Oaktree’s Italian football foray

One scoop to start: The consortium behind a planned $23bn ports deal, including representatives of the Swiss-Italian shipping company MSC and US asset manager BlackRock, has held talks with China’s competition regulator, as it seeks to navigate tensions between Washington and Beijing over the Panama Canal.

And one research paper: Bayes Business School and the Independent Investment Management Initiative delve into the world of independent asset management boutiques. The paper looks at both the competitive advantage that boutiques believe they have over larger fund houses — and some of the impediments they face.

In today’s newsletter:

• The off-field challenges for Inter Milan’s owner Oaktree

• Japan’s ambitions to become an “asset management nation”

• Dollar’s correlation with Treasury yields breaks down

Inside Oaktree’s turnaround plan for Inter Milan

At the Allianz Arena in Munich on Saturday evening, Qatar-owned Paris Saint-Germain won the Champions League for the first time, cruising to victory over an ageing Inter Milan side. The 5-0 scoreline was the widest margin in any Champions League final.

Overseeing the rebuilding of an ageing squad, as well as fixing the club’s finances and commercial operations, are just some of the challenges facing Inter’s new-ish owner, Oaktree Capital, as we explore in this deep dive.

The $203bn US distressed debt investor took control of Inter a year ago after its previous owner, Chinese retailer Suning, failed to repay a €400mn loan secured against its controlling stake in the club, which was valued at about €1bn at the time of the ownership change. 

“Oaktree did a smart thing — they seized it on the cheap,” said the owner of a rival European football club.

Following the investment industry’s typical playbook after acquiring a business, Oaktree started with a 100-day plan. 

Twelve months later it is behind schedule, according to one person familiar with the situation, who said that while it had found that things in Italy took longer than it had anticipated, its vision of how to strengthen Inter’s financial and operational stability remained unchanged. 

Oaktree had sought to change “people and attitudes”, the person said. The club last June unveiled a new board that included several representatives of the firm and promoted former director Giuseppe Marotta to president and chief executive. 

The executive team has tried to focus on maximising revenues by renegotiating contracts with existing sponsors, finding new commercial partners and identifying growth opportunities. 

Looking further ahead, Oaktree’s most challenging task — and one crucial to the club’s finances — is to build a new stadium to replace the increasingly dilapidated San Siro, home to both Inter and AC Milan.

Demolishing the iconic venue is fraught with difficulties, from planning and financing to local politics. “Sometimes it felt like talking about knocking down San Siro was like talking about knocking down the Colosseum,” said the person familiar with the situation.

Read the full story here

Japan’s Dai-ichi Life to buy 15% stake in M&G 

The Japanese government has been vocal about its ambition to transform Japan into an “asset management nation”. 

With the return of inflation and a rapidly ageing population, it has been driving asset managers and insurers to build up their expertise and deepen international ties. The idea is both to give them access to new markets and to bring knowledge back home.

This has heralded a spate of tie-ups between Japanese financial services groups and US and European players — a trend that appears to be gathering momentum. Often the form that they are taking is minority stakes or strategic partnerships, rather than (the more risky) all-out mergers and acquisitions.

The latest example? Dai-ichi Life, one of Japan’s largest life insurers, plans to take a 15 per cent stake in UK asset manager M&G, the two firms announced on Friday.

This would make Dai-ichi Life the largest shareholder in the FTSE 100 company, which in turn would become the Japanese group’s preferred asset management partner in Europe as part of the tie-up. 

“This partnership is about growth, distribution and product development,” M&G chief executive Andrea Rossi told the Financial Times. “It accelerates our growth ambitions internationally and in private markets, and gives us distribution access to Japan and Asia where we want to expand.” 

Tetsuya Kikuta, Dai-ichi’s chief executive, said the partnership would act as a “spearhead to develop our presence across Europe and the UK, accelerating our strategy to become a global top-tier insurance group”.

The deal follows a flurry of activity involving Japanese companies on both sides of the Atlantic.

Nomura’s April deal to buy up Macquarie’s US and European public asset management business for $1.8bn was its biggest international expansion since Lehman Brothers. It followed life insurer Meiji Yasuda, which said in February that it planned to purchase about 5 per cent of Legal & General. 

Meanwhile, last year Mizuho Financial Group bought a minority stake in credit asset manager Golub Capital, European alternatives player Tikehau Capital struck a strategic partnership with Japan’s Nikko Asset Management, and Dai-ichi Life also bought a minority stake in Los Angeles-based alternative investment manager Canyon Partners.

Which firms do you think will strike the next deals? Email me: [email protected]

Chart of the week

The close relationship between US government bond yields and the dollar has broken down as investors cool on American assets in response to President Donald Trump’s volatile policymaking, writes Emily Herbert in London.

Government borrowing costs and the value of the currency have tended to move in step with each other in recent years, with higher yields typically signalling a strong economy and attracting inflows of foreign capital.

But since Trump’s “reciprocal tariffs” were announced in April, the 10-year yield has risen from 4.16 per cent to 4.42 per cent, while the dollar has dropped 4.7 per cent against a basket of currencies. This month, the correlation between the two has fallen to its lowest level in nearly three years.

“Under normal circumstances, [higher yields] are a sign of the US economy performing strongly. That’s attractive for capital inflows into the US,” said Shahab Jalinoos, head of G10 forex strategy at UBS.

But “if the yields are going up because US debt is more risky, because of fiscal concerns and policy uncertainty, at the same time the dollar can weaken”, he said, a pattern that was “more frequently seen in emerging markets”.

The president’s “big, beautiful” tax bill, along with the recent Moody’s downgrade of the US’s credit rating, has brought the sustainability of the deficit into sharper focus for investors and weighed on bond prices.

Analysis by Torsten Sløk, chief economist at Apollo, suggested that US government credit default swap spreads — which reflect the cost of protecting a loan against default — are trading at levels similar to Greece and Italy. Trump’s attacks on Federal Reserve chair Jay Powell have also spooked the market.

“The strength of the US dollar comes partly from its institutional integrity: the rule of law, independence of central banking and policy that’s predictable,” said Michael de Pass, global head of rates trading at Citadel Securities.

“The last three months have called that into question,” he added.

Five unmissable stories this week

Jamie Dimon has warned that the US bond market will “crack” under the weight of the country’s rising debt as the JPMorgan Chase boss called on Donald Trump’s administration to place America on a more sustainable trajectory.

The US has opened the door to Americans purchasing crypto tokens in their retirement accounts, underscoring how Donald Trump is taking a far more tolerant approach to digital assets than his predecessor Joe Biden.

Dan Olley, the chief executive of Hargreaves Lansdown, is leaving the UK’s largest investment site after less than two years at the helm, following its £5.4bn private equity takeover. He will hand the reins on an interim basis to Richard Flint.

Rachel Reeves has confirmed she will create a “backstop” power to force large pension funds to back British assets, as she vowed to unleash more than £50bn of investment in domestic infrastructure, housing and fast-growing businesses.

Disappointing returns from private equity investments meant Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan and Caisse de dépôt et placement du Québec all underperformed last year. 

And finally

A curated selection from the extraordinary collection of art dealer Daniel Katz goes under the hammer at Sotheby’s next week, spanning from Renaissance masterpieces to Modern British art. This 2021 interview with Katz tells the story of how he morphed from an 18-year-old who “didn’t even know what a work of art was” to a legendary figure in the art world.