Lisa Fu

My commentary on the Treasury's NPRM on outbound investment and findings from the 2023 CSET report in Roll Call today: "Between 2015 and 2021, at least $40.2 billion, or about 37 percent, of the $110 billion in capital raised by Chinese artificial intelligence companies involved U.S. investors, according to a 2023 report by the Center for Security and Emerging Technology at Georgetown University’s Walsh School of Foreign Service. The proposed rule seeks to cover investments in AI technologies that would have specific military end uses, including weapons development, target identification and combat simulation. But it also would expand investment prohibitions to the development of powerful AI systems known as frontier models, said Ngor Luong, a senior research analyst at Georgetown’s CSET. The proposed rule intends to set the boundary for prohibitions based on the computing power such AI models would use, Luong said." https://lnkd.in/emp62Ks3

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MY LATEST ON PRIVATE CREDIT: Blue-chip asset managers known primarily for their private-equity businesses have significantly increased private credit as a percentage of their assets under management within the past year. Private-equity giant Blackstone, with assets that rose about 7% to more than $1.06 trillion in the first quarter, increased its credit and insurance assets 13% to $329.6 billion at the end of March from $291.3 billion a year earlier. At buyout firm KKR & Co., assets managed by its credit business rose almost 12% to $260 billion at the end of this year’s first quarter from $233 billion a year earlier. Other publicly traded asset managers have also noted the increasing importance of private credit. In recent earnings reports and conference calls on the results, firm leaders cited strong returns as well as significant investor and borrower interest in debt offerings as driving forces of growth in the asset class. https://lnkd.in/ebDbhWw2

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Guggenheim Partners is talking to lenders, including private credit firms, to gauge their interest in financing the potential $6.6 billion buyout of US department store chain Macy’s Inc. by investment firms Arkhouse Management Co. and Brigade Capital Management. The funding could include at least $1.4 billion of debt, spread over multiple transactions tied to different types of collateral, according to people with knowledge of the matter. Guggenheim is seeking a $650 million loan at the operating company level, said the people, asking not to be identified as the details are private. That financing would be a type of debt known as “first in, last out,” and would be in addition to a large asset-based loan from a bank. Meanwhile, Guggenheim is also sounding out investors for debt backed by the department store-operator’s real estate, which could total more than $700 million to be financed through the commercial mortgage-backed securities market, according to the people. Another slice of debt tied to the company’s properties could be added on top of that, said the people. w/ Reshmi Basu https://lnkd.in/dfRunsHV

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Eye on the CFPB: 2023 Annual Report Takeaways for Fintech The Consumer Financial Protection Bureau's annual report is out, and as an investor focused on early-stage fintech, a few things jumped out at me (and probably should stand out to you too): Credit Reporting Reigns Supreme (Again) It's no secret that credit reporting continues to be a major pain point for consumers. Identity theft, unauthorized accounts, and error resolution remain at the crux of consumer vexation. With 1.1 million of the total 1.3 million complaints logged in 2023, credit and consumer reporting claimed over 80% of the total volume. With the three major nationwide consumer reporting agencies alone (Experian, Equifax, & TransUnion) receiving north of 1 million complaints, it's clear the current system is falling short. Can Fintech play a disruptive role here? To me, this landscape underscores the critical role emerging technologies can play. Dodd-Frank Section 1033, granting consumers the right to access their own financial data, opens exciting possibilities for innovation. I’d like to see an environment where consumers have more control over their data, with secure and transparent identity verification and streamlined dispute resolution. Fintech Takes’ Alex Johnson just sent out an incredible write up on this very notion, be sure to check that out if your nerdy curiosities are spiked by consumer data. Debt Collection Concerns Linger Debt collection woes ranking second on the CFPB's list shouldn't be dismissed as a mere formality either. While the CFPB plays a vital role, there's room for fintech to improve the often-fraught debt collection experience. We need solutions that prioritize communication, transparency, and a focus on financial well-being. Fintech can, and should, revolutionize how debt collection is handled – modern, consumer-friendly AI-powered tools that personalize repayment plans and connect debtors with resources to get back on track. The Road Ahead for Fintech The CFPB report highlights areas ripe for improvement, and hopefully, innovation. As early-stage investors, we should be looking for fintechs striking the balance between fostering solutions that are both effective and fully compliant with the evolving regulatory environment, especially as data privacy and access become increasingly important. Here's the exciting part: with challenges, come solutions! These challenges present an opportunity for growth in the fintech space. By focusing on building trust, empowering consumers, and creating a more efficient financial system, we can not only generate positive returns but also make a real difference in people's lives. #CFPB #Fintech #VentureCapital #FinancialInclusion #ConsumerFinance P.S. If you're a fintech founder or investor, these things are pretty important. Please share your thoughts on the CFPB report and the future of fintech in light of these findings!

