Brief : The U.S. securities regulator on Friday said it would review actions that may “unduly inhibit” trading of certain securities and said it was closely monitoring potential wrongdoing amid recent price volatility in the U.S. stock market. Securities and Exchange Commission (SEC) officials warned against illegal “manipulative trading activity” and said they were working closely with other regulators to monitor the situation after a wild week of trading during which an army of small investors have driven a dramatic squeeze of Wall Street hedge funds in shares of GameStop Corp and other hot companies. “The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities,” the SEC said on Friday, following a statement earlier in the week it was monitoring market volatility. Online broker Robinhood earlier in the week placed disputed trading restrictions on certain shares, drawing ire from lawmakers and scrutiny from regulators. The firm had eased restrictions on Friday. “Our core market infrastructure has proven resilient under the weight of this week’s extraordinary trading volumes. Nevertheless, extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence,” the SEC said on Friday.
Brief: Canada’s economy showed surprising strength in the final two months of 2020, even amid a new wave of Covid-19 restrictions. Gross domestic product expanded 0.7% in November from a month earlier, Statistics Canada reported Friday in Ottawa, topping the 0.4% forecast of economists in a Bloomberg survey. A preliminary estimate from the agency showed GDP grew 0.3% in December, defying expectations for a contraction. Friday’s report is helping to ease concern about the economic costs from a second wave of lockdowns that has closed large parts of the country. Some analysts are even questioning whether a first-quarter contraction, which had been almost taken for granted, will even happen. “Today’s result for November and early read on December do indeed suggest that the economy overall is managing much, much better with this second stage of lockdowns,” Doug Porter, chief economist at Bank of Montreal, wrote in a report to investors. Porter said he’s raising his 2021 GDP forecast to 5%, from 4.8%, “as a direct result of this high-side surprise.” The unexpected resilience largely reflected gains in resource production and manufacturing. Growth in the fourth-quarter came in at about 8% annualized, according to Bloomberg calculations, above the 4.8% pace projected by the Bank of Canada. The Canadian dollar jumped on Friday’s report, gaining 0.7% to C$1.2740 against the U.S. currency at 10:31 a.m. Toronto time.
Brief: Demand to invest in funds which focus on environmental, social and governance (ESG) issues jumped in 2020, driving assets under management up 29% in the fourth quarter to nearly $1.7 trillion, industry tracker Morningstar said on Thursday. In a turbulent year marked by the effects of the COVID-19 pandemic, the surge in ESG assets was bolstered by a stimulus-driven market recovery and as investors increasingly looked for more resilient investments. Covering everything from how a company handles climate change or boardroom diversity to how a country is positioned to withstand the impact of changing weather patterns, the belief is that those with a good ESG score will perform better over time. The flows have also been helped by an accelerating push from governments globally to transition to a low-carbon economy, changing market rules and tax regimes to encourage climate-friendly investments, many of which are held by ESG funds. Given the strong demand, inflows into sustainable funds hit a record high during the fourth quarter, up 88% to $152.3 billion, with Europe-domiciled funds accounting for almost 80% of the total inflows, or $120.8 billion.
Brief: Real estate has proven resilient throughout the Covid-19 pandemic so far. Over the course of last year, global direct property funds saw their net assets grow, despite ripples of market turbulence felt across the investment industry. Data from Morningstar shows total net assets in ‘bricks and mortar’ funds reached nearly €247 billion in 2020 compared to around €243.5 billion in 2019. Meanwhile, assets invested in European ‘sustainable landscape’ direct property funds have increased from €2.5 billion in 2015 to nearly €12 billion by the end of last year. ESG is becoming an increasingly core focus in the real estate industry, with sustainability set to be a megatrend. There is a lot of space for improvement in the sector in terms of aligning structures with sustainability targets, however. A report by the Buildings Performance Institute Europe found that 97% of buildings in the EU need to be upgraded if they are to meet energy targets. Earlier in January, Aviva Investors announced plans to reach net zero emissions across its £47.3 billion real estate platform over the next 20 years, bringing green real estate goals further into the mainstream.
Brief: For Kuok Meng Xiong’s family office, 2020 was a bumper year with investments in technology startups like Bytedance Inc. doing well throughout the pandemic. Despite this good fortune and promises of a vaccine, the grandson of billionaire Robert Kuok remains wary about private deals in the year ahead. “We anticipate Covid may be protracted even with the vaccine, and travel may not go back to pre-March 2020 days so the early-stage startups would be challenging,” he said, stipulating that he only spoke for his tech-focused remit at K3 Ventures Pte and not his family’s Shangri-La hotel empire. It’s a view shared by many of his Asian family office peers. Government subsidies for jobs and loans that have helped prevent broader meltdowns are set to end in the coming months, and vaccines may take years to be fully deployed. When combined with continuing geopolitical strife between China and the U.S., that’s left many of the region’s wealthiest clans feeling anxious. “The key word is ‘uncertain,’” said Ben J Benjamin, co-founder at Genesis Alternative Ventures, which provides debt funding to startups. “A lot of the pain and the shock that was brought about by Covid-19 is going to come to the fore in 2021.” Their caution comes even as Asian economies begin to bounce back, led by China and India, and as the region’s stocks rally. It contrasts with the bullish forecasts of many capital markets specialists and Western family offices, with some even getting into risky assets such as Bitcoin. JPMorgan Chase & Co. is predicting the strongest global recovery in a decade if vaccine distribution plays out as expected.
Brief: Given the economic instability generated by the ongoing Covid-19 pandemic, European private equity deal activity showed remarkable resilience last year, according to Pitchbook’s 2020 European PE Breakdown. The report found that private equity deal volume rose to a new quarterly peak in Q4 last year, closing more than 1,200 deals for the first time. Both deal value and volume recorded third- and fourth-quarter decade-raging records, respectively, during what proved to be the worst economic climate since the Great Depression in Q2 2020, with 4,179 deals closing for a total of EUR449.1 billion. The European private equity industry held back towards the end of Q1 2020 after starting the year off on a high. As economic and political shocks including the Covid-19 crisis, world wide protests and Brexit chaos ensued, deal activity slowed down in March throughout June last year as GPs paused to reflect and review current portfolios, while holding off temporarily on looking at new deals. Year on year deal volume decreased by more than 30 percent during the second quarter in 2020 as managers focused elsewhere, such as PIPE and minority stake deals, due to lockdowns, restrictions on social gatherings and a sharp drop in global travel.
Brief : KKR & Co Inc aims to attract at least $15 billion for its flagship North America private equity fund, which would make it the second largest amount raised for a fund managed by the U.S. firm, people familiar with the matter said on Thursday. Buyout firms are seeking to tap cheap and plentiful financing for acquisitions amid rising corporate valuations, as economies start recovering from the COVID-19 pandemic. Several investors have committed to KKR’s new fund, North America XIII, the sources said, requesting anonymity as the matter was confidential, adding that the target included money KKR employees would contribute. It will be the largest pool of capital KKR has attracted since its KKR 2006 Fund raised $17.6 billion. A spokeswoman for New York-based KKR, which now has $234 billion in assets under management, declined to comment. KKR Americas XII Fund raised $13.9 billion in 2017 and delivered 20% growth by June 2020, according to the website of Oregon Public Employees Retirement Fund, one of the investors. This means the fund ranks in the top quartile of all private equity funds of that vintage based on its financial performance, according to Cambridge Associates. KKR North America Fund XI raised $9 billion in 2013 and delivered 100% growth by June 2020, the Oregon Public Employees Retirement Fund website said.
Brief: The U.S. economy contracted at its deepest pace since World War Two in 2020 as the COVID-19 pandemic depressed consumer spending and business investment, pushing millions of Americans out of work and into poverty. Though a recovery is underway, momentum slowed significantly as the year wound down amid a resurgence in coronavirus infections and exhaustion of nearly $3 trillion in relief money from the government. The moderation is likely to persist at least through the first three months of 2021. The economy’s prospects hinge on the distribution of vaccines to fight the virus. President Joe Biden has unveiled a recovery plan worth $1.9 trillion, but some lawmakers have balked at the price tag soon after the government provided nearly $900 billion in additional stimulus in late December. White House economic advisor Brian Deese said the report from the Commerce Department on Thursday underscored the urgency for Congress to pass Biden’s plan, warning that the cost of doing nothing was too high. “Without swift action, we risk a continued economic crisis that will make it harder for Americans to return to work and get back on their feet,” said Deese. Gross domestic product decreased 3.5% in 2020, the biggest drop since 1946. That followed 2.2% growth in 2019 and was the first annual decline in GDP since the 2007-09 Great Recession.
Brief: Two months after acquiring bathtub maker American Bath Group, Centerbridge Partners decided it was time for an early payout. Days later, Bain Capital cut itself a check from a distributor of building products it had owned for just five weeks. On Wednesday, Clayton, Dubilier & Rice got in on the action, seeking to sell $300 million of junk bonds to take a dividend out of White Cap, a construction firm it acquired three months earlier. Such early dividend payouts are rare in the private equity industry -- and have little to do with an investment charging hard out of the gate. Rather, they’re a product of a surge in demand for high-yield debt that’s pushed borrowing costs for the riskiest debtors to their lowest ever, in a market where almost anything goes. “It’s a case of fear of missing out,” said Matt Freund, co-chief investment officer at Calamos Investments. “The economic outlook has not dramatically changed, but market yields are lower, investors look ahead to the new year with more optimism and new mandates. It all leads to higher risk tolerances.” The average borrowing cost for debt rated just above default -- the kind typically used to finance leveraged buyouts -- dropped on Jan. 21 to 6.42%, its lowest level since records began, according to Bloomberg Barclays indexes. The average yield on junk bonds, in general, hasn’t topped 4.3% since the beginning of the year, and also touched an all-time low this month. That has helped fuel a flurry of new deals that have made January the busiest on record for junk-bond sales in the U.S., with almost $50 billion sold, according to data compiled by Bloomberg.
Brief: Venture capital returns reached an all-time high in 2020, even as global economies were decimated by the coronavirus pandemic. As of the third quarter — the latest period for which returns are available — venture capital funds globally had delivered “exceptional performance” for the year, according to a report from eFront, a BlackRock-owned financial software and research company. Data from eFront show that venture capital returns reached a record-high multiple of 1.64x in the second quarter of 2020. These return multiples stayed elevated at 1.63x in the third quarter, eFront said. The company used multiples of invested capital, or TVPI, to analyze venture capital returns. “Thus far, it is difficult to find any impact of the Covid-19 pandemic on the performance of active VC funds,” eFront said in the report. It’s not just venture capital performance that hit all-time highs in 2020. U.S. venture capital funds also set new records in deal making, exits, and fundraising last year, according to a January 14 report from PitchBook and the National Venture Capital Association. The report said that deal value topped $150 billion for the first time in 2020, while exit value hit a record $290 billion after a surge of public listings in the second half of the year. In addition, new venture capital funds raised $73.6 billion in their biggest haul ever, PitchBook and the NVCA said. According to eFront, the new performance heights achieved by active venture capital funds in 2020 are part of a longer trend of increasing multiples over the last decade. “In terms of performance, active VC funds have so far gone from record to record,” the report stated. “This evolution echoes the progression of the valuation of listed tech firms.”
Brief: More than £78m was stolen from investors over the course of 2020 as clone investment firm scams took advantage of pandemic-induced financial worries, according to new data from Action Fraud. The increased prevalence of these scams has led the Financial Conduct Authority (FCA) to issue a warning to investors as part of its ScamSmart campaign. April 2020 saw a month-on-month increase of 29% in these types of scams as the UK entered its first full month of lockdown. Two out of five investors (42%) say they are "currently worried" about their finances due to the pandemic, while three-quarters (77%) either have or plan to make an investment over the coming six months to help improve their financial situation. The FCA warned that even experienced investors could be at risk of these clone firm scams, as despite 75% of investors saying that "felt confident" they could identify a scam, 77% admitted they did not know or were unsure what a clone investment firm was. Over the course of 2020, fraudsters imitating genuine investment firms cost consumers an average of £45,242 each. The FCA issued alerts relating to more than 1,100 firms over 2020, more than double the amount issued in 2019, according to Mark Steward, executive director of enforcement and market oversight at the FCA, who warned investors to check both the FCA Register and Warning List of firms before engaging.
Brief: For once, Main Street is beating Wall Street. In a matter of weeks, two hedge-fund legends -- Steve Cohen and Dan Sundheim -- have suffered bruising losses as amateur traders banded together to take on some of the world’s most sophisticated investors. In Cohen’s case, he and Ken Griffin ended up rushing to the aid of a third, Gabe Plotkin, whose firm was getting beaten down. Driven by the frenzied trading in GameStop Corp. and other stocks that hedge funds have bet against, the losses suffered over the past few days would rank among the worst in some of these money managers’ storied careers. Cohen’s Point72 Asset Management declined 10% to 15% so far this month, while Sundheim’s D1 Capital Partners, one of last year’s top-performing funds, is down about 20%. Melvin Capital, Plotkin’s firm, had lost 30% through Friday. It’s a humbling turnaround for the hedge fund titans, who in 2020 staged a comeback by pouncing on the wild markets caused by the Covid-19 pandemic. But that crisis helped push thousands if not millions of retail traders into the U.S. stock market, creating a new force that for now the professionals seem powerless to combat. And it’s not just the big names: Jack Woodruff’s $2.8 billion Candlestick Capital has fallen 10 to 15% in January on its short wagers, while the $3.5 billion Maplelane Capital lost about 33% through Tuesday in part because of a short position on GameStop, according to investors.
Brief : Blackstone Group Inc. deployed a record $25.4 billion in the fourth quarter, as the world’s biggest alternative asset manager sealed large deals and found opportunities in an economy ravaged by the Covid-19 pandemic. New York-based Blackstone spent $11.7 billion on real estate in the three months ended Dec. 31, and its private equity unit invested $8.2 billion, the firm said in a statement Wednesday announcing their fourth-quarter earnings. The moves show that company’s leaders are making big bets after sitting out the early stages of the pandemic. The statement also showed record assets under management and distributable earnings for the period. “It was our best quarter in the 35-year history of the firm,” Blackstone President Jon Gray said in an interview. Shares rose 0.1% at 12:09 p.m. in New York. The S&P 500 was down 1.8%. The deployment strategy echoes Blackstone’s approach in 2009 when it invested amid the financial crisis and pulled off deals that helped power its rise over the past decade. While the U.S. stock market has been soaring, assets from commercial real estate to travel are struggling as lockdowns and social distancing rules have changed the patterns of everyday life from Los Angeles to Shanghai. The firm continued to bolster its business units, with $32.3 billion of inflows in the last three months of the year. Deals such as Ancestry.com Inc. and the recapitalization of BioMed Realty Trust Inc. helped to shrink piles of cash that have been sitting on the sidelines. Blackstone said Tuesday it would buy a life insurance business from Allstate Corp., adding $27.9 billion in assets to its roster.
Brief: Saudi Arabia’s flagship investment conference began on Wednesday with top global asset managers predicting that 2021 would bring a return to growth as nations get the Covid-19 pandemic under control -- and with it a rise in inflation. “We will see a rebound in growth and a rebound in inflation,” Bridgewater’s Ray Dalio said during the opening panel of the Future Investment Initiative, or FII. “With that, you’re also going to see a pick up in deficits,” leading governments to sell more bonds. That view was shared by BlackRock Chief Executive Larry Fink, who predicted that developed countries would likely reach herd immunity around September. “I think we are going to have a huge amount of job creation, but all these elements are highly potentially inflationary.” Saudi Crown Prince Mohammed bin Salman’s signature event will host top global executives like Goldman Sachs Group Inc.’ David Solomon, Blackstone Group Inc.’s Steven Schwarzman and SoftBankCorp.’s Masayoshi Son.
