—— Family Offices Embrace Direct Investment Trend; Citadel to Build 411m Manhattan HQ; Morgan Stanley Veteran Resigns After 28 Years; Goldman to Lay Off 3,200 This Week; KKR Takes Over Meta’s Hudson Yards Space; Three Biopharma Firms Acquired; Lululemon Profit Margin Unexpectedly Falls
1. Family Offices Embrace Direct Investment Trend
According to a new report by law firm Dentons, 63% of 188 surveyed family offices are bypassing traditional private equity funds and investing directly in promising companies.
Direct investing has become increasingly popular in recent years, primarily because it avoids private equity management fees. Many family offices now form syndicates to directly invest in companies.
Edward Marshall, Global Head of Dentons’ family office and high-net-worth practice, said that the most attractive long-term sectors include healthcare and disruptive technologies such as AI.
Over the past two decades, the number of family offices has surged, fueled by wealth from tech, finance, and real estate. These offices are a major investment vehicle for wealthy families and are lightly regulated.
The report also found that, on average, family offices allocate 37% of their assets to professional private equity funds, totaling around $19 million per office.
65% of family offices believe healthcare and disruptive tech are strong long-term investment themes.
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2. Citadel to Build 411m Manhattan HQ
Hedge fund giant Citadel, founded by Ken Griffin, plans to develop a 411-meter-tall, 51-story office tower in Manhattan.
The preliminary proposal names star architect Norman Foster’s firm Foster + Partners as the project’s designer. The skyscraper is expected to be completed by 2032.
Once finished, Citadel’s tower will be comparable in height to JPMorgan Chase’s new HQ and Manhattan’s iconic One Vanderbilt building.
The announcement is a positive signal for New York’s real estate sector, which has been battered by the pandemic, and affirms that top financial firms remain committed to NYC.
Last year, Citadel’s market-making unit generated $7.5 billion in profits, while its flagship hedge fund posted a 38% return.
Citadel’s skyscraper will rival JPMorgan’s new headquarters in height.
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3. Morgan Stanley Veteran Resigns After 28 Years
Morgan Stanley CEO James Gorman announced in a company-wide memo that COO Jon Pruzan will leave at the end of January to pursue other opportunities.
During his 28-year tenure, Pruzan also served six years as CFO and was once considered a top candidate to succeed Gorman as CEO.
Gorman noted that Pruzan had long been a trusted advisor and played a key role in major decisions, including the firm’s acquisitions of E*Trade and Eaton Vance.
With Pruzan’s departure, the list of likely successors to CEO James Gorman narrows.
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4. Goldman to Lay Off 3,200 This Week
Sources revealed that Goldman Sachs will begin a large-scale cost review this week and cut around 3,200 jobs, with more than one-third from its core trading and investment banking divisions.
Goldman is also expected to report losses for its credit card and installment loan business, with a pretax shortfall possibly exceeding $2 billion.
In recent years, the firm significantly over-hired in non-revenue-generating roles. Since David Solomon became CEO in late 2018, headcount has grown by 38%.
During the pandemic, Goldman refrained from firing underperformers—this round of cuts will include employees who should have been let go earlier.
To protect livelihoods during the pandemic, Goldman delayed firing underperforming employees.
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5. KKR Takes Over Meta’s Hudson Yards Space
According to sources, private equity giant KKR has expanded its lease at 30 Hudson Yards by 200,000 square feet.
Meta, the parent of Facebook, recently opted not to renew its lease at the same location.
KKR had already leased the tower’s top 10 floors—300,000 square feet in total—and also invested $500 million to acquire a major stake in the building’s observation deck.
With Meta exiting, other finance and legal firms now have the opportunity to occupy this high-end Manhattan district.
KKR, BlackRock, and Amazon are among the prominent firms headquartered in Hudson Yards.
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6. Three Biopharma Firms Acquired
Today, shares of several small biotech firms surged after being acquired by larger pharmaceutical companies.
AstraZeneca announced an $1.8 billion acquisition of CinCor Pharma, whose shares soared 142%.
Albireo Pharma, which focuses on rare diseases, was acquired by Ipsen, sending its stock up 94%.
Amryt Pharma will also be acquired for $1.48 billion, and its ADRs jumped 108%.
Despite these three deals, the total transaction value was only several billion dollars—below investor expectations and insufficient to meaningfully revive industry M&A activity.
In 2022, U.S. biotech M&A totaled $138 billion—an improvement over the pandemic lows, but still behind the $203 billion seen in 2019.
The three acquisitions broke the lull in the biotech M&A market.
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7. Lululemon Profit Margin Unexpectedly Falls
Athletic apparel brand Lululemon Athletica announced today that its gross margin for the quarter ending January could decline by as much as 1.1%, missing the prior forecast of a 0.2% increase.
The Vancouver-based company’s shares dropped as much as 12% on the news.
Just a month ago, Lululemon had lowered its Q3 profit outlook and, like many retailers, has struggled with excess inventory.
On the bright side, the company raised its Q4 revenue forecast, citing strong traffic at both physical stores and its website, and plans to double revenue by 2027.
Lululemon’s healthy in-store traffic suggests the post-pandemic fitness boom is still going strong.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.