Investors in Morgan Stanley’s North Haven Private Income Fund (PIF) sought to withdraw 11.4% of shares in the latest tender offer, a slight dip from the 11.6% in the prior quarter.

“The fund will repurchase 5% of shares, the customary threshold for such vehicles,” the filing stated further.

However, Morgan Stanley is not witnessing the phenomenon alone, as wealthy investors in general have pulled money ⁠from non-traded private credit funds in recent months over concerns regarding lending standards and whether software companies, a key borrower base for direct lenders, can withstand disruption from the AI.

Other industry giants like Apollo, Ares, and Blue Owl have also felt the pain and are likely to release similar data in the coming weeks.

Redemption pressure, however, may be starting to ease as asset managers work through a backlog of unfulfilled withdrawal requests.

As per the fund’s filing, nearly two-thirds of repurchase requests for the latest quarter came from investors who were not allowed to fully cash out in the prior two repurchase offers.

“We believe the composition and stabilization ‌of ⁠request activity may indicate the durability of the company’s investor base. Upon completion of this quarter’s repurchases, investors who sought full tender of their units during the prior two repurchase offers will have received more than 80% of their requested tendered amount,” the ⁠fund said in an investor update.

As per Morgan Stanley, the hit to PIF’s net asset value is expected to be roughly USD 101 million after accounting for new subscriptions and dividend reinvestments.

Meanwhile, a smaller Morgan Stanley ⁠fund, North Haven Private Income Fund A (PIF A), logged about 6.8% in redemption requests, compared with 7.2% in the prior quarter.

This fund will also repurchase ⁠5% of shares.

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So were Blackstone president Jon Gray, Apollo president Jim Zelter and Brookfield chief executive Bruce Flatt. KKR sent Waldemar Szlezak, who runs its digital infrastructure business. Larry Fink of BlackRock joined by video link from the road.

The segment ran for more than half an hour and contained remarkably little detail. What it contained instead was a message, delivered with the theatrical confidence that has become Huang’s trademark.

Nvidia had signed memorandums of understanding (MoU) with all six firms to create what it called independent compute financing platforms, with the aim of mobilising more than $500 billion of third-party capital for the construction of AI data centres and the purchase of Nvidia hardware.

No deals had actually been signed. There is no fixed timetable. The USD 500 billion figure, as Bloomberg later reported, is a round number combining transactions already under discussion with a forecast of demand still to come. Each lender will vet borrowers individually before committing a cent.

And yet the announcement may prove to be one of the most consequential financial events of the AI era. Because what Huang was really doing was not raising money. He was proposing a new asset class.

The problem nobody could keep paying for

To understand why Nvidia needed to stand on a stage with six financiers, look at what has happened to the balance sheets of its biggest customers.

For most of the last decade, Big Tech funded its own expansion. Cloud businesses threw off enormous operating cash flow, and capital spending, however large, stayed comfortably inside it. That relationship has now broken.

Alphabet, Amazon, Meta and Microsoft have collectively guided to something close to USD 700 billion of capital expenditure in 2026, a rise of roughly three quarters on the previous year’s already record figure.

Bank of America projects aggregate hyperscaler capex will top USD 860 billion this year and approach USD 1.2 trillion in 2027. Goldman Sachs now models more than USD 5 trillion of combined capex for the big four between fiscal 2025 and fiscal 2030.

The cash consequences arrived faster than most investors expected. Alphabet posted its first negative free cash flow quarter since its 2004 listing in the second quarter of 2026, burning USD 5.9 billion as capital spending surged past USD 44 billion in three months.

It then raised the top end of its full year capex guidance by as much as USD 15 billion. Amazon’s trailing 12-month free cash flow swung to negative USD 7.6 billion after three consecutive positive years.

Research house Epoch AI, fitting growth curves to quarterly filings, calculated that aggregate hyperscaler cash capex would overtake operating cash flow somewhere around the third quarter of 2026. That crossover point is now behind us.

Microsoft remains the outlier, the only one of the American hyperscalers still generating meaningful free cash flow, and it has managed that partly by leasing rather than buying, adding some USD 26 billion of finance lease assets over four quarters rather than issuing senior bonds.

The rest have gone shopping for outside money, and at extraordinary scale. FactSet calculates that incremental annual debt has risen from 9% of hyperscaler capex in fiscal 2024 to 32% by mid-2026.

Equity has returned to the funding mix too. Alphabet priced an USD 84.75 billion raise in June 2026, the largest equity capital transaction ever completed by a listed company, including a USD 10 billion private placement with Berkshire Hathaway.

Oracle, the most leveraged of the group, raised USD 43 billion of debt and USD 5 billion of equity in fiscal 2026 and plans roughly USD 40 billion more.

Then there is the arithmetic that hangs over the whole sector. Morgan Stanley’s widely circulated estimate puts global data centre capital expenditure through 2028 at around USD 2.9 trillion, against hyperscaler operating cash flow capable of covering perhaps USD 1.4 trillion of it.

The remaining USD 1.5 trillion has to come from somewhere else. In Morgan Stanley’s own bridge, the largest single share, about $800 billion, is allocated to private credit, with roughly USD 200 billion from corporate bonds and USD 150 billion from securitised products.

That USD 1.5 trillion hole is the reason six financiers were sitting in a television studio in August.

