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New Blockchain Protocol to Address Pensions Crisis

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New Blockchain Protocol to Address Pensions Crisis

Akropolis Plans to Use Blockchain Technology to Re-Design the Failing Pensions Infrastructure and Safeguard the Future of Millions of People

Berlin, Germany: A technology startup Akropolis, founded by ex-Lehman Brothers Anastasia Andrianova, has today announced it is building a new smart contract based pensions infrastructure it believes will be able to address many issues that have led to the current global pensions crisis.

According to the World Economic Forum, the retirement savings gap around the world will grow from $70 trillion in 2015 to $400 trillion by 2050. This means workers who have been contributing to savings pots for decades are trapped in schemes which may not deliver their funds in full, or even at all. Meanwhile, younger generations are facing a future with no pension safety net, unless they start making provisions for themselves now.

Akropolis — Greek for a citadel or fortress — says its new protocol is designed to pre-empt and render these issues impossible for the future generations by acting as a decentralized marketplace and data exchange with a modular smart-contract platform. The open nature of the protocol promises transparency built in at the protocol level. No single entity can be in control of the ledger and once data is appended, it can’t be erased or edited. The risk of fund seizures, hidden costs, mis-selling and surprise payouts is nullified.

Control of pensions is given back to the individual users who can be directly connected with fund managers and financial institutions —bringing clarity, and cutting out the middlemen that siphon value out of investments.

Meanwhile, institutional participants are incentivised for accountability and transparency. Participants can rate funds and organisations, which are accurately and immutably stored on the blockchain for everyone to see – allowing others to make better-informed choices when it comes to picking a pension plan. The ledger also guarantees pension portability. The friction and hassle of moving from one employer to another — a common occurrence in the modern mobile economy — is no longer an issue as funds can easily be tracked.

CEO Anastasia O. Andrianova said:  “We’re entering a new age in which blockchain technology will disrupt existing power structures, and empower individuals. The pensions industry is next. I believe transparent smart-contract-based pension fund infrastructures will dramatically change the way the world thinks about saving and investing. We’re working with industry experts to build a platform that supports the pension ecosystem whilst facilitating the transition to a more robust retirement savings model.”

“Together, our pensions community can tackle the pensions crisis and ensure a secure future for many,” she continued.

User-friendly mobile apps and tools will be at the heart of the Akropolis solution. A portable digital wallet includes individuals’ historical pensions contributions, private savings and pension data — as well as records of corporate contributors’ formula-based contributions (meaning a modern mobile worker no longer needs to chase historical employee contributions across various jurisdictions).

The core Acropolis platform is initially being developed for a single jurisdiction in the private pensions and savings market space. But in due course Akropolis will develop country-specific add-ons.

Built by a team with deep experience in pensions, finance law, and blockchain infrastructure, the ecosystem will operate through a native token to create a system of incentives, encouraging good behaviour and to support elements of self governance in the development of a free and open industry wide protocol.

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GameStop: How events unfolded and the next chapter

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GameStop: How events unfolded and the next chapter 1

By David Morrison, Senior Market Analyst at Trade Nation,

GameStop is a bricks and mortar video gaming retailer which launched in 1984. It has stores in malls around the US and, for a time, was very successful. But as shopping habits changed, it faileda not only to anticipate these changes, but also to subsequently alter course and build a strong online presence. That’s the main reason that several Wall Street hedge funds decided to target the company by borrowing shares in GameStop and then selling them short, betting that the company would eventually go out of business. This would mean stocks plummeting to zero, and as these funds were selling between about $10 and $20 per share, they would make a decent profit. This ploy is nothing new, particularly since the big shift in retailing from bricks and mortar to e-commerce. But the search for vulnerable businesses accelerated after lockdowns were introduced last year due to the coronavirus pandemic.

But there were Wall Street players and other traders prepared to take the other side of this bet having studied the company’s accounts. In the twelve months between August 2019 and August 2020, the share price of GameStop hovered between $3 and $6. They thought this was irresistibly cheap given the company’s assets, so buyers came in and the stock broke out of this range to spend the next few months butting up against resistance around $20, where most of the short-selling took place. And this is where the GameStop saga started to unfold.

