Pension Pulse

Big Banks Boost the Dow and S&P 500 to Record Highs

Sinéad Carew, Lisa Mattackal and Pranav Kashyap of Reuters report S&P 500, Dow hit records, boosted by bank earnings surprise:

The S&P 500 and the Dow scored record closing highs on Friday, with the big boosts from financial stocks after banks reported strong quarterly results while the latest inflation data fueled expectations for a U.S. Federal Reserve rate cut in November.

Major financial companies kicked off earnings season with JPMorgan Chase finishing the session up 4.4% after the lender reported higher-than-expected third-quarter profit and raised its annual interest income forecast.

Shares in Wells Fargo rallied 5.6% after its profit also beat analysts' expectations. BlackRock stock gained 3.6% after the asset manager reported that its assets under management had hit a record high for the third straight quarter.

Other stocks in the industry rose broadly, making the S&P 500 Financials index the biggest index points boost for the benchmark.

"We'd some good earnings reports from some leading financial companies. That's a good start to earnings season," said Evan Brown, Portfolio Manager and Head of Multi-Asset Strategy, UBS Asset Management, adding that it bodes well for the economy.

"When financials do well, this is what a soft landing looks like. It's a positive overall sign for the economy and sets a positive tone for earnings releases in other industries in the next few weeks."

For the day, the Dow Jones Industrial Average rose 409.74 points, or 0.97%, to 42,863.86, the S&P 500 gained 34.98 points, or 0.61%, to 5,815.03 and the Nasdaq Composite gained 60.89 points, or 0.33%, to 18,342.94.

For the week, the S&P 500 added 1.1% while the Dow climbed 1.2% and the Nasdaq added 1.1% with all three notching their fifth weekly gain in a row.

Earlier in the day, data from the U.S. Department of Labor showed the Producer Price Index (PPI) for final demand was unchanged on a monthly basis in September, compared to the 0.1% rise expected by economists polled by Reuters.

Friday's PPI data follows Thursday's Consumer Price Index (CPI) reading, which was slightly higher than forecast, although weekly jobless claims rose more than expected.

"The market's pretty convinced that we're going to have a soft landing and that inflation, even with CPI being a little bit higher than expected yesterday, is going to be moderate," said Scott Wren, senior global market strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

"If you look at today's PPI data, the core and final demand were both a little lower than expected ... Inflation's certainly been moderating and that's a positive that the market paid attention to."

Meanwhile, a preliminary reading of the University of Michigan's October consumer sentiment index stood at 68.9, compared with analysts' estimate of 70.8.

With the week's data under their belts, traders kept bets steady for a roughly 88% probability the Fed would cut rates by 25 basis points at its November meeting, and a 12% chance it will leave rates unchanged, according to CME's FedWatch tool.

During the session the consumer discretionary index was under pressure from an 8.8% slump in shares of Tesla after the EV maker unveiled its long awaited robotaxi, but did not provide details on how fast it could ramp up production or deal with potential regulatory hurdles.

With S&P 500 financial services stocks adding 1.95%, the S&P 500 Banks index added 4.2%. During the session it hit its highest level since February 2022. The KBW regional bank index closed up 3.4%.

Advancing issues outnumbered decliners by a 3.96-to-1 ratio on the NYSE where there were 455 new highs and 44 new lows.

On the Nasdaq, 3,142 stocks rose and 1,088 fell as advancing issues outnumbered decliners by a 2.89-to-1 ratio. The S&P 500 posted 69 new 52-week highs and one new low while the Nasdaq Composite recorded 139 new highs and 84 new lows.

On U.S. exchanges 10.27 billion shares changed hands compared with the 12.06 billion moving average for the last 20 sessions.

Samantha Subin and Brian Evans of CNBC also report the Dow jumps 400 points to a record on Friday, S&P 500 closes above 5,800 for the first time:

The S&P 500 and Dow Jones Industrial Average powered to new highs on Friday and capped off a winning week as banking behemoths ushered in a promising start to the third-quarter earnings season.

The broad index gained 0.61% to end at 5,815.03, while the Dow rallied 409.74 points, or 0.97%, to finish at 42,863.86. Both averages hit fresh all-time highs and closed at records. The Nasdaq Composite added 0.33% to finish at 18,342.94 and less than 2% below its all-time high.

