Three years ago, the founders of the $10 billion Stone Ridge Asset Management had a problem. Several of the advisory firm’s founders and senior employees were buying bitcoin at such a rate it became obvious the purchases needed to be looked at more closely by the firm’s auditors. As word got out that Stone Ridge’s staff was personally investing in bitcoin at such a scale the firm’s clients increasingly wanted to express the same thesis. As Stone Ridge co-founder, Robert Gutmann, put it, that thesis is a belief in “the long term growth of an open-source monetary system—in assets like bitcoin.”
The problem was, Stone Ridge needed a way to turn the dollars they wanted to invest into bitcoin, and to safely store that cryptocurrency once they had it. And since they were personally invested in bitcoin, they needed to do all that in a way that not only satisfied their clients, auditors and regulators, but themselves. So, instead of just establishing a few custom funds for their clients as they’re wont to do, Stone Ridge took the extraordinary step of building execution and custody tools from scratch and kicking off an entirely new line of revenue, executing cryptocurrency purchases, and then holding onto the assets for their customers.
By 2017, that vision had evolved into the New York Digital Investment Group (NYDIG), the first Stone Ridge subsidiary that isn’t wholly owned by the parent company. That year, the firm quietly raised $50 million in a previously unannounced investment and set about building a spinoff that served the new breed of institutional investors increasingly seeking their services. Last Friday, that work went to the next level, when NYDIG raised another $50 million growth equity fundraise led by Fintech Collective, with Bessemer Ventures, and Ribbit Capital participating, bringing the total raised to $100 million. As part of the announcement, Stone Ridge Holdings Group revealed NYDIG is custodying 10,000 of the parent company’s bitcoin, valued at $115 million at today’s price.
Behind the sudden burst of activity is none other than the Covid-19 pandemic. As businesses around the world closed up shop as part of quarantine or sought help from their governments, central banks tried to offset the drop in activity by injecting billions of dollars into their economies. While unemployment increased, markets stayed surprisingly stable, resulting in a sense of impending collapse, says Gutmann, speaking in his first interview since taking over as co-founder and CEO of NYDIG. “We’ve seen a pretty dramatic acceleration in the count of institutional investors who want to participate in the market since March of this year,” he says. “The macro backdrop against the public health backdrop has caused a lot of people to rethink their portfolio composition.”
Based in New York, NYDIG spent the $50 million it raised in 2017 to build out the execution and custody services they would need to manage a rafter of custom bitcoin funds, and to acquire two cryptocurrency-specific licenses. The first license, a BitLicense from the state of New York is used by the NYDIG Execution subsidiary to convert dollars into cryptocurrency and back again. Another subsidiary, NYDIG Trust has a New York State limited purpose trust charter allowing them to buy and hold bitcoin and other cryptocurrencies for investors. Few NYDIG customers are public yet, though a representative of the company says Stone Ridge’s $115 million position isn’t the largest it manages. Last month Ripple chairman Chris Larsen revealed he’d moved one of his XRP wallets to NYDIG custody.
Currently, the majority of NYDIG’s revenue comes from banks, registered investment advisors to ultra high net worth individuals and institutional allocators. These products are built on a single platform that integrates execution, custody, anti-money laundering and know your customer protection. Specifically, NYDIG builds custom funds, separately managed accounts (SMAs) for middle-income investors, and other services for ultra high net worth individuals. “Different institutional allocators are used to buying fund management services, so that’s what we sell them,” says Gutmann. “Macro hedge funds are used to buying prime brokerage services. So that’s what we sell them. RIA’s are used to buying a set of ultra high net worth advisory solutions. And that’s what we sell them.”
The two largest funds currently managed by NYDIG are the $190 million Institutional Bitcoin Fund LP, disclosed in regulatory documents in June and the $140 million Bitcoin Yield Enhancement Fund LP disclosed in May. Among what Gutmann calls “several” smaller funds is the NYDIG Basket Fund totaling $2.4 million, including bitcoin, ethereum, XRP, litecoin, and bitcoin cash. While NYDIG isn’t sharing its total assets under management the firm now custodies more than $1 billion, it says, and the number of its clients has quadrupled over the past ten months.
