Stanhope Capital Chief Executive Officer Daniel Pinto warned that fallout from the banking crisis will be “substantial” and the Federal Reserve must bear the blame.
“I agree we are not on the verge of a massive run on the banks but there will be very, very substantial consequences,” Pinto said in an interview with Francine Lacqua at the Bloomberg Invest conference in London on Wednesday. These will include consolidation, especially in the US, as well as by banks specializing, he added.
The comments follow one of the wildest weeks in the recent history of finance which saw fears of a banking crisis emerge from the collapse of Silicon Valley Bank and quickly spread across continents. Three banks have collapsed and a fourth, Credit Suisse Group AG was forced to merge with rival UBS Group AG as regulators sought to avoid a broader financial collapse. Another, First Republic Bank, is wobbling.
The effects reverberated across markets with bank stocks, corporate debt, commodities and US Treasuries all seeing sudden moves that took many traders by surprise.
“The culprit is, I may say, the Federal Reserve,” Pinto said. “Taking interest rates from 0% to 4.75%, and probably to 5%, over eight months is irresponsible and was not necessary,” he said.
A variety of leaders from asset management and financial firms are speaking at the Bloomberg Invest conference (streaming on LIVE ). They are debating wealth creation in the region and the biggest risks and opportunities facing investors in the UK, Europe and beyond.
All times GMT.
Debate Over Investing in Art (2:12 p.m.)
Since the mid-1950s, art prices have increased at a rate of about 8.5% annually, Oliver Barker, chairman of Sotheby’s Europe, said at the Bloomberg Invest conference.
The rise of art funds that offer fractional ownership has changed the way the asset class is viewed, Barker said. Art used to be a “passion play,” with buyers looking to enjoy it on their walls. It’s “too early” to say whether returns on partial stakes will be significant.
There’s a “huge amount of speculation” on younger artists, he said, while high-end art is a particularly attractive asset for wealthy families prepared to hold as part of a longer-term strategy.
Retail Traders Have Closed the Gap (12:24 p.m.)
A flood of available information, including on social media, has helped retail investors “narrow the gap” on financial pros, according to a panel at the Bloomberg Invest conference.
During the recent banking turbulence, traders on the platform eToro stayed active, showing a willingness to navigate risk, according to Lule Demmissie, the company’s US CEO. She said more and more retail traders are using options and other “instruments that require more sophistication” to take advantage of volatility.
KKR’s Philipp Freise Says Private Equity’s Golden Era Just Beginning (11:22 a.m.)
Philipp Freise, co-head of European private equity at KKR, told the Bloomberg Invest conference, says his industry is at the start of a new golden era.
“In an ageing world, where people need to generate returns for people to live decent retirements, you cannot just rely on the public markets,” Freise said. “The democratization of private equity is ushering in a new golden era.”
But he warned the next three months would be “turbulent” for markets and investors.
Permira’s Kurt Björklund Strikes Note of Caution on Leverage (11:07 a.m.)
Private credit and access to a functioning secondary market to boost liquidity will be key in how private equity deals with volatility, industry executives told Bloomberg’s Jan-Henrik Foerster.
“You can’t leverage up to the hilt as you could do in the 1980s,” Kurt Björklund, managing partner at Permira said. “Now you have to make sure you’re investing in high profit streams.”
Direct lenders are replacing investment banks on larger leveraged buyouts as volatile markets, rate hikes and economic uncertainty stymie borrowers’ traditional debt financing options. Meanwhile, banks have been busy offloading tens of billions of dollars of debt on their balance sheets.
“Secondary solutions will be very interesting, it’s a market that is growing very significantly and we can better support our general partners,” Imogen Richards, a partner at Pantheon Ventures, said.
Lombard Odier’s Keller Says Swiss Strengths Remain (9:45 a.m.)
Hubert Keller, Lombard Odier’s senior managing partner, said Switzerland’s strengths as a wealth management center will survive Credit Suisse’s collapse.
“Switzerland is the largest place for cross border wealth management in the world for a number of reasons that have not changed with Credit Suisse,” he said in an interview with Lizzy Burden, noting the Swiss lender’s problems stemmed from its investment bank rather than its wealth arm.
He said he expects other Swiss wealth managers will likely benefit from Credit Suisse’s failure, as rich clients look to spread their wealth across multiple firms.
“There is no doubt that there will be some changes with clients as a result of this situation,” Keller said. “There is going to be a diversification effect which indeed is likely to benefit the rest of the wealth management industry in Switzerland.”
Man Group’s Ellis Says Central Banks Decisions (9:30 a.m.)
As well as warning of about the possibility of more pain to come in the banking sector, Man Group CEO Ellis also said central bankers will “have to keep rates high enough to cause pain and that will break things” if they want to bring inflation under control. That would include a willingness to see unemployment increase.
Ellis also had little sympathy for those Credit Suisse bondholders wiped out in the recent takeover. “If you invest in a bond or you lend money to someone and you don’t read the document, you deserve whatever happens to you,” he said.
Man Group CEO Says Banking Crisis Isn’t Over (9:20 a.m.)
Man Group Plc Chief Executive Officer Luke Ellis warned the banking crisis that has sent shockwaves through markets this month isn’t over and more lenders could fail.
“We will have a significant number of more banks that will not exist 12 months to 24 months from now that exist today,” he said in an interview with Dani Burger at the Bloomberg Invest conference in London on Wednesday.
Written By: Nishant Kumar, Loukia Gyftopoulou, Laura Benitez — With assistance from Fareed Sahloul @Bloomberg
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