Finance

The announcement came as the Israeli bourse announced the pricing of a secondary offering of 18.5% of its market value.
Bill Ackman, the CEO and founder of New York-based Pershing Square Capital Management, has been a vocal supporter of Israel particularly since the Oct. 7 Hamas-led terror attack.
Ackman describes himself as both pro-Palestinian and pro-Israeli, saying in late October that “it is not inconsistent to be pro-Israel and pro-Palestinian.”

Bill Ackman, founder and CEO of Pershing Square Capital Management.
Adam Jeffery | CNBC

Hedge fund billionaire Bill Ackman and his wife Neri Oxman are buying a nearly 5% stake in the Tel Aviv Stock Exchange, the bourse reported in a press release Wednesday.
The announcement came as the Israeli exchange announced the pricing of a secondary offering of 17,156,677 shares, or 18.5% of its market value, priced at 20.60 shekels ($5.50) per share, putting Ackman and his wife’s purchase at $17.3 million.

“The transaction drew robust interest from investors across Israel, the United States, Europe, and Australia, reflecting a strong vote of confidence in both the Tel Aviv Stock Exchange and the Israeli economy at large,” the statement read. 
“Among the prominent buyers were Neri Oxman and Bill Ackman who have agreed to purchase approximately a 4.9% equity stake in the TASE.” The exchange plans “to use the net proceeds from this offering for investment in its technology infrastructure,” it added.
Ackman, founder and CEO of New York-based Pershing Square Capital Management, has been a vocal supporter of Israel since the Oct. 7 Hamas terror attack on the country that triggered an Israeli ground invasion of the Gaza Strip. His wife, Oxman, is an American-Israeli architectural designer and professor.

The purchase is Ackman’s first investment in Israel since the war began, according to reporting by Bloomberg. Ackman, who is Jewish, became embroiled in a fight with Harvard University — his alma mater — after more than 30 of its student groups signed a statement that placed full blame for the Hamas-led Oct. 7 attack, which killed 1,200 people and took another 240 hostage, on Israel.
Ackman took to social media site X, formerly Twitter, to demand that Harvard make public the names of the students so that Wall Street employers would refrain from hiring them. He subsequently published a 3,138-word letter on X that he had written to the then-president of Harvard, Claudine Gay, outlining steps to counter rising antisemitism on campus.

Ackman later pushed for Gay’s resignation, alleging the academic leader was guilty of plagiarism and was not doing enough to counter antisemitism at the university. While managing to hold onto her post after testifying at a heated congressional hearing over campus hate speech and antisemitism, the controversy led Gay to ultimately resign in early January.
The hedge fund titan describes himself as both pro-Palestinian and pro-Israeli, writing in a post on X in late October: “I am pro-Palestinian. Some might be surprised by this due to my recent advocacy on @X for Israel, but you shouldn’t be. I am anti-terrorist, not anti-Palestinian. It is not inconsistent to be pro-Israel and pro-Palestinian.”
He added, “My pro-Palestinian perspective began more than 30 years ago when I was introduced to the Palestinian community and their plight in the early 1990s,” saying he “invested millions in helping promote Palestinian economic development and peaceful coexistence.” More

Swedish fintech firm Klarna is launching a monthly subscription plan in the U.S. to lock in its heaviest users ahead of an initial public offering this year, the company told CNBC.
“The thing we need to prove to ourselves and to the market is that we can add a new kind of revenue stream to Klarna,” said Klarna marketing chief David Sandstrom.
Klarna plans to roll out a high-yield savings account next, and subscription customers would likely earn a higher rate on savings.

Swedish buy now, pay later firm Klarna unveils a $7.99 monthly subscription plan called Klarna Plus
Courtesy: Klarna

Swedish fintech firm Klarna is launching a monthly subscription plan in the U.S. to lock in its heaviest users ahead of an expected initial public offering this year, the company told CNBC.
The product is set to be announced later Wednesday and will cost $7.99 per month, the Stockholm-based company said.

Users of the subscription plan, named Klarna Plus, will get service fees waived, earn double rewards points and have access to curated discounts from partners including Nike and Instacart, according to Chief Marketing Officer David Sandstrom.
Buy now, pay later services such as Klarna and Affirm have surged in popularity in recent years as more Americans rely on a new, fintech-enabled form of credit. The services typically break up a purchase into four payments.
When Klarna users shop outside the firm’s network of 500,000 retailers — at places such as Walmart, Target, Amazon and Costco — they pay $1 to $2 in transaction fees.
“The main proposition of Klarna Plus right now is that you don’t pay any service fees,” Sandstrom said. “So if you love Klarna and if you love shopping at Target and Walmart, it makes a ton of sense financially.”

Klarna’s IPO year

Klarna’s monthly plan is the latest example of a fintech player building out its offerings to boost recurring revenue. Wall Street investors tend to favor subscription revenue because of its predictability versus one-time transactions. Rival Affirm has explored its own subscription plan, though it hasn’t released one yet.

