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FT Alphaville’s inaugural Art of the Chart show landed last week, with hundreds of enthusiasts turning up for some dataviz delight.

With the immeasurable support of the FT’s graphics desk, helmed by data supremo Alan Smith, we put 24 of the finest, freshest, fanciest charts on display at A1 size inside London’s stunning St Bartholomew the Great church. Finance dominated the chartfest, but there was also plenty of economics, business, demographics and other good stuff (plus some non-good stuff).

Almost all of the charts were bought at auction by exhibition-goers, raising around £3,500 — which will be donated the FT Financial Literacy and Inclusion Campaign as soon as we can find a big-enough duffel bag. Three are still up for auction — details on how you can get your hands on them can be found below.

As well as traditional paper charts, Alan and co. masterminded a multimedia corner, with visitors able to watch a version of the FT’s sonic yield curve set to church bells, and try out a virtual reality version of the Phillips machine via an Apple Vision Pro.

Naturally, any attempt to show these charts here would be a pale imitation of the in-the-flesh experience, given how much smaller than A1 whatever screen you’re reading this is probably is (we can’t believe we’re getting to roll this graphic out again) . . .

. . . but here goes anyway (with apologies to mobile users). Scroll sideways to see them all:

As mentioned above, three of the charts haven’t set been sold. If you would like to bid for any of them (black wooden frame with glass front included), please submit a bid of at least £75 to [email protected] by this Friday 7 March.

Here are the ones that are still available:

How Trump triumphed:

The new guard:

Why chickens prefers log scales:

Personally we think the chicken one would be lovely in a paleo kitchen or a loo with an intimidating aura. Highest bid received by the deadline wins, and the money goes to charity, so don’t hold back.

Please note that you won’t receive the chart for a couple of weeks, as they’ll all temporarily be on display elsewhere, but we’ll get it/them to you as soon as possible.

The Art of the Chart will return. Until then, scratch that itch via our Friday charts quiz? We’re still accepting guesses until ca midday today.

A sell-off has taken more than $30bn in market cap off of AppLovin in the past week, a notable slide for a momentum-y stock that was (very briefly) talked about in the same breath as the Magnificent Seven.

That raises the question of what, exactly, AppLovin is and what it does. Here are a few things we know:

• The firm was formerly backed by KKR, and was at one point a mobile-gaming company. This is perhaps the easiest-to-understand part of its business.

• It’s now focusing on advertising, after this month announcing plans to sell its mobile-gaming division for $900mn to a private acquirer.

• This advertising business involves serving pop-up ads to people who play mobile games. The ads themselves are for mobile games.

• It also threw some ecommerce advertising into the mix late last year, but didn’t report exactly how much.

• AppLovin was trading at 75 times next year’s earnings as of Feb 14, according to FactSet.

• Its advertising sales growth is indeed compelling. Its advertising revenue grew 75 per cent in 2024 from the year before, according to the company’s latest quarterly report.

• A bunch of short sellers are sceptical about the sustainability of that growth, and have recently published reports about it.

• The company is now trading at just 45 times next year’s earnings. The Nasdaq Composite is trading at a 27 multiple.

After this, things get a little dicey to parse.

One of the short reports, from Culper Research, takes issue with the legitimacy of the app downloads that help power its revenue.

Here are Culper’s claims, if we’re understanding correctly: AppLovin sponsors an “AppHub” on some phones’ operating systems. And on those phones, at least some of AppLovin’s clients’ games can “bind” to the “AppHub” to download other games on to their phones, with just one click and no additional confirmation.

For the people playing the games developed by Applovin’s customers, it’s easy to see why all of this could be a bit frustrating, if Culper is correct. The gameplayer is already forced to look at an advertisement and interrupt their semi-meditative tapping. And mobile games necessarily involve touching a screen, so if this is indeed happening, an unintentional tap could prompt an immediate app download. It’s not exactly unauthorised, per se, but it’s certainly a departure from what smartphone users have come to expect.

This could certainly be grouped with other less-than-ideal experiences for mobile gamers — except that the company does “performance advertising”, which means that it’s paid when someone downloads a game, or spends money in the game.

The company’s CEO responded to the short sellers’ notes with a statement that says the reports are “littered with inaccuracies”, and seeks to assure investors that all of its platforms, and the games it promotes, comply with App Store policies.

AppLovin also had a call with sell-side stock analysts on Wednesday, according to a note from Bank of America. In that call, the CEO assured analysts that the direct-download business was “never a major growth revenue driver,” the analysts wrote. They summarised his comments as saying “AppLovin’s [direct download] revenues are de minimis”.

BofA analyst Omar Dessouky told Alphaville that the direct-download business are distinct and totally separate from in-game downloads, and that competitors Digital Turbine and Unity have a big head-start on that business. As for the App Store policies, there seem to be enough complaints about other companies doing it that the practice isn’t being censured (this one, for example, seems to be about Digital Turbine).

That doesn’t necessarily mean one-click downloading can’t be used within games, however, which seems to be one of Culper’s main arguments. And despite its moat, Digital Turbine is trading at, uh . . . 9 times next year’s estimated earnings, according to FactSet. As we mentioned above, AppLovin is trading at 45 times.

Another question raised by the short reports is the company’s relationship with members of the “Mag 7”, and especially Meta (née Facebook). But those questions seem to really stem from this interesting Business Insider piece from December.

According to BI, industry executives and competitors — who may have an axe to grind, to be fair — have raised eyebrows at AppLovin’s ecommerce expansion. From BI:

AppLovin is only inviting ecommerce advertisers that spend upward of $20,000 a day on Meta ads to try its product, and it’s incentivizing some of those buyers with $10,000 ad credits, multiple industry insiders told BI . . . 

