This week's interesting finds

 

A few charts worth discussing

“AI-linked issuance is becoming an increasingly significant source of capital across nearly every funding channel."

- Frank Mullen

Other charts worth pointing out

Historical 10-year yield change during U.S. Federal Reserve cutting cycles

Credit spreads by rating

Investment grade and hyperscaler bond issuance

Tech and AI drive nearly 40% of longer-duration issues

Travel spending by generation

Equal-weighted vs. cap-weighted S&P 500 performance

Megacap Technology/Media/Telecoms – fund ownership

Equity allocation mix

S&P 500 Index Earnings growth estimates

Ratings Firm Accused of Grade Inflation Vouched for $40 Billion of Insurer Debt

Egan-Jones Ratings, based in King of Prussia, Pa., is being sued by two former employees who allege that it pressured staff to inflate ratings to gain business. The Securities and Exchange Commission has questioned the company’s reliability, and a regulator in Bermuda, where insurers park a huge amount of capital, has stopped accepting the firm’s ratings.

Ratings firms play a crucial role in making sure life and annuity insurers don’t take too much risk when investing policyholders’ premiums. That is because the credit rating on each investment generally determines the dollar amount an insurer must set aside to protect against the risk of loss. A better rating means insurers don’t have to set aside as much capital.

Life insurers chasing higher returns have splurged on private credit deals in the past decade, leading to a sharp increase in confidential, or “private letter” ratings assigned by firms like Egan Jones that often accompany the investments.

A wave of defaults on often illiquid private-credit assets has brought attention to the potential pitfalls that come with lending to smaller or less-creditworthy businesses, and stoked concern about the ratings assigned to these investments even though they apply to a fraction of the total debt owned by insurers. 

Many insurers have debt rated by Egan-Jones on their books, according to the Journal’s analysis, which drew on ratings data disclosed by the firm and investment holdings data from the National Association of Insurance Commissioners.

Among the biggest holders are insurance companies controlled by Mark Walter, the financial titan who owns the Los Angeles Dodgers. Egan-Jones rated about $2.6 billion of loans held by Walter’s insurers, the analysis showed, including debt issued by American Media Productions, a firm controlled by a Walter affiliate that owns the Dodgers’ local TV broadcaster.

Loans tied to Walter’s business empire are at the center of a federal investigation into possible fraud. Egan-Jones said its understanding is that the Walter investigation is focused on disclosures, not ratings. A spokesperson for Walter’s insurers declined to comment.

Insurance companies and the state commissioners who regulate them have long relied on public ratings from Moody’s Ratings or S&P Global to assess risk and determine how much of a financial cushion insurers should hold for each bond they invest in. Those letter-grade credit assessments have historically been limited to public debt. But that changed in the past decade as private credit in life insurer portfolios swelled to an estimated $980 billion, or about a quarter of total holdings, as of 2025, according to an estimate by insurance-company ratings firm AM Best.

Rather than go to insurance regulators for an individual assessment of how much capital to hold for each private investment, insurers and debt issuers began paying for confidential, or private-letter, ratings. Insurers held about $480 billion worth of privately rated debt instruments in 2025, more than 10 times their $47 billion value in 2018, when companies first began disclosing their use, the Journal’s analysis shows. Most were for private debt, but insurers can also seek private-letter ratings on public securities.

Egan-Jones is among the main players in the private-letter ratings business but has lately attracted considerable scrutiny. The lawsuit filed in 2024 by the firm’s two former executives alleged they were fired after telling securities regulators they were concerned about conflicts of interest.

In its statement, Egan-Jones denied the allegations by the former employees and said they were establishing a competing ratings business.

In a September 2023 letter to Egan-Jones, the SEC wrote that the firm’s incentives for analysts could lead to compromised ratings. And in March, the Securities and Exchange Commission questioned Egan-Jones’s capacity to “consistently produce credit ratings with integrity” on asset-backed securities, a type of debt instrument it was seeking permission to rate. An SEC spokesperson declined to comment.

Egan-Jones said the incentives referenced by the agency were part of a work-tracking system commonly used by businesses.

In January, regulators in Bermuda removed Egan-Jones from its list of recognized ratings providers. A study by the National Association of Insurance Commissioners said private-letter ratings from small firms, a group that includes Egan-Jones, were often inflated. The group has pulled the report from its website, saying it needed to clarify its findings.