The approach is especially timely as Klarna nears an IPO that could value it at more than $15 billion, Sky News reported in November. Klarna CEO Sebastian Siemiatkowski told Bloomberg this week that a listing in the U.S., the firm’s largest market, was probably imminent.
Achieving that valuation would be a redemption of sorts for Klarna. The company was Europe’s most valuable startup before a collapse made it the poster child for so-called “down rounds” of funding. Klarna’s valuation sank 85% to $6.7 billion in 2022 as rising interest rates reined in high-flying fintech firms.

Savings sweetener

Klarna Plus could help persuade investors that the company can grow beyond its core product. The subscription, which was piloted in Ohio for six months last year, is a “no brainer” for about 15% of the firm’s heaviest users, Sandstrom said. The company said it has about 37 million American customers.
“The thing we need to prove to ourselves and to the market is that we can add a new kind of revenue stream to Klarna,” Sandstrom said. “That’s something that a lot of companies have struggled to do.”
Up next for the U.S. is a high-yield savings account, Sandstrom said. Klarna Plus customers would probably earn a higher interest rate on savings than nonusers, he added.
“If you look at our business from the outside, it looks very much like ‘buy now, pay later,'” Sandstrom said. But “a world of opportunity opens up with someone you’ve helped in a financial relationship. You get to say, ‘Hey, wouldn’t it make sense to get the Klarna card?'” More

The banking industry enjoyed a windfall in 2023 as lenders reaped the benefits of central banks’ interest rate hikes while keeping deposit rates low.
The head of the German regulator told CNBC Wednesday that while the shock from rate increases has been “digested in the banking books,” there could be further troubles ahead.

The headquarters of German banks Deutsche Bank (L) and Commerzbank in Frankfurt, Germany.
FRANK RUMPENHORST | DPA | Getty Images

Banks should be setting aside recent bumper profits to provision for clients defaulting on loans as the impact of higher interest rates feeds into the economy, according to the president of the country’s regulator.
The banking industry enjoyed a windfall in 2023 as lenders reaped the benefits of central banks’ interest rate hikes while keeping deposit rates low.

Central banks around the world tightened monetary policy aggressively over the last two years in a bid to tame soaring inflation, but focus has now turned to when the likes of the U.S. Federal Reserve, the European Central Bank and the Bank of England will start cutting policy rates again.
Though economies have been surprisingly resilient in the face of rising borrowing rates, many policymakers have warned that the impact on households and businesses has yet to be fully felt.

The head of the German regulator (the Federal Financial Supervisory Authority which is better known as BaFin) told CNBC Tuesday that while the shock from rate increases has been “digested in the banking books,” there could be further troubles ahead.
“The difficulties that come from this rate environment for the clients of the banking sector — whether that’s in the real estate sector or in the real economy — we haven’t seen that flow through yet,” he told CNBC’s Annette Weisbach, adding that it “won’t be easy” to repeat the profitability expected in 2023 and 2024 as rates remain historically high.
“So firms have to be very wary about provisioning requirements about not only letting the shareholders profit from this good year that they’ve had, but put as much aside to deal with the costs that are coming because they will come.”

Deutsche Bank, Germany’s largest lender, beat third-quarter expectations with a 1.031 billion euro ($1.12 billion) net profit, and promptly said it would increase and accelerate shareholder payouts.
Insolvencies ‘pre-programmed’ to rise
The euro zone economy is widely expected to be in recession and Germany in particular is projected to face a prolonged slump, having contracted by 0.3% year-on-year in 2023, as high inflation and interest rates bit into growth.
However, many banks have yet to meaningfully increase their loan loss provisions. Branson said the market should expect them to start this year, and some may have already begun setting aside more money for bad loans in the final quarter of 2023.
“We’ve seen things happen in the commercial real estate market, which we’ve maybe predicted for a long time but now are crystallizing, so as I said 2024 and the years thereafter, they’re not going to be as easy as 2023,” Branson said.

He added that lenders should “keep the powder dry for the more difficult times,” including investing in operational security and stability, such as protection against cyberattacks.
Company insolvencies have yet to meaningfully pick up in the way that would be expected during a rapid incline in interest rates. However, Branson noted that the figures have thus far been “artificially low” due to a prolonged prior period of extremely low interest rates and the massive fiscal stimulus from governments to tackle the Covid-19 pandemic and energy crisis in recent years.
“So I think it’s almost pre-programmed that insolvencies will begin to rise again and that’s in a way normal for banks that they’ll also have have to deal with some credit losses in their books,” he said.
“That’s why we’re a bit skeptical the profitability will continue to rise after such a good 2023, and that’s why the banks have to look carefully now about what they need to provision.” More

As Chinese electric car companies reveal new models at a rapid pace, they’re piling in a slew of features: in-car projectors, refrigerators and driver-assist.
“Electric vehicles in China becomes a consumer electronics [product]. It’s similar to the cellphone industry,” said Li Yi, chairman and CEO of Appotronics, a Shenzhen-based laser display company that claims to work with major automakers.
He expects that demand for car tech will help his new autos segment generate “a few hundred million” yuan this year in revenue – the equivalent of $40 million to $100 million.