Why Nvidia cannot simply write the cheque

Nvidia is not short of money. It reported record revenue of USD 81.6 billion in the first quarter of fiscal 2027, up 85% year on year, with data centre revenue of USD 75.2 billion and gross margins around 75%.

It has authorised a further USD 80 billion of share buybacks and raised its dividend 25-fold. Its market capitalisation sits around USD 5.5 trillion.

But Huang has said publicly that AI infrastructure spending could reach USD 3 trillion to USD 4 trillion a year by the end of the decade. At that scale, no single corporate balance sheet is adequate, including his own.

There is a second problem, and it is arguably more urgent. Nvidia’s growth increasingly depends on customers who are not hyperscalers. Frontier laboratories such as OpenAI and Anthropic, specialist AI clouds, sovereign projects and enterprises want compute at scale, but many of them lack the credit rating or the cash to buy millions of dollars of silicon outright.

Meanwhile the hyperscalers, Nvidia’s traditional customers, are busy designing their own accelerators. Broadening the buyer base is a strategic necessity, and the constraint on that broadening is no longer chip supply or data centre shells. It is financing.

Nvidia’s earlier attempts to solve this itself produced exactly the reaction it feared. The company has invested in customers including CoreWeave, contributed billions to an OpenAI funding round, and joined a consortium backing xAI. Analysts began describing the pattern as circular financing, the vendor funding its own demand, and comparisons to the telecom vendors’ financing collapse of the dot com era followed quickly.

The reaction sharpened when reports emerged that Nvidia was weighing a USD 250 billion guarantee for an OpenAI data centre project in Ohio. Nvidia shares fell 5%, and the price of credit default swaps on Nvidia bonds recorded their largest intraday move since they began trading actively. The company subsequently trimmed that guarantee to under USD 120 billion, covering only the first phase.

Seen against that background, the six-way partnership is a deliberate correction. Nvidia will still provide credit support, but Huang clarified after the announcement that its guarantees would cover as much as 25% of an opportunity, assessed project by project.

The other 75%, and the origination, structuring, distribution and warehousing of the risk, belongs to Wall Street. The chipmaker keeps the demand and sheds most of the balance sheet.

The intellectual move at the centre of the deal

Huang’s contention is that a rack of Nvidia GPUs should be treated the way a lender treats a warehouse, a toll road or a power station.

In his framing, Nvidia compute is an investable infrastructure asset, productive, revenue generating and fungible across the entire market.

Nvidia’s own statement described its compute as broadly adopted, transferable between customers and operators, and continuously improved by CUDA software updates that extend its useful life.

If that classification holds, everything else follows. Loans can be secured against the hardware itself alongside the offtake agreements that guarantee its use. Special purpose vehicles can own chips and lease them to Nvidia’s customers, keeping the debt off the customer’s balance sheet and off Nvidia’s.

Those vehicles can then issue bonds, some expected to run to tens of billions of dollars each. If a borrower fails, the chips can be re-rented to somebody else, which limits the damage from any single default. Insurance capital, pension money and sovereign wealth funds can buy the resulting paper, because it looks and behaves like infrastructure debt.

If the classification does not hold, the whole edifice is a very large pile of fast depreciating electronics dressed up as real estate.

The case against

An H100 that changed hands for roughly $30,000 in 2023 was trading at around $8,000 by the middle of 2026, a fall of about 73% in three years. Hourly rental rates for the same chip peaked near USD 8, collapsed to between USD 1 and USD 2 as supply arrived, recovered, then softened again.

CUDA’s ecosystem of more than six million developers may guarantee that a buyer exists for repossessed hardware. It does not guarantee the price.

Michael Burry, who made his name calling the last credit crisis, has attacked the depreciation schedules underpinning the sector, arguing that a two-to-three-year hardware upgrade cycle cannot support five- and six-year useful life assumptions, and estimating that understated depreciation could distort reported earnings by around USD 176 billion between 2026 and 2028.

Accounting specialists have pushed back on the strongest version of that claim, but the debate has moved from technical footnotes to the front of investor decks.

Then there is China. Bernstein Research expects Nvidia’s share of the Chinese AI chip market to collapse from roughly 40% to around 8% by the end of 2026, with Huawei approaching half the market. Should Chinese production flood the world with cheap compute, the collateral behind these loans could erode faster than the loans amortise.

One analyst estimate suggests investors will price GPUs as high depreciation equipment rather than property, and demand yields of 11% to 17% depending on their position in the capital structure. That is high yield pricing, and it sits well above what a hyperscaler pays in the corporate bond market.

Rating agency methodology for GPU backed securitisations, meanwhile, is still being worked out. Fitch has yet to publish a settled approach.

What Wall Street actually gets

Fees, and a lot of them. Alternative managers earn management fees on committed capital, typically 1.5% to 2%, plus carried interest on profits. Fee related earnings are what analysts prize, because they are recurring and predictable.

Apollo reported record fee related earnings of USD 785 million in the second quarter of 2026, up 25% year on year, on USD 74 billion of originations. Strikingly, that figure excluded the USD 35 billion Broadcom AI infrastructure financing entirely, because Apollo books volume at closing rather than announcement, leaving roughly USD 50 billion of signed deals to feed later quarters.

