Caldari Funds Unlimited

Chronicles | YC112-03-25

Caldari Funds Unlimited


Caldari Funds Unlimited is the largest financial institution in the Caldari State, forming the foundation for much of the State's banking and investment infrastructure. The corporation has two primary functions: it is the State's largest provider of pension management services and also provides the State's largest pool of ISK available to the megacorporations for short and long term loans. It also performs a variety of other services and has holdings in a variety of other powerful corporations, giving it far more influence than its sub-megacorporate size might indicate.

The corporation dates back to the years preceding the Caldari's secession from the Federation. The same trend of consolidation which led to the rise of the megacorporations also led to the rise of large financial conglomerates on Caldari Prime; Caldari Funds Unlimited spent years acquiring smaller banks and financial service providers during the decades before the Gallente-Caldari War, eventually becoming the dominant financial institution among the Caldari and vying for the top spot in the entire Federation itself.

While the investment banks the megacorporations had coalesced around were arguably larger, their assets were far less liquid, and the vast majority of consumer banking was done through CFU or one of its competitors. Most of the megacorporations had outsourced their retirement programs to CFU or one of the companies it had gobbled up, and Gallente-owned competitors were soon quietly complaining to the Federation Senate about the undue influence the Caldari bank was able to exert on the market.

Their most powerful argument centered on an incident that took place four years prior to secession, where CFU had sold off its entire stake in Shield Aerospace, a minor Federation defense contractor. The resulting fallout on the Federation stock exchange nearly drove the company to bankruptcy and forced the Federal government to bail them out. The most startling aspect of the entire incident was the reason for the move: the CEO of Shield Aerospace had been involved in an affair with the husband of CFU's CEO, and the sale was made out of spite. Despite the fact that CFU's board fired her after the incident (and that Shield Aerospace did survive), it raised many questions about how powerful the Federation should allow any financial institution to become – especially a Caldari one.

When the megacorporations began planning their secession from the Federation, Caldari Funds Unlimited became a key part of their strategy, necessary for both financial reasons and public support. Its coffers would be essential in paying for the war effort and backing the corporations' scrip, and making sure the bank was secure would also help convince the populace that the corporations would provide for their future. Unlike the anti-secession megacorporations, CFU could not simply be decapitated and dismantled; it would need to be preserved, for symbolic reasons as well as practical ones.

As Federation investigators began to get closer and closer to discovering the secret Caldari colonies, the six secessionist megacorporations colluded to launch a multi-pronged financial assault on Caldari Funds Unlimited. In the several months prior to secession, the stock market activity tripled as the megacorporations manipulated share prices, spread rumors, and used corporate espionage to buy up millions of CFU shares at bargain prices. The collateral damage was immense, with dozens of other companies in the Federation collapsing as part of the megacorporations' scheme. As an example, the megacorporations sabotaged two of the largest pyroxeres mines in the Federation – leading to explosions that killed nearly 20,000 workers – for no greater reason than to force their mines' owner into bankruptcy so he would default on a loan from CFU, triggering a drop in its stock price. The scale of the megacorporate campaign was unprecedented, and remains unrivaled in history. By its end, the secessionist megacorporations had taken nearly complete control of Caldari Funds Unlimited.

What emerged after the megacorporate buyout was a new corporation that combined its old role as a pension fund manager and investment bank with a new role as a pseudo-central bank for the emerging Caldari State and a neutral party to facilitate megacorporate agreements. With the end of most other non-megacorporate banks in the State, and the lack of a standard currency after secession, it was necessary for the megacorporations to establish a neutral party which could handle the high-level investment banking they required. CFU's strong reputation, both as a bastion of the banking industry and a pension provider, made it the perfect middleman. In addition, leaving the pension funds for most Caldari citizens in the hands of such an institution helped to reassure them that their future was still secure after the financial turbulence that followed the actual secession.

Today, Caldari Funds Unlimited has many roles in the Caldari State, but perhaps its most important role still remains as a symbol of financial stability in an often uncertain world.

Retirement Fund Management and Financial Instruments

Caldari Funds Unlimited is most familiar to people as a management entity for retirement funds. Nearly three-quarters of such funds, by total assets, are managed by CFU, with the lion's share of the rest managed by one of the other two major “independent” Caldari financial institutions, Modern Finances and the State and Region Bank. This is a legacy from before Caldari secession, when the relationship between corporate leadership and the workers was not nearly as dictatorial or adversarial. Corporate pensions were placed in the hands of neutral managers, like CFU and the other companies it absorbed, in order to ensure the protection of workers against corporate instability.

Today, this arrangement is maintained largely out of tradition and because it is what the workers have come to expect, rather than out of any particular sense of duty on the part of corporate leadership. However, even the hint of trouble at CFU can have widespread repercussions throughout Caldari society as a result. Rumors of malfeasance by CFU executives in YC 27 triggered a massive investigation by the Caldari Business Tribunal, as well as a steep decline in the bank's fortunes. Two years later, the Tribunal investigation determined it had been a propaganda campaign from an up-and-coming corporation that hoped to attain megacorporate status by taking CFU's business, Seaguard Financial. Before this was revealed, concerns about CFU's stability triggered panic in many parts of the State, especially on poorer worlds. Riots broke out as people demanded their money out of retirement funds, leading to thousands of deaths as they clashed with corporate security.