The front seats of the Aito M9 SUV can be adjusted to create reclining chairs for the second row. Passengers can watch a movie on the roll-down projector screen while storing drinks in a refrigerator compartment.
CNBC | Evelyn Cheng

BEIJING — Hot competition in China’s electric car market is pushing local automakers to sell vehicles with fancy tech that Tesla doesn’t yet offer in the country — and sometimes at lower prices.
No longer are companies competing primarily on driving range. Instead, as they reveal new models at a rapid pace, they’re piling on a slew of features: in-car projectors, refrigerators and driver-assist, to name a few.

Tesla’s cars don’t come with those accessories, and Elon Musk’s automaker only offers a limited version of its driver-assist tech in China right now.
“Electric vehicles in China becomes a consumer electronics [product]. It’s similar to the cellphone industry,” said Li Yi, chairman and CEO of Appotronics, a Shenzhen-based laser display company that claims to work with major automakers.
“In China, I think it’s more entertain[ment], more gadgets, people really want to buy something with the most advanced tech specs,” he said, adding that in Europe, people focus more on functionality.

Appotronics claims it made the 32-inch projection screen that unfurls inside the newly launched M9 SUV from Huawei’s Aito brand. Huawei did not immediately respond to a request for comment.
As of Jan. 1, Aito said orders for the M9 surpassed 30,000 vehicles, with deliveries set to begin in late February.

The six-seater car comes with a refrigerator, collapsible front seats, and instead of a physical dashboard, tech that projects the information so it appears overlaid on the road ahead. This tech, known as AR HUD, can also display navigation instructions.
The M9 SUV sells for about 470,000 yuan to 570,000 yuan ($66,320 to $80,430).
In comparison, Tesla’s Model Y, a mid-sized SUV, starts at 258,900 yuan while the Model S sedan starts at 698,900 yuan.
Among other well-known competitors, Li Auto’s L9 SUV starts at 429,900 yuan and comes with AR HUD, a refrigerator and driver-assist tech.
Xpeng’s G9 SUV, widely considered a leader in China for driver-assist tech on city streets, starts at 289,900 yuan.
That’s just a peek at the swath of cars and the available bells-and-whistles in China. More than 100 new EV models are due to launch in 2024 in China, according to HSBC.
Consumers’ interest in new car models has focused on in-vehicle tech features and driver-assist capabilities — “far more advanced” than prior electric cars or traditional gasoline-powered vehicles, said Yiming Wang, analyst at China Renaissance Securities.
Price and maximizing mileage are two other top considerations for consumers, Wang said.

A multi-million dollar business

Appotronics’ Li expects that demand for car tech will help his new business segment generate “a few hundred million” yuan this year in revenue – the equivalent of about $40 million to $100 million, he said. The Shanghai-listed company previously made about $300 million in overall revenue a year, Li said.
When asked about Tesla, Li said he wasn’t authorized to disclose details but said people at the U.S. automaker “want something completely different than Chinese carmakers.”
He also noted that in Appotronics’ experience, Chinese customers are willing to pay a premium for car tech, while U.S. automakers are more focused on reducing costs.
That’s because electric car batteries and other parts aren’t made in the U.S., which means American companies are already paying a premium for core components of the electric car, Li said.

Read more about electric vehicles, batteries and chips from CNBC Pro

Chinese companies dominate the supply chain for electric car batteries.
In fact, the main reason why BYD has succeeded is because of its early work in batteries, where it can now reduce costs, pointed out Zhong Shi, an analyst with the China Automobile Dealers Association.
BYD surpassed Tesla by total car production in 2023, and sold more battery-only cars than the U.S. automaker did in the fourth quarter.
Traditional foreign auto giants like Volkswagen are struggle to adjust to the surge of electric cars in China, while domestic companies, including smartphone company Xiaomi and Geely-backed startup Zeekr, are rushing to release electric cars.
“I think the German system is coming from the mechanical, the bottom-up. [The] Chinese system is coming digital, top-down,” observed Omer Ganiyusufoglu, a member of German’s National Academy of Science and Engineering.
When designing a car, German engineers think about horsepower first, while Chinese engineers start with the cockpit design and then the interior, he said, citing a Chinese car engineer, when he spoke Monday at a Huawei event on “5G Advanced.”

