Nadia Tuck of European Pensions reports NBIM 'all-in on AI' as it publishes new strategy:

Norges Bank Investment Management (NBIM) has said it is “all-in on artificial intelligence (AI)” in its updated strategy for 2026-2028.

NBIM, which is responsible for the management of the Government Pension Fund Global (GPFG), outlines five key areas in its Strategy 2028 – performance, technology, operational robustness, people and communications.

Within its technology section, the investment manager said it will be “at the forefront of applying responsible AI in asset management”.

“Our target is to cut manual processes in half so our people can focus on what matters most – generating returns,” it stated.

As part of this, it plans to create digital colleagues for routine tasks while developing AI solutions that execute complex analytical tasks and provide insights to enhance decision-making.

“We will continue automation of our real asset investment processes and use AI tools to reduce manual burdens, speed up operations, and reduce the risk of potential errors. We will work with our real asset partners to modernise industry processes.

“Data is one of our core assets and we will make our data platform more user- and AI-friendly,” it said.

However, it stressed that it recognises that “success depends on teamwork not technology alone”.

“Technology will augment our judgment, not replace it,” NBIM stated.

The new strategy builds on the revised plan for 2023-2025 and uses the fund’s attributes, such as its long-term investment horizon, scale, people, technology and data, as its starting point.

NBIM CEO, Nicolai Tangen, said the strategy sets out “how we will work to become the best and most respected large investment fund in the world”.

Regarding investment, the fund’s goal is to maximise returns after costs.

Its strategy lists its three main investment strategies: market exposure, security selection, and fund allocation, which it pursues across equities, fixed income, and real asset management.

NBIM said it will be honest about “what works and what does not”.

“We will implement systematic debriefs to learn from our successes and failures. We will build a culture where people feel safe to go against the crowd and create mechanisms to challenge consensus thinking.

“Good investment decisions depend on good information. By further integrating risk and performance data into our investment processes, we aim to make better decisions,” it stated.

It will continue developing its Investment Simulator to enhance investment decisions and provide feedback to portfolio managers.

“This tool will make portfolio managers increasingly aware of their behavioural strengths and weaknesses so they better incorporate these in their decision-making,” it stated. 

Evilyn Lou of PERE also reports NBIM reveals three-pat plan to overhaul real estate strategy:

Norges Bank Investment Management – which manages the assets of the world’s largest sovereign wealth fund, Norway’s Government Pension Fund Global – is implementing a three-pronged approach to revamp its real estate strategy in a bid to improve returns generated by the asset class.

“Real estate has changed a lot in certainly the last five years in pretty foundational ways,” said global head of real estate Alex Knapp, speaking with PERE at the fund’s London office last week. “And so I think it was time to do a material update to the real estate strategy for the fund.”

Although the update is part of a broader 2026-2028 strategy shift for the overall fund, the real estate business will likely see more changes than other parts of the organization “just given the nature of the market,” noted Knapp, who joined NBIM from Houston-based manager Hines in June.

The first major component is integrating NBIM’s separate teams for listed and unlisted real estate, which together account for roughly equal proportions of the fund’s $75 billion of equity in the asset class.

The second change is broadening the fund’s private real estate strategy. Previously, NBIM’s unlisted real estate investments were geographically restricted to eight cities – London, Paris, Berlin, New York, Boston, Washington DC, San Francisco and Tokyo – along with a globally focused logistics strategy.

The geographic focus will now expand from the eight cities to the larger regions of Western Europe and North America. Meanwhile, the fund is “studying” future investments in the Asia-Pacific region. “That’s a whole separate project,” Knapp said.

While a “good location” will vary by sector, “we’re trying to still pick strong locations and believe that’s a key driver of value, but just in a much broader way, so a much broader geographic remit, and with that, a broader set of tools to invest, especially on the private side,” he said.

Whereas NBIM’s real estate investment staff previously was grouped by cities, the team will now be organized by the four main food groups of office, logistics, retail and living, as well as a “fifth plank” for niche sectors. The 43-person team, which is now concentrated in NBIM’s London and New York offices, will not be changing materially in size, Knapp added.

Additionally, NBIM will no longer be restricted from investing in private market residential, with the investor having already built large positions in the sector on the public side.

Although private residential “was historically redlined” because of reputational concerns, “we’ll be very careful who we partner with and the types of deals we get involved in, because it’s clearly a concern from some stakeholders,” Knapp said.

“But obviously it’s also worth noting that we already have lots of residential investment and that our peer set of comparable pension and sovereign funds have large residential investments as well.”

The third component is taking a more strategic view of real estate. “The fund has almost doubled in size in the last five years,” Knapp remarked. “We need to work at a higher altitude and look more at big-picture trends that are going to impact real estate over the next five to 10 years, rather than micromanaging individual buildings.”

That will call for more of an indirect approach, whereby NBIM will make platform and fund investments for the first time.

Picking both the right strategy and the right partners will be paramount, with partners needing to fill three key criteria: an operational skill set, strong alignment with NBIM and the ability to operate at a certain scale.

“We’ll be evaluating all of our partners on the same basis,” Knapp said. “We have some great existing partners. We expect to have some new relationships as well, but we’re not looking to radically expand our partner base,” given the small size of NBIM’s real estate team.

