The Wall Street Journal - 04.03.2020

B12| Wednesday, March 4, 2020 THE WALL STREET JOURNAL.

The Public Investment Fund brought on former McKinsey consultant

Jerry Todd to run its strategy. The fund’s offices in Riyadh.

NICK POTTS/PA IMAGES/GETTY IMAGES

where the American expatriate

was once head of investment

banking. Mr. Khateeb is a con-

fidant of Crown Prince Mo-

hammed bin Salman, who is

PIF’s chairman.

A PIF spokesman declined to

comment on the hiring, but

said the fund had added 15 new

senior executives to its man-

agement team since late 2019.

Mr. Todd didn’t respond to

multiple requests for comment.

The hires come as some PIF

officials question the roughly

$300 billion fund’s strategy,

given a mixed record investing

internationally and struggles to

attract significant foreign capi-

tal to help finance domestic

projects, according to people

familiar with the institution.

Its first high-profile foray,

Uber Technologies Inc., is

trading more than 25% below

PIF’s purchase price, and the

fund recently sold down most

of its stake in Tesla Inc. before

a rally in 2020. It committed

$45 billion to SoftBank Group

Corp.’s Vision Fund, which

made some bad bets, including

on office company WeWork.

Other technology invest-

ments appear more positive.

Electric car firm Lucid Motors,

in which PIF invested more

than $1 billion, plans to start

production of a sedan to com-

pete with Tesla in 2020.

Some PIF officials are also

frustrated with the close rela-

tionship between PIF’s gover-

nor, Yasir al-Rumayyan, and a

former reality TV producer,

Carla DiBello, who has used

her connections to earn fees

from companies seeking to do

business with the fund, The

Wall Street Journal has re-

ported.

PIF has said Ms. DiBello

isn’tanadvisertothefund

and that deals are vetted by

an investment committee to

international standards.

Mr. Todd’s hiring comes as

PIF accelerates investments in

Saudi Arabia, where it has

committed capital to dozens of

new companies and real-estate

projects worth billions of dol-

lars, but hasn’t attracted sig-

nificant investment from in-

ternational firms.

These projects include a fu-

turistic city-state, called

Neom, which Prince Moham-

med hopes will have flying

cars and dinosaur robots, and

a tourism development across

an archipelago of islands on

the Red Sea.

It isn’t clear how many in-

ternational companies are in-

vesting in the kingdom with

PIF as it doesn’t produce finan-

cial reports, but over 1,100 in-

ternational firms set up there

last year, up 54% from 2018, ac-

cording to government figures.

Saudi Arabia’s sovereign-
wealth fund has hired a former
McKinsey & Co. consultant to
help run its strategy, turning
to a U.S. expatriate with long-
standing ties to the kingdom,
according to people familiar
with the appointment, after
cycling through Westerners
with less regional experience.
The Public Investment Fund
has recruited Jerry Todd, for-
mer head of business develop-
ment at Riyadh-based invest-
ment bank NCB Capital, in a
senior role that will include
boosting private-sector partic-
ipation in the fund’s projects
and advising on investments,
these people said.
Mr. Todd, whose exact title
couldn’t be learned, previously
worked with tourism minister
Ahmed al-Khateeb, who ran a
Saudi financial institution

BYRORYJONES

American Is Hired to Steer Saudi Fund

to the London interbank of-

fered rate.

For those with federal

loans, interest rates are al-

ready set every May, based on

a 10-year Treasury note auc-

tion. These interest rates are

fixed for the entire life of the

loan.

The rate for direct subsi-

dized and unsubsidized under-

graduate loans disbursed be-

tween now and June 30 is

4.53%. So while this latest

drop in interest rates won’t

currently affect those with

federal student loans, next

year it could have an impact

on loans distributed for the

2020-21 academic year.

are costing banks more, so

many are raising rates to

cover such costs.

According to WalletHub’s

January report of more than

1,000 credit-card offers, the

average APR for those with

good credit at the end of 2019

was 20.68%.

Student loans

Falling interest rates may

benefit you in other areas of

your financial life, but your

student loans, unfortunately,

are less likely to be affected.

If you have private educa-

tion loans, you could pay less

interest and could consider re-

financing. Those rates are tied

Group Inc.’s Marcus account

has dropped to 1.7%, and robo

advisers Betterment and

Wealthfront have also lowered

the rates on their saving prod-

ucts to 1.84% and 1.78%, re-

spectively.

Credit cards

A decline in interest rates

can sometimes affect the aver-

age credit card annual per-

centage rate, or APR, which is

pegged to the prime rate.

However, The Wall Street

Journal found that even as in-

terest rates fall, some credit

card rates are going up. This is

because popular, generous re-

wards and points programs

attention to car prices and

your existing debt load: Many

Americans are now taking out

auto loans that last longer

than six years, according to

Experian PLC, and buying new

cars with negative equity.

High-yield savings

accounts and CDs

The interest rates offered

on savings accounts and many

certificates of deposit move

with the federal-funds rate.