China’s driver-assist push

Driver-assist has emerged in the last year as competitive feature for electric cars in China.
Tesla’s version for helping with driving on highways — called Autopilot — is available in the country, but the company’s “Full Self Driving” (FSD) feature for city streets is not.
Chinese regulators are gradually allowing passenger cars to use more driver-assist features in cities, such as for smooth braking at traffic lights. Chinese authorities in November also announced a nationwide push for developing driver-assist and self-driving technologies via pilot programs.
However, it remains unclear to what extent consumers are willing to pay for such features.
“Even though customers, specially those in China, always indicate in surveys that they are willing to pay for general safety and navigation [advanced driver assistance system] features, their answers change when they are asked about specific ADAS features and their buying behavior tells are different story,” said Shay Natarajan, a partner at Mobility Impact Partners, a private equity fund that invests in transportation.
“There are over 20 unique ADAS features,” she said, noting blind spot warnings or surround camera view were the most popular items. “Note that FSD is not on top of the list of ADAS features customers are willing to pay for.” More

Blackstone listed on the New York Stock Exchange during the summer of 2007. Doing so just before the global financial crisis was hardly auspicious, and come early 2009 the firm’s shares had lost almost 90% of their value. By the time the two other members of America’s private-markets troika rang the bell, Wall Street had been battered. KKR listed on July 15th 2010, the same day Congress passed the Dodd-Frank Act, overhauling bank regulation. Apollo followed eight months later. Each firm told investors a similar story: private equity, the business of buying companies with debt, was their speciality.But as the economy recovered, private-markets firms flourished—emerging as the new kings of Wall Street. The biggest put more and more money into credit, infrastructure and property. By 2022 total assets under management had reached $12trn. Those at Apollo, Blackstone and KKR have risen from $420bn to $2.2trn over the past decade. Thanks to the firms’ diversification, their shares rose by 67% on average during 2023, even as higher interest rates caused buy-outs to grind to a halt. Although private equity has plenty of critics, the model of raising and investing funds—whether to buy firms or lend to them—seldom worries regulators. If things go wrong, losses are shouldered by a fund’s institutional investors and humiliated fund managers struggle to raise money again. There is little threat to financial stability.image: The EconomistThe latest development in the industry is upending this dynamic. Private-markets giants are buying and partnering with insurers on an unprecedented scale. This is transforming their business models, as they expand their lending operations and sometimes their balance-sheets. America’s $1.1trn market for fixed annuities, a type of retirement-savings product offered by life insurers, has been the focus so far. But Morgan Stanley, a bank, reckons that asset managers could eventually pursue insurance assets worth $30trn worldwide. Regulators are nervous that this is making the insurance industry riskier. Is the expansion by private-markets giants a land-grab by fast-and-loose investors in a systemically important corner of finance? Or is it the intended consequence of a more tightly policed banking system?Apollo, which has a well-deserved reputation for financial acrobatics, is leading the way. In 2009 it invested in Athene, a newly formed reinsurance business based in Bermuda. By 2022, when Apollo merged with Athene, the operation had grown to sell more fixed annuities than any other insurer in America. Today Apollo manages more than $300bn on behalf of its insurance business. During the first three quarters of 2023, the firm’s “spread-related earnings”, the money it earned investing policyholders’ premiums, came to $2.4bn, or nearly two-thirds of total earnings.Imitation can be a profitable form of flattery. KKR’s tie-up with Global Atlantic, an insurer it finished buying this month, resembles Apollo’s bet. Blackstone, meanwhile, prefers to take minority stakes. It now manages $178bn of insurance assets, collecting handsome fees. Brookfield and Carlyle have backed large Bermuda-based reinsurance outfits. TPG is discussing partnerships. Smaller investment firms are also involved. All told, life insurers owned by investment firms have amassed assets of nearly $800bn. And the traffic has not been entirely one-way. In November Manulife, a Canadian insurer, announced a deal to buy CQS, a private-credit investor. image: The EconomistSome see such tie-ups as a win-win. In the rich world, a retirement crisis is looming. Defined-benefit pensions, where firms guarantee incomes for retirees, have been in decline for decades. Annuities allow individuals to plan for the future. It is a business that life insurers are happy to hand off to a throng of private-markets buyers. Sales and reinsurance deals free life insurers’ balance-sheets for share buy-backs or other, less capital-intensive, insurance activities that are better regarded by their investors. At the same time, private-markets firms acquire boat-loads of assets and stable fees for managing them.But there could be risks to both policyholders and financial stability. The American insurance industry is mainly regulated by individual states, which lack the speed and smarts of the private-markets giants. Important standards, such as the capital insurers must hold, are set by the National Association of Insurance Commissioners (NAIC), a body of state regulators. In 2022 the NAIC adopted a plan to investigate 13 regulatory considerations about private-equity-owned life insurers, including their investments in private debt and penchant for offshore reinsurance deals.Since then, others have joined the chorus of concern. In December the imf urged national lawmakers to remove opportunities for regulatory arbitrage by adopting consistent rules on capital standards, and to monitor systemic risks in the industry. Analysis by researchers at the Federal Reserve argues that life insurers’ tie-ups with asset managers have made the industry more vulnerable to a shock. The researchers even compared insurers’ lending activities to banking before the financial crisis. Bankers, who frequently complain that they are over-regulated by comparison, might be inclined to agree.Unlike bank deposits, annuities cannot be withdrawn quickly or cheaply by policyholders. Surrender fees payable for early withdrawals make a “run” on a life insurer unlikely, but not impossible. Private-markets bosses reckon that this makes insurers ideal buyers of less liquid assets with higher yields. As such, they are shifting insurers’ portfolios away from freely traded government and corporate bonds, which make up most of America’s debt market, and towards “structured” credit, so-called because it is backed by pools of loans.Excluding government-backed property debt, America’s structured-credit market totals $3trn in paper promises, backed in roughly equal proportions by real-estate borrowing and other assets, including corporate loans bundled together to form collateralised-loan obligations (CLos). The logic