HgCapital Trust Delivers 5.4% Annual Return, Cites "Highly Resilient" Business Models

HgCapital Trust (HGT), a FTSE-250 listed private equity investment vehicle founded in 1980, delivered an NAV total return of 5.4% year ending December 2022. The majority of its 48 portfolio companies, including its top 20 holdings, delivered double-digit sales growth in the year.  Its parent investor Hg looks for "sector leading market position", "highly resilient and defensive (sic) business models". "loyal customers" and "high rates of recurring revenues", according to its Chairman (since 2020) Jim Strang, who is also an adjunct professor teaching Private Equity at London Business School and member of the Board of Advisors of Stanley Capital since 2023, a mid-market private equity investor focused on transforming businesses.

IMF Author of 100 Papers Warns a Third of the World Will Be in Recession

Sofia born IMF Managing Director Kristalina Georgieva said 2023 will be "tougher" than last year with slowdown in the US, EU and China expected. Inflation, interest rates and Covid in China are all playing a part. She has written more than 100 academic papers and was former CEO of the World Bank from 2017 to 2019.

EURUSD hovers around Parity

The EURUSD has dropped from a relative high of 1.13 in Feb 2022 to near parity on 23 August 2022.

$6m worth of tokens stolen relating to Solana Blockchain

The Zug-based Solana Foundation which advocates a blockchain built for speed, is blaming the developers of the Slope wallet. 

Elliott Management Sues LME Over Nickel Trade Cancellations

Elliott Management, the hedge fund founded by Paul Singer (ex DLJ attorney, JD Harvard Law School 1969) with over $51bn in assets under management, and that pursues commodities trading as one of its strategies, is suing the LME for $456m over mass cancellation of nickel trades. 

The assertion is that the cancellation was "unlawful on public law grounds". The cancellation occurred on March 8th following volatility that saw prices doubling to over $100k a tonne in a matter of hours. HKEX, the parent company of the LME, dismissed the claim as "without merit".

LME Nickel is now trading (both cash and 3m contract) under $30K a tonne. Nickel is used in alloying to give steel (stainless steel) its corrosion resistant properties. LME Physical futures on nickel trade in 6 tonne lots with the nickel presented required to be Primary Nickel.

Germany Banning Russian Oil Imports by End 2022

Germany has announced a ban on Russian oil imports, halving demand by summer and going to zero by winter.  

One quarter of Germany's oil imports currently come from Russia.  

Natural gas (40% of Germany's needs come from Russia) will be phased out post the oil ban. The 9.5 billion euro pipeline, Nord Stream 2, between Russia and Germany, will now no longer be used having been suspended 2 days before the Russian invastion of Ukraine on February 24th, by German Chancellor Olaf Scholz (successor of Angela Merkel). 

Importing LNG is one option but has been tricky due to the lack of regasification facilities in Germany. The leasing of FSRUs in the short term (Floating Storage and Regasification Units) is one option being explored, and Wilhelmshaven, coastal town facing the North Sea, has been identified as one location.

Employers and unions have resisted an immediate energy import ban due to loss of jobs. The UK will also phase out Russian oil imports by the end of 2022. 

Separately, the EU announced a ban on Russian coal imports on 7 April which will take effect in August (Russia is Europe's largest supplier of thermal coal - which is used in coal-fired power stations).

Bill Ackman's Pershing Square Stumbles on Netflix Bet

New York based Bill Ackman's Pershing Square (the company he founded in 2004 with $54m)  reversed a $1bn position in Netflix (purchased in January) after the streaming media firm announced an outflow of 200,00 subscribers (partly due to its exit from Russia) generating a 35% drop in share price.  

This exit resulted in a $400m loss for Pershing investors. 

Bill imparted the need to act quickly and pointed to Netflix's "enormous operating leverage" as the reason why future subscriber growth revisions would have an "outsized impact on (his) estimate of intrinsic value". This is not Bill's biggest lost - he had earlier lost $4bn in his stake in pharma firm, Valeant Pharmaceuticals (now renamed to Bausch Health).

In closing, Bill also expressed optimism about the "opportunity rich" environment and confidence in putting the Netflix sale proceeds to good use.

Pershing Square also has a UK closed-end fund, Pershing Square Holdings (PSH), launched in October 2014 on the London Stock Exchange, and whose legal entity is incorporated in Guernsey.