America's No. 1 financial conglomerate

Chapter 605 Compromise or Dominance

Through Warren Buffett's introduction, Ernst met with the CEOs of all the leading institutions in various financial sub-sectors on Wall Street.

Some of them I knew, people I'd met at various high-end parties before, but we were only nodding acquaintances; I'd barely exchanged more than a few words with most of them.

The other group consisted of completely unfamiliar faces; this was the first time the two sides had met.

Ernst rarely attended such events, and many of the organizations he worked with didn't have much interaction with him, so they rarely met.

For example, type B and type C funds, which are pension funds.

In its previous second round of financing, Flashbuy received funding from the California Public Employees Retirement System (CalPERS) and the California Teachers Retirement System (CTR).

Today, he met with people from the New York City Retirement Fund and the New York State Mutual Retirement Fund.

The former covers New York City civil servants, teachers, firefighters, and other similar positions, while the latter primarily targets pensions for employees of the New York State government and public institutions.

However, he prefers to engage with C-type funds from the Federal Retirement Thrift Investment Board rather than these B-type funds.

"You seem to be more enthusiastic about Daniel Fleming," Buffett asked with some curiosity after leaving Daniel Fleming, chairman of the Federal Retirement Thrift Investment Board.

Normally, companies prefer C-type funds like the New York City Retirement Fund because they are the company's ballast. But Ernst's attitude was quite the opposite; while he was enthusiastic about both, he was noticeably more enthusiastic about Daniel Fleming.

"Don't forget, most of my companies are not publicly listed." Ernst didn't see anything wrong with being a little more enthusiastic towards Daniel Fleming.

Buffett was momentarily stunned, almost forgetting that most of the companies owned by this young man who had created a vast fortune were not yet publicly listed.

That explains why he was more enthusiastic towards Daniel Fleming.

Type B funds are essentially pension insurance, promising a fixed return after retirement, while the fund bears the investment risk.

Regardless of the performance of the fund's investment portfolio, it cannot affect the amount of pension payments.

This characteristic of fixed returns and guaranteed risk dictates that the primary investment principle for Class B funds must be stability.

In specific portfolio allocation, Class B funds often invest a large amount of funds in financial products such as treasury bonds and local government bonds, which have government credit backing, stable returns, and extremely low risk.

Even when allocating equity assets, priority is given to industry leaders such as Coca-Cola, Procter & Gamble, and Johnson & Johnson, which have a century-old brand history, mature business models, stable cash flow, and consistent dividend policies.

These companies have withstood decades or even centuries of market testing and have demonstrated strong resilience to economic cycles, providing stable investment returns for Class B funds and aligning with their core objective of preserving and maintaining wealth.

Fund C, however, is completely different.

These types of funds are typically represented by 401k plans. Their operating model involves employee contributions plus matching subsidies from the employer. Funds are deposited into the employee's personal account, and the investment targets are standardized portfolios provided by the fund manager. Any gains or losses in the account's assets are entirely borne by the individual employee. The fund manager is only responsible for investment operations and does not guarantee fixed returns or assume investment risks.

This model dictates that C-type funds have a relatively more aggressive investment strategy.

Compared to the rock-solid B-type funds, C-type funds, while still having a lower overall risk appetite than hedge funds, private equity funds, and other financial institutions, will actively allocate a portion of their funds to pursue higher returns in order to meet investors' demand for asset appreciation.

In essence, C-type funds are more like professional asset management firms on Wall Street.

Users entrust funds, and the fund manager is responsible for investment operations, with users bearing all profits and losses.

The difference is that the company will subsidize a portion of the money invested by users.

Ernst's company, while possessing enormous potential, clearly lacks the heritage of a century-old brand and has no long-term stable cash flow record.

For Class B funds, these companies are high-risk assets that have not been tested by market cycles and are subject to great uncertainty.

Investment losses would directly impact the ability to pay pension funds, violating the core principle of prioritizing stability in Type B funds.

Therefore, Class B funds are often extremely cautious about innovative companies that are not yet listed or have just gone public, and will basically exclude them from their investment targets.

On the other hand, C-type funds are willing to participate in this type of investment as long as the project's growth potential is clear enough and the business logic is clear enough.

"I think you're overthinking it. You're Ernst, after all," Buffett said with a smile. Ernst shook his head, unsure whether the old man genuinely thought so or was just teasing him.

"Did you know that Flashbuy's second round of funding caused a huge sensation in California?"

Buffett saw this news, and there were even protests in the streets of California.

It's worth noting that Ernst is a native Californian, and his businesses are all based in California, making it his home base.

"But I believe in Flashbuy's future growth, and I also believe that the two largest B funds in California will reap unimaginable returns by investing in Flashbuy and becoming its shareholders."

"Thank you," Ernst said with a smile. "I also believe that Flashbuy will become a great company."

"But what can we do?" He shook his head. "Those protesters aren't afraid that flash sales can become a great company, but that they can't get started."

As the core vehicle for pension funds, the investment decisions of Type B funds are directly related to the stability of the entire society's pension security system.

In the public's perception, pension funds are life-saving money after retirement and must be managed in an absolutely prudent manner. Any investment behavior that may endanger the safety of funds should be prohibited.

If Class B funds begin to cross the line of prudence and invest in high-risk assets such as startups and unlisted companies that lack historical performance verification, then the safety of pension funds will be compromised.

If investments fail and the fund incurs losses, it could lead to difficulties in distributing pension funds, or even trigger the collapse of the entire pension system.

When Fund B starts to default, everyone will be on edge, because there will be no guarantee of pension security. No one can be sure that their pension fund will be able to pay out.

"So this is an experiment for you?" Wolfwart asked.

Ernst smiled wryly, "Unfortunately, the attempt failed, and I suffered heavy losses as well."

Coast Investments, besides sharing its own spoils and creating a complex web of interests involved in Flash Sale, also represents its experiment with Class B funds.

If possible, he hopes his company will completely disappear from the shadow of Wall Street investment banks.

Unfortunately, he failed.

It's only negotiations now, and there hasn't been a formal signing yet, but it's already caused such a big stir.

Although the financing will proceed as planned, it seems that his company's strategy of targeting pension funds for financing will no longer be viable.

Only when a company goes public and leverages its reputation and past achievements can it attract these funds to allocate shares.

For a startup, this is something others wouldn't even dare to imagine.

This shows that, in the eyes of these pension funds, Ernst's company is comparable to those century-old brands.

But he was still not satisfied. After visiting everyone, Ernst patted Monica Bellucci's small hand, who had been following him, and said to Buffett, "Allen, I might need you to look after her for me."

"Don't worry, we're all civilized people."

Ernst wasn't worried about people approaching him; he was afraid that the other person might have some kind of emergency and need help.

"And thank you." Ernst's thank you was very sincere.

Buffett waved his hand and said with a smile, "You'd be better off not saying anything. If those guys hear it, they'll misunderstand."

Ernst smiled without saying a word, patted Monica Bellucci on the shoulder, and whispered in her ear, "Wait for me quietly, relax, don't be shy."

After saying this, Ernst turned and left the bustling banquet hall.

His departure did not surprise the guests present too much.

Earlier, several institutional investors, including Citigroup, Goldman Sachs, and Tiger Global, who participated in shorting YueDong Games, had already left the same place.

Everyone knows that Ernst's departure is for a crucial negotiation and confrontation with these short-selling institutions.

Many people are also very curious about the final outcome of this battle between bulls and bears sparked by YueDong Games.

Will Wall Street continue its tradition, offering some compensation and hastily concluding the matter as before? Or will Ernst continue to demonstrate his assertiveness towards Wall Street, refusing to bow down?