of this securitisation is simple: the lower the expected correlation of defaults between risky loans, the more investment-grade credit can be created for investors.According to the NAIC, at the end of 2022 some 29% of bonds on the balance-sheets of private equity-owned insurers were structured securities, against the industry average of 11%. These assets would not just be harder to sell in a panic; they are harder to value, too. Fitch, a ratings agency, analysed the share of assets valued using “level 3” accounting, which is employed for assets without clear market values. The average holding for ten insurers owned by investment firms was 19%, around four times higher than the broader sector.And the biggest asset managers do not just buy private debt, they create it. Some have greatly expanded their lending activities to fill their affiliated insurers’ balance-sheets. Nearly half of Athene’s invested assets were originated by Apollo, which has scooped up 16 firms, ranging from a industrial lender based in Blackburn, in north-west England, to an aircraft-finance operation formerly owned by General Electric, an American conglomerate. KKR’s tie-up with Global Atlantic has driven a seven-fold rise in the size of its structured-credit operation since 2020. The role of private-markets firms in securitisation could grow if new banking rules, known as the “Basel III endgame”, increase capital requirements that banks face for these activities.One worry is about how this debt would perform during a prolonged period of financial distress. Ratings downgrades would mean increased capital charges. High-profile defaults could lead to policyholder withdrawals. Although the market expects interest-rate cuts in 2024, many floating-rate borrowers, not least those in commercial property, are still reeling from the effects of higher payments.Admittedly, the market for structured credit is simpler than it was before the financial crisis (structured securities backed by other structured securities are, for instance, a thing of the past). Insurers also typically buy the investment-grade tranches created by a securitisation, meaning that losses would first be felt by those further down the “waterfall” of cash flows. But not everyone is reassured. Craig Siegenthaler of Bank of America says that investors cannot come to a confident conclusion on these approaches until they have endured a significant stress test. Sceptics also note that regulation struggles to adjust to financial innovation, particularly in insurance. Under current rules, the amount of capital insurers must hold after buying every tranche of a CLO can be less than if they had bought the underlying risky loans, which encourages investments in complex, illiquid products.The special oneSome firms’ investments look astonishingly illiquid. Consider Security Benefit, an American life insurer established in Kansas in 1892. In 2017 it was acquired by Eldridge, an investment firm run by Todd Boehly, whose other properties include Chelsea Football Club. In September nearly 60% of the $46bn of financial assets held on Security Benefit’s balance-sheet were valued at “level 3”. According to data from S&P Global the firm’s $26bn bond portfolio contains just $11m of Treasuries.Like other insurers, Security Benefit has bought bonds from an affiliated asset manager. Its holdings include several CLOs created by Panagram, an asset manager owned by Eldridge. Security Benefit’s largest such holding is a CLO backed by $916m of risky loans. After securitisation, this pot yielded more than $800m of investment-grade debt for the insurer’s balance-sheet. (The firm says its “long-dated liabilities include built-in features such as surrender charges, market-value adjustments and lifetime withdrawal benefits that significantly protect against material adverse cash outflows relative to expectations”, and that it has several billions of dollars of liquidity available through institutional sources.)Across the insurance industry as a whole, assessing the risks posed by investments is made harder by the proliferation of offshore reinsurance. According to Moody’s, another ratings agency, almost $800bn in offshore reinsurance deals have been struck. These involve one insurer transferring risk to another based abroad (sometimes to a “captive” offshore insurer that it owns). Bermuda, which offers looser capital requirements, is by far the most popular location for such deals, which disproportionately involve insurers affiliated with private-equity firms.Last year saw a number of blockbuster reinsurance transactions, where traditional life insurers partnered with private equity-backed reinsurers. In May Lincoln National announced a $28bn deal with Fortitude Re, a Carlyle-backed Bermuda outfit. The same month MetLife, another big insurer, announced a $19bn deal with KKR’s Global Atlantic. Such is the demand for offshore reinsurance that in September Warburg Pincus, another big private-equity firm, announced that it would launch its own operation on the island backed by Prudential, an insurer.In a letter to the NAIC, Northwestern Mutual, a large life insurer, warned that offshore reinsurance transactions could decrease transparency and diminish the capital strength of the industry. Regulators seem to agree, and Bermuda has faced international pressure to tighten its rules. In November British officials proposed new rules that could limit offshore reinsurance. The month after, Marc Rowan, boss of Apollo, admitted that some of the industry’s offshoring was a concern. With Bermuda tightening its restrictions, he worried that some firms would simply move to the Cayman Islands in order to preserve the opportunity for regulatory arbitrage.Yet it is Italy, not Bermuda, which has furnished regulators with their most worrying case study. Beginning in 2015 Cinven, a British private-equity firm, acquired and merged a number of Italian life insurers. Cinven’s Italian super-group, called Eurovita, had assets of €20bn ($23bn) by the end of 2021. Rising interest rates then caused the value of its bond portfolio to fall and customers to surrender their policies in search of higher-yielding investments. A capital shortfall meant that in March 2023 Eurovita was placed into special administration by Italian regulators before some of its policies were transferred to a new firm.Eurovita’s woes stemmed from poor asset-liability management rather than investments in private debt. It had especially weak protections to stop policyholders withdrawing money and Cinven’s investment was made through a classic private-equity fund, not the partnerships, reinsurance transactions or balance-sheet deals undertaken by the biggest asset managers. Nevertheless, according to Andrew Crean of Autonomous, a research firm, there has been a palpable chilling of European regulators’ attitudes to private equity in the insurance industry after the debacle.Should more blow-ups be expected? The speed of the life-insurance industry’s marriage with private capital makes them hard to rule out. Competition for assets may tempt some private-markets firms to move beyond annuities to liabilities less suited to their strategies, or to invest in riskier assets. Should an insurer collapse, the reverberations could be felt throughout financial markets. Although private markets have reinvigorated the insurance industry, regulators have reason to worry they are also making it less safe. ■ More

