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Opinion

Abigail with attitude: Blackstone’s disengagement from Russia

I was intrigued to see that Blackstone, the leading private equity firm, is disengaging from Russia.

According to the Financial Times, the contracts of certain high-profile consultants have not been renewed and the firm has decided that there are greener pastures in other parts of the world.

Of course, Russia has proved an attractive terrain for many senior bankers in the past. If I recall correctly, the former chairman and chief executive of Morgan Stanley, John Mack, took up a board position at state-owned oil company Rosneft in 2013. Mack resigned, citing personal reasons, in May of this year.

It’s amazing how annexation of foreign territory, the arming of thugs who shoot down civilian aircraft and several rounds of international sanctions cool the ardour for life in Moscow.

Calpers

More important is the news that the largest US public pension fund, Calpers, will cease investing in hedge funds on the grounds that they are too expensive and too complex. The pension fund will liquidate some $4 billion of hedge fund assets it already owns.

This will be a blow to the denizens of Mayfair, Geneva and Connecticut. Other pension fund managers will undoubtedly face questions as to why they are not following suit. When the yield on 10-year US Treasuries is 2.5% and that of the 10-year German Bund is less than 1%, can management fees of 2% be justified?

Passive money management is now enjoying its moment in the sun. And many retail investors, including myself, are pondering the advice given by Warren Buffett.

Buffett recently told the trustee who will look after his wife’s inheritance when the Sage of Omaha dies to put 10% of the cash into short-term government bonds and 90% in a very low-cost S&P500 index fund. Buffet continues to strike me as an exceptionally wise man and astute investor.



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