“I think what we’ve advocated is a more flexible strategy to reflect a rapidly changing world with a certain amount of volatility in it,” he said. “The starting point is, let’s enhance the pool of potential opportunities we can consider and then focus our teams on better stock selection within that broader opportunity set.”

Return enhancer

NBIM’s planned overhaul of its real estate strategy comes a month after Norges Bank submitted a letter to the Ministry of Finance underscoring how the bank’s investment focuses in the asset class – traditional sectors, a limited number of countries and cities, as well as direct investments – resulted in a portfolio negatively impacted by major changes in the market, including structural shifts in office and retail demand and traditional sectors requiring more operational management.

“This has contributed to the real estate portfolio delivering weaker returns than the equities and fixed income we have sold to finance the investments,” Norges Bank governor Ida Wolden Bache and NBIM deputy chief executive Trond Grande wrote in the letter. “Norges Bank is not satisfied with the results in real estate management, and is now making changes to the strategy for real estate.”

Over the past five years, equity management’s contribution to the fund’s relative return has been 0.31 percentage points, while fixed income management’s contribution has been 0.18 percentage points, according to the letter. In contrast, real estate management has contributed -0.13 percentage points over the same period.

“Generally, you could say that we’re transitioning from being a core investor that holds assets forever into being more of a core-plus investor, so to have a slightly shorter horizon on our investments and definitely a greater focus on whether the current portfolio will deliver return for us over the next phase or not,” explained Knapp, who had spent the last 16 years at Hines, most recently as its chief investment officer for Europe.

The investor is looking to generate excess return over the benchmark index of equities and fixed income plus a hurdle, with the goal of beating the hurdle over the medium term. “We’re trying to be a return enhancer versus the index that we’re selling to do the real estate,” he explained.

At $75 billion in assets today, NBIM’s real estate portfolio is at the low end of its 3-7 percent target range, Knapp noted. However, “we’re not pushed in any way to invest. We’re really pushed to generate return. That’s the number one focus.”

The investor therefore will look to be “more thoughtful about the return prospects” for its real estate holdings. “We’re now looking at everything, saying, ‘Well, would we buy it at today’s pricing?’ If the answer is no, we’re going to sell it,” he said.

“So there will be more cycling for sure, and what’s key to successfully exiting assets is to have realistic pricing. I think our performance will be driven by a combination of smart new investments and smart divestments as well. We’re not going to hold a building just because it’s a beautiful building in a great location. We’re going to hold it because it’s got return potential.”

Overall, Knapp expects NBIM to be a net buyer rather than seller. “What we observe is that the market has a lot of investors with capital tied up. There are probably more net sellers than net buyers in the market right now,” he said.

“We’re definitely seeing a number of parties that are looking to rebalance their own portfolio – maybe they’re downsizing a bit, maybe they’ve reached the end of a business plan. So there’s a fair amount of dealflow, for sure.”

That's a fantastic interview with Alex Knapp, former CIO of Hines in Europe. He definitely knows what he's talking about in real estate and he and his team will focus on return enhancement and acquiring great assets in a new expanded real estate portfolio.

As far as NBIM's strategy plan for 2028, CEO Nicolai Tangen didn't mince his words:

The new strategy builds on the revised plan for 2023-2025 and takes the fund’s unique attributes as its starting point: our long-term investment horizon, our scale, our people and culture, and our technology and data.

Everything we do at the fund – from how we invest to how we develop our people – is designed to support our core mandate of maximising long-term return after costs, within an acceptable level of risk.

"The strategy sets out how we will work to become the best and most respected large investment fund in the world. We look forward to putting it into action over the next three years,” says CEO Nicolai Tangen.

The strategy has five key areas: Performance, Technology, Operational robustness, People and Communications.

I would invite my readers to take the time to read Strategy 28 here.

NBIM manages Norway's Government Pension Fund Global, the largest sovereign wealth fund in the world.

The Fund consistently ranks at the top position among global pension funds and truly sets the bar in terms of transparency (Canadian pension funds also rank high).

In Real Estate which is a major focus of Strategy 28, I note the following:

We will take allocation positions to manage the fund's total risk profile. With delegated investment mandates, the fund’s total risk profile may require adjustment - even when individual portfolios are well-positioned.

We do not expect any material changes in our average risk utilisation, but our active risk-taking will vary as market conditions change. We will occasionally take allocation positions when abnormally large market dislocations create attractive opportunities. Such dislocations can occur when other investors are forced to act due to behavioural factors, regulatory requirements, or funding problems – exactly when our patient capital becomes most valuable.

The management mandate allows us to invest up to 7 percent of the fund in unlisted real estate and up to 2 percent in renewable energy infrastructure. In this strategy period, we raise the ambition level for our real asset investment strategies. We invest in real assets as part of our active management. The purpose of active management is to exploit the fund’s defining characteristics to achieve excess returns over time. We invest in real assets to maximise fund returns after costs. We believe that achieving this goal also improves the long-term trade-off between return and risk in the fund, and that the fund’s characteristics position us to achieve our goal.

As one of the world’s largest investors, we can access unlisted investment opportunities unavailable to smaller investors and negotiate favourable terms when investing indirectly. Our scale and reputation provide access to premier partners. Our long investment horizon and limited short-term liquidity needs mean that we can be patient through market cycles.