The general lack of disclosures around private credit have been a concern for investors and lawmakers worried about hidden risks in the industry. Evaluating private-letter ratings is difficult because so few are disclosed, and unlike with big publicly traded bond issues, the investments are frequently rated by only one firm.

In its analysis of a data set of 5,000 private-letter deals rated by Egan-Jones, the Journal also assessed how the firm’s ratings compare with those of peers, drawing on limited publicly available data. The Journal found 52 investments that carried ratings from Egan-Jones and another firm covering the same period. Among those, Egan-Jones’s ratings were on average one notch higher than those of the other raters. In two dozen cases, they were at least three notches higher, the Journal’s analysis shows. Egan-Jones had a lower grade in 18 instances.

Methodology

The Journal assembled and analyzed a data set of nearly 18,200 private-letter rated instruments, drawing on filings made by insurance companies. Egan-Jones issued ratings for more than a quarter of those instruments, based on the Journal’s analysis of disclosures made by six ratings firms. The Journal identified 52 instruments across 79 rating actions where Egan-Jones and at least one other firm maintained an active credit rating.

To measure changes in ratings, the Journal converted letter ratings into numerical designations used by insurance regulators. The Journal only looked at ratings that were in effect during overlapping periods and used discrete, nine-character identifiers—known as Cusip numbers—to identify debt instruments that were rated by both Egan-Jones and a competitor.

Many of the ratings compared by the Journal applied to publicly traded bonds. Egan-Jones said that in many of those cases, it provided unsolicited ratings for its subscribers, using only publicly available information. Egan-Jones said it uses the same methodology whether ratings are private or public, solicited or unsolicited.

This week’s fun finds

From myth to reality. Kris from the Operations Team hosted one of the most anticipated moai’s of the year. He arranged to have infamous focaccia sandwiches delivered from his hometown of Bolton to our Toronto office. They were fresh, flavourful and offered a ton of variety for everyone to enjoy.

Scientists Reveal Why Mosquitoes Bite Some People More Than Others

Ever felt like mosquitoes bite you while ignoring everyone else?

Scientists are now making progress in deciphering the complex chemical cocktail that makes particular people more enticing to these disease-spreading bloodsuckers.

A range of sensory cues can cause mosquitoes to pick one human over another – mainly the smell and heat our bodies give off, and the carbon dioxide we exhale.

Female mosquitoes – which are the only ones that bite – detect these signals with finely-tuned receptors, then choose their target accordingly.

This week's interesting finds

We’re hiring!

We're always looking for talented people who can help us achieve our goals and we understand that extraordinary human ability is a scarce resource in high demand. If you think you've got some and are interested in our company, please send your resume to: WeAreGrowing@edgepointwealth.com.

We're currently looking for an Investment Analyst.

A few charts worth discussing

“China isn’t the only country with a ‘not enough babies’ problem.”

- Jeff Hyrich

Other charts worth pointing out

Canadian interest payments by level of government

2026 loan & high-yield return by rating

Household air conditioning by country

U.S. & Japan – exchange rates vs. interest rates

Japanese equity ownership by shareholder type

Employment and wage growth across income levels

Savings-to-spending ratios by generation

10-year U.S. Treasury yields vs. Effective Federal Funds Rate

S&P 500 Index and 10-year bond return correlations

North American merger & acquisition volumes

S&P 500 Momentum Index – relative total returns & volatility

S&P 500 Index Shiller P/E ratio vs. U.S. labour productivity

Historical ROE – S&P 500 Index vs. TMT sector

Relative performance of the best-performing U.S. equity vs. the rest of the market

Non-U.S. equity performance during major technology sector sell-offs

Style performance during major technology sector sell-offs

US Factory Activity Expands at Strongest Pace Since 2022

The Institute for Supply Management’s July manufacturing gauge rose to 55.6, the highest since May 2022, according to data out Monday. Readings above 50 indicate growth, and the sector has now been above that mark for seven consecutive months. 

The gauge for production rose to 58.5, its highest level since late 2021, while the employment measure indicated manufacturers increased headcount for the first time since September 2023. New orders growth — a sign of demand — also picked up.

The manufacturing sector has gained momentum this year, with factories benefiting from resilient consumer demand, solid business investment and government outlays on defense. 

All but one manufacturing industry reported growth in July, with chemical products being the only sector that contracted. Printing, apparel and electrical equipment were among the industries that grew. 

The report reflects a volatile month in the Middle East. The interim peace deal between the US and Iran effectively collapsed, driving up oil prices. After a brief respite in hostilities, fighting in the five-month war flared again toward the end of the month as attacks spread throughout the region.