“What we’re seeing — and I think you’re seeing it hit pretty hard today, in a good way — is a broadening of the market,” said Craig Sterling, head of U.S. equity research at Amundi US.

The major averages also registered a fifth straight week of gains. The S&P 500 and Nasdaq jumped 1.1% each, while the Dow toted a 1.2% gain.

A strong start to the third-quarter earnings season provided a lift to stocks. JPMorgan Chase rose 4.4% after topping profit and revenue expectations, while Wells Fargo popped 5.6% on stronger-than-expected profits. Investors overlooked disappointing revenue and an 11% decline in net interest income.

“Net interest income used to be the bellwether of whether [a] bank is doing well or not,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “Investors have comprehended that they’ll make money in good times and bad.”

Wall Street tends to view the banking sector as a barometer for the health of economy, setting the tone for the remainder of the earnings season. However, Forrest notes they lack the visibility into forward guidance that often affects the postearnings stock moves.

Stocks also benefited from data that alleviated fears that inflation was not cooling off quickly enough. That included a cooler-than-expected September producer price index reading after the consumer price index increased slightly more than expected. The findings signaled that the Federal Reserve may in fact attain a soft landing scenario and reach its 2% goal, which Goldman Sachs economists think upcoming September inflation data may already show.

“Overall, these numbers are getting less impactful as inflation moderates,” said David Russell, global head of market strategy at TradeStation. “The Fed could still be on track for 25 basis points at the next two meetings.”

Fed funds futures trading suggests a nearly 90% likelihood that the Federal Reserve will dial back interest rates by a quarter point in November, according to the CME FedWatch Tool. Central bank policymakers will keep a close eye on additional data, which will shape their course on rates.

Elsewhere, Tesla shares tanked 8.8% on the back of an underwhelming robotaxi event.

Hugh Son and Kristian Burt of CNBC also report Jamie Dimon says geopolitical risks are surging: 

JPMorgan Chase CEO Jamie Dimon sees risks climbing around the world amid widening conflicts in the Middle East and with Russia’s invasion of Ukraine showing no signs of abating.

“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,” Dimon said Friday in the bank’s third-quarter earnings release.

“There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history,” he said.

The international order in place since the end of World War II is unraveling in light of conflicts in the Middle East and Ukraine, rising U.S.-China tensions, and the risk of “nuclear blackmail” from Iran, North Korea and Russia, Dimon said last month during a fireside chat held at Georgetown University.

“It’s ratcheting up, folks, and it takes really strong American leadership and Western world leaders to do something about that,” Dimon said at Georgetown. “That’s my No. 1 concern, and it dwarves any I’ve had since I’ve been working.”

The ongoing conflict between Israel and Hamas recently hit the one-year mark since Hamas’ attack on Oct. 7, 2023, sparked war, and there have been few signs of it slowing down. Tens of thousands of people have been killed as the conflict has broadened into fighting on multiple fronts, including with Hezbollah and Iran.

At least 22 people were killed and more than 100 injured in Beirut from Israeli airstrikes on Thursday. Iran launched more than 180 missiles against Israel on Oct. 1, and worries have risen that an Israeli retaliation could target Iranian oil facilities.

Meanwhile, the Russian government approved a draft budget last week that boosted defense spending by 25% from 2024 levels, a sign that Russia is determined to continue its invasion of Ukraine, analysts say.

Dimon also said Friday that he remained wary about the future of the economy, despite signs that the Federal Reserve has engineered a soft landing.

“While inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world,” Dimon said. “While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment.” 

It's Friday, long Thanksgiving weekend here in Canada, most people are off till Tuesday.

Today was all about banks leading the charge as earnings came in stronger than expected.

The one bank everyone owns and watches closely is JPMorgan Chase:

As shown above, since dipping below its exponential 200-week moving average last October, shares of this bank stalwart have never looked back and powered higher.

In fact, you'd be hard-pressed to find a more bullish weekly chart than this, every time it dipped to its 20-week exponential moving average, buyers came in and shares surged higher (weekly MACD is also positive).