Many countries require U.S. citizens to have a few months of validity remaining on their passport in order to travel.
For example, Europe’s Schengen Area (which encompasses 27 European nations) requires at least 90 days of validity, and many nations in Asia and the Middle East require at least six months.
Passport processing times have returned to their pre-pandemic norm after lengthy delays in 2023.

Fatcamera | E+ | Getty Images

Passport processing times are back to normal after big delays in 2023, making it less likely travelers will miss a trip because of a stalled renewal.
However, another common passport snafu threatens to upend your trip overseas — and it involves passports that haven’t yet expired but are close to doing so.

Many countries require that Americans have at least a few months of validity remaining on their U.S. passport in order to travel there, or to secure a visa to that country.
More from Personal Finance:2024 is the ‘year of globetrotting.’ Here are some hot spotsNew Europe travel requirement delayed again, to 2025A controversial hack to save on airfare carries ‘super big risk’
For example, the Schengen Area, which encompasses 27 European nations, requires a U.S. passport be valid for at least 90 days beyond the end of your trip (i.e., your return date), according to the State Department.
Many countries in the Asia-Pacific and Middle East regions require at least six months of validity for permission to enter. Other areas like Hong Kong require one month.
What this means: Gatekeepers like border officials will deny travel if your passport doesn’t have a certain amount of validity remaining. Some airlines won’t even let you board the flight. In these cases, your nonexpired passport would cost you a vacation.

The requirement “trips a lot of people up,” said Charles Leocha, president and co-founder of Travelers United, a nonprofit advocacy group.  

Don’t forget visas, too

Rio de Janeiro, Brazil.
Christian Adams | The Image Bank | Getty Images

Here’s the reason for the rule: When traveling to Europe, for example, a valid U.S. passport allows tourists to stay for up to 90 days without a visa. Border officials “often assume you will stay the maximum 90 days, even if this is not your intention,” according to the State Department.
It’s important to remember that certain countries may require travelers to secure a separate visa for entry — typically at an additional cost, Leocha said. Brazil, for example, is reinstating a visa requirement for Americans on April 10. (It costs U.S. citizens $80.90 and lasts for 10 years.)
Travelers can find passport-validity and visa requirements for specific countries on the State Department website.

When to renew your passport

“It’s just really important to plan ahead,” said Sally French, a travel expert at NerdWallet.
She recommends applying for a new passport if it will expire within a year.
A traditional passport — a passport book — costs $130 for adults. First-time applicants must pay an additional $35 acceptance fee. Travelers can also pay more for faster service: Expedited passport processing costs an extra $60.
Passports are generally valid for 10 years. (They’re only valid for five years if the traveler was under age 16 when it was issued.)

Passport processing times are back to normal

Passport processing delays stymied many travelers last year as a historic volume of applications stressed government resources. The U.S. State Department issued more than 24 million passport books and cards during the 2023 fiscal year (from October 2022 to September 2023), a record high.
Processing times ballooned to 10 to 13 weeks for a routine passport application, and seven to nine weeks for an expedited passport.
By comparison, it took six to eight weeks for routine service and two to three weeks for expedited service before the Covid-19 pandemic. The State Department has returned to that pre-pandemic norm, it announced Dec. 18.