High Prices

Factories continued to face longer lead times on supplier deliveries and rising prices for raw materials. ISM’s prices index fell to 71.1 in July, the lowest in five months but still significantly higher than at the beginning of the year.

The report pointed to price pressures including tariffs and increased costs for petroleum-based products due to conflict in the Middle East.

ISM’s gauge of exports for July was the highest since March 2022 and a measure of imports climbed to its best mark since June 2021.

This week’s fun finds 

The 25 Sculptures That Define the Modern Age

Sculpture occupies an odd place in contemporary art. Because of their sheer physical presence, sculptures are often harder to show, not to mention more difficult to sell: This fact forces the medium into a secondary role behind painting, especially in a business so obsessed with the markets. And yet, sculpture is arguably the art that the public, throughout history, has tended to interact with the most, even if we’re not always paying it much attention. Sculpture is an indelible part of the global landscape. It’s in our public plazas, our corporate office parks. Celebrated (and often meticulously preserved) as a form of creative expression across the world, sculpture goes back to the prehistoric age, to early peoples’ use of stone flints to carve anthropomorphic figures out of mammoth ivory. Every culture since has made its own totems, sometimes to mark its triumphs and tragedies, and sometimes for reasons that are less clear. 

To choose the 25 most important works of sculpture made since 1945, we asked a panel of experts to gather at the New York Times building in March. They included the artists Firelei Báez, 45; Charles Gaines, 82; Adam Pendleton, 42; and Arlene Shechet, 77 — each of whom has, to varying degrees, explored and advanced sculpture in their work — along with Ruba Katrib, 44, the chief curator of MoMA PS1 in Queens and the former curator of the nearby SculptureCenter, the only museum in New York explicitly dedicated to the medium. Any task that ends in anointing something “the most important” is highly subjective and should be considered with a heavy dose of skepticism; a different group would have come up with different selections, and it’s easy to imagine the following list turning out differently had this same group met at a different time on the same day.

This week's interesting finds

Check out the second quarter podcasts! 

Investment Team members Jason Liu and Tracey Chen discuss their Q2 2026 commentaries with relationship manager Sydney Campbell.

A few charts worth discussing

“The U.S. fiscal situation is top-of-mind for me this week, especially after the FOMC rate decision on Wednesday. There seems to be no real path toward a balanced budget other than cuts to military spending (which seem unlikely) or cuts to entitlements such as Medicare and Social Security.”

- TJ de Gruijter

Other charts worth pointing out

Investment-grade corporate bond markets by currency

AI-related investment-grade debt issuance

AI-related high-yield and leveraged loan issuance

YTD software index performance

10-year government bond yields – U.S., Germany and Japan

Maturing U.S. Treasury debt within one year

Strait of Hormuz tanker vessel transit activity

China crude oil imports 

U.S. Strategic Petroleum Reserve levels

Historical U.S. household savings rate

European cyclicals vs. defensives – relative price

Minister apologizes as Korean leveraged ETF investors nurse heavy losses amid chip stock rout

The May 27 introduction of single-stock leveraged Exchange Traded Funds has seen Korean retail investors pile in with net purchases of 14 trillion won ($9.7 billion), compared with roughly 2 trillion won by foreign investors, according to KB Financial Group.

But the speculative trading boom that helped fuel one of the world’s hottest equity markets has resulted in those investors nursing heavy losses as Korea’s Kospi index has experienced a sharp correction, led by a downturn in chip stocks.

The pain has been especially acute for holders of single-stock leveraged ETFs tied to chip giants Samsung Electronics and SK Hynix, which had surged alongside the AI-driven semiconductor rally.

The KODEX SK Hynix Single Stock Leverage ETF — a product designed to deliver twice the daily move in SK Hynix shares — has fallen more than 80% since its June 23 peak, according to LSEG data.

It comes after a blistering rally in the Kospi has come to an abrupt halt, with jitters over chip stocks seeing the value of the index plunging almost 35% over the last month.

South Korea’s finance minister Koo Yun-cheol accepted lawmakers’ demand for an apology in a parliamentary session on Wednesday after single-stock leveraged ETFs were introduced without careful consideration, according to Reuters.

The country’s Financial Services Commission Lee Eog-weon also said on Wednesday that the regulator is considering cutting off access to the products to all but professional investors.