JPMorgan Chase shares are inching closer to a new 52-week high and unless the market sells off going into year-end, I don't see any reason why it won't get there with some volatility, of course:

I'm showing you shares of JPMorgan because it's by far the most important bank but truth is all banks and financials in general are doing very well:

The top holding of the Financial Select Sector SPDR Fund (XLF) shown above is Berkshire (13.4%) followed by JPMorgan Chase (9.5%) followed by well-known financial companies:

What's impressive is that banks and other financials are doing well as long bond yields back up:

The reason? The yield curve is steepening as traders anticipate more Fed rate cuts so the short end of the curve is rallying strongly.

And remember, banks borrow short and lend long, so when the yield curve steepens, it's positive for their net interest income.

But how long is this going to last and are we really headed for a soft landing or is the market getting overly excited and we have yet to see the hard landing?

I've consistently stated that it takes time for all those interest rate hikes to work their way into the economy and this time isn't different, a recession is coming

Still, there's no question stocks are headed for another strong year and capping off a historic run:

The stock market which is a leading indicator sure isn't pointing to a recession any time soon.

There are some who even think we are basing and the US economy is about to launch into another growth spurt:

I have my doubts but can't discount this possibility especially if the economy keeps muddling through.

I need to see employment data over the next three to six months to conclude we have indeed avoided a hard landing.

Alright, let me wrap it up with the top performing large-cap stocks this week:

And here's my stock of the week (do your due diligence):

Enjoy your weekend and wish all Canadians a Happy Thanksgiving!

Below, Tom Lee, Fundstrat Global Advisors managing partner and head of research, joins CNBC's 'Closing Bell' to discuss why he's cautious about the markets right now, his outlook on the economy, and more.

Next, CNBC’s Mike Santoli, State Street’s Michael Arone and KBW’s David Konrad, joins 'Power Lunch' to discuss the economy, banks and earnings.

Lastly, Nassim Taleb, Black Swan author and Universa Investments distinguished scientific advisor, talks about the fragility of markets, how to hedge against geopolitical risks and artificial intelligence. He's on "Bloomberg Markets." Take the time to listen to his insights.

Big Banks Boost the Dow and S&P 500 to Record Highs

Sinéad Carew, Lisa Mattackal and Pranav Kashyap of Reuters report S&P 500, Dow hit records, boosted by bank earnings surprise:

The S&P 500 and the Dow scored record closing highs on Friday, with the big boosts from financial stocks after banks reported strong quarterly results while the latest inflation data fueled expectations for a U.S. Federal Reserve rate cut in November.

Major financial companies kicked off earnings season with JPMorgan Chase finishing the session up 4.4% after the lender reported higher-than-expected third-quarter profit and raised its annual interest income forecast.

Shares in Wells Fargo rallied 5.6% after its profit also beat analysts' expectations. BlackRock stock gained 3.6% after the asset manager reported that its assets under management had hit a record high for the third straight quarter.

Other stocks in the industry rose broadly, making the S&P 500 Financials index the biggest index points boost for the benchmark.

"We'd some good earnings reports from some leading financial companies. That's a good start to earnings season," said Evan Brown, Portfolio Manager and Head of Multi-Asset Strategy, UBS Asset Management, adding that it bodes well for the economy.

"When financials do well, this is what a soft landing looks like. It's a positive overall sign for the economy and sets a positive tone for earnings releases in other industries in the next few weeks."

For the day, the Dow Jones Industrial Average rose 409.74 points, or 0.97%, to 42,863.86, the S&P 500 gained 34.98 points, or 0.61%, to 5,815.03 and the Nasdaq Composite gained 60.89 points, or 0.33%, to 18,342.94.

For the week, the S&P 500 added 1.1% while the Dow climbed 1.2% and the Nasdaq added 1.1% with all three notching their fifth weekly gain in a row.

Earlier in the day, data from the U.S. Department of Labor showed the Producer Price Index (PPI) for final demand was unchanged on a monthly basis in September, compared to the 0.1% rise expected by economists polled by Reuters.

Friday's PPI data follows Thursday's Consumer Price Index (CPI) reading, which was slightly higher than forecast, although weekly jobless claims rose more than expected.

