November 2024

Updated: Apr 11

Newsletter November 2024

November 2024:

After the end of the first partials, we had a month full of activities. During this time, we concluded internal workshops that were both highly interactive and practical. New and existing members delivered training sessions on Asset Management, Wealth Management, Venture Capital, and Company Investing. These were complemented by investment challenges and pitch competitions. In this way, we allowed everyone to delve deeper into different industries, enabling both new and existing members to get involved, share their previous experiences, and collaborate on delivering specific outputs for each role.

November Recap

Workshop on WM and AM: In the Wealth Management workshop, we focused on Client Segmentation, Service Frameworks, Portfolio Allocation, the Onboarding Process, and Team Dynamics. For the Asset Management workshop, we took a broader approach, analyzing different asset classes and teams, the sales and KYC processes, investment evaluation criteria, and highlighted Private Equity Real Estate, specifically focusing on appraisal methods, strategies in REPE, and quantitative metrics.

Workshop on VC and Investing: In the Venture Capital workshop, we explored the venture mindset, focusing on principles like prioritizing 'home runs,' leveraging power-law dynamics, recording an anti-portfolio, and fostering dissent to identify outliers. The session emphasized decision-making strategies, highlighting the value of promoting dissent, avoiding groupthink, and empowering diverse perspectives during investment evaluations. In the Company Investing workshop, we organized an internal pitch competition, emphasizing Task Structure, Analysis Skills, Presentation Strategy, and Evaluation Criteria.

Mentorship Programme: Moreover, as we entered the peak of banks' recruitment season, our mentorship program became even more intensive and focused. We ensured that every member received tailored support and guidance to navigate their application and interview processes effectively. Whether they were applying for spring weeks, summer internships, off-cycle opportunities, or graduate roles, our program was designed to address their individual needs. Members benefited from one-on-one coaching, mock interviews, CV reviews, and networking tips, equipping them with the tools and confidence to excel in a competitive recruitment environment.

Don’t miss out on our social media where we post our weekly tips, market news and market quizzes as well as stories of women that keep inspiring us!

News Recap

Trump's Tariff Plan – Beginning of a Trade War?

After winning the election in the beginning of November, the now re-elected president Trump has announced broad-based tariffs on import of foreign goods into the US.

According to Trump, the US economy had been in a decline, also caused by cheap imports making US products unprofitable. This contributed to the growing trade deficit between the US and China, but also other countries. His solution? Impose high tariffs to make imports more expensive and force firms to bring production back to the US. Other countries see this as hostile actions and are prepared to respond by taking similar measures on US goods.

During Trump’s first term, the tariffs imposed on Chinese imports ranged from 7.5% to 25%, depending on the type of good. Under Biden’s presidency, the tariffs remained mostly unchanged, but a sharp tariff hike is likely to come. According to experts, globalization is working against the US and that’s why Trump is keen on increasing the tariffs even more. Economists predict that by the beginning of next year, the tariffs will increase by 38% on average, ranging from 15% to 60%. This would negatively impact US households’ spending.

During Trump’s first presidency, China was not ready for the tariffs, but the government is prepared for a potential trade war this time around. Adopting policies that allow imposition of restrictions in response to other countries’ tariffs and having a list of “unreliable entities, that could undermine their national interests” would allow them to negotiate with the US over the trade tariffs. Nevertheless, China’s GDP would still suffer a slight decrease upon the tariff imposition.

If 20% tariffs were introduced on EU countries, eurozone’s GDP could suffer a decrease of 1.3% by 2028, particularly affecting Germany. Meanwhile, if tariffs of 20% were implemented by the EU, US GDP could drop by 1.5%. Europe is also ready with a list of goods they may impose the tariffs on, but this scenario would only occur in response to corresponding actions by the US. Due to the small value of bilateral trade, the direct impact on Ukraine should be minimal, but not negligent.

