Stock Markets

Odey scandal prompts Wall Street rethink on how to vet hedge funds

Published

1 year ago

June 16, 2023

Wall Street firms are poised to reassess how they vet hedge funds, industry sources and experts say, following a race to cut ties with Odey Asset Management after founder Crispin Odey was accused of sexual misconduct in the press.

The Financial Times and Tortoise Media, in a joint publication on June 8, reported allegations by 13 women that Odey – one of Britain’s best-known hedge fund managers – had sexually assaulted or harassed them over a 25-year period.

Within hours of that report being published, Wall Street firms including Goldman Sachs, JPMorgan and Morgan Stanley began reviewing prime broking ties with Odey Asset Management, which they then went on to cut.

Odey last week told Reuters that the report was a “rehash of an old article and none of the allegations have been stood up in a courtroom or an investigation.” A spokesperson for the hedge fund declined further comment on Thursday. Odey has since declined calls and messages.

OAM is now breaking up its funds and employees are moving to rivals following the allegations.

Big banks typically agree terms with hedge funds that allow them to cut ties at short notice, five sources from prime brokerages and hedge funds told Reuters.

They may decide to interpret those existing agreements differently to avoid being associated with scandal as they face greater scrutiny on their tolerance for misconduct even when it is making them money.

“Whilst the prime brokers have lagged, they are now catching up. They will likely no longer lend to managers with governance issues similar to those of Epstein or Archegos,” said Michael Oliver Weinberg at the family office, CMT Portfolio Advisers.

JPMorgan Chase agreed this week to pay about $290 million to settle a class action by victims of the late Jeffrey Epstein over the bank’s relationship with the disgraced financier.

Archegos Capital Management founder Bill Hwang allegedly hid his fund’s extreme exposure from its lenders before collapsing in 2021, raising questions about banks’ risk management policies as they faced losses of up to $10 billion.

All of the banks mentioned in this story declined to comment when asked about the vetting process between their prime brokerage services and hedge funds.

Prime brokers lend hedge funds money to make trades. They also often introduce them to new investors. Hedge funds that routinely take a short position on a stock – borrowing shares they do not own to sell them – cannot function without a prime brokerage. OAM takes long and short positions in equities.

Banks covet prime brokerage business – which generated more than $15 billion in annual revenue in recent years – as it enables firms to also offer those clients other services, such as wealth management and investment banking.

Prime brokerages may now refine due diligence processes and perform more thorough background checks on hedge funds, said Jim Neumann, chief investment officer of Sussex Partners, which advises investors on how they give their money to hedge funds.

“Whether or not the prime brokerages should have been aware of any improprieties will be discussed and investigated,” said Neumann.

According to the FT, Odey fired his executive committee in 2021 after he had been given a written warning on how to communicate with female staff. Odey was cleared of indecent assault charges by a British court earlier that year.

END GAME

Goldman Sachs, UBS, Morgan Stanley and JPMorgan have started to wind down service agreements they had with the firm, sources told Reuters. This can take up to 90 days, but the process is often shorter, one of the sources said.

Reasons to sever ties can include when a fund loses money, if it is sued, or goes bankrupt. Sometimes clauses about regulatory approval for employees or the departure of a key person from the fund can mean the end of a relationship, according to a former banker, a hedge fund manager and a prime broker who spoke on condition of anonymity.

But many of these agreements mainly focus on the financial viability of the hedge fund, two of the sources said.

One hedge fund manager said he was asked in his due diligence with the bank if he was approved by the UK regulator, the Financial Conduct Authority. That was enough to pass the checks at the time, some years ago, he said.

Moreover, these agreements typically are not reviewed or amended, the sources added.

Epstein, Archegos and now Odey may have brought a turning point for banks, said several insiders. Any chance of a bad actor and the banks will run, a second hedge fund manager said. They will use terms already baked in to contracts rather than ignore them, the prime broker that spoke to Reuters said.

In the financial services industry there appears to be “a culture of permissiveness towards predatory and abusive conduct towards women in the workplace,” said Erika Kelton, a lawyer at U.S. legal practice Phillips & Cohen, who represents whistleblowers.

