There are fewer super funds, and associations that represent them, than ever before. But multiple layers of industry representation working at cross-purposes means that true unity has remained elusive, according to the Financial Services Council.
The world’s largest sovereign wealth fund just made its largest return ever. But the probability of extreme market events has “arguably risen”, and it’s carrying out stress tests for a more uncertain future.
Liquidnet hedges its bets with private markets service
(Pictured: Seth Merrin)
Liquidnet, the global off-market trading network for asset managers, is looking to emulate its coverage of the listed space my moving into unlisted transactions. Headline-grabbing IPOs mask the fact that private companies are staying private longer.
On a visit to Australia last week, Seth Merrin, Liquidnet’s founder, said there are only about half the public companies now as there were 10 years ago. “We know in the US, that companies are staying private for about twice as long as they used to,” he said.
Liquidnet has been working for the past 18 months on a service which will facilitate trading in the private markets.
“We’ve done a couple (of transactions) now,” Merrin said. But he added later, and perhaps this is part of the listed markets’ problem, that “we like what we’re doing… I’m not interested in going public.”
The work on private markets is still in its infancy and is unlikely to be available as a service in Australia anytime soon. But Merrin does things for the very long term.
An important aspect of what he does, for instance, is in the philanthropic world. While it has a potential spin-off for Liquidnet, he helped create the “Access to Global Capital Initiative” with the Milken Institute, which former British prime minister Tony Blair joined this year. Its role is to incentivize governments to eliminate corruption.
“We use Singapore as an example. In 1965 it wasn’t much more than swamp land. They had a goal to become a leader in the region and it’s happened.”
His signature project, though, is Rwanda, where he says there is now no corruption. Liquidnet built a “youth village” for orphans of the 1994 massacre, which includes group homes, high school, medical facilities and land for organic farming. It’s a part of the “Liquidnet for Good” program which looks to foster improvements in broader societies around the world. Merrin says the next country they go into will be Colombia.
The spin-offs for Liquidnet are obviously very long term, helping to create another one billion middle-class consumers around the world, some of whom will also build businesses.
Liquidnet’s clients, which it calls “members”, total about 750 asset managers, including 230 in the Asia Pacific region. Liquidnet trades in 42 markets which account for 70 per cent of the world’s public companies. It is the largest facilitator of block trades in the world. Block trading requires critical mass to work.
“Australia was the best market we ever launched in,” Merrin says. “It was a very fast take-up.” The company is still signing up new members because it takes time to get a firm to change its daily workflow.
He is a believer in the “great rotation” theory that all or most of the money which left equities post the GFC and went into bonds will return soon.
“We know there will be a great rotation into equities but we don’t know when. US$1 billion left equities to go into fixed interest, so that’s up for grabs. Traditionally, 70 per cent of that would go back into US equities, but I don’t think that’s the case any more.”