Management has also noted a shift towards structures that recognise fees across multiple quarters or years rather than upfront, smoothing earnings in a way public shareholders reward. Goldman, the only participant with a full investment banking apparatus, collects the underwriting and distribution economics on top.

A home for permanent capital. The deeper motivation is a liability problem. The five largest listed alternative managers now oversee about USD 1.5 trillion of perpetual capital, roughly 40% of their combined assets, much of its insurance and annuity money gathered through platforms such as Apollo’s Athene, KKR’s Global Atlantic and Blackstone’s insurance mandates.

Annuity liabilities are long dated and require long dated, contracted, investment grade style assets to match them. Those assets are scarce. A twelve-year lease on a GPU cluster with an investment grade offtaker attached is, in principle, exactly the instrument these balance sheets are hungry for.

Apollo’s private credit assets alone stand at roughly USD 405 billion, Blackstone’s credit and insurance arm at about USD 465 billion, BlackRock at around USD 220 billion after its HPS and GIP acquisitions, and KKR at about USD 140 billion. All of that money needs somewhere to go.

Ownership of a new market at its inception. Asset classes are created rarely. Whoever writes the first documentation, sets the advance rates, defines the residual value assumptions and builds the ratings dialogue tends to own the league tables for a decade.

Data centre securitisation issuance ran near USD 27 billion in 2025 and is projected by JPMorgan at USD 30 billion to USD 40 billion annually in 2026 and 2027, a rising share of the combined asset backed and commercial mortgage-backed market.

CoreWeave has already priced an USD 8.5 billion investment grade rated GPU collateralised transaction. Nvidia has now handed six firms a franchise position in the market that follows.

Better risk for the same yield. Nvidia’s willingness to backstop up to a quarter of a transaction materially changes the credit maths. A lender writing a loan against hardware alone is exposed to residual value.

A lender writing the same loan with a first loss cushion from a company with 75% gross margins and a $5.5 trillion market capitalisation is in a different business. Combine that with collateral that mixes the chips themselves with contracted offtake, and with the ability to re-rent hardware to a different tenant on default, and the risk adjusted return starts to look attractive even at spreads well inside 11%.

Distribution, which is where the real prize sits. These firms do not intend to hold the paper. They intend to originate it and sell it. Executives are already sounding out sovereign wealth funds, pension schemes and insurers, and indicated during the announcement that some of the capital could come from retail investors.

That last point matters more than it sounds. American regulators have recently opened the roughly $13 trillion defined contribution market to private credit managers, while Europe’s revised ELTIF regime has broadened what long term investment funds may hold.

Non traded business development companies and evergreen vehicles are growing quickly. A manufacturing line for long dated, contracted, AI linked credit feeding those channels is a business with obvious compounding characteristics.

Apollo is expanding a trading operation to sell down chunks of what it originates and make markets in the paper afterwards, which adds a second fee layer.

Adjacency. The financing will not be a single product. As Mercer’s global head of real assets observed after the announcement, the partnerships are likely to spawn strategies across infrastructure, real estate credit and possibly private equity, giving investors multiple access routes. Data centres need land, power, transmission, cooling and construction finance. A firm that anchors the compute layer is well placed to sell the rest.

Competitive necessity. Nobody wanted to be left out. Huang has said he approached only these six and none refused. Within minutes of the announcement, Morgan Stanley published a framework to facilitate USD 1.5 trillion of funding for American innovation and national security, with AI and advanced computing at the top of the list.

JPMorgan’s asset management arm is reportedly discussing how to participate. Broadcom set the template weeks earlier, tapping Apollo and Blackstone as anchor investors for more than 20 gigawatts of compute for frontier laboratories through 2028, with USD 35 billion already committed and the borrowing structured to sit off Broadcom’s balance sheet.

Where the win-win could break

The mutuality depends on one assumption holding for a decade. Chips must remain productive long enough, and generate enough revenue, to service the debt raised against them.

Apollo’s own published view illustrates the tension. The firm has argued that more than $5 trillion of expected data centre capital expenditure implies USD 1.5 trillion to USD 2 trillion of annual AI revenue by 2030, against USD 40 billion to USD 60 billion today. That is the gap the entire structure is betting will close.

The risk is no longer confined to technology shareholders. It now runs through special purpose vehicles, private credit originators, securitisation trusts and ultimately into pension portfolios and insurance reserves.

Insurance regulators have already tightened capital treatment for collateralised loan obligations and overhauled how collateral loans are charged, moving from a flat charge to a framework tied to what actually backs the loan.

American law firms are circulating client alerts on litigation risk in AI data centre financing. The Federal Reserve Bank of Chicago has noted that direct bank exposure to AI adjacent industries averages under 1% of assets, while cautioning that indirect exposure through lending to private credit funds is harder to see.

One person close to the announcement described Huang’s intention as building a debt shopfront, an advertisement aimed simultaneously at customers and at nervous investors. If the deals do not materialise as promised, or if they sour, the reputational cost lands on all seven names.

The final take

Nvidia has done something clever. It has kept the demand, capped its exposure at roughly a quarter, and persuaded the deepest pools of capital in the world to carry the rest.

Wall Street, for its part, has been handed a manufacturing line for exactly the kind of long dated, contracted, high yielding asset its insurance balance sheets and retail distribution channels have been starved of.