“This will change when not only individuals are held accountable, but when firms too are made responsible for their failures of control and governance.”

Stock Markets

Consumers Energy Expanding Community Solar Program with 30-Acre Solar Project in Jackson County

Published

6 hours ago

September 20, 2024

JACKSON, Mich., Sept. 19, 2024 /PRNewswire/ — Consumers Energy plans to break ground next spring on Blackman Solar, a new 30-acre community solar array in its home Jackson County that will provide local clean energy to customers through its Solar Gardens program.

Consumers Energy this week received approval from Blackman Township for the community solar project, which is slated to start generating electricity by the end of 2025.

“Blackman Solar is a great example of a partnership with a community to develop a project that delivers reliable, clean energy as well as local tax and economic benefits,” said David Hicks. Consumers Energy’s vice president of renewable energy development. “We’re grateful for the reception we’ve received from Blackman Township leaders and are excited to continue developing solar projects like this on our path to a carbon-neutral electric grid.”

Blackman Solar will generate power for Consumers Energy’s Solar Gardens community solar program, in which customers choose to support new solar projects without having to own solar arrays.

The new community solar facility will be the fourth that Consumers Energy owns and operates, joining other Solar Gardens projects in Cadillac, at Western Michigan University and at Grand Valley State University. Blackman Solar will include nearly 5,000 solar panels and will generate up to 2.5 megawatts of renewable electricity for 2,500 future Solar Gardens customers.

Blackman Solar also will provide new capacity to expand Consumers Energy’s income-qualified Solar Gardens program MI Sunrise. MI Sunrise is an efficient, easy, cost-effective way for municipalities, nonprofits and tribal governments to deploy federal grant dollars, providing access to clean, reliable renewable energy and measurable financial benefits to offset energy bills.

“Blackman Solar will help meet increased demand for community solar and offers shared solar infrastructure, accessibility and inclusivity, as well as financial and environmental benefits for all customers,” Hicks said.

Consumers Energy is committed to Michigan’s clean energy future. The energy provider is closing its final three coal-burning units next summer, one of the nation’s most aggressive timetables. The company is developing solar projects as part of its Clean Energy Plan to be carbon-neutral by 2040.

Consumers Energy is Michigan’s largest energy provider, providing and/or electricity to 6.8 million of the state’s 10 million residents in all 68 Lower Peninsula counties. Consumers Energy’s Clean Energy Plan calls for eliminating coal as an energy source in 2025, achieving net-zero carbon emissions and meeting 90% of customers’ energy needs through clean sources, including wind and solar.

For more information about Consumers Energy, go to ConsumersEnergy.com.

Check out Consumers Energy on Social Media

Facebook (NASDAQ:): https://www.facebook.com/consumersenergymichigan
Twitter: https://twitter.com/consumersenergy
LinkedIn: https://linkedin.com/company/consumersenergy
Instagram: https://www.instagram.com/consumersenergy

Stock Markets

First Horizon Is Now the Official Bank of the Ragin’ Cajuns

Published

6 hours ago

September 20, 2024

MEMPHIS, Tenn., Sept. 19, 2024 /PRNewswire/ — First Horizon (NYSE:) Corp. (NYSE: FHN or “First Horizon“) is proud to announce that First Horizon Bank is now the Official Bank of the University of Louisiana at Lafayette Ragin’ Cajuns.

This five-year agreement expands First Horizon’s long-term commitment to the University and includes a Ragin’ Cajun Visa (NYSE:) Debit card, prominent in-venue signage, entertainment and hospitality opportunities along with participation in game day fan activations and experiences, including the new Cajun Village.

“This is an exciting time to expand our partnership with ULL and ULL athletics,” said Jerry Prejean, President of Acadiana for First Horizon. “With more than $2.5 million invested in recent years towards academic and athletic excellence, First Horizon is proud to deepen our relationship with the University and work together as two long-standing community leaders dedicated to making Acadiana a great place to call home.”

