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Corporate MovesFebruary 19, 2021

Northwestern Names Amy Falls New VP and CIO

She will be the first woman to oversee the $12.2 billion endowment.

Amy Falls

Northwestern University has appointed Amy Falls as its vice president and chief investment officer. She will be the first woman to oversee the $12.2 billion endowment.

Falls will succeed William H. McLean, who left the endowment in October after 18 years in the position, the school said Friday. Falls was chosen after a monthslong national search conducted by David Barrett Partners and was recommended by an internal committee.

“I am honored and excited to join the Northwestern Investment Office team and look forward to working with them, the board and my new colleagues to advance the university’s mission,” Falls said in a statement.

“As chief investment officer, I hope to build on Northwestern’s legacy of excellence and promote the growth of the endowment,” she added.

Falls will engage students and staff on environmental, social, and governance (ESG) issues. She will report to the investment committee and Craig Johnson, senior vice president for business and finance. A member of the university president’s senior staff, she will also be responsible for about a quarter of the school’s annual revenue.

She delivered top decile performance in her two prior CIO roles. Last year, as investment chief at Rockefeller University, a New York-based biomedical research institution, she delivered the second-highest performance among university endowments with more than $1 billion in assets. Previously, she was also the founding investment chief at Phillips Academy Andover.

Falls is now among a small cadre of women at top endowments. She was previously a partner at Morgan Stanley, and she is a board member of the Ford Foundation and the Harvard Management Company. She is also the first woman to lead the board of trustees at Phillips Academy Andover.

Falls will start her new role in the spring.

A Washington Beating for Robinhood’s CEO

The GameStop congressional hearings expose fractures in the online brokerage’s business model: its trading halt, margin level, and fee policy.

Seven years ago, online brokerage Robinhood promised to revolutionize the industry when it launched with a zero-commission trading model aiming to democratize investing for all. This was a standard that peers soon widely adopted.

But on Thursday, Robinhood took the heat. Its business management met sharp criticism from members of the House Financial Services Committee. They convened virtually for a high-profile hearing on last month’s massive market volatility involving GameStop, the video game seller, and several others.

Shares of those popular stocks soared, then plummeted, angering many. The hearing will be the first of several on the issue.

Lawmakers questioned the startup’s decision last month to restrict the manic buying of shares of GameStop and other social media-hyped firms, and they leveled accusations of market manipulation. Retail investors and both parties’ lawmakers saw the decision as deliberately benefiting hedge funds over individuals.

At the hearing, Robinhood CEO Vlad Tenev apologized for the trading ban, saying, “What happened is unacceptable to us. To our customers, I’m sorry and I apologize,” and promised such a curb would not happen again. Still, the chief executive sought to deflect blame by maintaining that the outage stemmed from higher required levels of cash on hand that clearinghouses demanded to cover the increased trading volume.

Tenev’s responses did not satisfy all committee members. When Committee Chair Maxine Waters, D-Calif., asked whether Robinhood has a liquidity problem, given its need to raise $3.4 billion in capital over one weekend to meet the increased clearinghouse requirements, Tenev responded: “We always felt comfortable with our liquidity.”

“Please answer yes or no,” Waters said. “We always felt comfortable with our liquidity,” Tenev repeated.

Other committee members took aim at the firm’s management of its business. Rep. Alexandria Ocasio-Cortez, D-N.Y., known as AOC, pointed out that while similar online trading platforms adjusted margin requirements last month, Robinhood took the drastic step of outright halting trading on shares of GameStop and others. Such a move could indicate that Robinhood, which lowered margin rates to 2.5% in December, may have failed to manage its business risk, AOC said.

“Isn’t it possible that the issue is not clearinghouses but the fact that you simply didn’t manage your book, or failed to appropriately manage your own margin rules, or failed to manage your own internal risk?” she asked.

In response, Tenev disclosed that Robinhood has a uniform margin rate, compared to other firms that have tiered margin rates, according to an investor’s wealth.

Of course, central to the controversy with Robinhood is its reliance on payment for order flows, which permits the app to offer commission-free trades for retail investors. The broker makes money through selling trades to market makers like Citadel to execute. While the practice is legal, critics have called it a conflict of interest.

Other questions were raised: Robinhood disclosed that the firm has made $35 billion in total gains, a figure that Rep. Jim Himes, D-Conn., said was “meaningless” unless converted into a rate of return to be compared with broader benchmarks.

In response, Tenev said the “proper comparison” would be to those who are not investing at all.

Maybe Those 3 Delisted Chinese Stocks Will Be Reinstated After All

Kicked off the NYSE under Trump, the companies could get a second chance under Biden, a Schwab strategist says.

Remember how the Trump administration forced the delisting of three big Chinese stocks from the New York Stock Exchange (NYSE)? Well, it’s possible that, under the Biden White House’s less-confrontational stance toward Beijing, the trio might return.

So says Jeffrey Kleintop, chief global investment strategist at Charles Schwab. This week, he wrote in a client note, the three telecom firms—China Mobile, China Telecom, and China Unicom Hong Kong—are eligible to be reviewed for reinstatement. “The NYSE may send valentines to China” soon, he wrote, just after that romantic holiday.

Neither the companies nor the exchange, let alone the new administration, is talking about what the next step will be. But the general Washington wisdom is that President Joe Biden, while willing to confront the Chinese regime on the economic, national security, and human rights fronts, will be less hardline elsewhere. Like in the investing realm.

The whole question here revolves around investor angst over whether any moves to profit from China’s burgeoning economy will end up being trampled in any upcoming geopolitical clashes between the world’s two biggest powers.

The back-and-forth drama began in December, with the NYSE announcing it would delist the three companies’ American depositary receipts (ADRs), instruments that allow US trading of foreign shares.

This move was to comply with then-President Donald Trump’s executive order in November that designated these telecoms as Chinese “military companies.” Then on Jan. 4, the NYSE reversed its decision after discussing the matter with regulators.

But, after Trump pressured the exchange, it did another pivot and again imposed the delistings. This caused a lot of agita on Wall Street, especially among the providers of stock indexes: MSCI, FTSE Russell, and S&P Dow Jones Indices. They scrambled to remove the banned companies from their benchmark lists. Word was that more Chinese companies also could be delisted.

What’s the scenario for getting the three companies back on the NYSE? “President Biden could rescind the executive order at any time,” Kleintop noted. Or that move could be made further down the Washington power structure, and Treasury Secretary Janet Yellen could revamp the Trump directive.

And even if the administration doesn’t act, Kleintop contended, the NYSE itself could yet again reverse its decision, pending further review. Trump’s original executive order did not mandate delisting.

At first, Kleintop opined, Trump may merely have wanted to see investors punish the three companies’ share prices. Then he chose to ladle on an extra layer of punishment and push the NYSE into delisting the three.

Turns out, however, that the three telecoms haven’t seen their shares suffer at all. On the Hong Kong exchange, where they do most of their trading, all three stocks have notched gains thus far this year. In fact, Kleintop stated, the average daily US trading in these stocks over the 12 months before the NYSE delisting is a small fraction of their Hong Kong trading volumes.

No one has addressed whether the three companies are actually linked to the Chinese military or intelligence agencies or, if they are, to what degree. But a spokeswoman for the Chinese Foreign Ministry responded to the Trump-impelled delisting this way: “The suppression against Chinese companies will have very limited direct impact on them, but will harm the national interests and image of the United States and the global standing of the American capital market.”