Hedge-fund investors have moved toward 'ultra customisation'; Nasdaq's CEO just threw her support behind the cloud

Dear Readers,

The bad news didn’t stop this week for the retail industry. Charlotte Russe, Family Dollar, Abercrombie & Fitch, and Chico’s all announced more than 1,100 store closings over the course of 24 hours.

The news comes one week after JCPenney,Gap,Victoria’s Secret, and Tesla announced that they would close more than 300 stores. That brings the total number of planned closures announced this year to more than 5,300.

If you’re new to the Wall Street Insider newsletter, you can sign up here.

And if you’re an existing Prime subscriber, please take our reader survey here.

Even more mind-boggling to me was news earlier in March that Dollar Tree would close hundreds of its Family Dollar stores. As a former retail reporter, I was always told that there were two types of retailers that were able to thrive in virtually any economic condition: the upper-high end like Hermes and Cartier and the low-end like Walmart. It was the brands in the middle (Gap, JCPenney) that were most at risk.

Family Dollar’s store closings completely turns this premise on its head. With their rock-bottom prices (most of its items are priced under $US10) and smaller store footprints, dollar stores have largely been considered by analysts to be defensible against threats from online retailers. While dollar stores are still good business (and it’s worth pointing out that Family Dollar has a host of other business-specific problems), they’re not completely immune from larger issues hurting the retail industry today.

As for other well-known brands, they’re finally making deep cuts and closing flagship stores after years of smaller store closures. Gap’s Fifth Avenue location and former flagship in New York closed its doors in December, while Calvin Klein plans to shutter its Madison Avenue flagship later this year. Lord and Taylor also closed its Fifth Avenue flagship in January after more than 100 years in business. As BI’s retail reporter Mary Hanbury told me: “These brands are wising up to the fact that they need to be more aggressive now. They struggled through the past two years and are now taking decisive action.”

While Amazon gets most of the blame for destroying the retail industry, the fact is that there are a host of other factors that are just as impactful. From the 1990s through the early 2000s, retailers grew rapidly and somewhat recklessly. The US is now the most over-stored country (roughly 52 square feet of retail space per person compared to 19 square feet of retail space in the UK).

There’s also changing retail habits. As a whole, shoppers are more price-sensitive, less brand loyal and are spending less on apparel and accessories.

Data suggests that the retail apocalypse is still in the early innings, but it may not be all doom and gloom. As poorly-run brands die off, the retail industry can learn what’s working – and what’s not – and become even stronger. And ultimately the brands that will win are those whose offerings can’t be replicated online. As Natalie Bruss, a partner at retail investment firm Fifth Wall Ventures, told Axios:The stores that will do well are the ones that know how to get you to leave your house.”

To read many of the stories below, you can subscribe to Prime (or email me at [email protected] for a free trial). As always, please reach out with any comments, tips, or feedback.

Thanks for reading and have a great weekend. Olivia

Adena FriedmanHollis Johnson/Business Insider

Nasdaq’s CEO just threw her support behind the cloud and said she hopes to eventually move the exchange there

New Jersey could soon lose some of its most notorious residents. The Garden State houses data centres where most US equity trading takes place, leading Wall Street firms to buy up space and implement cutting-edge technology in the region.

But Nasdaq CEO Adena Friedman said that moving exchanges out of these facilities and into the cloud is a key part of how she sees the financial industry evolving over the next decade.

Friedman’s vision is part of a larger trend she sees of moving the technology that powers the financial markets into the cloud.

Wall Street has spent years becoming more comfortable with cloud computing capabilities, or using remote servers that can increase processing power at will as opposed to buying and physically maintaining hardware. More recently, financial firms have begun using public clouds – managed by technology giants like Amazon, Google, or Microsoft – which were long considered too risky by some in the industry.


A 5G-themed ETF is the latest to try and tap into a hot trend, even as scores of thematic funds ‘flame out’

5G – the next generation of wireless technology – is set to supercharge smartphones and underpin innovations, including self-driving cars.