Both sides get what they want. Whether the arrangement is a win for the pensioners and policyholders who end up owning the paper depends entirely on a question none of the seven firms on that stage could answer, which is how long a graphics processor stays valuable.

The post How Nvidia turned its chips into Wall Street’s newest asset class appeared first on International Finance.

The chipmaker said it had struck partnerships with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to create “compute financing platforms” aimed at funding data centres, AI factories and other infrastructure required to support the rapid expansion of AI.

The USD 500 billion is not committed funding or money that has already changed hands. It represents the potential amount the platforms could mobilise over time, with the companies having signed memorandums of understanding and final agreements still to be concluded.

At the heart of the initiative is Nvidia’s attempt to establish its graphics processing units (GPUs) as an investable asset class. The company argues that its chips are widely used, transferable and capable of generating predictable economic returns, allowing lenders to provide financing against the hardware.

“In AI, compute is revenue,” Nvidia chief executive Jensen Huang said, describing computing capacity as a critical form of infrastructure.

Goldman Sachs said its role would include creating a market for credit backed by Nvidia compute, effectively allowing the chips to serve as collateral for loans.

The move comes as technology companies pour unprecedented sums into AI. Major Nvidia customers, including Microsoft, Amazon, Google, Meta, OpenAI and Anthropic, have collectively spent more than USD 1 trillion on AI projects and infrastructure over the past three years, with spending expected to rise further.

The new financing could help AI companies and cloud operators build more data centres and acquire the chips needed to power increasingly demanding models and services.

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The proposal placed by the Marc Rowan-led venture values easyJet at 7.15 pounds a share, above Castlelake’s 6.90-pound offer, which the British budget carrier’s board had agreed to in principle only days earlier.

Following the approach, easyJet said its board was “no longer minded” to recommend the Castlelake proposal, having unanimously concluded that Apollo’s terms were more attractive to shareholders.

Shares in easyJet jumped as much as 15% on Friday (July 10) to 6.75 pounds, the airline’s highest level since February 2022. However, the ratio was still below Apollo’s offer price. The stock has risen 81% since May 28, the last trading day before Castlelake’s interest became public.

Apollo said it was committed to taking “all necessary steps” to satisfy the European Union’s (EU) merger control and foreign-ownership rules, which require European airlines to remain majority-owned within the bloc even after Brexit.

It has also offered eligible shareholders the option to include/transfer their stakes into the private vehicle that would buy the budget carrier, as the avenue will enable them to continue to own their voting rights. The firm must announce a firm offer by August 7 or walk away, while Castlelake’s deadline falls on August 3.

Apollo said it backed easyJet’s existing strategy of strengthening its low-cost model, including fleet upgrades and expansion of its holidays business, and intended to retain management and staff.

It also plans to preserve the brand license agreement with founder Sir Stelios Haji-Ioannou, who holds roughly 15% of the airline with his family, apart from receiving a 0.25% royalty on easyJet’s revenue for the use of the “easy” brand.

As an alternative to cash, Apollo has offered shareholders the option to roll their stakes into the acquisition vehicle, retaining voting rights.

Castlelake, which went public with its interest in May 2026 after facing early rejections from the board, has partnered with two EU nationals, Peter Bellew and Mark Breen, to meet ownership rules through a separate holding company.

The bidding war comes as the wider aviation sector faces pressure from higher fuel costs following the Iran war. The budget carrier reported a pre-tax loss of 552 million euro for the first half of 2026, widening from 394 million euro a year earlier, though analysts said its profitable network and growing holidays business made it an attractive target for private equity.

“It’s no surprise that a second suitor has appeared for easyJet. The potential for the business remains substantial despite the underwhelming performance of recent years,” said Chris Beauchamp, chief market analyst at investing and trading platform IG.

Stephen Furlong, analyst at Davy Group, Ireland’s leading provider of wealth management and investment banking services, feels that while both Apollo and Castlelake proposals could ultimately gain regulatory approval, the acquisition price will now take the center stage, with the bidding war expected to become a hot one in the coming days.

While Castlelake has remained silent on specific business reorganization plans for easyJet beyond a broad commitment to support the airline’s fleet modernization program, Apollo has laid out its roadmap clearly: retain the airline’s key staff to continue easyJet’s strategy of expanding capacity and growing its holidays business.

And it looks like easyJet has found more solace with Apollo’s bid, as both businesses said in a joint statement, “The proposed cash offer delivers a superior outcome for easyJet shareholders by providing a higher cash value than Castlelake’s latest proposal.”

As per analysts, easyJet’s extensive fleet of over 350 aircraft and well-established model provide an excellent business opportunity for its suitors.

The post With USD 7.7 billion bid, Apollo gatecrashes Castlelake’s easyJet takeover attempts appeared first on International Finance.

Investors sought to pull 14.4% of shares from the USD 22.6 billion Ares Strategic Income Fund (ASIF) in the second quarter, up from 11.6% in Q1. The fund limited withdrawals to 5% of shares, the customary threshold for ⁠such vehicles.

Wealthy individuals, in 2026, have pulled money from non-traded private credit funds over concerns about lending standards and worries over how software companies that borrowed heavily from direct lenders will navigate the ongoing AI disruption. As per the investment bank Robert A. Stanger, a combined amount of USD 12.9 billion has been pulled from private credit funds in the first five months of this year.