UK Inflation Jumps to 2.3%, Raising Doubts on Rate Cuts

UK inflation rose to 2.3% in October, up sharply from 1.7% in September, mainly due to higher energy prices after a 10% increase in the energy price cap. This unexpected growth has shifted market expectations for interest rate cuts by the Bank of England, as traders are now less likely to expect a rate reduction at the next December meeting. The Bank of England's recent quarter-point cut to 4.75% is a sensible move as officials seek to balance the intricacies of inflation and work to hit a target of 2%.

The new inflation figures make it difficult for the BoE to decide on its policy, with particular respect to its gradual approach toward rates. Dave Ramsden, a deputy governor at the BoE, emphasized that despite the recent inflation uptick, the UK is on track for lower inflation overall. Analysts have commented that core inflation has picked up to 3.3%, exceeding expectations and adding weight to the present continuous price pressure in several sectors like transport and household goods. The BoE has stated that it will closely monitor economic data before pursuing any further rate action.

In response to the inflation figures, government officials admitted that British families were not yet free from the cost-of-living crisis. It is uncertain how much of the impact of recent budget decisions, including higher national insurance contributions, will be borne by companies or passed on to consumers. Ramsden announced that while progress has been made in controlling inflation since it rose to a peak of over 11% last year, any signs that disinflation might be persistent could require a reassessment of the Bank of England's cautious approach to interest rates.

Finally Peace in the Middle East, or...?

A ceasefire between Israel and the Lebanese armed group and political party Hezbollah was announced in the end of November. France and the U.S. brokered the agreement. Hezbollah was founded in the 1980s during the Lebanese civil war and has since been involved in several conflicts with Israel, including in the 2006 Lebanon War. After Israel’s attack against Gaza in October 2023, Hezbollah launched attacks to deter Israel´s military operations in Gaza. Now, more than a year later, there is finally a ceasefire between the two.

Following the ceasefire, several indexes in the Middle East increased, including Saudi Arabia´s benchmark index, Dubai’s main share index, and the Qatari benchmark index. Even though there are other ongoing conflicts in the Middle East, these gains reflected the investor optimism that has occurred as a consequence to the potential reduction in geopolitical risk in the Middle East.

A specific sector that experienced growth was utilities. Dubai Electricity and Water Authority advanced 2.4% in one day after the deal was settled, and there are several reasons for this. Infrastructure projects and utility services require consistent operational conditions and therefore rely on a stable environment to thrive. A ceasefire gave investor confidence that we have also previously seen when ceasefires occur. Historically, ceasefires and peace agreements have attracted investors both regionally and from across borders, which the utility sector often benefits from, since the sector is so fundamental for a society. Reconstruction and development projects are usually necessary after violent confrontations.

However, a day later, we could witness how fragile this ceasefire is when Israel fired tank rounds in the south of Lebanon. The Israeli military claimed their air attacks were launched at “terrorist activity”. After what the Lebanese army called multiple violations of the ceasefire from Israel, they have said in a statement that “The Army Command is following up on these violations in coordination with the relevant authorities.”

The potential financial impact of this is decreased investor optimism, and therefore an overall decrease in the markets. The Middle East does have a critical role in oil production, so a global consequence could be limited energy supplies from the region.

Even though a ceasefire could have been a step in the right direction, the Middle East is still experiencing uncertainty and confrontations with the war in Gaza still ongoing. The airstrike that happened right after the ceasefire highlights tensions and the difficulty to maintain peace, so the agreement might be much more temporary than expected. Therefore, the immediate gains in the markets in the Middle East, and the investor confidence in sectors such as utilities, might quickly turn around in the near future.

