This week's interesting finds

We’re hiring!

Specifically, we want to add an Internal Relationship Manager to our Relationship Management Team in our Montreal office (English posting here) and a Compliance Officer in our Toronto office.

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.

You can view the posting on our website here.

This week in charts

Company performance: negative vs. positive earnings per share

Tech-led investment - Capex as % of GDP

Mag 7 – slowing FCF growth

Innovative drug trials, by geographic location

China’s licensing deals for innovative drugs, by location

U.S. tariffs imposed in 2025

Estimated tariff impact

Private credit funds – assets under management

Global residential real estate markets

U.S. obesity rates 

Deaths due to wildfire smoke

U.S. growth in various market and economic categories

BlackRock Stung by Loans to Business Accused of ‘Breathtaking’ Fraud

BlackRock’s private-credit investing arm and other lenders are trying to recover hundreds of millions of dollars after falling victim to what they called a “breathtaking” fraud, marking another breakdown in an opaque corner of the U.S. debt markets.

The lenders have accused Bankim Brahmbhatt, the owner of little-known telecom-services companies Broadband Telecom and Bridgevoice, of fabricating accounts receivable that were supposed to be used as loan collateral. The lenders filed suit in August. They said Brahmbhatt’s companies owe them more than $500 million.  

The dispute centers on a kind of debt deal known as asset-based finance, in which the borrower posts as collateral a stream of revenue generated by specified businesses, equipment or customer receivables. This corner of the debt market has grown significantly along with the rest of the private-credit industry, and in recent months has garnered scrutiny for a pair of sudden auto-industry collapses that left a trail of losses and fraud allegations.

First Brands, an auto-parts supplier, filed for bankruptcy after the market lost confidence in its use of off-balance-sheet debt. Tricolor, a chain of auto dealers that financed subprime consumers, is accused by a bank partner of pledging fictitious car loans and has filed for bankruptcy. A lawyer for First Brands’ founder has denied wrongdoing by management. The chief executive of Tricolor hasn’t responded to requests for comment.

Wall Street has been on edge since those episodes played out, fearing that they were early warning signs of deeper problems within U.S. credit markets.

BlackRock, the world’s largest asset manager, bought credit giant HPS earlier this year as part of an acquisition spree to build out its footprint in private-asset investing. HPS began lending to at least one financing arm affiliated with Brahmbhatt’s telecom companies in September 2020. 

HPS increased the size of its debt investment to around $385 million in early 2021, and then to about $430 million in August 2024. BNP Paribas financed nearly half of the loan to Brahmbhatt’s Carriox and affiliated entities, people familiar with the matter said. HPS told clients it held the loans in two credit funds, the people said.

HPS hired Deloitte when it began lending to Carriox to verify its assets by conducting random customer checks, and later appointed CBIZ, an accounting firm, to conduct annual asset checks, people familiar with the matter said.

In July, an HPS employee noticed irregularities with certain email addresses that purportedly came from Carriox customers, the people said. In their August lawsuit, the lenders said that the emails came from fake domains mimicking real telecom companies, and that a review of past emails showed the same irregularities. When HPS officials asked Brahmbhatt about the irregularities, he assured them there was nothing to worry about, the people said. Then he stopped answering their phone calls.

On Wednesday morning, Brahmbhatt’s office suite was locked and appeared vacant. An employee at an adjacent tenant said she hadn’t seen anyone enter or leave the offices recently. No one answered the door at a Garden City house listed as Brahmbhatt’s residence. Two BMWs, a Porsche, a Tesla and an Audi were parked in the driveway. A package next to the front door was collecting dust.

After the HPS employee flagged the irregularities, CBIZ and the law firm Quinn Emanuel began to investigate at the lenders’ behest the customer emails that the borrowers had shared as proof of the invoice amounts, according to the lawsuit. Many of the email addresses didn’t match up with the public web domains of the supposed customers, court documents show. Brahmbhatt’s businesses sell services and infrastructure to other telecom companies, their websites said.

The lenders allege in their complaint that their investigation determined that every customer email Brahmbhatt-owned companies had provided to verify invoices over the past two years was fake. They also said they discovered fraudulent contracts from customers dating back to 2018.

Brahmbhatt’s telecom companies filed for bankruptcy in August and were joined in bankruptcy court last week by Carriox Capital II and another financing business, BB Capital SPV.

