Kamensky rejected it. He had spent millions on the fight and wanted to have the right to buy a bigger stake in MyTheresa to potentially boost his fund’s profits. He would offer to buy the preferred shares in MyTheresa that would be issued to other creditors.

By July, he was close to getting what he wanted and his hedge fund had recouped about half of its losses. Mr. Kamensky was feeling optimistic. But on July 31, he was blindsided by word that another bidder was also trying to buy the preferred shares. The bidder, he learned, was investment bank Jefferies LLC, one of his longtime brokers.

He feared Jefferies could scuttle a deal he had been pursuing for more than two years, just days before completion.

“There was a fuse exploding,” Mr. Kamensky says. “I lost it.”

At 3:20 that summer Friday afternoon, he texted

Joe Femenia,

his contact at Jefferies, “DO NOT SEND IN A BID.” In a phone call 20 minutes later with Mr. Femenia and

Eric Geller,

a Jefferies colleague, he yelled and cursed at the men, according to a Justice Department probe.

Mr. Geller not long after told a lawyer for the Neiman creditors committee that Jefferies wouldn’t bid because Mr. Kamensky told the firm to back off.

Mr. Kamensky realized he had violated the law. As a member of the creditors committee, he shouldn’t try to stop a higher bid that could benefit other investors.

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What do you make of Dan Kamensky’s case? Join the conversation below.

Four hours after he made his threat, Mr. Kamensky called Mr. Femenia again. On the call, he pleaded with Mr. Femenia to tell a different story to authorities—that Mr. Kamensky wanted Jefferies to bid only if it was serious about going through with the deal. “I pray you tell them that this was a huge misunderstanding,” Mr. Kamensky said on the call, which was recorded by Mr. Femenia. He said he could go to jail without Mr. Femenia’s help.

The creditors committee lawyer filed a report on possible wrongdoing in bankruptcy court. Mr. Kamensky apologized while admitting his wrongdoing to Justice Department lawyers.

In September, Mr. Kamensky was arrested in a surprise raid at his home, and in February pleaded guilty to one charge of extortion and bribery related to the Neiman bankruptcy.

Upon entering prison on Friday, Mr. Kamensky faces weeks of solitary confinement in keeping with Covid-19 guidelines. After completing his six-month sentence, he could face a lifetime ban from serving as an investment adviser.

While waiting to go to prison, Mr. Kamensky has given lectures to business and law students about the dangers of intense stress and letting emotions undermine one’s judgment. He spoke at several graduate schools, including the NYU Stern School of Business and the Duke University School of Law. He wonders, if he had been in his office with colleagues around, would he have reacted so quickly and angrily.

Mr. Kamensky is a “good man, but one who lost his moorings,” Judge Cote said at his sentencing. She said it wasn’t clear to her whether his actions had caused economic harm to creditors. Prosecutors requested a sentence of 12 to 18 months. Mr. Kamensky will serve six months of probation after prison.

“I regret letting anger get the best of me,” Mr. Kamensky says.

Write to Gregory Zuckerman at [email protected] and Soma Biswas at [email protected]

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U.S. Stock Futures Waver Ahead of Data | Sidnaz Blog


U.S. stock futures wavered, extending the week’s pattern of muted moves ahead of data on the trade deficit and job openings.

S&P 500 futures traded mostly flat and futures on the Dow Jones Industrial Average slipped 0.1%. The contracts don’t necessarily predict moves after the opening bell.

In Europe, the Stoxx Europe 600 added 0.1% in morning trade, and it is at its highest level in a year as gains in communication services and financials sectors were offset by losses in materials and consumer discretionary sectors.

Intermediate Capital Group

climbed 4.4% and Greggs jumped 2.3%.

The U.K.’s FTSE 100 rose 0.1%. Other stock indexes in Europe were mixed as France’s CAC 40 gained 0.1% and the U.K.’s FTSE 250 added 0.1%, whereas Germany’s DAX was broadly flat.

The Swiss franc, the euro and the British pound lost 0.1%, 0.2% and 0.3% respectively against the U.S. dollar.

In commodities, Brent crude fell 0.8% to $70.94 a barrel. Gold strengthened 0.1% to $1,899.80 a troy ounce.

