Brief : David Solomon wants to make sure you don’t get too attached to your Rona Rigs. The Goldman Sachs Group Inc. chief executive officer on Wednesday repeated his desire to see the firm’s offices fill up again. “This is not ideal for us and it’s not a new normal,” Solomon said at a Credit Suisse Group AG conference. “It’s an aberration that we are going to correct as quickly as possible.” The 59-year-old CEO has been one of the more vocal business leaders pushing government officials to move faster in making changes needed to bring employees back to work. He’s urged them to use private-sector support to speed up the process. Wall Street firms were preparing to welcome a larger cohort into their emptied-out skyscrapers last year, only to see that effort fizzle with a new surge of coronavirus cases. Some have been further frustrated by what they perceive as a botched vaccine rollout that delayed a return to pre-Covid normalcy. “The vaccine distribution and the process of recovery has been a little bit slower in the first quarter than some of us had hoped,” Solomon said. But additional government stimulus and the potential for an infrastructure bill after that will provide a “very, very strong tailwind” for economic recovery, he said.
Brief: A group of institutional investors worth USD13 trillion, including Aviva Investors, AXA Investment Managers, and Fidelity International, has pledged to support fair and equal global access to vaccines and healthcare in the fight against coronavirus. Last week, the United Nations secretary general António Guterres labelled the global vaccination effort “wildly uneven and unfair” in a security council meeting. Three quarters of all vaccinations have so far been administered by just 10 countries, while 130 countries have not yet received a single dose. Led by the Access to Medicine Foundation, the investor partnership aims to improve financing and co-operation on worldwide vaccination efforts. The investors say they are concerned about limited funding for the World Health Organisation’s ACT Accelerator global healthcare access scheme, which includes vaccination wing Covax, and the effect this will have on the “trajectory of the pandemic and global economic activity in the coming years”.
Brief: Global airline industry body IATA said it would launch a COVID-19 travel pass at the end of March, bringing into use a digital system for test results and vaccine certificates which will help facilitate international travel. IATA said on Wednesday that it was essential that governments start issuing their citizens with digital vaccination certificates which can then feed into its travel pass.
Brief: Hedge funds could be set for a rush of new capital pouring into the industry this year – potentially reaching up to USD30 billion – as investor appetite grows following strong 2020 performances, Barclays said on Wednesday. The bank’s ‘2021 Global Hedge Fund Industry Outlook and Trends’ report found that allocator sentiment towards hedge funds is the strongest it’s been since 2014, with 41 per cent of all investors planning to increase their hedge fund exposure this year. The annual hedge fund investor survey quizzed 240 firms representing USD5 trillion in assets, including USD725 billion of hedge fund investments - roughly 22 per cent of total industry capital. The bank’s Strategic Consulting team, which ran the poll, said hedge funds could draw between USD10 billion and USD30 billion of projected net inflows from investors, and around USD450 billion in gross allocations, in what could prove “a breakout year” for managers.
Brief: A breakneck selloff in the bond market left one of the biggest Treasury exchange-traded funds bleeding. The $14 billion iShares 20+ Year Treasury Bond ETF (ticker TLT) has plunged 11% this year as long-dated Treasury yields climbed, fueled by building wagers on a rebound in inflation. Investors have yanked over $3.2 billion from the fund so far in 2021, whittling TLT’s total assets to the lowest level since mid-2019, according to data compiled by Bloomberg. Covid-19 vaccine rollouts combined with the prospect of further fiscal aid from the Biden administration has forced a reckoning of sorts for the Treasury market, where long-dated yields were hovering near historic lows entering 2021. Breakeven inflation rates have soared to multi-year highs, dragging benchmark 10-year yields to the highest in over a year, as the economic outlook brightens. That point was reinforced by Federal Reserve Chairman Jerome Powell this week as he said the recent run-up in bond yields is “a statement of confidence” in the economy, while downplaying the risk of a sustained pickup in price pressures.
Brief: In the health-care industry, the coronavirus pandemic led to big fortunes, fast. Now some of them are evaporating just as quickly. Take Seegene Inc., a maker of Covid-19 test kits, and Alteogen Inc., a biotech with subcutaneous-injection technology. Their founders became billionaires as the shares surged last year. Fast forward a few months to the vaccine rollout, and they’ve lost their title after both stocks sank more than 40%, according to the Bloomberg Billionaires Index. It’s a similar story for glovemakers in Malaysia, which counted at least five industry billionaires by August as the worsening health crisis increased demand for the protective gear. Despite a brief rebound amid last month’s frenzy in retail trading, their shares are down by more than a third since hitting highs, wiping more than $9 billion from their founders’ net worths. While the billionaires created by the Pfizer Inc.-BioNTech SE and Moderna Inc. vaccines have maintained much of their wealth, many others have seen a falling off. The moves show how fleeting fortunes can be with a market so wild that some stocks have had days with fluctuations of more than 20%. Some of the founders took advantage of the volatility to book profits, just as others increased their control by buying more shares as prices fell.
Brief : Blackstone Group Inc. is seeking to raise about $15 billion for two new investment funds in the fast-growing private equity secondaries market. Blackstone Strategic Partners, a $38 billion unit focused on investing in existing private equity portfolios, aims to raise $12 billion to $13 billion for a ninth flagship fund, which would be its biggest ever, and a smaller vehicle of at least $2 billion to focus on so-called general partner-led secondary deals, according to people familiar with the plans. The firm’s secondaries business grew roughly eightfold over the past six years and should continue to expand at a “very rapid rate,” Blackstone President Jonathan Gray said on an earnings call last month, when he discussed plans for further secondaries funds without elaborating on fundraising targets. The value of secondaries transactions more than tripled over six years to $88 billion in 2019 and totaled $60 billion last year, data from Greenhill & Co. show, driven by private equity investors seeking to offload their stakes early in otherwise illiquid funds. The structure has evolved in recent decades as a solution for institutional investors to rebalance their portfolios and draw on cash when needed.
Brief: Over half of financial services firms worldwide plan to increase their spending over the next two years on next-generation technologies such as AI, blockchain, the cloud and digital, according to a new study surveying 1,000 global C-suite executives and their direct reports, by Broadridge Financial Solutions. Broadridge’s Next-Gen Technology Adoption Survey indicates that firms also reported a range of strategic benefits from prior investments in emerging technologies, including accelerated time to market, better decision-making and improved risk management. Broadridge developed The ABCDs of Innovation Maturity Framework for the study to categorise firms as either a Beginner, Implementer, Advancer or Leader in next-gen technology adoption. Next-gen technology maturity was based on progress made in implementing these technologies and reported effectiveness in driving business performance. Over the next two years, firms worldwide plan to increase the share of their overall IT budgets spent on next-gen technologies from 11.8 per cent to 15.7 per cent on average, an increase of 33 per cent.
