By Niket Nishant and Manya Saini

(Reuters) – The tepid reception to Venture Global’s ambitious valuation target shows companies need to set realistic expectations when going public, Wall Street analysts said, and could be a signal that the recovery in new offerings may be a cautious one.

Touted as the first blockbuster listing of 2025, the LNG exporter was initially aiming for a price tag as high as $110 billion, only to settle for 45% lower when it eventually sold shares in the IPO on Thursday.

“Even with the improved market sentiment we’ve seen, investors are going to continue scrutinizing deals carefully,” said IPOX CEO Josef Schuster.

“They aren’t broadly willing to pay over-valued companies when there are readily available market comparisons.”

Venture Global’s IPO price of $25, the mid-point of the $23 to $27 range, was 7.67 times its adjusted tangible book value, according to a Reuters calculation.

Rival Cheniere trades at 10.55 times its book value in 2024, according to LSEG data, and has a market value of $52.6 billion.

The pushback against Venture Global’s initial target came as sort of surprise, as it seemed to have a few factors going for it: demand for natural gas worldwide and a desire for more fossil-fuel production from new U.S. President Donald Trump.

The LNG firm’s contract dispute with some of its customers may also have prompted it to temper expectations after meeting resistance from investors.

“Venture Global was proposing a high absolute market cap than the closest peer. It’s also possible that the legal issues turned off some investors or made them comfortable pushing back on valuation,” said Nicholas Einhorn, vice president of research at Renaissance Capital.

The investor skepticism also points to the challenges of pushing for maximal valuations when the markets are already staring at several risks, such as fewer interest-rate cuts than expected and the potential fallout of tariffs proposed by President Trump.

“There are layers and layers of uncertainty,” said Michael Bayer (OTC:BAYRY), CFO at Wasabi Technologies and adjunct lecturer at Babson College.

While an underwhelming performance from Venture Global could be a hiccup, it is unlikely to halt the IPO plans of major technology companies lining up to go public, such as Swedish payments firm Klarna and fintech giant Chime.

“I expect Venture Global’s IPO to have little bearing on the prospects for this year’s robust pipeline of tech and venture capital IPOs,” said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

A renewed risk-on sentiment and progress in bringing inflation down to the Federal Reserve’s 2% target may also be tailwinds.

“Companies with strong fundamentals, a compelling growth narrative and transparency in their financial and operational performance can still find success in the public markets,” said Mike Bellin, IPO services leader at PwC U.S.

By Carolina Mandl

NEW YORK (Reuters) – The hedge fund industry ended 2024 with $4.51 trillion in assets under management, a 9.75% increase from the previous year, research firm HFR said on Friday.

Total (EPA:TTEF) assets increased by $401.4 billion last year, the highest amount since 2021, mainly driven by a strong performance across different strategies.

WHY IT’S IMPORTANT

The growth in hedge fund assets underscores how influential this less regulated and leveraged industry, which uses a vast array of trading strategies and assets, is in markets.

It also shows that hedge funds regained a bit of traction among investors. Hedge funds’ net inflows last year totaled $10.47 billion, the first calendar year in which more money came in than out of the industry since 2021. In the last quarter, however, outflows amounted to $12.57 billion.

CONTEXT

Hedge funds’ assets have grown by almost 56% since 2015, although the industry has struggled to lure new money from investors. Over the last decade, outflows surpassed inflows by $166.8 billion, showing that funds’ performance has driven the industry growth, not new money.

BY THE NUMBERS

On average, hedge funds posted a 9.83% gain to investors in 2024, according to HFRI Fund Weighted Composite index, with positive results in equity, macro, event-driven and relative value strategies. That compares with a 23.3% return of the S&P 500.

KEY QUOTE

Kenneth J. Heinz, president of HFR, said portfolio managers are “preparing for a wide range of market cycles, with the possibility for volatility and dislocations as investors adapt to new policies regarding interest rates/inflation, legislation and tariffs” in 2025.

“Total global hedge fund industry capital rose to a fifth consecutive quarterly record as managers, institutions and investors positioned for sweeping policy changes which are likely to have significant and far-reaching implications for U.S. and global financial market structure, regulation and capital,” he added.

