General Atlantic's Bill Ford still bullish on Uber
Bill Ford, chief executive officer of private equity firm General Atlantic, said he doesn’t consider the initial public offering of Uber Technologies Inc. a disappointment despite the plunge in its shares.
“I don’t see it as the end of the road, I call it an important milestone,” Ford said at the Bloomberg Invest New York conference Tuesday. “I think it has a long way to go."
Ford said Uber may have benefited if it had pushed its governance transition and moved to a professional leader more quickly. Shares of Uber have dropped about 9% since its May IPO. General Atlantic has been an investor in the ride-sharing firm since 2015.
General Atlantic, unlike many of its peers, doesn’t rely predominantly on closed-end funds and has long funded most of its investments through staggered managed accounts and permanent capital commitments. The firm, which manages $31 billion in assets, focuses on fast-growing companies globally within the consumer, financial services, health-care and technology sectors.
In March, Ford called on New York business leaders to ramp up their efforts to lure Amazon.com Inc. back to the city. The Internet giant ditching plans to build its second headquarters in Long Island City, Queens, sends a “negative signal” about conducting business in New York, he said.
Ford joined General Atlantic in 1991 and became CEO in 2007.
David McCormick, co-chief executive officer of Bridgewater Associates, said that the U.S. and China have many incentives to come to a trade agreement, but risks are growing that they’ll strike a “bad deal.”
“The discussion has gone from a market-access discussion and a tariff discussion to the weaponization of exports,” said McCormick, whose firm runs the world’s biggest hedge fund, at the Bloomberg Invest New York conference on Tuesday. He cited the U.S.’s decision to shut off supplies to Huawei Technologies Co. and China’s indication that it might respond by restricting rare metals.
McCormick echoed the sentiments of Bridgewater founder Ray Dalio, who has been outspoken about the trade war between the U.S. and China. Bridgewater registered its first private securities fund in China last year.
“There’s lots of costs of not finding an agreement, but there’s also a growing risk that both parties have created on both sides, through the way they’ve spoken about this publicly, of getting a bad deal," said McCormick. "The question will be how we manage through this last phase."
McCormick oversees the $160 billion firm’s governance and business operations with co-CEO Eileen Murray. A West Point graduate who worked as U.S. Treasury undersecretary for international affairs under George W. Bush, McCormick was poised to join the Trump administration as deputy defense secretary before withdrawing his name. McCormick was also at one time considered as a possible Treasury secretary in the Trump administration.
Leon Black, chief executive officer of Apollo Global Management LLC, said after 10 years of an upward economic cycle the next downturn won’t likely come until after the presidential election.
“We have an administration, like them or not like them, they have done a pretty good job extending economic growth and consumer confidence,” Black said in an interview with David Rubenstein at the Bloomberg Invest New York conference Tuesday.
Apollo, like its peers, has been benefiting from a robust fundraising environment as investors search for yield. The New York-based firm saw inflows of $24.9 billion during the first quarter, helped by its annuity seller Athene Holding Ltd.
Black said he has some regrets about taking Apollo public because investors don’t understand private equity firms like his. He said Apollo has many sides, operating as a value firm, a growth enterprise and a yield company, and shareholders have trouble seeing all the parts.
“The public market does not understand creatures like us very well,” he said. “They don’t know how to value. We trade at half of what we should be."
Last month, Apollo announced plans to convert to a corporation from a partnership -- a shift that is expected to take effect during the third quarter. The change in structure may help boost the firm’s stock price since it will be eligible for inclusion in indexes, potentially increasing mutual and exchange-traded fund ownership.
As critics of the industry call for firms like Apollo to pay ordinary income tax on its carried interest, the co-founder of Apollo also said he can see both sides of the argument. But in defending the current capital gains tax rate, he said Apollo doesn’t collect an incentive fee until its funds hit an 8% return hurdle and then return the management fees to investors.
“I think PE has one of the more fair formulas with all of its investors," said Black. "We get a relatively small management, which is taxed as ordinary income."
Black founded Apollo in 1990 with Josh Harris and Marc Rowan. He helped build the firm into one of the largest alternative asset managers with $303 billion in assets.
Mark Wiseman, global head of active equities at BlackRock Inc., said the firm has faced challenges in trying to raise a fund to take long-term stakes in companies.
The Long-Term Private Capital fund was seeking to raise as much as $12 billion by mid-2018 but fell behind schedule. In April, BlackRock said it had secured just $2.75 billion from investors, including $1.25 billion in hand and $1.5 billion committed.
“It’s been hard to explain a new model, a model that’s more of a permanent capital structure but private in nature,” Wiseman said at the Bloomberg Invest New York conference Monday night. “Having said that, sophisticated investors have understood it and we’re now seeing a lot of interest in the vehicle.”
Wiseman also voiced concern that public company executives are having difficulty focusing adequate energy on the long term. He said they need to look deeper into the future, rather than getting mired in quarter-to-quarter considerations. Public markets can put enormous pressure on a company’s leadership, making it easy to lose sight of the bigger picture, he added.
“You’re under constant pressure, under constant scrutiny day in and day out to perform. And if your stock is down, there are questions asked. You’re on the news, your shareholders are by definition selling, your board might be asking questions,” Wiseman said. “So there is this pressure put on public company executives to meet short-term targets.”
Wiseman understands that thinking given his previous role: he was chief executive officer of the Canada Pension Plan Investment Board. In that job, he said he liked to keep the mentality that “a quarter wasn’t 90 days, it was 25 years.”
BlackRock’s Long-Term Private Capital fund is part of its alternatives business, which it is trying to bulk up. The asset management industry is currently facing pressure on fees for indexed products, which make up about two-thirds of the firm’s assets. Its alternatives division is still tiny by comparison. BlackRock had about $152.9 billion in assets under management in alternatives as of March 31, making up just 2% of total assets under management at the world’s biggest money manager.
Wiseman is one of about seven contenders widely thought to be in the running to succeed CEO Larry Fink, who turned 66 in November.