“Most requests were concentrated among a small number of non-US institutions and family offices, representing less than 1% of ASIF’s more than 20,000 shareholders. They accounted for nearly half of second-quarter requests,” the fund said.

Talking about the ongoing crisis in the private credit sector, Ares Management’s industry peer Apollo recently flagged withdrawal requests ‌at ⁠its USD 26 billion private credit fund, moderated from the United States and increased from offshore.

“Nearly two-thirds of repurchase requests at ASIF were submitted by investors who had tendered in the prior quarter,” the venture stated further.

Reacting to the news surrounding ASIF, TD Cowen analyst Bill Katz ⁠said, “Optically, not a great update; however, the devil is in the details, and we are quite encouraged by the finer disclosure,” apart from noting that the pattern of repurchase requests does not suggest widespread angst, while repeat requesters indicate redemption pressures are not building.

“Withdrawal requests from US private wealth investors, ASIF’s largest shareholder segment, represented only 2.4% of ⁠shares and declined 35% from the prior quarter. The segment also accounted for nearly half of second-quarter inflows,” the venture remarked.

Talking about Apollo Global’s USD 26 billion private credit fund, Apollo Debt Solutions (ADS), it has curbed redemptions at 5% of its shares after investors sought to withdraw approximately 16.8% of the total.

“Paying out those investors will bring gross outflows from the fund to USD 700 million, outpacing inflows of USD 300 million, based on preliminary data,” the fund said in a filing. That leaves net outflows worth about 3% of the fund’s asset ⁠value so far in 2026.

Redemption requests rose from about 11.2% in the previous quarter at the fund, which is mainly aimed at wealthy individuals and typically provides an opportunity to withdraw some money once every three months.

“Institutional investors were continuing to show strong demand for private credit. We expect institutional ‌fundraising ⁠for our direct lending strategies will exceed that of the wealth channel this year. There was a notable regional split among investors,” the filing continued, specifying that requests to redeem from the onshore United States “moderated sequentially to approximately 4.3%, while redemptions from offshore investors increased to 12.5%.”

Apollo President Jim Zelter, in May, said he expected continued withdrawals and that the “industry turbulence” ⁠was not over. ADS had returned 1.5% through May 31, comparing with a 1.2% gain in the Morningstar LSTAn index of publicly traded leveraged loans.

Morgan Stanley, another private credit major, has limited redemptions again at its USD 7 billion flagship private credit fund after investors sought to withdraw almost 11.6% of units outstanding.

North Haven Private Income Fund (PIF) said it would meet 43% of Q2 redemption requests after investors sought to withdraw about 10.9% of the fund in the Q1, adding that about half of the latest requests came from investors who had been unable to fully cash out earlier.

“We believe that ⁠both the composition as well as the stabilization in the level of request activity as compared to the first quarter may be indicative of durability in the company’s investor base,” the bank’s investment management arm said in its market notes and filings.

As per Morgan ‌Stanley, the PIF was invested in 301 borrowers across 45 industries as of May 31 and had around 22.7% exposure to the software industry. After accounting for new subscriptions and dividend reinvestments, the net hit to the fund’s net asset value was about USD 102 million, or 3.2% of its ⁠March 31 value.

“Separately, a smaller affiliated fund, North Haven Private Income Fund A, faced 7.2% redemption requests, 5% of which will be honoured at the customary threshold level,” the venture stated further.

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“Morningstar’s Public/Private Select Series will bring together Morningstar Wealth’s asset allocation, manager research, and due diligence rigor; public market strategies from Franklin Templeton and JP Morgan Asset Management; and private market strategies from Apollo and Franklin Templeton, spanning private credit and real estate,” the company stated.

“Unlike many public/private offerings built around a single firm’s strategies, Morningstar Wealth draws on its experience in asset allocation, investment selection, and portfolio construction, with a research-led focus on investor outcomes. Morningstar Wealth is a group within Morningstar Investment Management LLC, a registered investment adviser, which works with advisors to provide investment strategies such as model portfolios and separately managed accounts (SMAs) with USD 370 billion in assets under management,” it added further.

“Morningstar is bringing independent research, disciplined asset allocation, and transparent pricing together in a single framework, so advisors can help navigate complex private markets and democratize access to them for even more investors,” said Kunal Kapoor, Morningstar’s CEO.

The portfolios will be constructed with ETFs (Exchange-Traded Funds) and interval funds to make private markets usable in individual investor portfolios. The suite will offer six risk-based portfolios, ranging from capital preservation to aggressive growth. Public and private exposures, on the other hand, will be integrated into a single asset allocation. The whole process will be transparent, as the pricing will be competitive and will exclude overlay fees.

“By packaging private market exposure within a diversified model, Morningstar Wealth aims to remove the burden of sourcing, sizing, and managing liquidity, allowing advisors to focus on client needs rather than portfolio construction. The initial models will include exposure to private credit and real estate through interval funds ranging approximately between 12 and 20% of the models’ allocation, depending on risk profile and current market opportunity,” the venture stated further.

Private markets have historically been limited to institutional investors and ultra-high-net-worth individuals. At the same time, industry demand continues to grow, with advisors increasingly seeking to incorporate private markets into mainstream portfolios.