"The market's pretty convinced that we're going to have a soft landing and that inflation, even with CPI being a little bit higher than expected yesterday, is going to be moderate," said Scott Wren, senior global market strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

"If you look at today's PPI data, the core and final demand were both a little lower than expected ... Inflation's certainly been moderating and that's a positive that the market paid attention to."

Meanwhile, a preliminary reading of the University of Michigan's October consumer sentiment index stood at 68.9, compared with analysts' estimate of 70.8.

With the week's data under their belts, traders kept bets steady for a roughly 88% probability the Fed would cut rates by 25 basis points at its November meeting, and a 12% chance it will leave rates unchanged, according to CME's FedWatch tool.

During the session the consumer discretionary index was under pressure from an 8.8% slump in shares of Tesla after the EV maker unveiled its long awaited robotaxi, but did not provide details on how fast it could ramp up production or deal with potential regulatory hurdles.

With S&P 500 financial services stocks adding 1.95%, the S&P 500 Banks index added 4.2%. During the session it hit its highest level since February 2022. The KBW regional bank index closed up 3.4%.

Advancing issues outnumbered decliners by a 3.96-to-1 ratio on the NYSE where there were 455 new highs and 44 new lows.

On the Nasdaq, 3,142 stocks rose and 1,088 fell as advancing issues outnumbered decliners by a 2.89-to-1 ratio. The S&P 500 posted 69 new 52-week highs and one new low while the Nasdaq Composite recorded 139 new highs and 84 new lows.

On U.S. exchanges 10.27 billion shares changed hands compared with the 12.06 billion moving average for the last 20 sessions.

Samantha Subin and Brian Evans of CNBC also report the Dow jumps 400 points to a record on Friday, S&P 500 closes above 5,800 for the first time:

The S&P 500 and Dow Jones Industrial Average powered to new highs on Friday and capped off a winning week as banking behemoths ushered in a promising start to the third-quarter earnings season.

The broad index gained 0.61% to end at 5,815.03, while the Dow rallied 409.74 points, or 0.97%, to finish at 42,863.86. Both averages hit fresh all-time highs and closed at records. The Nasdaq Composite added 0.33% to finish at 18,342.94 and less than 2% below its all-time high.

“What we’re seeing — and I think you’re seeing it hit pretty hard today, in a good way — is a broadening of the market,” said Craig Sterling, head of U.S. equity research at Amundi US.

The major averages also registered a fifth straight week of gains. The S&P 500 and Nasdaq jumped 1.1% each, while the Dow toted a 1.2% gain.

A strong start to the third-quarter earnings season provided a lift to stocks. JPMorgan Chase rose 4.4% after topping profit and revenue expectations, while Wells Fargo popped 5.6% on stronger-than-expected profits. Investors overlooked disappointing revenue and an 11% decline in net interest income.

“Net interest income used to be the bellwether of whether [a] bank is doing well or not,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “Investors have comprehended that they’ll make money in good times and bad.”

Wall Street tends to view the banking sector as a barometer for the health of economy, setting the tone for the remainder of the earnings season. However, Forrest notes they lack the visibility into forward guidance that often affects the postearnings stock moves.

Stocks also benefited from data that alleviated fears that inflation was not cooling off quickly enough. That included a cooler-than-expected September producer price index reading after the consumer price index increased slightly more than expected. The findings signaled that the Federal Reserve may in fact attain a soft landing scenario and reach its 2% goal, which Goldman Sachs economists think upcoming September inflation data may already show.

“Overall, these numbers are getting less impactful as inflation moderates,” said David Russell, global head of market strategy at TradeStation. “The Fed could still be on track for 25 basis points at the next two meetings.”

Fed funds futures trading suggests a nearly 90% likelihood that the Federal Reserve will dial back interest rates by a quarter point in November, according to the CME FedWatch Tool. Central bank policymakers will keep a close eye on additional data, which will shape their course on rates.

Elsewhere, Tesla shares tanked 8.8% on the back of an underwhelming robotaxi event.

Hugh Son and Kristian Burt of CNBC also report Jamie Dimon says geopolitical risks are surging: 

JPMorgan Chase CEO Jamie Dimon sees risks climbing around the world amid widening conflicts in the Middle East and with Russia’s invasion of Ukraine showing no signs of abating.

