Did Apple Win? It's Complicated

Joshua Franklin in New York and Laurence Fletcher in London SEPTEMBER 8 2021 51 Print this page Hedge funds are elbowing their way into Silicon Valley at an unprecedented rate with a record-smashing $153bn worth of investments in private companies in the first six months of 2021. A report from Goldman Sachs has found that hedge funds have done 770 deals so far this year, already beating the record number set in the whole of 2020, when 753 deals reached a total of $96bn. Just under three-quarters of this year’s agreements were “venture” bets on companies in their infancy. The data from Goldman Sachs Prime Services highlight how hedge funds, typically known for investments in publicly traded assets, have been drawn to private markets in an effort to fire up largely lacklustre returns. It also shows how private equity and venture capital have shot into mainstream finance. The asset class has soared to more than $7tn in value and is expected to double again by 2025, while the number of US public companies has roughly halved since 1996. “What has attracted hedge funds is predominantly a function of the opportunity set,” said Freddie Parker, co-head of Goldman’s prime brokerage insight and analytics team. The bets are concentrated, but they leave a big impact. Hedge funds participated in just 4 per cent of deals in the first six months of 2021 but provided just over a quarter of all capital put into private companies, according to Goldman. 

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Fearful of the growing influence of entrepreneurs and entertainers, the Chinese leader now demands conformity across all of society

Since the 100th anniversary of the Chinese Communist party (CCP) on 1 July, political edicts have been flowing out of Beijing. President Xi Jinping declared that China’s economy would now work to provide “common prosperity”. Social media has read this as a rhetorical assault on the country’s billionaires, who have become used to flaunting their wealth. There has been a well-publicised crackdown on entrepreneurs in the technology sector, in part because of the CCP’s increasing concern that figures such as Alibaba’s founder, Jack Ma, were becoming more prominent than the party itself. New anti-trust legislation may well break up some of the big companies that have dominated the sphere, creating more, smaller companies that the CCP hopes will power innovation through increased competition and also be easier to control politically.

China’s ultra-rich are scrambling to make high-profile philanthropic donations to shore up their reputations and avoid tax inspections, not least as China’s equivalent of HMRC has powers to arrest suspected evaders and hold them incommunicado for months. Technology billionaires are one target, but movie stars are another. Actress Zheng Shuang has been told she faces a $46m (£33m) bill for unpaid taxes and almost all the millions of online mentions of her fellow performer Vicki Zhao Wei have been wiped from China’s internet.

Alibaba has pledged to give away Rmb100bn ($15.5bn), the equivalent of roughly two-thirds of its net income last year, to projects that support president Xi Jinping’s call for more “common prosperity” as it seeks to defuse Beijing’s scrutiny of the tech sector. The online shopping giant confirmed that it had matched the pledge made by its biggest rival Tencent, which said last month it would double the sum it is donating to social responsibility programmes to Rmb100bn. Pinduoduo, another fast-rising online shopping company, has pledged to give Rmb10bn to farmers from its second-quarter and future profits. Alibaba will spread the money over five years to a number of projects that align with Beijing’s policy goals, including initiatives to bolster digital and medical services in rural areas, the state-backed Zhejiang Daily newspaper reported. Beijing has in recent weeks signaled a broad shift towards “common prosperity”, interpreted by experts as encompassing not only wealth redistribution but also improved rights of workers and consumers. Meanwhile, the pressure on the tech sector increased on Thursday as regulators set the country’s biggest ride-hailing companies, including Didi and Meituan a four-month deadline to “rectify” their treatment of their workers and customers.