(Bloomberg) -- Stanhope Capital Chief Executive Officer Daniel Pinto warned that fallout from the banking crisis will be “substantial” and the Federal Reserve must bear the blame.
“I agree we are not on the verge of a massive run on the banks but there will be very, very substantial consequences,” Pinto said in an interview with Francine Lacqua at the Bloomberg Invest conference in London on Wednesday. These will include consolidation, especially in the US, as well as by banks specializing, he added.
The comments follow one of the wildest weeks in the recent history of finance which saw fears of a banking crisis emerge from the collapse of Silicon Valley Bank and quickly spread across continents. Three banks have collapsed and a fourth, Credit Suisse Group AG was forced to merge with rival UBS Group AG as regulators sought to avoid a broader financial collapse. Another, First Republic Bank, is wobbling.
The effects reverberated across markets with bank stocks, corporate debt, commodities and US Treasuries all seeing sudden moves that took many traders by surprise.
“The culprit is, I may say, the Federal Reserve,” Pinto said. “Taking interest rates from 0% to 4.75%, and probably to 5%, over eight months is irresponsible and was not necessary,” he said.
A variety of leaders from asset management and financial firms are speaking at the Bloomberg Invest conference (streaming on LIVE ). They are debating wealth creation in the region and the biggest risks and opportunities facing investors in the UK, Europe and beyond.
All times GMT.
Troy’s Sebastian Lyon Says Inflation is Here to Stay, So Own Gold (3:25 p.m.)
Inflation is here to stay, according to Sebastian Lyon, founder and chief investment officer of Troy Asset Management, who spoke to Bloomberg Opinion’s Merryn Somerset Webb.
“It’s always wages that you’ve got to look at,” said Lyon. “There’s the noise of commodities and oil and food prices, but the thing that sustains inflation over longer periods of time is wages, and we have actually been seeing wages rising materially.”
“Capital has had a fantastic time for the last three decades and it’s labor’s turn.”
In terms of protecting investors’ wealth, Lyon suggests owning some gold.
It “is not a bad place to be in an environment where inflation is high and negative real interest rates remain in place,” he said. Central banks simply cannot raise rates to a level above inflation “because a lot more things will break,” he said.
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Future of the London Stock Exchange (2:25 p.m.)
Taavet Hinrikus, the co-founder of Wise, which listed on the London Stock Exchange in 2021, said that the exchange is losing its luster for initial public offerings.
“I’m not sure I see a very bright future ahead for the London Stock Exchange,” said Hinrikus, who’s since left Wise and co-founded the investment platform Plural. “It’s a very tricky decision, why would you list here.”
Still, other European exchanges are unlikely to unseat it in this part of the world, he said. He also said he hadn’t seen evidence that London is losing its position as a global leader in terms of company creation, and said it would remain so if it can still attract talent.
Debate Over Investing in Art (2:12 p.m.)
Since the mid-1950s, art prices have increased at a rate of about 8.5% annually, Oliver Barker, chairman of Sotheby’s Europe, said at the Bloomberg Invest conference.
The rise of art funds that offer fractional ownership has changed the way the asset class is viewed, Barker said. Art used to be a “passion play,” with buyers looking to enjoy it on their walls. It’s “too early” to say whether returns on partial stakes will be significant.
There’s a “huge amount of speculation” on younger artists, he said, while high-end art is a particularly attractive asset for wealthy families prepared to hold as part of a longer-term strategy.
Blackstone’s Solotar: Crisis Shows Private Equity Well-Positioned (1:35 p.m.)
The latest bank crisis is making it clear that private equity firms are better-positioned than banks to weather sharp shifts in investor confidence, according to Blackstone Inc.’s Joan Solotar.
The last week has highlighted the contrast between money managers that lock up investor capital for the long-run and banks that are susceptible to runs, said Solotar, global head of private wealth solutions, in an interview with Ben Stupples.
“We don’t take deposits. Our structures are meant so that we are never forced to sell assets,” she said. “The appreciation for those caps on liquidity today is far greater than it was.”
In recent months, Blackstone limited redemptions on a high-profile real estate fund, Blackstone Real Estate Income Trust, when a line of investors tried to cash out.
“Guess how many complaints we’ve had? Zero,” Solotar said. “No client complaints. This is a very high-performing fund.”