Jenny Johnson, chief executive officer of Franklin Templeton: “When I think about why private markets matter now more than ever, it’s not just access but also a focus on the long term in a short-term world. We are living in an environment of persistent inflation and structural uncertainty. We’re excited to bring greater access to these types of solutions.”

George Gatch, CEO of J.P. Morgan Asset Management, said, “As markets continue to test traditional investment approaches and the 60/40 portfolio evolves, advisors need access to a much broader set of investment opportunities and strong oversight. Together this group can help deliver diversified portfolios that lean on the expertise of skilled active managers to integrate public and private markets prudently.”

Jim Zelter, president of Apollo, remarked, “The next generation of model portfolios will blend public and private markets and offer investors greater diversification, more yield, and better reflect the full breadth of the economy. These models reflect what clients are seeking, private markets as a core portfolio building block, rather than an allocation to the side.”

With the vision of making the portfolios sensitive towards investor concerns like liquidity constraints, valuation timing, and complexity, Morningstar’s approach emphasizes research-driven allocations between liquid and illiquid assets, rigorous due diligence, ongoing oversight, and clear disclosure of liquidity and portfolio characteristics.

“Morningstar Public/Private Select Series is expected to be made available to financial advisors through leading wealth and technology platforms. All four organizations are fully committed to working as one to support shared clients, platforms, and advisors, ensuring comprehensive pre- and post-purchase support, reporting, and education,” the financial services firm concluded.

The post Morningstar, Wall Street biggies to develop public/private model portfolios appeared first on International Finance.

New faces at the helm

Michael T. Steen took charge as Atlas Air Worldwide’s CEO in June 2023, succeeding John W. Dietrich.

Spencer Schwartz, the Executive Vice President and Chief Financial Officer, will also retire on the same day. Steen has over 30 years of experience in aviation and logistics, including 16 years of executive leadership experience with Atlas. He has served as the Chief Commercial Officer since 2007 and is responsible for leading the company’s strategy and growing its market share. He has also been instrumental in developing and diversifying the company’s roster of blue-chip customers.

“Michael’s leadership experience, strong track record of innovation and success, and consistent focus on the company’s customer-centric mission make him the ideal candidate to lead Atlas forward in its next phase of growth,” says David Siegel, Chairman of the Board.

“On behalf of the Board, we look forward to working closely with Michael to execute Atlas’ strategic growth plans and continue building on the company’s strong commitment to safety, quality, and service excellence,” the official stated further.

Steen remarked, “I am thrilled by the opportunity to lead our incredible Atlas team as we design and execute our vision for growth and embark on new and exciting opportunities as a private company. This is a transformative time for Atlas, and the continued support from Apollo, J.F. Lehman, and Hill City will play an important role as we enhance our capabilities and deliver new solutions for our customers. I am grateful for John’s leadership and look forward to building on this strong foundation of global success. I also thank Spencer for his partnership and contributions throughout his time with the company.”

Dietrich added further, “I am immensely grateful for my time at Atlas over the last nearly 25 years and proud of all that our exceptional team has achieved together. Being part of Atlas’ growth and global expansion has been incredibly rewarding. I know that the company is well positioned to further accelerate its growth and will continue to deliver value for all stakeholders under Michael’s capable leadership.”

Recent takeover

A group of investors, including Apollo Global Management, have fully acquired Atlas Air Worldwide Holdings. Although FlightGlobal claims that the final deal had a value of about $2.9 billion, the deal was initially announced in 2022 August with an equity value of about £3 billion.

Atlas Air will become a privately held firm after the acquisition is finished, and its shares will no longer be traded on the Nasdaq. The company will keep using the name Atlas Air Worldwide.

The Apollo group in charge of the transaction included JF Lehman & Company and Hill City Capital’s investment affiliates. Shareholders of Atlas Air Worldwide will receive a cash payment of $102.50 per share under the deal.

The company, which has its headquarters in New York, declared about receiving all necessary clearances for the transaction in a stock exchange statement on March 14.

President and CEO John Dietrich and the present executive leadership team will continue to run Atlas.

According to Dietrich, the purchase “marks the beginning of an interesting new chapter for Atlas, and we are eager to start our partnership with Apollo, J.F. Lehman, and Hill City.”

“We are in an excellent position to fulfil our expansion goals while continuing to support the increasingly complicated global supply chain thanks to the assistance and resources of our investor partners. I want to thank the Atlas team, whose commitment to the customer’s needs allowed us to reach this milestone. I’m excited about this upcoming stage’s possibilities for our business and team,” Dietrich commented.

“We are excited to partner with the skilled Atlas team and build on the company’s strong foundation as a leader in the air freight industry,” said Chip Frazier, a chief investment officer of Hill City Capital, on behalf of the investor group, which included partners Antoine Munfakh and Jason Scheir of Apollo, Alex Harman of JF Lehman, and Antoine Munfakh and Jason Scheir of JF Lehman.

Although Atlas Air’s profits decreased in the fourth quarter of 2022-23, its revenues increased. If we want to locate a prospective multi-bagger, underlying trends might give indications. Typically, we’ll want to note a rising return on capital employed (ROCE) pattern and an expanding base of capital employed. This shows us that it’s a compounding machine, able to consistently reinvest its revenues into the firm and create better returns.