The second revenue stream comes from integrating NYDIG’s underlying execution and custody platform into banks, foundations, and university endowments. In September, the Office of the Comptroller of the Currency (OCC), a branch of the U.S. Department of the Treasury, published a letter saying banks and other financial institutions could hold reserves for clients that issue digital tokens on a blockchain, called stablecoins, which are backed by U.S. dollars. “We’re having lots of conversations with banks, about various kinds of partnerships all the way from basic sub-custody solutions,” says Gutmann, “up to end consumer products that the banks are providing, where we’re the back end”
As part of the preparation for today’s public launch Gutmann and other NYDIG and Stone Ridge executives published a lengthy analysis, in February 2019, called “Buying Bitcoin” about the difficulties money managers face when looking for significant bitcoin liquidity. The 22-page report concludes, for now, that today’s bitcoin market is dominated by retail investors and speculators. From the report: “Given that agents (fund managers, trustees, and other fiduciaries) control the vast majority of the trillions of dollars of investable assets in the world, we expect material institutional purchases of Bitcoin as these agents work their way through the challenges of this burgeoning asset class.”
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So far, the paper’s conclusion appears to be playing out. Last week payments giant Square invested about $50 million into bitcoin, or about 2.5% of its last reported cash-on-hand. Struggling business intelligence firm MicroStrategy converted a whopping $425 million of its assets into bitcoin, and at least 20 institutional investors have filed paperwork with the SEC showing they invested in the Grayscale Bitcoin Trust (GBTC). Newly launched Canadian digital asset manager 3iQ has $91.2 million in its Bitcoin Fund trading on the Toronto Stock Exchange and institutional investor, Cathie Wood, of New York-based Ark Invest told Forbes she sees bitcoin as an “insurance policy” against inflation.
To help bring NYDIG’s in-house execution tools to its clients, the company last Friday also bought New York-based Etale, which specializes in order management software and is integrated with Coinbase Pro, Gemini and itBit. Over the next few months NYDIG plans to further integrate its own in-house execution tools with Etale, making them available to clients for the first time. As part of the deal, NYDIG also obtains a data set including high frequency price, quote and depth data to further refine its own offerings. The firms are not sharing terms of purchase, but all four employees will be joining NYDIG.
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Further demonstrating institutional interest in the asset class, NYDIG last month hired former Goldman Sachs partners Ronnie Wexler and Tejas Shah to help run the company. Some other notable NYDIG staffers include former New York State Superintendent of Financial Services, Ben Lawsky, former Goldman Sachs managing directors Eric Kramer and Rodney Miller and CEO and co-founder of Stone Ridge, Ross Stevens. Brooks Gibbins, managing partner of lead investor, FinTech Collective, is joining the board as part of the investment. The startup now employs a total of 35 people.
The irony of the surge of interest in bitcoin brought about by Covid-19 is the pandemic is also testing one of bitcoin’s earliest value propositions: that it’s uncorrelated with traditional markets. As traditional markets dropped, so have bitcoin, in large part. Same goes for many upwards movements. However, depending on the time one looks, Gibbins argues, correlation, or non-correlation can be found anywhere. As a result, especially in the face of such global uncertainty, the lead NYDIG investor advocates that institutions should allocate between 100 and 500 basis-points of their portfolio to digital assets. “With the unprecedented fiscal and monetary stimulus happening across the globe post Covid-19, portfolio hedging in digital assets will continue to be more and more relevant,” he says. Already, NYDIG’s typical bitcoin investor has between 1% of 5% of its portfolio invested in cryptocurrency, with a few investors more comfortable with the technology exceeding 5%. “If you’re legging into a $5 million to $500 million position in an asset, you are going to want to apply a number of different offensive and defensive capital strategies,” he says.
Analysis: U.S. investment bankers' new pitch – Biden's tax hike – The Journal Pioneer
By Joshua Franklin and Chibuike Oguh
(Reuters) – Investment bankers keen to win lucrative assignments have a new pitch for U.S. corporate owners: hire us to sell your company now or pay at least twice as much in taxes if Democratic presidential candidate Joe Biden has his way.