Brief: Most endowments and foundations believe that a traditional portfolio of stocks and bonds will not meet their return requirements, new data shows. According to results from a TIFF Investment Management survey, only 10 percent of its respondents — all TIFF clients — said they expected a passive portfolio with a 65 percent allocation to stocks and 35 percent allocation to bonds to exceed their return hurdles. TIFF, the nonprofit outsourced-CIO provider that manages $7 billion in assets, is expected to published the survey results on Wednesday with details on how its more than 100 clients view the market. Although most respondents said that the economic conditions created by the Covid-19 pandemic haven’t affected the long-term health of their organizations, the surveyed investors were not optimistic about how the markets are shaping up. Over the next ten years, 41 percent of respondents said they believed equities will fare worse than they did the previous decade. Fifty percent of respondents said the same about bonds. Very few expected the asset classes to outperform the previous decade, with only 8 percent anticipating that equities will outperform, and 5 percent predicting that bonds will. Meanwhile, over a quarter of the respondents said they expect their institutions to increase spending in 2021, the survey showed. Endowments and foundations “are spending more in the middle of a pandemic and they’re going to do it for the next three to five years,” said Kane Brenan, chief executive officer at TIFF, via Zoom Tuesday.
Brief: Sector-specialist M&A advisory firm Ciesco has reported global resilience in the tech, digital, media and marketing sectors in the face of the Covid crisis. Ciesco tracked global M&A activity in these sectors, reporting 1,091 M&A transactions in 2020, with announced deal values of USD55.9 billion. This value excluded the one mega-deal of the year (defined as a deal greater than USD10 billion): the USD27.7 billion acquisition of communication platform Slack by Salesforce. This took place despite a mostly pandemic-induced 19 percent drop in M&A activity last year. Digital Media, Traditional Media and MarTech were the most popular sectors for deal-making, collectively representing over half of all deal volume in 2020. Customer Relationship Management businesses (CRM) saw a 30 percent year-on-year rise in M&A activity. The Private Equity market showed the greatest buoyancy. PE deals in tech, digital, media and marketing represented 37 percent of all M&A activity in 2020. This was down from 42 percent in 2019, but notably higher than 13 percent in 2017. Consultancies, tech companies and holding companies contributed to a diverse buyer universe, joining Private Equity among the Top 10 acquirers. Chris Sahota, CEO of Ciesco, says: “Our report demonstrates the attractiveness of data and technology-driven business models to financial investors, and through last year’s turbulence, businesses are learning to adapt and future-proof their operations. “2021 will be a period of re-invention for many companies. Technology and data will be at the forefront of this evolution, with smart use of data informing decisions across all parts of an organisation. “Global holding networks spent much of 2020 restructuring their operations in the face of declining revenues and took the opportunity to divest under-performing legacy assets. We see a strong appetite for M&A to strengthen technology services, disciplines and geographies.”
Brief: Fewer than four-in-ten (37 per cent) of data scientists in financial services firms currently use AI, machine learning and other advanced technologies in their key analysis and investment processes and workflows, according to new research executed in the UK, US and Asia, for Alveo a solutions provider of managed data services for data mastering and analytics. Conducted among banks, investment companies, insurance firms and hedge funds, the research reveals how the slow adoption of AI and other cutting-edge automation technology is seriously hindering quants and data analysts in their most valuable work. Two-thirds (66 per cent) of respondents say quants and data analysts in their organisation have to spend between 25 per cent and 50 per cent of their time collecting, preparing and quality-controlling data; time they could otherwise have spent on modelling and analysis. Poor data quality also prevents risk managers from making the best use of analytics. Nearly one-in-three respondents (29 per cent) say problems with data quality are most severe in risk management and market making. The benefits of data integration are, however, appreciated by more than a quarter of respondents. 27 per cent agree that improved productivity is one of the main gains from more closely integrating market data and reference data into advanced data analytics – a task vastly accelerated through integration of data using AI and machine learning.
Brief: UK fund buyers have a greater appetite for active and alternative funds than their global counterparts as a means to manage increased volatility, according to research. A survey conducted by Coredata Research found that 77% of those based in the UK are using alternatives for risk management, compared to the global average of 57%. There is a similar disparity in the use of active funds to protect against volatility, a strategy adopted by 65% of UK respondents compared to 47% globally. There was more alignment in the respective views of UK and global funds buyers when it came to predicting volatility for 2021. Covid-19 was identified by 23% of respondents in the UK and globally as the top volatility concern. Similarly, 60% of global respondents expect market volatility to increase in 2021 compared to 54% of UK fund buyers. Andrew Inwood, principal of CoreData, said that fund buyers will continue to favour active strategies and alternative assets in 2021 if, as expected, markets remain choppy. “We will likely see a continued shift to private markets and alternatives as investors seek out uncorrelated sources of return to diversify portfolios and generate alpha,” he said. The survey was conducted in November and December 2020 and canvassed 200 professional fund buyers globally.
Brief : Bridgewater Associates Chief Executive Officer David McCormick, a former U.S. Treasury undersecretary, said policymakers and business leaders are making a mistake trying to return the economy and U.S. society to a pre-pandemic “normal.” “There were some really significant underlying problems with normal,” McCormick, 55, said Tuesday during an interview at Bloomberg’s “The Year Ahead” virtual conference. He cited a lack of social mobility, political polarization, China’s rise as a global power and the U.S.’s ill-defined role in the world as reasons not to embrace the recent past as an ideal. If anything, McCormick said President Joe Biden should pursue policies that reassert American leadership and restore the nation’s sense of opportunity. McCormick, a Republican, served in the Treasury Department under President George W. Bush during the 2008 financial crisis and left in 2009. If he were in government today, he said he’d advocate for better access to education and health care for poorer Americans and collaboration between the public and private sectors that prioritizes innovation. He described both as the “building blocks of power.”
Brief: More pension funds, insurers and asset managers are outsourcing part or all of their dealing desks to specialist traders as they seek to cut costs and adapt their operations to deal with the coronavirus crisis, industry sources say. Last year’s volatility in markets, plunging as the pandemic took hold and rebounding as government stimulus kicked in, meant asset managers spent more time juggling trades and less time on their usual job of long-term asset allocation. Moving some or all of their trading to specialist firms offers access to a larger group of banks and brokers, making it cheaper to execute trades and allowing asset managers to cut trading staff and trading terminal costs, industry sources say. The shift to outsourcing has also been accelerated by changes in working practices brought about by the pandemic. “As we all work from home, people are realising you don’t need to be physically sitting next to the traders to be able to communicate,” said Tom Carroll, head of asset management at British fund manager Sanlam Investments, which outsourced trading to Northern Trust shortly before the pandemic. Carrol said the move meant his company’s 20 fund managers could “focus more on what they’re good at” - picking assets for the long term rather trading through short-term volatility.
Brief: Adapt to survive: this was the message for the asset management sector in 2020, which turned out to be one of the most extraordinary and unpredictable years in living memory. In March, the onset of the Covid-19 crisis and national lockdowns caused stock markets to lose a third of their value in one month, and mobilised an immense digital transformation as swathes of the economy adjusted to home-working. The asset management industry weathered the storm better than most. Assets under management worldwide have risen to exceed USD110 trillion, thanks in part to a remarkable rebound in underlying financial markets, with some indexes recouping their losses in as little as six months. While vaccine roll-outs indicate the pandemic’s end may be on the horizon, many of the changes it has caused are likely to stay – including a ‘lower for longer’ interest rates landscape and competition from passive investing putting more pressure on fees. Arguably the biggest shift asset managers have faced has been the pendulum of investor preferences, which has swung decidedly in favour of sustainable investing. At the start of 2021, a third of all assets under management in the US were held in sustainable strategies, and three quarters of institutional investors in Europe said they plan to stop buying European non-ESG products within the next two years. The story for asset management in 2021 will be over whether it can keep up with the pace of change and thrive in a post–coronavirus world.
Brief: Formidable Asset Management LLC, which gained about 83% last year, said “now more than ever, a nimble, active approach to management is required” for investment success in 2021. “Though we are early in the year, the truly bizarre events, both societally and in terms of markets, seem to be continuing in 2021,” the hedge fund’s Chief Executive Officer William Brown and Chief Investment Officer Adam Eagleston wrote in a letter to clients, seen by Bloomberg. Stocks that were “retail favorites” in 2020 could go still higher this year, they said, “buoyed by further fiscal stimulus and gains from prior winnings rolled forward.” The main contributors to the fund’s 2020 performance were its positions in green energy and electric vehicle-related stocks. According to the letter, some of the winners for the fund in 2020 included Nano One Materials Corp., Flux Power Holdings Inc., Maxar Technologies Inc., Workhorse Group Inc. Some 2020 “heartbreakers” included a position in AMC Entertainment Holdings Inc.’s debt and put options on GSX Techedu Inc. Formidable declined to disclose the size of assets under management. Brown previously served as managing partner of BBK Capital Partners and as senior vice president at Raymond James while Eagleston was formerly a portfolio manager at Driehaus Capital Management LLC.
Brief: The European fund industry saw a deluge of investment in 2020, with net inflows rising by around 61.6%, according to new figures from Refinitiv Lipper. Across the year, overall net inflows into European funds were estimated at 574.3 billion euros ($696 billion), up from 303.9 billion euros in 2019 and vastly outstripping the annual average of 192.7 billion euros between 2004 and 2019. Following a steep plunge in March as the coronavirus pandemic spread throughout the world, global stock markets recovered over the course of the year, due in part to unprecedented fiscaland monetary stimulus from governments and central banks and the later emergence of successful vaccines. The 2020 total also marks the second-highest inflows into mutual funds and ETFs (exchange-traded funds) in the history of the European fund industry. Mutual funds, which enjoyed 483.5 billion euros of inflows, are those which pool money from investors to allocate to stocks, bonds, money market instruments or other alternative assets. ETFs are baskets of securities that tend to track an underlying index and are listed on stock exchanges, trading throughout the day like ordinary stocks, and saw inflows of 90.8 billion euros in 2020.
Brief: For years, active managers blamed a seemingly endless bull market for the rise of low-cost passive investing. But after the market finally crashed last year, investors still favored passive strategies By the end of 2020, investors had pulled more than $250 billion out of active U.S. equity funds, according to Morningstar. Passive U.S. stock funds, meanwhile, bounced back from the March sell-off, attracting a net $9.4 billion over the calendar year. Passive strategies also held steady in Europe, according to Cerulli Associates. Citing Morningstar data, the asset management research and consulting firm said that investors fled actively managed funds at a higher rate in March, causing active strategies to lose 3 percent of their start-of-year assets under management. Passive funds, by comparison, lost 1 percent of their starting assets in March. “Passively managed funds weathered the market volatility of 2020, highlighting the need for active funds to deliver better and more consistent performances in order to slow the erosion of the marketplace,” Cerulli said in a January report. By the end of November, European equity index funds had attracted €91.4 billion ($111 billion) in net flows, according to Morningstar. Passive funds as a whole increased their market share to 20.3 percent of European long-term fund assets as of November, Morningstar said.
Brief :The world economy is facing a tougher start to 2021 than expected as coronavirus infections surge and it takes time to roll out vaccinations. While global growth is still on course to rebound quickly from the recession of last year at some point, it may take longer to ignite and not be as healthy as previously forecast. The World Bank already this month trimmed its prediction to 4% in 2021 and the International Monetary Fund will this week update its own outlook. Double-dip recessions are now expected in Japan, the euro area and U.K. as restrictions to curb the virus’s spread are enforced. Record cases in the U.S. are dragging on retail spending and hiring, prompting President Joe Biden’s new administration to seek an extra $1.9 trillion worth of fiscal stimulus. Only China has managed a V-shaped recovery after containing the disease early, but even there consumers remain wary with Beijing partly locked down. High frequency indicators tracked by Bloomberg Economics point to a troubling start to the year with advanced economies beginning on a weak note and emerging economies diverging. “That’s a reflection of the hard reality that, ahead of widespread distribution of the vaccine, a return to normality is an unlikely prospect,” said Tom Orlik, chief economist at Bloomberg Economics. It’s a stark outlook facing policy makers after $12 trillion worth of fiscal support and trillions in central bank money printing failed to cement a recovery. Those from the Federal Reserve meet this week.
Brief: AMC Entertainment Holdings Inc. got support from private investment firms including Oaktree Capital Management and Centerbridge Partners for a loan that will help the cinema chain avert bankruptcy, according to people with knowledge of the situation. Oaktree and Centerbridge, which specialize in lending to troubled companies, led firms providing the 400-million-pound loan (about $547 million) tied to AMC’s Odeon Cinemas in Europe, the people said, asking not to be identified discussing a private matter. The new loan will be used to refinance existing debt and provide liquidity to cash-strapped AMC, whose audiences have all but vanished amid the Covid-19 pandemic. The deal is part of $917 million of funds assembled since mid-December by the world’s largest movie theater chain as it tries to stay solvent until vaccines bring back customers. Talks are underway with creditors about more financing and waivers, and while AMC said it has enough cash to stay in business through July, company filings show it still may face default claims from lenders and landlords. Representatives for Leawood, Kansas-based AMC didn’t immediately provide a comment. Oaktree and Centerbridge declined to comment. “Success breeds success,” AMC Chief Executive Officer Adam Aron said in an interview Monday. “The reason bankruptcy was on the table was because people were afraid that we would run out of cash. Now that we’ve raised so much cash, bankruptcy is no longer an option.”
Brief: The world’s 20 best-performing hedge funds earned $63.5 billion for clients in 2020, setting a record for the last 10 years during a chaotic time when technology oriented stocks led a dramatic rebound from a pandemic induced sell-off, LCH Investments data show. As a group, the most successful managers earned half of the $127 billion that all hedge funds made last year, LCH Investments, a fund of funds firm that tracks returns and is part of the Edmond de Rothschild group, reported. Despite the pandemic that triggered a historic stock market sell-off in March, shut down large sectors of the economy and swallowed up millions of jobs, the 20 best hedge funds topped their 2019 returns of $59.3 billion. That was despite 2020 not being as profitable as the previous year for hedge funds as a whole, which saw earnings fall from $178 billion in 2019. The average hedge fund returned 11.6% in 2020, according to Hedge Fund Research data, lagging behind the S&P 500 index’ 16% gain. “The net gains generated by the top 20 managers for their investors of $63.5 billion were the highest in a decade. In that sense, 2020 was the year of the hedge fund,” Rick Sopher, LCH’s chairman, said in a statement. Last year’s biggest earners include Chase Coleman’s Tiger Global, which earned $10.4 billion, Israel Englander’s Millennium, which earned $10.2 billion and Steve Mandel’s Lone Pine with $9.1 billion. Andreas Halvorsen’s Viking Global Investors earned $7.0 billion and Ken Griffin’s Citadel earned $6.2 billion, according to LCH data.
Brief: Bridgewater Associates founder Ray Dalio wrote on Twitter on Sunday that the United States is still in a “terrible financial state” and remains “terribly divided”, but added he liked what he heard from President Joe Biden at his inauguration. The hedge fund billionaire wrote that the question was whether the president and both parties in Congress would work together “for peace and prosperity that addresses the big wealth, values, and opportunity gaps we’re now seeing.” Dalio has previously criticized here a widening wealth gap and under-investment in public education in the United States, which he has linked to lower high school graduation rates, greater disparity in test scores, and lower teacher pay.
Brief: The world is witnessing the greatest rise in inequality on record, with the poorest likely to feel the effects of the COVID-19 pandemic for years to come while the “mega rich” have already bounced back, according to Oxfam. That’s the conclusion from a report by the charity, which charts the wealth effects of the deepest slump since the Global Financial Crisis as widespread shutdowns of businesses lead to rising unemployment. “The pandemic has hurt people living in poverty far harder than the rich, and has had particularly severe impacts on women, Black people, Afro-descendants, indigenous peoples, and historically marginalized and oppressed communities around the world,” Oxfam said on Monday. “It is likely that almost every country will see an increase in inequality, the first time since records began.” The report follows in the footsteps of similar analysis by the World Bank, which has warned that the economic crisis is sending a new generation into poverty and debt turmoil. The International Monetary Fund has warned that developing nations may be set back by a decade. Oxfam is urging governments to do more to address inequality, including making tax policies more equitable and canceling developing countries’ debts. The study -- entitled ‘The Inequality Virus’ -- is being published in tandem with the World Economic Forum’s virtual conference, at which politicians and business executives are set to discuss the state of the global economy.
