Top pension funds cool on US | USAEMALL.com

One scoop to start: European buyout group CVC has explored a deal for $75bn private credit lender Golub Capital. A potential deal reflects how traditional private equity firms are look to expand into fast-growing corners of the finance industry focused on credit and infrastructure.

And one bit of programming: This newsletter is taking a break next week for Easter. We’ll return on Monday April 28.

In today’s newsletter:

• Canadian and Danish pension funds cool on the US

• US Treasuries ‘safe haven’ status challenged

• Gold enjoys best week in five years as investors rush to safety

Tariffs provoke pension fund rethink on US

Donald Trump is already restricting the movement of goods into the US through tariffs and the movement of people through immigration controls. Now there are signs that investors are starting to restrict movement of capital into the country in response.

Some of the world’s biggest pension funds are halting or reassessing their private market investments into the US, saying they will not resume until the country stabilises after Trump’s erratic policy blitz. 

The moves underscore how big institutional investors are rethinking their exposure to the world’s largest economy as the US president’s trade policy upends markets, adding pressure to America’s private capital industry which is under increasing liquidity strain.  

Some top Canadian funds are backing away from taking on more US private assets because of geopolitical concerns and fears they could lose tax exempt status afforded to foreign governments and their pension funds on their American investments. Canada Pension Plan Investment Board, which has C$699bn ($504bn) in assets, is among those considering its approach. 

Meanwhile, one of Denmark’s biggest retirement funds has paused new investments in American private equity because of concerns over stability and Trump’s threats to take over Greenland, an executive at the fund told the Financial Times. 

“If some private equity funds come by and say ‘we have a great investment in the US’, we will say ‘no thank you, come back in half a year when things are more stable and foreseeable or we will have to take a big discount’,” the executive said. 

The US approach to Greenland, a semi-autonomous territory which Trump has put pressure on Denmark to cede control of, was “very hostile”, the person added. “It’s difficult to find a happy smile and just say ‘now we start to invest in that country’.”

Another Danish fund is also pulling back. Anders Schelde, chief investment officer at AkademikerPension, which manages DKr150bn (€20bn), said he had started considering “pretty fundamental changes” to his portfolio which “could most certainly take us down a road with significantly less strategic exposure to US assets within a half year or so”.

Are you rethinking your investments in the US? Email me: harriet.agnew@ft.com

US Treasuries ‘safe haven’ status challenged

Bond, equity and commodity markets lurched violently last week as investors digested Donald Trump’s swingeing tariffs. 

But unlike previous sell-offs, investors found they had nowhere to hide, writes Costas Mourselas in London.

The mighty US Treasury market, normally a haven for investors, was aggressively sold throughout the week, dealing a blow to US economic exceptionalism.

“The sell-off may be signalling a regime shift whereby US Treasuries are no longer the global fixed-income safe haven,” said Ben Wiltshire, a rates strategist at Citi.

The week began badly for global markets as the fallout from “liberation day” continued.

But while the S&P 500 entered bear market territory on Monday, it was an accelerating sell-off in the US government bond market that truly alarmed investors. Yields for 10-year Treasury bonds were grinding higher, bucking the long-established trend in which Treasuries rally when equity markets fall.

On Wednesday, panicked hedge fund managers and prime brokers warned that the unwinding of leveraged trades in the Treasury market, including the so-called basis trade, were contributing to the sell-off — reminiscent of the early days of the pandemic. Some suggested that a weak auction for US Treasury bonds showed that foreign buyers, potentially China and Japan, were on strike.

Later on Wednesday, Trump admitted that he had been watching the bond market and that “people were getting a little queasy” as he announced a 90-day pause in some levies, propelling US equities to their largest single-day gain since 2008. 

But the Treasury sell-off continued apace. Market participants were increasingly blaming US policymaking and uncertainty rather than technical factors.

“There is real pressure across the globe to sell Treasuries and corporate bonds if you are a foreign holder,” said Peter Tchir, head of US macro strategy at Academy Securities. “There is a real global concern that they don’t know where Trump is going.”

A Federal Reserve official provided the market some respite on Friday when she said that the Fed stood ready to intervene if necessary. But last week may yet prove to be a major turning point for US investors in the weeks and months ahead. Indeed, fund managers are already warning that the US dollar’s status as a haven for global capital is under threat. 

Meanwhile don’t miss this profile of Scott Bessent, the former hedge fund manager and now Treasury secretary shaping Trump’s trade war.

Chart of the week

Gold has enjoyed its best week in five years, surging to record highs as investors rushed to the safety of one of the few havens left in global markets in the wake of Donald Trump’s tariff blitz. 

Bullion climbed more than 6.5 per cent by Friday close, reaching a new high of $3,237 per troy ounce, writes Leslie Hook in London. This marks the biggest weekly gain since the early stages of the Covid-19 pandemic in March 2020. 

The rise came as the market panic unleashed by the US president’s trade war caused investors to pull back from US Treasuries, a haven in normal times, as equities nosedived and the dollar fell to three-year lows against the euro.

“A broad sell-off in US equities and Treasuries has shaken confidence in American assets, prompting investors to seek safety in gold,” said Alexander Zumpfe, a bullion trader at Heraeus. 

“The rally is being fuelled by growing fears of a full-blown trade war,” he added, pointing to mounting recession risks, soaring bond yields and a weakening US dollar as contributing factors.

As gold is priced in dollars, it typically benefits from a weaker US currency, as this makes it cheaper to buy in other currencies. 

The escalating global trade war has roiled markets and contributed to uncertainty about the health of the US financial system. On Friday, Beijing hit back at Washington with a 125 per cent tariff on US imports. 

“You hold gold when you are worried about the system breaking,” said Peter Mallin-Jones, analyst at Peel Hunt. “It is not surprising that the safe haven of Treasuries, or just holding the dollar in cash, is not as appealing as it has been in previous crises.”  

Bullion has been on a historic rally this year, propelled by strong demand from investors as well as physical buying from central banks seeking to diversify away from the dollar.

Five unmissable stories this week

BlackRock has reported a slowdown in inflows after two record quarters. Chief executive Larry Fink said that anxiety about markets is dominating client conversations and warned that the US economy was “weakening as we speak”. 

With markets and tariffs, the only certainty is uncertainty, writes Howard Marks, co-founder of Oaktree Capital Management. The consequences of a move like Donald Trump’s are fiendishly hard to predict.

Fallout from the tariff tumult: shares in billionaire Bill Ackman’s main investment vehicle have fallen 15 per cent this year; and quant hedge fund Renaissance Technologies has suffered steep losses.

Mark Wiedman, a former top executive at BlackRock, is joining US bank PNC as its president, in a bet the regional lender can bulk up and better compete with industry behemoths such as JPMorgan Chase.

Untangling the spaghetti bowl of tariffs. Mohamed El-Erian, an adviser to Allianz and Gramercy, suggests four takeaways for investors to make sense of it all, from the certain to the less known.

And finally

The FT’s chief visual arts critic Jackie Wullschläger reviews the largest ever incarnation of Hockneyland, just opened at Paris’s Fondation Louis Vuitton. She writes: “The real subject is the cycle of life, nature’s and David Hockney’s: this elegiac, flamboyant exhibition of Hockney-picked greatest hits is likely the last in his lifetime, his own distillation of one of the most beloved oeuvres in postwar art.”

To August 31, fondationlouisvuitton.fr