Retail Traders Have Closed the Gap (12:24 p.m.)
A flood of available information, including on social media, has helped retail investors “narrow the gap” on financial pros, according to a panel at the Bloomberg Invest conference.
During the recent banking turbulence, traders on the platform eToro stayed active, showing a willingness to navigate risk, according to Lule Demmissie, the company’s US CEO. She said more and more retail traders are using options and other “instruments that require more sophistication” to take advantage of volatility.
Algebris CEO Davide Serra Says AT1s Aren’t Dead (11:40 a.m.)
Additional Tier 1 notes are “absolutely not” dead and the space for hybrid capital to protect our deposits is “higher than ever,” according to Davide Serra, founder and CEO at Algebris.
Recent turmoil in the banking system arose because “a couple of institutions did not respect Basel III rules,” Serra said. In the case of Credit Suisse there was a “massive risk management failure” with both Greensill and Archegos.
“Regulators probably should have intervened back then, because you cannot have a 20 times standard deviation event twice and nothing happens,” he said.
KKR’s Philipp Freise Says Private Equity’s Golden Era Just Beginning (11:22 a.m.)
Philipp Freise, co-head of European private equity at KKR, told the Bloomberg Invest conference, says his industry is at the start of a new golden era.
“In an ageing world, where people need to generate returns for people to live decent retirements, you cannot just rely on the public markets,” Freise said. “The democratization of private equity is ushering in a new golden era.”
But he warned the next three months would be “turbulent” for markets and investors.
Permira’s Kurt Björklund Strikes Note of Caution on Leverage (11:07 a.m.)
Private credit and access to a functioning secondary market to boost liquidity will be key in how private equity deals with volatility, industry executives told Bloomberg’s Jan-Henrik Foerster.
You can’t leverage it up to the hilt at low cost and magically conjure higher equity returns out of that anymore, according to Kurt Björklund, managing partner at Permira. Now you have to make sure you’re investing in high-growth profit pools, he said.
Direct lenders are replacing investment banks on larger leveraged buyouts as volatile markets, rate hikes and economic uncertainty stymie borrowers’ traditional debt financing options. Meanwhile, banks have been busy offloading tens of billions of dollars of debt on their balance sheets.
Secondary solutions will be very interesting, according to Imogen Richards, a partner at Pantheon Ventures, who said the market is growing significantly.
Lombard Odier’s Keller Says Swiss Strengths Remain (9:45 a.m.)
Hubert Keller, Lombard Odier’s senior managing partner, said Switzerland’s strengths as a wealth management center will survive Credit Suisse’s collapse.
“Switzerland is the largest place for cross border wealth management in the world for a number of reasons that have not changed with Credit Suisse,” he said in an interview with Lizzy Burden, noting the Swiss lender’s problems stemmed from its investment bank rather than its wealth arm.
He said he expects other Swiss wealth managers will likely benefit from Credit Suisse’s failure, as rich clients look to spread their wealth across multiple firms.
“There is no doubt that there will be some changes with clients as a result of this situation,” Keller said. “There is going to be a diversification effect which indeed is likely to benefit the rest of the wealth management industry in Switzerland.”
Man Group’s Ellis Says Central Banks Decisions (9:30 a.m.)
As well as warning of about the possibility of more pain to come in the banking sector, Man Group CEO Ellis also said central bankers will “have to keep rates high enough to cause pain and that will break things” if they want to bring inflation under control. That would include a willingness to see unemployment increase.
Ellis also had little sympathy for those Credit Suisse bondholders wiped out in the recent takeover. “If you invest in a bond or you lend money to someone and you don’t read the document, you deserve whatever happens to you,” he said.
Man Group CEO Says Banking Crisis Isn’t Over (9:20 a.m.)
Man Group Plc Chief Executive Officer Luke Ellis warned the banking crisis that has sent shockwaves through markets this month isn’t over and more lenders could fail.
“We will have a significant number of more banks that will not exist 12 months to 24 months from now that exist today,” he said in an interview with Dani Burger at the Bloomberg Invest conference in London on Wednesday.
--With assistance from Fareed Sahloul, Dawn Lim, Erin Fuchs and John Stepek.
(An earlier version of this story corrected quotes in the Permira blurb)
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