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  Tuesday, 15 Apr 2014 | 1:17 PM ET

Outlook for pensions is pretty awful: Bridgewater

Posted By: Lawrence Delevingne
Pension funds & return reality
CNBC enterprise reporter Lawrence Delevingne breaks down how many public pension funds overestimate annual returns.

Here's a scary retirement prediction: 85 percent of public pensions could fail in 30 years.

That's according to the largest hedge fund firm in the world, Bridgewater Associates, which runs $150 billion for pensions and other institutions like endowments and foundations.

Public pensions have just $3 trillion in assets to cover liabilities that will balloon to $10 trillion in future decades, Bridgewater said in a client note last week obtained by USA Today.

To make up the difference, the firm said pensions will need to earn about 9 percent per year on their investments. But Bridgewater estimates pension funds are more likely to make 4 percent. If that's true, the vast majority—85 percent—of retirement systems will run out of money because they will continue to pay out more than they take in.

The report comes as pensions wrestle with what rates of return to assume given their implications on future financial health.

The city of Detroit, for example, has reportedly agreed to increase its pensions' projected return to 6.75 percent on its pension funds, up from 6.25 percent and 6.5 percent, according to a separate USA Today report. The change is part of ongoing pension cut negotiations for the city to exit bankruptcy.

»Read more
  Tuesday, 15 Apr 2014 | 9:19 AM ET

Morning six-pack: What we're reading Tuesday

Posted By: Jeff Cox
Protesters call for tax increases on the wealthy.
Adam Jeffery | CNBC
Protesters call for tax increases on the wealthy.

Happy Tuesday. We interrupt our regularly scheduled springtime to bring you ... snow?

Fear not: Even if there are flurries forecast for parts of the Northeast, economists are getting optimistic that the real winter chill has begun to fade. (HeraldNet)

Even in liberal California, most residents there are saying that taxes are just way too high. (Breitbart)

»Read more
  Monday, 14 Apr 2014 | 10:38 PM ET

Hedge fund Balestra to lose two of three key execs

Posted By: Lawrence Delevingne
James Melcher, Balestra Capital
Jin Lee | Bloomberg | Getty Images
James Melcher, Balestra Capital

Balestra Capital, the hedge fund firm founded by James Melcher in 1979, is set to lose two senior leaders.

Norman Cerk and Matthew Luckett have decided to resign from the firm on June 30, according to an investor letter obtained by CNBC.com Monday evening.

Cerk and Luckett are co-portfolio managers of Balestra's flagship hedge fund. Cerk joined Balestra in 1997 and is head trader. Luckett joined in 2004 and is responsible for portfolio strategy, research and risk, according to the firm's website.

"Over the last few months, it became increasingly clear that we need a single voice and vision regarding the future of the Firm and the portfolio management of Balestra Capital Partners," the letter said. Melcher will resume serving as the sole portfolio manager for the fund. Balestra managed $1.64 billion as of Jan. 1, according to a regulatory filing.

A spokeswoman for Balestra did not immediately respond to a request for comment.

»Read more
  Monday, 14 Apr 2014 | 2:28 PM ET

Longtime Barclays executive to depart

Posted By: Lawrence Delevingne
Adam Jeffery | CNBC

A senior investment banker at Barclays is set to leave following a combined 17 years at the bank and the one it acquired, Lehman Brothers.

Larry Wieseneck, now head of global distribution and structuring at Barclays, will depart in June to "pursue other interests," according to an internal memo sent to employees today that was obtained by CNBC.com.

»Read more
  Monday, 14 Apr 2014 | 6:00 AM ET

Private equity unloads BRICs, targets new regions

Posted By: Lawrence Delevingne
Bangkok, Thailand.
Piriya Photography | Moment Open | Getty Images
Bangkok, Thailand.

Private equity investors have long looked to four large emerging markets for big returns: Brazil, Russia, India, and China. But the BRICs today don't quite fit the fast-growth that Goldman Sachs strategist Jim O'Neill described in the 2001 paper that coined the widely used acronym.