“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,” Dimon said Friday in the bank’s third-quarter earnings release.

“There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history,” he said.

The international order in place since the end of World War II is unraveling in light of conflicts in the Middle East and Ukraine, rising U.S.-China tensions, and the risk of “nuclear blackmail” from Iran, North Korea and Russia, Dimon said last month during a fireside chat held at Georgetown University.

“It’s ratcheting up, folks, and it takes really strong American leadership and Western world leaders to do something about that,” Dimon said at Georgetown. “That’s my No. 1 concern, and it dwarves any I’ve had since I’ve been working.”

The ongoing conflict between Israel and Hamas recently hit the one-year mark since Hamas’ attack on Oct. 7, 2023, sparked war, and there have been few signs of it slowing down. Tens of thousands of people have been killed as the conflict has broadened into fighting on multiple fronts, including with Hezbollah and Iran.

At least 22 people were killed and more than 100 injured in Beirut from Israeli airstrikes on Thursday. Iran launched more than 180 missiles against Israel on Oct. 1, and worries have risen that an Israeli retaliation could target Iranian oil facilities.

Meanwhile, the Russian government approved a draft budget last week that boosted defense spending by 25% from 2024 levels, a sign that Russia is determined to continue its invasion of Ukraine, analysts say.

Dimon also said Friday that he remained wary about the future of the economy, despite signs that the Federal Reserve has engineered a soft landing.

“While inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world,” Dimon said. “While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment.” 

It's Friday, long Thanksgiving weekend here in Canada, most people are off till Tuesday.

Today was all about banks leading the charge as earnings came in stronger than expected.

The one bank everyone owns and watches closely is JPMorgan Chase:

As shown above, since dipping below its exponential 200-week moving average last October, shares of this bank stalwart have never looked back and powered higher.

In fact, you'd be hard-pressed to find a more bullish weekly chart than this, every time it dipped to its 20-week exponential moving average, buyers came in and shares surged higher (weekly MACD is also positive).

JPMorgan Chase shares are inching closer to a new 52-week high and unless the market sells off going into year-end, I don't see any reason why it won't get there with some volatility, of course:

I'm showing you shares of JPMorgan because it's by far the most important bank but truth is all banks and financials in general are doing very well:

The top holding of the Financial Select Sector SPDR Fund (XLF) shown above is Berkshire (13.4%) followed by JPMorgan Chase (9.5%) followed by well-known financial companies:

What's impressive is that banks and other financials are doing well as long bond yields back up:

The reason? The yield curve is steepening as traders anticipate more Fed rate cuts so the short end of the curve is rallying strongly.

And remember, banks borrow short and lend long, so when the yield curve steepens, it's positive for their net interest income.

But how long is this going to last and are we really headed for a soft landing or is the market getting overly excited and we have yet to see the hard landing?

I've consistently stated that it takes time for all those interest rate hikes to work their way into the economy and this time isn't different, a recession is coming

Still, there's no question stocks are headed for another strong year and capping off a historic run:

The stock market which is a leading indicator sure isn't pointing to a recession any time soon.

There are some who even think we are basing and the US economy is about to launch into another growth spurt:

I have my doubts but can't discount this possibility especially if the economy keeps muddling through.

I need to see employment data over the next three to six months to conclude we have indeed avoided a hard landing.

Alright, let me wrap it up with the top performing large-cap stocks this week:

And here's my stock of the week (do your due diligence):

Enjoy your weekend and wish all Canadians a Happy Thanksgiving!

Below, Tom Lee, Fundstrat Global Advisors managing partner and head of research, joins CNBC's 'Closing Bell' to discuss why he's cautious about the markets right now, his outlook on the economy, and more.

Next, CNBC’s Mike Santoli, State Street’s Michael Arone and KBW’s David Konrad, joins 'Power Lunch' to discuss the economy, banks and earnings.

Lastly, Nassim Taleb, Black Swan author and Universa Investments distinguished scientific advisor, talks about the fragility of markets, how to hedge against geopolitical risks and artificial intelligence. He's on "Bloomberg Markets." Take the time to listen to his insights.