Reddit’s WallStreetBets steps in

Those on the bullish side believed that even at $20, shares in GameStop were undervalued. They were convinced the company was worth three times as much. One of these traders was a prominent contributor to the ‘wallstreetbets’ community named Keith Gill, also known as ‘Roaring Kitty’. He has lots of followers interested in trying out his investment hypotheses. Not only did Mr Gill and others see value in GameStop, but they also noticed the large ‘short interest’ in the stock by Wall Street firms. There was little doubt that GameStop was vulnerable thanks to its lacklustre online presence paired with the ravages inflicted by the political reaction to the coronavirus pandemic. But short sellers also have weaknesses to exploit. After all, a stock can only fall to zero, while in theory there’s no limit to its upside. Incredible as it sounds, the overall short position on GameStop was larger than the shares in existence thanks to derivative trades. That meant further instability. Should a pack of determined buyers get together to take advantage of this fact, all hell could break loose with the right catalyst. And that’s exactly what happened.

The short squeeze begins — then Robinhood gets involved

David Morrison

David Morrison

In early January, GameStop appointed three new executives to its board. One of these executives was Ryan Cohen, the founder and former CEO of e-commerce business Chewy Inc. The other two were colleagues of his. This raised hopes that GameStop was serious in addressing weaknesses in its online offering. Once the potential impact of the news filtered through, the stock jumped from around $20 to just below $40 in a single day. But it didn’t stop there. A little over two weeks later, following a cryptic tweet from Elon Musk, the stock soared to $483 before crashing back down to little more than $100 on the same day. Unusually, most of the speculators buying the stock were the retail crowd, with many on the ‘wallstreetbets’ subreddit, and dealing on no-commission trading apps like Robinhood. While Wall Street hedge funds, notably Melvin Capital and Citron Capital, were on the other side of the trade.

Then the followers and contributors on wallstreetbets targeted other stocks with a large short interest, including AMC Entertainment, Blackberry, Nokia, and Bed Bath & Beyond. Then it was silver and pot stocks. But it didn’t take long before conflict broke out. First there were accusations that Reddit had enabled market manipulation to drive GameStop higher and bust the hedge funds. Then without warning, Robinhood and several other retail-focused brokers set trading restrictions on GameStop and many other shorted stocks. Retail traders could sell and close existing positions but were unable to open new ones. This caused outrage, particularly as Wall Street firms were able to deal unhindered. It also meant the end of the short squeeze as buying momentum in GameStop had been quashed.

Regulators were called upon to take action

Regulators such as the Securities and Exchange Commission (SEC) and the Commodities and Futures Trading Commission (CFTC) were called on to review events around the GameStop short squeeze. There was even talk of the US Federal Reserve and the US Treasury getting involved. It’s possible there will be an investigation of some sorts. But what would such an investigation focus on? Accusations of market manipulation? The involvement of social media in communicating trading ideas? Short-selling? Retail involvement in stock markets? These are all possibilities. But as far as the US House Financial Services Committee is concerned, there are far more problematic issues and Wall Street would probably prefer to see these swept under the carpet.

The first hearing and what it tells us

On Thursday 18th January, the committee convened a hearing. As witnesses they called:

  • Robinhood CEO, Vlad Tenev.
  • Ken Griffin, founder of Citadel Securities, through which Robinhood processes its customers’ orders.
  • Gabe Plotkin, founder of hedge fund Melvin Capital, one of the big losers from the short-squeeze and also the beneficiary of a rescue bailout from Citadel.
  • Jennifer Schulp, expert in financial regulation at the Cato Institute.
  • Steve Huffman, the CEO of Reddit.
  • Keith Gill, aka ‘Roaring Kitty’.

It soon became apparent that Congress wasn’t interested in Reddit or Mr Gill, who each provided an impressive five minutes of testimony stating their positions clearly and confidently. They both received backing from Ms Schulp, who insisted that markets had been orderly overall so there was no need whatsoever to consider retail traders an issue. Instead, it was the Wall Street professionals who were the targets. Their testimony was poor and they sounded evasive. Indeed, Mr Tenev received quite a roasting from just about everyone and the cosy relationship between Robinhood and Citadel was highlighted, as was Robinhood’s decision to restrict its customers’ trading.

So, three cheers for the House Financial Services Committee, and well-done Mr Huffman and Ms Schulp. But we should also offer a big round of applause and a box of catnip for Roaring Kitty. This may not be the end of the enquiry but it certainly sets the parameters. Any new investigation will have to focus on Wall Street and how it runs its affairs. Then we’ll see if Vlad’s Robinhood turns out to be the scapegoat once again.

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Bonding with equities

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Bonding with equities 2

By Rupert Thompson, Chief Investment Officer at Kingswood

Global equities slipped back last week, retreating 1.5% in sterling terms, and have also opened lower this morning. These declines, however, follow two weeks of strong gains and are nothing noteworthy.