Real estate

Real estate is a large part of the overall investable market and an opportunity for us to enhance the fund’s returns. During this strategy period, we will shift from geographic concentration to sector diversification. We will to a larger extent delegate the operational management of the real estate portfolio and gradually invest more through indirect structures. We continue to view listed and unlisted real estate as complementary ways of achieving exposure to the real estate market, and our long investment horizon makes us well-suited to handle higher short-term volatility from the listed real estate portfolio.

• We will evolve from a combined strategy to a fully integrated strategy. For any desired real estate exposure, we will systematically evaluate whether listed or unlisted real estate provides the most attractive risk-adjusted return.
• In unlisted markets, we will continue to invest in large, traditional sectors such as office and logistics, but will gradually invest more in newer and higher growth sectors.
• We will invest more through indirect structures to get access to specialised strategies and operational capacity. However, most of the unlisted portfolio will continue to be directly invested with partners by the end of the strategy period. 

Anyway there is a lot more so please take the time to read Strategy 28 here.

Below, NBIM CEO Nicolai Tangen sits down with David Rubenstein, founder and chairman of the Carlyle Group and host of the David Rubenstein Show. They explore what makes truly great investors, why going against conventional wisdom matters, and the critical importance of humility in business and leadership. Great interview, take the time to watch it.

Swetha Gopinath of Bloomberg reports Canada pension giant balks at paying fees to co-invest with private equity:

Institutional investors will not allow alternative asset managers to start charging them for large deals despite the emerging competition from retail money, according to Canada Pension Plan Investment Board, one of the world’s largest retirement funds.

Large pensions and sophisticated investors like CPPIB have for decades jointly invested with buyout firms in marquee transactions on a no-fee, no-carry basis. An influx of capital from wealth channels now threatens to change that dynamic.

Any moves by alternative asset managers to levy co-investment fees “will undoubtedly have an impact on our appetite for the asset class, because that’s the model we run,” CPPIB chief executive John Graham said in an interview on Wednesday. If the firm can’t keep the traditional structure “we actually will tend not to partner with them,” he said.

Private equity firm EQT, for one, has been working to quell concerns that it might start charging investors to do those transactions after its chief executive officer described it as a potential new source of revenue. Institutions are “economic animals” and if the fee model changes they will reevaluate their allocations to the sector, Graham said.

The shift in the investor base in private equity is playing out even as institutions get more selective about where they park their money after waning performance from the asset class in recent years. Larger investors are also worried they’ll get smaller allocations for deals amid the competition from wealthy individuals.

CPPIB had net assets of $777.5 billion at the end of September. About 29 per cent of the portfolio is made up of private equities, it reported earlier this year. It’s also a big investor in real estate, infrastructure and credit.

It’s still too early to tell how the influx of retail money will impact the industry and co-investments like those favoured by CPPIB, Graham said.

“Institutional investors are still the bedrock investors,” he added. “Retail might be the shiny new thing, but for 20-plus years, institutional investors have helped build these franchises.”

Still, he said, the influx of retail brings in other considerations, like regulatory scrutiny. Investments like junk leveraged credit “are buyer beware markets,” he said. “These are not public equity markets, which is a gentleman’s game.”

CPPIB is also taking a differentiated approach to public markets, deliberately choosing to be underweight the Magnificent Seven megacap technology stocks, which means the manager currently underperforms the S&P 500.

“Diversification is an act of humility,” he said. “The concentration level in the United States equity markets is not a risk we want to take.”

I'll get back to the Mag-7 below, first on the subject of potentially levying fees on co-investments.

Put simply, CPP Investments' active management strategy which was introduced back in 2006 relies heavily on the partnership model, meaning, they invest in private equity funds but they expect big co-investment opportunities in return where they pay no fees to reduce fee drag.

Co-investments serve two purposes: to reduce fee drag and to allow them to maintain a heavy allocation to the asset class.

If they are forced to pay fees on co-investments because of intense competition from wealth management and other retail outfits, then they will be forced to rethink their hefty allocation to this asset class. 

It's that simple, I personally don't see this happening, big institutional pension funds, sovereign wealth funds and insurance funds make up the bulk of the assets private equity manages so they'd be shooting themselves in the foot imposing fees on co-investments for this group.

But this example and John Graham's comments show us that the landscape in private markets is changing, there is intense competition in private equity, infrastructure, real estate, private credit and structural changes there are forcing big pension funds to rethink their strategy.

Below, recent market volatility and geopolitical uncertainty have raised questions about the US' status as a safe haven. But there are still no strong alternative 'safe harbours', says John Graham, President and CEO of CPP Investments, Canada's largest pension fund. Graham says the fund is underweight AI in the US, but seeking more opportunities in large-scale infrastructure. It also remains committed to private equity. He spoke with Francine Lacqua on 'Bloomberg: The Pulse'.

John raises excellent points on the symbiotic relationship between them and private equity and how that model has been a win-win over the past 25 years.

He also mentions they're underweight Mag-7 stocks and here a couple of points. First, there seems to be a bifurcation going on in the Mag-7 where Google and Nvidia are leading the rest (same with Broadcom if you expand to Mag-10). Second, no doubt about it, cyclical stocks like financials and industrials and defensive pharmaceuticals have outperformed technology shares in the last quarter. Whether this continues in 2026 remains to be seen.

On that topic, Ed Yardeni, Yardeni Research president, joins 'Squawk Box' to discuss the latest market trends, why he's moving away from being overweight on Magnificent 7 stocks, sectors he's in favor of, the Fed's interest rate outlook, and more.