Brief: Not many people would want to leave a steady job to start a new business during a global pandemic. For former Fir Tree partner Aaron Stern, that kind of counterintuitive thinking is par for the course. Stern, who ran distressed, special situations, and event-driven investments at Fir Tree before launching Converium Capital Management last year, says he’s been a contrarian since his father introduced him to investing and let Stern manage the family’s college savings when Stern was still in his teens. “I’m a contrarian and problem solver by nature,” said Stern, in his first interview about Converium, a multistrategy and opportunistic manager based in Montreal. “I’m drawn to companies and situations that are going through changes. When something bad happens, the folks who are closest to the situation, the experts, tend to be the most negatively impacted and don’t want to touch it.” That creates a vacuum that investors like Stern can fill, and it’s a perspective that shapes the new firm’s investment philosophy, he said. Converium has the flexibility to make event-driven investments around the globe, depending on where the team sees opportunities at any particular time. Investments could include, among others, activist situations, distressed debt, and sovereign debt.
Brief : Some of New York’s biggest employers are urging local leaders to let them help with the Covid-19 vaccination effort, arguing that the slow rollout is putting the state’s economic recovery at risk. Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc. and KKR & Co. were among a few dozen companies that got on a call Thursday with the state’s vaccination czar, Larry Schwartz, to offer their services, according to people on the call. The firms said they can provide distribution and logistics, and could help persuade the Biden administration to boost New York’s vaccine allocation. “Our economy will not recover, and we won’t be able to get people back into the office, until we have good penetration of the vaccines,” Goldman Chief Executive Officer David Solomon said. Wall Street leaders, who have operated from largely empty office towers, are getting increasingly concerned about continued delays that threaten a return to normal operations. New York City has had to cancel thousands of appointments and temporarily suspend 15 community vaccination sites due to vaccine shortages and distributor delays. The city continues to administer the shots, but many hospitals and vaccine sites have stopped offering new appointments for first doses. Appointments for second doses are still being made.
Brief: Citadel Securities went from strength to strength in 2020, as the pandemic spurred wild swings across finance. To cap the tumult, Ken Griffin’s firm, one of the world’s biggest market makers, just posted record revenue -- some of it from a rapidly constructed Florida trading floor. Fourth-quarter net trading revenue of $1.7 billion brought the firm’s full-year total to $6.7 billion, almost double the previous high in 2018, according to a presentation to investors. The surge came after some of its traders decamped from Chicago and New York to set up shop in a Palm Beach hotel in late March as the pandemic upended lives and markets across the globe. The figures for the closely held firm are being disclosed to investors as part of a $2.5 billion loan Citadel Securities is seeking, with proceeds going to refinance debt and bolster trading capital. A representative of Chicago-based Citadel Securities declined to comment. The company’s success comes in a year that was defined by economic pain and despair for many, but will go down as one of the most lucrative environments in Wall Street history. Traders across investment banks profited from volatility sparked by the pandemic and an explosion in stock-market speculation by people cooped up at home on apps such as Robinhood Markets. Citadel Securities’ results also highlight how buttressed it is as a pure trading firm from the health catastrophe, which forced the biggest investment banks to set aside billions to cover future soured loans.
Brief: United Airlines may make the COVID-19 vaccine mandatory for employees, and other companies should do the same, United Chief Executive Officer Scott Kirby told workers at a meeting on Thursday, according to a transcript reviewed by Reuters. A United spokeswoman confirmed that the company was “strongly considering” making vaccines compulsory, though it isn’t a policy yet. “I think the right thing to do is for United Airlines, and for other companies, to require the vaccines and to make them mandatory,” Kirby said. “If others go along and are willing to start to mandate vaccines, you should probably expect United to be amongst the first wave of companies that do it.” CNBC had earlier reported the news of Kirby wanting to mandate the vaccine for employees. Private U.S. companies can require employees to get vaccinated against COVID-19, but are unlikely to do so because of the risks of legal and cultural backlash, experts have said. Companies are still in the early stages of navigating access and distribution of vaccines against the disease caused by the novel coronavirus, but inoculation is considered the key to safely resume operations at crowded warehouses, factory lines and on sales floors.
Brief: During his first full day in office, President Joe Biden on Thursday vowed a “full-scale wartime effort” to address the coronavirus pandemic, which includes a previously announced $1.9 trillion stimulus proposal that calls for spending on vaccine distribution, a $400 unemployment insurance supplement, and $1,400 stimulus checks. The new administration’s commitment to aggressively address COVID-19 came amid news that 900,000 Americans filed new unemployment claims last week — a slight drop from the week prior but an elevated figure otherwise not seen since last August. In a new interview, Democratic New York City mayoral candidate and former Citigroup vice chairman Ray McGuire applauded the Biden administration’s stimulus proposal but emphasized that the scale of the COVID-19 crisis will require additional government support beyond the nearly $2 trillion promised. Stimulus funds must target low-income people, especially those in communities of color that have suffered acutely from the pandemic, he said. “We welcome the assistance,” McGuire tells Yahoo Finance. “We will need more.” “We will need more in order for this country to make sure that it addresses the least of these Americans,” he says. “New Yorkers are suffering from the COVID economy [and] injustices across the system.” “We’ve got the existential crisis,” he adds. “This COVID pandemic has ripped and ripped through our communities and wrought havoc on many communities, especially disproportionately on Black and brown communities.”
Brief: Bainbridge Partners, a $900 million hedge fund firm that relies on algorithms to make its money, is now giving human traders a chance. The London-based money manager is investing $60 million in Andra Asset Management, which uses fundamental analysis to bet on small- and medium-sized companies in Europe, according to a company statement. Bainbridge will also get a stake in the firm co-founded by Sarunas Mazeikis and Jacob Brahms. While the investment is small, it may be another sign of a shift in sentiment in the industry following a volatile year that showed human stock pickers proving their mettle in a global crisis. Discretionary hedge funds such as Brevan Howard, Andurand Capital and BlueCrest posted record gains last year, while some of the best-known quant firms like Renaissance Technologies, Winton and Two Sigma suffered losses. Flesh-and-Blood Hedge Fund Traders Prevailed in 2020’s Tumult Mazeikis, who previous worked at Marble Bar Asset Management, and Brahms, a former employee at Artemis Investment Management, specialize in picking European small and mid-cap equities. Their Andra Absolute Return fund has gained about 17% since its launch in December 2019, according to the statement. “Because of their lower liquidity profile and reduced analyst coverage, small and mid-caps are usually more suited to a discretionary approach,” said Antoine Haddad, chief executive officer of Bainbridge.
Brief: According to newly released research by equity management platform Capdesk, 77 per cent of startup founders are saying that the Covid crisis has made them more likely to offer employee equity in their company. Capdesk is headquartered in London and works with European scale-ups including Secret Escapes, Curve, GoHenry, Privitar, Nutmeg and Gousto. The study found that among employees, founders and CEOs at private equity-backed UK startups and scale-ups, a majority of employees (80 per cent) and business owners (78 per cent) believe companies should be required by law to offer equity share schemes to their workforce. “After an extremely challenging year, it is encouraging to see something positive emerge: a fundamental shift towards distributing business wealth to more of those responsible for creating it,” said Christian Gabriel (pictured), CEO and co-founder of Capdesk. “Leaders are not only recognising the power of unlocking equity to drive their business and get through an economic crisis, but also the positive impact these actions can have on wider society,” he added. The research, which was conducted by Censuswide on behalf of Capdesk, consisted of opinion surveys completed by 200 founders, CEOs and business owners as well as 1,000 employees at private equity-backed startups and scale-ups across the UK in early December 2020. Listen to this interview with Christian Gabriel, co-founder and CEO of Capdesk and Private Equity Wire’s editor Karin Wasteson to find out more about why the pandemic has made it more likely CEOs will offer employee ownership, how it could improve business performance and in what way it might further the post-pandemic recovery.
Brief : The best measure of success for the new U.S. government of President Joe Biden will be the speed at which it rolls out COVID-19 vaccines, BlackRock Chief Executive Larry Fink said on Thursday. Speaking at online event organized by a business forum linked to Italy’s G20 presidency, Fink said he was confident the new administration would focus on sustainability in the first 90 days and smother any tensions with other countries. It’s about ... have America stand again for the principles of democracy ... and multilateralism ... and at the same time be aggressive and forthright in terms of the rollout of the vaccination,” the head of the world’s biggest asset manager said. Fink said it was a priority to rebalance the economy given the uneven impact of the pandemic across different sectors, but that could not happen until the population reached herd immunity and industries built on “aggregation” could be revived. “The economy will accelerate ... (once) we feel safe and secure again,” he said.
Brief: Amazon is offering its colossal operations network and advanced technologies to assist President Joe Biden in his vow to get 100 million COVID-19 vaccinations to Americans in his first 100 days in office. “We are prepared to leverage our operations, information technology, and communications capabilities and expertise to assist your administration’s vaccination efforts,” wrote the CEO of Amazon’s Worldwide Consumer division, Dave Clark, in a letter to Biden. “Our scale allows us to make a meaningful impact immediately in the fight against COVID-19, and we stand ready to assist you in this effort.” Amazon said that it has already arranged a licensed third-party occupational health care provider to give vaccines on-site at its facilities for its employees when they become available. Amazon has more than 800,000 employees in the United States, Clark wrote, most of whom essential workers who cannot work from home and should be vaccinated as soon as possible. Biden will sign 10 pandemic-related executive orders on Thursday, his second day in office, but the administration says efforts to supercharge the rollout of vaccines have been hampered by lack of co-operation from the Trump administration during the transition. They say they don’t have a complete understanding of the previous administration’s actions on vaccine distribution.
Brief: Deluged by client orders and often working from home, Goldman Sachs Group Inc.’s workforce generated 15% more revenue per employee during the tumult of 2020. But as the year wound down, the firm had spent an average of just 2% more on each person. Inside JPMorgan Chase & Co.’s investment bank, revenue per employee surged 22%. The figure for pay: up 1%. For months, the question has hung over the industry: How would investment banks reward workers hauling in a windfall during a pandemic spreading pain and economic disparity? The answer -- at least broadly -- is not so lavishly. While few big U.S. banks disclose figures revealing how they compensated Wall Street-oriented workforces, the few that do offered striking snapshots of restraint. Even companywide figures at major banks hint at similar trends. And no wonder: Earnings reports in recent days underscored anew how hard 2020’s tumult battered other business lines such as lending, where banks stockpiled tens of billions to cover bad loans. Despite the flurry of activity on Wall Street, total revenue at the nation’s six banking giants was little changed last year. The group boosted average pay per employee by a mere $271. Now those same firms are bracing for tougher times in Washington, where Democrats skeptical of large financial-industry paychecks are ascendant. From President Joe Biden’s recent picks of veteran watchdogs -- such as Gary Gensler for the Securities and Exchange Commission and Rohit Chopra for the Consumer Financial Protection Bureau -- to his focus on inequality, there are signs the industry faces both tougher scrutiny and regulation.
Brief: The coronavirus pandemic has brought considerable challenges to the way hedge funds and asset management firms do business, with far-reaching consequences for cybersecurity, data safety and business communications. The need for fully flexible working around the pandemic continues to change. Collaboration tools have been key to successful working environments as staff need to work in the same way and securely, regardless of location.In the early stages of the pandemic, the major tech challenges centred around endpoint security. Individuals may have been using personal devices for professional purposes, and the prevalent model was of decentralised security and centralised data. We no longer look to secure a network or server in the same way. Endpoint security is now key, and every device needs security protection. With so many entry points to firms' applications and data, managing the security at the end point has been at the forefront since early 2020 across the sector. These challenges have generally been overcome across the market, and RFA has been ahead of the curve with our MDR and AI tools. Most of our clients were already using an iteration of the cloud to harness their data, but some have advanced their programmes to embrace what the cloud can offer in terms of data management. RFA have always been supporters of a public or hybrid cloud offering, and by having our own Security Operations Centre (SOC) we offer an end-to-end secure cloud-based solution to our clients which has helped them – and us – during the upheaval of the past 12 months. The hedge fund community faced the challenges of 2020 head-on, and I have every confidence that it will do the same through 2021.
Brief: The latest Enterprise Software M&A report from Hampleton Partners, an international technology mergers and acquisitions adviser, reveals that the number of deals targeting enterprise software assets has jumped, with 836 deals recorded in the second half of 2020 compared to 641 deals in the first half of the year. Total transaction value disclosed across all deals in the space was also sky-high, reaching USD112 billion – the highest amount on record. Valuation multiples remain healthy but have dipped slightly: the trailing 30-month median EV/S multiple came in at 3.4x, while the EV/EBITDA came in at 14x. This is possibly because the pandemic motivated sellers to decrease pricing to a more appetising level for buyers earlier this year. Meanwhile, the second half of 2020 saw the highest recorded share of private equity and financial buyer transactions: 38 per cent of all deals were carried out by financial buyers, up from 34 per cent in 2018 and 33 per cent in 2019. Miro Parizek, founder, Hampleton Partners, says: “The new circumstances and challenges around Covid-19 have created opportunities for software services.
Brief: State Street Corp. is preparing to lay off staff, a plan revealed about a month after media reports that the firm is considering a sale of its asset management business. During an earnings call on January 19, State Street’s chief financial officer said that the firm is eliminating about 1,200 positions, mostly in middle management. Last month, Bloomberg and the Wall Street Journal reported that the firm was exploring options for its State Street Global Advisors, including a possible sale of the more than $3 trillion asset manager to UBS Group. The roles State Street plans to eliminate are primarily a result of changes to its operating model and business process, as well as automation, Brendan Paul, a spokesperson for the firm said in an email Wednesday. According to Paul, the employees whose roles have been eliminated will be entered into State Street’s talent pool and may be “redeployed” to new roles. “At the onset of the pandemic, we committed to suspending headcount reductions through 2020 in order to provide our employees with some security during a time of tremendous economic uncertainty,” Paul said. At that time, the company built an internal talent network, which helped to keep more than 3,000 employees working for State Street in 2020, Paul said. State Street expects to spend $82 million on employee severance charges, its financial highlights report shows. During the earnings call, State Street’s president and chief executive officer Ronald O’Hanley declined to comment on “market rumors,” but he did say that the firm’s asset management business is strong thanks to organic growth. “We see the world evolving, and therefore we need to think about how to add capabilities, both product and distribution capabilities, or distribution access to this,” O’Hanley said. He added that the firm would “continue to look at inorganic activities” for State Street Global Advisors.
Brief : Long-term US Treasury yields are predicted to rise even higher with a steeper yield curve as the economic outlook improves, with President-elect Joe Biden set to inject fresh fiscal stimulus after his inauguration on Wednesday. Last week, yields on US 10-year debt reached their highest levels since March, rising to 1.17 per cent as expectations of a return to higher inflation and economic growth prompted investors to sell longer-dated government debt. The yield curve also steepened to levels not seen since 2016, according to ratings agency S&P. Investor optimism was sparked initially by the outcome of run-off elections in Georgia favouring the Democratic Party, which is expected to help Biden push through a planned USD1.9 trillion relief package to support the US economy while vaccines are rolled out. Support for the stimulus package came from Biden’s nominee for Treasury Secretary, former Federal Reserve chair Janet Yellen, who said the “smartest thing we can do is act big” as she outlined the plan before the Senate finance committee on Tuesday. If passed by Congress, relief would include direct payments of USD1,400 to all Americans, in addition to USD440 billion aid for small businesses, and USD415 billion for fighting the virus. Brad Tank, CIO of fixed income at US-based asset manager Neuberger Berman, says that yields have risen rapidly in 2021, and are likely to keep going up. Tank says that so far there has been a “fairly orderly adjustment of bond prices to improved growth and inflation expectations”. US 10-year Treasury yields have doubled since August and currently hover around 1.10 per cent yield, with almost 20 basis points of that increase coming since the start of this year.