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Infranity Insight: The Case for Resilient High Yield Private Credit. We're thrilled to share our latest Infranity Insight, authored by Patrick Liedtke (Chief Client Officer & Chief Economist) and Nohman Iqbal (Investor Relations Director). This timely report dives into why High Yield Private Credit is well-suited to navigate current market conditions. Follow the link below to read more - Professional Investors only - :

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Software maker Databricks Inc. has clinched more than $5 billion of financing from lenders including Blackstone Inc., Apollo Global Management Inc. and Blue Owl Capital Inc. in its largest debt raise to date, according to people with knowledge of the matter. With Ellen Rose Schneider https://lnkd.in/dxD3Qrfd

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Seems like the private market is on fire! 🔥 Ares Management Corporation just made a splash with a $5.2 billion acquisition of GLP Capital Partners' international arm. This follows similar deals by Blue Owl Capital and BlackRock, all driven by the booming demand for AI and energy storage. According to Infralogic data, 118 data center deals already closed this year valued at $86.16 billion, compared to 140 deals worth $61.64 billion at the end of 2023. With several months left in the year, we're on track to set another record for data center transactions. “This market is so massive in terms of the data centre demand,” Michael Arougheti CEO of Ares told Financial Times this week. “There is still a significant undersupply of capital to meet that demand.” Follow us on Infralogic for a live pipeline of upcoming data center deals and financing trends. #privatecredit #realestate #AI #datacenters

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Apollo Global Management Inc. is focusing its new private-credit trading desk on investment-grade debt it has originated as the firm rolls out plans to bundle it into exchange-traded funds, according to people with knowledge of the matter. The refined scope of the firm’s operation would help traders to establish a market price for the debt, which would be crucial to the ETF push. Some of the debt, including portions of the Intel transaction, has already been sold to investors such as insurers, said the people, who declined to be identified because the matter is private. W/ Silas Brown https://lnkd.in/eP2XtriH

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Blackstone Inc. is considering tapping the securitized debt market to help finance its acquisition of a majority stake in Jersey Mike’s, to support a portion of the $8 billion buyout of the sandwich chain. Read more from my esteemed colleagues: https://lnkd.in/e_BiiuFZ

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A kaleidoscope of opportunity: Investing in rainbow bonds 🌈 I spoke to Nuveen, a TIAA company's Stephen M. Liberatore, CFA about the colorful world of sustainable fixed income for Citywire Selector's most recent In Focus. Read all about the bonds that build up rhino populations, reduce greenhouse gas emissions, protect marine ecosystems, and promote women's empowerment while delivering a financial return. Image: Thunderstorm in the Alps (1868) by Frederic Edwin Church https://lnkd.in/eXui9m6f

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From my Taking Stock today: the higher technology stocks go, the less tolerant one nook of Wall Street gets to any signs of weakness in the group. Commodity trading advisors, or CTAs, that use trend-following strategies boosted exposure in Nasdaq 100 futures to such stretched levels that the so-called stop-loss triggers have become very tight, according to Bank of America Corp. From where things stand, CTAs can start unwinding their positions if the gauge’s futures drop 2.8% or more. A month ago, the pain threshold hovered near 4%.

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Trading of Cboe S&P 500 Variance Futures (ticker: VA) launched today! Mandy Xu and Natalie Reed share how VA futures fit into our volatility trading toolkit below - learn more here: https://bit.ly/3B8360e