Third, in a wide-ranging interview with Yahoo Finance Executive Editor Brian Sozzi, Apollo Global Management CEO Marc Rowan discusses the Federal Reserve's rate cut decision, the rise of private credit markets, and data centers (Note: Apollo Global Management is the parent company of Yahoo Finance).

Lastly, earlier today, Bloc MP Christine Normandin expressed disapproval for Prime Minister Mark Carney's rumoured pick for Canada's ambassador in the U.S., Mark Wiseman, during question period. 

Mark Wiseman was the former CEO of CPP Investments and it's clear his rumoured appointment is making opposition parties howl. 

Poor Mark, he's getting no respect but he's a born politician and very smart guy so let's give him a shot (and for the record, I don't agree with the Century Initiative, if we increase immigration at the expense of housing, education and health care, we are doomed. We need better coordination).

JP Alegre of The Deep Dive reports Ottawa plans to fund worker buyouts with their own pension money:

The Canadian government plans to use public servants’ own pension money to fund early retirement buyouts for 68,000 workers, a decision unions are calling “borderline theft.”

The $1.5 billion program, announced in letters distributed last week, would allow eligible federal employees to retire early without penalties as Ottawa pursues 40,000 job cuts from a peak of 367,772 employees in 2024. But the decision to source funding from the Public Service Pension Fund has ignited fierce criticism from labor groups who say younger workers will subsidize their older colleagues’ departures.

“It’s all well and good to protect the jobs of younger people, but they are the ones who, throughout their careers, will pay half the cost of the program through their contributions to the pension plan,” said Nathan Prier, president of the Canadian Association of Professional Employees. “In the same vein, the government is using civil servants’ money as if it were its own, which sounds like borderline theft.”

Federal regulations normally impose a 5% annual reduction on benefits for civil servants who leave before reaching retirement age. The new program would eliminate this penalty for eligible participants.

Two categories of employees received the letters. The first group includes workers aged 50 or older with at least 10 years of federal employment and two years of pensionable service. The second covers employees 55 and older who joined the pension plan after January 1, 2013, meeting the same service requirements.

Treasury Board communications director Mohammad Kamal said notification letters reached about 68,000 employees who may qualify for the program. The government estimates the program will save $82 million annually in pension contributions once fully implemented.

The Public Service Alliance of Canada, representing the largest federal public service union, raised separate concerns about the program’s structure. National president Sharon DeSousa said workers considering early retirement might forfeit lump-sum severance payments based on years of service.

“That’s real money owed to workers under the collective agreement that this government seems to be trying to bypass,” DeSousa said in a statement released last week. She added that any early departure program must be negotiated with unions and warned members against making hasty decisions.

DeSousa told reporters in November she does not expect significant uptake given current cost of living pressures. The union is pressing the government to release complete program details before members commit to participation.

The Professional Institute of the Public Service of Canada echoed concerns about institutional knowledge loss. President Sean O’Reilly said the program would drive out experienced professionals rather than retaining talent.

“Let’s be clear: this program will drive out some of the most experienced people in the federal public service,” O’Reilly said. “Instead of retaining talent, the government is actively incentivizing its most seasoned professionals to leave. That should concern anyone who cares about effective government.”

The letters sent to employees emphasize that the program is voluntary and note that acceptance of applications is not guaranteed. Treasury Board will set parameters designed to maintain essential services and business continuity, according to the letter reviewed by media outlets.

The government plans to launch the one-year program as early as January 15, 2026, though Kamal confirmed legislation is still required before implementation. The application window would remain open for 120 days following the program’s start or legislative approval, whichever comes later.

Employees whose applications receive approval must retire within 300 days. The letters direct workers to internal pension calculators for personalized projections and caution that the Pension Centre is experiencing increased call volumes.

The federal workforce reached 367,772 employees in 2024 before falling to 357,965 this year through attrition. Budget 2025 targets further reductions to approximately 330,000 positions by 2028-29, a 10% decrease from peak levels.

Kamal did not respond to questions about whether departments would announce job cuts before gauging employee interest in voluntary departures. He said departments will manage workforce reductions through attrition and voluntary programs to the greatest extent possible, working to reassign employees where feasible.

The unions raise a number of concerns but let me tackle an important issue in this post.

Let's discuss inter-generational fairness. I don't agree with unions that younger generations will be paying half the cost of the $1.5 billion pension buyout program.

Typically, the assets in these pension plans are made up of 1/3 pension contributions and 2/3 investment gains.

In fact, the Public Service Pension Plan had a $9 billion surplus mostly owing to investment gains by its investment manager, PSP Investments, which is money that belongs to the federal government.

As I explained in detail here, the Public Service Alliance of Canada (and other unions) are wrong to claim this money belongs to members, it doesn't because this is not a jointly sponsored DB plan where members (retired and active) share the pain or gain of that plan. 

The federal government (ie. taxpayers) are on the hook if there's a deficit so the surplus belongs to taxpayers.

PSP's former CEO Neil Cunningham had good ideas of what the government can do with that $9 billion surplus which he shared with my readers here.

I believe that $9 billion surplus was transferred to a government account. 

A year ago, the federal public service pension plan posted a surplus of $1.9 billion, according to a report presented to the House of Commons by Treasury Board President Anita Anand.  