Brief: Morgan Stanley boosted both its short and long-term operating targets on Wednesday after coronavirus-induced volatility in financial markets helped the Wall Street bank post a quarterly profit that sailed past estimates. The company also confirmed plans to buy back $10 billion of shares this year, more than three times the figures announced by its retail banking peers, as it wrapped up results for U.S. lenders, which pointed to a modest rebound in the economy. “We are in the growth phase of this company for the next decade,” Morgan Stanley Chief Executive Officer James Gorman told analysts on a conference call. Morgan Stanley increased its two-year target for return on tangible equity to 14%-16%, from an earlier forecast of 13%-15%. The metric measures how well a bank is using its capital to produce profit. The company also raised its longer term target for the same metric to more than 17%, from its previous outlook of 15%-17%.
Brief: The annus horribilis that was 2020 in which payouts from UK companies were slashed by more than 40%, could be a positive development if it leads to a more sustainable dividends market, according to UK fund managers. The idea of a positive reset for UK dividends was part of a cautiously optimistic response to the latest dividend figures. While managers acknowledged they are the lowest since 2011, they also pointed to signs of a slight recovery in Q4 and the hope that the vaccine rollout will spark a recovery in both earnings and dividends over the next year and beyond. According to the UK Dividend Monitor produced by Link Group, UK dividends fell by 44% in 2020 to £61.1 billion, effectively wiping off eight years of growth. The headline dividend figures were the lowest since 2011. Unsurprisingly, Covid-19 accounted for £39.5 billion of the cuts with 67% of companies either cancelling or reducing their dividends between Q2 and Q4. Link’s figures also show that the financial services sector was by far the most affected sector in 2020 with £16.6 billion of dividends either cut or cancelled between April and December, equivalent to two-fifths of the Covid-related cuts.
Brief: Private-equity investors in southern Africa are closing deals again after a virus-induced lull, tapping a cash pile that stood at more than 30 billion rand ($2 billion) in June, according to an industry association. Businesses in the education, health care and retail sectors operating online are among the top picks for investors seeking to take advantage of market gaps amplified by the Covid-19 pandemic, Tanya van Lill, chief executive officer of the Southern African Venture Capital and Private Equity Association, said by phone. “From a venture-capital perspective, we are seeing a lot of activity in East Africa and West Africa, specifically in Nigeria and Kenya, where there has been investment in the fintech, agritech and insuretech space,” Van Lill said. “From a private-equity perspective, it’s fairly equal across the continent, though we are seeing a lot of activity in North Africa.” Prior to the pandemic, private-equity capital was increasingly allocated to infrastructure and energy projects in the region. However, lockdown restrictions imposed as a result of the virus meant firms couldn’t get on the ground to perform due diligence processes and close deals. They also battled to raise funds and sell out of investments, Van Lill said.
Brief: The success of short sellers during the pandemic appears tied to their health-care expertise and information processing skills, according to a paper from researchers in Germany and Australia. The Covid-19 pandemic is a “health-care crisis by nature,” making health-care-related information valuable across industries and a competitive edge for some short sellers, said Karlsruhe Institute of Technology researchers Levy Schattmann and Jan-Oliver Strych and University of Sydney business school professor Joakim Westerholm in a paper this month. They found short sellers with health-care expertise outperformed a control group that lacked it in their general market trading. The study drew from a German sample of daily short-selling data from November 1, 2012 through June. The researchers covered 266 different short sellers and 214 different stocks, “including a range of well-known brokers and hedge funds like J.P. Morgan or Renaissance Technologies,” according to the paper. As volatile markets moved fast last year as a result of the Covid-19 pandemic, short sellers’ health-care expertise and ability to process aggregate information became more important to producing superior returns than having insight into specific companies, the researchers found.
Brief: Qatar Investment Authority is generating strong returns on a multi-billion dollar bet it made on distressed debt and highly rated bonds at the start of the COVID-19 crisis, two sources familiar with its move said. QIA, a sovereign wealth fund with assets of $300 billion, owns department store owner Harrods and stakes in Barclays and prime properties such as Canary Wharf in London, bet that investment grade bonds would rebound from lows hit in March, investing in both sovereigns and corporates, they said. It was not alone in such a shift, as sovereign wealth funds invested a net $4.5 billion across U.S. fixed income in the third quarter of 2020, the most since at least the end of 2017, latest data from eVestment shows. The S&P 500 Investment Grade Corporate Bond Index has gained about 20% since hitting a low of 417.88 in mid-March. And in a departure from its previous portfolio purchases, QIA also put significant sums into so-called distressed credit, including funds that help struggling companies.
Brief : Goldman Sachs Group Inc dwarfed Wall Street estimates as its fourth-quarter profit more than doubled, powered by another blowout performance at its trading business and a surge in fees from underwriting a series of blockbuster IPOs. Revenue from global markets, which houses the bank’s trading business, registered its best annual performance in a decade as investors churned their portfolios at the end of a roller-coaster year for financial markets amid the COVID-19 pandemic. Trading, Goldman’s main revenue-generating engine, surged 43% annually. On a quarterly basis, revenue from the unit jumped 23% to $4.27 billion. Investment banking revenue jumped 27% to $2.61 billion during the quarter, driven mainly by equity underwriting, which was up 195% from the same period last year. Equities trading and investment banking revenues both comfortably beat forecasts, Oppenheimer analyst Chris Kotowski said. “It was an exceptionally strong quarter,” he said. The bank’s shares surged 2.6% in early trading, adding to a 20% gain in the past year. Goldman’s shares hit a record high of $307.87 last week, giving it a market cap of over $100 billion. Total revenue climbed 18% to $11.74 billion. The bank’s net earnings applicable to common shareholders rose to $4.36 billion, or $12.08 per share, in the quarter ended Dec. 31. Analysts had expected a profit of $7.47 per share on average, according to IBES data from Refinitiv.
Brief: The coronavirus has exposed the “catastrophic effects” of ignoring long-term risks such as pandemics, and the economic and political consequences could cause more crises for years to come, according to the World Economic Forum. The WEF’s annual survey of global risks lists infectious disease and livelihood crises as the top “clear and present dangers” over the next two years. Knock-on effects such as asset bubbles and price instability lead concerns over three to five years. The WEF said most countries struggled with crisis management during the pandemic, despite some remarkable examples of determination and cooperation. That highlights how leaders need to prepare better for whatever the next major shock turns out to be. “The immediate human and economic cost of COVID-19 is severe,” the WEF said in the report. “The ramifications -- in the form of social unrest, political fragmentation and geopolitical tensions -- will shape the effectiveness of our responses to the other key threats of the next decade.” While the impact of the pandemic is dominant at the moment, other events will likely come to the fore, according to the survey. As in previous years, extreme weather is seen as the most-likely risk, just ahead of a failure on climate action. Infectious diseases make the top five for the first time in at least a decade. Digital inequality and the concentration of digital power are also seen as major concerns, with WEF Managing Director Saadia Zahidi warning of a global “bifurcation in terms of growth and development.”
Brief: A report by the Association for Financial Markets in Europe (AFME) and PwC reveals that an equity shortfall of up to EUR600 billion threatens Europe’s economic recovery despite the significant public support measures and private capital made available across Europe to support economies during the pandemic.AFME is calling on the European Commission and members states to introduce measures to bolster Europe’s equity and hybrid markets and expand funding avenues for businesses, further enabling Europe’s economic recovery In a report published today (19th) in partnership with PwC, AFME warns that Europe needs to bridge a gap of EUR450-600 billion in equity needed to prevent widespread business defaults and job losses as Covid-19 state support measures are gradually reduced. The report Recapitalising EU businesses post Covid-19 reveals that despite the support provided by governments and the private sector since the start of the pandemic, 10 per cent of European companies have cash reserves to only last six months. The pan-European trade association is calling on authorities to explore and develop further short-term measures to support Europe’s equity and hybrid markets and accelerate the Capital Markets Union to help fund the recovery. Unless urgent action is taken, a spike in insolvencies could start as early as this month and threaten the EU’s recovery prospects, AFME warns.
Brief: Investors have been flocking to hedge funds, an area of alternative investing viewed as a volatility dampener and portfolio diversifier, as markets move toward a post-pandemic world, according to JPMorgan Chase & Co. J.P. Morgan Asset Management saw record capital flowing into its hedge funds during the last two weeks of 2020 and into the first half of January, according to Anton Pil, the global head of the bank’s alternative investing arm. Investors are viewing hedge funds as a counterweight to stretched valuations in equities, embracing them as a diversification strategy on the expectation that they will produce more yield than fixed income, Pil said in a phone interview. “They’ve done something which took a long time,” he said of hedge funds, an asset class that had been out of favor with investors. “They delivered returns that have a low correlation to both fixed income and equity,” Pil explained, while generally providing “pretty significant excess returns over cash.” J.P. Morgan Asset Management’s hedge fund strategies last year produced returns ranging from high single digits to more than 20 percent, Pil said. Investors, meanwhile, face tough challenges finding yield, with the firm forecasting that a traditional portfolio consisting of 60 percent stocks and 40 percent bonds will return 4.2 percent annually over the next 10 to 15 years. The best opportunities for alternative investing have shifted significantly over the past year, according to J.P. Morgan Asset Management’s 2021 Global Alternatives Outlook report, which is expected to be released Tuesday. While hedge funds remain among the “opportunity set” laid out by bank’s alternative asset management arm for the next 12 to 18 months, subordinated credit and real assets have now entered that framework, as well.
Brief: M&A valuations are soaring, with rich valuations and intense competition for many digital or technology-based assets driving global deals activity, according to PwC's latest Global M&A Industry Trends analysis. Covering the last six months of 2020, the analysis examines global deals activity and incorporates insights from PwC's deals industry specialists to identify the key trends driving M&A activity, and anticipated investment hotspots in 2021. In spite of the uncertainty created by COVID-19, the second half of 2020 saw a surge in M&A activity. "Covid-19 gave companies a rare glimpse into their future, and many did not like what they saw. An acceleration of digitalisation and transformation of their businesses instantly became a top priority, with M&A the fastest way to make that happen — creating a highly competitive landscape for the right deals," says Brian Levy, PwC's Global Deals Industries Leader, Partner, PwC US. Dealmaking jumped in the second half of the year with total global deal volumes and values increasing by 18 per cent and 94 per cent, respectively compared to the first half of the year. In addition, both deal volumes and deal values were up compared to the last six months of 2019. The higher deal values in the second half of 2020 were partly due to an increase in megadeals (USD5 billion+). Overall, 56 megadeals were announced in the second half of 2020, compared to 27 in the first half of the year. The technology and telecom sub-sectors saw the highest growth in deal volumes and values in the second half of 2020, with technology deal volumes up 34 per cent and values up 118 per cent. Telecom deal volumes were up 15 per cent and values significantly up by almost 300 per cent due to three telecom megadeals.
Brief: Wall Street power player Rob Arnott — the founder of influential money manager Research Affiliates who is known to challenge conventional thinking in markets — is out with a double barreled warning to market bulls who continue to print money during the pandemic on the back of gobs of fiscal and monetary stimulus. First, don’t forget the long-term ramifications of government spending. At some point, that money is going to have to be paid back and Mr. Market won’t dig that. And secondarily, remember the health of Main Street remains detached from the bullish realities of Wall Street this past year during the health crisis. “Applying the word stimulus to spending large quantities of money on a fiscal basis that we don’t already have — creating new money from the central bank — it all feels good. Stimulus, think of it as a little bit like heroin. I have heard that heroin feels good, but it doesn’t do you a lot of good long-term,” explained Arnott on Yahoo Finance Live. The reduced spending from the lockdowns paired with the fiscal and monetary so-called stimulus, pours money into the markets. There is no alternative. With zero yields you may as well go into the markets at any price creating bubbles. And when fiscal and monetary stimulus don’t promote spending in the macro economy, it does into Wall Street and not Main Street.” Arnott founded Research Affiliates in 2002 and it has about $145 billion in assets under management.
Brief : President-elect Joe Biden has picked a pair of veteran regulators strongly backed by progressive Democrats to lead two key Wall Street watchdogs, signaling that his administration is planning tough oversight after four years of light-touch policies under appointees of President Donald Trump. Former Commodity Futures Trading Commission Chairman Gary Gensler will be nominated to lead the Securities and Exchange Commission and Federal Trade Commission member Rohit Chopra is being tapped to lead the Consumer Financial Protection Bureau, Biden’s transition team said Monday… The selections follow weeks of intra-party wrangling over the financial regulation posts between moderate Democrats and those on the party’s left wing who want to see a sharp departure from business-friendly policies advanced during the Trump administration. They are bad news for the banking industry, which has been bracing for the prospect of stiffer rules since Biden was elected in November. Gensler, 63, is a former Goldman Sachs Group Inc. partner who gained a reputation as a Wall Street scourge when he engaged in bruising battles while advancing derivatives regulation at the CFTC during the Obama administration. Chopra, 38, is an acolyte of Massachusetts Senator Elizabeth Warren who helped her set up the CFPB before she ran for office.
Brief: Investment in biotech is booming. In Europe, the biotechnology and healthcare sector accounted for 20% of overall private equity investment in the first half of 2020, according to data from funds trade body Invest Europe. Investors in the field are faced not only with financial and ethical dilemmas, but the risks posed by the presence of bad actors. Andrew Hessel, a microbiologist, tells the latest issue of Funds Europe that, as with all developing technologies, the risks entailed are ever-evolving. “The core of the technology is agnostic, it’s human intention,” he says. “There’s always the potential for harm.” Hessel is chairman of Genome Project-write, a collaborative research effort focusing on large-scale synthesis and editing of genomes. A geneticist himself, he says molecular science is evolving dramatically, with scientists able to write genetic code to their own design, for example, and the programming of synthesised viruses to destroy cancer cells using computer-aided design. 20 years on since scientists sequenced the human genome, and concepts such as designer babies are no longer science-fiction. Agustin Mohedas, senior research analyst specialising in biotechnology at Janus Henderson, highlights that a moral line in the ground has been drawn when it comes to ‘biohacking’ embryos.
Brief: K2 Advisors, the hedge fund investing unit of Franklin Templeton, says active-management alpha will be critical to hedge funds’ success this year, as the global economy mounts a tentative recovery from the coronavirus pandemic. Brooks Ritchey and Robert Christian, co-heads of investment research and management at K2, said the Covid-driven economic slowdown appears to be nearing an end, as individuals and corporations have been able to weather the economic storm partly due to “enormous stimulus” from governments. But they warned that vaccination challenges, virus mutations, subsequent waves of new infections, and renewed lockdowns could derail the recovery. That, in turn, could keep volatility and dispersion elevated, creating opportunities for active management. K2 Advisors’ first-quarter Q1 hedge fund strategy outlook suggested inflation “will inevitably surface” if earnings, growth and sentiment jump the gun on the recovery, though a period of reflation without inflation could boost equities. “Our underlying hedge fund managers are identifying many opportunities, both on the long and short side, and think that active-management alpha will be key to success in 2021 as beta-driven momentum slows,” the pair observed in the commentary.
Brief: To find out how finance executives are getting through the pandemic, Bloomberg Markets asked three leaders about some of their habits and recommendations. Here are their responses. Lori Heinel: Deputy global chief investment officer, State Street Global Advisors What is your morning routine? I’m generally awake at 5 a.m. On a good day, I hop on the stationary bike or elliptical trainer while I am reading through the news or catching the morning broadcast. What did you get to do during the pandemic that you wouldn’t have done otherwise? I’ve been doing a lot more cooking—baking bread, trying new recipes, and cooking (and delivering) meals for family members and close friends. Where are you most eager to travel for nonwork reasons? I can’t wait to go to Colorado or Utah to ski! A very close second is Iceland. When the pandemic is over, how will your life be different than it was before? I’ve learned to slow down a bit. I got a bird feeder a few months back, and every time I look out the window, watching the birds dive in, seeing the different species, it makes me smile.