Processing times don’t account for mailing. It can take the government up to two weeks to receive an application, and another two weeks for travelers to get their new passport.
Almost half, 48%, of Americans have a passport, up from 5% in 1990, the State Department said. There are more than 160 million valid U.S. passports in circulation, nearly double the amount from 2007. More

The former president’s tax reform bill in 2017 cut the top corporate tax rate from 35% to 21%, and he has vowed on the campaign trail to lower it further to 15% if he is elected to a second term.
Felices said that the market is “fairly complacent about the risks associated with a Trump win, fiscal expansion (e.g. tax cuts, defence budgets) and military conflict escalation.”

Former U.S. President and Republican presidential candidate Donald Trump holds a rally in advance of the New Hampshire presidential primary election in Rochester, New Hampshire, U.S., January 21, 2024. 
Mike Segar | Reuters

Markets are “fairly complacent” about the risks of a second Donald Trump presidency, which could trigger a “tantrum” in long-duration bond markets, according to Guillermo Felices, principal and global investment strategist at PGIM.
Wall Street has enjoyed a remarkable rally since November last year, culminating in both the Dow Jones Industrial Average and the S&P 500 hitting record highs on Monday.

Much of the market focus remains on short-term economic data and on what it means for the Federal Reserve’s potential interest rate cutting path this year.
Bullishness in risk assets is driven largely by the consensus that the Fed will begin cutting rates rapidly in the early part of the year, and that the U.S. economy will manage a “soft landing” — bringing inflation back to the Fed’s 2% target without triggering a recession.

Some analysts are also looking ahead through a fiscal and geopolitical lens to November’s U.S. presidential election and beyond.
Trump’s tax reform bill in 2017 cut the top corporate tax rate from 35% to 21%, and he has vowed on the campaign trail to lower it further to 15%, if he is elected to a second spell in the White House.
Risk of a ‘duration tantrum’ in bond market
In an email to CNBC on Monday, Felices said one of the developments that limited PGIM’s optimism versus the market consensus for an economic “soft landing” in the U.S. was that the market has been “fairly complacent about the risks associated with a Trump win, fiscal expansion (e.g. tax cuts, defence budgets) and military conflict escalation.”

“A Trump presidency we think would be positive for the economy in the sense that there would be probably more fiscal stimulus through state tax cuts — the question is what that stimulus does to the bond market, and what’s the backdrop for the economy?”
He explained, “If the economy is still very strong and it doesn’t really require that further fiscal stimulus, the bond market could start getting nervous about debt sustainability and higher interest rates, and therefore we could see higher yields, a bit of a duration tantrum, and risky assets wouldn’t like that.”

The U.S. economy has proven surprisingly resilient in the face of a steep increase in interest rates to combat high inflation over the last two years, with growth and employment remaining robust. Thursday’s fourth-quarter GDP growth estimate will offer further insight into how activity is faring, as the Fed tries to wrestle price increases back to target.
“If the backdrop is one where the economy is a lot weaker, and it deserves that extra fiscal push, then I think the market would be okay and would handle that in a good way — it would be supported. But it really depends on the economic backdrop that the U.S. economy is facing at that time.”
‘Fiscal risk’ at a time of high deficit
The crucial point, Felices acknowledged, is America’s deteriorating fiscal position in recent decades. The U.S. government deficit is projected to run at between 6% and 8% through to the end of the decade, and Fitch projected on Monday that this shortfall would exceed 8% of GDP annually from 2023 to 2025.
This would mean that whoever occupies the White House from January 2025 would have little room for either big government spending pledges or the type of tax cuts Trump is promising, he suggested.
“The market at the moment is not really seeing that two-sided risk. At the moment, the market is pricing in ‘Oh, central banks will save the day again, they will cut rates, and if there is some weakness in the economy, they will cut by more’,” said Felices, a former senior economist at the Bank of England.
“The market is not really focusing too much on the potential upside risks to yields that are associated with this potential repricing of term premia. [Having] fiscal risks with the sort of deficit that the U.S. is running is a really, really important one that the market will have to come to terms with again.”

As such, he suggested that both risk assets and fixed income face a “much choppier” period ahead than investors have experienced over the last year.
As well as the tax cuts, analysts have also flagged risks associated with Trump’s proposed 10% tariff on all U.S. imports, widely criticized as a net negative for the U.S. economy and consumers.
Along with a very different macroeconomic environment, particularly much higher interest rates, the broader geopolitical landscape is also unrecognizable since Trump was last in office.
Felices joined several strategists over the past week, who have argued that the former president’s famously erratic approach to foreign policy decisions carries an added risk to markets and to the economy in the current environment.
Dan Boardman-Weston, CEO of BRI Wealth Management, told CNBC on Monday that Trump’s tendency to “change his mind” on geopolitical alliances — in a world of simmering tensions between China and Taiwan alongside Russia’s war in Ukraine — would lead to “heightened risks” and an added level of uncertainty that would impact market valuations. More

Plural, a venture firm set up by the founders of Wise, Skype and Songkick, raised 400 million euros ($436.4 million) for a new fund.
Plural II will invest mainly in European tech, seeking to find innovative names that haven’t been discovered by mainstream funds like Atomico.
Plural co-founder Taavvet Hinrikus, formerly of Wise, said his fund is different from competitors as it was started by entrepreneurs with “scar tissue.”

