Alternatives.

Very News Items item: Zombie cells.

1. In the first 11 months of 2021, private-equity (PE) firms sealed over 13,000 deals globally, worth a combined $1.8 trillion—more than in any previous full year. Private buyers have bought or are eyeing up Sydney Airport, Italy’s phone company, the French football league and Saudi Arabia’s pipelines. Private-capital firms—which include PE shops as well as funds that target credit, infrastructure and property—have raised $1.1 trillion from end-investors this year, not far off the highest-ever annual tally (see chart 1 in the linked story). Private assets were once so obscure they were called “alternatives”. The label seems absurd today. Private-capital firms manage a record $10 trillion of assets, the equivalent of 10% of total assets globally (see chart 2). The boom this year reflects both wider exuberance as well as the culmination of a structural shift in finance. In order to meet their future liabilities, institutional investors such as pension funds and insurers must achieve annual returns of 6-7%. With rates at rock-bottom levels they have continued to pile into private assets where, it is argued, returns are more attractive. The Economist calculates that the world’s biggest 25 investors by assets under management—including pension funds, insurers and sovereign funds that together manage $22 trillion—now have 9% of their assets in private markets, a doubling since 2011 (see chart 3). (via economist.com)

2. Private equity firms have been buying up companies that advise individuals on their wealth. The number of private equity deals for registered investment advisers has surged to a record 223 so far in 2021, according to data from investment bank Echelon Partners. The sum is up almost two-thirds from 2020 and more than three times the number of deals five years ago. The latest came this month, when Apollo agreed to buy the US wealth distribution and asset management arm of Los Angeles-based Griffin Capital, which has more than $5 billion in actively managed closed-end funds, including a credit and real estate fund and dozens of staff who distribute investment strategies. Other private equity firms such as KKR, Hellman & Friedman and TA Associates have been acquiring investment adviser groups. (via ft.com)

3. Stock buybacks are back. Companies in the S&P 500 repurchased $234.5 billion in shares during the third quarter, topping the previous record of $223 billion in the fourth quarter of 2018, according to preliminary data from S&P Dow Jones Indices. The wave of share repurchases has helped propel U.S. stock indexes to dozens of records in 2021. The S&P 500 is up 25% this year, notching 67 record closes. More buybacks are coming. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said he projects that S&P 500 buybacks will reach $236 billion in the fourth quarter. (via wsj.com)

4. Smaller US-listed companies are trading at a steep discount compared with their larger peers, highlighting how corners of the market remain relatively inexpensive despite the big rally from the depths of the coronavirus crisis. The S&P 600 gauge tracking the smallest stocks by market value on the index provider’s composite US equities barometer is priced at 14.5 times expected earnings over the next year, according to FactSet data. The valuation is well below the 21.3-times for the benchmark S&P 500 index, which tracks America’s corporate behemoths such as Apple, Facebook and Tesla. (via ft.com)

5. A historic surge of cash has swept into exchange-traded funds, spurring asset managers to launch new trading strategies that could be undone by a market downturn. This year’s inflows into ETFs world-wide crossed the $1 trillion mark for the first time at the end of November, surpassing last year’s total of $735.7 billion, according to Morningstar Inc. data. That wave of money, along with rising markets, pushed global ETF assets to nearly $9.5 trillion, more than double where the industry stood at the end of 2018. (via wsj.com)