TORONTO — Caisse de depot et placement du Quebec (CDPQ), Canada’s second-largest pension fund, named former investment banker Charles Émond as its chief executive officer on Wednesday, replacing Michael Sabia on Feb. 1.
Émond, at Caisse since February 2019, has served as the pension fund’s executive vice-president, Quebec, for private equity and strategic planning since November.
Prior to this, he was the global head of investment banking and capital markes and head of Canadian corporate banking at Bank of Nova Scotia. (Reporting By Nichola Saminather Editing by Nick Zieminski)
TikTok was just the beginning: Trump administration is stepping up scrutiny of past Chinese tech investments – The Washington Post
The letters, which began landing in dozens of companies’ email inboxes in the spring, reflect the broadly held view among U.S. officials and lawmakers that the United States failed in recent years to adequately screen investments pouring in from China and other countries — particularly low-profile venture-capital investments that didn’t make the headlines. The 2018 Foreign Investment Risk Review Modernization Act, or FIRRMA, aimed to address that by boosting CFIUS’s funding and powers.
Tech executives say the inquiries are part of a growing chill in U.S.-China relations that has made Silicon Valley companies more cautious about accepting foreign investments and caused some China-backed venture-capital funds to curb their activity.
The decoupling can be seen in data showing that Chinese venture-capital investment in the United States dropped to a six-year low in the first half of 2020, to $800 million, according to research provider Rhodium Group. VC investment by U.S. firms in China hit its lowest level in four years, at $1.3 billion.
Michael Borrus, the founding general partner of XSeed Capital, said CFIUS scrutiny is causing investors and companies to think twice about deals.
“We’ve had Chinese VCs or Chinese families who have been interested in putting money in” to some companies where XSeed Capital is a shareholder, Borrus said. “In the current environment, we’ve decided it’s too complicated.”
Start-ups decide which investments to accept, but existing shareholders often have a say in the matter, Borrus said. “You have discussions with companies, ‘You need to think about this very seriously, it could open you up to CFIUS investigations … if you have alternatives, you should consider them,’ ” he said. “They usually see the wisdom.”
In addition to boosting CFIUS’s work, the government is also sending national-security officials to visit venture capitalists and other tech leaders in Silicon Valley to advise them to exercise caution about accepting Chinese investments, industry executives say.
Some tech companies have overlooked the CFIUS emails because they are brief and cryptic, requesting a phone call to discuss a confidential matter, tech-industry lawyers said.
CFIUS is particularly focused on companies and apps that collect sensitive personal information on users, such as location or financial data, and on companies involved in technology seen as critical for national security, such as certain types of battery technology and biotechnology, lawyers said, requesting anonymity to discuss sensitive matters. The committee is mostly inquiring about Chinese investment, but on a few occasions has asked about Russian investors.
CFIUS, an interagency committee chaired by the Treasury Department, has several powers to influence foreign investments it sees as risky. The committee can impose conditions, such as limiting a foreign investor’s access to information on the company’s research and development, or mandating that the company’s board members be government-approved. In extreme cases, CFIUS can advise the parties to abandon or unwind a deal, or kick the matter up to the president for a formal ban or divestment order.
The Treasury Department declined to comment for this story.
CFIUS’s more aggressive role stems from the authority FIRRMA gave the committee to scrutinize more types of foreign investment, including minority shareholdings and real estate transactions. The legislation also gave CFIUS funds to set up a new enforcement arm.
The Treasury Department introduced the enforcement arm in a tweet this summer, linking to a Web page that included an email address where the public can send tips about transactions that might carry national-security risks.
The email tip line “has the potential to ratchet up CFIUS enforcement activity by giving commercial competitors a mechanism to create CFIUS troubles for their rivals seeking foreign investment,” the law firm Wilson Sonsini Goodrich & Rosati warned this summer.
The 2018 FIRMMA law made it mandatory for companies to report to CFIUS some investments involving foreign governments or certain technologies. Previously, it had been optional for companies to notify CFIUS of planned transactions. If they did and CFIUS cleared them, it protected the parties from further CFIUS interference. If they didn’t, they ran the risk CFIUS could take an interest in their deal after it closed and demand changes.
“CFIUS is increasingly contacting parties that didn’t make filings,” said Stephen Heifetz, a lawyer at Wilson Sonsini. “We’ve heard about matters going back almost 10 years. Historically, it was unusual for [CFIUS] to reach back more than three years. But there is in theory no time limitation, and we are increasingly hearing about long reach-back periods.”
CFIUS’s scrutiny of TikTok shows how a foreign investment can raise alarms years after the fact.
The committee only late last year began probing the November 2017 acquisition that helped TikTok’s owner build its U.S. presence. In that deal, Beijing-based ByteDance spent about $1 billion on a karaoke app, Musical.ly, that was popular with American tweens, and rebranded the app as TikTok.