While the nascent technology won’t be widely used for years, Defiance, a startup exchange traded fund provider, is betting that the businesses related to 5G will take off as the technology evolves. On Tuesday, the New York-based company launched the Defiance Next Gen Connectivity ETF, which trades on the New York Stock Exchange as FIVG, the first ETF to invest specifically in 5G.

Managers are launching more thematic ETFs, like FIVG, partly as a way to make up revenue from cheaper market funds that track broad parts of the market.

But despite their popularity, Ben Johnson, Morningstar’s director of fund research, cautioned that thematic funds sometimes “flame out in a catastrophic fashion.” Many fund sponsors pick a theme relating to headlines – cybersecurity when major companies get hacked, for example – and launch funds that fail to gather significant money.


Hedge-fund investors have moved toward ‘ultra customisation,’ and it’s changing how funds raise money

It’s the era of personalisation, in which anyone can create their own soda or bomber jacket, as well as their own shampoo or running shoe – and hedge funds have not been immune.

Alternative-asset managers increasingly are being asked to create specialty products for their largest investors. More than a quarter of new money that flowed into the $US3.2 trillion hedge-fund industry last year went into customised strategies offered through a separately managed account (SMA), or fund-of-one, according to research from Jefferies. In 2016, only 14% of hedge-fund investors said they would be interested in a hedge fund offered in a SMA structure, according to a FIS report.

It’s another byproduct of the hedge-fund industry’s biggest investors – institutional capital providers such as pensions, endowments, and foundations – warping the industry to fit their wants and needs, instead of kowtowing to hedge-fund managers, who historically have demanded high fees and little supervision.


We talked to Morgan Stanley’s commodities chief about her outlook for hiring, automation, and how plastics is a new hot business

Nancy King has been running Morgan Stanley’s commodities business in one form or another for the past four years. During that time, the investment bank slashed the size of the business and led many long time employees to the door.

More recently, the business has been growing again. Business Insider caught up with King recently at the firm’s Times Square headquarters and the mood was upbeat – Morgan Stanley has begun to look for growth opportunities and King professed satisfaction with the shape of the business. New growth markets include plastics and paper pulp markets, shale pipeline management and renewable power trading, among others.

King also took time to address the dearth of senior women on Wall Street, how she approaches hiring and how the firm might respond to a loosening of the Volcker Rule restrictions on proprietary trading.

Here’s the Q&A of the meeting.

We just got an inside look at the dramatic 10 weeks that sealed a cutting-edge, $US4.8 billion biotech acquisition

It took 10 weeks for Swiss pharma giant Roche to agree to a nearly $US5 billion acquisition of the biotech Spark Therapeutics. Most of the action, though, took place on one dramatic, eventful Friday in late February.

Spark played Roche off against another, very interested buyer that day, escalating the size of the deal as the day went on.

These details and more are revealed in a new Spark financial filing about the transaction. Though the other bidders for Spark aren’t disclosed, Jefferies analyst Michael Yee has suggested they may have included Pfizer and Novartis, which have partnered with Spark on certain drug programs.


Nasdaq quietly changed its rules in a move that pits it against rival NYSE in the war to lure top tech listings

Nasdaq quietly tweaked a rule last month that will allow it to compete head-on with rival NYSE for direct listings of splashy tech companies.

While the New York-based exchange group has executed a handful of direct listing since 2014, it sought a rule change with the Securities and Exchange Commission to provide more clarity around the process. The filing also served another purpose, according to Jay Heller, Nasdaq’s head of capital markets and IPO execution: To remind the Street Nasdaq is open for business when it comes to direct listings.

The move comes as unicorn startups like AirBnB and Slack are rumoured to be considering a direct listing. Streaming music company Spotify also went public via a direct listing last year on the New York Stock Exchange.


Quote of the week:

“If Jesus returns to the Earth before May, I am going to try and book him for SALT.” – Anthony Scaramucci on plans for his upcoming hedge fund conference.

Wall Street move of the week:

Carlson Capital is bleeding assets in its stock-picking fund following the departure of one of its portfolio managers

In markets:

In tech news:

Other good stories from around the newsroom:

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.