Finance

Active stock funds have seen record inflows, but what’s a good business for Wall Street still can’t deliver long-term outperformance to investors, according to Charley Ellis, who helped pioneer market indexing.
The vast majority of flows still go to index funds due to the lower fees on portfolios like ETFs that appeal to average investors, but it’s become a bloated industry also, with too many niche and “unhealthy” ideas, he told CNBC’s Bob Pisani on “ETF Edge.”

Stock picking looks easy, but the numbers prove it isn’t. S&P Global reports that after one year, 73% of active managers underperform their benchmarks. After five years, 95.5% of active managers miss the mark. After 15 years, nobody outperforms.
That is not going to change, according to Charles Ellis, a veteran investment industry figure and believer in the power of indexing. In fact, the growth of passive funds has led some in the industry to worry it will kill the active management business, a charge Ellis says doesn’t hold true, but it will remain true that active managers struggle to find an edge in the market. 

“The number of people that get hired into active management keeps rising and we’re way overloaded with talent in that area and we’ll stay there as long as it is great fun, with high pay and you can also make a small fortune,” Ellis said on CNBC’s “ETF Edge” this week.
ETF industry expert Dave Nadig agreed that active managers aren’t going away. “We just had the best year for active management inflows that we’d ever had,” he said on “ETF Edge.” 
Active ETFs continued their hot streak bringing in investor money in January. Still, good times for active fund flows can’t compare to the index fund and ETF flows behemoth. “It isn’t that anybody thinks active management shouldn’t exist, but the vast majority of flows are coming from fairly unsophisticated individual investors going into big indexes and big target data funds,” Nadig added. 

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Ellis, who first made his mark in finance by founding the consulting group Greenwich Associates, and was later a board member at low-cost index fund giant The Vanguard Group, is worried about the ETF space as it grows. “What you have to be really positive about is the increase of ETFs that are available and a steady reduction in the fees that are being charged,” he told CNBC’s Bob Pisani.
But Ellis, whose new book is called “Rethinking Investing – A Very Short Guide to Very Long-Term Investing” said success has bred some new investor dangers. “You must worry about the ETFs that are being produced much more for the salesperson than the buyer and how they’re too specialized and too narrow,” he said.  Ellis is especially concerned about leveraged ETFs “so that you get explosive upside but also explosive downside.” 

Ellis believes investors have to look for ETFs “that are best for you, and what you want to accomplish.”
Nadig made the point that technology has become the great equalizer in the markets: everyone has it, meaning getting an edge on other traders who often have the same or similar technology, is difficult.  “Active management is possible, you’ll just never find it in advance,” he said.
“The ironic reason that active managers underperform is that they’re all so good at what they’re trying to do, they cancel each other out,” Ellis said. Because of the computing power and quantitative models that are now so accessible to stock pickers, “it’s like playing poker with all the cards face up,” he added.
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GameStop is exploring investments in alternative asset classes, including crypto and bitcoin in particular, three sources said.
The company is still in the process of figuring out if this makes sense for GameStop’s business, according to one source.
Last weekend, CEO Ryan Cohen posted a photo on social media site X with Michael Saylor, co-founder and chairman of MicroStrategy, the largest corporate holder of bitcoin.

A general view of the GameStop logo on one of its stores in the city center of Cologne, Germany.
Ying Tang | Nurphoto | Getty Images

Video game retailer turned meme stock GameStop is considering investing in bitcoin and other cryptocurrencies, according to sources familiar with the matter.
GameStop is exploring investments in alternative asset classes, including crypto and bitcoin in particular, three sources said. Shares of GameStop soared as much as 20% in extended trading following the news.

The retailer could decide not to follow through with the investments. The company is still in the process of figuring out if this makes sense for GameStop’s business, according to one source.
Last weekend, CEO Ryan Cohen posted a photo on social media site X with Michael Saylor, co-founder and chairman of MicroStrategy, the largest corporate holder of bitcoin. However, Saylor is not involved in GameStop’s discussion about crypto investments at this time, two of the sources said.
In 2022, GameStop launched crypto wallets that let users manage their crypto and nonfungible tokens. However, the firm shut the service down in 2023, citing “regulatory uncertainty.”
Cohen, co-founder of Chewy, bought shares in GameStop in 2020 and joined the board in 2021 as GameStop became one of the key meme stocks in the trading mania. His e-commerce experience fueled hopes that he could help modernize the brick-and-mortar retailer, but the company is still struggling to adapt to changing spending habits by gamers.
Under Cohen’s leadership, GameStop has focused on cutting costs and streamlining operations to ensure the business is profitable even though it is not growing. As of Nov. 2, the company had amassed a $4.6 billion cash pile and has been using those funds for investments, according to a December securities filing.

Companies considering adding bitcoin to their balance sheet would be following in the footsteps of MicroStrategy. That company, recently rebranded to Strategy, has bought billions of dollars worth of bitcoin in recent years, effectively transforming from a software stock to a bitcoin holding vehicle.
The decision has helped fuel a rapid, if volatile, rise for Strategy’s stock.
In December 2023, GameStop’s board approved a new “investment policy.” It allows Cohen, plus two independent board members and other necessary staff, to manage GameStop’s portfolio of securities investments. Those investments have to conform to the policy’s guidelines, or be approved by the committee by unanimous vote or the full board by majority vote.