TikTok’s quick rise in the U.S. was shadowed by signs that Beijing was influencing the videos that could appear on the app. In September 2019, The Washington Post reported that a search for “#hongkong” on TikTok yielded few images of the city’s pro-democracy protests, while such images were common on Twitter.
The Post also reported that ByteDance imposed strict rules on what could appear on the app, in keeping with China’s restrictive view of acceptable speech, a policy that sparked a backlash from the company’s U.S. employees.
In October 2019, Sen. Marco Rubio (R-Fla.) asked CFIUS to review the 2017 Musical.ly acquisition out of concern that TikTok was “censoring content” around the world to satisfy Beijing’s leaders.
CFIUS opened a review the following month. In keeping with protocol, it did not publicly disclose the probe or the reasons behind it, but when it concluded its review nine months later, it suggested TikTok’s access to user data was a primary concern.
In August, the Treasury Department said CFIUS had advised President Trump to order ByteDance to divest its U.S. business.
“CFIUS conducted an exhaustive review of the case and unanimously recommended this action to the President in order to protect U.S. users from exploitation of their personal data,” Treasury Secretary Steven Mnuchin said in a statement.
A Trump executive order that same day ordered ByteDance to sell within 90 days, a deadline that expires Nov. 12.
Silver Lake Launches New 25-Year Investment Strategy Backed by Mubadala
Abu Dhabi sovereign-wealth fund Mubadala Investment Co. is making an investment in Silver Lake and contributing $2 billion to help the technology-focused private-equity firm launch a new long-term strategy, according to people familiar with the matter.
Mubadala will take a stake of less than 5% in Silver Lake, buying roughly half of what Neuberger Berman Group LLC’s Dyal Capital Partners purchased in 2016, the people said.
Under the new strategy, Silver Lake will have 25 years to deploy the capital and harvest any gains, allowing it to hold assets for much longer than the typical 10-year buyout-fund time horizon.
Silver Lake and the P.E. Industry
It couldn’t be learned what Mubadala is paying for the stake, what it values Silver Lake at or how much in total the firm intends to raise for the new strategy.
The twin investments represent a vote of confidence that will give a boost to a big expansion that is under way at Silver Lake as the firm seeks to capitalize on a surge in interest in tech investments. It has been one of the most active investors since the coronavirus pandemic began, striking billions of dollars worth of deals with companies including
Airbnb Inc. and
Expedia Group Inc.
Silver Lake is separately close to completing fundraising on a new flagship fund and had collected more than $18 billion for that vehicle as of Aug. 14, according to a regulatory filing then. It is replacing a $15 billion pool raised in 2017. The Mubadala-backed strategy initially will co-invest alongside the flagship fund to build up a portfolio of investments but also will be able to do its own deals, the people said.
The new business line will offer Silver Lake a broad mandate to invest in debt and equity and across various geographies and industries, the people said. It may make investments in fast-growing upstarts or do traditional leveraged buyouts of more mature companies.
With headquarters in Menlo Park, Calif., and New York and more than $60 billion in assets under management already, Silver Lake has a longstanding playbook of taking large stakes in technology and media companies including computer-maker
Dell Technologies Inc.
and entertainment firm Endeavor Group Holdings Inc. and working closely with their founders or management to help spur growth.
There has been a broader industry shift in favor of what is called perpetual capital—pools of money that firms don’t need to constantly refresh at great effort and expense. At 25 years, the new strategy could last for the entire remaining investment career of Silver Lake’s new co-chief executives, Egon Durban and Greg Mondre, both in their mid-40s.
Private-equity rivals including
Blackstone Group Inc.,
Carlyle Group Inc.
and CVC Capital Partners also have been developing long-term strategies, although most of those funds have a lifespan of around 15 years. They tend to pay up for businesses that are stable and have steady cash flows and aren’t fixer-uppers, giving them annualized return expectations of 12% to 15% versus the 20%-plus touted by traditional buyout funds.
Silver Lake’s 2013 flagship fund—the most recent vehicle with meaningful performance data—had returns net of fees of 23% as of March, according to public pension-fund records. The firm isn’t lowering its return expectations for the new strategy, according to people familiar with the matter.
For Mubadala, which manages $232 billion, the partnership with Silver Lake may represent a strategic shift for its technology investments. Mubadala was a key backer of
SoftBank Group Corp.’s
Vision Fund, committing $15 billion to the $100 billion vehicle. But it privately has complained about the high valuations at which SoftBank made its investments and subsequent losses in the fund.
Mubadala’s relationship with Silver Lake dates back years. The sovereign-wealth fund invested in William Morris Endeavor Entertainment in 2012, the same year Silver Lake took a stake in the company. In 2013, Mubadala said it was investing alongside the private-equity firm in WME’s acquisition of IMG Worldwide, forming what is now known as Endeavor.