“As opportunities have grown for businesses to support Ragin’ Cajuns athletics, First Horizon Bank has been right there growing with us every step of the way,” adds Brian Bille, General Manager of LEARFIELD-based Ragin’ Cajuns Sports Properties. “Jerry’s commitment to our community has never wavered, and I’m excited to help First Horizon build affinity with our fans through this enhanced partnership, and encourage our fans to add the all-new Ragin’ Cajuns branded debit card to their wallet.”

About First Horizon
First Horizon Corp. (NYSE: FHN), with $82.2 billion in assets as of June 30, 2024, is a leading regional financial services company, dedicated to helping our clients, communities and associates unlock their full potential with capital and counsel. Headquartered in Memphis, TN, the banking subsidiary First Horizon Bank operates in 12 states across the southern U.S. The Company and its subsidiaries offer commercial, private banking, consumer, small business, wealth and trust management, retail brokerage, capital markets, fixed income, and mortgage banking services. First Horizon has been recognized as one of the nation’s best employers by Fortune and Forbes magazines and a Top 10 Most Reputable U.S. Bank. More information is available at www.FirstHorizon.com.

Stock Markets

Oil prices rise on easing demand worries after jumbo Fed rate cut

Published

6 hours ago

September 20, 2024

Investing.com — Oil prices jumped Thursday, riding on a wave of risk-on sentiment as the Federal Reserve’s outsized interest rate cut on Wednesday eased worries that a slowing US economy would further dent crude demand.

At 2:06 p.m. ET (1906 GMT), rose 1.6% to $74.80 a barrel and rose 1.8% to $71.12 a barrel.

Jobless claims rise by less than expected

The number of Americans filing for first-time unemployment benefits rose by less than anticipated last week, with coming in at 219,000 in the week ended on Sept. 14, compared with an upwardly revised 231,000 in the prior week.

Economists had forecast a consensus figure of 230,000.

This figure was better than expected, and has allayed to a degree concerns over the health of the US economy, particularly after the Federal Reserve started its latest rate-cutting cycle on Wednesday, trimming interest rates for the first time since March 2020 by a hefty 50 basis points to a range of 4.75% to 5%.

While lower rates usually bode well for economic activity, the Fed’s aggressive cut sparked some concerns over a potential slowdown in economic growth.

While Fed Chair Jerome Powell helped soothe some of these concerns, he also said that the Fed had no intention of returning to an era of ultra-low interest rates, and that the central bank’s neutral rate was likely to be much higher than seen in the past.

His comments indicated that while interest rates will fall in the near-term, the Fed was likely to keep rates higher in the medium-to-long term.

US inventories fall, but product stockpiles up

Government data released on Wednesday showed a bigger-than-expected, 1.63 million barrel draw in .

While the draw was much bigger than expectations for a draw of 0.2 mb, it was also accompanied by builds in and inventories.

The builds in product inventories sparked increased concerns that U.S. fuel demand was cooling as the travel-heavy summer season wound to a close.

Looking ahead, some expect further draws in domestic crude stocks as exports reaccelerate.

“We look for a significant rebound in exports across crude and products this week. Among products, our preliminary expectations point to draws in gasoline (-1.5 MM BBL) and distillate (-3.7 MM BBL) with a build in jet (+0.5 MM BBL),” Macquarie said in a recent note.

Crude deficit could boost Brent

Still, prices could be bolstered in the near-term by demand possibly outstripping supply in the fourth quarter, according to analysts at Citi.

A reported decision by the Organization of the Petroleum Exporting Countries and its allies to delay the beginning of a tapering in voluntary output cuts, along with ongoing supply losses in Libya, is predicted to contribute to a oil market deficit of around 0.4 million barrels per day in the final three months of 2024, the Citi analysts said.

They added that such a trend could offer some temporary support to Brent “in the $70 to $75 per barrel range.”

Meanwhile, the benchmark could be further boosted by a potential rebound in recently tepid demand from top oil importer China, the analysts said.

But they flagged that they still anticipate “renewed price weakness” in 2025, with Brent on a path to $60 per barrel due to an impending surplus of one million barrels per day.

(Peter Nurse, Ambar Warrick contributed to this article.)