That surplus which belongs to the federal government is at the centre of debate on who gets to cash out of it:

A $1.9bn pension surplus is at the centre of a sweeping federal plan to shrink Canada’s public service, as the government prepares to offer $1.5bn in early retirement incentives to thousands of eligible employees, according to the Ottawa Citizen.  

The move, part of a broader strategy to cut 30,000 public sector jobs by 2028-29, is set to rely heavily on attrition, with new retirement rules allowing certain public servants to leave with an immediate, penalty-free pension based on years of service. 

Eligibility for the program, as outlined by the Department of Finance, extends to public servants over 50 who joined before 2013, or over 55 who joined after, provided they have at least 10 years of employment and two years of pensionable service.  

The incentive program is expected to run for one year, launching as early as January 15, 2026, or once budget legislation receives royal assent. 

The government’s plan to tap into the Public Service Pension Plan’s surplus has drawn sharp criticism from public sector unions, who argue that the reallocation of the “non-permitted surplus” into a general account lacks transparency and could undermine retirement security.  

Treasury Board spokesperson Barb Couperus confirmed to the Ottawa Citizen that the surplus remains at $1.9bn, but the Board has not clarified whether these funds will directly finance the early retirement program. 

Union leaders have responded with public rallies and warnings about the broader impact of job cuts. 

Jessica McCormick, president of the Newfoundland and Labrador Federation of Labour, told CBC News that “there are real people, real families, lives behind those cuts,” emphasizing the human cost of what the government describes as efforts to “streamline” the public service.  

Chris Di Liberatore of the Public Service Alliance of Canada added that “critical programs and services will be gutted, and communities will be left behind,” urging the government to reconsider its approach. 

Meanwhile, Tom Osborne, parliamentary secretary to the president of the treasury board, acknowledged to CBC News that the public service has grown by 100,000 positions over the past decade, much of it in response to the COVID-19 pandemic. 

Osborne described the current size as “unsustainable,” but said the government is committed to mitigating the impact on workers, particularly those nearing retirement. 

Well, I agree with Osborne, the current size of the public sector is unsustainable and we need to restore balance. Also consider this, more than 27,000 federal public servants now earn at least $150,000 a year, even as Ottawa moves to cut tens of thousands of jobs and roll out an early retirement program funded from the public service pension plan: 

According to the Treasury Board of Canada Secretariat, more than 20,000 employees received total compensation between $150,000 and $199,999 in 2024-25, The Canadian Press reported.  

Nearly 5,000 employees were in the $200,000 to $249,999 range, almost 1,400 were between $250,000 and $299,999, 654 were between $300,000 and $399,999, 42 were between $400,000 and $499,999, and six received $500,000 or more. 

The document says compensation includes salaries, bonuses, benefits and overtime pay. It covers permanent, term, casual and student workers.   

While it's unclear to me whether the $1.9 surplus will be used to pay for these early retirements, it would be the easiest way to fund them and maintain inter-generational equity. 

Discussing the early retirement option with friends working in Ottawa, many are seriously considering it, fed up, they want out.

Are you losing experienced people? No doubt, you'll lose some, but you're also losing dead wood, people that just counting the minutes to retire.    

And unfortunately, from what my friends tell me, there's a lot of dead wood in Ottawa.

Let's not forget the civil service grew exponentially under the fiscal profligacy of the Trudeau Liberals, across all departments.

So even with these cuts (early retirement), we are just getting back to "normal size" of the civil service, hardly draconian by any measure.

Anyways, take everything the public sector unions claim with a grain of salt, they love to play the victim card.

Still, I do believe the $1.9 billion surplus can and should be used to fund this $1.5 billion early retirement program. It's the easiest way to fund this program without asking taxpayers to pitch in.

As far as PSP Investments, it will continue to manage the assets of a shrinking pool of federal workers, the demographics of the plan will change (become younger) and it will need to revise its risk-taking behaviour across all assets.

That's my two cents, please feel free to email me if you have anything to add here (LKolivakis@gmail.com).

Lastly, it's up to every worker to decide for themselves whether or not to take this early retirement if eligible. Unfortunately, I cannot give advice to everyone, please sit down with a financial advisor and see if it makes sense for you.

Below, the Treasury Board is sending letters to approximately 68,000 federal public servants regarding a potential early retirement incentive. The government aims to reduce the public service by 28,000 jobs by 2029 through voluntary attrition to avoid layoffs. Unions like PSAC warn that employees should not be pressured into giving up rights during a tough economic climate. CTV's Stefan Keyes has more.

Dan Primack of Axis Pro Rata reports lawsuit highlights private equity's CV conflict: 

A Middle Eastern sovereign wealth fund last month sued to stop a Houston-based private equity firm from selling a portfolio company to a continuation vehicle, with both sides yesterday agreeing to enter arbitration.

• The deal is on hold. For now.

Why it matters: This dispute gets at the fundamental conflict between LPs and GPs when it comes to CVs, which may have just peaked, if you boil away all goodwill and assumption of positive intent.

On the docket: Abu Dhabi Investment Council is a limited partner in PE funds raised in 2011 and 2014 by Energy & Minerals Group. They both hold stakes in Ascent Resources, a large natural gas company that also counts First Reserve among its investors.