So when the International Finance Magazine examined Atlas Air Worldwide Holdings and its trend of ROCE, we liked what we observed.

Return of Capital

The critical question is whether Atlas Air is worth investing in and what its return on capital is like.

ROCE measures a company’s yearly pre-tax profit (its return) relative to the capital invested in the firm. Analysts use this formula to calculate it for Atlas Air Worldwide Holdings.

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) (Total Assets minus Current Liabilities) 0.10 = US$551 million (US$6.7 billion minus US$1.2 billion) (based on the trailing twelve months to December 2022).

Thus, Atlas Air Worldwide Holdings has a ROCE of 10.0%. In absolute terms, that’s a poor return, yet it’s about the logistics sector average of 12%.

Even if ROCE is still low in absolute terms, knowing it’s headed in the correct direction is encouraging. The figures demonstrate that in the previous five years, the returns earned on capital employed have climbed dramatically to 10.0%. The firm is making more per dollar of money invested, and in addition to that, 31% more wealth is being employed presently too.

The increasing returns on a growing quantity of cash are frequent among multi-baggers, and that’s why we’re impressed.

To sum it up, Atlas Air Worldwide Holdings has demonstrated it can reinvest in the business and create greater returns on the capital used, which is excellent. Since the stock has returned 74% to owners over the previous five years, investors are beginning to understand these developments. If Atlas Air Worldwide Holdings can keep these trends up, it might have a bright future in the stock market.

The owner of the last 747

Boeing and Atlas Air Worldwide recently celebrated the delivery of the last 747 to its freighter wing, putting to an end over a half-century of production.

Boeing personnel who planned and built the first 747, known as the ‘Incredibles,’ returned to be recognized at the Everett factory, where the voyage of the iconic jumbo jet began in 1967. The factory produced 1,574 aeroplanes over the length of the program.

The CEO of Boeing Commercial Airplanes, Stan Deal, acknowledged the hard work of Boprogram employees who contributed to creating an aeroplane that improved air travel and cargo efficiency.

He considered this day to be an important milestone in aviation history. The final 747-8 Freighter has been delivered to Atlas Air, the biggest 747 operator, where it will continue to inspire innovation and advancement in air cargo.

John Dietrich expressed his gratitude for Boeing’s shared dedication to safety, quality, innovation, and the environment. He also mentioned that Atlas Air has a long history of flying this iconic aircraft for their customers around the world. Atlas Air has covered the world, flying every fleet type of the 747, including the Dreamlifter, Boeing’s 747 Large Cargo Freighter, for the transfer of 787 Dreamliner parts.

As the first twin-aisle aeroplane and “jumbo jet,” the “Queen of the Skies” enabled airlines to connect people across huge distances and conduct non-stop trans-oceanic flights. Its development reinforced Boeing’s role as an industry leader in commercial aviation. The aeroplane’s main design, with its distinctive hump and seating on the upper deck, has charmed generations of passengers and operators alike. Boeing proceeded to improve on the cargo design with variants like the 747-400 in 1988 and the final 747-8 model that debuted in 2005; throughout all the generations, the jet has given unrivalled operating economics and come to the passenger and air freight sectors.

As a significant global aerospace corporation, Boeing develops, manufactures, and maintains commercial aeroplanes, defence goods, and space systems for customers in over 150 countries. As a top U.S. exporter, the company uses the talents of a worldwide supplier base to enhance economic opportunity, sustainability, and community impact.

Boeing’s diverse team is committed to innovating for the future, leading with sustainability, and developing a culture founded on the company’s core values of safety, quality, and integrity.

Atlas Air Worldwide Holdings, a leading provider of outsourced aircraft and aviation operating services, has undergone significant changes in its leadership and ownership.

Also, two other interesting developments have taken place. On one hand, English football giant and European champions Manchester City has reportedly chartered a Boeing 747-400 aircraft, operated by Atlas Air for the team’s pre-season trips to Japan, and South Korea. Also, the airline’s new chief commercial officer Richard Broekman became the venture’s new head of sustainability too.

Apollo Global Management, JF Lehman & Company, and the investment affiliates of Hill City Capital were among the investors who purchased Atlas Air Worldwide Holdings. The acquisition resulted in the company becoming privately held, with its shares no longer traded on the Nasdaq stock market. The addition gives Atlas Air the resources and support to pursue its expansion goals and continue serving the global supply chain. Despite decreased profits in the previous year’s fourth quarter, Atlas Air’s revenues have been increasing.

The company’s return on capital employed (ROCE) has also shown a positive trend over the past five years, with an increase of 10.0%. This indicates that Atlas Air has been able to reinvest its capital and generate better returns, positioning the company for continued growth and potential future success.

Furthermore, Atlas Air has been recognized as the recipient of the final Boeing 747, marking the end of over half a century of production for this iconic aircraft. Atlas Air has a long history of operating various fleet types of 747 and will continue to fly this legendary aircraft for its global customers.

With its new leadership, strong financial performance, and strategic partnerships, Atlas Air Worldwide Holdings is poised for growth and has the potential for a bright future in the airfreight industry.

The post Rejuvenated Atlas Air eyes expansion appeared first on International Finance.