Brief: China’s economy picked up speed in the fourth quarter, with growth beating expectations as it ended a rough coronavirus-stricken 2020 in remarkably good shape and remained poised to expand further this year even as the global pandemic rages unabated. Gross domestic product grew 2.3% in 2020, official data showed on Monday, making China the only major economy in the world to avoid a contraction last year as many nations struggled to contain the COVID-19 pandemic. And China is expected to continue to power ahead of its peers this year, with GDP set to expand at the fastest pace in a decade at 8.4%, according to a Reuters poll. The world’s second-largest economy has surprised many with the speed of its recovery from the coronavirus jolt, especially as policymakers have also had to navigate tense U.S.-China relations on trade and other fronts. Beijing’s strict virus curbs enabled it to largely contain the COVID-19 outbreak much quicker than most countries, while government-led policy stimulus and local manufacturers stepping up production to supply goods to many countries crippled by the pandemic have also helped fire up momentum. GDP expanded 6.5% year-on-year in the fourth quarter, data from the National Bureau of Statistics showed, quicker than the 6.1% forecast by economists in a Reuters poll, and followed the third quarter’s solid 4.9% growth.
Brief: Prophet Capital Asset Management LP, an investor in loans and structured credit securities with $2.5 billion in assets, has restructured a hedge fund that had been rocked by March’s market turmoil, a company executive said on Friday. Reuters reported in March that Prophet Capital, based in New York and Austin, Texas, had temporarily blocked investor withdrawals from its Prophet Opportunity Partners LP fund with a view to ultimately dissolving it, amid extreme volatility sparked by the onset of the coronavirus. The fund primarily held high-yield collateralized loan obligations (CLO), which were hard hit amid fears over the widespread risk of corporate loan defaults stemming from pandemic lockdowns. The CLO market has since rebounded dramatically, allowing Prophet Capital to raise new cash for the fund and let investors redeem their money, said the firm’s partner David Rosenblum. Effective Jan. 1, the fund has allowed investors three options: to cash out at net asset value, remain invested but sell their legacy assets over time, or reinvest with a two-year lockup that would make it easier to manage the fund through times of extreme volatility, said Rosenblum. The restructuring underscores how default rates in the leveraged loan market have been far lower than feared, thanks largely to extraordinary interventions by the U.S. Federal Reserve.
Brief : Wall Street’s worst fears about the fallout from Covid-19 are receding. Three of the biggest U.S. lenders -- JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. -- cut their combined reserves for losses on loans by more than $5 billion, helping fourth-quarter profit top estimates even as they faced headwinds from low interest rates. While posting results Friday, executives expressed guarded optimism about fiscal stimulus and rising vaccinations during a pandemic in which delinquencies have remained low. Still, the banks warned the economy isn’t out of the woods yet. Six of the largest U.S. banks urgently set aside more than $35 billion to cover loan losses in the first half of 2020 with the message that they simply had no idea what to expect. Now, banking chiefs are pointing to prospects for a rebound this year. Unprecedented action from the Federal Reserve and lawmakers have allayed the worst-case scenarios. “We’ve seen further improvement on both GDP and unemployment,” Citigroup Chief Financial Officer Mark Mason told reporters on a conference call, referring to gross domestic product. There are a lot of favorable indicators that “make for a more positive outlook in 2020 and hopefully a continued, stable recovery,” he said. Beyond vaccines, he pointed to more clarity on the next U.S. presidential administration and prospects for additional stimulus.
Brief: KKR & Co.’s Henry McVey is advising investors to buy “tail risk” protection against the potential for low-probability events, like the dollar losing its status as the world’s reserve currency or a sudden spike in interest rates. The strategy is a form of financial insurance that typically pays off in the event of sudden selloffs, such as the pandemic-driven market chaos of last year. While McVey anticipates the current mix of economic trends and policy will drive a strong rebound in growth, he’s wary after the recent run-up in asset prices and the increase in Treasury yields. “There are two or three things that could go wrong against a generally constructive backdrop,” KKR’s head of global macro and asset allocation said in an interview on Bloomberg Television. Besides the potential loss of confidence in the dollar and a disorderly increase in rates, McVey also highlighted the “black swan” risk of a major disappointment in corporate earnings that could make investors re-evaluate equities. However, he thinks the probabilities remain low. Tail-risk hedging is a small industry that includes LongTail Alpha in Newport Beach, California, and Universa Investments, a Miami-based firm advised by Nassim Taleb, the former options trader who wrote the 2007 bestseller “The Black Swan.” The LongTail Alpha hedge fund gained 10-fold in March, rewarding investors who bought protection against a market collapse.
Brief: The ‘social premium’ for investing in companies with good or improving social practices is rising, according to new research from US-based asset manager Federated Hermes. In 2020, social factors were found to add up to 17 basis points each month to returns, which is two basis points higher than the result of a previous study in 2018. Lewis Grant, senior global equities portfolio manager at Federated Hermes, says that this increase reflects the fact that 2020 was a “huge turning point in society that brought some really difficult and ingrained issues to the fore”. The impact of the coronavirus pandemic and the growth of the Black Lives Matter movement after the death of George Floyd at the hands of police in the US, both helped accelerated the trend toward social investing. “We were already seeing an increase in the importance of social factors. I think that's just what's happening in the world,” says Grant. General sustainable funds have grown rapidly in recent years, with sustainable investment now accounting for a third of all assets under management in the US. When Federated Hermes first started researching the topic of sustainability premia several years ago, Grant says they did not find any statistical relationship between returns and social factors at all, only for governance factors. Social factors include a company’s treatment of its staff, rates of employee turnover, health and safety in the workplace, and supply chain standards.
Brief: Following the initial uplift from the announcement of a Covid-19 vaccine, markets have slowed, caught between optimism for the 2021 outlook and short-term concerns around the second wave impact. However, we expect a positive kick-off for risk assets in 2021, with conditions ripe for a co-ordinated acceleration of global growth. Over the next three to six months, as vaccine rollouts allow economic activity to resume, the return of growth and inflation will offer a temporary relief from the global economy's long-term state of 'Japanification'. This macro reflation scenario has been confirmed week after week by economic data and is supported by the promise of ongoing accommodative support from central banks. Nevertheless, we do not expect the reflation to evolve in a straight line, with Brexit a potential bump along the road, and investors need to be mindful of ongoing volatility. Moreover, if we head into 2021 with a strong rally, this will be difficult to sustain - and investors will have to be quick to capitalise. The ongoing global recovery fuels a pick-up in global trade and especially Asian exports, similar to the previous 'reflation' episode in 2016-17. The global pandemic drove a wedge between equity sectors, starkly separating winners from losers. The technology and online retail sectors outperformed during the pandemic, as working from home and e-commerce accelerated demand for these firms.
Brief: Standard Chartered Plc is preparing further job cuts as the emerging markets lender continues a restructuring that was postponed by the onset of the pandemic. The London-headquartered bank is expected to cut several hundred staff next month across its global businesses, with the reductions focused on more junior employees, according to people familiar with the matter. The bank has about 85,000 employees around the world. Job cuts restarted in the second half of last year as Standard Chartered, like other major lenders, faced pressure to curtail costs to cope with the impact of the pandemic. It’s one of a handful of large European banks who have resumed job reductions in the past months including HSBC Holdings Plc and Deutsche Bank AG. “A number of roles are being made redundant in line with our commitment to transforming the bank to ensure its future competitiveness, work that has been underway for the last few years,” Standard Chartered said in a statement. In July, the company said it was making a “small number of roles” redundant. Since then, several senior managers have left, including Didier von Daeniken, the head of its private banking arm. Standard Chartered Chief Financial Officer Andy Halford said in October that the firm needed to improve returns and its goal of achieving a 10% return on equity had been pushed back by Covid. The lender has said it will consider resuming dividend payments to investors after the Bank of England started to relax pandemic-related curbs in December.
Brief: The pandemic has upended the U.S. economy and it has also had a far-reaching effect on Silicon Valley, the venture capital industry and the entrepreneurial ecosystem in America. According to PitchBook’s 2021 US Venture Capital Outlook report that was released late last month, the Bay area’s share of total VC count in the U.S. will fall below 20% for the first time in history, while other cities around the country grab larger amounts of equity capital for their home-grown innovators. In 2020, $27.4 billion of venture capital was raised in the U.S., PitchBook reports. Of the total, 22.7% of the dealmaking occurred in the Bay Area, and 39.4% of deal value was invested in Bay area-headquartered companies. “The Covid-19 pandemic and subsequent exodus from San Francisco will only exacerbate this trend,” said PitchBook’s analyst Kyle Stanford. He notes that Silicon Valley’s share of venture capital deal count in the U.S. has fallen every year since 2006. The forces driving the continued shift: the rise of remote work during the pandemic, the high cost of living in the Valley, and the fact it’s become more expensive to finance start-ups in the Bay area. Another factor is the fact that many investors have left — either temporarily working from home or relocating all together. For example, 8VC has made 70% of its investments in California-headquartered companies, yet it moved its own headquarters from San Francisco to Austin in November.
Brief :BlackRock Inc’s, quarterly results topped analysts’ expectations on Thursday, buoyed by a rising stock market that boosted the firm’s assets under management to a record high $8.68 trillion, further widening its lead against peers. The firm drew $127 billion of total net inflows in the fourth quarter as investors poured money into its various business, including its exchange-traded funds, as well as active funds that aim to beat the market. “We begin 2021 well-positioned and intend to keep investing in our business to drive long-term growth and to lead the evolution of the asset management industry,” BlackRock’s chief executive, Larry Fink, said in a statement. Financial markets rallied in the fourth quarter, building on sharp gains of the prior two quarters, as accommodative global central bank policy and improving growth prospects helped lift investors’ risk appetite. While rallying stock markets provided a powerful boost to BlackRock’s results, the profit report showed outsized growth in inflows at a time when the rest of the industry is expected to struggle with redemptions.
Brief: The incoming US administration led by Joe Biden will be a “crucial” factor looming large over the healthcare industry this year, with planned reforms heralding potentially far-reaching implications for healthcare stocks and drug prices, Rhenman & Partners Asset Management said this week. Rhenman’s flagship Healthcare Equity Long/Short hedge fund gained 17.1 per cent in its main euro-denominated IC1 share class last year, bolstered by a 4.8 per cent monthly return in December. The strategy – which trades a range of small, medium and large pharmaceuticals, biotechnology, medical technology and service company stocks – made profits in each of those sectors last month, with medical technology and biotechnology companies bringing in the biggest gains. In an update this week, the Stockholm-based global healthcare-focused hedge fund said once the fall-out from the coronavirus pandemic is brought under control, the Biden administration’s proposed healthcare reforms will come under closer re-examination this year. While the Senate is now controlled by the Democrats, Rhenman believes major new healthcare reforms may prove tricky to push through with a weak majority.
Brief: Wells Fargo & Co Chief Executive Charlie Scharf will give investors more details on his long-awaited turnaround plan for the scandal-plagued bank this week. Although Wall Street expects Wells Fargo to report a 38% profit decline on Friday against the backdrop of the coronavirus pandemic, investors have become more bullish in anticipation of details about expansive cost-cutting plans. Wells Fargo shares have jumped 45% since Scharf teased a strategic update in October, outperforming JPMorgan Chase & Co and Bank of America Corp. Wells Fargo management has promised transformation since its 2016 fraudulent account scandal with little to show for the effort, but it feels different now, Raymond James analyst David Long said. Scharf’s “really changed the internal attitude to make improving the bank’s governance the number one priority,” Long said. Scharf started making changes shortly after taking the helm in October 2019, though he has not yet provided firm targets or timelines for progress. He installed a slew of external leaders, overhauled the reporting segments, and began to shed non-core businesses. He also implemented weekly and monthly reviews to increase oversight and address regulator concerns more efficiently.
Brief: London retained its position as the top European destination for tech venture capital in 2020, with levels near the record amount of the year before despite the impact of COVID-19, according to research by Dealroom.co and London & Partners. Start-ups and growth companies attracted $10.5 billion worth of funding, accounting for more than a quarter of all investment into Europe and three times the level in Paris, Berlin and Stockholm, the research found. Some of the largest deals involving London companies included a $500 million funding round for London fintech firm Revolut, a $400 million deal for electric vehicle maker Arrival and two funding rounds totalling $527 million for renewable energy firm Octopus Energy. The British capital is also home to more unicorns - start-ups with a valuation exceeding $1 billion - than anywhere else in Europe. At 43, it has more than Paris, Berlin and Amsterdam combined, according to the research. Dealroom said it had identified 81 potential future unicorns headquartered in the city. Eileen Burbidge, partner at London VC firm Passion Capital, said activity quickly rebounded after the shock of the pandemic in the first half.
Brief: What began as a desperate year for startups, characterized by mass layoffs as the pandemic took hold, has turned into a record venture capital funding haul. Despite the economic tumult wrought by the coronavirus, startup investing in the U.S. reached a record high of $130 billion in 2020, according to a new Money Tree report from PricewaterhouseCoopers/CB Insights. Companies like Instacart Inc. and Stripe Inc. helped drive the surge by raising hundreds of millions apiece, even though the total number of funding rounds was lower than in 2019. The year also saw an uptick in funding for several cities outside the Bay Area, long the center of the startup universe. Venture capital funding in 2020 rose 14% from 2019, according to the report, which includes private equity and debt investments as well. Last year also saw an increase in megarounds, meaning deals larger than $100 million, even as the number of funding rounds decreased, particularly for very young startups. The largest deals were a $1.9 billion infusion into Space Exploration Technologies Corp. and $1.5 billion in funding for Epic Games Inc., both giant funding rounds that were emblematic of the increasing muscle of private equity and mutual funds willing to write large checks to late-stage tech companies. In 2016, megarounds represented just 25% of the total money invested. That number increased to 49% in 2020—higher than ever—the report found. Large corporate players, including SoftBank Group Corp., Google Ventures and Uber Technologies Inc. also helped drive the rush to fund large startups.
Brief: Renaissance Technologies’ famed Medallion fund, available only to current and former partners, had one of its best years ever, surging 76 percent, according to one of its investors. But it was a different story for outsiders who are only able to invest in other RenTec funds — two of which had their worst years ever. The Renaissance Institutional Equities Fund, which launched in July of 2005, lost 22.62 percent through December 25, according to HSBC’s weekly scoreboard of hedge fund performance. A newer fund, Renaissance Institutional Diversified Alpha, fell even more: It fell 33.58 percent through the same time period, HSBC reported. Those two funds’ performance was so poor that they made HSBC’s top 20 losers list for 2020. Renaissance launched RIDA in February of 2012, and 2020 was its worst year since then, the report said. Renaissance declined to comment. Last year wasn’t RIEF’s first bout with turbulence. The fund was launched as a way for outsiders to partake of RenTec’s special sauce, as Medallion had only been available to insiders for several years by then. But RIEF fared poorly during the financial crisis: The fund fell 16 percent in 2008 and 6.17 percent in 2009. Its longest drawdown was between May of 2007 and April of 2009, a period when it fell 35.73 percent, according to HSBC. But until last year RIEF had produced double-digit returns for most of the past decade. Still, the earlier losses dragged down its annualized return, which is now only 8.05 percent. That’s below the Standard & Poor’s 500 stock index’s annualized return of 9.6 percent during the same time period.
Brief: Hedge fund managers have experienced “significant” performance dispersion over the past 12 months, with the biggest funds seeing the largest gaps between gains and losses, new industry data shows, once again underlining the importance of investor due diligence in separating winners from losers. Hedge funds globally ended a tumultuous 2020 on a high, generating an average monthly gain in December of some 4 per cent, to bring full-year returns to more than 11 per cent, according to newly-published year-end performance data from eVestment. The 10 biggest hedge funds tracked by eVestment generated returns of just 3.72 per cent between January and December last year – almost three times below 2020’s hedge fund industry average. But, of that grouping of the 10 largest funds, just one was close to that average, said Peter Laurelli, global head of research at eVestment, with most scoring strong double-digit gains. “Despite the high average returns across the industry, 2020 was a year where the dispersion of returns between fund types and within those various segments was significant. This was very apparent among large funds,” Laurelli noted in a commentary on Wednesday. “There were more large funds with double-digit gains and double-digit losses than not in 2020, highlighting the importance of fund due diligence and monitoring when selecting any hedge fund.