Biden has proposed raising the capital gains tax rate from 20% to 39.6% for those making over $1 million. He would also increase the corporate income tax rate from 21% to 28%.
Biden would have to win the presidency and his Democratic Party would have to gain control of the Senate and keep control of the House of Representatives in the Nov. 3 election for his tax proposals to become law. While far from certain, this prospect has been seized on by bankers hungry for new business.
“We urge all of our current and potential clients to take note of the potential forthcoming changes, along with their associated consequences, as they consider an exit strategy for their business in the near future,” Houlihan Lokey Inc bankers wrote in a note earlier this month.
The Biden campaign did not immediately respond to a request for comment.
The investment bankers’ pitch is geared toward individuals and families, as well as private equity firms, who control companies and can decide when to sell them. It also targets company founders, who may only sell one business in their lifetime, making it the most important transaction of their lives.
The strategy appears to be working. Sales of privately held U.S. companies totaled a record $253 billion in the third quarter, up fivefold from the second quarter and up 51% from the third quarter of 2019, according to financial data provider Dealogic. This is despite the COVID-19 pandemic suppressing corporate valuations in some sectors.
“Since the summer we have seen a lot of dialogue from family offices about exploring a sale of some assets. Many of these investors are sophisticated about how they handle their affairs from a tax perspective,” said David Perdue, a partner in investment bank PJT Partners Inc’s strategic advisory group.
One of the U.S. companies pursuing a deal because of tax considerations is Asplundh Tree Expert LLC, a family-controlled tree-trimming firm, according to people familiar with the deliberations.
The family that has owned Asplundh since 1928 has been keen to hold onto the company and resisted overtures to sell to private equity firms hungry for a quick flip. When one of these firms, CVC Capital Partners Ltd, convinced the Asplundh family to sell it a minority stake in 2017, it had to use a buyout fund it manages that is dedicated to retaining holdings for a decade or more, rather than cashing out after a few years.
Now the Asplundh family is working with investment bankers to cash out on part of its stake, partly because of its concerns about upcoming changes in the tax system, one of the sources said. It is seeking a valuation for Asplundh of as much as $10 billion, according to the sources. Asplundh did not respond to a request for comment.
Even if Biden wins and implements his tax plan, corporate owners may still have time to cash out. Most of President Donald Trump’s corporate tax cuts, which were enacted into law in 2017, became effective in 2018, a year after he came into office.
Still, the big uptick in the divestitures of privately owned companies shows how some of their owners view Biden’s election victory, and subsequent tax changes, as likely.
BEST PRICE VERSUS TAX SAVINGS
Goldman Sachs Group Inc advised on more sales of privately held U.S. companies year-to-date than any other, followed by Morgan Stanley , JPMorgan Chase & Co and Bank of America Corp , according to Dealogic.
To be sure, getting the best price is still the overriding consideration for corporate sellers, rather than saving on taxes, investment bankers said. Private equity firms, in particular, are wary of being criticized by investors if they think they sold a company for the tax benefit of buyout fund managers, rather than getting the best price.
“There is a tax consideration and there is a more strategic consideration. The tax consideration only applies if you are ready to sell and could attain attractive valuation multiples that could lead to a successful sale,” said Solon Kentas, co-head of M&A for the Americas at UBS Group AG
(Reporting by Joshua Franklin and Chibuike Oguh in New York; Editing by Greg Roumeliotis and Lisa Shumaker)
The CPP fund aligns the pursuit of a cleaner planetwith its investment goals – WellandTribune.ca
As CPP Investments winds down its 2020 public meetings in each province, we welcome perspectives on one of society’s greatest challenge — climate change. This universal threat is real, serious and happening now. All of us should be asking ourselves whether we are acting responsibly in the face of it.
Multiple dimensions define our approach. Our exposure to conventional energy as a percentage of our overall investment portfolio has dropped precipitously to 2.6 per cent today from 4.6 per cent three years ago. Over this same period, our investments in renewable energy have increased exponentially by nearly 10,000 per cent to $6.6 billion.