With each BRIC economy in some sort of trouble, private equity firms are increasingly putting their investment dollars to work in other less-developed markets—especially Southeast Asia and Sub-Saharan Africa—in hopes of better returns.

Money invested in non-BRIC emerging markets increased 18 percent in 2013, reaching a five-year high of $11 billion and representing 44 percent of total capital invested in emerging markets, according to a recent study by the Emerging Markets Private Equity Association. At the same time, total capital invested in the BRICs declined 20 percent between 2012 and 2013 and was 38 percent lower than in 2011.

"Investors are certainly looking beyond the BRICs, acknowledging that consumer driven growth is accelerating most in these new markets," said Aly Jeddy, partner at The Abraaj Group, a global private equity firm that runs $7.5 billion across more than 20 sector and country-specific funds. "Investors are increasingly as wary of BRICs hype as they are weary of the unattractive returns many of the funds in these markets have delivered."

To be sure, the BRICs are still a force. China, India and Brazil alone still accounted for more than 50 percent of total capital invested in emerging markets and more than 30 percent of all funds raised, according to the same EMPEA report. But the recent pullback in all funds raised from investors for emerging markets—from $45 billion in 2012 to $36 billion in 2013—was largely a result of fewer funds raised targeting China, India and Brazil.

No region has gotten more money outside the BRICs than Southeast Asia.

In 2013, fund managers invested a five-year high of $2.2 billion and raised $2.9 billion for the region, a six-year high. In 2011, so-called emerging Asia countries like Indonesia, Malaysia, the Philippines, Thailand and Vietnam received just 7 percent of emerging market private equity investment. That increased to 17 percent in 2012, and 23 percent in 2013.

»Read more
  Sunday, 13 Apr 2014 | 3:00 PM ET

Here's the one trend to watch in earnings season

Posted By: Jeff Cox
Trader on the floor of the New York Stock Exchange.
Getty Images
Trader on the floor of the New York Stock Exchange.

The first-quarter earnings season looks to offer something the market hasn't seen in years. Subsequent quarters likely will have to keep up or it could be an ugly year for corporate America.

Total sales could top bottom-line profits, a turnaround that comes after corporations had spent quarter after quarter slashing costs through layoffs and other forms of austerity. At the same time, revenue lagged amid weak demand and a general lack of confidence.

So in some respects this could be what the market has been waiting for since the financial crisis and the accompanying recession—that point where consumers are willing to take the handoff and generate growth.

Read More Why earnings will make or break the market this week

"At the end of the day this is what the market needs to move forward," said Quincy Krosby, chief market strategist at Prudential Annuities. "It shows us the demand. Where is the demand coming from and how much is it? Which sectors is the demand coming from? It's a multifaceted picture of demand. That is what the market is demanding right now."

»Read more
  Friday, 11 Apr 2014 | 1:51 PM ET

Tale of two banks: So far, Wells winning the race

Posted By: Jeff Cox , Kayla Tausche
JPM & WFC: Tale of two banks
CNBC's Kayla Tausche breaks down JPMorgan's Q1 earnings miss and explains what's to like at Wells Fargo.

First-quarter earnings looked very different for two of Wall Street's biggest banks.

For Wells Fargo, the news was good: Credit losses, which had been a drag on profits, eased. Consumer and commercial loans were up, and there was even good news in what had been an otherwise terrible quarter for mortgages: A renewed effort in subprime loans—now euphemistically called "another chance mortgages"—could reverse slowing mortgage activity as Wells drops FICO credit score requirements from 640 to 600.

Across the way, at JPMorgan Chase, the news was nowhere near as positive: Trading fell, loan growth painted, at best, a mixed picture and the mortgage business all but collapsed with little hope on the horizon.

Investors reacted in kind. Shares of Wells, the third-ranked U.S. bank by deposits, rose 1.1 percent, and JPMorgan, the No. 1-ranked bank, fell 3 percent.

»Read more
  Friday, 11 Apr 2014 | 10:09 AM ET

Morning six-pack: What we're reading Friday

Posted By: Jeff Cox
Traders work the floor of the New York Stock Exchange.
Getty Images
Traders work the floor of the New York Stock Exchange.