German 10-year bund yields were down to minus 0.203% and U.K. 10-year gilts yields slipped to 0.803%. The yield on 10-year U.S. Treasury fell to 1.556% from 1.570%. Bond prices and yields move in opposite directions.

In Asia, indexes mostly fell as Hong Kong’s Hang Seng declined 0.3% after trading higher 0.7% during the session, Japan’s Nikkei 225 index was lower 0.2%, and China’s benchmark Shanghai Composite shed 0.5% after gaining 0.6% earlier.

NYSE employees eating lunch outside the New York Stock Exchange on Monday.



Photo:

Richard Drew/Associated Press

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Elliott Management Has Big Dropbox Stake | Sidnaz Blog


Cloud-computing company Dropbox went public in March 2018.



Photo:

Tiffany Hagler-Geard/Bloomberg News

Elliott Management Corp. has taken a sizable stake in software company

Dropbox Inc.,


DBX 7.01%

the latest target for the activist hedge fund, according to people familiar with the matter.

Elliott has told Dropbox it is the company’s largest shareholder after Chief Executive Officer

Drew Houston,

the people said. That suggests the hedge fund owns a stake of more than 10%, worth well over $800 million. The two sides have been in talks since earlier this year.

Dropbox, a cloud-computing company with a market value of roughly $11 billion, went public in March 2018 and has been trading below its IPO price for most of that time. Its modest valuation compared with those of other cloud companies such as

Salesforce.com Inc.

and

ServiceNow Inc.

has made it the subject of persistent takeover speculation.

Write to Cara Lombardo at [email protected]

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Fintech Startup Acorns Plans to Go Public in $2 Billion SPAC Deal | Sidnaz Blog


Acorns automatically invests small contributions from users into baskets of stocks and bonds.



Photo:

Tiffany Hagler-Geard/Bloomberg News

Acorns Grow Inc. plans to go public through a merger with a blank-check company in a deal that values the digital savings and investing app at about $2.2 billion, according to people familiar with the matter.

The Irvine, Calif.-based financial-tech company is expected to announce a combination with

Pioneer Merger Corp.


PACX 0.21%

, a special-purpose acquisition company affiliated with the hedge funds Falcon Edge Capital and Patriot Global Management, as soon as Thursday, the people said. As part of the transaction and a related private placement involving funds managed by

BlackRock Inc.,


BLK 0.28%

Wellington Management Co. and other investors, more than $450 million in proceeds will flow to Acorns’s balance sheet, the people said.

Acorns automatically invests small contributions from users into baskets of stocks and bonds. It counts more than 4 million subscribers, most of whom pay $1 a month for the service, though Acorns also offers $3-a-month and $5-a-month options for additional features such as bank accounts or retirement plans. As of May, Acorns had $4.74 billion in assets under management, according to a recent regulatory filing.

Special-purpose acquisition companies, or SPACs, like Pioneer are corporate shells that raise money from investors and go hunting for a private company interested in taking both the shell’s cash and its stock listing as an alternative to an initial public offering. SPACs have raised more than $100 billion in 2021, according to data provider SPAC Research. But share prices for many SPACs and the companies they have taken public have tumbled in recent weeks.

SPACs have become a popular outlet for financial-tech startups, with banking startup Social Finance Inc., real-estate platform Better Holdco Inc. and trading app eToro Group Ltd. all agreeing to multibillion-dollar deals with SPACs in recent months.

Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

Write to Peter Rudegeair at [email protected]

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Speculation Over Elon Musk Tweet Prompts Bitcoin Selloff | Sidnaz Blog


Bitcoin’s dollar value fell more than 7% after a tweet from

Tesla Inc.


TSLA -1.35%

Chief Executive

Elon Musk

prompted speculation that the electric-car maker had sold, or would sell, its holdings of the cryptocurrency.

Elon Musk has long been a prolific tweeter regarding cryptocurrencies.



Photo:

Liesa Johannssen-Koppitz/Bloomberg News

While Mr. Musk later tweeted that Tesla hadn’t sold any bitcoin, the selloff demonstrated his power to shift cryptocurrency markets. Last week, he said Tesla had suspended accepting bitcoin as payment for its vehicles, citing concerns over its carbon footprint. Since then, the market value of bitcoin has fallen to about $850 billion from more than $1 trillion.