(Reuters) -Diageo, the world’s top spirits maker, is exploring a potential spin-off or sale of beer brand Guinness and is reviewing its stake in LVMH’s drinks unit, Moet Hennessy, Bloomberg News reported on Friday, citing people familiar with the matter.

News about a potential sale of the beer label, a star performer in Diageo (LON:DGE)’s portfolio, helped lift Diageo’s shares almost 4% higher, becoming the top percentage gainer on the blue-chip index. However, some analysts and one source familiar with the situation said a Guinness sale right now did not make sense.

Diageo declined to comment on market speculation; LVMH declined to comment.

Guinness is an outlier in Diageo’s business, which consists mostly of spirits rather than beer, but its performance recently has outshone that of key liquor labels like Johnnie Walker whisky.

Spirits sales have struggled as a post-pandemic boom in demand for pricey bottles of liquor went into reverse. Meanwhile, Guinness sales have grown by double digits every year since 2021, with its zero-alcohol version also surging.

Its recent success could make Guinness an attractive asset. It would likely be valued at above $10 billion, Bloomberg reported, citing the sources.

Diageo’s liquor brands also offer a higher margin and generally, drinkers in developed markets are shifting away from beer and towards spirits-based drinks like cocktails.

But at the same time, Guinness’ success also left analysts like Laurence Whyatt at Barclays (LON:BARC) wondering why Diageo would want to sell it.

“I would be very surprised if Diageo wanted to sell Guinness,” he said, adding it was unusual for companies to want to sell their best-performing assets.

A source familiar with the situation agreed that it makes no sense for Diageo to sell Guinness in the near term given its performance, adding Diageo does not need the money and CEO Debra Crew had said publicly how much she likes the label.

Bloomberg also reported that Diageo could look to deepen its ownership in the Moet Hennessy venture, or exit altogether.

In a note earlier on Friday, Bernstein analyst Trevor Stirling said Diageo taking full control of the LVMH wine and spirits division would likely necessitate “a very reluctant disposal of beer/Guinness”.

Investing.com — As the U.S. economy and equity markets thrive halfway through the decade, UBS analysts suggest 2025 will be pivotal in determining whether the “Roaring ‘20s” economic regime can continue through the decade. 

In their latest macroeconomic assessment, UBS highlights that while the economy is currently roaring, the sustainability of this momentum hinges on key factors.

Defining the “Roaring ‘20s” as a period of steady GDP growth (2.5% or higher), moderate inflation (2–3%), and policy-driven investment, UBS notes that current conditions meet these criteria. 

However, interest rates—currently above 4% for the 10-year Treasury yield and 3–4% for the fed funds rate—remain higher than UBS’s ideal “roaring” range.

The analysts attribute much of the economic strength to earlier fiscal stimulus, policy-driven private investment, and immigration, but they caution that tailwinds are weakening. For the economic boom to persist, productivity growth must accelerate. 

“Productivity gains need to be at or above 2% for growth, inflation, and rates to meet the regime criteria,” UBS writes, while noting that recent productivity gains have yet to reflect the full impact of AI and emerging technologies.

UBS remains cautiously optimistic about 2025, citing the growing adoption of AI and rising “animal spirits” in the economy as reasons to believe in sustained productivity gains. 

However, risks loom. “The regime will likely ‘break’ if inflation re-accelerates and rates stay higher for longer,” the analysts warn, adding that a potential equity bubble could undermine the long-term outlook.

Ultimately, UBS emphasizes that supportive policy and productivity growth are critical to extending the Roaring ‘20s. 

“2025 is more likely to be a ‘make’ than a ‘break’ year,” they conclude, though uncertainty surrounding policy, inflation, and rates keeps the range of outcomes wide.

By Nell Mackenzie

LONDON (Reuters) – Half of the global investors surveyed by Bank of America’s prime brokerage department plan to allocate more money to hedge funds this year, while 37% wanted no change.