Happy Friday. Investor alert: The Morning Six-Pack is not subject to momentum selling.

On the other hand, the mo-mo stocks are getting absolutely crushed, and this could morph into something pretty ugly by the time it's all over. (Wall Street Journal)

Just in case Thursday's 3 percent selloff didn't send a clear enough message, here are five more reasons to worry about the Nasdaq. (USA Today)

»Read more
  Thursday, 10 Apr 2014 | 10:06 PM ET

JPMorgan crashes Goldman’s date with eBay

Posted By: Kate Kelly
Carl Icahn, billionaire investor and chairman of Icahn Enterprises Holdings LP
Scott Eelis | Bloomberg | Getty Images
Carl Icahn, billionaire investor and chairman of Icahn Enterprises Holdings LP

In discussing their marriage of interests for the first time on Thursday, activist investor Carl Icahn and eBay chief executive John Donahoe name-checked a particular matchmaker for special credit: Jimmy Lee, a longtime banker at JPMorgan Chase.

There was just one awkward thing: JPMorgan wasn't the banker of record on the shareholder battle. Goldman Sachs, which had been hired earlier this year to advise eBay on handling Icahn's attack, was.

Read More EBay CEO: Truce signals Icahn a long-term investor

Earlier Thursday, eBay issued a surprise press release announcing an end to an ugly battle with Icahn, who had built up a large position in the online auctioneer and was demanding a spinoff of its payment-processing company, PayPal, and the addition of two candidates he had selected to eBay's board.

Along the way, Icahn had called out Donahoe for demonstrating "inexcusable incompetence" and eBay had criticized Icahn for airing accusations that were "false and misleading." As part of a newly-inked agreement, however, Icahn was withdrawing both demands before eBay's upcoming annual meeting in exchange for naming telecom industry veteran David Dorman as an independent director to the auctioneer's board. And apparently, eBay had Lee to thank for the amicable settlement.

»Read more
  Thursday, 10 Apr 2014 | 10:53 AM ET

Risk? What risk? Big funds go all-out for yield

Posted By: Lawrence Delevingne
Public water utility workers fix a pipe in Old San Juan. The island-territory of the United States is on the brink of a debt crisis as lending has skyrocketed in the last decade with the government issuing municipal bonds mostly to finance pensions.
Getty Images
Public water utility workers fix a pipe in Old San Juan. The island-territory of the United States is on the brink of a debt crisis as lending has skyrocketed in the last decade with the government issuing municipal bonds mostly to finance pensions.

Recent strong demand for relatively risky bonds adds to the case that investors are reaching for yield, meaning they are willing to bet more on lower returns in the absence of other options.

Prominent hedge fund firms Och-Ziff Capital Management, Fir Tree Partners, Perry Capital, Paulson & Co., and Brigade Capital Management each bought more than $100 million of new Puerto Rican municipal bonds in March, according to The Wall Street Journal.

The U.S. territory is seen as one of the riskiest municipal bond markets in the world, and its rating was cut to junk status earlier this year. The 21-year bonds originally were sold at a yield of 8.72 percent,which has risen to 8.84 percent according to the report.

Read MoreDespite blockbuster bond sale, Puerto Rico debt-holders still in crosshairs

Greece also raised more than $4 billion on bonds in a Thursday auction. Thanks to strong demand, the five-year bonds were priced to yield 4.95 percent—sharply lower than initial estimates of 5.25 percent to 5.5 percent, according to the Journal.

»Read more

About NetNet

  • NetNet is where you'll find the low-down and the high jinks of Wall Street. It's the place for insider stories, trader gossip, and tales of the foibles of the moneyed crowd and the culture of finance.Wall Street news and commentary served fresh all day long.

 

  • Jeff Cox is finance editor for CNBC.com.

  • Lawrence Develingne

    Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.

  • Stephanie Landsman is one of the producers of CNBC's 5pm ET show "Fast Money."

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