The Importance of Relationship Banks and How They can Benefit Alternative Investment Funds

In this interview, Johannes Geberth, Head of Institutional Investors at Raiffeisen Bank International AG, discusses the key role of relationship banks in supporting alternative investment funds throughout their lifecycle.

1. In your opinion, what are the key factors that alternative investment funds should consider when selecting a relationship bank?

When selecting a relationship bank, alternative investment funds should consider key factors such as the bank’s industry expertise, tailored financial solutions, dedicated relationship management, flexibility, and ability to provide strategic advice and product support throughout the fund lifecycle.

2. What makes a successful relationship bank – especially for the alternative investment industry?

Relationship banks provide more than just basic banking services. Unlike transactional banks, which focus primarily on individual transactions, relationship banks prioritize building long-term partnerships with their clients. A successful relationship bank, based on my experience, is characterized by several key factors:

The first is a relationship bank’s deep understanding of its clients’ businesses and industry: understanding the business models, unique dynamics and challenges of alternative investment funds is critical to the success of the relationship. This enables the bank to offer tailored financial solutions and strategic advice that are aligned with the fund’s objectives.

The second key success factor is a dedicated and proactive relationship manager focused on long-term partnership: Professionals who develop a deep understanding of the fund industry per se, the fund’s business objectives and operational requirements, acting as the primary point of contact and coordinating with various internal teams to ensure seamless service delivery. Successful relationship banks take a proactive approach to relationship management. They anticipate their clients’ needs, identify opportunities for value creation, and offer strategic advice to help funds achieve their investment objectives. This may include identifying new financing opportunities, optimizing cash flow, or providing insights on market trends. A Relationship Bank invests time and resources in understanding their clients’ business needs, and doesn’t take an opportunistic client approach, but remains committed to supporting them throughout the entire fund lifecycle, from fundraising to exit.

The third success factor is tailored solutions: A Relationship Bank offers customized financial solutions that meet the specific needs of the funds. Whether it’s fund finance, leveraged and acquisition finance, project and structured finance, or cash management, these solutions are designed to support the fund’s investment strategy and goals.

3. Can you discuss the role of relationship banks in supporting alternative investment funds through various stages of the fund lifecycle, from

Wall Street found a win in the messy FTX bankruptcy

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Cryptocurrency was supposed to democratise finance. Wall Street, though, always finds a way to win.

The debtor in the bankruptcy of FTX this week said account holders would get at least 118 cents on the dollar for the value of their claims from the crypto exchange’s November 2022 collapse. It is, all things considered, a good outcome. It is also one that vulture funds saw coming.

Firms such as Attestor, Farallon, Oaktree and Silver Point, among others, have been purchasing secondary claims for months on exchanges that specialise in the racy world of bankruptcy interests. In the chaotic weeks after the FTX bankruptcy filing, those claims were changing hands for well under 20 cents on the dollar.

The task of the case was to find, collect and sell every FTX asset under the sun for cash. And those assets were pulled in just as crypto prices were surging, along with the value of the company’s venture capital portfolio.

In the weeks leading up to the unveiling of the reorganisation plan, claims were changing hands at levels approaching 100 cents. It was obvious merely by following the case docket that plenty of money was flowing into FTX’s coffers.

Still, assembling a plan remained an administrative nightmare. Government agencies such as the Department of Justice, Internal Revenue Service and Commodity Futures Trading Commission each had their own claims to assert against FTX. The debtor was able to convince Uncle Sam to let account holders get the first dibs on proceeds.

Bankruptcy wonks have been impressed how quickly John Ray, the emergency FTX chief executive and his advisers, have filed their plan of reorganisation. Similarly messy liquidations such as Enron and Lehman Brothers took much longer.

Account holders themselves have mixed feelings about their win. The 118 cent recovery is based on crypto prices at the nadir of the 2022 crypto winter. They will not have fully benefited from the huge rally in coin prices since.

Depositors of financial institutions have the right to ask for their money back on demand. Impatience can be an expensive luxury.

Patience, on the other side, can prove a lucrative virtue. The total par value of FTX claims is $12bn. With total recoveries to reach $15bn, the total trough-to-peak gains will be more than $13bn.

The funds that were willing to buy available claims for 30, 40,

SoftBank Group considers acquisition of semiconductor startup Graphcore 

Japanese multinational investment company SoftBank Group has been considering the acquisition of Graphcore, a UK semiconductor startup that has faced challenges despite a previous valuation of $2.8bn, according to a report by Bloomberg. 

Bloomberg’s unnamed sources revealed that SoftBank’s discussions have been ongoing for several months and have recently progressed to more detailed negotiations, although the financial terms are yet to be finalised. The possibility of the talks falling through still exists, and a final agreement is not expected in the immediate future.

According to the report, the discussions come as Masayoshi Son, Chairman of SoftBank, reportedly plans to amass approximately $100bn to fund an AI chip venture, having paused its tech investments in 2022 and returning to dealmaking in late 2023 with a focus on AI and autonomy.