Brief: The U.S. economic recovery remains “uneven and far from complete” and it will be “some time” before the Federal Reserve considers changing policies it adopted to help the country back to full employment, Fed Chair Jerome Powell said on Tuesday. Powell began is testimony before the Senate Banking Committee as Wall Street looked set for its sixth straight day of declines from last week’s record highs, although losses were pared after the release of his comments. Fears about rising U.S. Treasury yields hit the technology sector particularly hard. The U.S. central bank’s interest rate cuts and purchases of $120 billion in monthly government bonds “have materially eased financial conditions and are providing substantial support to the economy,” Powell said in prepared remarks.
Brief: Global dividends fell by 12 per cent in 2020 to USD1.3 trillion in the full year of 2020, after cuts and cancellations reached USD220 billion between April and December. Companies in the UK and Europe made up more than half the value of cuts and cancellations combined, according to a new report from UK-based asset manager Janus Henderson. The UK saw the largest total fall in dividends, with total pay-outs falling by 41 per cent to an annual sum of USD62.5 billion. This compared to falls of 32 per cent in the rest of Europe, 18 per cent in Asia Pacific ex-Japan, and 10 per cent in emerging markets. In 2020, London-listed Royal Dutch Shell cut its dividend for the first time since 1945 due to a collapse in oil prices, and major banks Barclays, HSBC, Lloyds, Royal Bank of Scotland and Standard Chartered all halted payments.
Brief: Despite the pandemic, 2020 turned out to be a good year for equities. When markets are volatile, there are lots of opportunities to pick up bargains that can enhance returns. Manulife Investment Management’s mutual fund family led in investment performance for the year ended Dec. 31, 2020, with 87.9% of long-term assets under management (AUM) held in funds ranked in the first or second quartile by Morningstar Canada. (All companies are Toronto-based unless otherwise noted.) “Our [portfolio] managers deployed some cash in March to buy really good names at discounted prices,” said Sanjiv Juthani, head of product management at Manulife. The firm focuses on bottom-up stock-picking and “even with the potential for short-term market pain, our managers don’t make macroeconomic bets,” Juthani said. When Covid-19 hit, no one knew what the markets would do. “Equities could have gone down by 50%, up by 50% or anywhere in between,” said Paul Moroz, chief investment officer at Calgary-based Mawer Investment Management Ltd., which had 80.4% of its AUM in funds with above-average returns.
Brief: International Finance Corp. is on track to sell a record amount of environmental and social bonds as part of its global response to the pandemic. The World Bank Group’s arm for the private sector expects its sustainable bond sales this year will likely surpass the previous high of $2.3 billion it set in 2017, according to John Gandolfo, vice president and treasurer at IFC. Issuance will come in different currencies, and proceeds will go to clients globally, including small businesses, low-income households and poor and fragile nations, he said. “IFC is certainly focused on, first and foremost, its response to the pandemic and saving jobs, lives, livelihoods and also building a path to a resilient recovery,” said Gandolfo in an interview. It raised about $2.2 billion in debt tied to environment, social and governance last year, including a record $1.9 billion in social bonds. One key area of focus this year is vaccine campaigns, especially in emerging markets where distribution has been slow compared to developed nations, he said. IFC said it has already raised $440 million in social bonds across five different currencies in its current fiscal year, which runs July 1 to June 30. That included its first bond swapped from fixed-rate to the new Secured Overnight Financing Rate benchmark interest rate. The organization is also looking to issue social bonds in additional currencies to reach more investors.
Brief : Millennium Management’s Israel Englander earned $3.8 billion last year, landing him the biggest payday of any hedge fund manager in 2020, showed data from Institutional Investor. Englander more than doubled his $1.5 billion payday in 2019 and made $2 billion more than the previous year’s rich list leaders Chris Hohn and Jim Simons, while making gains of 26% for his investors. The top 10 hedge fund managers globally earned $20.1 billion in 2020, a 50.2% rise from $13.4 billion in 2019, against the backdrop of volatile markets amid the coronavirus pandemic. Hedge funds made gains of 11.7% on average in 2020 amid a huge sell-off in March and large economic shutdowns following the emergence of the novel coronavirus, according to data from Hedge Fund Research. But top 10 averaged returns of 43% in 2020, with Coatue Management making 65%, Renaissance Technologies racking up 76% and Tiger Global Management 48%, the data from Institutional Investor showed. All of the top 10 hedge fund managers made over $1 billion in 2020, compared with eight in 2019.
Brief: Staff at financial firms in Britain are suffering from “lockdown fatigue” and their bosses are not always making sure all employees can speak up freely about their problems, the Financial Conduct Authority said on Monday. Many staff at financial companies have been working from home since Britain went into its first lockdown in March last year to fight the COVID-19 pandemic. One year on, the challenges have evolved from adapting to working remotely to dealing with mental health issues, said David Blunt, the FCA’s head of conduct specialists. “During this third lockdown, there has been a greater impact on mental well-being, with many people struggling with job security, caring responsibilities, home schooling, bereavements and lockdown fatigue.” Bosses should continually revisit how they lead remote teams, he said. “The impact of COVID-19 is creating a huge workload for those considered to be high performers, while the remote environment potentially makes it much more challenging for those who were previously considered low performers to change that perception,” Blunt told a City & Financial online event.
Brief: BlackRock Inc. said it’s turned bearish on credit and government bonds, downgrading the two asset classes to underweight over the long-term because of high valuations and inflation expectations. A stronger economy on the back of the Covid-19 vaccine rollout, combined with the potential for as much as $2.8 trillion of additional fiscal stimulus and higher inflation will drive up nominal yields this year, the world’s biggest money manager said in a note Monday. The surge in public debt, and increased appetite for it, could also pose a risk over the longer-term, the firm said. “We turn underweight credit due to rich valuations and are now modestly overweight equities,” Jean Boivin, head of the BlackRock Investment Institute, and others said in the note. “Equities valuations are also closer to long-term averages after factoring in historically low interest rates and an improving earnings outlook.” The call is in line with a broader concern that’s sent the 10-year Treasury yield soaring in recent weeks: that price pressures are poised to re-emerge amid an economic boom powered by vaccines, pent-up consumer demand and another round of government stimulus. The New York-based firm said it prefers inflation-linked bonds.
Brief: Inflation is the next big risk facing the nascent economic recovery, and equity investors should be “exceptionally selective” in their exposures, tilting portfolios towards market neutral strategies that will help avoid excessive beta risk, says Man Group’s Pierre-Henri Flamand. Flamand – CIO emeritus and senior investment adviser at Man GLG, the discretionary hedge fund unit of London-listed investment giant Man Group – believes UK, European and Asian markets now offer attractive relative value stockpicking opportunities away from the “equity euphoria” seen Stateside. In a recent market commentary, he said the surge in government borrowing globally during the coronavirus pandemic to keep economies afloat and stave off a downturn may ultimately prove “a significant drag on growth and earnings for years to come”. As a result, investors should “look beyond the good news”, and instead construct their portfolios “with one eye on a potential inflationary future”. Specifically, this means pivoting towards certain UK, European and Asian stocks, and away from “frothy” US equities whose prices are being driven up by “all the frustrated ambitions of last year”.
