FirstFT: Goldman capitalises on UK pensions fire sale

Good morning. A group of investors including Goldman Sachs is seeking to buy cut-price private assets from UK pension funds, which are rushing to raise cash after last week’s government bond market turmoil.

UK pension funds have sold liquid assets since Chancellor Kwasi Kwarteng’s “mini” Budget sparked a crisis in the gilts market. Many are planning to sell more illiquid holdings, including property, private credit and stakes in buyout funds.

“We’re seeing discounts of 20 to 30 per cent for a high quality portfolio [of stakes in private equity funds]” — Gabriel Möllerberg, a managing director at Goldman Sachs Asset Management

Investors including a unit of Blackstone also have multibillion-dollar funds that can buy up pension scheme holdings, some of which are trading far below face value. The deals are privately negotiated and can take months to arrange, but investors are expecting a surge in the next few months.

Terry Smith, chief executive of Fundsmith, weighs in on why the meltdown in pension funds’ liability driven investment strategies happened — and who is to blame.

Thanks for reading FirstFT Europe/Africa. Share feedback on today’s newsletter at firstft@ft.com. — Jennifer

Five more stories in the news

1. US accuses Opec+ of aligning with Russia The Saudi Arabia-led oil cartel said it would reduce production targets by 2mn barrels a day, equivalent to 2 per cent of global supply, prompting a backlash from the Biden administration and countries battling surging energy inflation triggered by Russia’s invasion of Ukraine.

2. Russia retreats from Kherson Russian forces are retreating from the front lines in southern Ukraine after losing significant swaths of territory in recent days, according to Kirill Stremousov, Moscow’s acting governor of Kherson, the first admission of a withdrawal in the region less than a week after President Vladimir Putin annexed it.

3. Spain and Belgium warn of threat to EU market Germany’s €200bn fiscal stimulus package announced last week risks unfair competitive distortions and could have major consequences for the single market, some member states have warned. Here’s why it could undermine EU unity.

4. UK households to lose more than they gain from Kwarteng tax cuts Stealth freezes in tax and benefit thresholds will take twice as much money from households as they stand to gain from the government’s cuts to headline rates, the Institute for Fiscal Studies said today.

5. Teen chess grandmaster likely cheated more than 100 times: report Hans Niemann, the 19-year-old at the centre of chess cheating allegations, probably did so more than 100 times in online games, according to a 72-page statement by chess.com. Unlike cheating over the board, which is viewed as a major crime, there is a widespread tolerance of it online.

The day ahead

Kwasi Kwarteng meets UK bank chiefs The chancellor has called retail and commercial bank chief executives including Alison Rose at NatWest, Debbie Crosbie at Nationwide and Charlie Nunn at Lloyds to discuss turbulence in the mortgage market following his “mini” Budget last month.

European security talks The new European Political Community grouping gathers in Prague and will be joined by non-EU states including Ukraine. UK prime minister Liz Truss will attempt to informally raise the prospect of a deal over post-Brexit trading relations in Northern Ireland.

National Grid winter outlook Following energy stress tests with the UK government, National Grid will detail its assessment of whether there will be sufficient supplies to avoid power cuts this winter.

Economic indicators The EU’s statistics agency publishes August retail sales data, following a rise in July, reflecting resilient consumer spending despite high inflation. S&P Global construction purchasing managers’ indices are out in Germany and the UK.

Nobel Prize in Literature The prize will be announced in Stockholm. Yesterday, a Danish and two American scientists won the chemistry prize for discovering “click chemistry”, a way of putting molecules together that has transformed pharmaceutical and medical research.

Corporate earnings ConAgra Brands, Constellation Brands, CMC Markets, Levi Strauss and McCormick report results.

What else we’re reading

Elon Musk’s ‘everything app’ plan for Twitter “Buying Twitter is an accelerant to creating X, the everything app,” the Tesla chief executive wrote on Twitter yesterday after the announcement that he planned to move forward again with buying the social media platform. Our Lex column writes that Musk would struggle to develop a WeChat-like super app.

• Winners and losers: Carl Icahn, Pentwater and Hindenburg Research are among the investors who predicted the billionaire would close the deal.

Thank you to everyone who took part in yesterday’s poll. Fifty-four per cent of respondents said Twitter should not go ahead with Musk’s offer to buy the company.

Spare a thought for Kim Kardashian The reality star has been forced to settle $1.26mn, or about 0.07 per cent of her reported net worth, for “unlawfully touting” a “crypto security” (cue the sound of tiny violins). While Jemima Kelly does not defend Kardashian, she writes that regulators should keep an eye on more egregious crypto behaviour.

Martin Wolf speaks with Larry Summers In the latest edition of our Economists Exchange series, the former US Treasury secretary delivers his verdict on the UK’s fiscal statement that sent markets spinning: “You went from a stable . . . situation to a catastrophic one within a matter of a few days”.

Why Big Tech shreds storage devices it could reuse Companies such as Amazon and Microsoft as well as banks, police and governments destroy millions of data-storing devices each year in the name of digital security, the Financial Times has learnt. But industry insiders say there is a better option.

The world-changing power of making your bed Physical rituals can improve our individual lives, but can they be applied to address wider societal problems? If we want to solve collective issues, it sometimes pays to look to physical habits for the answer, Gillian Tett writes.

Arts

Cézanne at the Tate Modern in London presents a hypnotically absorbing exhibition showing how one man reinvented the possibilities of paint.