In This Issue

• Brookfield's Mark Carney breaks down his firm's commitment to net zero transition
• Post-merger SPACs have erased half of their value this year
• Ron Baron sees a once-in-a-generation buying opportunity

• Register to attend CNBC's Delivering Alpha conference Sept. 28 in New York City

The Sharpe Angle Interview: Mark Carney

Brookfield's big bet on the energy transition

Brookfield just announced that it reached a final institutional close for its Brookfield Global Transition Fund, raising a record $15 billion. 

The colossal fund size (Brookfield says it was “oversubscribed” as well) is the latest signal that investors have no intention to decelerate their commitment to the transition toward cleaner portfolios. 

The trend comes even as some have made ESG-investing the culprit for the high energy inflation. The critique is that focus has been diverted to cleaner sources, while the world remains dependent on fossil fuels, therefore thwarting investment, which may have helped boost supply. 

We sat down with Mark Carney, who co-heads Brookfield’s Global Transition Fund, in Berlin last week. He previously served as the governor for the Bank of England and Bank of Canada, making him an expert in inflation mandates as well. 

He said the real issue is that there was a historical lack of capital discipline among the “financial markets, private equity world and the debt world” and as a result, they got “burned in U.S. shale in 2014, 2015.” Carney believes that because so much capital was destroyed then, they withheld capital from the sector. And then, the industry as a whole didn’t invest or add barrels during COVID, he said. And then, of course, the war exacerbated matters. 

But Carney doesn’t believe the opportunity requires excluding fossil fuels entirely from the portfolio. 

He said the plan is to be “going to where the emissions are, getting those down and helping wind down emissions in sectors that aren’t going to run to their whole economic life.” 

The firm’s Global Transition Fund has already deployed $2.5 billion, including the acquisition of a U.S. and German solar power and battery developer and an investment in a carbon capture and storage creator. 

Carney’s also spearheaded the Glasgow Financial Alliance for Net Zero, with managers for more than $130 trillion worth of assets committing to the idea that their portfolios’ total emissions are negligible by 2050. 

He said given the scope of investment required to meet those goals, there are “actually some big positives,” through this “process of transition that has a big multiplier for growth and, of course, for jobs.” 

SPACs wipe out half of their value as investors lose appetite for risky growth stocks

SPACs, once Wall Street's hottest tickets, have become one of the most hated trades this year.

The proprietary CNBC SPAC Post Deal Index, which is comprised of SPACs that have completed their mergers and taken their target companies public, has fallen nearly 50% this year. The losses more than doubled the S&P 500's 2022 decline as the equity benchmark fell into a bear market.

Appetite for these speculative, early-stage growth names with little earnings has diminished in the face of rising rates as well as elevated market volatility. Meanwhile, a regulatory crackdown is drying up the pipeline as bankers started to scale back deal-making activities in the space.

"We believe SPACs will need to continue to evolve in order to overcome challenges," said James Sweetman, Wells Fargo's senior global alternative investment strategist. "General Market volatility in 2022 and an uncertain market environment resulting in losses in the public markets have also dampened enthusiasm for SPACs."

The biggest laggards this year in the space include British online used car startup Cazoo, mining company Core Scientific and autonomous driving firm Aurora Innovation, which have all plunged more than 80% in 2022.

SPACs stand for special purpose acquisition companies, which raise capital in an IPO and use the cash to merge with a private company and take it public, usually within two years.

Some high-profile transactions have also been nixed given the unfavorable market conditions, including SeatGeek's $1.3 billion deal with Billy Beane's RedBall Acquisition Corp. 

Delivering Alpha Headlines

Big thoughts from the big money

Ron Baron says this is a once-in-a-generation buying opportunity

Longtime investor Ron Baron believes investors are being presented with a once-in-a-lifetime buying opportunity after stocks fell into a bear market on fears of a recession. “Hope you’re able to get someone or lots of someone to tell your viewers that this is HUGE once in generation BUYING opportunity,” Baron said in an email sent to CNBC’s Becky Quick and Joe Kernen. “Huge monstrous opportunity following June 2022 (June 2020 TOO) Crash!”

Cliff Asness touts value stocks

Cliff Asness, co-founder of AQR Capital Management, believes value stocks are still a lot more attractive than their growth counterparts, even after a big market correction. Growth stocks are “way off the highs, but the highs were so high; it’s tied with the tech bubble," Asness said. "I still think relative prices are crazy out there.” AQR is having a stellar year even as the broader market got crushed amid recession fears and rising interest rates. Asness said his pure trend-following portfolio is ahead by more than 50% this year.

Dan Niles sees no bottom in sight for stocks

Hedge fund manager Dan Niles said he expects stocks have a lot more to lose before a bottom is reached as corporations are about to turn in disappointing earnings and weak forecasts.

“You don’t want to fight the fundamentals,” Niles said. “I think you are going to see Q2 earnings be absolutely horrible in terms of the guidance they are going to give for Q3 because you are dealing with slowing growth at the same time you are dealing with high inflation affecting their businesses.”