Brief: Global dividends fell sharply in 2020 due to the coronavirus pandemic, with the amount of investor payouts declining 12.2% to $1.26 trillion, according to new research. As the international public health crisis spread throughout the world, prompting lockdowns and curtailing business activity, dividend cuts and cancellations totaled $220 billion between the second and fourth quarters of 2020, according to the latest Global Dividend Index from asset manager Janus Henderson. Still, the total amount of dividends paid out between April and December 2020 was $965.2 billion, noted Janus Henderson, which analyzes dividends paid by the 1,200 largest firms by market capitalization before the start of each year. Dividend cuts were most severe in the U.K. and Europe, the index found, with both together accounting for more than half the total reduction in payouts globally, “mainly owing to the forced curtailment on banking dividends by regulators,” Janus Henderson found.
Brief: A year after Covid-19 reordered world markets, sparking a brutal selloff for many stocks and creating new lockdown darlings, the prospect of vaccine-led reflation is turning the tide for the pandemic’s main laggards. Rebounds in shares that were the hardest hit during the early days of the crisis have helped equity benchmarks around the world climb to near record highs. The likes of European tour operator TUI AG and U.S. mall owner Simon Property Group Inc. are among those that have rallied most strongly. “There’s broad opportunity in those laggards,” said Hani Redha, a portfolio manager at PineBridge Investments, referring to airline stocks, cruise operators and hotels. “We are on the more bullish side that there’ll be a lot more normality coming back sooner than you may think.” The increasing optimism among investors about an end to months of lockdowns and travel restrictions can also be seen in the recent underperformance of those stocks that were among the pandemic’s biggest winners. The likes of Zoom Video Communications Inc. and Germany’s Delivery Hero SE, which soared as the coronavirus took hold and changed the way we all live, are now some way off their peak valuations.
Brief : Federal Reserve actions will continue to bolster the U.S. economy as it battles the Covid-19 pandemic, the central bank said Friday in its twice-yearly update to Congress. “Monetary policy will continue to deliver powerful support to the economy until the recovery is complete,” the Fed said. The report was published on its website ahead of Chair Jerome Powell’s testimony before the Senate Banking Committee on Tuesday and the House Financial Services panel a day later. Fed officials have signaled they will hold interest rates near zero at least through 2023 and last month repeated they would keep buying bonds at a monthly pace of $120 billion until “significant further progress” had been made on employment and inflation. On an optimistic note, the Fed said data show a pickup in employment through early February in the hard-hit leisure and hospitality sector -- which includes restaurants, entertainment venues, and hotels. The Fed said data on new-business applications started to pick up in the summer. Nevertheless, other data show that services spending remains restrained, the report said. The Fed noted that job losses in the pandemic have fallen disproportionately on low-income workers, those without a college degree, Americans of color and mothers. These groups also still have the most ground left to make up as economic activity remains suppressed.
Brief: Asset managers are preparing for a rebound in UK equities, as an easing of coronavirus restrictions is expected to follow a swift roll-out of vaccinations. Last week, the chief economist of the Bank of England Andy Haldane said that the UK economy is “like a coiled spring” with “enormous amounts of pent-up financial energy waiting to be released” once the effects of the mass vaccination programme kick in. The UK economy shrank by almost 10 per cent last year, resulting in a contraction more than twice as large as any on record, said the Office for National Statistics. The IMF expects the UK economy to expand by 4.5 per cent this year, and another 5 per cent in 2022. At the end of January, London-headquartered asset manager Schroders, upgraded its outlook on UK equities to ‘positive’. “We upgraded UK equities as we expect it to benefit as the global recovery broadens into multinational and commodity-sensitive markets,” wrote Schroders, noting strong recent gains from oil and gas and basic materials companies. The FTSE All-Share index posted negative returns in January as companies in the financials, industrials, and consumer goods sectors all weakened.
Brief: Sovereign wealth and public. pension funds are bolstering their funding of private debt, with close to $9 billion committed since the COVID-19 crisis as they hunt for yield and their ample liquidity allows them to take on more risk than banks. Most recently, Saudi Arabia's Public Investment Fund said last week it had become an anchor investor in a new $300 million shariah credit fund. Queensland Investment Corp (QIC), an investment arm of the Australian state, last month became the latest state-owned investor to launch a private debt team. Last year marked a tricky time for the asset class. Private-debt fundraising declined substantially and commitments to direct lending, the largest chunk of it, fell by more than half. But as the uncertainty surrounding the pandemic lifts, activity is expected to pick up in 2021. State-owned investors with their deep pockets and long-term investment horizons are at the forefront. "Now we are seeing real interest from sovereign and pension funds that wasn't there a couple of years ago," said Antoine Josserand, head of business development at pan-European private credit manager Pemberton Asset Management, which counts both types of investors as clients. "It's a reflection of the fact that they recognise the merit in terms of diversification of their alternative asset bucket. Others, as part of their fixed-income portfolio, are trying to find the best relative value they can in the current negative rate environment."
Brief: Hamilton Lane Inc. is putting the probability of an economic downturn this year at zero, according to Chief Executive Officer Mario Giannini. “There is virtually no chance that there is a recession in 2021,” Giannini said Thursday during the firm’s annual market overview. “We’re not going into a downturn, and in fact we may have an even stronger environment than people expect.” The Bala Cynwyd, Pennsylvania-based alternative-asset manager, which oversees about $657 billion, believes that central banks will continue to plow more money into the system to hold up markets. “When you look at what governments are doing in the U.S., in Europe, everywhere -- they are saying this pandemic was no one’s fault and we are not going to allow economies to turn down and not do something about it,” said Giannini. “So we think they are going to continue to provide enormous fiscal stimulus through this year.” Giannini said interest rates will remain low for a longer period of time than expected. He did predict one wild card: the possibility of an inflation scare from pent-up demand for a return to pre-pandemic life with outings such as eating at restaurants and taking trips driving “an enormous amount of activity.”
Brief: Activist hedge fund manager William Ackman, whose bets on companies are closely watched, updated investors on how his flagship fund earned a record 70.2% return in 2020 on Thursday in a socially distanced way by sending out a 57-page presentation. Normally this would be one of the rare occasions where investors could pepper the billionaire investor and his partners in person with questions about markets and individual companies over dinner in New York. Ackman has plenty to celebrate after his Pershing Square Capital Management put up a second straight year of record returns in 2020. In 2019 the fund returned 58.1%. And 2021 is off to a strong start with an 8.1% return. Because of the COVID-19 pandemic however, Ackman and his team continue to work remotely, something they started over a year ago, and there will be no public champagne cork popping or dinner tonight. It was only in 2018, over dinner, that Ackman told investors that he would stop jetting around the world to meet with investors throughout the year. He was going to focus more on researching new ideas instead of acting as his firm’s chief marketer. For investors, the shift has paid off, and Ackman called 2020 and “outstanding year” in the presentation.