In his chat with Alphaville, Bank of America’s Dessouky said Meta is the destination for about 80 per cent of ecommerce ad spending, so that’s an easy way to ensure these ecommerce clients will be worth the expense of onboarding.

[Jeremy Sonne, founder of AI marketing tech co Simbiant] said he’d seen an “extremely high correlation” between when AppLovin sees a spike in conversions and when Meta sees an increase in ad spend. He said he hadn’t seen a similar trend when comparing Meta and Google or AppLovin and Google.

He said that made him wonder if AppLovin was driving real incremental value or whether its campaigns were just reaching the exact same audience as Meta in some way.

He said he’d also seen a “concerning overlap” where Shopify sales purportedly driven by AppLovin have a very high geographic overlap with where Meta ad website traffic was coming from.

Now, this is all interesting, but it sort of dodges the fact that AppLovin’s biggest business has been advertising mobile games within other mobile games.

And it is odd to see just how popular it is on the sell-side for a company that — lest we forget — is mostly the marketing equivalent of a Matryoshka doll. Digital Turbine, for all of its supposed moat, is thinly covered by analysts. Dessouky downgraded it to “underperform” last November citing “increased competition”.

AppLovin, on the other hand, has 19 buy-equivalent ratings out of 27 analysts covering the stock, according to FactSet.

Are mobile games really that popular? Like . . . $109bn market cap that used to be $170bn popular?

The BI article raises another interesting point that probably isn’t related to its Wall Street popularity, but maybe could be related to its Wall Street popularity, given the Times We Live In. BI’s reporter closed out the story quoting some speculation about whether AppLovin could eventually acquire a social network — Snap was the example cited — to increase its reach to non-gaming customers.

AppLovin did just do a deal, though. Here are the terms, with its 4Q earnings report. With our emphasis:

On February 12, 2025, the Company announced that it had entered into a term sheet for the sale of the Company’s mobile gaming business to a privately held company (the “Acquirer”) for total consideration of $900 million (the “Term Sheet”). The Term Sheet provides for the total consideration to consist of $400 million in shares of the Acquirer’s common equity and $500 million in cash, subject to customary purchase price adjustments.

The Term Sheet also provides that the Acquirer will borrow up to $250 million of the cash portion of the total consideration and that, if the Acquirer is unable to obtain such financing, the Company agrees to provide financing in such amount to the Acquirer through the issuance of a promissory note. The Term Sheet is non-binding, except with respect to an agreement by the parties to use commercially reasonable best efforts in good faith to negotiate and finalize definitive agreements for the proposed transaction, a prohibition on the Company engaging in discussions or negotiations with any third party other than the Acquirer regarding the sale of the Company’s mobile gaming business for a specified period, and customary terms such as fees and expenses, governing law, and termination.

So if we’re understanding this correctly, out of that $900mn sale . . . $250mn will be funded with cash that the undisclosed acquiring company has on hand. Fair enough.

And sure, it seems fine that $400mn will be funded with equity (ie AppLovin taking an equity stake in the acquirer). But it seems like, in that case, it could be important to know what company it is. And if the acquirer can’t secure the financing to complete its purchase, AppLovin will provide that funding itself, by issuing the acquirer a promissory note. Interesting stuff.

But hey, JPMorgan’s fixed-income analysts say that investors should buy AppLovin’s bonds, citing the company’s introduction of a 2x leverage target in 3Q of last year. Since then it been upgraded to investment-grade status by S&P Ratings and Fitch. On top of its roughly $3.5bn in outstanding paper, another $250mn won’t make a huge dent, right? Though presumably a giant Snap-style acquisition, if funded by cash/debt, would push its leverage up.

That sorts it out, right?? Any questions??

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

One month ago, we acquired (via freedom of information request) the Office for National Statistics’ guidance on what its staff and agents should be looking for when observing the “basket” of items used to monitor inflation.

We wrote then:

We’ll try to make a tidier version of the ONS’s table soon

In the meantime, stuff has happened. But now we’re SO back, and we’ve got the mega spreadsheet to prove it.

If you’re from a hedge fund and are just here to scrape said spreadsheet, please scroll down. If you’re interested in a woeful tale, stick with us.

A woeful tale, pt.1

We mentioned last month that:

Because civil servants are cruel, the document’s formatting is horrible, half of its text isn’t actual text, and there are redactions. 🙃

Wah, wah, wah — yes, journalism really IS hard and don’t let anyone tell you otherwise.

The ONS’s response to our freedom of information request landed as a 70-page PDF file, which can be downloaded here.

The PDF is, basically, a spreadsheet, consisting of item names, and up to six “help line” columns detailing exactly what the ONS considers valid for that category.

So, for instance:

This is clearly odd. Why a continuous string of text is being written across six columns in this way, we have no idea.

Of course, not all of the items are this oddly separated, eg:

While others are much more condensed, such as:

There is no apparent rhyme nor reason to why the guidance is sometimes spread out across columns, nor is there anything resembling a consistent style to how things are written. It very much feels like the product of years of ad hoc tweaks and edits (presumably in response to requests for clarification), and gives us concrete poetry flashbacks.

Readers may have noticed references to codes such as N and C in those help lines above. N means a new product is non-comparable to a previously observed product, while C means it is. Simple!