The reaction from the Chief Executive Panel was swift and merciless. Seaguard Financial, which had started the rumors and inserted its agents inside CFU to fan the flames, was placed under “extreme sanction” by the Panel. The megacorporations went to war against the upstart, and within a year, every asset of the company had been absorbed by the Big Eight. It's worth noting that similar propaganda campaigns against other corporations – even members of the CEP – have happened many times in the past, and have never provoked such a vicious response. The Seaguard Incident remains a cautionary tale of the limits that exist to the State's regularly occurring corporate warfare.

CFU's fund management strategy, and the financial instruments it sells on the market, are generally geared towards conservative, long-term gains. Its largest funds focus on conservative financial instruments, such as low-interest, low-risk corporate bonds, funds with broad-based stock portfolios to minimize exposure to trouble in any one industry or market (also known as index funds), and stocks focused on returning a strong annual dividend rather than a rapid increase in price.

However, in order to reduce its vulnerability and pursue slightly more aggressive growth, over the last century it has offered more diverse investments, such as funds focusing on Caldari ventures in the Khanid Kingdom and Amarr Empire, treasury bonds from the Kingdom, Empire, and even the Federation, and even growth-based funds focusing on foreign stocks. Clients can adjust their asset allocation, and therefore risk exposure, through the company's NeoCom portal. Despite this, most Caldari, especially at the lower end of the economic spectrum, take a hands-off approach.

The downturn in the State which manifested itself during YC 108-110 and the upswing in the fortunes of the Federation and Republic during that time has raised the profile of more aggressive managers at CFU, and as a result many funds at the company have become somewhat less risk-averse in an attempt to duplicate their success. The Caldari Business Tribunal, which is charged with maintaining the stability of CFU due to the bank's integral importance to the State's economy, has expressed some concerns over this shift. So far, however, the Tribunal has been hesitant to step in, concerned with triggering a panic that would only exacerbate the problem.

Corporate Banking

Caldari Funds Unlimited's other major line of business is acting as a “banker's bank” or reserve bank for the State's megacorporations. While the megacorporations have vast amounts of assets (including entire planets or star systems), their liquid cash is often considerably more limited, which is where CFU comes in.

CFU keeps a large treasury full of ISK and various corporate scrips in order to fund its day-to-day activities and secure itself from the risk of a run on the bank or temporary market fluctuations. These funds are also used to provide the megacorporations liquid capital for financial maneuvers through short-term loans. This is one of the reasons the megacorporations found it necessary to take control of CFU during secession, as a lack of liquid capital would have paralyzed their ability to effectively pursue the war against the Federation. Usually, these loans are secured by some sort of hard asset, but the unique position of the megacorporations has often allowed them to acquire large unsecured loans, especially when four or more megacorporations are working together on a project. Much of the development of Black Rise was financed this way, as was a great deal of the investment the megacorporations have put into the Caldari-occupied territories of the Federation. This is risky behavior, but objections within CFU and from the Tribunal have usually been quieted by political pressure.

CFU's cash reserve also allows it to handle currency exchanges for the megacorporations. Although technically allowed to do so for individuals, it does not deal in amounts smaller than a million ISK, which limits its utility for the vast majority of people. Corporations wishing to exchange megacorporate scrip for another megacorporation's scrip, ISK, or foreign currency must use CFU to handle such transactions, for which it charges an extremely small fee. This is most often used by corporations when trying to make significant investments in foreign markets or as a hedge against fluctuations in the value of their own currency; however, corporations also keep reserves of other corporate scrips and foreign currency to pay contractors, foreign workers, and “extralegal” assets.

Relations With the Big Eight

Though not technically a megacorporate subsidiary or a megacorporation in its own right, the status Caldari Funds Unlimited enjoys in the State is considerably higher than that of any other independent corporation. Despite the push and pull of the various political blocs, CFU itself is allowed to operate independently for the most part so long as the business runs smoothly. Board meetings are considerably more sedate than might be expected considering the company's shareholders. This is mostly due to the focus CFU has on simply providing the best return for its clients, whereas issues discussed in similarly divided venues (such as the CEP) tend to be considerably more political in nature.

The Patriots have long held the strongest position on the CFU board, and as a result most operations that need to be outsourced, such as security, tend to go to Patriot firms of one stripe or another. Kaalakiota and its allies have exerted political pressure on the firm, especially since the rise of the Heth regime, to allow them a considerably greater number of concessions than the other state factions (as evidenced by the Black Rise development loans, for one). CFU also uses Kaalakiota's Home Guard as its preferred security provider, and CFU employees who have given public objection to some of these politically sensitive moves have recently been fired and/or arrested. While the reasons for their fates were never clearly stated, the fact that the Home Guard or Provists seem to pay very close attention to 'troublemakers' of that nature has led to a pervasive aura of fear among the company's executives, consequently keeping vocal dissent to a minimum.

While other corporations have been wary of Kaalakiota and the Patriots' growing influence over CFU, so long as things continue to run smoothly they appear to have little interest in making waves. With a company of CFU's reputation, not to mention the pensions of billions of Caldari, playing political football is a very dangerous game, and one that even the CEOs of the megacorporations are not willing to play unless they have little choice.