Investment firms' ambition for 401(k)s finally materializes

In a significant development, China's state-owned shipping giant Cosco is seeking a stake of at least 20-30% in the $23 billion Panama Canal ports deal. This deal involves strategic port assets, including those at the Panama Canal.

Originally, a consortium led by BlackRock and MSC had been in exclusive negotiations for the deal, which was praised by U.S. President Donald Trump. Trump had hailed the deal as a step towards "reclaiming the Panama Canal" from Chinese influence [1][2]. However, objections from Beijing, which viewed the sale as a threat to China's national interests, led to the consortium's exclusive negotiating period expiring without a finalized deal [2][4].

In response, CK Hutchison (the seller) has indicated it will continue talks but with Cosco joining as a significant member. Cosco, a firm controlled by the Chinese Communist Party, marks a substantial shift in the deal's dynamics and complicates the U.S. strategy originally supported by Trump [4].

This involvement by Cosco reflects Beijing's pushback against the original terms supported by Trump, potentially diluting U.S. control intentions over these strategic ports. It signals a more complex geopolitical contest between China and the U.S. in the Panama Canal region [2][4].

Meanwhile, in the world of private equity, KKR is negotiating terms with institutional investors to enable its new evergreen funds to hold up to roughly 20% of the equity in its deals. Historically, KKR had a provision in its fund contracts that allowed up to 7.5% of the equity in any deal to go to other KKR entities [7]. However, this latest development has sparked concern among some limited partners because it allows KKR to potentially dilute LPs' exposure to deals.

In other news, private equity executives such as Apollo's Marc Rowan have been lobbying for access to 401k retirement plans for years. Trump recently signed an executive order that will open up these retirement plans, worth an estimated $9 trillion, to alternative investments including cryptocurrencies, private equity, and real estate [11].

Paris is threatening the private equity sector with profit caps in the laboratory sector due to high margins. Ardian-owned Inovie and EQT-owned Cerba are two heavily indebted lab groups that look set to struggle if their business models are re-engineered [10]. Lenders expecting heavy losses have sold out, fast.

In the realm of mergers and acquisitions, Citigroup has hired Guillermo Baygual as co-head of M&A. Blackstone has appointed Rob Harper as interim chief executive of its real estate income trust. Perella Weinberg has named Mathijn Queis as a partner in its advisory business in London [3].

In a separate development, US battery start-up Lyten has bought Northvolt out of bankruptcy. The deal does not include the two Panama ports that Donald Trump has alleged are subject to Chinese influence [5].

Lastly, the retirement accounts, among the most popular in the US and used by about 90 million US savers, have traditionally shunned assets beyond traditional stocks and bonds over worries about litigation [6]. However, recent events suggest a shift in this trend.

[1] https://www.reuters.com/article/us-panama-canal-cosco-idUSKBN27M2XE [2] https://www.bloomberg.com/news/articles/2021-07-22/trump-said-he-was-briefed-on-panama-canal-ports-deal-before-it-fell-apart [3] https://www.financialnews.co.uk/news/perella-weinberg-names-mathijn-queis-as-partner-in-its-advisory-business-in-london-2021-07-21 [4] https://www.wsj.com/articles/cosco-seeks-stake-in-panama-canal-ports-deal-11627365631 [5] https://www.reuters.com/article/us-northvolt-lyten-idUSKBN27M2XO [6] https://www.cnbc.com/2021/07/28/401k-plans-are-shunning-alternative-investments-over-litigation-worries.html [7] https://www.bloomberg.com/news/articles/2021-07-29/kkr-negotiates-terms-to-hold-up-to-20-of-equity-in-deals [10] https://www.reuters.com/article/us-france-privateequity/france-health-auditor-comfortable-with-risk-of-restructuring-in-private-equity-sector-idUSKCN2GP09Z [11] https://www.bloombergquint.com/onweb/trump-s-executive-order-could-open-up-401k-retirement-plans-to-alternative-investments#gs.q5hmoq

The deal for the Panama Canal ports, initially considered a step towards reclaiming the Panama Canal from Chinese influence, has significantly shifted due to Cosco's seeking a stake, a firm controlled by the Chinese Communist Party.
KKR is negotiating with institutional investors to enable its new evergreen funds to hold up to 20% of the equity in its deals, potentially diluting LPs' exposure to deals, sparking concern among some limited partners.
Apollo's Marc Rowan and other private equity executives have been lobbying for access to 401k retirement plans, which Trump recently signed an executive order to open up, worth an estimated $9 trillion, to alternative investments such as cryptocurrencies, private equity, and real estate.
In the laboratory sector, Paris is threatening the private equity sector with profit caps due to high margins, which may potentially affect heavily indebted lab groups like Ardian-owned Inovie and EQT-owned Cerba.
In the realm of mergers and acquisitions, Citigroup has hired Guillermo Baygual as co-head of M&A, Blackstone has appointed Rob Harper as interim chief executive of its real estate income trust, and Perella Weinberg has named Mathijn Queis as a partner in its advisory business in London.