Hedge fund Millennium’s landmark stake sale 

One scoop to start: Chancellor Rachel Reeves is considering a less dramatic cut to the annual cash Isa allowance following a backlash from building societies. The UK Treasury has privately floated a level of £12,000 a year, down from the current £20,000 but higher than Reeves’ initial £10,000 proposal.

In today’s newsletter:

• Izzy Englander’s firm Millennium sells stake in itself

• Private equity investor body sounds alarm

• US money market risks new bout of stress

Hedge fund Millennium’s stake sale

For the first time in its 36-year history, Millennium Management’s billionaire founder Izzy Englander parted with equity in the firm as it offloaded a stake to a group of investors.

The 15 per cent stake sale values Millennium at about $14bn and is the latest move by the hedge fund group to prepare for life beyond its founder, who is in his 70s, writes Costas Mourselas.

In an email to staff on Monday, the New York-based hedge fund said it had sold the “minority, passive equity interest in Millennium’s management company” to a group that included some of its largest institutional investors.

The equity investments, which would be worth about $2bn for a 15 per cent stake, were made through funds managed by Goldman Sachs’ Petershill group, which invests in hedge funds and private equity firms.

“This transaction is the latest step in our evolution and further positions Millennium for the future,” the email said. The firm declined to comment.

Millennium is one of the pioneers of a multi-manager hedge fund structure, where hundreds of trading teams known as “pods” operate across markets rather than a few star traders.

The strategy has enabled Millennium to accumulate $79bn in assets under management and become one of a select few hedge fund giants that dominate the industry.

As well as bringing in outside investors to the management company, senior staff at the hedge fund were also due to participate in the stake sale.

Millennium had already moved most of its fund investors into a longer-term share class that increases the time it takes to withdraw capital to five years, similar to a private equity vehicle. The typical hedge fund might impose a redemption period of between a month and a year.

Private equity investor body sounds alarm

An influential group representing some of the private equity industry’s largest backers has sounded the alarm about the risks to institutional investors from a rush of retail money into the sector, writes Alexandra Heal.

The number of deals needed to deploy wealthy individuals’ cash could pull managers’ attention away from investing the capital of pension plans and endowments, the Institutional Limited Partners Association warned.

Fees on offer from evergreen funds, a newly popular type of vehicle suited to retail investors, could encourage buyout firms to prioritise them instead of the traditional funds backed by institutions, ILPA said in a report.

Billions of dollars are flowing into evergreen funds, and institutional investors have expressed fears privately that this influx of new cash could undermine their standing as the sector’s top clients.

The flood of retail money could “fundamentally alter the landscape of private equity”, said Neal Prunier, managing director of industry affairs at ILPA.

He added that, while private equity had historically “outperformed” other asset classes, institutional investors were concerned that “might not continue to the same degree given the types . . . and the volume of investments that are needed to satisfy the retail capital space”.

Evergreen vehicles have no end date and allow investors to redeem their money at regular intervals, while institutions largely lock their capital into closed-end funds for about a decade.

By June, more than €88bn had been invested in evergreen funds in Europe alone, over double the amount in early 2024, according to consultants Novantigo.

ILPA warned that, where a private equity group had both a retail vehicle and an institutional fund, those interests might not align and the institutional investors could be the ones to lose out.

Chart of the week

Stress in US money markets could flare up again and spur the Federal Reserve to take swifter action to tame another burst higher in short-term interest rates, Wall Street banks have warned.

Short-term funding rates steadied last week after signs of strain late last month in a vital section of the financial system’s plumbing prompted concern among some bankers and policymakers, write Kate Duguid and Claire Jones.

The difference between a key market-based rate known as tri-party repo and one set by the Federal Reserve on October 31 hit its highest level since 2020, despite the central bank saying that it would halt a programme to reduce the size of its balance sheet on December 1.

Tri-party repo rates eased back in line with the Fed’s rate on reserve balances last week, as pressure on money markets waned. But market participants remain worried about the spectre of another jump in repo rates in the coming weeks.

“I don’t think it was a one-off anomaly of just a few days of volatility,” said Deirdre Dunn, head of rates at Citigroup, who also serves as chair of the Treasury Borrowing Advisory Committee.

Scott Skyrm, executive vice-president at repo market specialist Curvature Securities, said that, while markets had “normalised”, in part because banks tapped a Fed facility to release pressure in money markets, “funding pressure is going to be back at least at the next month-end and year-end”.

Samuel Earl, a US rates strategist at Barclays, echoed that sentiment, noting that funding markets were “not out of the woods”.

Five unmissable stories this week

Insurers are increasingly using borrowed money to enhance the returns they earn on their gilt holdings, raising concerns that risky leverage is creeping back into the market for UK government debt.

Warren Buffett offloaded stocks for the third consecutive year, as the chief executive of Berkshire Hathaway enters his final months at the sprawling conglomerate he built over more than six decades.

Eighty per cent of all private capital groups could be zombie firms within the next decade, according to one of the industry’s most senior executives, surviving only to manage existing investments because they cannot raise fresh capital.

Apollo Global has reported near-record profits from its Athene insurance operations after a surge in new loans made by the unit generated more than enough income to offset declining investment returns from private credit.

Rachel Reeves is drawing up a £2bn raid on UK retirement savings by reducing tax benefits from salary sacrifice pension schemes ahead of the Budget this month.

And finally

More 250 years since his birth, the exhibition Turner: Always Contemporary showcases JMW Turner’s work ranging from paintings to prints. The exhibition highlights themes that remain pertinent, including travel, landscape, climate change, immigration and the role of the artist.

At the Walker Art Gallery, Liverpool, until 22nd February 2026