The partners of European venture capital firm Plural, from left to right: Ian Hogarth, Taavet Hinrikus, Carina Namih, Sten Tamkivi and Khaled Helioui.

The founders of Wise, Skype and Songkick have raised 400 million euros ($436.4 million) for a new fund to back technology startups in Europe. It seeks to compete with established funds like Atomico, Balderton Capital and Creandum with its founder-led focus.
Plural Fund II, the firm’s second to date, arrives just 18 months after the firm raised its last fund, a 250 million-euro vehicle. Its co-founders include Taavet Hinrikus, co-founder of fintech firm Wise, Ian Hogarth, co-founder of concert discovery service Songkick, Sten Tamkivi, co-founder of communications platform Skype, and Khaled Helioui, former CEO of Bigpoint Games.

Hinrikus told CNBC that Plural could serve as a better partner to startups in Europe than most venture capital funds, given that it was started by people with the “scar tissue” of proven entrepreneurs. Only 8% of VCs in Europe are former founders, he says, much lower than the 60% in the United States.
“If we look at a lot of VC funds, you have lots of people who have done great work with spreadsheets, not with startup life,” Hinrikus told CNBC in an interview. “In our case, it is seen as a core criteria for choosing our partners that they’re totally unemployable.”
“It feels like it’s world war three, and we’re in the trenches together as one of the founders. So, if we look at the track record, and our ability to get the deals done, I think that all seems to say that this is really missing in Europe,” Hinrikus added.
Plural raised the funds from a mix of limited partners, including British and American university endowments, U.S. foundations and insurers, strategic family offices in Europe and the United States. The firm said it saw “significant appetite” from LPs — limited partners, the institutional backers of venture funds — for its new fund and exceeded its own fundraising target, despite being in the “toughest environment” for raising a fund.
“The fact that, in a difficult fundraising environment, we’ve been able to raise a fund of this scale, with a huge amount of appetite from LPs, just shows you that some of the most sophisticated investors in the world are really recognising the opportunity in Europe, and really want to see a fund the shape of Plural,” Carina Namih, partner at Plural, told CNBC in an interview.

“I think it’s a real testament against the sort of macro backdrop that we’ve raised a fund of this size and scale so quickly,” she added.

The ‘unemployables’

Plural plans to invest at a pace of two to three investments per investor per year with its new fund. The firm has five partners in total, whom it dubs the “unemployables,” owing to the fact that they wouldn’t readily join a VC firm, or be employable at a startup. Each of the partners is an active angel investor.
Plural has made 27 investments in total, backing companies including law-focused artificial intelligence firm Robin AI, nuclear fusion power plant developer Proxima Fusion, and most recently drug discovery platform Sano Genetics. Its largest sectors by investment are AI (31%), frontier technology (16%), and climate and energy (14%).

Hinrikus said Plural isn’t interested in finding the next major software-as-a-service name in Europe, referring to companies that make software for businesses to ease the burden of storing data, accessing infrastructure, and carrying out data analytics. It’s more interested in deep tech, focusing on founders looking to solve fundamental scientific problems around energy, unlock AI “superpowers,” and make groundbreaking progress in health care.

Building tech giants in Europe

Plural says it wants to build technology giants in Europe, identifying winners in emerging categories that other funds may tend to ignore, such as deep tech and clean tech.
Carina Namih, a biotechnology entrepreneur-turned-partner at Plural, said she wouldn’t be surprised to see major technology names on a par with U.S. and Chinese giants start to emerge in Europe in the not-too-distant future.
She noted technological breakthroughs are happening much faster now, boosted by key developments around AI and more established pools of capital. 
“Look at how quickly OpenAI burst onto the scene with ChatGPT,” she said, adding it’s taking shorter amounts of time for new technologies to hit major milestones. “Clearly, the big tech companies have a lot of advantages and are entrenched in many ways. But I think now is a time more than ever, where new players and emerging players can come in and dominate entirely new spaces that didn’t exist a year ago.”
Namih previously worked on applying AI to mRNA-based medicine at her former startup HelixNano.
Plural’s new fund launch adds to the wave of startup activity that’s been happening in Europe in the last decade or so. 
A report from venture capital firm Accel late last year showed that $1 billion-plus unicorn firms often serve as catalysts for startup creation, with 1,451 new startups being founded by former employees of European and Israeli unicorns.
Of that new batch of startups, a great deal of them tend to come from fintechs, according to the report, with 70 fintech unicorns producing 423 startups.
“In the last 10 years, the whole ecosystem really has become an ecosystem, whereas before, we were just wild game hunting,” Harry Nelis, partner at Accel, told CNBC. “There was one here, one there, there was no ecosystem.”
“It’s a lot easier to start a company than before. The engineering has been done before, the marketing has been done before,” he added. “That is a flywheel that we have never had in Europe, that we now do have.” More