The investment represents a fraction of HPS’s $179 billion in assets under management, and writing it off won’t materially affect the returns of the HPS funds that held it this year, a person close to BlackRock said. The person said HPS had been collecting payments on the loans until this year.

Brahmbhatt, who had granted the lenders’ request to give a personal guarantee on the loans, filed for bankruptcy himself on Aug. 12, the same day his telecom companies filed for chapter 11.

This week’s fun finds

No tricks, just tasty treats! Aishwarya from the Investment Analytics & ESG Team treated her fellow partners to a Halloween-themed Moai with food from the Mediterranean. She finished it off with some sweets (because what’s Halloween without a little sugar?!). Thanks for organizing, Aish!

How Halloween Scares Can Soothe Anxiety

Dark copers, as researchers have dubbed us, use “horror as an instrument with which to navigate a world that they perceive to be scary,” says Mathias Clasen, co-founder of the Recreational Fear Labat Aarhus University in Denmark. And we derive great enjoyment, self-discovery, and personal growth from this pursuit, according to the lab’s findings.

Contrary to conventional wisdom, their research shows that seeking out scares for sport—watching a horror film or visiting a haunted house, for example—is linked to greater resilience among adults and, when age-appropriate, a lower risk for childhood anxiety.

As humans, “we’re constantly forecasting,” Clasen says. “In a sense, horror is just like a formalized worst-case scenario that’s a very natural product of the way we cope.”

This week's interesting finds

3rd quarter commentaries are now live!

This quarter, Jeff Hyrich talks about two things that are consistent over time – the investing patterns that appear to form around technology and the EdgePoint investment approach. On the credit side, Derek Skomorowski offers an alternative to “Alternative” investments – corporate bonds.

This week in charts

A.I. impact on hiring

Interest in A.I. bubble grows

Lifespan of historical bubbles

Price of gold

U.S. consumer resilience

Average price of new autos breaks $50,000 in the U.S. for the first time

U.S. Federal deficit

U.S. mortgage rate breakdown

Non-A.I. corporate capex

Global central bank rate cuts

Canada tells pension funds to invest at home in age of ‘economic nationalism’

Canada is calling on its C$3tn (US$2.1tn) pension system to boost domestic investment as it seeks C$500bn in new finance to reboot the economy and lower its dependence on the US.

Industry minister Mélanie Joly told the Financial Times the new wave of “economic nationalism” means Canada’s financial institutions must foster homegrown investments and major infrastructure projects to kick-start the country’s sluggish economy.

Like the UK, Canada has been examining how to channel more pension assets to domestic targets to combat weak productivity and poor business investment.

Last year more than 90 Canadian corporate executives signed an open letter calling on the government to amend rules which would allow them to increase domestic investments, saying the amount they allocated to Canadian equities had dwindled from 28 per cent in 2000 to 4 per cent by 2023.

Ottawa in December lifted its 30 per cent cap for investments in Canadian entities at a time when Trump was threatening tariffs and trade wars against its major trading partner.

The Canada Pension Plan Investment Board, the country’s largest fund with C$714bn of assets, revealed its total allocation to Canadian assets dropped to 12 per cent of the fund in March from 14 per cent two years earlier, although the total value of Canadian assets still increased.

But Paul Beaudry, a former Bank of Canada deputy governor, warned forcing funds to invest locally was “very dangerous” as it risked creating “a type of crony capitalism”.

Beaudry said the government could identify either socially beneficial projects or mid-level companies that big funds overlooked for investment.

Prime Minister Mark Carney launched a “Buy Canada” campaign last month that prioritises local products for procurement as a way to make Canada “the strongest economy in the G7”.

It is an ambitious goal considering the country’s economy shrunk more than expected in the second quarter while exports fell 7.5 per cent compared with the first three months of the year because of the tariffs, according to Statistics Canada.

Canada has also set up its Major Projects Office to fast track national infrastructure proposals and to create a positive investment environment for financial institutions such as its pension funds.

The government is also potentially lowering the 90 per cent threshold that limits municipal-owned utilities from attracting more than 10 per cent private sector ownership, in particular from Canadian pension funds.