This week’s fun finds

To celebrate the Toronto Caribbean Carnival (a.k.a. Caribana), relationship manager Aisha organized a laid-back Moai full of good food, music and vibes. Carnival is all about energy, culture and bringing people together. Her Moai kept that same spirit with a spread of flavourful Caribbean dishes. It was a perfect way to kick off the long weekend. Thanks, Aisha!

‘Spider-Man’ superhero jumps to the aid of a man using wheelchair to cross several lanes of traffic

A man using a wheelchair was struggling to get across six lanes of traffic in an Arkansas city when help came in an unexpected way — from a spidery superhero who jumped into action from a red Jeep waiting at a light.

Christopher Hellenthal was still garbed in his Spider-Man costume from a superhero-themed event at a trampoline park where he works when he spotted the person in traffic Tuesday and ran out to help, declaring: “I got you.”

Hellenthal swiftly rolled the person in the wheelchair to safety only seconds before the light changed and the rows of traffic advanced. The moment was captured by a street security camera in the city of Jonesboro and shared on social media by local police, who thanked Hellenthal for helping the man reach safety across the crosswalk.

This week's interesting finds

Second quarter commentaries are now live!

This quarter, Jason Liu talks about how we've taken opportunities to upgrade the Global Portfolio despite market valuations being near all-time highs, while Tracey Chen discusses the importance of having a consistent credit process regardless of market conditions.

A few charts worth discussing

“1.2 million retail investors in Korea were margin called last week, which is equivalent to 3.4% of the total adult population. Increased leverage and speculative behaviour remain popular in the markets.”

- Steven Lo

"There’s less local competition in the Chinese prestige beauty market.”

- Tracey Chen

“McKinsey's new global balance sheet estimate showed the diverging trends between the world's largest economies continue to widen in 2026.”

- Claire Thornhill

Other charts worth pointing out

U.S. market participation and retail stock forum mentions

Retail investor attention by stock

Levered ETFs and margin loans outstanding

Sector correlations with AI and momentum

U.S. adoption of Chinese AI models

Consumer spending – experiences vs. services

Relative valuation of consumer experience stocks

Announced M&A volumes and deal distribution by industry

Market-adjusted IPO returns since 1980

Share of business applications by generation

Emergency savings expectations by generation

G10 markets – household equity ownership and asset allocation

U.S. household wealth allocation by asset class

Wildfire activity across the Americas

Wildfire activity by continent

London Stock Exchange plans to launch round-the-clock trading next year

The LSE said on Tuesday it would launch a night-time trading venue in the first half of 2027. The new exchange will operate separately from the LSE’s main market, and initially offer access to exchange-traded products such as funds tracking the UK or US stock market.

The move highlights the fierce competition between mainstream exchanges and crypto venues, which have wooed younger investors by allowing them to trade 24/7 on their smartphones. Crypto companies such as Coinbase and Kraken have muscled in on the territory of traditional venues by giving investors round-the-clock access to stock trading.

The shift to longer trading hours also comes as London faces questions over its competitiveness amid a prolonged listings drought, with the government seeking to urgently revive appetite for IPOs.

The LSE’s main venue will continue operating under its standard hours of 8am to 4.30pm and the new exchange will operate from 5pm to 7.50am, with a 30-minute pause between 6.30pm and 7pm to apply end-of-day processes.

The move echoes a similar push by traditional trading venues in the US. Nasdaq, the New York Stock Exchange and Cboe Global Markets have either launched or are planning to launch extended trading hours, subject to approval from US regulators.

While retail trading is driving the move towards longer trading hours, institutional investors have generally been more ambivalent about round-the-clock trading.

The World Federation of Exchanges said last year that “in particular, Apac retail investors are interested in being more active on US markets”, but that overseas institutional investors wanted extended access “to a lesser extent”. “Extended trading is not appropriate or desirable in all contexts,” the WFE added. 

The Federation of European Securities Exchanges said that “it remains to be seen whether such models are sustainable or beneficial in the long term”.

This week’s fun finds

Beluga Whale Live Cam brings the ‘canaries of the sea’ to your screen

Glittery white, ice-dwelling beluga whales log hours of chattering from their melons as they navigate their frosty world. These canaries of the sea are also among some of the most charismatic summer visitors to Canada’s Hudson Bay, where they arrive with their babies in tow to feast on fish and kick back.

Now, viewers from around the world can catch a glimpse of these blubbery cetaceans via Polar Bears International (PBI) and explore.org’s Beluga Whale Live Cam.