Brief: Federal Reserve rate actions have had a coercive effect on the markets and forced investors to move into risk assets, according to Oaktree Capital Group co-founder Howard Marks. “This has required people to invest because they don’t want to sit around with their cash,” Marks said Tuesday in an interview on Bloomberg TV. “They don’t want Treasuries at less than 1% or high-grade bonds at 2%.” Global credit and equity markets have staged a dramatic rebound since March, when the Fed first took unprecedented steps to steady the economy amid the Covid-19 outbreak. This dramatically cut the amount of distressed debt outstanding and propped up companies that were ailing even before the pandemic hit, depriving value-oriented investors like Oaktree of new targets. “The greater question is, why is the market making new highs every day if we have these problems?” he said. “The political division in the country is a terrific one but the greatest one of course is the pandemic.” Discussing Tesla Inc.’s meteoric rise, Marks said the stock is so high some investors may want to sell. “If you describe an individual not of great needs, he should take some profits,” Marks said. “If he bought Tesla two years ago, he probably has a huge gain. It’s probably a very disproportionate amount of his financial net worth. He should absolutely cut back, unless he really wants to try to hit the long ball.” Oaktree is one of the largest distressed-debt investors in the world, with more than $19 billion committed to credit from troubled companies.
Brief: An unprecedented number of delays when sending out orders to market is costing hedge fund managers USD20 million per year, according to new research from TradingScreen. A combination of operational inefficiencies and trade errors cause the majority of delays, while high costs associated with IT systems maintenance is also a significant contributor. The findings show that the most unprotected trade errors cost hedge funds anywhere between 3 and 10% of trade notional, which in some cases is USD5 million a year. Time delays and execution slippage, which is the difference between the expected price and the price at which the trade is executed, impacts performance by 2 per cent of AUM, which results in costs as high as USD9.5 million annually. When it comes to IT support and administrative costs, a large hedge fund with USD5 billion AUM spends between USD3.5 and USD5 million. Varghese Thomas, President and COO at TradingScreen, says: “From computer meltdowns to human errors, erroneous trades and order delays are caused by a myriad of factors. With so much disruption facing markets right now, hedge fund managers can ill afford not to keep execution delays down, particularly now that European share trading is likely to fragment post-Brexit.
Brief: Sophos Capital Management, the largest dedicated short selling firm in the world as recently as a year ago, is scaling back its hedge fund business, according to people familiar with the plans. The move by founder Jim Carruthers — widely considered a legend in the business — comes as short sellers faced one of their worst years on record. Short-biased funds lost 47.59 percent through November, according to the HFRX Equity Hedge: Short Bias Index. This year isn't looking any better. The Goldman Sachs “most shorted” index of stocks was already up 13 percent in 2020 and more than 200 percent over the past year. Carruthers did not respond to a request for comment, and his funds’ performance details weren’t publicly available. Menlo-Park-based Sophos reported $1.16 billion in regulatory assets under management, six separate hedge funds, and nine employees at the end of 2019. That made it larger than even Jim Chanos’ Kynikos Associates, which had slipped below the $1 billion mark by that time. An individual familiar with Carruthers’ plans said the short seller had been telling people he was winding down some positions since late last year, and some employees have been looking for jobs. It's unknown how long it could take to unwind some of the positions, but people close to the situation said that he is not shutting the firm down. Carruthers launched Sophos in 2014 with about $200 million, including a seed investment from Yale University’s endowment. The move by Yale led other university endowments to invest in short sellers, according to one short-biased hedge fund manager.
Brief: Funding secured by cybersecurity start-ups since the start of lockdown in March increased by more than half compared to the same period in 2019, according to new research released today by Plexal and Beauhurst. This is in contrast to start-ups across all sectors, which saw investment volume fall by 10 per cent year-on-year. Only 23 of the 1,715 start-ups falling into administration, liquidation or dissolution since the start of lockdown were from the cybersecurity sector. The research also found that despite the overall boost in funding (52 per cent increase) and deal numbers (33 percent increase), highlighting the importance of cybersecurity companies during the pandemic, activity consisted mainly of a small number of very large deals, showing that investors continue to prioritise later stage businesses. The volume of funding secured by cybersecurity companies seeking funding for the first time fell to just GBP11.9m since lockdown, from GBP265 million in the same period in 2019 – as companies raising capital for the first time fell by 96 per cent. “While increased total funding demonstrates the relevance of cybersecurity and shows that the UK’s cyber industry has not been impacted to the same extent as others, the almost complete absence of backing for early-stage firms puts the sector’s future at risk, said Saj Huq, director of Innovation at innovation centre Plexal. “It is these companies that we will ultimately rely on to solve the inevitable new cyber challenges arising from a society that is increasingly digital-first,” he added.
Brief: Bond giant PIMCO expects the U.S. economy to return to pre-pandemic levels later this year but warned of political and economic risks that could derail the recovery, including a sooner-than-expected withdrawal of fiscal stimulus. In its 2021 outlook published Tuesday, the California-based fixed-income investor, which manages over $2 trillion in assets, predicts that U.S. economic activity will hit pre-recession peaks in the second half of the year. Global gross domestic product, PIMCO says, will grow at the fastest rate in a decade, buoyed by the worldwide rollout of COVID-19 vaccines. But a pullback in U.S. fiscal stimulus, Chinese corporate deleveraging and continued caution in U.S. spending, investment and hiring could all disrupt the expected recovery, potentially hurting investors who have already priced in a rebound, PIMCO said in the report. “Investors may have become too complacent as reflected by the bullish consensus positioning. As these risk factors underline, we see this as a time for careful portfolio positioning and not for excessive optimism or risk-taking,” the report said. PIMCO’s comments come amid a broad market rally. The promise of the coronavirus vaccine and hopes the Democratic Congress will ramp up spending have driven U.S. stocks to all-time highs and corporate credit spreads to pre-pandemic levels.
Brief: U.S. private equity firms raised “healthy” amounts of money from investors after the pandemic began last year, particularly for technology deals, even as most firms also poured cash into struggling portfolio companies, according to PitchBook’s 2020 review of the industry. Private equity firms quickly figured out how to negotiate the extremes of 2020, cannily shifting from the frozen leveraged buyout business to buying minority stakes and putting money to work in public companies, according to the report, expected to be released Tuesday. After an initial downturn early in the year, exits also rebounded as private equity firms turned to special purpose acquisition companies (SPACs), traditional listings, and other sponsors to take holdings off their hands, reported PitchBook. “What a rollercoaster 2020 was,” said Wylie Fernyhough, lead private equity analyst at PitchBook, in an interview with Institutional Investor. “Whether it was LPs having to pause allocations, or figuring out how to do due diligence online. Private equity really showed its resilience in 2020 with all these headwinds thrown at it.”
Brief: Chris Rokos’s hedge fund racked up its best year since the billionaire investor started his own macro trading firm more than five years ago, joining a string of peers who posted record gains in 2020. His $14.5 billion macro fund soared 44% as the pandemic upended markets, according to people with knowledge of the matter who asked not to be identified because the information is private. The London-based fund’s previous best year was in 2016, when it rose 20%. Macro hedge funds, which trade across asset classes to capitalize on broad economic trends, ended last year up 7% on average, according to data compiled by Bloomberg. Rokos’s returns coincide with a structural overhaul at his firm in late 2019, which allowed for bigger bets as portfolios previously run by individual traders were merged into a single pool of money. A spokesman for London-based Rokos Capital Management, which started in 2015, declined to comment. Rokos joins a slew of macro fund managers that posted double-digit gains last year as market turbulence created opportunities for the firms. Brevan Howard Asset Management, Rokos’s former employer, made 27% in its master fund, the best year since 2003, while its U.S. Rates Opportunities Fund soared nearly 99%. EDL Capital and Glen Point Capital gained 23% and 14%, respectively.
Brief: The Google News Initiative on Tuesday launched a global open fund to fight misinformation about COVID-19 vaccines, worth up to $3 million. The “COVID-19 Vaccine Counter Misinformation Open Fund” aims to support journalistic efforts to effectively fact-check misinformation about the COVID-19 immunisation process, the initiative belonging to Alphabet’s Google said in a blog post. “While the COVID-19 infodemic has been global in nature, misinformation has also been used to target specific populations,” it added. “Some of the available research also suggests that the audiences coming across misinformation and those seeking fact checks don’t necessarily overlap.” The fund will accept projects looking to expand the audience of fact-checks, particularly to groups disproportionately hit by misinformation. Applications will be reviewed by team of 14 jurors from across the academic, media, medical and non-profit sectors, as well as representatives from the World Health Organisation. In December, the Google News Initiative pledged $1.5 million to fund a COVID-19 vaccine media hub to support fact-checking research.
Brief: San Francisco’s office market is being hit so hard by the pandemic that, by some measures, it’s worse than the global financial crisis or dot-com collapse. The city’s office-vacancy rate reached 16.7% at the end of 2020, up 11 percentage points from a year prior, according to a report from commercial real estate brokerage Cushman & Wakefield. That’s a higher level than in the aftermath of the 2008 recession. The vacancy rate is being driven by a record amount of sublease space, which has surpassed the worst of the dot-com bust two decades ago, said Robert Sammons, senior director of research at Cushman in San Francisco. In addition, new leasing has effectively been on pause and hit the lowest annual level in 2020 since at least the early 1990s. Companies have been reevaluating their office needs after months of pandemic lockdowns showed them that it was possible to function with employees working from home. That’s caused a spike in vacancies, especially in cities like New York and San Francisco, where the cost of renting space is higher. The technology companies that dominate the Bay Area, in particular, have embraced remote work. Pinterest Inc. last year paid almost $90 million to cancel a large San Francisco office lease, saying it is rethinking where employees are based.
Brief: The upheaval in global labour markets triggered by the coronavirus pandemic will transform the working lives of millions of employees for good, policymakers and business leaders told a Reuters virtual forum on Tuesday. Nearly a year after governments first imposed lockdowns to contain the virus, there is a growing consensus that more staff will in future be hired remotely, work from home and have an entirely different set of expectations of their managers. Yet such changes are also likely to be the preserve of white-collar workers, with new labour market entrants and the less well-educated set to face post-COVID-19 economies where most jobs growth is in low-wage sectors. “I think it would be a fallacy to think we will go back to where we were before,” Philippines central bank Governor Benjamin Diokno told the Reuters Next forum. “We were already geared towards the digital, contactless, industries ... That will define the new normal.” The pandemic, which according to a Reuters tally has so far infected at least 90.5 million people and killed around 1.9 million worldwide, has up-ended industries and workers across the globe.
Brief: It could have been a disastrous year for the European fund management industry, but policymakers rode to its rescue. Huge fiscal and monetary stimulus packages supported markets and continued to push investors away from cash. In the end, the industry ended the year close to where it began, but this headline figure masked considerable variation underneath. The European fund industry had €10.03trn (£9trn), excluding money market funds, as at 30 November 2020 according to Morningstar data, an organic growth rate of 3.2%. In aggregate, fixed income saw the strongest inflows, at €110bn, in spite of continued low yields. Equity funds saw inflows of €91.7bn, while allocation funds saw inflows of €34.8bn. The notable weak spot was in alternatives, which saw €35.5bn exit the sector – a combination of the weakness of the property sector and a growing disillusionment with the poor performance and high fees from hedge fund strategies. Commodities had a good year, drawing in an extra net €1.6bn of assets. However, this overall picture masked huge shifts in the popularity of different asset classes through the year as economic news and investor sentiment ebbed and flowed. In November, for example, equity funds were firmly in the ascendancy as vaccine news emerged and some stability returned to US politics.
Brief: Hedge funds weathered the political, social and economic shocks brought about by the global pandemic and frequent bursts of soaring volatility to score a near-12 per cent return last year – their best since 2009 – outperforming both the Dow Jones Industrial Average and FTSE 100, new data from Hedge Fund Research shows. HFRI’s main Fund Weighted Composite Index – a global, equal-weighted measure of some 1400 single-manager hedge fund strategies – finished 2020 up 11.6 per cent for the year following a 4.5 per cent rise in December. The full-year gains represent a strong rebound for the hedge fund sector as a whole, which had earlier plummeted 11.6 per cent in Q1 following three months of consecutive losses amid the initial coronavirus outbreak. The index’s annual 11.6 per cent rise builds on 2019’s 10.45 per cent annual return. The strong annual showing – the benchmark’s best since a near-20 per cent surge in 2009, at the height of the Global Financial Crisis – is likely to further draw in more yield-hungry allocators, according to HFR president Kenneth Heinz. “Hedge funds effectively navigated both December and calendar year 2020 volatility, and accelerated into 2021 with powerful, broad-based performance which continued yet broadened the high-beta equity- and crypto-driven gains to also include quantitative, trend-following macro, energy and special situations exposures,” Heinz observed.
Brief: Activist investor Elliott Management Corp. returned 12.7% on its investments in 2020, turning in one of its strongest years in the past decade, according to an investor letter reviewed by Bloomberg. The New York-based hedge fund reported the same returns for both its international and onshore funds, marking their best year since 2012 and 2016, respectively, according to a person familiar with the matter who asked to not be identified because the matter isn’t public. A representative for Elliott declined to comment. The document shows Elliott was profitable every month in 2020, including in March when it eked out a 0.1% return amid a broader selloff in the markets in the wake of the coronavirus pandemic. The S&P 500 returned 16% over 2020. Elliott’s assets under management grew to $45.2 billion from roughly $41 billion at the end of June. Elliott, which is run by billionaire Paul Singer, took at least 16 new activist positions in 2020, including at Twitter Inc., Softbank Group Corp., and others, according to data compiled by Bloomberg.
Brief: Eventus Systems, a global provider of multi-asset class trade surveillance and market risk solutions, has reported 'unprecedented growth' on multiple fronts in 2020, marking its strongest year to date in revenue and new client onboardings. The company has additional expansion plans for 2021, with deeper penetration in asset classes such as equities, foreign exchange (FX), fixed income and digital assets. Eventus CEO Travis Schwab says: “In a year full of so many challenges and hardships for us all, we are profoundly grateful that it was also the most monumental year since our launch. Our Series A funding round enabled us to make strategic investments that accelerated our growth in terms of staff, geographical presence, market coverage, client acquisition, product enhancements, scalability and efficiencies. I’m incredibly proud of our team and Board for the hard work, persistence, insights and first-class client service that made this growth possible. Our Validus platform is now a mission-critical piece of infrastructure for a wide range of leading financial market participants and exchanges. We ended 2020 on a particularly strong note, with one of the world’s largest non-bank cash FX trading firms and a major digital asset exchange both signing in the last week of the year.” Schwab says that following a year in which the firm established leadership as the trade surveillance platform used by many of the largest cryptocurrency exchanges, he expects further market penetration in this space, attracting not only more exchanges but also various other market participants active in digital assets.
Brief: When the biggest U.S. banks begin reporting fourth-quarter results on Friday some of the headlines could show profits plunged by as much as 40% from a year earlier, before the pandemic struck. But investors will be focused on digging out clues to the earnings rebound expected in 2021. “You can look at Q4 as somewhat of a transition quarter as you put some of the challenges from 2020 in the rear-view mirror and look ahead to an improved 2021,” said Barclays analyst Jason Goldberg. The pandemic caused interest rates to plunge and produced a record decline in the margin between what lenders charge for loans and what they pay for money, said Goldberg. The pandemic also pushed big U.S. banks to set aside more than $65 billion for expected loan losses. From those low points, banks could see profits more than double in first and second quarters of 2021, according to Refinitiv’s IBES estimates. Bank stocks have risen 35% since early November. Since then, effective COVID-19 vaccines started being distributed, Democrats took power in Washington, promising more economic stimulus, and the Federal Reserve said it would allow banks to repurchase stock again, which will increase earnings per share.
Brief: New strategic research from Mercer focuses on what the coming year holds for alternatives, outlining some of the issues investors may want to follow closely in an effort to optimise their portfolios. “We are seeing that though investors have been tested this year, the experiences of previous crises have made them more resilient. There were unorthodox challenges such as not being able to vet new managers in person, but clients continued to put capital to work, especially with existing investment manager relationships across all private market segments,” says Raelan Lambert, global head of alternatives at Mercer. “In 2021, investors should consider stretching their risk appetites and consider their allocation to real estate. Although the pandemic will continue to challenge the property market, 2021 is likely to be an opportune time for entering the asset class with a medium- to longer-term investment horizon. Initially, investors should prioritise allocations to the largest, most-liquid markets, where price discovery is furthest along.”