• ADIC claims that EMG decided that it could maximize its value for Ascent via a CV strategy.
• It then alleges that EMG tried to force an LP vote on very short notice, provided different data to different investors, and refused to let the LPs confer in private. ADIC also casts doubt on EMG obtaining the requisite votes it claims to have obtained.
• Neither side responded to Axios' request for comment.

The big picture: General partners often claim that they form CVs for their best portfolio companies, the ones they just can't yet bear to part with. Almost as a favor to LPs desperate for liquidity ("We're not selling, but if you need to...").

• LPs, however, are often skeptical but feel boxed in. If they don't participate, might they be blackballed in the next fundraise?
• There certainly are amicable CV situations in which everyone expects to benefit, but there's just as many that create LP unease.

Zoom in: ADIC's complaint, filed in Delaware Chancery Court and recently unsealed, lays out a different narrative. It alleges that EMG told existing LPs that Ascent was in bad shape, unable to go public or be sold, while telling prospective CV investors the opposite.

• Moreover, ADIC claims that the CV would have reset management fees and carry on Ascent in a way that would have benefited the general partner, which is generally frowned upon.
• It's also not too surprising, given that EMG hasn't raised a new fund since 2019 (i.e., the fee stream is running dry).

Look ahead: An arbiter is expected to render a final decision by Feb. 27, 2026, before which EMG has pledged not to complete the CV transaction.

The Financial Times also reports private equity’s hot ‘continuation’ trade leaves some feeling singed:

A recurring theme in 2025 in the world of private equity is “keeping the wolf from the door”. For companies on the brink of running out of money, that manifests through the increasing popularity of so-called liability management exercises, where zombie companies are temporarily kept upright by tapping bountiful debt markets and strong-arming investors.

For companies in private equity portfolios that are not quite hobbled but not exactly thriving either, there are continuation vehicles. These are new funds created by the same private equity sponsor that can purchase a business when the original fund is at its contractual end. A way, in effect, of keeping a promising company in the fold.

A general rule in finance is that where there’s innovation there’s litigation. Liability management has produced a glut of US court cases; now continuation vehicles look likely to follow. A Middle Eastern wealth fund, the Abu Dhabi Investment Council, has sued a private equity firm, Energy & Minerals Group, which wants to shift a natural gas driller it owns from one pocket to another.

The problem, ADIC says, is that the deal is great for the private equity firm but not for the investors in the original fund. It contends the company in question, Ascent Resources, could be worth more than $7bn in a regular sale or an initial public offering, yet in fact the stake being transferred by EMG suggests a valuation of just $5.5bn.

Such blow-ups are inevitable when a buyout firm is on both sides of the deal, as is the case where continuation vehicles are involved. There are certain safeguards, to be sure: transparency, independent advisers, “fairness opinions” and fiduciary duty. Some claims of wrongdoing might be meritorious and others not. Where the original investors don’t get a windfall, disappointment will often ensue.

ADIC describes being forced into a “Hobson’s choice”. It could put in new cash, or roll over its investment on terms it described as “materially worse than the status quo”. It also said in its lawsuit that EMG had not tried hard enough for third-party, arms-length deals — though the Financial Times has reported other buyers passed on Ascent, believing the price too rich.

Private equity groups need to worry not just about selling assets to continuation funds, but the deals that come after. Where a continuation vehicle later makes a big profit by exiting its investment, it will spur claims — sincere or otherwise — that the limited partners in the first fund were taken for a ride. Some sponsors, including Clayton Dubilier & Rice, have netted sizeable profits through a second deal.

There are also examples that work the other way around. Clearlake Capital’s Wheels Pro went bankrupt in a successor fund. More recently, portable toilet company ISS, in a continuation vehicle backed by Fortress, Blackstone and Ares, is expected to be a wipeout, Bloomberg has reported.

Continuation vehicles, like liability management exercises, address real problems over timing and liquidity. Secondary funds, which buy whole slices of private equity portfolios, are another example.

But while the Masters of the Universe are good at navigating deadlines and cash crunches, they’re not always as deft at placating investors who feel they’ve got the rough end of the stick. For those people, litigation may continue to feel like the best medicine.

The person who sent me Dan Primack's comment also shared their perspective:

It’s a noteworthy case: continuation vehicles have become commonplace but they remain fraught with embedded conflicts, and this lawsuit puts several of those tensions in sharp relief.

They added: 

... for background, Alain Carrier (formerly CPPIB infrastructure/international, then CEO of Bregal Investments) has recently joined ADIC as head of private equity. You can likely expect them to take a more active stance going forward.

I don't personally know Alain Carrier but he has a great reputation and I'm sure as Head of PE at ADIC he will lean on GPs heavily, especially if he feels it's not in their best interests. 

These continuation vehicles have mushroomed recently and not surprisingly, they're not always in the best interest of LPs who want to see GPs realize and collect the maximum gain. 

2025 hasn't been a great year for private equity. The environment is improving as rates drop, exits increase but there are a plethora of issues the industry needs to contend with.

This lawsuit against EMG will be monitored closely by LPs and GPs.

If ADIC proves the continuation vehicle isn't in their best interest, then this case might set legal precedence.

We shall see and while not all continuation vehicles are bad, you really need to do proper due diligence or risk having the wool pulled over your eyes. 

At the very least, understand the challenges and potential conflicts of interest. 

It doesn't surprise me that a new report finds continuation vehicles have peaked. 