Of rather more note, last Friday was exactly one year on from when equity markets hit their pre-Covid high. Remarkably, global equities are now up 10.5% in sterling terms since then. China is the stand-out winner with a gain of 36.2% while the US is up 12.1% and the UK trails behind with a loss of 6.7%.

But it was government bonds which were the main focus of attention last week. 10-year yields rose 0.15%- 0.20% in the UK and US to 0.73% and 1.38% respectively, and are now up some 0.4%-0.5% since the start of the year. Gilts have now lost 5.9% year-to-date, highlighting that UK government bonds are no longer the risk-free investment they once were – which is why we only have a small allocation in our portfolios.

The rise in the US has been driven by the prospect of another large fiscal stimulus over coming weeks. John Doe could well receive another $1400 cheque from the US Treasury, hard on the heels of the $600 they received only a few weeks ago. The latter incidentally was no doubt behind the unexpected 5.3% surge in retail sales in January.

In the UK, the January retail sales numbers also contained a big surprise – but of the negative variety. They plunged 8.2% as the lockdown took its toll. Moreover, no big give-aways are likely in the forthcoming Budget with any largesse limited to a grudging extension of the furlough scheme for a little while longer.

Instead, the spike higher in UK yields has been driven by the rapid vaccine roll-out and an end to speculation that rates could be pushed into negative territory. For all the talk from the Government at the moment of being driven by ‘data rather than dates’ and of only a cautious exit from lockdown, the markets are pencilling in a rapid rebound in the economy starting in the second quarter.

The current high level of equity valuations has been justified by the exceptionally low level of interest rates. The upward trend in bond yields naturally therefore raises the question of whether this increase poses a threat to equity markets. While far from complacent on this front, our view is that yields will have to increase significantly further than is likely before they pose much of a threat.

The rise in yields is being driven primarily by expectations of stronger growth and inflation, which are good news for corporate earnings and supportive for equities. It would be more problematic if it was down to worries that central banks were poised to start unwinding the massive monetary stimulus. But, as Fed Chair Powell will no doubt reiterate in his testimony to Congress this week, the Fed plans to remain ‘patiently accommodative’ to support the struggling labour market.

With no reduction in stimulus likely this year anywhere (possibly other than China), any further rise in yields should be limited. Back in 2013, in the so-called taper tantrum, US bond yields surged 1% in a matter of months on fears the Fed would start scaling back its QE. But even then, this caused no more than a brief correction and failed to halt the upward march of equities.

While bonds were the main focus last week, the pound did its best to grab the attention of UK investors, if not non-existent UK holiday makers. It hit $1.40 for the first time in just under three years, up from a low of $1.15 last spring, buoyed by the same factors driving up gilt yields.

Sterling’s gains, however, have been much more pronounced against a weak dollar than other currencies. Overall, the pound is only back to the top end of the trading range seen since its post-Brexit referendum slide in 2016. If as we expect, foreign investors start to appreciate the cheapness of UK equities, such inflows could drive the pound somewhat higher – hopefully in time for a resumption of foreign holidays later this year!

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British fund industry warns companies on ethnic diversity

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British fund industry warns companies on ethnic diversity 3

By Simon Jessop

LONDON (Reuters) – Britain’s investment industry trade body has warned companies they must show progress on boardroom ethnic diversity or risk pushback at their 2021 annual general meetings.

The call from the Investment Association, whose members manage 7.7 trillion pounds ($9.88 trillion) and own around a third of British companies, aims to spur greater action to meet the targets set by Britain’s Parker Review into the issue.

Under the targets, FTSE 100 companies would aim to have at least one ethnic minority board member by 2021, with every FTSE 250 company following by 2024.

Those that fail to disclose either the ethnic make-up of their board or a plan to have at least one ethnic minority member by 2021 would be flagged as a company of concern by the IA’s corporate governance team, it said in a statement.

“The UK’s boardrooms need to reflect the diversity of modern-day Britain,” said Andrew Ninian, Director for Stewardship and Corporate Governance at the Investment Association.

“With three-quarters of FTSE 100 companies failing to report the ethnic make-up of their boards in last year’s AGM season, investors are now calling on companies to take decisive action to meet the Parker Review targets.”

While the IA does not advise investors on how to vote, IVIS, the IA’s Institutional Voting Information Service, instead flags topics of concern at companies to the pension schemes and others that pay for the service.

A ‘Blue Top’ assessment indicates there are no areas of major concern; an ‘Amber Top’ highlights a significant issue to be considered; and a ‘Red Top’ flags a topic of major concern. Breaches of the ethnic guidelines will face an ‘Amber Top’.

(Reporting by Simon Jessop; Editing by Giles Elgood)

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