A woeful tale, pt.2

We’re not exactly sure how the ONS managed this, but the PDF’s pagination per item loosely goes like this:

First pages (labelled 1–35, odd numbers in PDF)

Item description / Help line 1 / Help Line 2

Second pages (labelled 36–70, even numbers in PDF)

Help line 3 / Help Line 4 / Help line 5 / Help line 6

Obviously this isn’t a big issue in and of itself, but we wanted to convert this into a more usable format and here (non-exhaustively), are some of the other issues the PDF has:

— Some pages, including the first, have not been saved as text
— Some cells are full of random line breaks and other typographic artefacts
— Nothing redacted ever pastes good
— Text copied from cells came out as unbroken strings when pasted
— In Acrobat and OS X preview, some pages copied sideways, natch.
— Lom
— Lom
— Lom

We reached out to the ONS and asked if we could simply get the underlying spreadsheet, and in the meantime went to work doing things semi-manually (copying individual cells or typing them out by hand).

A woeful tale, pt.3

Although [REDACTED] was actually extremely helpful — and there’s a twisted logic to how things were done here — so it was that we ended up primarily deriving our information from the optical-character-recognition generated .docx version of a PDF version of an Excel spreadsheet.

Behold, a basket

Some time later, we’d got everything into a single spreadsheet. Caveats:

— we have undoubtedly made some typos given the amount of manual copying of weirdly-written data we had to do
— we’ve recreated the guidance in the exact style it was written, which is often massively inconsistent.
— in some instances, the OCR process applied by the ONS means that letters with descenders that appears at the bottom of a page have scanned weirdly, or that some letters are borked (eg we had to fix “fluten” to “gluten”)

As mentioned, the column divisions made very little overall sense. So we concatenated them to make each set of guidance read as one paragraph.

For everyone else, enjoy (nb there’s a direct download link in the bottom right if you want the raw data):

Observation notes on observation notes

Last time around, we mentioned some of the oddities in this document. The laborious process of preparing this spreadsheet caused us to note several more:

— a child’s soft toy/teddy bear CANNOT be a hand puppet
— a child’s baby doll must have a plastic element
— gold rings aren’t allowed to be rose gold (don’t be basic)
— organic bread should only be priced if it’s “representative” of the shop it’s from, whatever that means
— quiche crusts are optional
— observers must specify whether popcorn is sweet/salary/both, but it doesn’t actually matter
— the guidance on livery charges is… thorough
— 2-in-1 shower gel products aren’t allowed, sorry Boris
— chicken nuggets don’t count as chicken for the purposes of a chicken and chips takeaway

In particular, we found ourselves drawn to a number of items where there is little or no help provided, including…

— Digital Media Player
— Computer Software
— Mobile Phone Applications
— Interchangeable Lens Digital Camera
— Laptop Computers

…and dozens more, all of which have hugely variable product types and costs. ¯\_(ツ)_/¯

In fact, almost everything in here seems absurd if you look closely enough. Oh well.

Further reading:
— small caged mammal (FTAV)
— small caged mammal infinity (FTAV)
— small caged mammal revelations (FTAV)
— small caged mammal merchandise (Redbubble)

Last year, Norges Bank Investment Management’s dreams of adding private equity to its investment mandate once again got kicked into the long grass. This was probably the right call.

However, if Nicolai Tangen — the Norwegian sovereign wealth fund’s restless and ambitious head — is keen on a different titanic, legacy-making project, then here’s one that FTAV has been noodling on for a while: it should let other institutions and perhaps even ordinary people invest in the fund.

OK . . . we may need to backtrack a bit to explain what that would mean, how it would work, and why it’d be a big deal. It probably won’t happen, but it really should. As Espen Henriksen, a finance professor at BI Norwegian Business School, told Alphaville:

The recipe for managing the fund has been broad and systematic risk diversification and economies of scale in open public markets.  Allowing other savers to participate in the fund and enjoying efficient and cost-effective risk-return exposure could enhance economies of scale and improve net returns for the Norwegian government. 

This approach could generate a double win-win: supporting the broader public good while increasing the Norwegian government’s net financial returns.

To be clear, this is not actually something that is currently being discussed in Norway, even informally. It’s just a flight of fancy after reading NBIM’s latest annual report yesterday.

But after jotting down some half-baked thoughts we convinced ourselves that this is a tremendous idea, and we wanted to test out how ludicrous it is in the public arena. As Tangen is fond of saying: “Screwing up is allowed.”

Hydrocarbon heaven

First of all, here’s some background on what Norwegians usually just call “the oil fund”. If you already know all about it then feel free to skip to the next section.

The $1.82tn sovereign wealth fund is technically called the “Government Pension Fund Global”, but funding retirements is only a small part of its job. The money in the fund comes from surplus revenues generated by Norway’s oil and gas revenues, which is invested overseas by Norges Bank Investment Management — a division of the central bank — to avoid overheating the domestic economy.

The national government is only supposed to be allowed to spend roughly the annual real return of the fund across the budget. Initially this was set at 4 per cent but was subsequently lowered to 2.9 per cent. This is just a guideline, however. In times of plenty, governments have often spent much less, and in times of pain (eg after financial crisis and Covid-19) they are allowed to spend more.

By any reasonable standards, it has been a phenomenal success. The fund’s financial returns bankroll about 20 per cent of the Norwegian government’s entire budget — almost equal to its annual expenses on pensions and defence. And the model has mostly prevented the “Dutch disease” that has blighted many resource-rich countries. NBIM has become a model of transparency in an often murky world of sovereign wealth funds.

Here’s a snapshot of the first deposit cheque that seeded the fund back in 1996. From tiny acorns etc etc.