Brief: KKR & Co. raised $3.9 billion for its first Asia-Pacific infrastructure fund, amassing the largest pool of cash in the region for investments in everything from waste management and renewable energy to communication towers. In the process of raising funds, the firm boosted its initial target from $3 billion and stopped fundraising after reaching its cap. It tapped three dozens investors in the U.S., Europe, the Middle East and Asia-Pacific, said Alisa Amarosa Wood, head of KKR’s Private Markets Products Group. KKR and its employees contributed about $300 million. Accelerating its expansion across a region that’s emerging from the pandemic and bolstered by a growing middle class, the firm is also in the midst of raising at least $12.5 billion in a fourth private equity fund and planning its first real estate and credit funds in Asia. KKR declined to comment on the other fund-raisings. Institutional investors are increasingly looking for a “one-stop shop” with deal-making, operational and capital market expertise, favoring assets with a lower-risk profile that aren’t tied to public market indexes, Wood said. “Investors are looking for a safe pair of hands,” she said in an interview.
Brief: Cash-rich private debt and equity providers are hunting for viable pandemic-hit businesses to fund, according to London-listed alternative asset manager Intermediate Capital Group PLC. “If a business has a shortfall purely due to Covid-19, there is plenty of capital to support them,” said Nicholas Brooks, ICG’s head of economic and investment research in a telephone interview. European private debt managers had almost $93 billion of capital available as of December 2020, with over $295 billion in the hands of private equity, according to data provider Preqin. That cash could help out a lot of companies bearing the brunt of the pandemic that have already tapped out government-backed emergency loans. It’s a relatively expensive option, but may be the only one open to some of the hardest hit sectors as parts of Europe enter their third lockdown. That means yet more pain for many of the firms identified by ICG in their analysis of financial data for around 500 private companies. Hardest hit were automotive and components, travel, hotels, restaurants and leisure, and retail, which endured months of almost zero revenues last year. “Private debt and private equity have record levels of dry powder,” Brooks added. “Funds aren’t the issue, it’s really whether a business is viewed as viable in the long-run.” It’s also a question of whether borrowers can afford the money on offer.
Brief: The pandemic has made one thing abundantly clear for hedge funds: Trading a once-in-a-century crisis is best left to humans. Funds that survive largely on their ability to place high-conviction bets made some of their strongest returns in decades last year. Some of the industry’s best-known names such as Brevan Howard Asset Management, Millennium Management and Andurand Capital Management soared past peers as stormy markets provided rich pickings. That’s thrown a wrench into the rise of computer-driven quant funds, which gobbled up assets year after year but couldn’t protect investors or make money in 2020. Algorithms largely failed to decipher the impact of a rapidly moving virus and the response from central banks to contain economic damage. The “narrative was: stock selection is dead, the future is all about indexing and quants and the blackbox and all that,” said Craig Bergstrom, chief investment officer at the $7.5 billion Corbin Capital Partners that invests in hedge funds. “It’s another kind of arms race and there are winners, but there are definitely also losers, and it’s not the future of active management.” The market selloff in March and subsequent recovery humbled some of the most sophisticated of quants last year -- most notably behemoths such as Renaissance Technologies, Winton and Two Sigma.
Brief: Investor optimism has increased “significantly” since the start of the pandemic, according to a new survey. The Scotia Global Asset Management Investor Sentiment Index found that investor optimism spiked from a reading of 100 in May to 117 in November. The reading was even higher — 130 — among investors who use advisors. Eight-two per cent of investors who’d met with an advisor in the past six months said they felt more confident about their investments, compared to 56% of investors who hadn’t met with an advisor. The survey also found that 80% of investors who use advisors felt they were on track to meet their financial goals, and 90% were somewhat or very confident about funding their retirements. Scotia commissioned Environics to conduct an online poll of 1,024 investors with a minimum of $25,000 in household investable assets from Nov. 10 to Nov. 19, 2020. Online polls cannot be assigned a margin of error because they do not randomly sample the population.
Brief: Venture capital backed companies in the United States raised nearly $130 billion last year, setting a record despite the COVID-19 pandemic, figures from data firm CB Insight released on Friday show. While the investment total is up 14% from 2019, the number of deals is down 9% to 6,022. And so-called mega-rounds, deals that are $100 million or higher also hit a record amount and number with $63 billion raised in 318 deals. “What we’re seeing is a ‘rich get richer’ phenomenon where successful, high momentum technology companies are vacuuming up most of the financing,” CB Insights chief executive Anand Sanwal told Reuters by email. He said that data showed a big drop in a very early stage investment called seed stage, and expected some of those companies that stand out to see “insatiable investor demand” with fewer competitors for the money. The trend of big investments doesn’t look like it will slow in 2021 as there is a lot of capital chasing investments, say some venture capitalists.
Brief: Commerzbank AG will take an additional 2.1 billion-euro ($2.6 billion) hit in the fourth quarter as the pandemic weighs on interest rates and drives up bad loans, pushing the lender deeper into the red as it readies a new turnaround plan. Commerzbank will write off 1.5 billion euros in goodwill on its books and set aside about 630 million euros for bad loans to reflect the impact of a second lockdown, according to a statement Friday. That’s on top of a 610 million-euro charge the Frankfurt-based bank announced last month to cover job cuts. Chief Executive Officer Manfred Knof, who took over this month, is preparing to unveil a radical restructuring after shareholders pushed out the previous leadership amid frustration with the slow pace of change. Knof and new Supervisory Board Chairman Hans-Joerg Vetter are now working on a more ambitious cost-cutting plan with about 10,000 jobs on the line, Bloomberg has reported. “After this balance sheet clean-up, we are well prepared for the road ahead of us,” Knof said in the statement. “Our goal is to make the bank more profitable in the long term.” Commerzbank shares fell as much as 4.1% after the announcement and were trading 3.1% lower at 12:56 p.m. in Frankfurt. They have fallen about 5% in the past 12 months.
Brief: The COVID-19 pandemic has changed the way hedge funds do business, from raising money to investing and more. Some trends are here to stay, while others will change as the pandemic continues and eventually comes to an end. Craig Bergstrom, chief investment officer at Corbin Capital Partners, said in an email that active management had returned in 2020, exceptionally fundamental stock selection. He said results across the industry are mixed, but dispersion has meant that careful portfolio construction has been precious. "Broad hedge fund performance has certainly been disappointing in recent years," Bergstrom said. "Very low interest rates are a big part of that problem, but clearly another key factor is fund fees, which have come down, but not fast enough, which means they are consuming too much of the gross returns." He adds that it's not fair to compare hedge fund returns to stock market returns because it is nearly three times as volatile. However, in recent months, investment managers have finally started to have an easier time generating alpha. "The right hedge fund portfolio, though, has been able to deliver solid alpha, and attractive risk adjusted returns, which we think remains very attractive in a world where prospective fixed income returns are very low," Bergstrom said.
Brief: The financial regulator has warned 4,000 firms in the financial services sector are at "heightened risk" of failing as a result of the coronavirus crisis. In its most detailed financial snapshot of the market published since the pandemic began the Financial Conduct Authority said almost a third of these firms could potentially cause harm to consumers should they collapse. Within the retail investment market, which includes advisers, self-invested personal pension operators and platforms, 3,414 firms predicted the crisis would have a negative impact on income. The advice sector had one of the highest proportion of firms expecting a drop in income, equating to 66 per cent of the 5,159 firms which responded to the FCA's data request. But the impact on income was largely predicted to be minimal, with 2,973 of the firms in the retail investment market which predicted a drop estimating the reduction would sit between 1 and 25 per cent and only 26 firms saying income might plummet by more than 76 per cent. The FCA sent its financial resilience survey to 13,000 firms in the wider financial services in June and to a further 10,000 firms in August.
Brief: Brevan Howard Asset Management has recorded its best year since the hedge fund firm began investing nearly two decades ago. The main fund at billionaire Alan Howard’s firm was up 27.4% last year, the most since 2003, according to an investor letter seen by Bloomberg. That compares with a 3.4% average return for macro hedge funds through November, according to data compiled by Bloomberg. The Brevan Howard Master Fund managed $4.3 billion at the end of November. The biggest boost came in March thanks to gains from interest-rate bets, option trading in equity and credit indexes and from oil, according to an investor letter seen by Bloomberg. A spokesman for the Jersey-based investment firm declined to comment. Brevan Howard is making up lost ground after years of mediocre returns shrunk its assets by more than 80% from a 2013 peak to about $6.4 billion two years ago. Clients are now returning, lured by improved performance and as rising volatility creates money-making opportunities for macro hedge funds. Its assets rose to about $11.4 billion at the end of November. The firm’s rebound was also fueled by a more than 100% gain in a hedge fund earlier last year that Howard personally manages. Full-year returns for the AH Master Fund, which invests money for the main hedge fund, the billionaire’s own cash and for a few external investors, are not known.
Brief: Marathon Asset Management ("Marathon"), a leading global credit investment manager, today announced the final close for its Marathon Distressed Credit Fund, which was oversubscribed with approximately $2.5 billion in commitments. The fund will invest in a wide range of situations by providing capital solutions that allow companies to grow or reposition their businesses, including stressed and distressed companies in transition. The opportunities it will pursue include restructurings, debtor in possession financings, and exit financings where Marathon can bring to bear its differentiated expertise, experience and resources. "While the broader market has recovered, the K-shaped recovery has resulted in a disparate impact that requires tailored capital solutions to help companies across industries recover from the 2020 cyclical decline," said Bruce Richards, Chairman & Chief Executive Officer of Marathon. "Companies that are well positioned for future growth may need a thoughtful and sophisticated capital partner to navigate the downturn, even in the event it may require a consensual restructuring." Louis Hanover, Chief Investment Officer of Marathon, said: "Following a prolonged economic expansion marked by mispriced risk and heavily levered capital structures with weak documentation we are presented with an optimal investment environment to prudently and opportunistically deploy capital."
Brief: Canada’s economy and financial markets are moving in opposite directions as investors drive up asset prices in response to cheap-money policies. That trend will continue in the months ahead, according to Manulife’s Frances Donald. The country is grappling with a fresh set of lockdowns as governments try to quell a wave of Covid-19 infections. Quebec, the second-largest provincial economy, is likely to unveil new restrictions Wednesday that will shut down the construction sector. Less than 1% of the population has been vaccinated so far, putting Canada behind the U.S. and U.K. Meanwhile, the S&P/TSX Composite Index is near a record after rising about 8% in three months. Economically-sensitive energy and industrial stocks have surged, while bank shares are up 14% since Oct 5.While vaccines have arrived, “the economic benefits are probably not solved before the second half of the year,” Donald, global chief economist and head of macro strategy at Manulife Investment Management, said by phone. “In 2021, my suspicion is the disconnect between the economy and markets continues.” Economists are still predicting a strong recovery in the second half of the year, as vaccines allow for a rebound in travel, entertainment and other sectors that have been crushed by the pandemic. Even so, Donald doesn’t see a full recovery until 2022. That’s because there will be structural scarring to the economy from business closures, job losses and new ways of working.
Brief: The majority of family offices will not significantly alter their asset allocation strategies in 2021 despite the likely market turbulence and challenging economic conditions that lie ahead. This is the chief finding from a survey of family offices conducted by BlackRock. Of the 185 offices that were canvassed, only 23% said that they plan to make material changes to their asset allocations. BlackRock ascribes this to the long-term investment outlook adopted by most family offices. However, the asset manager also warned against viewing the events of 2020 as simply short-term volatility and ignoring the likely long-term impacts. “While we recognise Family Offices have a long-term investment horizon, we believe that the nature of the crisis will have a long lasting impact on economic growth, interest rates and corporate fundamentals leading to structural shifts across asset classes,” said Sheryl Needham, managing director, head of Emea family offices at BlackRock. “It’s important that even long-term investors consider the resilience of their portfolios by reviewing their strategic asset allocation, to ensure they are positioned to navigate current markets, protect wealth and to harness opportunities through the recovery.”
Brief: Some investors including William Ackman and Glenn Welling, who push corporations to perform better, posted record-breaking returns in 2020 when activist investors generally backed off demands during a year marked by wild and unexpected business conditions. Ackman’s publicly traded Pershing Square Holdings fund rose 70.2%, marking the best-ever return at his 16-year-old firm Pershing Square Capital Management and one of the best in the hedge fund industry. In 2019, the fund rose 58%, also a record. Welling’s Engaged Capital, founded in 2012 and known for pushing companies like Medifast Inc and Hain Celestial Group Inc to make changes, returned 51%. That tops the firm’s previous record return set in 2019 with a 34% gain. And Andrew Left, who has targeted companies he thinks are over-valued through his work at Citron Research, told investors that his hedge fund returned 155% in 2020, after gaining 43% in 2019, the fund’s first year in business. The gains reflect a late-year rebound among activists - fueled partly by strong stock market gains - with the average fund up 6.7% in the first 11 months of 2020 after a 27% drop in the first quarter, Hedge Fund Research data shows. Activist campaigns were down 20% in 2020 from the previous year, Lazard data shows.
Brief: Billionaire activist investor Christopher Hohn’s hedge fund has racked up a 12th straight year of gains, overcoming record losses at the onset of the pandemic. The Children’s Investment Fund made about 14% in 2020 as its concentrated stock portfolio rose amid surging markets, according to people with knowledge of the details. That took the fund’s assets to about $35 billion, a separate person said, asking not to be identified because the information is private. Hohn hasn’t lost money in a year since the last financial crisis. Last year, the fund recovered from losing 19% in March, the most in a month since it started trading in 2004, as the coronavirus roiled global markets. Bets on firms such as Microsoft Corp., Canadian Pacific Railway Ltd. and Charter Communications Inc. contributed to the fund’s 2020 gains. Still, while Hohn outperformed activist hedge funds that were up an average 6.2% through November, he fell short of the 18.4% gain in the S&P 500 Index. A spokesman for the London-based investment firm, which manages about $45 billion, declined to comment on the returns. Hohn is famous for building large stakes in companies and pushing for change to boost their share prices. He runs a long-biased portfolio spread over a small number of stocks, making it susceptible to sharp drops in values. The strategy has worked for his investors over the years, with the fund losing money only in 2008 when it dropped 43%.
Brief : The International Stock Exchange (TISE) listed 831 securities during 2020 against the backdrop of the coronavirus (Covid-19) global pandemic. This is the second highest annual total of new listings since the inception of the Exchange – eclipsed only by a bumper 2018 – and represents a 27 per cent increase on 2019. It means that there was a total of 3,162 securities listed on TISE at the end of December 2020, which is a rise of 6 per cent year on year. Cees Vermaas, CEO of The International Stock Exchange Group, says: “It is really pleasing that our business flows have held up so well this year, despite the impact of Covid-19 across the world. What we have seen is that while Covid-19 may have disrupted or slowed some market activity, it has also generated other new listings business as companies refinance, whether opportunistically or essentially, in the face of the changing economic conditions.” During 2020, TISE has maintained its position as a leader in the European high yield bond market. There were 124 high yield securities issued by companies such as telecommunications firms Altice and eircom, luxury car manufacturer Aston Martin, LEGOLAND owners Merlin Entertainments, transport operator Stena and US digital content platform and producer Netflix, which were listed on TISE during the year. This also included three of the largest 10 transactions in the third quarter of the year: the largest being the Liberty Global and Telefónica financing vehicle for the merger of Virgin Media and O2; the UK’s largest pub chain, Stonegate Pubs; and debut issuer First Quantum Minerals. Overall, the total number of high yield bonds listed on TISE reached 291 at the end of December 2020.