Dealflows & IPOs

US Healthcare Services Provider Cardinal Health Announces 2 Acquisitions At the beginning of the month, Cardinal Health announced two strategic acquisitions of GI Alliance and ADSG (Advanced Diabetes Supply Group), totaling $3.9 billion. The first deal ($2.8 billion) will give Cardinal Health 71% ownership of GIA and will help the healthcare services company expand their specialty provisions in gastroenterology, building on the offerings of oncology and rheumatology (acquired earlier in the year). The second deal ($1.1 billion) involves ADSG merging with Cardinal Health’s Home-Solutions business; bringing specialist diabetes medical equipment direct to patients. Cardinal Health has a history of acquisitions, having already made 29 deals to date. These recent deals represent Cardinal Health’s drive to deliver greater value to patients, having been exercising their growth strategy for the past few years. The deals are expected to close in early 2025, subject to regulatory approval.

US Global Technology Company Broadcom Finalizes $61 Billion Acquisition of VMware

On November 1, 2024, Broadcom, which designs, develops, and supplies semiconductors and infrastructure software solutions, completed its acquisition of VMware, a US leading technology company specializing in virtualization and cloud computing software. The acquisition was valued at $61 billion, paid through a combination of cash and stock, and is expected to bolster Broadcom’s annual revenues by diversifying its portfolio beyond semiconductors.

It is a deal that marks one of the largest transactions in the technology sector. This merger is set to transform Broadcom into a leading provider of cloud and software services, diversifying its traditionally hardware-focused business model. Broadcom's entry into the cloud and virtualization market strengthens competition against tech giants like Microsoft, Amazon Web Services (AWS), and Google Cloud.

Broadcom aims to leverage VMware's expertise in cloud infrastructure, virtualization, and hybrid cloud solutions to expand its offerings in enterprise software. At the same time, VMware’s software solutions will enable Broadcom to support businesses in managing complex hybrid and multi-cloud environments, an area of growing demand.

Despite US and EU antitrust regulators approving the deal after a rigorous review, there have been many regulatory challenges to overcome, because of rising concerns about potential monopolistic behavior, particularly in niche software markets like virtualization and cloud management. Abu Dhabi's State Investment Fund Extends its Exposure in North America with CI Financial

Mubadala Capital, the asset management subsidiary of the state-backed investment fund of Abu Dhabi, just realized one of its largest direct investments into North America. It agreed to buy the Toronto based investment manager CI Financial for C$32 a share, representing a 33 per cent premium. CI financial has more than C$500bn in assets and is known to manage the money of wealthy US and Canadian investors.

This is a big step for Mubadala which will rely on a large equity investment by its parent company to finance this deal larger than its entire fund. Moreover, Mubadala Capital decided to invest alongside existing management which currently owns almost 16.9 per cent of the company and agreed to keep the CI Financial’s data in Canada to ensure a smooth transition.

This acquisition comes in a long series of deals realized by the Abu Dhabi fund in the past year such as credit manager Fortress, high-end baby stroller brand Bugaboo and Spanish IT consultancy Babel and is part of Mubadala Capital’ strategy to build stakes in private equity-owned businesses.

Analysis of the Markets

Bitcoin: A Risky Bet or Strategic Economic Shift?

The Trump administration has made Bitcoin a major focus of its economic policies, advertising it as a tool to boost U.S. financial leadership. Recently, officials proposed the creation of a national Bitcoin reserve, aiming to incentivize domestic mining operations. Their goal is to reduce reliance on foreign mining, particularly in China, and to harness the potential of blockchain technology.

This approach strongly contrasts the Biden administration’s more cautious stance. For example, Biden-era policies implemented strict regulations to avoid Bitcoin’s misuse for money laundering. In contrast, Trump officials view it as a free-market innovation, gaining immense support from libertarians and crypto enthusiasts.

However, the strategy comes with significant risks. Bitcoin is subject to extreme price fluctuations, often reaching double-digit percentage changes within a day. Therefore, Bitcoin is objectively rather a poor candidate for a reserve asset. Critics note that integrating such a volatile asset into financial systems could increase instability, while supporters argue that it offers protection against inflation and geopolitical threats.

In conclusion, Trump’s embrace of Bitcoin is bold and ambitious, but its long-term impact remains unclear.