CPP Investments has nearly 50 per cent of all its assets invested in the US, despite pressure from Ottawa to invest more in its home market. Similarly Omers, the pension fund for Ontarian municipal workers with C$141bn of assets, had 16 per cent invested in Canada and 55 per cent invested in the US at the end of June.

CPP Investments in July announced a C$225mn investment in a new data centre in Cambridge, Ontario. It also has a $1.7bn investment in Canadian Natural Resources, the country’s largest energy producer.

Other Canadian funds have a higher domestic allocation, such as the C$123bn Healthcare of Ontario Pension Plan, which has more than 55 per cent of assets invested in Canada, and the C$270bn Ontario Teachers’ Pension Plan which has 36 per cent.

This weeks fun find

How the Blue Jays’ home run jacket began

Toronto Blue Jays' Andrés Giménez puts on the celebratory post season jacket with the help of Vladimir Guerrero Jr., first, after hitting a two run home run against the Seattle Mariners during the third inning in Game 3 of baseball's American League Championship Series, Wednesday, Oct. 15, 2025, in Seattle. (AP Photo/Lindsey Wasson)

***

Before George Springer entered the Blue Jays dugout following his go-ahead three-run home run in Game 7 of the American League Championship Series, his teammate greeted him in the top step and helped him put on a blue jacket.

If you’re a new fan, that’s how the Blue Jays celebrate the long ball. 

“It makes you feel good,” Springer said on Thursday when asked about the jacket. “It means that you did something cool.”

This week's interesting finds

This week in charts

Quantum computing, meme stocks and non-profitable tech driving YTD performance

Direct lending AUM evolution – U.S. vs. Europe

U.S. business development companies

Source of systemic credit event predictions

Gold

Historical U.S. dollar value in gold terms

Copper supply deficit

Household food consumption

Robotic automation added each year, by country

Glass Lewis to end benchmark voting recommendations on proxy issues

Glass Lewis said it would stop issuing single voting positions on proxy issues and instead offer multiple perspectives to clients, after facing criticism from Republicans over diversity and environmental criteria.

Starting in 2027, Glass Lewis will offer recommendations based on views that are oriented towards management, governance, activism or sustainability.

The firm’s move follows a similar decision by the other major proxy advisory business, Institutional Shareholder Services. Earlier this month, ISS introduced governance research services that do not include voting recommendations and provide customisable data, analysis and recommendations to its clients.

Glass Lewis said one of the primary drivers of the shift was the “growing divergence” between American and European institutional investors who have taken different approaches to fiduciary duty and sustainability. European clients already rely more on thematic policies rather than benchmark views. 

Glass Lewis’s new voting practice comes as proxy advisers have become increasingly scrutinised by public companies and Republican officials over prioritising matters related to environmental, social and governance, and diversity, equity and inclusion. Glass Lewis and ISS are both suing Texas over a state law that limits the guidance that proxy advisers can give to shareholders on corporate governance, diversity and environmental practices.

The proxy adviser’s latest move could blunt some of the criticism that it provides “ideologically driven” recommendations as it moves to give clients more choice to vote in line with their own beliefs and priorities.

Glass Lewis already offers custom voting recommendations to clients but ending its benchmark guidance would push all of its customers under a custom framework.

This week’s fun find

Celebrating 10 years of partnership with CIBC Mellon.

The Quest to Save the World’s Rarest Pasta

In October 2021, Canadian chefs Rob Gentile and David Marcelli found themselves in the stark, mountainous countryside of Sardinia, surrounded by sheep. They were following in the footsteps that pilgrims had trodden for more than 300 years in pursuit of a pasta so mythical, so rare, that few have ever had the pleasure of eating it: su filindeu, or “threads of God” in the local Sardo dialect. Although there are currently around 350 recognized shapes of pasta, none are so shrouded in mystery as these ethereal strands. To make them, one must stretch a mass of nothing more than semolina flour, water, and salt into 256 “threads” barely wider than a human hair.

Historically, these labor-intensive noodles were made only twice a year for the Feast of San Francesco. They were reserved for faithful Christians who made the trek from the city of Nuoro to Lula for 20 miles in the dark of night.

For centuries, the art of making su filindeu was passed down through a single matrilineal line. Yet as with so many old traditions, the number of women who possessed this generational knowledge dwindled, until there were, at one point, only three left in the world. Gentile and Marcelli had come to Sardinia to meet Paola Abraini, one of the last masters.