About 70 per cent of the fund is invested in equities and 30 per cent in bonds. Up to 7 per cent can be invested in real estate, and up to 2 per cent in renewable energy projects. The latter two are being gradually scaled up, but equities and fixed income are, and probably will remain, the dominant asset classes.

NBIM allocates some money to external and internal portfolio managers, but the vast majority of the money is managed passively, mimicking a benchmark handed to it by the Norwegian finance ministry (Excel snafus excepted). NBIM is allowed a tracking error of just 1.25 per cent from this index. Over the past 15 years it has only averaged 0.44 per cent.

This means that only 676 full-time people are needed to run the whole $1.8tn show, and the all-in cost of NBIM clocked in at just 0.041 per cent of assets last year. That is exceptionally low. It helps that even Tangen only takes home about $663,000 a year — roughly what a generic Wall Street MD might make.

And what of the performance? Well, NBIM has since 1998 generated annual average net returns of 6.34 per cent. Now, this may not sound enormously compelling at a time when US stocks post double-digit returns most years, but remember that only 40 per cent of the fund was initially in stocks. This was only raised to 60 per cent in 2007, and 70 per cent in 2017 (Moreover, corporate bonds weren’t added until 2002, until which it was all in lower-income, high-grade government debt).

Over the past decade it has averaged 7.3 per cent, and it has annualised about 8.9 per cent since it started scaling up in equities in 2008.

Its overall risk-adjusted returns therefore compare well with other sovereign wealth funds (at least the ones that report their results), with some allowances for the different investment strategies. NBIM has also outperformed the average US university endowment over the past 3, 10 and 25 years despite their often much racier asset mix.

NBIM’s returns have also outpaced its index by about 25 basis points a year since its inception, showing how you can still eke out some alpha even with a passive mandate. Last year it undershot its benchmark by 0.45 per cent, but over time, those small wins — from things like smarter trading, rebalancing strategies and securities lending — can really add up.

Indeed, of NBIM’s $1.8tn of assets today, only about $460bn come from oil and gas revenues. The rest has been generated by investment gains and currency movements. This is nice if you’re Norwegian, and full disclosure: the author of this post is Norwegian. [Ed: This will be shocking to readers, pls consider disclosing more often…]

This combination of good results, decent diversification, cheap costs and incredible transparency is why an open-ended, publicly available fund that replicates NBIM’s results could be a killer proposition.

After all, picking a smart selection of cheap funds that ensure a base level of diversification and performance is difficult for many people (even professional CIOs).

NBIM in practice resembles Bill Sharpe’s ultimate market portfolio. For a lot of people — both ordinary household savers and large institutional pools of money — it would therefore be a great investment choice.

A public investment utility

So how would this even work? Well, now we’re definitely entering spitball territory, but the technical difficulties don’t seem insurmountable.

NBIM would need set up some kind of separate open-ended mutual fund structure for to the public to avoid directly commingling its existing pool of public money with private money raised. This would require more lawyers and back-office staff, but on the investment side it would simply piggyback off the existing infrastructure to replicate NBIM’s returns.

This fund could probably have the same headline 4 basis point annual cost as NBIM. In fact, the more money this fund raises, the cheaper it might become over time, thanks to the economies of scale (NBIM’s current expenses are down from long-run average cost of 8 basis points).

This vehicle shouldn’t offer the same openness to constant inflows and outflows that a traditional mutual fund does. This would be an investment product designed for long-term saving, so quarterly or even annual withdrawal windows would be fine.

Sure, this would deter some people from investing. But that seems like an acceptable tradeoff to prevent haphazard and sometimes lumpy redemption requests from NBIM, which could spike in turbulent times.

At first, this public NBIM fund might just be open to other public pools of money in Norway, such as municipal pension plans. Frankly, these should already have been allowed to piggyback on the expertise built up at NBIM over the years, rather than doing it in-house.

Once the concept is proven it could be opened up to ordinary Norwegian savers, positioned as a kind of public utility for locals — a one-stop-shop for broad, cheap market exposure to encourage long-term savings, managed by one of the best custodians in the business.

Plenty of money is already invested in Norwegian asset managers, with $139bn in equity funds and another $29bn in bond funds. Most of these funds are laughably overpriced, and perform just about as well as you’d expect from primarily active funds.

Even the cheapest global equity index fund in Norway charges 15 basis points a year, triple NBIM’s costs. The all-in costs are usually much higher. There’s a reason why DNB Asset Management, the investment arm of Norway’s biggest bank, enjoyed a 63 per cent pre-tax profit margin last year.

And over time, there’s no reason why NBIM couldn’t open up this fund to investors elsewhere in Europe or even the world. As BI’s Henriksen said:

NBIM’s systematic strategy of efficient, broad diversification and economies of scale—so-called “enhanced indexing”—has, historically, delivered positive risk-adjusted returns relative to index even after costs.  If the administrative fees are kept at a modest level, that could also be the case for outside savers if given access to the fund.

A natural starting point could be Norwegian public endowments, such as municipal funds created through the privatization of hydropower plants and other public utilities. These entities share the Norwegian government’s objectives and long-term savings and consumption-smoothing horizon. If successful, this model could be gradually expanded to include other savers.

Sure, we’re glossing over logistical challenges and legal issues — NBIM would need to hire a KYC team, for example — but none of them seem insurmountable. And an NBIM product would probably be very attractive to a lot of global institutional and retail money, which is often managed less well and more expensively than what NBIM can offer.