The results represented a 2% uptick in those wanting to spend more on hedge funds from the start of 2024, a report by the bank to clients showed on Friday.

The survey was sourced from responses from 256 firms that oversaw a combined amount of over $1 trillion invested in hedge funds.

Investors who would ditch their hedge fund holdings and take their money back thinned to 7% from 12% in 2023, BofA’s 2025 hedge fund outlook report said.

Dissatisfied investors thought returns should have been better, said the bank. Of those that were unhappy, 73%, cited underperformance as their reason for wanting to redeem money.

Other reasons investors were unhappy included when hedge funds changed their investment strategy and when hedge funds simplified, or consolidated their portfolio, the survey said.

Allocators have also been worried that their hedge funds are piling into crowded trade positions where everyone has the same idea, said the report. Crowded positions can grow costly if speculators rush for the exit at the same time.

Hedge funds growing too large to nimbly invest without their trades moving the market was also a top concern which had increased from last year, the report said.

Roughly the same investors as last year harboured concerns that hedge funds which said they specialised in one kind of investing actually made money by doing something else, or so-called style drift, it said.

Talent was named as an ongoing concern, as well.

Smaller hedge funds running under $500 million in assets were a fifth less likely to see their investors leave.

Family offices, pension plans and endowment and foundations were the most likely to take all of their money off the table, rather than partially, said the report.

In 2025, investors are most interested in stock and bond trades and less in trend followers and systematic funds that play on macroeconomic events.

These hedge fund clients were more successful in bargaining down on fees compared to this time last year.

Around 60% of investors won fee discounts compared to roughly half last year, and there was a slight uptick to 22% from 17% who got more favourable liquidity terms, allowing them to buy and sell out of their hedge fund investments with less of a delay.

Investing.com — Goldman Sachs analysts highlighted the growing issue of tariff evasion as a significant factor in the apparent decline in U.S. imports from China, which have dropped by $240 billion since the 2018-2019 trade war. 

“Tariff evasion likely overstates this decline,” Goldman noted, adding that curbing evasion could become a focus for the second Trump administration.

According to Goldman Sachs, there are three primary methods of tariff evasion: routing goods through bystander countries (entrepot trade), underreporting the value of goods, and mislabeling goods to take advantage of lower tariff rates. 

While entrepot trade impacts bilateral trade flows, underreporting affects overall import levels, and mislabeling does not alter headline trade data.

In its research note, the bank estimates that tariff evasion has had a substantial impact. In 2023, Goldman believes $30-50 billion worth of trade was rerouted via entrepot trade, accounting for 20% of the decline in reported U.S. imports from China. 

Furthermore, they state that the gap between U.S.-reported imports from China and China-reported exports to the U.S. widened by $150 billion. Of this, Goldman attributes $80 billion to tariff evasion, split evenly between underreporting and mislabeling.

“Our estimates imply $110-130bn in total tariff evasion in 2023—of which entrepot trade accounted for $30-50bn, underreporting $40bn, and mislabeling $40bn—that reduced the bilateral US-China trade deficit by $70-90bn (entrepot rerouting + underreporting),” says Goldman.

Extrapolating these trends to a scenario with higher tariffs on Chinese imports and European autos, Goldman projects $125 billion in incremental tariff evasion and a further $80 billion reduction in the reported U.S.-China trade deficit.

By Libby George and Karin Strohecker

LONDON (Reuters) – Foreign investors are flocking to Turkey’s local debt markets, saying they are impressed by interest rate cuts and easing inflation and are hoping that a regional transformation could further boost their bets on the economy.

Turkey’s central bank cut rates by another 250 basis points on Thursday to 45%, continuing an easing cycle it began just last month after an aggressive drive to end years of soaring prices and a tumbling currency.

More than a year and a half after President Tayyip Erdogan’s re-election and pivot back to more orthodox economic and monetary policies, Turkey is back to being a mainstay of emerging market investors.

“Turkey is one of the bigger success stories, one of the positive dynamics in our space that we like,” said Nick Eisinger, co-head of Emerging Markets with Vanguard.

“The reform story and the macro story is very positive and still has runway to go.”