COP29 Conference: What This Means for the Climate Finance and Carbon Markets?

The COP29 negotiations in Baku marked a substantial step forward in climate finance and the carbon market regulations, whilst also underlining the economic disparities between developed and lower-income nations. The key outcome of this long strenuous conference was the following: a commitment by developed countries to provide $300 billion annually by 2035 to support climate adaptation and mitigation in developing nations. This commitment does represent an increase from previous commitments, it falls short of the $1.3 trillion economists argued is necessary to adequately address climate changes globally. Developing nations expressed frustration over the perceived insufficiency of these commitments, highlighting the historical responsibility of wealthier nations to lead more robust efforts given their outsized contributions to greenhouse gas emissions.

Following this, the carbon market mechanism was further elaborated on with the new framework allowing international carbon credit trading. This allows developing countries to access fresh financing opportunities, through carbon credits (permit that allows the owner the emission of one ton of carbon dioxide or its greenhouse gas equivalent and is also known as a carbon allowance) but also demands significant capacity-building investments to ensure they can fully participate in the new framework.

Finally, for the developed nations, the focus remains on managing the financial commitments while balancing their own emission reduction targets. Notably, lower-incomes face the dual challenged of navigating complex new market mechanisms and securing sufficient funds to protect their systems from worsening climate impacts.

Technicals Explained: Equity Value vs Enterprise Value

Equity Value and Enterprise Value are two essential metrics in finance, used to determine a company's valuation. Even though they are closely related, they provide distinct perspectives on a company’s worth.Equity Value, also referred to as Market Capitalization, represents the market value of a company’s equity. It is calculated by multiplying the share price by the total number of outstanding shares, representing how much the company is worth to its shareholders.On the other hand, Enterprise Value, often referred to through the acronym “EV”, represents the total value of a company, taking account of both equity and debt holders. It is calculated using the following formula: Enterprise Value = Equity Value + Debt + Preferred Stock + Noncontrolling Interests - Cash & Cash Equivalents

Hence, EV is the "true cost" to acquire a company, accounting for its debt and cash. Debt adds to the acquisition cost as it must be repaid, whereas cash reduces it as it can be used by the acquirer.

We should apply Equity Value and Enterprise Value in different situations. If we are analyzing metrics tied to equity holders, such as Net Income or Earnings Per Share, then Equity Value should be used. Alternatively, Enterprise Value should be used for metrics that consider all capital providers, such as EBITDA or Revenue, since these exclude the effects of financing decisions.

Application: Valuation in Mergers & Acquisitions (M&A)

Imagine an investor evaluating a company for acquisition. The target company has the following metrics:

Share price: $25

Shares outstanding: 20 million

Debt: $200 million

Cash: $50 million

Calculate Equity Value: Equity Value = Share Price × Shares Outstanding = $25 × $20M = $500M.

Calculate Enterprise Value: EV = Equity Value + Debt - Cash = $500M + $200M- $50M = $650M.

By the calculations above, we can see that $650 million represents the total cost of acquiring the company. Without this calculation, the investor might underestimate the required capital by ignoring the company’s debt obligations. Additionally, it is important to note that cash reduces the acquisition cost because the buyer can use the acquired company's cash to partially fund the purchase or other operational needs.

Woman of the Month: Annamaria Lusardi

This month’s woman of the month is Annamaria Lusardi, a true inspiration for all women within not only the economics fields but in the world as a whole.

This month’s woman of the month is Annamaria Lusardi, a true inspiration for all women within not only the economics fields but in the world as a whole.

Lusardi is a leading figure in the field of financial literacy and is best known as being in the top 1% for her research. Born in Italy, she studied at Bocconi University where she graduated with a Bachelor’s in economics and then went to further her studies at Princeton, earning a PhD in the subject.