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We wont see spot SOL ETFs in 2024. Let me explain: 1. The absence of Solana futures contracts on the Chicago Mercantile Exchange (CME) presents a major hinderance in the US seeing spot SOL ETFs anytime soon. Even if the CME were to introduce SOL futures contracts today, it would take months (even years) to record data deep enough to analyse in the same way the SEC did before approving spot BTC and spot ETH ETFs. For context, the SEC used a 31-month sample period to study  the correlation between spot ETH prices and CME ETH futures prices before coming to the conclusion that the two were correlated. The close price correlation gave SEC enough confidence to accept that any "fraudulent and manipulative acts and practices" could be detected by CME's surveillance system. 2. Furthermore, the SEC explicitly called Solana a security on three separate occasions in 2023 in its lawsuits against Coinbase, Binance and Kraken. On the contrary, the market watchdog did not mention BTC and ETH as securities in its lawsuits against the three exchanges. 3. Lastly, Sergei Chmel of SeQuant Capital said that Solana market cap is too small and it "doesn’t make sense for any traditional allocator to put money there.” At the time of writing, Solana’s market cap stood at over $75 billion - 1,673% less than BTC's $1.33 trillion and 494% less than ETH's $446 billion.

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The private credit boom is spilling over into the secondaries market and some participants are anticipating private credit secondaries will be a $50B market by 2027. https://lnkd.in/emq5qeYh What else is happening? Drop me a line. #privatecredit #secondaries

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Portfolio allocation is something we have been talking to managers and investors a lot lately in PERE Credit - most recently, we spoke to J.P. Morgan Asset Management's Pulkit Sharma, CFA, CAIA and Jared Gross about how real estate allocations are changing in a higher-rate world. https://lnkd.in/eZG8qQkK

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My latest for PitchBook Leveraged Commentary & Data (LCD) on the rise of investment-grade private credit as direct lenders seek to lend to...everything

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Leading private equity firm Carlyle & Goldman Sachs to invest $1.1 billion in financial services provider Apex Group via Holdco PIK Notes (Payment-in-Kind).   In 2020, Carlyle & Goldman Sachs had invested in Apex Group Preferred Equity Note, and investing in a follow-on issue in 2021.  Read - https://lnkd.in/gnx7uTdp follow Caproasia | Driving the future of Asia Leading private equity firm Carlyle ($425 billion AUM) & Goldman Sachs ($450 billion Alternatives AUM) have committed to invest $1.1 billion in financial services provider Apex Group via Holdco PIK Notes (Payment-in-Kind).   In 2020, Carlyle & Goldman Sachs had invested in Apex Group Preferred Equity Note, and investing in a follow-on issue in 2021.  Announcement (24/6/24): “Apex Group Ltd. (“Apex”) has announced global investment firm Carlyle’s Global Credit business (“Carlyle”) and Goldman Sachs Private Credit (“Goldman Sachs”), have jointly committed in excess of $1.1bn into the global financial services provider. This commitment endorses Apex’s sustainable growth strategy, following the successful integration of a number of previous acquisitions, continued strong organic growth and technological innovations.  Apex’s assets on platform now stand at $3.1 trillion serviced across custody, administration, depositary and under management by over 13,000 employees worldwide.  Carlyle and Goldman Sachs have committed to Holdco PIK Notes of Apex to continue to support the company’s growth plans that will focus on optimising the current platform, strategy and combined investment in technology innovation.  This builds on the firms’ continued relationship with Apex, following an initial Preferred Equity Note in 2020 and a follow-on issuance in 2021. Upon completion of the transaction Apex will have enhanced its financial profile, both in terms of leverage and liquidity.  Financial terms were not disclosed.” Peter Hughes, Founder and CEO at Apex Group Ltd : “We are extremely pleased to further expand our relationship with Carlye and Goldman Sachs. The new issuance validates Apex’s strong business model but will also enable product and geographic expansion as well as further technology investment.”

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NEW: MUFG's US corporate lending arms just came back to market from an almost four month break after getting dinged by regulators. More details now available for subscribers on 9fin. If you want access to this and more on what's happening in the private credit market, contact [email protected] for more information. The latest w/ David Brooke: #privatecredit #leveragedfinance

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  With less than a month to go until election day, many #hedgefund managers are taking a new approach: wait and see.   Jon Caplis shares some thoughts with Natalia Kniazhevich of Bloomberg on how Wall Street is approaching the election this year. #Hedgefunds are “waiting until there’s more clarity before making significant politically connected investment bets. It’s much easier to discern the investment impact of a #Fed interest-rate cut than a hazy statement from the Trump or Harris campaigns.”   As we also shared, the approach has worked so far this year; US long-short hedge funds have posted an 11% gain through September, which is in the top quartile of rolling nine-month returns since 2010.   #election2024 #interestrates   https://lnkd.in/e2krSR6a

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