#194
The Trillion Dollar Prize
Published:
Aug 18, 2018
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Trump’s tax overhaul includes a golden opportunity for corporates to bring home their cash from abroad. The law sets a one-time tax rate of 15.5% for cash and liquid assets, and 8% for illiquid assets - much lower than the 35% corporate tax. As a result, companies have already brought $400b back to the US - and they are expected to bring $1.5 trillion total.
But what should they do with all that cash? The largest asset managers are scrambling to compete for this trillion dollar prize. Blackrock, Fidelity, Goldman Sachs, and JP Morgan all boast nuanced strategies on how to handle this - whether using the cash to invest in money market funds, pay down debt, buy back shares, or reinvest in growth. And the money is moving quickly - as Cisco alone recently redeemed $5b from Deutsche Bank to execute on its repatration.
The scramble to service repatriated funds has also contributed to recent dealmaking. Last year Blackrock acquired Cachematrix, a cash management SaaS startup, to pursue this opportunity. In 2016, BlackRock also acquired Bank of America Corp.’s $80 billion money market fund - bringing the firm’s money-market AUM to nearly $400b and within striking range of Fidelity’s $500b.
Whether any of the asset managers can build a differentiated way of attracting or managing these funds remains to be seen. After all, who can really do it better than Daffy?
Portfolio News
Enterprise blockchain startup Axoni raises $32M Series B - Congrats to portfolio company Axoni on their $32m Series B! Axoni is on a mission to bring enterprise blockchain to scale in the traditional capital markets. Axoni has been selected by infrastructure providers (DTCC, ICAP) as the partner of choice for asset classes like credit derivatives and FX. Axoni has also been selected by large broker-dealers for OTC traded assets like equity derivatives. Read more
The Trillion Dollar Prize
Asset managers scramble to pick up repatriated cash - The US tax overhaul has incentivized the repatriation of corporate money overseas, an inflow of cash expected to reach nearly $1.5 trillion. Asset managers such as BlackRock and Fidelity race to take advantage of the change. Read more
BlackRock acquisition of CacheMatrix - In an effort to streamline its cash management efforts, BlockRock acquired the startup in June 2017. This underscores a larger effort by asset managers to capitalize on the higher cash inflows that a rising rate environment brings. Read more
Industry News
Meet the German fintech that's now worth more than Deutsche Bank - Wirecard, a German online payments and fraud prevention startup, recently surpassed Deutsche Bank in market value. Its stock has increased by over 84% this year. Read more
Bank of China pushes fintech spending - The Bank of China (separate from the central bank of China) announced a plan to dedicate 1% of its annual operating budget on fintech-related projects, though it has yet to disclose specifics. Read more
Wealthsimple announces zero-fee trading platform in Canada - The Toronto based wealth management startup has launched the first zero-commission stock trading service in Canada. Robinhood, Wealthsimple's would-be competitor, has not announced any plans to expand into the Canadian market. Read more
Square expands cash app bitcoin service to all 50 US states - The mobile payments firm now lets all US customers buy and sell bitcoins via Cash App, including New York given it has secured a "BitLicense" as well to operate in the state. Read more
Bitwise gives investors new tools for tracking crypto - Bitwise Asset Management announced three new indexes to track baskets of digital assets including Bitwise 20 Mid Cap, Bitwise 70 Small Cap, and Bitwise 100 Total Market. The company also currently has an application for a bitcoin related ETF with the SEC that differs from others as it tracks a basket of coins (the HOLD 10 Index), as opposed to a single coin. Read more
PayPal partners with India’s HDFC bank - Paypal has partnered with the India-based multinational lender in an effort to expand its presence in the Indian market. HDFC serves 35 million cardholders domestically. Read more
How is TransferWise so much cheaper than the banks? - The money transfer service gets transparent with fees - and explains why banks don't do the same. On average, TransferWise saves you 80% on exchange rate. Read more
WEEL brings default rate to zero - In a market known for its high default rates and fraud, the founder of Weel, a Brazil based invoice factoring patform, discusses how to grow aggressively without incurring more defaults. Read more
Mifid II pushes asset managers toward greater efficiency with research spending - Mifid II is shifting the burden of research costs from the investor to the investment manager, tightening managers' budgets by 20%. Read more
Distributed Systems to join Coinbase identity team - Coinbase acquired the digital identity startup as part of its effort to expand beyond the crypto space. It begs the question of whether the decentralization of private information is really worth the hassle of maintaining it. Read more
Bank of Montreal and Ontario Teachers' Pension Plan test canadian debt issuance over blockchain - The Canadian bank issued C$250m ($190m) of fixed income to the Ontario pension fund, using a blockchain-powered settlement system through which buyers and sellers may view the transaction. Read more
Toshi No More: Ethereum Network Browser Renames to Coinbase Wallet - Coinbase's Toshi has rebranded as "Coinbase Wallet," in the hopes of being a one stop shop for users to interact with the decentralized web and apps, manage all digital tokens, send payments, and store identity all from your phone. Read more
Select Financings
AuditBoard - Los Angeles based compliance and audit software company has raised $40m of Series B financing, led by Battery Ventures. Read more
Deposit Solutions - Hamburg based open banking platform provider has raised $100m in Private Equity financing, led by Vitruvian Partners. Read more
Flywire - Boston based remittance technology startup has raised $100m led by Temasek. Read more
Lucidity - Los Angeles based digital advertising blockchain protocol has raised $5m in a strategic funding round backed by 3Rodeo, CoinUs, Cypher Group, YouBi Capital, and Pithia. Read more
Oscar Health – New York based health insurance startup has raised $375m in equity funding from Alphabet at a valuation over $3b. Read more
Pie Insurance - Washington DC based workers' compensation insurance startup has raised $11m of Series A funding led by Greycroft. Read more
Progressa - Vancouver based direct-pay lending platform provider has raised $84m in Series B financing, led by Gravitas Securities and Canaccord Genuity. Read more
SFOX - Los Angeles based algorithmic cryptocurrency trading startup has raised $22.7m in Series A financing, led by Tribe Capital. Read more
Steady - Atlanta based income-building platform provider has raised $9m of Series A financing, led by Propel Venture Partners. Read more
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