The discussions also coincide with a period of increased sales for SoftBank, largely attributed to its majority ownership of another UK-based chip designer, Arm Holdings. In February, Arm announced developments in its expansion beyond smartphones into additional artificial intelligence applications, leading to a roughly 40% increase in its share price.

Graphcore was founded in Bristol in 2016 and specialises in a different type of chip technology than Arm, designing large “intelligence processing units” intended to assist with AI software processing within data centres.

Despite securing investment from companies such as Samsung Electronics, Bosch and Sequoia Capital, Graphcore has struggled to gain momentum. The company’s revenue for 2022 was reported at just $2.7 m, a 46% decrease from the previous year, and pre-tax losses increased to $204.6m. Graphcore has closed operations in Norway, Japan and Korea and plans to reduce its workforce in other markets. The company has also indicated a need to secure additional capital to continue operations.

Number of investment trust share buybacks hits record high but effectiveness called into question

At the same time, an increasing number of investment trusts veered towards tender offers, with a total of 28 funds embarking in 47 transactions of the sort, a level not seen since 2019. These had a combined worth of £860m, down from the record £1.2bn of 2020, but nearly double the £580m tendered in 2022. Deep Dive: UK companies lean towards buybacks as trusts weigh discount narrowing efficiency The rationale behind share buybacks stems from investment trust boards’ urge to proactively attempt to narrow discounts. At the end of October 2023, the average investment trust discount …

Concord sticks with $1.51bn offer for Hipgnosis Songs Fund

The firm said its offer of $1.25 per SONG share, which values the trust at around $1.51bn, is “final and will not be increased”. Blackstone ups offer for Hipgnosis Songs Fund to $1.57bn Concord’s decision follows an increased bid by Blackstone of $1.3 per SONG share, valuing the fund at more than $1.57bn, on 29 April – a 4% increase from Concord’s revised offer. At the time, SONG’s directors said they would unanimously recommend Blackstone’s counteroffer to shareholders, urging them to vote in its favour at the requisite court and general meetings. A date for the meetings is yet…

Investment management drives 13.6% rise in operating income for Rathbones

In its Q1 results published today (9 May), the company noted an operating income of £223.6m, without the £89.8m contribution from IW&I.  Rathbones raids Brown Shipley for five senior managers At the same time, total funds under management and administration (FUMA) reached £107.6bn during the first three months of 2024, increasing by 2.1% compared to the previous quarter. The largest share of assets was posted by Rathbones Investment Management (£49.2bn) and Investec Wealth & Investment (£42.2bn). Market and investment performance added £2.8bn to Rathbones’ FUMA during the firs…

The Worst-Performing ETFs of the Month

Exchange-traded funds, or ETFs, are often low-cost instruments for investors to track popular indexes or leverage experienced manager choices in an attempt to beat the market. The best ones serve as building blocks for a portfolio, and unlike open-end mutual funds, all ETFs are traded throughout the day on an exchange.

In April 2024, the worst performers included VanEck Crypto & Blockchain Innovators UCITS ETF (DAPP) and iShares Blockchain Technology UCITS ETF (BLKC). Data in this article is sourced from Morningstar Direct.

To read about the best-performing ETFs, check out our other story.

To find the month’s worst-performing ETFs, we screened those in Morningstar’s Equity, Allocation, or Fixed-Income categories that are available in the UK. We excluded exchange-traded notes, known as ETNs, and ETFs with less than $25 million (£20.0 million) in total assets. We also excluded funds that fall into Morningstar’s “trading” categories, as these funds are designed for active traders and are not suitable for long-term investors.

Among the worst-performing ETFs, three were from the Indonesia equity category, where funds fell 7.23% in April.

The 10 Worst-Performing ETFs for April 2024

1. VanEck Crypto & Blockchain Innovators UCITS ETF (DAPP)
2. iShares Blockchain Technology UCITS ETF (BLKC)
3. Invesco CoinShares Global Blockchain UCITS ETF  (BCHN)
4. Invesco Solar Energy UCITS ETF  (ISUN)
5. Xtrackers MSCI Europe Information Technology ESG Screened UCITS ETF  (XS8R)
6. HSBC MSCI Indonesia UCITS ETF  (HIDD)
7. Amundi MSCI Indonesia UCITS ETF  (INDO)
8. Xtrackers MSCI Indonesia Swap UCITS ETF (XMIN)
9. Invesco Real Estate S&P US Select Sector UCITS ETF (XRES)
10. WisdomTree Cloud Computing UCITS ETF (WCLD)

Metrics for the Worst-Performing ETFs

VanEck Crypto & Blockchain Innovators UCITS ETF

• Morningstar Rating: N/A
• Ongoing Charge: 0.65%
• Morningstar Category: Equity Technology

The worst-performing ETF in April was the £93 million VanEck Crypto & Blockchain Innovators UCITS ETF, which lost 22.69%. The passively managed VanEck ETF fell further than the average 3.05% loss on funds in the equity technology category in April. Over the past 12 months, the VanEck Crypto & Blockchain Innovators UCITS ETF rose 66.74%, placing it in the 2nd percentile within its category and outperforming the 26.96% return on the average fund.