QuadReal and Valor Expand European Logistics Platform

QuadReal, BCI's real estate subsidiary, and its strategic partner Valor announced they will accelerate London urban logistics deployment and extend development pipeline with c. £60 million Barking and Enfield acquisitions:

Valor Real Estate Partners (“Valor”), Europe’s fastest growing last mile real estate specialist, has acquired, on behalf of its joint venture with QuadReal Property Group (“QuadReal”), a global real estate investment, operating and development company, two prime last mile logistics sites in Barking and Enfield, London, with a total GDV of £60 million. Both properties were acquired off market.

In Enfield, North London, the joint venture has acquired, Trafalgar Trading Estate, Enfield’s pre-eminent multi-let industrial park. The 79,435 square foot property benefits from strong specifications and totals 11 units across three terraced buildings. It is 92% occupied by a range of trade counter and last mile businesses, with an average lease term of two years. Located at the base of the M1 motorway and A10 trunk road, it provides access to approximately 6.4 million people within a 60-minute drive.

In Barking, East London, the joint venture has acquired a currently vacant 3.49-acre site, where it intends to develop a best-in-class build-to-suit last mile distribution hub. Occupiers will benefit from excellent connectivity via the nearby A13 and North Circular, as well as Barking’s position as one of London’s major industrial centres, where ongoing residential-led regeneration projects, including Barking Riverside, are set to continue eroding supply.

Jeremy Achkar, Senior Vice President at Valor, added: “The off-market purchase of the Trafalgar Trading Estate represents our first acquisition in Enfield. It is one of London’s key industrial submarkets, and we look forward to growing our presence there in the coming years.”

Timour Wielemans, Vice President at Valor, commented: “We are thrilled to have secured this prime 3.5-acre site, which extends our London development pipeline past 700,000 sq ft and where the intention is to deliver our first build-to-suit scheme. Leveraging our new in-house development team, we are well-positioned to take on increasingly complex projects and deliver bespoke products that align with the needs of our occupiers.”

Thomas Blangy, Senior Vice President at QuadReal Property Group, said: “These acquisitions align with our strategy of capitalising on high-growth urban logistics markets where supply constraints and strong demand present opportunities for long-term value creation. London’s last-mile logistics sector continues to offer solid fundamentals, and through our partnership with Valor, we are well-positioned to generate sustainable returns by delivering strategically located assets that meet occupier needs in these key submarkets.”

The joint venture was advised Altus and SBY on the Barking acquisition.

I think it's worth repeating what Thomas Blangy, Senior Vice President at QuadReal Property Group, said: 

“These acquisitions align with our strategy of capitalising on high-growth urban logistics markets where supply constraints and strong demand present opportunities for long-term value creation. London’s last-mile logistics sector continues to offer solid fundamentals, and through our partnership with Valor, we are well-positioned to generate sustainable returns by delivering strategically located assets that meet occupier needs in these key submarkets.”

Indeed, London’s last-mile logistics sector continues to offer solid fundamentals and this partnership with Valor is allowing QuadReal to expand its logistics assets in key cities.

And this joint venture with Valor on logistics is ramping up quickly.

At the end of September, IPE Real Assets reported Valor and QuadReal European venture adds four French assets:

Valor Real Estate Partners and Quadreal Property have invested €50m to acquire four assets in France as part of their ongoing logistics investment partnership.

The joint venture has acquired and will refurbish a vacant 7,000sqm building in Goussainville, North Paris, and has also bought a vacant 10,000sqm warehouse in Lyon.

In separate deals in Paris, the partnership has acquired a 5,000sqm fully-let property located near Orly Airport, and a 6,000sqm vacant property in West Paris, where Valor will carry out a refurbishment programme.

Ben Brunschwig, principal at Valor, said:  “Our disciplined focus on select high growth metropolitan areas in France, coupled with a data driven local market approach and deal sourcing capabilities, is enabling us to continue deploying capital at an attractive entry point.

“With new supply increasingly constrained by competition for land from alternative uses, and supportive technological and demographic mega trends, we have a high conviction that our value add strategy will continue to generate both rental and capital growth outperformance.

“We see the rest of this year and next as an exciting time to accelerate deployment, extending our market leading last-mile platform.”