According to the FDIC, the

average annual percentage

yield on a one-year CD is

0.48%, and firms are continu-

ing to cut rates on high-yield

offerings. Goldman Sachs

The falling yield on Treasurys could set the stage for mortgage rates to drop, too, lowering the cost of financing for home buyers.

LUCAS JACKSON/REUTERS

into low rates.

“If you’re saying, ‘I’m plan-

ning on being in this home for

the next five years, and I don’t

want to worry about what’s

happening with interest rates,’

that’s pretty much a no-

brainer,” he said.

Those with high loan-to-

value ratios may not be able to

refinance. But Sam Khater, chief

economist at Freddie Mac, said

that with home values steadily

rising over the past decade, this

circumstance is rare.

Dan Egan, managing director

of behavioral finance at Better-

ment, is himself considering re-

financing his house. To him, the

move makes sense because he

and his wife have decided to

also shorten the period of their

loan from a 30-year mortgage

to a 15-year mortgage. Their net

monthly payments could be

higher as a result, but he’d be

paying lower interest rates over

a shorter time. His tax situation

wouldn’t change as “the stan-

dard deduction is high enough.”

difference somewhere between

one-half a percentage point or 1

percentage point.

Ms. Droster said it’s easier

for people to understand the

potential saving when they

make it personal. Calculate how

refinancing could affect

monthly mortgage payments

rather than simply looking at

the percentage difference and

examining it in an abstract way.

“When they see it in real

dollars, then they can make that

comparison,” she said. “That’s

where they can really see what

it means, when they can see it

in dollars and say, ‘I’m paying

$1,500 a month right now for

my mortgage and 1% lower is

down to $1,200 a month.’”

For those with adjustable-

rate mortgages, however, Mr.

Cecala recommends borrowers

check how often their rate ad-

justs. Most only do so once ev-

ery six or 12 months, in which

case some homeowners might

want to refinance from an ARM

to a fixed-rate, he said, to lock

rate and the rate in the market.

Then looks at costs, as a refi-

nancing means paying signifi-

cant closing costs—including ti-

tle insurance and an appraisal—

which can often amount to a

few thousand dollars.

If the potential saving from a

lower-rate mortgage doesn’t

make up for those costs, it may

not make sense to refinance

just yet. “The old rule of thumb

used to be two years,” Mr. Ce-

cala said. “If you can pay it back

within two years and you ex-

pect to be in the house five

years, then why not do it?”

Rates have fallen before, so

those who wait to refinance

could potentially see even bet-

ter ones. As the coronavirus

continues to develop and its ef-

fects are felt around the globe,

Mr. Cecala said the mortgage

market could see even more

changes.

Lauri Droster, branch direc-

tor at RBC Wealth Management

in Madison, Wis., suggests con-

sidering a refinance if there’s a

but at a minimum, we’re talking

mortgage rates at 3.25% if not

below 3% in the next few weeks,

if everything stays the same—

and frankly, that would be a

once-in-a-lifetime refinancing

opportunity.”

Whether it makes sense to

refinance a mortgage now

comes down to a host of per-

sonal factors. It depends, for ex-

ample, on the cost of a refi, how

long you plan to stay in your

home, how much you hope to

save, what you think your house

is worth—and your view of the

world economy.

“Yields have fallen quite

steeply and the reason is that

there’s concerns about a big

slowdown in the global econ-

omy, largely because of the cor-

onavirus,” said Kathy Jones, se-

nior vice president and chief

fixed income strategist at the

Schwab Center for Financial Re-

search.

For those considering a refi

now, first look at the difference,

or spread, between the current

research group. “It’s a matter of

time in terms of how fast lend-

ers lower their rates to reflect a

10-year [U.S. Treasury note] and

it’s also a question of how fast

they want to go to that level,

Worries about coronavirus
have battered stocks and sent
investors fleeing to the safety of
U.S. government debt.
On Tuesday, the yield on the
10-year U.S. Treasury dropped
below 1% for the first time and
the Federal Reserve cut its
benchmark rate to a range be-
tween 1% and 1.25%.
Mortgage rates are expected
to fall along with those yields.
The 30-year fixed-rate mortgage
averaged 3.45% during the week
of Feb. 27, according to Freddie
Mac, and the 15-year fixed-rate
mortgage dropped to 2.95%.
If the yield on the 10-year
Treasury declines even further,
mortgage rates could drop
more, too, though they don’t al-
ways move in lockstep with the
government benchmark.
“This opens up a whole new
world of refinancing for mort-
gage borrowers,” said Guy Ce-
cala, publisher of Inside Mort-
gage Finance, an industry

BYJULIACARPENTER

Home Refinancing Looks Attractive, but First Do the Math

3.45%

Averagerateon30-year

fixedmortgage

Source: Freddie Mac

5.0

3.0

3.5

4.0

4.5

%

2016 2017 2018 2019 2020

Mac. The yield on the 10-year

Treasury note—which has hit

record lows in recent days—is

used as a benchmark for dif-

ferent types of loans, including

mortgages.