Brief : Wall Street hedge fund managers, the chief executives of Robinhood and Reddit, and a YouTube streamer known as Roaring Kitty were grilled on Thursday by U.S. lawmakers about the Reddit rally in shares of GameStop Corp. Some of Wall Street’s most powerful players, including billionaire Republican mega-donor and Citadel CEO Ken Griffin, made rare public defenses of their business practices as lawmakers probed how Reddit users trading on retail platforms squeezed hedge funds that had bet against shares of the video game retailer and other companies. Griffin appeared before the Democratic-led House finance panel alongside Robinhood CEO Vlad Tenev, Melvin Capital CEO Gabriel Plotkin, Reddit CEO Steve Huffman, and Keith Gill, a Reddit user and YouTube streamer known as Roaring Kitty who promoted his investment in GameStop. The five men have been at the center of the saga, which roiled Wall Street in January prompting probes by several federal and state agencies.
Brief: Despite a boost in optimism following the approval of Covid-19 vaccines towards the end of 2020, six out of ten fund selectors believe that the ‘new normal’ is here to stay, a survey by Natixis Investment Managers has found. With heightened risk expected for the year ahead, two thirds of the 400 global fund selectors surveyed also predict that the global economy will not recover from Covid in 2021. However, regardless of concerns over Covid-19 and political issues, 80% believe central banks will support the market in the event of a downturn, according to the report. According to respondents, volatility and negative rates were considered the first and second top portfolio risks for global fund buyers in 2021, at 49% and 39% respectively, while a credit crunch was also cause for concern. Against this backdrop, 66% of the fund selectors believe that aggressive portfolios will outperform their defensive counterparts. Matt Shafer, EVP, head of wholesale and retail distribution at Natixis IM, said: “2020 marked a year of extreme challenges for markets that went beyond the health pandemic, including climate events and natural disasters, political tensions and the fastest market correction in history.
Brief: The coronavirus pandemic has shone a spotlight on underfunded public health issues and infectious diseases. Investors once reluctant to put capital toward niche vaccine candidates, diagnostic tools and other public health solutions are taking notice. A venture capital firm launched by veterans of the Bill & Melinda Gates Foundation-sponsored Global Health Investment Fund has attracted $300 million in an oversubscribed fund to spur development of affordable technologies to address global health issues. Adjuvant Capital drew a $75 million anchor investment from the Gates Foundation’s Strategic Investment Fund, as well as significant investment from large drugmakers Merck & Co. and Novartis AG, and such others as the International Finance Corporation and Dalio Philanthropies. The capital will be deployed across a portfolio of 14 companies, which are focused on a range of health issues including yellow fever, non-hormonal contraception and Covid-19.
Brief: WisdomTree has launched a bond ETF dedicated to EU coronavirus recovery efforts in what has been called a world first. The ETF will invest in bonds issued by the EU to finance initiatives designed to mitigate unemployment risks as well as repair economic and social damage caused by the coronavirus pandemic. The ETF provider highlighted that the bloc is expected to issue €850 billion of bonds focusing on the recovery through the initiatives SURE and NextGeneration EU. SURE is a temporary tool aimed at mitigating unemployment risks, while NextGeneration EU focuses on repairing the immediate socio-economic damage brought on by the virus. The WisdomTree European Union Bond Ucits ETF (EUBO) fund tracks the iBoxx EUR European Union Select Index, which contains bonds issued by the EU to fund these programmes. Together, NextGeneration EU and the EU’s long-term budget form the largest ever stimulus package financed through by the EU totalling €1.8 trillion, WisdomTree said.
Brief: Corporate venture investors took part in a record-setting year for betting on European startups in 2020 as companies sought to increase their exposure to pandemic-proof sectors, and the trend looks set to continue into 2021. Last year, European startups raised a record $21.4 billion through rounds with CVC participation, a nearly 35% increase over the year before, according to PitchBook data. About 34% of 2020's investment was directed to IT and software startups, with healthcare companies accounting for 23% of the capital raised. "The pandemic has shown that there's never been a better time to be investing in software early-stage tech," said Matthew Goldstein, a London-based partner at Microsoft's venture arm, M12. "It has become very clear that sitting on the sidelines is a losing strategy for corporate investors whether they are strategic or financially driven." In many cases, CVCs back technologies that are relevant to their sector or could even be integrated. Notable examples include ABN AMRO Ventures, which joined an €85 million (around $102.4 million) round for Swedish open banking platform startup Tink in December.
Brief: Over 50 per cent of healthcare businesses in the UK have yet to reap the rewards of digital transformation, according to a new report from Equator.The Healthcare industry digital wellness report 20/21 surveyed 20 private equity-backed healthcare businesses to uncover the digital maturity of the sector, with digitisation critical in the post-pandemic landscape. Private equity firms invested over GBP140 billion across 1,227 healthcare deals in 2019, with the sector now accounting for 14 per cent of total deal value. Covid-19 had an impact on deal activity in 2020, but over the last three quarters, healthcare has been the highest demand sector for digital due diligence, advisory and transformation services for Equator. The report includes detailed reviews of twenty healthcare businesses which have seen a PE-backed buyout, or significant growth funding over the last three years. Over a third (40 per cent) of websites reviewed in the report can benefit from using human-centred design principles to accommodate evolving preferences and expectations. Smart tools, such as chatbots and AI, can help businesses operate more efficiently and adapt faster. Out of the 20 businesses surveyed, none currently power their interactions or enhance their overall customer experience in this way.
Brief : The COVID pandemic has added $24 trillion to the global debt mountain over the last year a new study has shown, leaving it at a record $281 trillion and the worldwide debt-to-GDP ratio at over 355%. The Institute of International Finance’s global debt monitor estimated government support programmes had accounted for half of the rise, while global firms, banks and households added $5.4 trillion, 3.9 trillion and $2.6 trillion respectively. It has meant that debt as a ratio of world economic output known as gross domestic product surged by 35 percentage points to over 355% of GDP. That upswing is well beyond the rise seen during the global financial crisis, when 2008 and 2009 saw 10 percentage points and 15 percentage points respective debt-to-GDP jumps. There is also little sign of a near-term stabilisation. Borrowing levels are expected to run well above pre-COVID levels in many countries and sectors again this year, supported by still low interest rates, although a reopening of economies should help on the GDP side of the equation.
Brief: Global institutional pension fund assets in the 22 largest major markets (the P22) continued to climb in 2020 despite the impact of the pandemic, rising 11 per cent to USD52.5 trillion at year end, according to the latest figures in the Thinking Ahead Institute’s Global Pension Assets Study. The seven largest markets for pension assets (the P7) – Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US – account for 92 per cent of the P22, unchanged from the previous year. The US remains the largest pensions market, representing 62 per cent of worldwide pension assets, followed by Japan and the UK with 6.9 per cent and 6.8 per cent respectively. According to the study, there was a significant rise in the ratio of pension assets to average GDP, up 11.2 per cent to 80.0 per cent at the end of 2020. This is the largest year-on-year rise since the study began in 1998, equalling the increase recorded in 2009 as pension assets bounced back after the global financial crisis. Whilst the measure usually indicates a stronger pension system, the sharp rise also underlines the economic impact of the pandemic on many countries’ GDP. Among the seven largest pensions markets, the trend was even more pronounced with a 20 per cent rise in the pension assets to GDP ratio to 147 per cent in 2020, from 127 per cent the year before.
