Bloomberg Markets 50 Summit - Activism, M&A, and Fed Policy


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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 noted.

James Lee, Vice Chairman of JP Morgan ( JPM ) and Stephen Schwartzman, CEO of the Blackstone Group ( BX ) 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 ( AAPL ) and has been outspoken about the company's capital allocation plan, to William Ackman's failed attempt at restructuring JC Penney ( JCP ), activism has become a critical part of the investment industry. Icahn is also the largest shareholder of Take-Two Interactive ( TTWO ), 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 exponentially.

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities
More Headlines for: AAPL , BX , JCP , JPM , TTWO

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