Falling interest rates could

also mean it is a good time to

consider refinancing. With

rates trending down, whether

it makes sense to refinance a

mortgage now comes down to

a host of personal factors.

Black Knight Inc., a technology

and data firm, reported that

refinancing activity has nearly

doubled over the past three

quarters.

The Fed’s previous rate cuts

sparked a spending streak

among U.S. households, in-

cluding boosting the mortgage

market to its highest level

since the financial crisis.

Auto loans

Auto loans have fixed inter-

est rates, which are pegged to

Treasury yields, but the falling

interest rates won’t predict

what dealers and lenders can

charge for your auto loan. At

the end of February, the aver-

age rate on a five-year new car

loan was 4.56%, according to

Bankrate.com.

If you’re considering buying

a new car or trading up, pay

The Federal Reserve cut its
short-term benchmark rate by
half a percentage point Tues-
day. The timing of this rate
cut, which comes in between
the Fed’s scheduled policy
meeting, hasn’t occurred since
the 2008 financial crisis.
This lowers the federal-
funds rate to a range between
1% and 1.25%.
Last year, the Fed cut rates
three times to keep the U.S.
economy moving amid slowing
global growth and trade ten-
sions. This year, disruptions
from the coronavirus epidemic
has unsettled global financial
markets, with policy makers
preparing for the economic
fallout from the spread of the
virus. The Fed’s next sched-
uled meeting is March 17-18.
Interest rates affect the
cost of borrowing, so falling
interest rates can ripple
through the cost of mortgages,
the interest earned on savings
accounts and more. Below, a
few things to watch for:

Mortgages
The average rate on a 30-
year fixed mortgage rate is
3.45%, according to Freddie

BYBOURREELAM
ANDJULIACARPENTER

Rate Cut Opens

Opportunities for

Borrowers to Save

Fidelity Investments
posted new records in annual
profit and revenue, as market
gains and its broad reach to
millions of investors have
helped the financial firm
thrive during a tumultuous
time for the money-manage-
ment industry.
Fidelity said Tuesday that

BYJUSTINBAER

BANKING & FINANCE

operating income rose 9.5% to

$6.9 billion in 2019. Revenue

climbed 2% to $20.9 billion,

touching an all-time high for

the fourth straight year.

Assets under management

finished 2019 at $3.2 trillion,

up from $2.5 trillion a year

earlier.

Fidelity is riding a diverse

set of businesses that has in-

sulated the firm from a broad

shift toward low-cost invest-

ments that has harmed many

asset managers. Today, clients

are demanding better perfor-

mance and lower fees on ev-

erything from mutual funds to

brokerage accounts, upending

what had been one of the most

profitable corners of the fi-

nancial-services industry.

While Fidelity hasn’t been

immune to the effects of those

changing tastes—investors

continue to pull money from

its flagship stock- and bond-

picking arm—the firm is also

luring new clients to its bro-

kerage and retirement-savings

businesses.

Fidelity added new clients

across all of its platforms in

2019, from retail brokerage

and employee-stock plans to

401(k) and health-care savings

accounts.

“It’s really a story about

making sure they’re in every

financial-services niche they

can get themselves into, and

doubling down on those

things,” said John Bonnanzio,

editor of Fidelity Monitor & In-

sight, an investing newsletter.

“They lagged on that side of

the business for a while. You

can’t say they are anymore.”

Some $193 billion in net

new money poured into Fidel-

ity investments, paced by

managed accounts as well as

index and money-market

funds. Fidelity’s actively man-

aged stock funds, though, had

net outflows of $65 billion.

Assets under administra-

tion, which include what Fidel-

ity oversees for brokerage and

retirement-account clients, to-

taled $8.3 trillion at the end of

the year—up 24% from a year

ago. The firm’s institutional

business added 338,000 new

accounts in 2019.

Fidelity is owned by the

Johnson family, who founded

the company in 1946, and its

employees. The report filed

Tuesday gives clients and

competitors a glimpse of the

firm’s performance, though Fi-

delity’s disclosures aren’t as

extensive or as frequent as

those produced by its publicly

traded counterparts.

BlackRock Inc., the world’s

largest asset manager with

more than $7 trillion in assets,

had net income of $4.48 bil-

lion in 2019 on revenue of

$14.54 billion.

Charles Schwab Corp., Fi-

delity’s rival in retail broker-

age services, earned $3.53 bil-

lion last year. Revenue totaled

$10.72 billion.

Fidelity said a year ago that

operating income rose 19% to

$6.3 billion in 2018. Revenue

jumped 12% to $20.4 billion. A

market rout at the end of 2018

helped push assets under man-

agement down 1%, to $2.42

trillion.

Fidelity Reports Record Profit, Revenue

Asset manager adds

new clients across all

platforms as many in

industry struggle