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British bank Barclays posted a rise in full-year pre-tax profit that came in just ahead of analyst expectations, while also launching a £1 billion share buyback.
Pretax profit rose by 24% to £8.108 billion in 2024, just above analyst expectations of £8.081 billion, according to LSEG. 

Chris Ratcliffe | Bloomberg | Getty Images

Shares of British bank Barclays sank in early Thursday trade, after the lender’s forward guidance failed to impress despite its full-year pre-tax profit beat.
Pretax profit rose by 24% to £8.108 billion in 2024, just above an analyst forecast of £8.081 billion, according to LSEG. 

Net profit attributable to shareholders also picked up by 24% to £5.316 billion in 2024, but fell short of the £5.449 billion expected by analysts. Fourth-quarter attributable profit came in at £965 million, below the £994 million analyst outlook for the period.
The lender’s total income picked up to £6.96 billion in the three months to the end of December, versus £5.6 billion in the fourth quarter of 2023, with the core Barclays investment and retail units logging 28% and 46% year-on-year hikes to £2.61 and £2.62 billion, respectively.
The group’s return on tangible equity, a measure of profitability, averaged 10.5% in 2024, up from 9% in the previous year — as the bank set out targets for an increase to around 11% in 2025 and to more than 12% in 2026.
The bank also sets out to achieve a net interest income (NII) — a key profitability metric that indicates the money a bank made from loans after deducting the interest paid on deposits — of  £7.4 billion across its retail unit this year, in line with expectations cited by Citi analysts.
“New 2025 guidance for NII, cost-income and RoTE are all broadly in-line with consensus, while 2026 targets are unchanged. Overall a solid set of results, but little new to get excited about either. This, plus the strong run up in the share price over the past year, may temper any initial reaction, but the stock still appears inexpensive in our view,” they said.

RBC’s Benjamin Toms told CNBC that, coming into the results, anticipation had built that Barclays could improve its outlook compared with the bank’s 2024 strategic plan — yet, instead, “the messaging today was very much a reiteration of existing guidance.”
“There was a slight disappointment around NII guidance. But our takeaway from the presentation is that management are probably being a bit conservative here,” he added.
“The results themselves look satisfactory but the outlook is disappointing. In particular there is no change to FY26 targets (we expected increased capital return) and FY25 targets look in-line with consensus except for a slight downgrade to Banking NII – surprising given the Q4 beat,” KBW analysts said in a note.
Barclays shares were down 5.51% by 12:08 p.m. London time.

Restructuring

Since last year, Barclays has been implementing a strategic overhaul to whittle down costs by £2 billion by 2026, lift shareholder returns and stabilize financial returns, sharpening its focus on the profitable consumer and lending operations — and leading to the absorption of the retail banking business of British grocer Tesco’s.
Yet Barclays’ traditionally strong banking unit could now stand to benefit from more open market share in the domestic space, as HSBC last month announced it is preparing to exit its M&A and equity capital markets businesses in Europe, the U.K. and the U.S. amid a larger restructure of its investment banking operations.
The bank has also been recovering from a sweeping three-day tech outage that disrupted payments and transactions at the end of last month, which has since been resolved.
More broadly, lenders have been battling lethargy in the U.K. economy and a pullback in IPO activity in the London Stock Exchange. The Bank of England executed its first rate cut of the year last week and signaled further trims in 2025 amid a downgrade in the U.K.’s economic forecast — with monetary easing typically eating away at bank profits, as it tightens the spread between lenders’ return in loans and their payout on deposits. British and European banks are also struggling to keep pace with counterparts in the U.S., which could benefit from an additional competitive edge if newly inaugurated U.S. President Donald Trump takes a lighter approach to local regulation.
In parallel, U.K. Finance Minister Rachel Reeves is prodding Britain’s Financial Conduct Authority toward promoting competitiveness in tandem with consumer protection, with markets eyeing the government’s Financial Services Growth and Competitiveness Strategy due out in spring. More

Commerzbank on Thursday announced it will eliminate 3,900 full-time positions by 2028, largely in its native Germany, as it unveiled a spate of new strategic targets.
Commerzbank CEO Bettina Orlopp told CNBC’s Annette Weisbach after the news that it was important the job cuts were done in a “very social, responsible way.”
Germany’s second-largest lender anticipates around 700 million euros ($730.7 million) of before-tax restructuring costs in 2025, targeting a net result of 2.4 billion euros after these charges for the year.

Germany’s second-largest lender Commerzbank on Thursday announced it will eliminate 3,900 full-time positions by 2028, largely in its native Germany, as it unveiled a spate of new strategic targets.
The job cuts will be accompanied by increases in staffing in “selected areas” such as in international locations, resulting in a broadly constant global headcount of 36,700, the bank said in its strategic update.