Steve Huffman made the above observation while stating that the ongoing blackout of thousands of subreddits would eventually pass.

So what is going on in the social media company?

Knowing The Crisis In Detail

Reddit is community-driven, where people create forums called subreddits. Here, you can open your accounts with pseudo names and posts, and share engaging stuff like memes. These subreddits have categories like economy and politics, where suitable content can be posted. Based on audience engagement, Reddit’s front page shows the most popular posts from each default subreddits.

As per Finshots, there are over 130,000 such active communities, along with more than 400 million monthly active users.

Journalist Christine Lagorio-Chafkin, during an interview with the business journal ‘Knowledge at Wharton’, said that over 50,000 words are typed into Reddit forums every minute. The award-winning scribe also suggested that Reddit can very much be the information goldmine for generative AI tools like ChatGPT, with the chatbot getting most of its information from the subreddits’ conversations.

Coming back to the crisis, the blackout mentioned by Steve Huffman has seen over 7,000 subreddits, setting themselves private to protest Reddit’s API pricing changes.

Developers of third-party apps wouldn’t be able to afford Reddit’s updated API pricing. The developers for Apollo for Reddit and others announced the shutdown of their apps on June 30.

While some subreddits went private from June 12th to June 14th, some are planning not to become public until things change.

Let’s Talk About The Bone Of Contention

Reddit API policy changes will see its content being used to train artificial intelligence tools, and this content will be put under a paywall from now on.

Be it ChatGPT or Google Bard, generative AI tools are using Reddit sources to train their Large Language Models to provide credible responses to human prompts. While Reddit’s API will help tech companies to access and package useful data easily, the content aggregation company is now using the opportunity as a moneymaking one.

Reddit’s API, available since 2008, used to be open for developers to do activities like building moderation tools for subreddits, creating Reddit browsing clients, and making the content site a user-friendly one.

While the Steve Huffman-led venture will keep the API free for those building moderation tools or creating educational and research environments on Reddit, the company’s new terms will be applied for developers using the APIs in ways that require “broader usage rights”. Also, the new policy won’t grant automatic licenses for anyone needing to modify user content.

Training AI language models will now require interested parties “to enter into a separate agreement with Reddit.”

The ‘Data API Terms’ have also empowered the company to enforce limits on how many API requests can be made. The charges required for making the API requests will also be high for clients (developers), since the latter generally use OAuth tokens for Reddit user authentications.

Reddit is also planning for an Initial Public Offering in 2023. With generative AI being the talk of the town in 2023, analysts believe that the venture wants to build its financial health around its user-generated content, which will be used for training for LLMs.

Users and moderators here use third-party apps like ‘Apollo’ or ‘Rif is fun’ to access Reddit, as these tools reportedly provide better user experiences.

These apps were built using Reddit’s APIs. If they need to show Reddit’s content now on their portals, they will have to pay for it. Apollo has said the API fees alone would amount to a staggering yearly amount of USD 20 million, something which is not feasible for them.

This development has now riled up Reddit’s users. The community members and moderators are now showing solidarity with these third-party apps by taking the subreddits ‘dark’ or private.

The article titled ‘Is Reddit digging its own grave?’ by Finshots remarks, “Apparently, third-party Reddit apps don’t display advertisements. That means if most of Reddit’s users actually prefer these non-native apps, Reddit can’t go to advertisers and claim a higher user number. It will have to discount this. And advertisers will pay less.”

“So the only way to change that is to kill these third-party apps and get people on board the Reddit app. Then it can bombard them with ads and get advertisers to pay more as well,” the article stated further.

Reddit Sticking By Its Plans

“So the vast majority of the uses of the API — not [third-party apps like Apollo for Reddit] — the other 98% of them, make tools, bots, enhancements to Reddit. That’s what the API is for. It was never designed to support third-party apps. Let it exist. I should take the blame for that because I was the guy arguing for that for a long time,” CEO Steve Huffman told The Verge on the API issue.

The Reddit boss thinks that these third-party apps have made their own business models at the expense of his company. However, Apollo’s statement against the new API pricing suggests otherwise.

Reddit has now informed the subreddits moderators that it has plans to replace ‘resistant moderation teams’ to keep its spaces “open and accessible to users.”

A comment shared by r/Apple moderator @aaronp613 shows the social media platform citing its ‘Moderator Code of Conduct’ and warning its detractors that it has a duty to keep communities “relied upon by thousands or even millions of users” operational.

“Mods who do not agree to reopen subreddits that have gone private will be removed,” the company stated, while CEO Steve Huffman stated that the 48-hour blackouts hardly caused “any significant revenue impact so far”.

The Final Verdict

Reddit’s goal is to become a public company, by getting listed on the stock markets. The content aggregation company is eyeing a USD 15 billion valuation. So, the new API policy is part of Steve Huffman’s bigger monetisation goals.

However, analysts believe that these plans may end up killing Reddit, as the third-party apps, which Steve Huffman accused of building their ‘own businesses at the expense of Reddit’, have actually been the company’s support system.

Experts now fear a scenario where community members will start ditching the platform and in the worst case, may end up joining an alternative one (if it pops up).

The post IF Insights: Has Reddit pressed the ‘self-destruct button’ with its API pricing? appeared first on International Finance.