Below, Steve Balaban discusses everything you need to know about continuation funds.

Sean Conlon and Pia Singh of CNBC report the S&P 500 closes higher, notching four-day win streak and nearing record after light inflation reading:

The S&P 500 edged higher on Friday, securing its fourth straight winning day, as traders digested inflation data that could provide further incentive for the Federal Reserve to lower interest rates next week

The broad market index closed 0.19% higher at 6,870.40, putting the index about 0.7% off its intraday record. Friday also marked its ninth positive session in 10. The Nasdaq Composite increased 0.31% to settle at 23,578.13, while the Dow Jones Industrial Average climbed 104.05 points, or 0.22%, to end the day at 47,954.99.

The market sorted through a fresh slate of economic releases Friday. The Commerce Department said that the core personal consumption expenditures price index for September – which was delayed due to the record-setting U.S. government shutdown – showed an annual rate of 2.8%, lower than the 2.9% Dow Jones estimate. Core PCE’s 0.2% rise on the month was in line with expectations, as were the monthly and annual inflation readings for headline PCE.

Also on Friday, the University of Michigan’s consumer survey, a report that provides a glimpse at sentiment as well as the view on inflation over the near and longer term, came in higher than expected for December.

The PCE report, which serves as the Fed’s primary inflation gauge, gives the central bank its final inflation view before Wednesday’s interest rate vote. With inflation being mild, jobs remains more in focus after recent reports showed signs of weakening in the labor market. Investors are hoping that this will influence the central bank to lower its benchmark rate by a quarter percentage point when it announces the decision Wednesday.

Traders are pricing in an 87% chance of a cut next Wednesday, far higher than just a couple weeks ago, according to the CME FedWatch tool. The key fed funds futures rate is currently targeted between 3.75%-4%, trading near the high end of that range amid ongoing pressures in short-term funding markets.

“I think it really just solidifies what the market’s already been pricing in, which is almost certainty of a cut for next week,” David Krakauer, vice president of portfolio management at Mercer Advisors, told CNBC. “If inflation does continue to stay somewhat relatively tame and [is] potentially decreasing, then what’s the outlook for more rate cuts into early next year?”

With expectations running high for a rate cut, Krakauer doesn’t necessarily believe that it will serve as a catalyst for stocks to move higher as the new year approaches. That said, he still thinks the market is in a healthy position for some upside, at least enough to reach new highs on the S&P 500.

“It may be a steady move, it may be a choppy move, but I certainly see the path for equities forward as being very positive,” he said.

Stocks posted gains for the week. The S&P 500 finished up 0.3% week to date, while the Nasdaq and 30-stock Dow have added almost 1% and 0.5%, respectively.

During Friday’s trading session, Netflix shares seesawed after initially seeing sizable losses earlier in the day following the company’s announcement that it struck a deal with Warner Bros. Discovery to buy its film and streaming assets for $72 billion — a transaction that’s expected to close in 12 to 18 months. Netflix shares were nearly 3% lower, while shares of WBD jumped more than 6%.

The streaming giant’s stock came off its lows of the session after a senior administration official told CNBC that the Trump administration views the deal with “heavy skepticism.”

Rian Howlett , Karen Friar and Ines Ferré of Yahoo Finance also report the S&P 500, Nasdaq notch fourth day of gains with next week's Fed meeting in focus: 

US stocks moved higher on Friday as Wall Street digested a cooling in the Federal Reserve's preferred inflation gauge, increasing the odds that the central bank will cut rates next week.

The S&P 500 (^GSPC) rose 0.19%, within striking distance of its first record close since October. The Nasdaq Composite (^IXIC) also gained about 0.3%, eyeing its ninth positive close in 10 sessions. The Dow Jones Industrial Average (^DJI) rose around 0.2%, following a mixed Thursday session for the gauges.

Investors continue to bet heavily on a quarter-point interest rate cut from the central bank next Wednesday. Traders are pricing in 87% odds of a move lower, compared with 62% a month ago, according to CME FedWatch.

On Friday, a delayed reading of the PCE price index showed inflation rose about as expected in September. The "core" PCE index — the Fed's favored price gauge — cooled slightly, rising 2.8% on an annual basis. Meanwhile, US consumer confidence rose for the first time in five months as respondents' inflation expectations improved.

The jobs market, meanwhile, has presented more of a mixed bag of data this week. A Challenger report on Thursday showed US companies cut 71,000 jobs last month, the worst November print since 2022. Yet new weekly jobless claims fell to their lowest since September 2022, reinforcing the picture of a labor market cooling gradually rather than rapidly.

Meanwhile, news landed that Netflix (NFLX) will buy Warner Bros. Discovery's (WBD) studios and its streaming unit for $72 billion, following a weeks-long bidding war. Netflix stock ticked down 3%, while WBD shares moved 6% higher.

In earnings, Hewlett Packard Enterprise (HPE) stock rose slightly after the server maker's quarterly sales outlook missed high AI-fueled expectations.

S&P 500 hovers near record, while bitcoin has decoupled from stocks

S&P 500 (^GSPC) was a stone's throw away from reaching a new high on Friday, while bitcoin (BTC-USD) tumbled below $90,000 per token.

The world's largest cryptocurrency is on pace to close out the year decoupled from stocks for the first time since 2014.