Local bonds sucked in $1.24 billion of foreign investor cash in the week to Jan 17, the biggest such inflows in two months, bringing the 2025 tally so far to as high as $1.9 billion, central bank data show. Foreigners hold more than 10% of government debt, levels last seen in 2019.

While that is a sharp increase from around 1% in 2022, it is still less than half of the 25% prior to August 2018, when the lira crisis started.

Emerging from that crisis has been painful.

Turkey for years opted for unorthodox fiscal and monetary policies that fuelled red-hot growth. It claimed the top spot for economic growth among larger emerging markets since the onset of the COVID-19 crisis, according to Oxford Economics.

But those exposed to local bonds paid a hefty price: with inflation topping 85% in 2022 and touching 75% last year, and a lira tumbling to a series of record lows, a big chunk of investments were wiped out.

DISINFLATION

The more favourable recent backdrop has also seen Amundi, Europe’s largest asset manager, venture into domestic bonds.

“We like Turkey from a local currency perspective,” said Yerlan Syzdykov, global head of emerging markets & co-head of emerging markets fixed income at Amundi.

Easing inflation – which was lower than expected at 44.38% annually in December – coinciding with a fragile balance of payments situation that gave Turkey little wiggle room to allow the lira to slide further, was favourable to investors for now, said Syzdykov.

“The pace of the disinflation should continue being higher than the pace of devaluation – so that’s the bet that we have as well.”

A Reuters poll shows the central bank is expected to forge ahead with cuts that leave its key rate at 30% at year-end, when the bank itself expects inflation to slow to about 21%.

While the government may be less inclined to push for high growth for now, recent regional developments – including the ousting of Syrian leader Bashar al-Assad and the Israel-Hamas ceasefire in Gaza – could add to Turkey’s growth momentum, analysts said.

“Everything that’s happened in the Middle East is probably quite positive for Turkey,” said Magda Branet, head of emerging markets and Asian fixed income with AXA Investment Managers.

“Turkey will probably be an actor in the reconstruction of the region and in the reconstruction of Ukraine… So on the growth outlook and the fiscal outlook there’s definitely some positive news.”

Turkey still has to prove its orthodox pivot will last before it lures back so-called crossover investors: the major developed-market investors who also dabble in emerging markets. Often managing big pots of money, they have in recent months sought exposure to emerging economies, especially investment-grade rated sovereigns in the Gulf or Latin America.

“From their perspective, it’s too risky to go into Turkey because of these factors… on the geopolitical side, but also because of the fragility of the institutional space,” said Amundi’s Syzdykov. (This story has been refiled to include the company’s full name ‘AXA Investment Managers’ in paragraph 17)

WASHINGTON (Reuters) – U.S. consumer sentiment weakened in January for the first time in six months amid worries about the labor market and potential higher prices for goods if President Donald Trump’s new administration presses ahead with planned tariffs on imports.

The University of Michigan said on Friday that its Consumer Sentiment Index fell to 71.1 this month from a preliminary reading of 73.2 and 74.0 in December. Economists polled by Reuters had expected an unchanged reading. The final survey was closed on Monday, the day when Trump was inaugurated for a second term as president. 

The decline in sentiment was broad-based and seen across income, wealth and age groups. 

“Despite reporting stronger incomes this month, concerns about unemployment rose,” Joanne Hsu, the director of the University of Michigan’s Surveys of Consumers, said in a statement. “About 47% of consumers expect unemployment to rise in the year ahead, the highest since the pandemic recession.”

Consumers’ one-year inflation expectations were at 3.3%, unchanged from the preliminary estimate, but up from 2.8% in December. The 12-month inflation expectations are now above the 2.3%-3.0% range seen in the two years prior to the COVID-19 pandemic.

Long-run inflation expectations were at 3.2%, revised down from a preliminary reading of 3.3% and up from 3.0% in December. 

“Concerns over the future trajectory of inflation were visible throughout the interviews and were tied to beliefs about anticipated policies like tariffs,” Hsu said.

