Investment consultants who advise on trillions scored taxpayer loans - The Guardian | Canada News Media
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Investment consultants who advise on trillions scored taxpayer loans – The Guardian

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By Lawrence Delevingne

BOSTON (Reuters) – R.V. Kuhns & Associates Inc, an investment consulting firm that advises on $2.5 trillion in retirement plans and other assets, sent a message of confidence in a Securities and Exchange Commission filing this spring, as COVID-19 wreaked destruction across America’s economy. The firm, it said, stood ready to “to maintain all the services we provide.”

The Portland, Oregon-based company, known as RVK, disclosed in the filing that it had been helped by some extra cash: a forgivable loan of between $2 million and $5 million from the Small Business Administration’s pandemic relief fund.

It was not alone in the world of big-money consultancy. RVK is one of at least 40 consultants to retirement plans and other institutional investors that were approved for loans totaling as much as $37 million to support staffing levels and pay rent, according to a Reuters review of government data released this month. It wasn’t always clear why the consultants found it necessary to apply, given incomes that are typically steady and based on client fees from long-term contracts to design portfolios or provide administrative services.

Graphic: Paycheck Protection Program – https://graphics.reuters.com/USA-ECONOMY/PPP/xlbvgodxbvq/

RVK’s president, James Voytko, told Reuters his firm took the government assistance because its nearly 200 clients – which include major public pension plans and charitable endowments – were “under significant financial pressure” and sought increased support from the firm, whose staff has worked unusually long hours.

The loan to RVK was meant to protect 119 jobs at the firm, according to the government data. Voytko said in an e-mail that RVK had followed program guidelines and maintained staffing levels, though he declined to answer written questions about the extent to which the coronavirus pandemic had impacted the company’s finances.

He confirmed that almost all of RVK’s revenue comes from fixed annual retainer fees. But, he said, “while the assets under advisement are large, our firm is not compensated via an asset based fee.” And, he added, “we do not have a well financed parent with access to operating capital from many sources.”

Kyle Herrig, president of Washington, D.C.-based government watchdog group Accountable.US, told Reuters that investment consultants taking the taxpayer-funded loans was an “egregious” example of how the program had too often benefited relatively healthy companies, especially during its quickly-depleted first funding round.

The Small Business Administration and Treasury Department did not respond to an email seeking comment about the loans from the Paycheck Protection Program (PPP), which they jointly administered.

Graphic: Industry jobs and PPP loans – https://graphics.reuters.com/HEALTH-CORONAVIRUS/PPP/rlgpdlqknpo/

Another large consulting firm, Meketa Investment Group Inc, told Reuters that taking a PPP loan, listed as between $2 million and $5 million, was a “prudent” step to protect employees and maintain high-level service to clients.

“We believe this and other preemptive steps are the responsible actions of fiduciaries,” given likely future impacts of COVID-19, the firm said in a statement.

Meketa, based near Boston with $1.5 trillion of assets under advisement as of March 31, said in a regulatory filing this June that “we do not believe that we would have been unable to meet any contractual commitment absent our receipt of the loan. However, we believe that the loan was necessary to support our existing operations, including allowing us to maintain full staffing.”

The company’s clients include major state pension plans such as the California Public Employees’ Retirement System and the New York City Employees’ Retirement System, according to public disclosures.

Another company, LeafHouse Financial Group LLC in Austin, Texas, which consulted on $9.6 billion as of December 31, took up to $350,000 in PPP funds in mid-April to protect its 19 staff amid business uncertainty and protections for lost revenue, according to a spokeswoman, Kassandra Hendrix.

Hendrix said LeafHouse had received word from its mostly small business and non-profit clients that they were getting squeezed by a variety of factors, including a plummeting stock market and lower retirement contribution rates.

“We applied for the loan to prepare us to weather this temporary storm and maintain all staffing levels while striving to provide our clients with the best possible service when it is needed most,” she wrote. LeafHouse, she said, typically collects fees of less than 0.05% on assets it advises on.

Other large investment consultants approved for up to $1 million each in PPP loans include Advanced Capital Group Inc, which advises on $23 billion; Pensionmark Financial Group LLC, which advises on $14.7 billion; and Newport Capital Group, which advises on more than $13 billion, according to government data and regulatory filings as of December 31.

Those firms did not respond to e-mails seeking comment. The government data set included only loans that were approved, and did not say which of them were actually disbursed or if they had been returned or forgiven.

Overall, the PPP loans protected about 51 million American jobs, the Trump administration said on July 6 https://www.reuters.com/article/us-health-coronavirus-ppp/u-s-pandemic-aid-program-saved-51-1-million-jobs-but-wealthy-and-connected-also-benefited-idUSKBN2471ZD, as it revealed how $521.4 billion in taxpayer cash was injected into small businesses. But problems in the data have cast doubt on the projection of how many jobs were saved, Reuters has reported https://www.reuters.com/article/us-health-coronavirus-ppp-jobs/trump-administration-says-pandemic-aid-saved-51-million-jobs-did-it-idUSKBN24901U.

(Reporting by Lawrence Delevingne. Editing by Tom Lasseter and Nick Zieminski)

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S&P/TSX composite down more than 200 points, U.S. stock markets also fall

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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 150 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Crypto Market Bloodbath Amid Broader Economic Concerns

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The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.

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