Commerzbank CEO Bettina Orlopp told CNBC’s Annette Weisbach after the news that it was important the job cuts were done in a “very social, responsible way.” She added that she believes the reductions can take place “without weakening the morale, which is actually really, really good.”
The lender anticipates around 700 million euros ($730.7 million) of before-tax restructuring costs in 2025, targeting a net result of 2.4 billion euros after these charges for the year. It plans a payout ratio of more than 100% over the 2025-2028 period, after the deduction of restructuring costs and Additional Tier 1 (AT 1) bond coupons.
The bank also raised its longer-term revenue goals to 3.8 billion euros in 2027, up from a previous forecast of 3.6 billion euros, and said it is now targeting a higher return of tangible equity rate — a profitability metric — of 13.6% in the year, from 12.3% previously.
Commerzbank had disclosed its “record” annual performance two weeks before the scheduled release of its financial results, in a bid to fall in step with German legal requirements when a company’s capital return significantly exceeds the expectations of capital markets.
At the time, it said net profit hiked by 20% to a forecast-beating 2.68 billion euros ($2.78 billion) in 2024, outlining plans to repurchase 400 million euros of shares and boost its dividend payout to 0.65 euros per share, compared with 0.35 euros per share in the previous year. Full-year revenue in 2024 came in at 11.1 billion euros, compared with 10.461 billion euros in 2023, the bank said Thursday.

“We have delivered, consequently, over the past four years, what we have promised, and we intend to do that also in the coming years,” Orlopp said Thursday.
Deutsche Bank analysts said the “relatively linear” planned progress to Commerzbank’s new mid-term target is a “positive,” noting the spate of “bullish new targets.”
Commerzbank shares are up 21.8% year to date and were 0.68% higher at 11:34 a.m. London time on Thursday.

‘Activist investor’

Commerzbank has been advocating its case to stand alone since last year’s surprise build of a stake by UniCredit fueled market talk that Italy’s second-largest lender could be on the hunt for a cross-border takeover. UniCredit currently holds a direct 9.5% stake and a 18.5% stake via derivatives in Commerzbank.
The German government has opposed the prospect of such a cross-border consolidation, with Finance Minister Jörg Kukies slamming UniCredit’s “very aggressive, very opaque” bid in a CNBC interview in January.
Split between the German overture and a takeover offer for Italian lender Banco BPM, UniCredit CEO Andrea Orcel has kept his cards close to his chest over his company’s ultimate intentions regarding Commerzbank.
Speaking to CNBC on Thursday, Orlopp said that Commerzbank has a dialogue with UniCredit, which it views as a shareholder.
“At the moment, we can only treat them as investors, and that we do, and we are very open to answer their questions,” she noted. “Beside that, we said, if we want to talk about anything else, like a combination, given that we have a situation where we have one side who has secured nearly 30% of the shares in our company, we expect kind of an outline draft of what they think they would like … to achieve with respect to the structure, with respect to the financials, and then we are also open to talks.”
UniCredit “feels a little bit like an activist investor, yeah, that’s true. It’s all about style,” Orlopp added.
Speaking to CNBC this week after UniCredit reported a fourth-quarter profit beat and guided a slowdown in 2025 revenues, Orcel stressed that Commerzbank remains an investment — but also that he is “quite optimistic of being able to convince everybody, not only on the premises of how we got to this investment, but also that a combination between the two banks has massive value to be created, not only for the two banks and the stakeholders, but also for Germany and for Europe.” More

In 1812 Frederick Winsor, a madcap entrepreneur, invented the public utility. The idea behind his Gas Light and Coke company, which would supply residents of London, was that instead of each household buying its own energy—bags of coal, bits of firewood—the stuff would be piped directly to them from a central location. More customers, with differing patterns of demand, would allow power plants to be used more efficiently. It was a natural monopoly: scale would spread the cost of the gasworks, the pipes and so on across large numbers of customers, each spending less than they would individually to consume just as much. The idea of “energy as a service” spread across the world. More

While inflation has cooled almost everywhere, in Russia it is hotting up. Consumer prices rose by 9.5% year on year in December, up from 8.9% the previous month and uncomfortably above the central bank’s target of 4% (see chart). The prices of fruit and vegetables have risen by more than 20% on average in the past year. In a normal country, this sort of high inflation would be unsustainable. But Russia is not a normal country. More

The holiday from reality, for the happy few enjoying it, has been delightful. Three years ago it was still possible to fix a mortgage rate in Britain and much of the euro area at somewhere near 1%. American housing loans were dearer by just a percentage point or two. Even as interest rates have risen and borrowing costs for new mortgages have doubled or tripled, homeowners who locked in the enviable rates of the early 2020s have been living blissfully in the past. Moreover, the inflation that prompted rates to rise has bitten chunks out of the real value of their debt. More

At a summit in Paris on February 10th and 11th, tech bosses vied to issue the most grandiose claim about artificial intelligence. “AI will be the most profound shift of our lifetimes,” is how Sundar Pichai, Alphabet’s boss, put it. Dario Amodei, chief executive of Anthropic, said that it would lead to the “largest change to the global labour market in human history”. In a blog post, Sam Altman of OpenAI wrote that “In a decade perhaps everyone on earth will be capable of accomplishing more than the most impactful person can today.” More