Mr. Musk’s recent posts on

Twitter

have shown that his sentiments are having a significant impact on the market, said Chris Bendiksen, head of research at London-based asset management firm CoinShares.

“It’s a little too much for my liking,” he said.

The Tesla chief has long been a prolific tweeter regarding cryptocurrencies, sharing memes and posts about the joke cryptocurrency dogecoin. Earlier this year, Tesla said it added $1.5 billion worth of bitcoin to its corporate treasury. The company sold $272 million worth of bitcoin in the first quarter, helping it report record earnings.

The attention on bitcoin from Mr. Musk likely helped usher new individual investors to buy it, investors and analysts say. Those traders might be more likely to sell based on Mr. Musk’s tweets, increasing volatility.

The price of bitcoin is skyrocketing, driving a rally of momentum trading that’s pushed its value higher than it’s ever been before. WSJ explains how bitcoin trading works, and why the volatile digital currency is reaching all-time highs. Illustration: Jacob Reynolds/WSJ (Video from 12/21/20)

Write to Caitlin Ostroff at [email protected]

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BlackRock’s Rick Rieder Learned the Value of Moderation From | Sidnaz Blog


BlackRock


BLK 2.13%

bond chief

Rick Rieder

learned long ago that making big bets is the easiest way to end up with outsize losses.

The head of fixed income at the world’s largest asset manager says he is distributing his wagers broadly in the face of unprecedented times. He doesn’t expect the pandemic recovery and fiscal stimulus to spur a wave of inflation that ends the long bull market in bonds, but he is also hedging those wagers after learning early in his career that being right isn’t the same thing as making money.

Recently, that has meant trimming assets sensitive to inflation and interest-rate swings, building up cash in his portfolios and buying more corporate loans for their higher returns. To the clients calling to ask whether the economy is overheating, he says price increases are likely temporary, but that the Federal Reserve will have to gradually reduce support for the economy—a prospect he doesn’t find daunting.

“We don’t think inflation is going to be that high for a persistent period of time,” says Mr. Rieder, 59 years old. “But if the markets believe in inflation, well that’s more important than whether six months from now people say, ‘Gosh, you were right.’”

His stance is a key marker on Wall Street, and it stands out at a time when broad inflation worries have racked markets. BlackRock handles $9 trillion in assets on behalf of investors around the globe. Mr. Rieder oversees roughly 20% of that. That alone would give his decisions reach far beyond the company. He is also known as a wizard at divining market forces from the swings of currencies or sovereign bonds.

Many on the Street disagree with his sanguinity. Investors including Bridgewater Associates founder

Ray Dalio

and billionaire trader

Stanley Druckenmiller

are among those worried that the government’s post-pandemic largess risks fueling inflation, hurting the dollar and inflating asset bubbles. A measure of inflation surged in April as the U.S. recovery gained steam, with consumer prices jumping to the highest 12-month level since 2008.

Mr. Rieder’s position is supported by benchmark bond yields, which continue to suggest a rapid return to slow, steady growth. The yield on the 10-year Treasury note, which tends to rise when investors expect a surge in growth and inflation, settled at its highest level in more than a month after data Wednesday showed a bigger-than-expected climb in consumer prices. It remains below its yearly high of 1.749% hit at the end of March.

Mr. Rieder, who works remotely, is boosting the cash in his portfolios and buying more corporate loans for their higher returns.

Wall Street colleagues and competitors describe Mr. Rieder as the opposite of a swashbuckling trader: affable, modest, measured—a 10-handicap golfer whose favorite course is Augusta National. In an era of slow growth, heavy borrowing and perpetually low interest rates, his focus on the crosscurrents of markets and economics commands attention from many.

“There isn’t an investor out there who doesn’t want to know what he’s thinking,” says

Marc Badrichani,

global head of sales and research at JPMorgan Chase & Co. “With an expansive view of global markets, he has a unique ability to spot emerging trends and incorporate them into long-term investment strategies.”