(Reuters) -Meta Platforms plans to spend between $60 billion and $65 billion this year to build out AI infrastructure, CEO Mark Zuckerberg said on Friday, joining a wave of Big Tech firms unveiling hefty investments to capitalize on the technology.

As part of the investment, Meta will build a more than 2-gigawatt data center that would be large enough to cover a significant part of Manhattan. The company — one of the largest customers of Nvidia (NASDAQ:NVDA)’s coveted artificial intelligence chips — plans to end the year with more than 1.3 million graphics processors.

“This will be a defining year for AI,” Zuckerberg said in a Facebook (NASDAQ:META) post. “This is a massive effort, and over the coming years it will drive our core products and business.”

Zuckerberg expects Meta’s AI assistant — available across its services, including Facebook and Instagram — to serve more than 1 billion people in 2025, while its open-source Llama 4 would become the “leading state-of-the-art model”.

Shares of the company were 1.6% higher in early trading.

Big technology companies have been investing tens of billions of dollars to develop AI-related infrastructure after the meteoric success of OpenAI’s ChatGPT highlighted the potential for the technology.

U.S. President Donald Trump on Tuesday announced that OpenAI, SoftBank (TYO:9984) Group and Oracle (NYSE:ORCL) will form a venture called Stargate and invest $500 billion in AI infrastructure across the United States.

Earlier this month, Microsoft (NASDAQ:MSFT) said it was planning to invest about $80 billion in fiscal 2025 to develop data centers, while Amazon.com (NASDAQ:AMZN) has said its capital spending for 2025 would be higher than an estimated $75 billion in 2024.

Meta’s planned capital spending of up to $65 billion would mark a significant jump from its estimated capital spending of $38 billion to $40 billion for last year.

As part of the AI efforts, the company said it would build an AI engineer that will start contributing increasing amounts of code to its research and design efforts. It will also continue to grow the teams working on AI services.

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. existing home sales increased to a 10-month high in December, but further gains are likely to be limited by elevated mortgage rates and house prices, which are keeping many prospective buyers on the sidelines.

Home sales rose 2.2% last month to a seasonally adjusted annual rate of 4.24 million units, the highest level since February, the National Association of Realtors said on Friday.

Economists polled by Reuters had forecast home resales would rise to a rate of 4.19 million units. Sales surged 9.3% on a year-on-year basis, the largest increase since June of 2021.

A total of 4.06 million previously owned houses were sold last year, the lowest number since 1995.

“Home sales in the final months of the year showed solid recovery despite elevated mortgage rates,” said Lawrence Yun, the NAR’s chief economist. “Job and wage gains, along with increased inventory, are positively impacting the market.”

A survey from mortgage finance agency Fannie Mae (OTC:FNMA) on Wednesday predicted weak existing home sales in the first half of the year, noting that “new homes are now priced competitively with existing homes and are far more available.” It forecast the popular 30-year fixed-rate mortgage would average 6.7% in the first quarter and edge down to 6.6% in the second quarter.

Mortgage rates increased late last year in tandem with U.S. Treasury yields, which have jumped amid economic resilience, especially in the labor market, and investor worries that President Donald Trump’s plans for tax cuts, broad tariffs and mass deportations could fan inflation.

The Federal Reserve has scaled back its projected interest rate cuts for this year to only two from the four it estimated in September, when it launched its policy easing cycle. The average rate on a 30-year fixed-rate mortgage is just below 7%.

Housing inventory fell 13.5% to 1.15 million units last month. Supply increased 16.2% from one year ago. The median existing home price shot up 6.0% from a year earlier to $404,400 in December, and hit a record high of $407,500 in 2024.

At December’s sales pace, it would take 3.3 months to exhaust the current inventory of existing homes, up from 3.1 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.

Properties typically stayed on the market for 35 days in December, compared to 29 days a year ago. First-time buyers accounted for 31% of sales versus 29% a year ago. They made up a record low of 24% in 2024. Economists and realtors say a 40% share is needed for a robust housing market.

All-cash sales constituted 28% of transactions last month, down from 29% a year ago. Distressed sales, including foreclosures, represented only 2% of transactions, unchanged from last year.