For comparison, the average asset-weighted cost of equity-focused active US mutual funds stood at 0.65 per cent in 2023, according to the Investment Company Institute. Even if you include passive index funds in the mix the average cost still only falls to 0.42 per cent. In the less competitive European market — where many people blithely plough their money into any fund recommended by the smooth salesman at their local bank — the average equity fund costs 1.18 per cent.

Institutional investors usually pay a lot less than retail investors, but an NBIM fund would probably be an extremely competitive product. Hell, even Vanguard funds cost an average at 0.08 per cent at the end of 2023 — almost twice as high as NBIM. 😱

Obviously, the asset management industry would despise it, much like how commercial publishers hate competing with taxpayer-funded public broadcasters who give away their content for free. Hardly anyone would have an interest in selling it. Distribution might therefore be a problem. It’s hard to envisage NBIM going on an advertising blitz or offering sales commissions either, so it would have to rely on word of mouth and media attention to gather customers.

But that’s pretty much how Vanguard operates, and it’s worked out pretty well for them. We’re pretty sure that broadly-available version of NBIM would get decent traction regardless.

Yes but . . . 

We’ve flicked casually at some logistical issues — back office stuff etc — and dismissed them as completely manageable, but there are probably tons of small fiddly things that we’re oblivious about, forgetting or downplaying. And there are some broader issues that are worth highlighting.

For example, NBIM has ethical guardrails set by Norway’s parliament to ensure broad popular support in a country known for social-democratic politics.

A host of companies are completely excluded because of blanket prohibitions on investing in anything involved in the production of nuclear weapons, coal and tobacco, or any company that “contribute to violations of fundamental ethical norms”, mostly relating to human rights and environmental degradation.

These are assessed by an independent “Council on Ethics”, which can recommend putting individual companies under observation, recommend NBIM exclude them, and review previous exclusions.

This council has at times been controversial — for example, the optics of banning tobacco investments while tobacco remains legal in Norway are a bit iffy — and as the size of the fund has swelled and times have changed, the controversies have grown in magnitude.

For example, Israeli investments have become a major flashpoint lately. Some groups want to prohibit hydrocarbon investments entirely (despite the awkward fact that oil riches created the fund). The ban on investments in companies with any involvement in nuclear weapon production mean that European giants like Airbus and BAE are uninvestable, but NBIM still owns shares in more controversial US guns and ammo makers like Sturm Ruger and Vista Outdoor. That looks out of sync with the current zeitgeist.

Here’s a snapshot of some of the exclusions. You can find the full list here.

More generally, the kind of “responsible stewardship” and active ownership long advocated by NBIM has become less trendy these days.

It already became a minor scandal in Norway when Elon Musk clashed with Tangen after NBIM voted against his mammoth Tesla pay package. As the fund keeps growing, these conflicts will probably become larger and more frequent. For some investors, NBIM’s approach might be exactly what they want; others might prefer a more passive ownership approach to go with the passive investment strategy.

Moreover, if NBIM-Public were successful, it would transform an already huge fund into a behemoth, and dramatically increase NBIM’s already sizeable boardroom influence.

To some Norwegians this might be part of the attraction — leveraging already-existing investment infrastructure to subtly increase the country’s soft power projection — but as a rule of thumb it’s probably healthier for the financial system to have a diversity of distinct pools of capital with differing investment and governance styles, rather than a narrowing club of titanic ones.

For NBIM itself, adding a broader range of clients could also be a distraction from its core job. Tangen, a former hedge fund manager, has often joked about how nice it is to just have one client to care about (the Norwegian finance ministry). Adding a listed fund of some kind would add all sorts of diversions.

Moreover, the Norwegian parliament — which would need to bless the decision — is not prone to make big ambitious moves, and has a lot of other more pressing things to deal with. So it will probably never happen.

Still, Alphaville has now wrung more than 2,000 words out of this flight of fancy, so that’s something at least. And who knows what the future holds? A listed NBIM fund arguably makes more sense than venturing into private equity.

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The Betaville M&A blog, the Wario to FT Alphaville’s Mario, sent an interesting story to subscribers this morning about UK-listed Pets at Home:

Pets at Home Group, the FTSE 250-listed pet food retailer, is at the centre of takeover rumours.

People following the situation had heard rumours Pets at Home may have attracted takeover interest, possibly from a private equity firm.

Some people following the situation suggested the private equity firm circling Pets at Home may be based in Europe but have a similar business to Pets at Home in the US.

Funnily enough, we’d been hearing similar speculation after an intriguingly named vehicle appeared on the Companies House register: Pug Bidco.

Pug Bidco’s registration doc lists one director, a Michael Chang of 650 Madison Avenue, NYC. The vehicle’s registered address is 40 Portman Square, London. These are both offices of BC Partners, the UK private equity group.

A person named Michael Chang is Partner, Private Equity (North America) at BC Partners. He was part of the team that took private Petsmart, the US pet supplies retailer, in 2015 and bolted on the Chewy pet-food website in 2017.

Asked about the speculation, a BC Partners spokesman told FTAV that it was “totally incorrect”, adding: “Pug Bidco is nothing to do with Pets at Home. We are not involved here at all.”

Pets At Home did not immediately respond to a request for comment.

[Updated 11:07 GMT to include BC Partners’ response.]

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Your guide to what the 2024 US election means for Washington and the world

Once upon a time, before everything else happened, Donald Trump’s defining obsession could be measured in billions. Whether the billions were real never seemed to matter much.

“Donald’s verbal billions were always a topic of conversation whenever we visited,” Timothy O’Brien writes in his 2005 biography TrumpNation: The Art of Being the Donald. He describes how Trump would pluck ever-larger 10-digit numbers out of the air when talking about personal wealth.