Brief: Unpaid debt from pandemic-stricken borrowers has ravaged profits at Europe’s big banks and kick-started a debate among politicians about whether they may ultimately need state help. Reflecting on the pandemic impact, many bank executives say the worst is behind them, with Societe Generale CEO Frederic Oudea and BNP Paribas CEO Jean-Laurent Bonnafe predicting an imminent rebound. “Optimism is ... a weapon of war,” Philippe Brassac, chief executive of Credit Agricole said in January, decrying “doom-mongers”. “And this war, we can win.” All three French lenders saw profits shrink last year and profits at Spain’s Santander and Dutch bank ING also dipped. While executives voice confidence, European officials worry the banks’ problems have barely begun. They fear more borrowers will default when government support, including billions of euros of loan guarantees in France, Spain and elsewhere, is unwound.
Brief: Investors are building bets against the largest corporate debt exchange-traded funds as spreads shrink and interest rates rise. Short interest as a percentage of shares outstanding on the US$48 billion iShares iBoxx $ Investment Grade Corporate Bond ETF (ticker LQD) jumped to more than 15 per cent, up from 5.9 per cent at the start of the year, according to data from IHS Markit Ltd. That’s the highest level since last March, when high-quality bonds sold off as investors raced to raise cash in the face of a quickly spreading pandemic. Now, with the vaccine rollout underway and an economic reopening in sight, investment-grade credit spreads to Treasuries have tightened sharply. Meanwhile, building reflation bets have boosted long-dated Treasury yields to the highest levels in a year, renewing concerns about relatively high LQD’s duration -- a measure of sensitivity to interest-rate changes. Against that backdrop, the risk-reward for high-grade corporate bonds looks less compelling, according to Wells Fargo Investment Institute.
Brief: For the last year, market commentators and investment professionals have blamed volatile markets on bored retail investors trading on Robinhood while stuck at home during the pandemic. Turns out they were right, according to a new study from a top Australian university.Researchers from the University of Western Australia used Google mobility data and internet traffic to analyze how much individual investors in the U.S. paid attention to stock markets and publicly traded companies while under lockdown. The academics found that the extended periods at home led to higher market engagement by retail investors, especially among younger populations and in states where fewer people worked from home prior to the pandemic. “The stay-at-home duration increases retail attention and contributes to heightened trading activity in the financial market,” authors Daniel Cahill, Chloe Ho, and Joey Yang wrote in their paper. To measure how much attention individual investors paid to public companies, the trio looked at pageviews for those companies’ Wikipedia profiles. They found that the daily average views for company Wikipedia pages increased from March to April, as people spent more time at home due to Covid-19.
Brief: CQS, Sir Michael Hintze’s long-running multi-strategy credit-focused hedge fund firm, has launched a new actively-managed strategy which aims to generate higher returns across corporate sub-investment grade opportunities against a backdrop of increased volatility and unpredictable markets. The CQS Total Return Credit Fund targets a range of geographies, asset classes and sectors, across various ratings classes, using a bottom-up, fundamental research process. The UCITS compliant strategy - managed by Craig Scordellis, head of multi-asset credit, and Darren Toner, head of high yield investment grade and financial portfolios - will use an unconstrained investment approach to scope out the strongest opportunities and maximise risk-adjusted returns while aiming to curb volatility and potential defaults. The fund will also use ESG (environmental, social and governance) processes as part of the portfolio-building process, including engaging directly with debt issuers to influence long-term corporate behaviours, promote responsible practices, and mitigate ESG risks.
Brief : Three House Democrats are pushing legislation that would repeal the carried-interest tax break used by fund managers to reduce the levies they owe to the Internal Revenue Service. The bill would close the carried-interest tax break and require many hedge fund and private-equity managers to pay higher ordinary income-tax rates, rather than the lower rates on capital gains. Representatives Bill Pascrell of New Jersey, Andy Levin of Michigan and Katie Porter of California are sponsoring the legislation, which could become part of broader talks on taxes in Congress in the coming months. “The ability of private-equity and hedge fund financiers to use the loophole impacts income inequality, as this tiny subset of executives make up some of the wealthiest citizens in the world,” the lawmakers said in a statement on Tuesday. The legislation would mean that investment fund managers could pay significantly higher tax rates, because they wouldn’t be able to classify some of their income, called carried interest, as capital-gains earnings. Ordinary tax rates max out at 37% and long-term capital gains rates are 20%, plus an additional 3.8% surcharge to fund the Affordable Care Act. Carried interest is the portion of an investment fund’s returns that are paid to hedge fund and private equity managers, venture capitalists and certain real-estate investors eligible for lower tax rates. Money managers who put their own money at risk, such as private-equity partners who invest money in their funds, could still qualify for the break under the House bill. However, all the income earned from managing a firm’s assets would be taxed at ordinary rates, according to the lawmakers.
Brief: Cash levels in investment portfolios have hit the lowest since just before the so-called taper tantrum of 2013, according to Bank of America’s February fund manager survey, which also showed investors to be overwhelmingly bullish on the economic outlook. World stocks have been notching successive record highs in 2021, with central banks remaining supportive and governments injecting money into the system to get economies up to speed after the damage caused by COVID-19. “The only reason to be bearish is ... there is no reason to be bearish,” Michael Hartnett, BofA’s chief investment strategist, told clients, who have the highest equity and commodity allocations in a decade. A net 91% of them expect a stronger economy, the best ever reading in BofA’s survey published on Tuesday, which covered 225 fund managers with $645 billion in assets under management. Investors showed they had the capacity to increase risk, taking their cash levels down to 3.8%, the lowest since March 2013, just before the U.S. Federal Reserve sparked a market tantrum by signalling its intent to wind down, or taper, the bond-buying programme it launched during the 2008 crisis. However, investors hear echoes of the 2013 situation, and see another taper tantrum as the second biggest “tail risk” after delays in the rollout of coronavirus vaccines.
Brief: Emerging markets funds must use the next five years to ensure ESG is at the centre of investment philosophies, with the biggest environmental and social challenges located in the countries they invest in, RWC Partners’ John Malloy has said. Coming off the back of a strong end to 2020, which was boosted by factors including the US’ announcement of a further USD1.9 trillion of Covid-19 related stimulus, the challenge for emerging markets investors now is to focus on five years of real change across economies. Malloy, co-head of Emerging and Frontier Markets at RWC Partners, says a focus on ESG across emerging markets is paramount: there is significant scope in these markets to effect long-lasting change. “On a global scale, emerging and frontier markets account for the largest share of the world’s population, land and mineral resources. They are the drivers of global growth and consumption. Sustainability is a function of their development, and it is therefore essential to promote responsible business practices, enforce human rights and environmental protection,” Malloy says. “These are also high impact markets where a minor change can have major global consequences. Stopping deforestation in Brazil, reducing emissions in China, eliminating poverty in India, or finding a solution to water scarcity in Africa, for example, could change the entire planet. ESG considerations are vital when investing in developing countries, and if the next five years are to be the years of emerging and frontier markets, they will also be the years of ESG.”