Thomas Blangy, SVP at QuadReal Property, said: “Over the past four years, alongside Valor, we have built a robust logistics portfolio in Europe, a sector that remains one of QuadReal’s key areas of conviction in our global investment strategy.

“These four properties, located in the high-demand regions of Paris and Lyon, add to QuadReal’s global industrial portfolio and will benefit from the Valor team’s on-the-ground urban logistics expertise.”

In November 2020, European urban logistics investor Valor and QuadReal Property formed a joint venture to invest €1bn urban logistics assets located in key UK, French and German cities.

At the time, the companies said QuadReal, the real estate arm of British Columbia Investment Management Corporation, would be the majority investor in the partnership, which had initial capital commitments of €440m.

With leverage, the value-add and develop-to-hold investment platform was expected to have more than €1bn of investable capital.

In January 2022, the pair launched a second value-add and development venture with a plan to invest an additional €3bn.

Just shows you how important strategic partners are when investing around the world.

This joint venture between Valor and BCI has been extremely successful at ramping up their European logistics portfolio.

I'd invite my readers to read more about Valor Real Estate Partners' strategy here. 

 

Think about  how many things you order from Amazon, Walmart, the Bay or whatever and how important it is for companies to store those goods closely to you in a warehouse and deliver them to you in a timely manner.

That's why the last-mile logistics sector continues to offer solid fundamentals and Canada's pension funds all have invested in this sector in Europe and elsewhere via strong strategic partnerships (joint ventures where they put up most of the capital and pay no fees).

Alright, going to make it short tonight but before I let you go, BCI released its inaugural Stewardship Report this week:

Stands firm on ESG and climate engagement to achieve real-world outcomes

Victoria, B.C. – October 8, 2024 – British Columbia Investment Management Corporation (BCI) today published its 2023-2024 Stewardship Report, demonstrating continued leadership in driving positive environmental, social, and governance (ESG) performance and generating long-term sustainable value through global policy advocacy, proxy voting, and engagement.

“BCI’s inaugural stewardship report builds on more than two decades of responsible investing,” says Gordon J. Fyfe, BCI’s Chief Executive Officer and Chief Investment Officer. “Active ownership is critical to delivering the returns our clients depend on, both through the management of risks associated with responsible investing and by capturing sustainability-related opportunities.”

This inaugural report furthers BCI’s annual ESG and climate-related disclosures, which are moving towards alignment with the globally recognized IFRS Sustainability Disclosure Standards, and provides an in-depth look at how BCI leverages its influence as one of Canada’s largest asset managers to drive continuous improvement with our portfolio companies.

“The challenges we face require action from all parties. As a global investor, we play a role in creating a resilient and productive investment environment for generations,” says Jennifer Coulson, BCI’s Senior Managing Director & Global Head of ESG. “While there is significant work ahead, the progress we are seeing from companies and policymakers alike reinforces our belief that multifaceted engagement can drive real-world outcomes.”

Highlights:

  • Engaging beyond equities: BCI directly engaged 134 public and private portfolio companies
  • , achieving our objectives or observing positive momentum in 58 per cent of cases, and supported collaborative engagements targeting over 2,000 additional public companies. Within fixed income, a less targeted asset class, BCI’s engagement with sustainable and conventional bond issuers supported the structuring of instruments more aligned with ESG best practices.
  • Pursuing value creation: BCI engaged with 31 portfolio companies and partnersin our private equity and infrastructure & renewables resources programs, leveraging governance rights like board representation to support alignment on ESG and implement sustainability initiatives that will lead to stronger performance over time, generating value that can be realized at exit.
  • Voting on climate disclosure: BCI voted at 2,445 public company meetingsin 52 countries during the most recent proxy season. We voted against over 100 directors for insufficient climate disclosure and supported 67 per cent of climate-related shareholder proposals, including those calling for additional emissions data from companies in high-emitting sectors and the incorporation of climate risk assessments into audited financial statements at oil and gas companies.
  • Driving systemic change: BCI contributed to 26 ESG-related policy consultations, roundtables, and joint statements globally to advance priorities like ESG disclosure and methane regulation. We actively participated in the development of the International Sustainability Standards Board’s global disclosure baseline, released last year, and continue to advocate for its widespread adoption, especially in Canada.