Peter Newcomb, a veteran editor of the Forbes 400 rich list, told O’Brien that Trump “constantly calls about himself and says we’re not only low, but low by a multiple.” It wasn’t just that the magazine attached a dollar value to individual achievement, but that its staff lacked the time to run deep audits on its subjects, so could be lobbied effectively, he writes. The Forbes 400 was a malleable benchmark ideal for a bullshit billionaire.

Now that Trump projects his idiosyncrasies and fragilities on to the western world, his game of bullshit billionaire bingo has gone macro. Winning the approval of the US administration is as simple as showing Trump a big number. He remains impressed to the point of obsession by big numbers. And, because empathy is not one of Trump’s strengths, he believes everyone else will be too.

It worked in late 2016, when Masa Son made a splash by announcing with the president-elect that SoftBank would invest $50bn in the US over the following four years. (About half the pledged cash went into WeWork.)

For Trump’s second term Masa repeated the gambit but added a zero. SoftBank is a lead partner on the Stargate datacentre project announced on January 21:

The Stargate Project is a new company which intends to invest $500 billion over the next four years building new AI infrastructure for OpenAI in the United States.

Saudi Arabia’s Crown Prince Mohammed bin Salman tried one-upmanship a few days later, telling Trump during their “congratulations on your inauguration” phone call that the Kingdom plans $600bn in US investments over the next four years.

Apple this week put a familiar-looking figure on its nearshoring plan:

Apple today announced its largest-ever spend commitment, with plans to spend and invest more than $500 billion in the U.S. over the next four years. This new pledge builds on Apple’s long history of investing in American innovation and advanced high-skilled manufacturing, and will support a wide range of initiatives that focus on artificial intelligence, silicon engineering, and skills development for students and workers across the country.

“We are bullish on the future of American innovation, and we’re proud to build on our long-standing U.S. investments with this $500 billion commitment to our country’s future,” said Tim Cook, Apple’s CEO.

Meanwhile, over in territorial statecraft, Trump’s team has been pulling on the same string:

US officials presented Kyiv last week with a plan to channel up to $500bn in proceeds from resource extraction into a fund that would be 100 per cent owned by the US. Trump has described the plan as repayment for previous US military aid.

Ditto Elon Musk. When pitching the Department of Government Efficiency to the WSJ-subscribing public via an op-ed in November, Musk and Vivek Ramaswamy picked a cost-saving target that you’ve probably already guessed:

DOGE will help end federal overspending by taking aim at the $500 billion plus in annual federal expenditures that are unauthorized by Congress or being used in ways that Congress never intended

Why $500bn? What makes that number so compelling?

Why we prefer round numbers for everything from state budgets to medicine dosing is a matter of debate among psychologists. The choice overload that comes with precision tends to get the blame, even though broad-based evidence is weak. Some of the confounding factors might apply to a 78-year-old POTUS, however. A person is more likely to seek the comfort of a round number when required to make a lot of decisions quickly about things they don’t really understand, for instance.

There’s also numerical cognition. Studies show the average human brain is optimised for the amounts it encounters regularly, so will struggle badly with anything above a few hundred. We can grasp intuitively the difference between $10 and $50, but have to pause when asked about the difference between $10mn and $50mn. Conceptualising big numbers in anything other than abstract terms is a luxury reserved for the 0.1 per cent.

And the bigger the number, the more likely a person will fall back on approximate quantities where terms like “million” and “billion” are category markers. The bigger the number, the more likely its difference to a smaller number will be underestimated.

Here’s a neat experiment that asked people to place numbers on a line that goes up to a billion. Most people put a million in the middle, “as though they believed that the number words ‘thousand, million, billion, trillion’ constitute a uniformly spaced count list,” its authors write.

Trump approaches policy in the same way he approached the Forbes 400. For a number to register with the public as being significantly bigger than the last one, it has to be a multiple. So, much like Trump’s lobbying routinely multiplied his measurable wealth by 10, SoftBank’s $50bn investment for his first term becomes $500bn for his second. It’s nearly impossible for anyone to contemplate a trillion, but they can still appreciate that half of one is a lot.

None of it matters overly, at least judging by what happened under the first presidency, The average quarterly volume of gross private domestic investment — one of the broadest measures of it in the economic calculus — did rise from $3.11tn under Obama’s last term to $3.7tn under Trump. But it jumped to $4.8tn under Joe Biden’s presidency.

The trend in incomprehensibly big numbers is up irrespective of whether the person in charge wants it press-released, which suggests Trump’s love of $500bn is just another piece of Kayfabe. His ear has always been tuned to whatever bullshit the public will understand.

Further reading:
— A brief history of Tesla and the number 500,000 (FTAV)

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History weaves odd threads sometimes. In 1971, with Cold War détente in the air, the Soviet Union established the Ost-West Handelsbank to finance trade with West Germany.

Fast-forward over half a century. After the fall of the Soviet Union, a VTB merger in the 2000s, Russia’s invasion of Ukraine and subsequent sanctions on VTB, then a takeover by German regulators, what’s left of the OWH name is the mystery creditor pursuing one of Moscow’s old Cold War allies.

From MainFT over the weekend:

Liquidators of the European arm of VTB Bank have accused Angola of defaulting on a loan after the lender’s Russian parent was hit by sanctions, according to two people familiar with the matter.

Frankfurt-based OWH, the former VTB Europe, has launched arbitration proceedings against the African country to repay the loan, the people said. It is seeking to recover money on assets that were held in the subsidiary and severed from state-owned VTB by western sanctions on Russia.