Brief: Switzerland’s wealth tax offers a rare real-world example of how a levy on assets can work, just as such ideas gain traction elsewhere in the wake of the coronavirus crisis. The measure forces residents in one of the world’s richest nations to tally the value of their investments, real estate, cars, fine art, Bitcoin, and even beehives and cows. A percentage is then skimmed off by cantonal governments. Switzerland, among only a handful of countries with the levy, can make a claim that it has the most effective one. With the Covid-19 fallout causing government debt to swell, and hurting poorer people most, wealth taxes are being debated from California to the U.K. as a tool both to pay down debt and address inequality. U.S. Senator Elizabeth Warren, Nobel laureate Joseph Stiglitz and economist Thomas Piketty are among proponents. Criticisms range from the view that it’s wrong to target assets accumulated through income that is already taxed, to more practical questions of how to fairly operate such a levy. The Swiss don’t seem to be very bothered by all of that. “It works for us,” said Stefan Kaufmann, a farmer from Wetzikon in the canton of Zurich, who describes the policy as a good Swiss compromise.
Brief: We all know that the residency status and the domicile of an individual can have a dramatic impact on their tax position, so it is important to understand what impacts both. As a result of the covid-19 pandemic many people have been caught the wrong side of borders and for some this could be expensive. Neil Jones explains the added complexities affecting residency status, and outlines how to stay on the right track. In the normal course of events the ability, or inability, to travel to and from the UK would have consequences, however fortunately HMRC issued guidance. This deals with the exceptional circumstances presented by covid designed to help advisers and individuals understand the impact on both residency and domicile. Before looking at the impact of the guidance, we need to understand how residency and domicile work. This test starts with conditions to establish if an individual is non-UK resident. If they were resident in the UK for at least one of the last three tax years and present for fewer than 16 days in the UK in the current tax year, or were not resident in the UK in the three previous tax years and present in the UK for fewer than 46 days in the current tax year, then they would be classed as non-resident. This would also be the case if they worked overseas full-time and are present in the UK for fewer than 91 days, and work fewer than 31 days in the UK.
Brief: A year of pandemic prudence is giving way to jumbo dealmaking in Europe for deep-pocketed private equity houses. Buyout firms have announced $29 billion of takeovers involving European companies this year, up 60% year-on-year and the most for this period on record, according to data compiled by Bloomberg. That’s after months in which many large buyers, including Blackstone Group Inc. and CVC Capital Partners, stayed on the sidelines or focused on funneling much-needed capital to their existing portfolio companies. Now, opportunities stemming from the coronavirus crisis, an abundance of cheap credit and willing sellers looking to clean up their balance sheets are creating ripe conditions for bigger deals. Soaring equity markets, meanwhile, are driving up prices. “It‘s hard to overstate it,” said Anthony Diamandakis, co-head of global asset managers at Citigroup Inc. “Chances are high that we will see jumbo deployment this year.” The industry has long had the luxury of holding a record amount of unspent capital, and with the time to pick its bets. Investors continued to pour money into buyout funds last year, even as private equity firms stayed penny wise.
Brief : New U.S. President Joe Biden’s administration told allies on Friday it was re-engaging with them to help steer the global economy out of its worst slump since the Great Depression, a contrast with go-it-alone approach of Donald Trump. U.S. Treasury Secretary Janet Yellen told her peers from the Group of Seven rich nations that Washington was committed to multilateralism and “places a high priority on deepening our international engagement and strengthening our alliances”. Yellen spoke to the G7 in an online meeting, chaired by Britain, at which she called for continued fiscal support to secure the recovery, saying “the time to go big is now”. Britain said officials discussed giving help to workers and businesses hit by the pandemic while ensuring sustainability of public finances “in the long term”. As well as the United States and Britain, the G7 includes Japan, France, Germany, Italy and Canada.
Brief: A growing market niche where investors profit from others’ legal troubles is getting a boost from Covid. Distressed-investing funds and litigation-finance boutiques are likely to be spoiled for choice after a landmark U.K. court ruling last month rejected pleas from insurers looking to dodge pandemic payouts. They’re looking to finance or buy denied Covid-19 insurance claims for policyholders without the means or stomach for taking their insurers to court. “This is going to be huge,” said Steve Cooklin, chief executive officer of London-based litigation funder Manolete Partners Plc, whose biggest shareholder is veteran distressed investor Jon Moulton. “It’s hard to say at this stage how big exactly this issue is, but it’s probably going to be in the hundreds of millions of pounds.” Insurers have warned that Covid-19 coverage claims could top as much as $100 billion –- potentially the industry’s largest loss in history. Business-interruption coverage -- which protects against losses when companies have to shut for a period of time -- has been one of the most costly and contentious policy lines in the pandemic. U.K. virus-related claims, including on business-interruption policies, could exceed $2 billion. For investors in a zero-yield world of spiraling stock prices, the insurance payout battles present opportunities that can be profitable regardless of how debt and equity markets perform -- they’re “uncorrelated,” in the jargon of the trade.
Brief: Positive outcomes on sustainability issues from UK companies have been brought forward by three years as many firms prioritised employee and customer welfare through the peak of the coronavirus pandemic, Ninety One's Matt Evans has said. Companies in various sectors across the world were hit hard in H1 2020, as global lockdowns caused planes to be grounded as well as sporting, theatrical and musical events to be cancelled, leaving large swathes of the economy with zero revenue for months. Governments reacted by instituting schemes such as furlough in the UK, allowing companies to reduce their workforce without needing to fire people as the Government would pay up to 80% of their wages. All companies were able to access the furlough scheme, but Evans, who manages the £38m Ninety One UK Sustainable Equity fund, told Investment Week some were more introspective than others. Evans highlighted Dechra, a provider of veterinary pharmaceutical products, as an example of a firm that decided against taking furlough cash, instead promising to pay its employees itself even when they were unable to work. Since, Dechra has benefitted from the work-from-home trend as consumers spend more time with, and therefore money on, their pets.
Brief: The chief executives of major U.S. airlines, including American Airlines, Southwest Airlines and United Airlines, met virtually with the White House’s COVID-19 response coordinator on Friday amid airline concerns that new restrictions could be imposed on domestic air travel. “We had a very positive, constructive conversation focused on our shared commitment to science-based policies as we work together to end the pandemic, restore air travel and lead our nation toward recovery,” Nick Calio, chief executive of the Airlines for America industry group, said in a statement. The White House, which declined to comment on the airline meeting, has a separate interagency meeting scheduled for later on Friday to discuss coronavirus issues and is not expected to endorse requiring negative COVID-19 tests before flights at this point, said people briefed on the matter, who spoke on condition of anonymity. The airline CEO meeting with coronavirus response coordinator Jeff Zients and other administration officials involved in COVID-19 issues came after airlines, aviation unions and other industry groups strongly objected to the possibility of requiring COVID-19 testing before boarding domestic flights.
