MPs chastise Starmer over Mandelson scandal

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0:17Good morning from the Financial Times. Today is Tuesday, April 21st, and this is your FT News Briefing. There are big changes happening at Apple, and Keir Starmer makes his case in the Peter Mandelson vetting scandal. Plus, wealth managers are sitting pretty from the private credit boom. We'll tell you why. I'm Mark Filippino, and here's the news you need to start your day.

0:52Tim Cook is stepping down as CEO of Apple. The iPhone maker announced that John Ternus, the company's hardware chief, will take over when Cook retires at the beginning of September. Cook has led Apple for 15 years. He took over from founder Steve Jobs in 2011. In that time, Apple grew 10 times larger. It's the world's leading smartphone company and also a services behemoth with things like the App Store, Apple Pay, and iCloud. Cook's departure from the top job caps a year and a half of high-profile moves at Apple. several of its top executives left or stepped back. Cook will remain on as chair of the big tech company after Ternus takes over.

1:33Apple shares dropped in after-hours trading yesterday.

1:42Keir Starmer is battling for his future. The UK Prime Minister addressed members of Parliament yesterday to explain how one of Starmer's ambassadors took on the post even though he failed security vetting. Here to discuss is the FT's Whitehall editor, Lucy Fisher. Hi, Lucy. Hi, Mark. So get me up to speed. What's going on with Keir Starmer? So Keir Starmer has had to explain to the House of Commons why he previously suggested that there was no issue with Peter Mandelson's vetting when he was appointed UK ambassador to the US. Starmer went up before MPs and claimed that he had been deliberately and repeatedly kept in the dark by the Foreign Office over this matter.

2:24Mr Speaker, let me be very clear, if I had been told that Peter Mandelson or anybody else had failed security, had not been given clearance on security vetting, I would not have appointed them. And in response, he's been accused of scapegoating officials over this saga, and he's faced calls from the opposition for him to resign for misleading Parliament previously about the state of affairs. How did this saga even come to light? Well, look, it was a marmalade dropper of a scoop from The Guardian last week that Peter Mandelson had failed his vetting. I should say we don't precisely know why Mandelson failed his security check, but in the due diligence exercise, another set of checks that were carried out regarding his appointment as ambassador, It flagged up his links to the convicted paedophile Jeffrey Epstein.

3:17It highlighted his links to China. And so there are a range of issues that have given rise to speculation about what might have been in the developed vetting that was flagged up. So there's this whole argument in the UK about, well, why did that happen? And some allies of the very senior official at the UK Foreign Office who overrode that recommendation are saying, well, look, Starmer and his political advisors had made so clear that they wanted this appointment to happen. It had a momentum of its own. And there's also been some back and forth about what the rules are regarding the vetting and whether the official in question actually was able to, under the law, tell ministers about what the vetting process had thrown up.

3:59So quite a confusing picture. But at heart, it comes back to Keir Starmer's judgment and whether it was appropriate or in any way a good idea to appoint Mandelson, whose reputational risks were already well known, regardless of this vetting issue. Yeah, and the civil servant that we're talking about here is a guy named Sir Ollie Robbins. What has Starmer said about Mandelson's failed vetting check and Robbins' role in all this? Well, he says that Robbins could and should have come to him and that he repeatedly withheld the information from him. So very much throwing Robbins under the bus. A deliberate decision was taken to withhold that material.

4:40This was not a lack of asking. This wasn't an oversight. It was a decision. It was a decision taken not to share that information on repeated occasions. But look, this isn't the last we're going to hear about it. Robbins has his own chance to hit back on Tuesday when he will be appearing in front of the Foreign Affairs Committee of the House of Commons, and he will be asked for his version of events. What does this scandal mean more broadly for the UK and, you know, the future of the Labour Party? Well, look, I think we have to remember that this is becoming a bit of a pattern for Keir Starmer.

5:16He's a prime minister that always seems to be blaming someone else for the scandals or problems that beset his administration. He's already been through two cabinet secretaries. He's had two chiefs of staff. he's had a whole spate of directors of communication and it's always someone else who's the fall guy beyond that the other criticism is that he is a prime minister who does not have grip on his own government he doesn't really know what's going on and so him telling MPs you know I didn't know about this issue with Mandelson's vetting but some people sort of plays into that idea well you don't really never seem to know what's going on in your own government so while While I don't think it's likely there will be any move made against him by the Labour Party this week, it adds to the sense that he could face pressure later this year to sort of set out some kind of timetable for his departure, according to some Labour MPs.