Even when we first wrote on this, we knew that it had to be a Russian bank debt. But it was almost certainly not a Russian bank that was making the claim of default.

In terms of where the debt came from, no other country could really be home to several sanctioned lenders who had a track record in a place such as Angola. But, politically, it was hard to imagine Russia legally pursuing a not-unfriendly country over a debt because of sanctions problems.

Angola-Russia relations are less comfortable than they were, not least because of sanctions in other areas. But there’s history here. And when Russia does turn legal holdout, it tends to go differently.

That left a creditor that had to pursue repayment. Short of a maniac distressed debt investor somehow acquiring this claim, it could only be an entity with the duties of something like a liquidator.

So, even if the original bond disclosure by Angola wasn’t great — mystery solved?

Almost. But not quite. There are other important questions here.

First, does it matter anyway? Whoever owns it, is this leftover loan really material to investors in Angolan debt? After all, that is the pushback that we had from debt managers and analysts after our original post.

Even if we don’t know exactly how big the OWH-inherited VTB debt is, it can’t be much bigger than the very low hundreds of millions of dollars. On size alone, it won’t make or break Angola’s credit. After all, this all emerged in a half-disclosure buried in the issuance of nearly $2bn in bonds, to serve as collateral for a $1bn loan from JPMorgan, ahead of approximately $6bn in external debt service this year.

If you are bullish and think Angola will soon have market access and other money coming in to cover its bills, you might well bet that other creditors will safely ignore the OWH claim and that, in the worst case, Angola can pay it off in full in the last resort.

And if you are bearish, you are probably bearish for more sweeping reasons: the over-collateralised loan is a bad, not a good sign for you, or you think the price of Angola’s main export will go lower, and so on.

It takes two views to make a market, as ever.

The point is though, the disclosure still lacks for informing those views. Sanctions are complex. International arbitration very often does involve confidentiality. But neither feature of markets is likely going away soon for sovereign debt disclosures, including at times the thorny issue of who may have stopped paying whom when, and if that ranks as a default.

One more thing. Let’s recap the original disclosure:

Other defaults

Angola is a party to an arbitration in relation to a syndicated facility entered into with certain lenders. The facility was performed in accordance with its terms until each of the lenders became subject to international sanctions, the effect of which was to restrict the parties’ ability to perform the facility in accordance with its terms. One lender has recently commenced arbitral proceedings claiming that an event of default has occurred and that it is entitled to full repayment of its portion of the loan. There is no evidence that that lender has the required majority lender consent of 66 2/3rds and therefore, any demand or action taken by that lender in its own name contravenes the terms of the loan documentation. As such, Angola denies that the lender is entitled to accelerate the loan or pursue the claim and intends to defend the arbitration.

What does that tell us clearly about the current sanctions status of the ‘lender’?

Shielded from VTB and now in liquidation, OWH is no longer subject to sanctions. Assuming that it can pursue this claim, that means one of the issues in any litigation may well be whether sanctions now apply to the debt at all. So it’s quite important.

Anyway. We look forward to perusing the prospectus of Angola’s next eurobond sale. Join the https://vic2.club/ community and experience the ultimate online betting destination, where excitement and rewards await.”

Europe has a financial plumbing problem. Nothing illustrates this better than its securitisation markets. This is such a big issue that a seemingly exotic financial tool has shot up the agenda in Brussels lately.

Securitisation is the process of transforming a bunch of smaller loans or other cash-generating assets into larger, tradable securities. Despite the lingering bad smell from the damage this caused in the global financial crisis, a trio of landmark reports by Mario Draghi, Enrico Letta and Christian Noyer have all recommended European securitisation reforms to unclog the process and help credit flow to new projects.

The scale of the challenge is huge. Just to take one example securitisation of US data centre debt has totalled $35bn since 2018, according to JPMorgan. The EU has yet to see a single transaction. Similarly, US solar securitisation has raised $23bn since 2018, whereas the EU saw its first and so far only residential solar securitisation in 2024, raising just €230mn.

If Europe can’t even finance these so-called strategic assets, what hope is there for midsized businesses or a broader array of assets? That’s why the Draghi-Letta-Noyer triptych matter more than most European reports, work streams and white papers.

Already there is a sense that something might finally change. Late last year, the EU kick-started a short consultation process on how to make European securitisation great again. The comment letters are now in, and the EU will make recommendations before the summer.

This is overdue. Almost a decade ago, Simon Potter, formerly the markets head of the New York Federal Reserve and now vice chair of fixed income at Millennium, argued that “too much research before the crisis put too much faith in market efficiency and spent too little time exploring the detailed plumbing of the financial system.” The consultation helps address that.

However, the letters make clear that the EU probably needs to consider a system-wide response, much like a plumber would bleed every radiator to help warm a house. This won’t be easy, as individual agencies may not view the system-wide issues as their problem.

Willingness to push through will be litmus test of Europe’s determination to recalibrate regulations for growth — and close the widening gap to the US. But the comment letters do highlight four important valves that could at least be jiggled to get things going.

Valve 1: Life insurers, the missing EU lender

Europe has straitjacketed insurers from playing a larger role in financing the real economy via buying senior tranches of securitisations. As Apollo’s comment letter puts it:

Life insurers are particularly well-suited to finance the E.U.’s strategic, long-dated capital needs, but the European life sector currently holds only 0.33% of investment assets in securitizations vs. ~17% for U.S. life insurers despite similar industry sizes . . . The missing life insurer ‘bid’ dampens the broader E.U. securitisation market, reducing supply and demand at all points in offered securitisation tranches.