Brief: DWS Group has abandoned plans to sell a City of London office building after bids fell short of its 145 million-pound ($200 million) asking price, the latest evidence of the pandemic eroding demand for all but the best new properties. The German asset manager majority-owned by Deutsche Bank AG has taken 85 King William Street off the market, and will now carry out a partial renovation, according to a DWS spokesman. The recent departure of some tenants from the building known as Capital House contributed to the low bids, according to people familiar with the matter, who asked not to be identified because the process is private. Capital House is “one of many strong core London office assets that DWS will continue to add value to through our active management strategies,” the DWS spokesman said, without commenting on the vacancies. An easing of coronavirus restrictions helped boost activity in London’s office market late last year, with deal volumes in line with the long-term average. But the latest lockdown, which has further delayed the return of workers to offices, has once again put a damper on sales, especially for properties that need modernizing.
Brief: Outsourcing the generation of leads and new business will become the ‘new norm’ as the pandemic eases, one leading digital marketing firm has predicted. Scottish headquartered 4icg Group, chaired by entrepreneur Brian Williamson, says it has experienced an increase in private equity backed businesses looking to retain its services because of the need to recover falling revenues and maintain equity value. Dr Williamson pointed towards American PE-backed software and tech companies who accelerate their growth by outsourcing lead generation from day one to build sales volume quickly – a business model which is moving across the Atlantic. Williamson says: “Business quickly had to deal with the immediate impact of the pandemic but now we’re seeing companies taking the steps to recalibrate in line with revisions to their medium and long-term strategies. “For PE backed businesses, generating leads quickly and in good volume from a limited sales budget is more important than ever. A total package per sales employee may be GBP75k per annum but delivering the volume from that is trickier than ever given the restrictions on movement. A remote sales force can be guilty of chasing rainbows right now in an effort to justify their existence.
Brief : Global financial firms including Goldman Sachs, BlackRock and Fidelity International are poised to add hundreds of staff in China this year as they look to take advantage of the opening up of its $40 trillion financial sector. Beijing in the last one-and-a-half years stepped up the pace of liberalisation mainly as part of a trade deal with the United States, and allowed foreigners to fully own their local ventures in areas including investment banking and asset management. After having won regulatory approval to raise holdings and dealt with the disruptions caused by the COVID-19 pandemic, Western firms are now readying plans to boost their onshore presence, representatives and headhunters said. Foreign financial firms have long coveted a bigger presence in China, and their expansion comes against the backdrop of a revival in its economy, increased onshore deal activities, and a rapid pace of wealth creation. Goldman is leading the charge of the Wall Street banks operating in China - the first to move towards taking full ownership of its securities business after it was fully opened up to foreigners last April.
Brief: For a man whose flagship hedge fund was down more than 50 percent at one point last year, Michael Hintze sounds surprisingly upbeat. On a chilly winter afternoon, Hintze, 67, phones from London to talk about his firm’s reckoning this past spring, a time when the flagship fund’s structured credit instruments went terribly wrong and the firm’s positioning amid market turmoil sent that and one other fund plummeting to their worst-ever losses — wiping out billions of assets in mere weeks. It was an exceedingly rare stumble for CQS, a London-based hedge fund that had reliably minted money for investors more or less uninterrupted since its founding in 1999. Its flagship Directional Opportunities Fund had averaged gains of nearly 14 percent per year since its inception in 2005. That changed drastically in 2020, as the coronavirus ravaged global economies worldwide and bond markets gyrated wildly amid fears over liquidity. The fallout hit the assets CQS primarily invests in — structured and complex credits — particularly hard, as Hintze noted in a letter to investors in November. CQS’s Directional Opportunities, which accounts for 10 percent of the firm’s assets, lost 33 percent in March and a further 17 percent in April. The wretched performance, paired with upheaval in the executive ranks, took a toll on the firm, which cut some 50 jobs, scrapped a planned expansion into equities, and saw assets shrink by $3 billion in the short term, according to a June 2020 Bloomberg report.
Brief: BlackRock Inc., the world’s biggest asset manager, sees a “powerful mix” of drivers for stocks in Europe’s emerging markets, including Covid-19 shot roll outs, stimulus measures and easy financial conditions. Valuations and investor presence in emerging European stocks remain “extremely low” and it’s time investors pay more attention to this equity class, Chris Colunga, co-manager of BlackRock’s 617 million euro ($748 million) Emerging Europe fund said in emailed comments. The provision of vaccines and continuing stimulus are likely to fuel earnings growth in the region, he said. European Union spending on sustainable infrastructure is set to feed liquidity into eastern Europe, he added. “As we enter 2021, the combination of strong liquidity, easy financial conditions and high levels of disposable income are a very powerful mix for earnings growth at a time the vaccine is offering hope of some demand normalization,” said Colunga. The BlackRock fund manager said he favors exposure to Greek stocks on bets tourism will recover and financial conditions as well as investments will improve. The stock fund has also turned “more constructive” on Turkey after the market’s underperformance and as the new economic leadership team pledges more traditional policies, Colunga said. As of the end of December, the fund had a 9.6% exposure to Greece, its third-biggest, and a 5.5% exposure to Turkey, its fifth-highest.
Brief: The Covid-19 pandemic has left over a quarter of UK adults financially vulnerable with too much debt or low levels of savings, a survey by watchdog the Financial Conduct Authority (FCA) has found. Nearly 28 million adults in the UK were showing characteristics of vulnerability such as poor health, low financial resilience or negative life events by October last year. Having any one of these characteristics means that these consumers are at greater risk of harm, the FCA said. This figure was up 15% from February 2020, before the first lockdown kicked in and businesses closed. The FCA also found that the number of consumers with low financial resilience, such as over-indebtedness or with low levels of savings or low or erratic earnings, has grown. Over the course of last year, the number of UK adults with low financial resilience increased from 10.7 million to 14.2 million, the report shows, while different demographics are being affected more than others. Highlighting the threat to people’s incomes from the pandemic, in October one in three adults said they expect their household income to fall during the next six months, while 25% expected to struggle to make ends meet.
Brief: KPMG has confirmed that its chairman is stepping aside after the accounting giant launched an investigation into controversial comments he made to staff in a virtual meeting this week. Bill Michael, who took over as chairman in 2017, told staff on Monday to “stop moaning” about the pandemic and the impact of lockdown on people’s lives, adding that they should stop “playing the victim card”. The online meeting was attended by around a third of the financial services consulting team’s 1,500 staff. Michael, who was in hospital with Covid-19 in March last year, later rejoined the call and apologised to staff who had criticised his choice of words in the comment section of the app used to run the event, according to the Financial Times which first reported the story. He also apologised in a separate email to all members of the consulting team. The chairman also reportedly told staff he was still holding client meetings despite Covid lockdown restrictions, and claimed unconscious bias was “complete crap”. The big four accounting firm has now launched an investigation into Michael’s comments, prompting him to step aside – at least temporarily – until KPMG completes its inquiry.