In 2019, Silver Lake invested $500 million for a minority stake in City Football Group, the owner of soccer clubs including the English Premier League’s Manchester City. Mr. Durban joined the board of the company, which is chaired by Mubadala CEO Khaldoon Al Mubarak.
Mubadala also participated in the $2.25 billion funding round for
self-driving car unit Waymo LLC that Silver Lake led in March, as well as in the firm’s subsequent investment in Indian tech-and-telecom giant Jio Platforms Ltd.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com
Lawyer for prominent Halifax investor says the bank is to blame in multi-million investment loss – Global News
The lawyer representing a high profile investment advisor in Halifax says his client is not at fault in a civil lawsuit that is seeking $40 million from a failed investment strategy and is placing the blame squarely on the National Bank of Canada and its subsidiary National Bank Investment Network (NBIN).
On Sept. 14, a $40 million civil lawsuit was filed on behalf of 30 plaintiffs at the Nova Scotia Supreme court against Fredrick Saturley and his investment firm High Tide Wealth Management and the NBIN who supervise the accounts.
High Tide’s lawyer Chris Robinson says many of the plaintiffs in the civil suit are long-time clients who have had financial success with Saturley and as part of their investment strategy had signed discretionary trading agreements which allow Saturley and High Tide to pursue trades without consultation.
Robinson says every one of these clients listed in the civil suit entered into and signed an agreement as part of their investment policy statement with High Tide.
“And that investment policy statement for these clients indicated that they were seeking capital appreciation, generation of income and that they were willing to accept above-average risk to achieve these results,” said Robinson.
A discretionary agreement allows Saturley and High Tide the ability to make trades without having to call and consult the client said Robinson which contradicts exactly what many of the clients are claiming in the lawsuit.
$40 million lawsuit filed against prominent Halifax investor and national bank
Lawyer Ian Gray represents the 30 plaintiffs and acknowledges that some of his clients may have signed discretionary agreements with High Tide but says they didn’t sign up for the high-risk trading that he says put their investments at risk.
“We’ve got people who wanted relatively aggressive strategies and we’ve got people who wanted extremely safe strategies and as best we can tell, they all got the same risky ride,” said Gray.
Gray and his clients allege Saturley was independently executing these risky investment strategies, and when the COVID-19 pandemic hit and the market crashed, so did the clients’ portfolios.
Retired Canadian Armed Forces member Trevor Long is one of the plaintiffs, he says he invested a significant amount of his disability payout from veteran affairs with High Tide wealth management in early 2019.
Long says he initially invested $80 thousand and when his portfolio was doing well, he added another $36 thousand.
“Everything was going good until the middle of February and then March, I get a call and a lot of money disappeared,” said Long.
Long estimates he lost more than $80 thousand and alleges Saturley was pursuing high-risk investment strategies which he never signed up for.
“He was doing what he wasn’t authorized to do by me as a client and the bank obviously let him do it and we all got run roughshod over,” said Long.
Coronavirus outbreak: The impact COVID-19 is having on the global economy
Robinson says the client’s anger is misplaced and says it’s not Saturley or High Tide that is at fault but suggests it’s the bank and NBIN who panicked in Mid-March when COVID-19 sent the market crashing.
On March 9 as the market was sinking, many of the clients received a margin call on their account and needed to make a deposit to bring their accounts back onside says Robinson and in the meantime, Saturley was working with his clients to come up with the money the bank was looking for.
Robinson said the bank came calling again on Sunday, March 15 and said they were going to liquidate all the accounts on Monday if the money wasn’t in place, which he said left Saturley and the clients little time to come up with the money.
“The bank panicked and I have no idea why they did that,” said Robinson. “What they did however is step into the shoes of Mr. Saturley and his clients and simply said if there’s not a cheque there at market open, everything is getting liquidated and that’s what they did.”
Robinson said Saturley and his clients didn’t have time to meet the bank’s demands and if they only allowed them a few more days the market would have turned itself around and the accounts would have stabilized themselves.
“If the bank had of just been patient,” said Robinson. “Within 10-days those accounts would have been back onside and none of those liquidating transactions would have needed to happen.”
Gray said he agrees the bank is at fault but says Saturley was operating outside of his clients’ agreement.
“Make no mistake we say the bank is responsible for this,” said Gray. “But we say Mr. Saturley and his company are responsible as well.”
Global News reached out to the National Bank for an interview but they declined to comment for this story.
Neither side has filed a defense statement at this point as the legal counsel for the plaintiffs said they will likely be adding further names to the civil lawsuit and will make amendments to the lawsuit in the coming weeks.
None of these allegations have been proven in court and no court date is scheduled at this time.
© 2020 Global News, a division of Corus Entertainment Inc.
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