We might be urged to abandon our own investment thesis and engagement work and simply divest from conventional energy according to a specific target linked to policies of government, from which we must always remain independent. Such a target, by definition, is a matter of wider public policy, not an investment decision, in stark contrast to clear objectives enshrined in our enabling legislation. Importantly, we are equally accountable to 10 governments so that would involve administering diverse policies with varied interests and approaches to the energy evolution.
If not politics, what drives our investment thesis? Insights from real-time analysis of powerful climate-related trends in household and corporate consumption, technology and innovation, and global regulatory developments orient our compass and momentum. The question is whether our approach is in the best interests of contributors and beneficiaries.
This question was foremost in the minds of federal and provincial governments in 1997. The clarity of the CPPIB Act they promulgated is rooted in the looming crisis the legislation sought to avert. Simply put, the Canada Pension Plan was running out of money.
The CPP Fund was exclusively composed of low-yield government bonds at the time. Exposing it to global capital markets was viewed as part of the solution and so an independent organization of investment professionals was established to manage the fund to achieve a maximum rate of return without taking excessive risk, recognizing that having a multitude of objectives would hamstring the fund. The Right Honourable Paul Martin, Canada’s finance minister at the time, emphasized the wisdom of clarity:
“By placing the focus on maximizing returns, all other potential distractions are eliminated. Markets don’t need to fret that investments are being guided by political considerations. Managers are liberated to pursue the best possible financial strategies. And pensioners can be reassured by the fact that the CPP will be used to benefit retirees — and only retirees.”
Consequently, the CPPIB Act sets no ancillary policy requirements. Invoking some amorphous duty — removed from clear investment parameters — simply contradicts our mandate.
From our perspective, climate change is not only an existential threat, but is also a long-term investment risk. It impacts our analysis and actions on virtually every sector of the global economy — beyond fossil fuels. Our approach is well-documented in our “Report on Sustainable Investing” published in September.
Since inception 21 years ago, our investment strategy has evolved considerably to reflect global best practices, emerging risks and opportunities, and trends described above. Governments, investors and other organizations around the world uphold our framework as the gold standard for pension funds. Our financial performance — 10-year annualized rate of return of 10.7 per cent — is the fruit of a framework determined by Canada’s policy-makers who collectively understood the severity of the challenges associated with sustaining a national fund over many generations.
Sustainability unquestionably involves addressing climate risk. But that is only part of the definition.
Sustainability also applies to the solvency of a fund that promises to provide benefits to workers whose financial future is undeniably more challenging than it is for baby boomers. Young Canadians today will retire into an economy with far fewer workers contributing to the CPP. In 2006, there were more than five Canadians aged 15 to 64 years for each person aged 65 and older. By 2056, there will be an estimated 2.2 working-age persons for each person aged 65 years and older.
Maintaining a solvent national fund is a perpetually difficult challenge and one that requires laser focus, without interference. Politicians make policy, we make investments, and 20 million Canadians sleep more soundly knowing their financial security in retirement is our purpose.
Shackling our progress to non-investment targets, perhaps imposed by external pressure, is precisely what the CPPIB Act sought to avoid. Meanwhile, we firmly believe there is a way to align the pursuit of a cleaner planet and meet our investment goals. Divestment, external pressure and arbitrary targets are excluded from our investment process. They simply do not work.
Divestment is attractively simple. But it also means walking away from the opportunity to bring about change. Engaging with, and demanding greater transparency by, investees on the measurable progress of their climate strategies is constructive. Working with energy companies to accelerate the transition to cleaner energy sources is productive. Divesting from companies that are making a real difference in how we generate energy is counterproductive, akin to betting against human ingenuity and innovation.
We do not downplay the severity of climate change by any means. It is among the most significant challenges of our time, and the actions we are taking today to address both the risks and the opportunities are in the best interests of contributors and beneficiaries.
RioCan Real Estate Investment Trust Announces Senior Executive Management and Board Changes – GlobeNewswire
- Edward Sonshine, O. Ont., Q.C. to transition from Chief Executive Officer to Non-Executive Chairman on April 1, 2021;
- Jonathan Gitlin to be appointed as President and Chief Executive Officer
TORONTO, Oct. 21, 2020 (GLOBE NEWSWIRE) — RioCan Real Estate Investment Trust (“RioCan” or the “Trust”) (TSX: REI.UN) today confirmed that, as previously announced, RioCan’s founder, Edward Sonshine, O. Ont., Q.C., will retire as Chief Executive Officer of the Trust on March 31, 2021. Mr. Sonshine will become Non-Executive Chairman of RioCan’s Board of Trustees (the “Board”) effective April 1, 2021. Mr. Paul V. Godfrey, C.M., Chairman of the Board, has agreed to step down as Chairman of the Board effective April 1, 2021 and will serve as Lead Trustee.