Brief: Health and wellness technology has received a big boost from venture capital. “VC deal activity within this space has spiked significantly,” with $8.3 billion worth of venture capital deals in 2020, PitchBook analysts said in a newresearch report. That’s 70 percent more than enterprise-oriented companies within enterprise health and wellness received in 2019 — and the most venture funding they’ve obtained in at least a decade, according to the report. The most active venture capital firms in enterprise health and wellness tech since 2018 include Oak HC/FT, F-Prime Capital, and Echo Health Ventures, while the top private equity firms in the area since 2008 include Warburg Pincus, Francisco Partners, and Blackstone Group, the report shows. PitchBook, which tracks private-market data, projects the valuation of the sector will double to $1.3 trillion by 2025, from $640 billion at the end of June. “In the wake of the Covid-19 pandemic, we expect governments and NGOs will prioritize technologies that can help mitigate the health impacts of future pandemics,” the firm’s analysts said. “This will likely accelerate investment into technologies in the realm of disease tracking, public health tools, and pharmaceutical technology.”
Brief : Varde Partners is investing more than $250 million to fund development of single-family homes in Arizona, Florida and Texas in a bet on Sun Belt suburbs. With historically low mortgage rates driving a housing rally during the pandemic, Varde is putting money into the real estate market through a trio of transactions as Americans shift away from coastal cities in a search for larger properties. The fund, which manages more than $14 billion, is acquiring a master-planned community in Austin, according to a statement. It’s also purchasing an active-adult community in Scottsdale, Arizona, where it will partner with builder Shea Homes to complete hundreds of houses for residents 55 and older. In a third transaction, Varde is investing $100 million to develop land in Florida and Colorado. The firm is making the investments as “traditional lenders continue to retrench,” according to a statement. The transactions come at a time when the Covid-19 pandemic is accelerating demographic shifts to the suburbs. Wall Street firms have sought to invest behind those trends, placing bets on single-family rentals, suburban apartment buildings and land for developing new subdivisions.
Brief: Southwest Airlines Chief Executive Gary Kelly and the leaders of the airline’s unions urged President Joe Biden not to mandate COVID-19 testing before domestic flights, warning it would put “jobs at risk.” The letter dated Tuesday and released by the airline on Wednesday said “such a mandate would be counterproductive, costly, and have serious unintended consequences.” The Centers for Disease Control and Prevention (CDC) last month said the Biden administration was “actively looking” at expanding mandatory COVID-19 testing to travelers on U.S. domestic flights, which has sparked push back from the aviation, aerospace and travel industries.
Brief: Jim Simons added $2.6 billion to his vast wealth in 2020. His clients weren’t so fortunate. Investors in three hedge funds run by Simons’s Renaissance Technologies lost billions of dollars as the firm’s computer models were flummoxed by the market’s gyrations. Meanwhile, Simons ranked second on Bloomberg’s list of the highest-paid managers, and was the only one in the top 15 whose clients didn’t make money last year. The secret to his success: access to a Renaissance strategy that’s closed to outsiders. The legendary Medallion fund gained 76% last year, according to Institutional Investor, while the public offerings racked up double-digit losses. It’s a stark disparity that has led some observers to wonder if Simons’s 15-year experiment to bring his brand of quantitative investing to the masses no longer works. Investors, including some employees, have yanked at least $5 billion from the three public funds since Dec. 1. After a further 9.5% dip in the $26 billion Renaissance Institutional Equities Fund in January, investors said they expect more will follow. Investors said they were surprised by the firm’s reaction to the losses.
Brief: Macquarie, the world’s largest infrastructure investor, has raised 1.6 billion euros ($1.93 billion) for its second global renewables fund, driven by strong demand from institutional investors in Britain and Germany. Countries and companies are seeking to increase their usage of renewable energy to lower carbon emissions and fight climate change. At the same time, record low interest rates have crimped fixed income returns and boosted the allure of alternative assets. Macquarie Infrastructure and Real Assets (MIRA), manager of the fund, said it had drawn investment from 32 institutions, including pension schemes, insurers and sovereign wealth funds, helping it exceed a minimum target of 1 billion euros. While Europe-based investors contributed most of the capital - German and British investors accounting for 30% each - the fund, Macquarie Green Investment Group Renewable Energy Fund 2, also attracted interest from Asia Pacific and North America. It will target wind and solar projects in Western Europe, the United States, Canada, Mexico, Japan, Taiwan, Australia and New Zealand.
Brief: The global pandemic has highlighted both the importance of ESG issues and is accelerating ESG integration by institutional investors, according to the respondents of MSCI’s 2021 Global Institutional Investor Survey, a survey of 200 asset owner institutions with assets totalling approximately USD18 trillion. The survey of sovereign wealth funds, insurers, endowments/foundations, and pension funds found that over three-quarters (77 per cent) of investors increased ESG investments “significantly” or “moderately” in response to Covid-19, with this figure rising to 90 per cent for the largest institutions (over USD200 billion of assets). “The combination of climate-related events, such as devastating wildfires, floods and droughts, and a global pandemic have accelerated the paradigm shift on ESG and climate change. Once an issue for ‘green funds’ and side-pockets, ESG and Climate are now firmly established as high priority issues,” says Baer Pettit, President and Chief Operating Officer, MSCI. “2020 marked a profound shift in the way institutions invest as many investors have recognised that many companies with strong environmental, social and governance practices outperformed during the pandemic.” The survey reveals that while US investors in general have been lukewarm about ESG in the past, with some high-profile exceptions, 2020 dramatically shifted their views closer to those of their international counterparts. Of US respondents, 78 per cent said they said they would increase ESG investment either significantly or moderately as a response to Covid-19, while the figure was 79 per cent and 68 per cent in Asia-Pacific and EMEA, respectively.
Brief: One of the biggest risks in 2021 is betting that vaccines will bring a quick end to the coronavirus pandemic, according to Pacific Investment Management Co. With growth-linked assets at or near records, “the biggest risk is probably the market prematurely pricing the end of the pandemic,” said Robert Mead, Pimco’s co-head of Asia-Pacific portfolio management. “It’s easy for markets to get a little too optimistic.” Mead is also sanguine about the chances of a breakout in inflation and interest-rate risks, while remaining broadly upbeat about the prospects for growth across developed and emerging economies this year. The money manager expresses his view through bets on steeper yield curves in Australia and the U.S. -- though his positions are less aggressive than they were last year. Mead’s strategy is based on the premise that although economies are seeing some pick up in prices, inflation targets remain stubbornly out of reach and major central banks are unlikely to raise borrowing costs for at least three to four years. His views are in contrast to the vibe in markets this week, with bond traders seeing the strongest inflation outlook in years and warnings from BlackRock Inc. and JPMorgan Asset Management on resurgent price risks.