Industry bids ‘good riddance’ to SEC rules

A pair of scoops to start: Chancellor Rachel Reeves is exploring reversing a decision to charge UK inheritance tax on the global assets of non-doms, following a spate of departures and lobbying by the City of London.

Hedge fund Millennium Management is working with Goldman Sachs’ Petershill division to sell a 10-15 per cent stake to external investors at a $14bn valuation, as it presses ahead with plans to open up its ownership for the first time. 

In today’s newsletter:

• Trump SEC chair scraps proposed market rules as he charts new path

• Scottish Widows to slash UK equity exposure

• Emerging markets defy investor gloom to outshine developed world

Out with the old SEC rules . . . In with the new?

Donald Trump’s top cop on Wall Street has thrown out more than a dozen rules put forward by his predecessor, in a move described by advocacy groups as “potentially very harmful to investors” but hailed as a win for trade groups. 

Securities and Exchange Commission chair Paul Atkins bludgeoned 14 rules earlier this month that hadn’t been enacted by the time Gary Gensler left office, in a fresh sign of the new administration’s laissez-faire attitude to investment regulation, write my US colleagues Stefania Palma, Harriet Clarfelt and Eric Platt.

The withdrawals have been lauded by the investment industry as good news, eliminating debate over which plans proposed by the Gensler-era SEC would be put into practice by the next.

“It doesn’t mean they’ve abandoned the policy goals,” according to Lance Dial, partner at law firm K&L Gates, who said the SEC could reintroduce the measures in different ways. Still, “good riddance” to most of the 14 rules, he added. “They were not ones that the industry really favoured.”

Among the scrapped proposals by Atkins, a champion of light-touch regulation, were a measure attempting to manage how artificial intelligence is used to give financial advice to investors. 

Another rule also thrown out would have required investors to disclose their positions in opaque derivative trades because of the potential for them to mask outsized holdings that posed systemic risks. That rule was opposed by activist investors including Elliott Management.

Atkins, a digital asset advocate, also withdrew a proposal to define a securities “exchange” in a way that captured decentralised peer-to-peer digital currency platforms.

But while the investment industry has cheered Atkins’ withdrawals as a sign that the SEC is now back within the parameters of its mandate, it’s still waiting to see the new chair’s own regulatory schedule. 

“We don’t know in what direction Atkins will take the rulemaking agenda,” said Aaron Schlaphoff, a partner at Paul Weiss. “Very little has been said about that.”

For the full list of the 14 scrapped rules click here

Scottish Widows to slash UK equity exposure

Just as lots of big investors have been reassessing and reducing their exposure to the US after Donald Trump’s erratic tariff policy upended the outlook for global markets, one of the UK’s largest pension funds managers is bucking the trend. 

Lloyds-owned Scottish Widows, which manages £72bn of workplace pension assets in its default funds, is about to deliver a major revamp of its asset allocation, writes Mary McDougall in London. This will see its North American equity exposure rise from 46 per cent to 65 per cent by January in its highest-risk portfolio, according to documents reviewed by the Financial Times. 

Its lower-risk portfolio would increase US stocks from 17 per cent to 25 per cent, according to the planned allocations described as “indicative” that could still change.  

The move involves a plan to sell billions of pounds worth of UK stocks, the latest blow to Britain’s ailing stock market, where delistings are outpacing initial public offerings and there is a gulf in valuations between UK and US-listed companies. It comes just as ministers are trying to persuade domestic retirement funds to invest more in companies at home. 

The 210-year-old firm is planning to lower allocation to UK equities from 12 per cent to 3 per cent by January next year, while the lower risk portfolio would reduce exposure from 4 per cent to 1 per cent. 

Scottish Widows said its new approach “takes a market weight allocation to global equities by default, in line with similar propositions from other pension providers”.

The planned changes come after Scottish Widows last month refused to sign a pledge by 17 providers to invest at least 5 per cent of their default funds in British private market assets by 2030 in the Mansion House Accord. It was the only big UK pension fund manager to do so.

Chart of the week

Currencies, stocks and bonds in developing countries are defying US President Donald Trump’s trade war and the conflict in the Middle East to outperform global markets in 2025, after years in the shadow of a strong dollar, write Joseph Cotterill and Emily Herbert in London.

A JPMorgan index of the local currency bonds of large emerging markets and an MSCI gauge of their shares have each gained about 10 per cent so far this year. In comparison, the MSCI World index, covering large stocks across 23 developed economies, is up 4.8 per cent, while the FTSE World Government Bond index is up 6.6 per cent.

Despite initial expectations that developing economies would be hit hardest by a global trade war, investors have warmed to these markets in recent months, as they look to diversify away from dollar assets amid concerns over erratic US policymaking.

“Suddenly, it makes emerging market local currency debt great again,” said Damien Buchet, chief investment officer of Principal Finisterre.

Investors are now returning to markets that had previously been very much out of favour and on lowly valuations, or offering attractive yields when adjusted for inflation. Emerging market stocks have dropped to about 5 per cent of the assets under management in global equity funds, compared with more than 10 per cent before 2013, according to JPMorgan analysts.

Even this year investors have pulled more than $28bn net out of emerging markets shares and bond funds overall, according to JPMorgan data. That largely reflects $22bn that was withdrawn in April, at the peak of concerns over the impact of US tariffs on global growth, although a net $5bn came back in during May and June.

“Emerging market local currency assets had been underinvested for a number of years,” said Kevin Daly, co-head of CEEMEA economics at Goldman Sachs. “Even small inflows are having arguably disproportionately large effects.”

Five unmissable stories this week

Howard Marks, co-founder of $200bn alternatives manager Oaktree Capital Management, has called on China to open up more “asset classes” to foreign investors as he set out an upbeat view of the world’s second-largest economy.

Redinel Korfuzi, a former Janus Henderson analyst who used working from home as a cover for insider trading, making profits of nearly £1mn, has been found guilty in one of the most high-profile UK insider dealing cases in recent years. 

German prosecutors have closed their criminal investigation into former DWS chief executive Asoka Wöhrmann over greenwashing allegations, opting not to press charges in the wake of fines for Deutsche Bank’s asset management arm in the US and Germany.

When UK asset manager Aberdeen Group renamed itself four years ago as Abrdn, the new moniker stood out — arguably for the wrong reasons. Here are the lessons from Abrdn’s disastrous rebrand.

Legal & General is doubling down on its asset management business as it seeks to expand internationally and sell more private-market products to customers ranging from pension schemes to wealth managers.

And finally

Jenny Saville: The Anatomy of Painting, now showing at the National Portrait Gallery in London, exemplifies “horror rendered with feather-light tenderness,” writes art critic Hettie Judah. “The best works in this career-spanning show are proof of an artist with prodigious and audacious talents,” she says.