RioCan is pleased to announce that the Board appoints Jonathan Gitlin, currently the Trust’s President and Chief Operating Officer, to succeed Mr. Sonshine as President and Chief Executive Officer, effective April 1, 2021. Effective April 1, 2021, concurrently with Mr. Gitlin’s appointment to the role of CEO, the Board has also agreed to appoint Mr. Gitlin as an additional Trustee to the Board.
“The Board is very pleased to announce both Jonathan Gitlin as Mr. Sonshine’s successor as CEO, and Mr. Sonshine’s continued involvement in the leadership of the Trust following his retirement,” said Paul V. Godfrey, C.M., Chairman of the Board. “Given Mr. Gitlin’s long and successful history at RioCan, currently as President and Chief Operating Officer, and Mr. Sonshine’s continued involvement as Non-Executive Chairman, the Board is confident that we will have a seamless transition of leadership in 2021.”
Mr. Gitlin joined RioCan in 2005 and progressed through a series of key leadership roles leading to his appointment as President and Chief Operating Officer in March 2019. Mr. Gitlin is an accomplished, strategic leader, and as the head of the Trust’s Investment team since 2007, he has played a significant role in RioCan’s tremendous growth, including responsibility for the execution of the Trust’s residential program, RioCan LivingTM. In addition, as part of RioCan’s accelerated major market strategy, Mr. Gitlin drove RioCan’s secondary market disposition program, resulting in the Trust now generating 90% of its revenue from major markets, and 50% from the Greater Toronto Area. Mr. Gitlin’s broad experience and industry acumen has allowed him to effectively, efficiently and responsibly lead RioCan’s Operations team through the current global pandemic and its myriad of economic implications. Consistent with RioCan’s long-standing principles, Mr. Gitlin has mobilized the RioCan team to address changing market dynamics in a manner that prioritizes the long-term wellbeing of the business, and all its stakeholders.
“I am pleased to have confirmed the arrangements for my succession in 2021, which we first announced last year and have now finalized,” said Mr. Sonshine. “During my remaining time as Chief Executive Officer, I will focus on overseeing continued execution of RioCan’s strategy and major initiatives as well as preparing for an orderly transition of my duties. I would like to congratulate Jonathan Gitlin for this well-deserved promotion to RioCan’s President and Chief Executive Officer. Jonathan’s integrity, decisiveness, credibility and unwavering focus on sustainable growth make him the ideally suited to lead the Trust. I have great confidence in Jonathan and I look forward to working with him as Non-Executive Chairman as we overcome the current industry challenges and capitalize on evolving opportunities to position RioCan for the next phase of its growth and success.”
RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at June 30, 2020, our portfolio is comprised of 221 properties with an aggregate net leasable area of approximately 38.6 million square feet (at RioCan’s interest) including office, residential rental and 15 development properties. To learn more about us, please visit www.riocan.com.
Forward Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian securities laws. This information includes, but is not limited to, statements concerning RioCan’s objectives, its strategies to achieve those objectives, as well as statements with respect to management’s beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as “may”, “will”, “would”, “expect”, “ intend”, “estimate”, “anticipate”, “believe”, “plan”, or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management’s current beliefs and is based on information currently available to management. All forward-looking information in this News Release is qualified by these cautionary statements.
Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan’s current estimates and assumptions, which are subject to numerous risks and uncertainties, including that the events contemplated herein are completed as contemplated, which could cause actual events or results to differ materially from the forward-looking information contained in this News Release. Although the forward looking information contained in this News Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forwarding-looking statements. Except as required by applicable law, RioCan undertakes no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
For further information contact:
RioCan Real Estate Investment Trust
SVP and Chief Financial Officer
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