The VanEck Crypto & Blockchain Innovators UCITS ETF, launched in April 2021, has a Morningstar Medalist Rating of Bronze.

iShares Blockchain Technology UCITS ETF

• Morningstar Rating: N/A
• Ongoing Charge: 0.50%
• Morningstar Category: Equity Technology

With a 19.23% loss, the £35 million iShares Blockchain Technology UCITS ETF was the

The PHA Group’s Neil McLeod: Navigating the FCA’s proposal to name companies under investigation

Having provoked fury in business and politics, the Financial Conduct Authority has even drawn a rare intervention concerning its dealings from the Chancellor, Jeremy Hunt, who urged a rethink from the operationally independent regulator.  His ire was topped by the Lords financial services regulation committee, which wrote to FCA CEO Nikhil Rathi asking for the work on the plans to be paused. Having been ignored, this may even lead to a short inquiry at which Rathi will be ‘invited’ to appear. Jeremy Hunt calls on FCA to ‘re-look’ at name and shame policy – reports UK Finance, among…

Why investors should exercise restraint on debt

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The writer is co-founder and co-chair of Oaktree Capital Management and author of ‘Mastering the Market Cycle: Getting the Odds on Your Side’

It is obvious that all else being equal, people and companies that are indebted are more likely to run into trouble than those that are not. It is the presence of debt that creates the possibility of default, foreclosure and bankruptcy.

Does that mean debt is a bad thing and should be avoided? Absolutely not. Rather, it is a matter of whether the amount of debt is appropriate relative to the size of the overall enterprise and the potential for fluctuations in the enterprise’s profitability and asset value.

The reason for taking on debt, using what investors call “leverage”, is simple: to increase so-called capital efficiency. Debt capital is usually cheap relative to the expected returns that motivate equity investments and thus relative to the imputed cost of equity capital.

Thus, it is “efficient” to use it in lieu of equity. In casinos, I have heard the pit boss say: “The more you bet, the more you win when you win.” Likewise, for a given amount of equity capital, the more debt capital you use, the more assets you can own, and the more assets you own, the greater your profits will be — when things go well.

But few people talk about the downside. The pit boss never says: “And the more you lose when you lose.” Likewise, when your assets decline in value, the more leverage you have employed, the more equity loss you will suffer.

The magnification of gains and losses stemming from leverage is typically symmetrical. A given amount of leverage amplifies gains and losses similarly. But levered portfolios face a downside risk to which there is not a corresponding upside: the risk of ruin.

The most important adage regarding leverage reminds us to “never forget the six-foot-tall person who drowned crossing the stream that was five feet deep on average”. To survive, you have to get through the low points, and the more leverage you carry, everything else being equal, the less likely you are to do so.

Obviously the greatest leverage-related losses occur when the potential for downward fluctuations has been underestimated for a meaningful period of time and thus the use of leverage has become excessive.

When things have been going well in markets for a

How to worry about markets

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Good morning. Shares in Arm fell by a tenth in late trading yesterday after the chip designer gave slightly disappointing revenue projections for the year to come. Is this the beginning of the end of the AI stock bubble? Only if you think Arm is really an AI stock, which I don’t. Still, it tells you something about what happens when a tech stock with a high valuation comes up a little bit short. Email with better news: robert.armstrong@ft.com.

Amid prosperity, gloom

Anyone convinced that the US economy is slowing — gently or violently — owes the rest of us an explanation of this:

In the last week or so, the Atlanta Fed’s GDPNow tracker of the annual growth rate of real US output has gone from warm and falling to hot and rising. It’s still early in the quarter, and the tracker incorporates more data, becoming more accurate, as the quarter passes. But still.

It will not surprise readers of this newsletter, or of the fourth-quarter GDP report, or of most first-quarter earnings reports, that the key contributor to the hot reading is consumer spending. About two-thirds of the growth in GDPNow’s current reading derives from consumer spending; two-thirds of that comes from spending on services. Most of the growth is down to investment. Within investment, only non-residential construction is creating a drag.

But even against this robust backdrop there have been plenty of comments from economists, analysts, and money managers suggesting the economy is already cooling, or might start to soon — and that it’s not just cooling enough to get inflation to target, but enough that we should worry. I would expect this strain of commentary to persist, even if the main economic indicators continue to signal strength. The increasingly normal post-pandemic economy is still strange enough that we have no choice but to take hints of trouble seriously. This remains an environment where surprises are not surprising.

What follows, then, is a gallery of the main negative data points that I have been hearing about recently. I present them not because I think they point to a serious slowdown or