This week's interesting finds

This week in charts

Global equity returns by source

AI relationships

European and U.S. manager fund performance

U.S. active manager holdings

Robin Hood Investor Index

Contribution to returns: U.S. tech & European sectors

Small-cap vs. Large-cap

Gold vs. oil

Materials equity fund flows

AI companies market value of the S&P 500 Index

Mag7 free cash flow and earnings

Investment grade debt tied to AI

Data center Capex deployment

Regulators Are Investigating MassMutual’s Accounting Practices

U.S. regulators are investigating Massachusetts Mutual Life Insurance, a major U.S. insurer and asset manager, over accounting practices in its investment operations, people familiar with the matter said.

The Securities and Exchange Commission has been gathering information, including through subpoenas it issued, about MassMutual’s bookkeeping around income on billions of dollars of loans it holds in its general investment account, the people said.

The SEC is investigating whether MassMutual properly reconciled accrued interest as it received payments on loans held in its general investment account, the people familiar with the matter said. The agency is trying to determine whether its accruals are overstated.

The investigation isn’t complete and may not result in any formal allegations of wrongdoing.

Founded in 1851, MassMutual today is one of the country’s largest providers of life-insurance policies and annuities. It counts more than four million customers and sold more than $41 billion of insurance and annuities last year. The total volume of MassMutual life-insurance protection in force topped $1 trillion at the end of 2024.

MassMutual is owned by its policyholders, and its shares don’t trade publicly. The company is, however, a regular issuer of corporate notes and debt, which are held by a wide universe of investors who depend on the company’s financial statements to make decisions.

Life insurers have traditionally invested policyholders’ premiums in government bonds and other safe securities to generate returns and afford benefit payouts. More recently, they have increased their exposure to higher-yielding but more illiquid forms of private credit and nonbank lending, from commercial mortgage loans to financing other investment firms.

MassMutual’s experience highlights the complexity of managing those investments. Among the $285 billion in invested assets it held at the end of 2024 are tens of billions of dollars of mortgage loans and more bespoke financings originated by Barings, its wholly owned asset-management subsidiary.

Insurers book as an asset the accrued interest income they are due from performing loans that is owed but that hasn’t been paid yet. When interest payments on those loans arrive in a given month or quarter, accounting rules dictate that the asset value of the accrued investment income should decrease and the insurer’s cash account should increase.

MassMutual’s life-insurance operations reported $4.5 billion in investment income that is due and accrued at the end of June. That represented about 16% of its $28 billion in capital, or surplus.

This week’s fun finds

So much to be thankful for, especially our fellow partners. Happy Thanksgiving everyone!

Secret food critic finally reveals his identity after 25 years of terrorizing restaurants

A veteran food critic who took extreme measures to preserve his anonymity is finally ripping off the mask as he steps down from his role.

The Washington Post's Tom Sietsema sported everything from fat suits to fake teeth in a bid to keep his identity top secret.

Sietsema's columns and social media have been notable devoid of his likeness since he took up the role in 2000.

During that time he has penned more than 1,200 full restaurant reviews and dined at roughly 10 establishments per week.

He hoped that by maintaining anonymity, he would be able to get an authentic restaurant experience and not one geared towards a celebrity critic.

But in his final column, he revealed the enormous challenge of maintaining a secret identity in today's world.

This week's interesting finds

This week in charts

Japanese corporate profits

Japanese tourism

Not-profitable tech stocks vs. the S&P 500 Index

Businesses using AI by sector

A.I. hyperscalers and U.S. industrial production

S&P 500 Index valuation measures

S&P 500 Index price-to-earnings ratios and equity returns

Magnificent 7 

Top 10 S&P 500 Index companies market cap by decade

Fixed income yields by sector

The AI capex endgame is approaching

The AI “bubble” looks to be approaching its endgame. The dramatic rise in AI capital expenditure by so-called hyperscalers of the technology and the stock concentration in US equities are classic peak bubble signals. But history shows that a bust triggered by this over-investment may hold the key to the positive long-run potential of AI. 

AI stocks have exhibited bubble characteristics for a while. Share prices have skyrocketed, driving excessive index concentration. AI companies are doing deals between themselves, helping inflate their valuations. And they are buying each other’s products and using vendor financing to sustain growth.

