General sentiment at the third annual Bloomberg Markets 50
Summit is fairly sanguine given the improving housing industry,
easy monetary policy, coupled with the liquidity and level of cash
held by both asset managers and corporations, most panelists
James Lee, Vice Chairman of JP Morgan (
) and Stephen Schwartzman, CEO of the Blackstone Group (
) discussed the increasing amount of activism occurring at both
hedge funds and private equity.
From Carl Icahn, who is well known for his position in Apple (
) and has been outspoken about the company's capital allocation
plan, to William Ackman's failed attempt at restructuring JC Penney
), activism has become a critical part of the investment industry.
Icahn is also the largest shareholder of Take-Two Interactive (
), in which sales of the latest version of Grand Theft Auto
surpassed the $1 billion mark.
In another sign of the growing influence of activist investors,
Steve Ballmer's exit from Microsoft (MSFT) is largely attributed to
ValueAct, an activist fund that is generally thought of as more
effective given its more shareholder friendly and long-term
oriented mandate, Schwarzman said.
Scott Barshay, Partner of Cravath Swaine & Moore, and
Kenneth Jacobs, CEO of Lazard (LAZ) noted that the M&A sector
has become increasingly bifurcated. There has been a dearth of
large cap deals, but flows within the middle market have grown
Barshay also stated that he expects activity this year "to run
slightly ahead of last year." In an environment where financing is
relatively cheap and organic growth has become more difficult, he
noted that there has been evidence of both acquirer and target
prices rising post announcement (typically, once the merger hits
the tape, only the target's stock price increases). This is an
incremental positive for the M&A industry.
Moving over to Europe, Barshay and Jacobs echoed their views of
slower growth in the region, as evidenced by RedHat's (RHT) Q2
earnings last night. However, both seemed optimistic for a pick up
in European activity in 2014.
Five years after the financial crisis, led by the fall of Lehman
Brothers, Mark Lasry, the co-founder of Avenue Capital, cited that
"the biggest change...[is that] most banks no longer have
proprietary trading groups, and [as a result], hedge funds have
more leverage now."
Lasry also reiterated that change has been, on the margin,
positive with the biggest growth in risk and compliance. For
smaller hedge funds, however, it has become more difficult given
the cost of managing operations and scale, according to Glenn
Dubin, CEO of Highbridge Capital.
As it relates to Fed policy, Marathon Asset Management CEO Bruce
Richards provided an interesting take on Larry Summer's withdrawal.
In his view, President Barack Obama clearly favored Summers, but
after his indecision with Syria, it would have been too difficult
for Obama to get Summers passed through Congress, where Janet
Yellen was clearly the favorite.
Obama was left with no choice, and Yellen became the front
runner. Moreover, current Chairman Ben Bernanke's decision not to
taper was not surprising. Richards offered his insight with the
belief that Bernanke specifically set up an "easy monetary"
environment for Yellen and effectively, put her in the driver's
seat to manage the tapering process going forward.
MT Newswires is on location at the third annual Bloomberg
Markets 50 Summit at the New York Historical Society.