Bitcoin is down roughly 3% year-to-date compared the the S&P 500's 17% gain.

It hovers about 30% off its all-time high, north of $126,000 in October. 

Alright, a strong week in stocks all based on expectations the Fed will cut 25 basis points next week. I have no doubt the Fed will cut as employment is trending lower but given the stock market is a leading indicator and all stock indices including small caps are flirting with record highs, it's hard to envision more rate cuts in the new year. Interestingly, Bank of America strategist Michael Hartnett is warning that a dovish Fed rate cut could imperil the rally: 

“Only thing that can stop Santa Claus rally is dovish Fed cut causing a selloff in long-end,” Hartnett wrote in a note, referring to Treasuries with a longer maturity date. US stocks have rallied as investors bet the central bank would reduce rates further to shore up a softening labor market. Wagers on a quarter-point cut at the meeting on Dec. 10 have soared to over 90% from 60% just a month prior, according to swaps markets. Traders have also fully priced in three cuts by September 2026. 

The S&P 500 is now about 0.5% away from its October peak, and seasonal trends generally bode well for a year-end rally. However, this time the market faces two risk events in the form of key jobs and inflation reports due later in December after being delayed by the government shutdown.

Hartnett and his team also note that the US administration is likely to intervene to stop inflation from running hot and the unemployment rate rising to 5%. They recommend positioning for that possibility by buying “inexpensive” mid-caps into 2026. They also see the best relative upside in sectors linked to the economic cycle, such as homebuilders, retailers, REITs and transportation stocks.

The strategists had reiterated a preference for international equities through 2025, a call that proved correct as the S&P 500’s  advance trailed a  rally in the MSCI All-Country World ex-US index. 

So, is Hartnett right, will stocks sell off if it's a dovish rate cut? I wouldn't be surprised if there's a "sell the news" initial reaction but in the weeks following the December rate cut, I expect stocks to continue grinding higher until March, with volatility of course. The reality is with fiscal and monetary policy being accomodative, it's hard to envision stocks selling off right now as we head into the new year.  And even though US Treasuries sold off this week, I expect yields to behave as employment growth and inflation expectations remain muted. The bigger story today was in Canada: 

A much bigger selloff in Canadian government bonds Friday, sparked by stronger-than-expected employment data, was a factor. But US yields had already risen to weekly highs.

The US 10- and 30-year yields climbed more than 12 basis points since Nov. 28, with the 10-year closing at 4.14%.

The move held after the delayed release of September personal income and spending data — which includes the inflation gauge the Fed aims to keep around 2% — showed that it accelerated to 2.8%, as economists estimated. Several Fed policymakers have said the inflation trend should forestall rate cuts.

I know a really good Canadian fixed income trader who got dinged today but I agree with him, employment trends in Canada are not strong, the data was stronger than expected because of part-time workers and I'd remain long Canadian bonds here/ short the loonie. What else? The big news today was Netflix (NFLX) will buy Warner Bros. Discovery's (WBD) studios and its streaming unit for $72 billion, following a weeks-long bidding war. Netflix stock lost 3% today, while WBD shares gained 6%. Is Netflix a buy here? I have no idea what will happen with this acquisition as it will face political and regulatory scrutiny but it's a good time to initiate a position in Netflix but don't expect it to pop back up to a new high any time soon (can go lower before it stabilizes): 
With or without Warner Bros. Discovery, Netflix will remain a global powerhouse and a defensive tech stock that does well even in a downturn (the last hing people cut in desperation in their Netflix). But the stock moves violently to the downside sometimes like it did back in 2022 so you need to remain alert and humble even if I think a nice buying opportunity is emerging here. What else? On Wednesday Oracle reports and we shall see the post-earnings reaction as the stock has sold off recently quite a bit on debt concerns: 
It could pop back over $250 or drop back to retest its recent low of $185, nobody really knows, but sentiment is so bearish on this stock that I wouldn't be surprised if it reaccelerates up if earnings are good. Either way, it's a leader in ts field and just like Netflix, you need to see these selloffs as an opportunity to add or initiate a position (imho). Of course, this week was all about banks (US and Canadian) with a lot of them making new highs. I invite you to carefully scroll down the list of stocks making a new high here (you should be doing this every single trading day to see where strength lies).  Lastly, I know there is a lot of angst on the spillover from surging Japanese bond yields but I agree with Dhaval Joshi of BCA Research, the idea that, past a certain point, Japanese government bond yields could trigger a global stock-market meltdown is pretty far-fetched: 

"There isn't a critical level [for Japanese bond yields] that is going to cause a tsunami of capital flooding back to Japan. That's not going to happen," Joshi said.   

I've seen this "yen carry trade unwind" story so many times in the past 25 years that I tend to be more skeptical about a potential global stock market rout from rising Japanese bond yields. Alright, let me wrap this up with the best performing US large cap stocks this week:  Below, Andrew Davis, Bryn Mawr Trust Advisors SVP & Head of Macroeconomic Research, joins 'Fast Money' to talk the current state of play in teh market and how to position going into next year.

Also, Jeremy Siegel, Wharton professor emeritus and WisdomTree chief economist, joins 'Closing Bell' to discuss Siegel's thoughts on equity markets, if investors are afraid of missing out on equity markets growth and much more.

Lastly, Bloomberg's Asia Trade discusses how Japan's 2-year yield hit the highest level since 2008.