BlackRock’s non-public fairness ache | USAEMALL.com

One scoop to start: Elon Musk’s political action committee awarded its final $1mn prize of the 2024 election campaign to a Donald Trump campaign staffer, according to election filings.

And a legal feud: Nathaniel Rothschild has filed a lawsuit against the financier Lars Windhorst less than six months after the scion of the banking dynasty agreed to become chair of the German entrepreneur’s investment firm.

In today’s newsletter:

• BlackRock takes a $600mn hit

• Meta’s new Maga board member

• Record-breaking bond issuance

BlackRock takes a $600mn hit on private credit deal

BlackRock last year staked its claim in the alternative asset business, spending nearly $30bn to buy two marquee private investment shops, as well as one of the main data providers to the entire industry.

Less than two weeks into the new year, it has been hit with a hard loss on one of its earlier ventures into the private investment space.

The firm’s private equity fund has lost more than $600mn on an investment in an insurance outsourcing company after the business declined rapidly and ultimately struggled with its debt load, said people briefed on the matter.

The business, Alacrity, has been taken over by a group of private credit funds led by Antares Capital, Blue Owl Capital, KKR and Goldman Sachs Asset Management.

BlackRock entered the picture in February 2023 when it bought a controlling stake — a $600mn equity investment — from Kohlberg & Co.

BlackRock’s entire equity stake will be wiped out as part of the restructuring, tarnishing the group’s investment record, DD’s Eric Platt and the FT’s Brooke Masters report.

Alacrity’s the latest big restructuring to hit the white-hot private credit industry.

Private equity-backed companies — which are big borrowers from private credit — have been weighed down by higher interest rates and big debt loads they took on right after the pandemic.

Last year a group of private credit lenders led by Blue Owl and Ares Management suffered losses from loans to software company Pluralsight. The restructuring also dealt a $4bn hit to Vista Equity Partners and other investors.

BlackRock has moved swiftly to build up its alternative investment business, to better compete with the likes of Blackstone, KKR and Apollo.

The fund that made the Alacrity investment has done well overall.

It reported an internal rate of return of 33 per cent through early 2024, although its distributed to paid in capital ratio was 0.6 per cent — a closely followed ratio that shows how much money a fund has returned to investors.

A figure higher than 1 indicates more money has been sent back to investors than they invested in the fund.

BlackRock was marketing a new vintage of the fund last year, hoping to raise $5bn, but it wound it down instead. Alacrity is the most recent of the Long Term Private Capital strategy’s seven publicly disclosed investments.

Zuckerberg’s new Trump whisperer

What can a cage-fighting supremo offer a Silicon Valley giant? That’s been a topic of much discussion this week after Ultimate Fighting Championship boss Dana White agreed to join Meta’s board.

The simple answer: he provides a direct link to the next US president.

White calls Donald Trump a “very, very good friend” — the two have been close for more than two decades and the president-elect is a regular spectator at UFC fight nights.

But is there a business case beyond corporate diplomacy? After all, White helped turn a small and failing fight promoter into a global enterprise worth more than $12bn.

He didn’t do it alone. In the early years he was a highly effective frontman, while the Fertita brothers — casino operators and friends of White who bought UFC for $2mn in 2001 — brought their business acumen.

The valuation leap from $4bn in 2016 to $12bn in 2023 came under the ownership of Ari Emanuel’s Endeavor and a group of private equity funds.

Several factors help explain the success of UFC. Strong cultural tailwinds, a powerful executive structure, early mover advantage in the digital world, and a magic formula for understanding what excites people.

But does Meta lack any of those things? Are Silicon Valley algorithms not already the most powerful barometers of what the citizens of the world are into?

Another explanation for choosing White is that Meta sees a need to retune its political and cultural antenna following Trump’s victory — as further demonstrated by its policy changes this week.

But it may be simpler.

Zuckerberg has become an obsessive MMA fan. He’s even built a training camp inside his Hawaii compound.

White and Zuckerberg also share an interest in biohacking and unusual health regimes. Perhaps the Facebook chief just sees White as a kindred spirit.

Corporate bond bonanza kicks off

The new year is young enough that some of us still have remnants of tinsel on the mantelpiece. But corporate borrowers have burst into 2025 at a record clip — issuing $83bn worth of new bonds so far, the highest figure in more than three decades.

Borrowing across the high-grade and junk dollar bond markets reached $83bn by January 8, according to data from London Stock Exchange Group — the biggest amount in that first week of the year since 1990.

The lion’s share of issuance has stemmed from investment-grade borrowers including international banks, car giants and heavy machinery maker Caterpillar. (US banks are expected to join the party later this month, after they come out of earnings season.)

“The market is strong, so there is no need for them to delay. They’re trying to come as early as possible,” said Marc Baigneres, global co-head of investment-grade finance at JPMorgan Chase.

January is usually busy for debt issuance, but the latest deals come as investor demand has remained extremely strong — helping to keep a lid on spreads, or the premiums paid by borrowers to issue debt over the US Treasury.

The average investment-grade spread stood at just 0.83 percentage points on Wednesday, not far above its narrowest point since the late 1990s.

Market participants say that other non-financial companies may choose to step into the market soon and do their own debt issuance rather than waiting for bond yields to move any higher.

Some economists warn that Donald Trump’s proposed policies — such as blistering tariffs — could drive up inflation. And if prices rise, that would put pressure on the Federal Reserve to keep interest rates elevated.

While deals have gone well for borrowers this month, some investors say they would now rather wait for bonds to look a little cheaper.

Job moves

• Wiz, the Israeli cyber security start-up that spurned a $23bn takeover offer from Google parent Alphabet last year, named Fazal Merchant chief financial officer.

• Southwest Airlines is losing two longtime executives, following its months-long proxy battle with Elliott Investment Management. Chief financial officer Tammy Romo and chief administration officer Linda Rutherford will step down in April.

• William Blair named Stewart Licudi the head of European investment banking, based in London. He most recently led the London office and has worked at the investment bank for 19 years.

• Partners Capital has promoted seven people to its leadership team. Lenia Ascenso and Leslie Fitzgerald were promoted to partner.

• Tech, media and telecom-focused merchant bank The Raine Group promoted Jake Vachal, who focuses on advisory in digital media, ecommerce, ad-tech and sports, to partner, a source told DD. Logan Britt, Kenny Lee and Joe Tillman were named managing directors.

• Thomas Hennelly is launching Point One, a new hedge fund recruitment firm, a source told DD. He was most recently a director at Paragon Alpha.

Smart reads

Lunar airwaves Private companies are staking claims to radio spectrum on the Moon with the aim of exploiting an emerging lunar economy, FT research has found.

Finance scandal Hidden commissions to UK car dealers inflated car costs for buyers, the FT reports. The legal fallout could cost banks billions and restrict access to credit. 

Semi-liquid Once exclusive to institutional investors, private assets are now promoted through semi-liquid funds. The FT’s David Stevenson asks: could 2025 be the year to invest in private markets? 

News round-up

BlackRock quits climate change group in latest green climbdown (FT)

Keir Starmer aide to receive dividends from corporate advisory firm Hakluyt (FT)

Elon Musk calls on California and Delaware to force auction of OpenAI stake (FT)

Insurers brace for losses of up to $20bn from California wildfires (FT)

Private equity turns to volleyball as financiers seek new sport frontiers (FT)

US dock strike deal wipes $5bn off three biggest listed shipping groups (FT)

Airbus comes close to 2024 delivery target after year-end sprint (FT)

7-Eleven owner’s sharp profit fall adds to takeover pressure (FT)