Until recently, the missing ingredient was the rapid build-out of physical capital. This is now firmly in place, echoing the capex boom seen in the late-1990s bubble in telecommunications, media and technology stocks. That scaling of the internet and mobile telephony was central to sustaining “blue sky” earnings expectations and extreme valuations, but it also led to the TMT bust.

This followed the similar patterns from the introduction of nearly all general-purpose technologies — from railways, electricity, radio, semiconductors, to the internet. These bubbles didn’t end because the dream about the new technologies fell short; rather, the bubbles burst either due to regulation, increased competition, or the buyers of the products being unwilling, or unable, to sustain the demand. While the technology theme may be structural, all too often the end users are cyclical, putting the returns on investment in this excess capacity at risk from weakness in end-user cash flow.

Today’s AI hyperscalers are seeing these vulnerabilities emerge. Europe is leading the way on regulation, with the European AI Act. Competing models Deep Seek from China and K2 from the United Arab Emirates use less computing power. More importantly, tech cash-flows are beginning to be squeezed. If the end buyers of AI suffer an exogenous cash flow shock, the merry-go-round will slow rapidly as sales collapse faster than capex can be reined in, resulting in faltering earnings and accelerated cash burn. Tech buybacks would also likely be cut, undermining both share prices and market valuations. 

So the message for today’s investors is “buyer beware”. The TMT bust shows why. Today we are living the digital dream envisioned in the TMT bubble: a hyperconnected world, with seamless digital communication and where the internet of things is a reality. Yet this did not stop today’s digital winners from the TMT era falling heavily in the tech bust — Microsoft (65 per cent), Apple (80 per cent), Oracle (88 per cent), and Amazon (94 per cent). These companies took 16, five, 14 and seven years respectively to regain their 2000 peaks. 

My perspective on technology bubbles has been shaped by five themes that emerged from William Janeway’s book Doing Capitalism in the Innovation Economy. First, periods of bubble behaviour — and especially excess capex — are central to the adoption of new technologies. The hype around them drives down the cost of capital, allowing the rapid build-out of the new technology.

Second, when the bubble bursts, the excess capacity does not just disappear. It can be acquired at low prices by new players. The waste in the creative destruction identified by economist Joseph Schumpeter is inherent to bubbles, giving access to the new technology capacity at a lower price than if the boom persisted. This cheap capacity helps embed the technology in society.

Third, late equity investors funding this excess capex are likely to lose a big slice of their investment. You need to have been invested in hyperscalers since 2019-2020 to survive a 70 to 80 per cent bust without a portfolio loss.

Finally, tech busts have more negative economic impact when this capex is funded by debt rather than equity. Given this AI capex is largely equity funded, the fallout may be more similar to the TMT bust. Policy should respond to any bust using the 1987 or 1998 playbooks, rather than zero rates and quantitative easing after the Great Financial Crisis.

The good news is that the aggressive AI capex build-out almost guarantees AI’s future ubiquity. The bad news is that this will probably only come after a period of Schumpeterian creative destruction. So, despite our positive view on the structural narrative for AI, investors should be wary of paying for AI stocks on valuations equivalent to 30 times earnings, or 8 times sales. Unless of course, they want to altruistically fund this rapid AI capacity build-out as their way of contributing to society’s longer-term gain.

This week’s fun find

Does painting cows with stripes prevent fly bites? Researchers who studied this win Ig Nobel prize

A team of researchers from Japan wondered if painting cows with zebralike stripes would prevent flies from biting them. Another group from Africa and Europe pondered the types of pizza lizards preferred to eat.

Those researchers were honored Thursday in Boston with an Ig Nobel, the prize — a hand made model of a human stomach — for comical scientific achievement. In lieu of a big paycheck, each winner was also given a single hand wipe.

The 35th annual Ig Nobel prize ceremony is organized by the Annals of Improbable Research, a digital magazine that highlights research that makes people laugh and then think. It’s usually held weeks before the actual Nobel Prizes are announced.

The ceremony to celebrate winners Thursday night at Boston University began with a longtime tradition: the audience pelting the stage with paper airplanes. Several of those who couldn’t attend had their speeches read by actual Nobel laureates including Esther Duflo, who won the Nobel Prize for her experimental approach to alleviating global poverty.