Raised in Westchester County in New York and educated at Emory University and the University of Pennsylvania’s Wharton School, Mr. Rieder says he enjoyed picking penny stocks when he was younger, such as shares of AMF Bowling Worldwide Inc., and thought he might become a financial analyst. After business school, he joined E.F. Hutton & Co. in 1987 without knowing much about bonds. Brokers shouted and flashed hand signals. The trading floor was jammed with bulky computers, but he says he relied on blotters, pen and paper.

“I’ll never forget the first month, sitting there and thinking maybe this is the wrong job,” Mr. Rieder says. “I couldn’t figure out what they were talking about. It was all lingo. I’d go home, and then a week later I’d realized I heard that word again.”

An early trade provided a lifelong lesson. Mr. Rieder bought a chunk of Canadian bonds issued by a utility company, Hydro-Québec. He still remembers the coupon and maturity—details on a bond that affect its value.

He would stay after work to write down the price of every asset that could move his investment. Certain in his analysis, he bought even more. But word of his position got out to traders at other banks. The price moved against him, and he eventually sold at a significant loss. Ever since, he has avoided putting too many eggs in one basket, a strategy he calls “make a little bit of money a lot of times.”

“It changed my thinking and really influenced how I thought about fixed income,” Mr. Rieder says. “I learned that you may be right, but if enough people believe you’re wrong the markets can really hurt you.”

Mr. Rieder says he prefers to ‘make a little bit of money a lot of times,’ rather than become too reliant on one trading area.

It is a strategy that served him well during his climb at BlackRock. He joined the firm in 2009 to run alternative investments for fixed income and became known for his deep dives into data and a habit of cramming multiple, tiny charts into presentation slides. His performance—three of the funds he manages have been awarded gold medals by rating company Morningstar—eventually earned him a promotion to chief investment officer of fixed income in 2010.

In April 2019 he took over BlackRock’s Global Allocation Fund, which includes investments in stocks. Institutional-class shares have since posted a cumulative return of 35% through March 31, outperforming benchmarks and other comparable funds. More than 85% of BlackRock’s actively managed taxable fixed-income assets beat peers or benchmarks over the one- and five-year periods ended March 31.

Morningstar analyst

Claire Butz

says the ratings company upgraded the Global Allocation Fund in May because of Mr. Rieder’s leadership and ability to combine big-picture views with extensive research. She says his takeover was “a welcome change from the previous manager’s more siloed approach.”

BlackRock has also ascended. Quarterly profit rose 49% in April. The firm posted record inflows, with $61 billion pouring in to fixed-income investments in the first quarter of 2021. Across all strategies, BlackRock took in $171.6 billion in net new money, up from roughly $35 billion in the year-earlier quarter.

That size makes BlackRock a prized client for bond desks across Wall Street, with dedicated top-ranked salespeople squabbling over the revenue generated from its trades. It also poses a challenge for Mr. Rieder’s strategy—making it hard to invest in smaller markets without moving prices.

The inflows also indicate that investors remain willing to buy bonds and other fixed-income investments, despite the worries about inflation or a sudden reversal from the Fed.

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Mr. Rieder expects growth to surge and the dollar to remain stronger than many analysts and investors currently predict. Inflation could be “shocked higher over the next few months,” Mr. Rieder says, but he expects it to remain contained in the long term by trends that include an aging population.

“We are living in a very different time than the 1970s and 1980s because of the demographics,” he says. “As the baby-boomer population ages, individuals have to buy fixed income for pensions, retirement investments—and soak up this huge amount of debt that’s coming, meaning it’s not as scary today.”

Still, he has adjusted his holdings for potential inflation risks. He has pared positions in junk bonds, citing their extremely low yields. He is also holding a lot of cash in portfolios, increasing his investments in loans and buying long-dated corporate bonds with derivatives that offer protection from interest-rate swings. He is holding some euros, too.

The possible end of easy monetary policy doesn’t worry Mr. Rieder, who has lived through previous Fed tapering that didn’t deal a lasting blow to stocks and other assets.

“Letting rates normalize, knowing what that plan is—markets can deal with that, they just don’t like uncertainty,” he says. “It’s really hard setting your portfolio up when you’re not certain how that plan will evolve.”

Mr. Rieder has trimmed positions in junk bonds, citing their extremely low yields.

Write to Julia-Ambra Verlaine at [email protected]

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