Hello readers – Happy New Year!
Fractional trading is something we’ll be hearing a lot about in 2020. After this fall’s broker wars, $0 commissions for stocks and ETFs are pretty much a given, and fractional shares have emerged as the next battleground. Robinhood is planning to roll it out, Charles Schwab is reported to be thinking about it, and even lending app MoneyLion is looking to jump in.
Rebecca Ungarino and Dan DeFrancesco wanted to learn why firms in the fiercely competitive discount broker space are suddenly making a lot of noise about “democratizing” trading by letting investors buy slices of shares (there’s also a lot of pizza-related marketing going on), and it turns out there’s much more to the story. Read more about how the new wave of fractional trading will work, and what’s in it for the brokerages.
Casey Sullivan wrote last month about how Hollywood private-equity mogul Bill McGlashan is fighting charges in the college admissions scandal, and wanted to learn more about John Hueston – the lawyer defending the ex-TPG exec. Casey talked with Hueston’s colleagues and friends about how the one-time Enron prosecutor turned into a must-have fixer for the rich and powerful.
Dakin Campbell learned that Goldman Sachs plans to add people to a 30-person team helping clients better understand – and put money into – a suite of alternative investments managed by the bank. Investor demand for alternatives like private equity and real estate has surged, and managing those kinds of investments happens to be a business that Goldman is looking to grow. But until now, Goldman was lacking a dedicated team to help clients navigate all the strategies it had on offer.
We also had a pair of stories that show how buzzy startup robo-advisers are starting to find themselves in a tricky spot. Dan talked to Jason Gurandiano, global head of fintech investment banking at RBC, about the IPO and M&A prospects for standalone robos. While they’re sitting pretty on VC cash, that has made them fiercely independent when they may be better served by joining forces- and they could be too richly valued versus the assets they have actually amassed for a strategic buyer or public investors to be interested.
Robo startup SigFig has inked some big deals white-labeling technology for wealth giants including UBS and Wells Fargo. But, as Rebecca reported, it had recently cut about 10% of its workforce and seen departures in top roles including its head of wealth management. And this week, we reported that another senior leader has left – marking at least the third to exit since August.
More long reads below, including the hot and not hedge funds of 2019, and a deep dive on how Ally Bank is embracing fintech partnerships over the build-it-yourself approach.
Have a great weekend,
SoftBank is all over the biggest real-estate tech funding rounds
2019 was the biggest year for real-estate technology funding yet.
Oyo Hotels is one of four companies on the top-10 list as a result of a SoftBank funding round. It is joined by Compass, Opendoor and WeWork; each of the four companies representing one of the major categories on the list.
Expectations for continued funding growth in the broad space are high. As we wrote in October, when CB Insights counted a record $24.6 billion in funding through the third quarter of this year, it also predicted category winners would begin to break out in 2020, and that the number of funding rounds and the sizes of deals would continue to increase.
But the biggest dollars have, so far, avoided the cutting-edge of real estate technology in construction and AI.
In 2019, activists and stock pickers were hot – but Ray Dalio made a rare stumble and short sellers got crushed
Big names closed shop. Billions were pulled out of the industry. Fees continued to drop.
But 2019 wasn’t all bad for hedge-fund managers. Once embattled stock pickers like Bill Ackman and David Einhorn had bounce-back years, with Ackman posting record returns.
Activists like Third Point, Elliott, and Starboard Value saw big campaigns go their way. And Steve Cohen’s first full year of trading after his ban from regulators beat several rivals – and the billionaire is set to buy his favorite baseball team. That said, there were funds that slipped and stumbled.
Ally’s head of strategy explains why one of the oldest digital banks is embracing fintech partnerships instead of building its own tech
We spoke to Dinesh Chopra, Ally’s head of strategy, about his outlook on M&A, partnering with other fintechs, and the Ally’s venture investing. In April, Ally announced it had teamed up with mortgage startup Better.com. Ally’s venture arm also invested in Better’s Series C fundraising round.
A bank can expand its product lineup in a few ways. It can build in-house, buy a company that has already built that product, or partner with a fintech. “We as a company wrestle with that decision on a day-to-day basis,” Chopra said.
Hedge funds are making most of their money by crowding into no-brainer wins like Apple and Amazon – and it’s another reason for investors to question hefty fees
The hedge-fund trades of lore – like George Soros’ big bet against the pound or John Paulson’s wager against US housing – were moves that no one saw coming and examples of the cunning instinct of an expert of the markets.
These days, though, the stock-market moves making the most money for hedge funds are ones that don’t require a Wharton degree or years of experience deciphering balance sheets.
Apple has been the stock that has generated the most alpha for hedge funds in five of the past 10 years. Amazon was the stock that produced the most alpha for managers in 2015 and also the third-best stock pick for the decade by hedge funds.
But it’s not just that these companies grew rapidly over the past 10 years, benefiting all shareholders. Hedge funds have meanwhile lost their touch in finding little-known companies set to explode.