6:07Lucy Fisher is the FT's Whitehall editor. Thanks so much, Lucy. Thanks for having me, Mark.

6:18Donald Trump's so-called Board of Peace is moving forward with its plans for the reconstruction of Gaza. Representatives at the International Organization are discussing logistics for rebuilding the Palestinian enclave with DP World. It's an Emirati company that's a big player in container shipping and port terminals. This is all according to sources familiar with the matter. The U.S. president set up the Board of Peace earlier this year to oversee rebuilding the Gaza Strip. Israeli strikes raised it and killed over 70 ,000 people in Gaza, according to health authorities in the Strip. That was in response to Hamas's attack on Israel in October 2023.

6:56Rebuilding Gaza will cost more than$70 billion over the next 10 years, according to a joint report by the EU, UN, and the World Bank. But since the ceasefire between Israel and Gaza began last fall, the humanitarian situation in the Strip is still dire. Israel continues to restrict essential goods from entering, and no reconstruction has begun.

7:22Banks and other wealth managers have reaped big benefits from the private credit boom. That's according to an FT analysis of the industry's regulatory filings. Funds managed by Blackstone, Blue Owl, Apollo, and others have generated more than$2 billion in servicing fees since 2017. And they've done it by steering wealthy individual investors into private market funds. It's a place many retail investors are now trying to flee. I'm joined by the FT's Antoine Gara to talk more about this. Hi, Antoine. Hi, how are you? Doing well. So Antoine, what does this data tell us? Well, we first thought it was good to actually just go get numbers, right?

8:00So we know that there's been this boom in evergreen funds, which are these sort of perpetual private funds. And they're very popular among wealthy individual investors who now have access to some of the world's largest, most successful investment firms to their funds in a pretty easy to understand format. But also what we keep hearing in our reporting is, well, these are pretty lucrative products for the people who are distributing them themselves, i.e. the banks who have large wealth management operations. So these evergreen funds, they've paid about$2 billion in just servicing fees. That's a pretty big number for fees on funds at a time when like the whole world has moved into very low cost index funds that carry almost no fees.

8:58Okay, so why are retail investors the ones that are being pushed into these funds? Well, it's really where a lot of the industry's growth has come. These are new types of funds. They've really cropped up over the last 10 years. And it's been an exciting new thing. And that can be really interesting to a lot of different types of investors, given that these are really successful firms who historically have really great track records. And clients also are trying to diversify away from the public markets, publicly traded credit funds, publicly traded property funds. They've been very volatile. They're boom and bust cycles in any given year.

9:33They could be down 30%. And so these non-traded funds can be a lot smoother of a ride. What are the groups, you know, the ones that manage these funds have to say about this trend? Well, they say that the fees are all very well disclosed. And they are also pointing out that, you know, these funds have performed very well. The returns that the funds have reported, you know, in private credit are ballpark 10 % annually the last few years. So that's a pretty strong performance, especially relative to a lot of public bond funds. So they're saying the clients are being placed into high-performing funds with a clear merit for an investment.

10:20Antoine, what would you say is the one big thing that you've taken away from this story? I think when I talk to wealth management people, what they say is that there's a real question that's entering a lot of people's minds on like, am I getting a good bang for my buck in going into more complex, higher fee, private market alternatives than broad indexes, which is just basically capturing the market return? And a lot of advisors are now starting to say, I'd rather just have my clients be in indices and things like that. It's hard to beat the market after fees. Interestingly, they're also saying in the age of AI, people can really understand fees and the different expenses much quicker than they could have in the past where they would have been reading some pretty dull sort of fun literature documents that may be hard to parse.

11:19But if you were to ask Claude or chat GPT, they can give you a pretty easy to understand answer within a few seconds. Antoine Gara is the FT's private equity and deals editor. Thanks, Antoine. Thank you.

11:37Before we go, Kevin Warsh's long-anticipated day is finally here. He's Trump's pick to be the next head of the Federal Reserve. And today, the U.S. Senate Banking Committee will begin confirmation hearings. But Warsh isn't a sure bet. One Republican said he won't give the green light until the Department of Justice drops its criminal probe into current Fed Chair Jay Powell. Powell, for his part, said he will stay on his chair if Warsh is not confirmed by the time his term ends next month. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing.

12:13Check back tomorrow for the latest business news.

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