Specifically, Lusardi’s work has been focused around the importance of financial literacy for economic decision-making. Through her research, she has highlighted the implications a lack of financial literacy has on society’s demographic and its effect on retirement planning, debt management and general economic security. Fundamentally, her work showcases how financial literacy is not just an individual asset but a societal necessity because it is crucial in order to foster economic stability and growth.

Moreover, to reduce financial illiteracy internationally, Lusardi founded the Global Financial Literacy Excellence Center (GFLEC) at George Washington University. This organisation serves to both expand Lusardi’s research whilst also collaborating with worldwide institutions and governments to promote initiatives to economic awareness. Furthermore, Lusardi's work became monumental in order to measure financial literacy through three simple questions referred to as the “Big Three”. These focus on the topics of Inflation, Interest Rates and Risk Diversification, questioning whether individuals truly understand the implications of these three economic phenomena on both their lives as well as on society as a whole.

For her work, Lusardi was awarded an honorary degree of Economics and Business Administration in 2019 from the Finnish University of Vaasa as well as also causing her to be the recipient of the Fidelity Pyramid Prize. Through her contribution, Lusardi has truly allowed many to address the goal of improving lifelong financial well-being, leading her to be a true cause for economic growth in many nations.

"Financial literacy is an essential skill for the 21st century. It’s not a luxury; it’s a necessity."

Cause of the Month: UN Orange the World

With the 25th of November being the International Day for the Elimination of Violence against Women, the UN’s campaign “Orange the World” is focused on ending violence against women and girls. Fundamentally, it is part of the broader UNiTE by 2030 to End Violence against Women campaign, which was initiated by the United Nations in 2008.

Every ten minutes, a woman is killed in the world. Violence against women is still one of the most prevalent human rights violations in the world and through its annual campaign, the UN both raises awareness for its victims whilst inciting others to speak up. This year the hashtag #NoExcuse serves as the backbone for the sixteen days of activism focused on uniting women and ending the violence.

Nearly one in three women experience violence in their lifetime. Through this campaign, the UN calls out the role governments, institutions and individuals hold in stopping this violation, specifically pushing governments to enforce laws and National Action Plans to prevent violence against women. Moreover, #NoExcuse pushes individuals to take action through three simple steps: ending impunity for perpetrators; implementing National Action Plans; and investing in women’s rights organisations. Without ending violence against women, the world cannot reach the Sustainable Development Goals.

The killing of women and girls is increasing over the years. Through donations, the UN combats this statistic, preventing future femicides whilst also helping the victims who have suffered from violence. By taking action to end violence against women and girls, the UN uses its donations to: fund services for survivors; support women's organisations; and drive prevention programs to stop violence before it starts.

Donate to the UN’s Take Action to End Violence Against Women and Girls here.

“Every 10 Minutes, a woman is killed. #NoExcuse. UNiTE to End Violence against Women”.

2 Truths & 1 Lie

We hope you've been paying attention ;)Results will be posted to Instagram!

a 20% tariff on EU goods could decrease the eurozone's GDP by 1.3% by 2028
Trump's tariff plans could increase import costs by an average of 38%
US GDP is expected to grow by 1.5% if tariffs are introduced by the EU

WiF Recommends

Bondcast

is a weekly podcast hosted by Natwest about all things fixed income, exploring trends and events shaping the bond market. With rates at the centre of attention, it's the perfect time to tune in.

The Venture Mindset

is a book written by Stanford professor Ilya Strebulaev, and was the focus of one of our workshops this month! The book delves into decision-making principles that characterise the 'venture mindset', applicable not only to finance but also questioning our day-to-day decision-making processes. An incredibly interesting read for absolutely anyone.

Finimize

is a daily newsletter with bite-sized financial and market news sent to you in the most digestible format, perfect for keeping up to date even in the busiest of times.

What’s next?

As the first semester comes to an end, with the Christmas break and exam session approaching, we are preparing for our final dinner. This event will be a chance to say goodbye to students leaving to spend the holidays in their home countries or embarking on exchanges next semester, as well as to gear up for our exams. Activities will resume in January!