    • BCI’s annual ESG and climate-related disclosures are published in our 2023-2024 Corporate Annual Report.

    Read the 2023-2024 Stewardship Reporton BCI.ca.

    ABOUT BCI
    British Columbia Investment Management Corporation (BCI) is amongst the largest institutional investors in Canada, with C$250.4 billion in gross assets under management as of March 31, 2024. Based in Victoria, British Columbia, with offices in Vancouver, New York, and London, U.K., BCI manages a portfolio of diversified public and private market investments on behalf of its 29 British Columbia public sector clients.

    With a global outlook, BCI integrates ESG factors into investment decisions and activities that convert savings into productive capital to meet clients’ risk and return requirements over time. Founded in 1999, BCI is a statutory corporation created by the Public Sector Pension Plans Act. For more information, visit BCI.ca or LinkedIn

Last month, Jennifer Coulson, BCI’s Senior Managing Director & Global Head of ESG, was interviewed by Net Zero Investor where she stated “private markets are well-suited to engagement”:

Of the top 100 carbon emitters, only 30 are listed on a stock exchange. Is engaging with private markets an important  part of your efforts to reach net zero by 2050?

One of our climate ambitions is to ensure at least 80 per cent of BCI’s carbon-intensive investments across asset classes have set mature net-zero aligned commitments by 2030. With about half of our $250bn in gross AUM invested in private markets, engagement with our private portfolio companies and partners is critical to achieving this goal, as well as managing climate risk and finding new ways to create value for our clients through the energy transition.

To support our increasing focus on engagement in private markets, we have grown the ESG teams embedded in our private equity and infrastructure and renewable resources programs, and recently developed a data platform that automates and provides on-demand access to climate information to empower portfolio managers and our investment teams.

While ESG stewardship in private markets is still developing, these asset classes are well suited for engagement, particularly to capture long-term sustainability trends. Investors are uniquely positioned and incentivised to support ESG performance and initiatives where it will increase risk-adjusted returns for clients. Through engagement, our partners and portfolio companies can tap into our team of experts and build value over a longer time horizon that can be realised at exit, which we see as a competitive advantage.

Can you provide some examples of specific engagements?

Over the past year, we have engaged extensively with five portfolio companies in our private equity programme, representing $1.6bn in net asset value, to establish and quantify ESG-related initiatives. Through this work, we have identified numerous opportunities for value creation and are working to execute on ESG-related initiatives that we believe can unlock hundreds of millions in value for our portfolio.

One example is PS Logistics, a leading flatbed truck transportation and logistics provider in the US. Collaborating with management, we quantified the financial benefit attributable to their "driver-first" culture. Management’s focus on prioritising drivers has led to distinct financial benefits such as reduced insurance premium costs, avoidance of costs in recruiting and training new drivers, lower energy costs through route optimisation, and greater market share from clients who are focused on sustainability in their supply chain.

Then, in our infrastructure & renewable resources program, we provided active oversight and strategic direction as a board member and owner of Mosaic Forest Management (Mosaic), a timberland management company located in Canada, on the development of its Big Coast Forest Climate Initiative. The overall direction of the company involves selling certified carbon credits generated from conservation of old forest habitats. BCI participated on a carbon credits committee to oversee the evaluation and execution of the initiative.

She didn't talk about sustainable investing and engagement in real estate because that falls under QuadReal but I can assure you, they take ESG very seriously there too.

For example, Valor Real Estate Partners has a section on ESG on its website where you can read their 2023 and 2024 ESG Report. QuadReal obviously has a section on ESG on its website.

Below, Christian Jamison set Valor up in 2016, with investment partners Jeffrey Kelter and Robert Savage, with the idea of creating a pan European Real Estate investment and Asset Management partnership focused exclusively on the logistics sector. 

Today they have over 3bn euros under management, spanning over 180 properties and 12 million square feet.  

Prior to Valor, Christian, established Delin Capital Asset Management in 2012 where he served as the CEO. He has worked at Robert Fleming, Credit Suisse, GE Real Estate and JP Morgan having graduated from the University of Bristol with a B.Sc. in Economics & Politics. 

Great interview, QuadReal picked the right strategic partner to expand its European logistics platform.