Here’s a great chart from Apollo that highlights the stark difference.

The absence of European insurers is largely driven by Solvency II capital rules, which impose punitive capital charges on securitisation — even those with investment-grade ratings that carry comparable or lower risks than corporate bonds.

Addressing this gap is vital. By recalibrating Solvency II to better align capital charges with the true risks of securitisation, European regulators could incentivise insurers to invest in these assets. Doing so would unlock a massive pool of private capital, reduce the cost of financing for businesses and infrastructure projects, and help Europe meet its strategic economic objectives.

As the Investment Company Institute argued in its submission:

The current EU prudential framework does not properly reflect these different levels of risk in the securitisation market. In certain circumstances, 10-year duration non-STS bonds, regardless of seniority in the capital structure, have a 100% capital charge. These charges are also considerably higher than those imposed by other regulatory frameworks, placing EU market participants at a competitive disadvantage.

Valve 2: STS criteria don’t work for many assets

So what’s this “STS” referenced in the ICI’s comment letter? To revitalise the securitisation market, the EU created the “simple-transparent-standardised” label – STS for short – which came into effect at the start of 2019.

This was meant to make things simpler, but many comment letters suggest it has inadvertently had the opposite effect. One of the strengths of securitisation is the breadth of stuff that can be financed, but the STS label was seemingly designed primarily for a very narrow set of bank-dominated assets. As BlackRock argued:

The regulatory standards put in place following the Global Financial Crisis represented a significant prioritisation of risk management, governance and investor protection in securitisation markets. However, the securitisation market believes that while well intended the regulations ended up being overly prescriptive and rather than reviving the market have ended up restricting it.

The optimal solution would be to streamline the STS categorisation all together via simplifying definitions, broadening STS criteria and ensuring that regulations reflect the economic risks rather than adding unnecessary complexity.

A simpler option suggested by some of the comment letters would be to just carve out asset classes that are strategically important to long-term economic growth, have a low default rate history, address asymmetry of information, and represent transactions solely between sophisticated parties that already address these risks and inbuilt protections. That way, new assets like data centres and solar projects could be included.

Valve 3: Scale up true sale securitisation

Another problem is “true sale securitisation.” This process converts illiquid assets into tradable securities and is a proven mechanism for mobilising capital.

Unlike synthetic securitisation — or Europe’s €2.4tn covered bond market — this enables banks to offload loans completely, freeing up balance sheets to support further lending while connecting investors to a broader range of financing opportunities.

The EU lags far behind the US in this critical area, with just €440bn in true sale securitisation outstanding, compared with approximately €2.8tn in the US — a 6.5-fold difference. The discrepancy underscores how underutilised this financial tool remains in Europe.

Closing this gap is essential to boosting Europe’s economic vim. With a better securitisation framework, the EU could potentially unlock over €1tn in additional financing, according to Apollo’s estimates.

The irony is that as banks struggle to issue true sale securitisation in size, they instead end up creating more opaque “synthetic risk transfers”. Moreover, true sales are simpler, have a more direct impact on credit availability in the economy and at the same time reduce interconnected risk to the banking system.

Valve 4: Streamline paperwork and due diligence

The current due diligence framework for securitisation is too costly and complex, discouraging investment, especially in the secondary market. The EU rule book shouldn’t require investors to verify regulatory compliance already handled by other regulated entities, the International Capital Markets Association argued in its response.

This is a point European Cooperative Banks make too, arguing that the due diligence requirements are “too complex and involve many overlapping reporting requirements, creating a significant obstacle for the full development of the market” — particularly for smaller businesses.

The European Fund and Asset Management Association argues the paperwork is also disproportionate and overly proscriptive:

Many of our members have explained that, for certain types of securitisations such as CLOs and CMBS, the quarterly granular reporting templates mandated under the SECR are not fit for purpose.

There are naturally a host of other suggested valves that could be adjusted, such as limits on mutual fund ownership, what is considered a liquid asset for a bank, and bank retention rules.

But the above four seem to be the main ones Europe should focus on, judging by the comment letters.

Where next?

So will the Commission accept these recommendations? It’s hard to ignore the fact that Europe has been talking about “capital markets union” for over a decade, but periodic tweaks have failed to grasp the nettle. The comments certainly underscore how frustrated market participants are.

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In the most recent review of securitisation in 2022 the European Insurance and Occupational Pensions Authority argued that there was insufficient demand from insurers to merit change. However, the Association for Financial Markets in Europe, an umbrella trade group, suggested in its latest response that this is simply not true:

We have had categoric feedback from insurers that there would be material interest in securitisation investments, across the capital structure if it were not for the elevated capital charges associated with securitisation positions vs vanilla credit (on a like-for-like rating basis).

In fact, over 40 groups or institutions which responded to the Commission’s request for comment argued that the Solvency II rules are an impediment to the market.

Will something actually change this time? Who knows, but for the first time in a long time there seems to be some guarded optimism.

At Davos this year, Nicolai Tangen, the head of the Norwegian sovereign wealth fund, went around saying that the restoration of Notre-Dame was Europe’s greatest success story of the past five years — and it happened simply because almost all regulation and rules were negated for the rebuild. “It is unbelievable what Europe can achieve if they are allowed to,” Tangen argued.

Europe needs a more flexible financial market to finance innovation and growth. Closing the gap to a buoyant and deregulating US won’t be easy.   But unclogging the securitisation market would be a great to start. We prioritize the security and privacy of our players, using advanced encryption technology to protect your personal and financial information. https://ku88.pro/mobile