Brief: As a growing number of Wall Street firms plan to move New York employees to cheaper U.S. hubs and even let rainmakers work from faraway homes, BlackRock Inc. is planting its feet firmly in Manhattan. Executives at the world’s largest asset manager have privately urged employees not to get too attached to doing their jobs remotely full-time, while it awaits a move to a new office tower in New York, where it’s based. With the pandemic surging across the U.S., the company extended the work-from-home period through this year’s first quarter. But that won’t be the new normal. “The office will remain our primary work location longer-term,” senior executives including Chief Operating Officer Rob Goldstein wrote in one memo sent to staff in November. “Employees will have increased flexibility to work remotely part-time, but full-time remote work will be done very selectively and with approval.” Returning to offices on a larger scale will take time, they wrote, and the company is working on making regular Covid-19 testing available to “as many people as practicable.” BlackRock still plans to move its New York staff into 50 Hudson Yards, a new skyscraper on Manhattan’s west side, in late 2022 or early 2023, a spokesman confirmed this week. The relocation, first announced in 2016, came with a lucrative incentive: BlackRock secured $25 million in state tax credits to create hundreds of new jobs and keep staff there.
Brief: Once believers, professional investors are getting antsy about stock bets tied to a smooth reopening of the American economy. Hedge funds that make both bullish and bearish equity bets spent Monday -- the worst opening day in five years -- leaning back into what has come to be known as the stay-at-home trade, buying lots of online tech companies optimized for lockdown commerce. Their preferences showed a shift away from the travel-leisure-retail group they’d favored in the second half of 2020, data compiled by Goldman Sachs’s prime brokerage show. It happened as virus angst mounted, with infections surging and vaccine distribution short of hopes. “When we think of what could possibly derail these lofty expectations of a second-half economic boom, it has to do with the race between the vaccines and the virus,” said David Rosenberg, founder of Rosenberg Research & Associates Inc. “Nobody said it’s not a big bull market. It’s just one premised on cheap money rather than solid fundamentals. Hence the speculative fervor.” When the S&P 500 dropped 1.5% Monday, hedge-fund clients tracked by Goldman reduced short positions in companies that cater to at-home demand, such as internet and software shares, with a basket of such stocks seeing the biggest net buying in three weeks. Meanwhile, reopening companies, like airlines and cruise operators, experienced the largest net selling in two weeks.
Brief: U.S. private companies shed workers in December for the first time in eight months as out-of-control COVID-19 infections unleashed a fresh wave of business restrictions, setting the tone for what is likely to be a brutal winter for the economy. The ADP National Employment Report on Wednesday showed job losses across all industries last month as the coronavirus outbreak kept many consumers and workers at home. While the report underscored the magnitude of the crisis, the economy was unlikely to slide back into recession, thanks to additional fiscal stimulus approved in late December. The ADP report added to slumping consumer spending and persistently high layoffs in suggesting that the economy lost significant momentum at the end of 2020. “America’s great jobs machine ran into a wall of rising coronavirus cases and state lockdowns which puts the entire economic recovery from recession at risk,” said Chris Rupkey, chief economist at MUFG in New York. “The heart of every recession is job losses and right now the decline in jobs at year end is hinting that the dark days of the labor market last spring have returned.” Private payrolls decreased by 123,000 jobs last month, the first decline since April, after increasing 304,000 in November. Economists polled by Reuters had forecast private payrolls would rise by 88,000 in December.
Brief: Family offices are heading back to hedge funds. More than a third of 185 investment firms for wealthy clans plan to boost allocations amid the economic upheaval caused by the Covid-19 pandemic, according to survey released Wednesday by BlackRock Inc. and Juniper Place, a London-based firm that helps asset managers raise capital. Family offices and other investors soured on hedge funds in recent years, bemoaning high fees and lackluster returns. But the health crisis has given some of those managers a boost, particularly stock-pickers who benefited from aggressive bets on technology stocks and copious economic stimulus that drove equities to new heights. “Recent market turmoil and the expectation of sustained volatility in the medium term has re-invigorated hedge fund appeal,” New York-based BlackRock and Juniper Place said in their report. Family offices have proliferated in recent years along with a surge in personal wealth derived from tech, finance and real estate. Some of the largest include Bill Gates’s Cascade Investment and Sergey Brin’s Bayshore Global Management. There are now more than 10,000 single-family offices globally, according to accounting firm EY. Single family offices, which have just one client, had average assets of $802 million, according to research published in 2019 by Campden Wealth and UBS Group AG. More than three-quarters of family offices said they preferred long-short equity hedge funds, according to research BlackRock conducted in July and August. Such funds were the best performing broad strategy last year, gaining about 4% through November on an asset-weighted basis, according to data from Hedge Fund Research Inc.
Brief: "The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble,” says GMO’s Jeremy Grantham. “Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history,” wrote the investor. He compares this period the South Sea bubble, the 1929 market crash, and the dot-com boom of 2000. “These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part,” he wrote. He warns the bubble will burst in due time, “no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios.” The markets had a wild ride in 2020, briefly going into a bear market after COVID-19 lockdowns were set in place. Soon after they recovered as the Federal Reserve made unprecedented moves to support the economy, and Congress passed a stimulus bill. “I am not at all surprised that since the summer the market has advanced at an accelerating rate and with increasing speculative excesses,” wrote Grantham.
Brief : Goldman Sachs Group Inc. Chief Executive Officer David Solomon said he expects to have all his employees back at their offices by the end of the year as the vaccine rollout ramps up. “The big focus right now is we’ve got to get people vaccinated -- we’ve got to get to the other side,” Solomon said in a Bloomberg Television interview Tuesday. “I certainly would expect a lot of Goldman Sachs employees back in full by the end of the year. We will get through this, and I’m really hopeful that over the course of the next six months we see a real improvement.” The Goldman CEO said he’s encouraged by the amount of vaccine production, but flexible, efficient ways need to be found to get shots distributed, which he believes will be the biggest challenge facing President-elect Joe Biden’s administration. In addition to government actions, the private sector can play a role in speeding up vaccinations, he said. “There’s still work to be done,” he said. “And once we deal with the vaccine and the virus, and people feel safe, we’re still going to have to deal with the economic consequence of the shutdowns and the impact on our economy that this pandemic’s had.”
Brief: The world’s largest asset manager, BlackRock, has predicted that the “revolution” in monetary and fiscal policy spurred by the Covid-19 pandemic will dampen government bond real yields in 2021. The asset manager favours inflation-linked bonds, as well as risk assets such as equities and high-yield credit. Central banks across the world responded to the coronavirus crisis last spring by lowering interest rates and buying bonds, totalling 190 rate cuts and USD1.3 billion spent every hour since March 2020 on asset purchases. Interest rates are expected to enter an era of “lower for longer”, despite the potential for rising inflation as vaccination programmes are rolled out and the global economy continues its recovery in 2021. BlackRock Investment Institute writes in a recent market note: “A key takeaway is how swiftly macro policies can evolve and the lasting impact this can have on market dynamics. The policy revolution that started in 2020 is still a key driver of our investment views for this year.” The Federal Reserve has already outlined plans to allow US inflation to exceed the 2 per cent target temporarily, without hiking rates, in a new monetary policy framework.
Brief: No one in the investment world appears to have mastered the tumultuous pandemic year as well as Bill Ackman, who banked more than $1 billion in 2020. Ackman’s billion-dollar pay day is based on the gains of the shares he owns of Pershing Square Holdings — his publicly traded hedge fund — as well as estimates of performance fees and a few private investments. The 54-year-old hedge fund manager declined to comment on his spectacular year, saying he did not want to “gloat.” “Happy New Year,” he added, on the record. Pershing Square’s publicly-traded fund, now its largest, gained a net 70.2 percent in 2020, a record for the firm and multiples of the returns of the broader market and other hedge fund legends, many of whom nursed steep losses until markets began to recover from their March swoon. Ackman owns 45 million shares, or 23 percent, of that fund, earning him $720 million on the gain in the stock alone. It gained 86 percent, including dividends, for the year. But he's been uncharacteristically shy about his winnings. “It’s hard to talk about success when a lot of people are suffering, and many more have died,” Ackman told investors in a recent call.
Brief: Hedge funds increased bets against major gold miners, filings reviewed by Reuters showed, as COVID-19 vaccines weakened expectations for the yellow metal after a year of record gains. Gold prices have dipped from last year’s record highs above US$2,000 per ounce as vaccines deployed against the coronavirus encouraged investment in assets that perform well during periods of economic growth. “While we are by no means out of the woods in our view, the light at the end of the tunnel means that gold markets should begin to see an unwind of the trends that became quite exaggerated over the course of 2020,” Royal Bank of Canada analysts said last month. The bank cut its 2021 forecast for gold to US$1,810 per ounce from US$1,893. Short trades as a percentage of total traded volume for Barrick Gold rose to 24.8 per cent for the second half of last month, from approximately 14.9 per cent for the first half of December, according to filings reviewed by Reuters. Newmont Corp. saw an increase to 11.4 per cent, from 8.8 per cent, over the same period, while trades in Kinross Gold rose to 20.6 per cent, from 18.2 per cent, according to the data.
Brief: Testing financial conditions during 2020 have added to the pressure on Australia’s superannuation industry to deliver better investment outcomes and greater cost efficiency, according to Funds Global Asia’s 2020 Australia survey conducted in partnership with Calastone. Respondents predict that this will accelerate mergers between superannuation funds, while placing fresh demands on fund providers to offer wider product choice to scheme members. The Australian pension fund, or “superannuation”, sector, has been under scrutiny from financial regulators over the past four years as part of a far-reaching review of pensions and wealth management provision. The Australian Royal Commission on Misconduct in the Banking, Superannuation and Financial Services was established in 2017 to investigate misconduct and poor standards in the financial services industry. Publishing its findings in February 2019, the Commission identified “cultural failings” in the superannuation, banking and wealth management sectors and highlighted a need to reform governance, fee structures and remuneration policies which often worked to the “financial detriment” of scheme members.
Brief: Hedge funds, which use leverage and employ more aggressive, often riskier strategies than other investors, believe many previously undesirable sectors, ranging from energy to retail, will rebound in 2021. Accounting for roughly $3 trillion in assets, hedge funds showed resilience in 2020, with many outperforming the market, according to investors. “We think 2021 is going to be a really positive year for the markets,” said Jason Donville, president and CEO at Toronto-based hedge fund Donville Kent Asset Management. He forecasts an explosion of pent-up demand for travel and leisure producing a period of “super growth.” “I think it will take a little while for the vaccines to roll out and then somewhere around March, April, May, you’re going to get a confluence of the vaccines getting to a certain critical mass... and infection rates dropping.” For 2020 as a whole, the S&P 500 unofficially rose 16.26%, a stunning rally from a bear market that kicked off when the pandemic spread rapidly earlier in the year. “What I would say about 2021 is it looks like it’s going to be a year of recovery,” said Robert Sears, chief investment officer at UK-based Capital Generation Partners, which invests in hedge funds globally. “That’s the consensus view.”
Brief : Eighty three per cent of institutional investors believe that a global financial crisis is a possibility, with 60 per cent expecting the next severe crisis to occur in the next one-to-three years, according to Block-Builders.net. A new infographic - https://block-builders.net/crash-alert-83-of-major-investors-believe-gl… - highlights that around 80 per cent of major investors believe that markets have not yet sufficiently priced in the long-term risks posed by the Corona crisis, while more than half see the advantage of a defensively oriented portfolio. Institutional investors remain largely unanimous in their view that, despite all the risks, securities from the Asian region have great growth potential. One of the reasons for this is the fact that countries such as China have got a better grip on the pandemic and their economies are now correspondingly growing much faster. Meanwhile, the scars left by the pandemic on business owners' coffers are becoming ever clearer. The situation is most critical in the case of the hospitality industry, where 19 per cent of businesses report having only 4 weeks of cash reserves. Across all sectors, 11 per cent of entrepreneurs say they only have reserves for just under 4 weeks. "Despite all the risks, many stocks are still trading at all-time highs," says Block-Builders analyst Raphael Lulay. "Whether we are already in the midst of a speculative bubble remains to be seen. Many market participants continue to see the stock market as almost without alternative".
Brief: Airlines say a slew of questions remain about the federal government's decision to require passengers returning to Canada to show negative results on COVID-19 tests taken abroad. Transport Minister Marc Garneau announced Thursday that air travellers overseas will have to present proof of a negative molecular test — known as a PCR test, conducted with a nasal swab — that was taken within 72 hours of departure, unless the testing is unavailable in that country. National Airlines Council of Canada chief executive Mike McNaney says the Transport Department has yet to provide a list of foreign agencies whose tests are considered acceptable or to establish how airline employees should determine whether a test document is valid. He says the new rule, which mandates a 14-day quarantine in Canada regardless of the test result, will cause "confusion" and "frustration" for carriers and passengers alike. Air Transat vice-president Christophe Hennebelle says Ottawa announced the requirement, which takes effect this Thursday, "out of the blue" without any prior consultation or notice to industry. Transport Canada did not immediately respond to questions Monday. The rule comes as a devastated airline sector continues to bleed cash following a collapse in demand caused by the pandemic. It also arrives amid growing criticism of the federal sick-leave benefit that pays $500 per week for up to two weeks to Canadians quarantined after touching down from abroad, including after vacations.
Brief: The new year is expected to be a mergers and acquisitions bonanza as deal makers attempt to put the pandemic behind them, meaning attorneys must be on top of trends like the continued use of special purpose acquisition companies and an anticipated increase in distressed M&A. The coronavirus pandemic caused a short-term slowdown in the pace of deal-making last year, but players in the M&A space didn't spend too much time on the sidelines; after initial shockwaves from the virus-induced shutdowns decimated figures for the second quarter, the third and fourth quarters of 2020 were relatively strong. As of Dec. 10, the total value of U.S.-targeted M&A deals announced in the third and fourth quarters totaled $915 billion, far greater than the $378.4 billion overall value of deals across quarters one and two, according to data provided by Dealogic. "There was a slowdown in the first two months post-shutdown," said Susan Oakes, an M&A partner at Holland & Hart LLP. "But once things settled into place, the deals that were on hold restarted, and we've been really extraordinarily busy." In 2021, clients will look to build on the momentum from the end of 2020, but they'll have to do so in a landscape that has been significantly altered because of the once-in-a-century pandemic.
Brief: Big Apple billionaires are booming — with a collective wealth that ballooned by $81 billion to more than $600 billion during the pandemic, according to an analysis. That 16 percent surge among Gotham fat cats since mid-March included big gains for former Mayor Mike Bloomberg, the city’s richest person, whose financial data and media empire shot up by $6.8 billion to some $55 billion, a 14 percent spike, says Americans for Tax Fairness and the Institute for Policy Studies, which crunched the Forbes data. President Trump also did quite well, as his net worth grew by $420 million, jumping from $2.1 billion to $2.5 billion, a 20 percent increase, the data shows. New Mets owner and hedge fund titan Steve Cohen is also among the metro-area billionaires — a class of 141 — who had a great 2020, adding $700 million to his pile, which now totals $14.6 billion, a 5 percent uptick. Buoyed by trillions in federal COVID-relief largesse, Wall Street powerbrokers notched some of the largest gains. Stephen Schwarzman of Blackstone Group fattened his wallet by some $5 billion to about $21 billion, a 34 percent gain. JPMorgan’s Jamie Dimon’s holdings went from $1.2 billion million to $1.5 billion, about a 29 percent increase.
Brief: New hedge fund launches increased to the highest level in five quarters in Q3 2020 on optimism in the US economy, as managers and investors positioned for acceleration of performance gains and capital growth into 2021, according to the latest HFR Market Microstructure Report, released today by HFR. New hedge fund launches increased to an estimated 151 in Q3 2020, the highest quarterly launch total since 2Q19 and exceeded the estimated quarterly liquidations for the first time since 2Q18. Launches in the most recent quarter exceeded the 2Q estimate of 129 new funds, bringing the YTD 2020 launches to 364 through Q3, a period which included a record low number of fund launches in 1Q as the global pandemic began. Fund liquidations fell to an estimated 137 in Q3 2020, the lowest liquidation total since 2Q18 and marked a decline of over 50 percent from the 304 liquidations in Q1 2020. Through Q3 2020, an estimated 619 funds liquidated in 2020, with nearly half of those occurring in Q1 2020. The investable HFRI 500 Fund Weighted Composite Index® advanced +5.1 per cent in November, increasing its YTD return to +6.1 percent and topping the +3.9 per cent YTD gain of the DJIA. The HFRI 500 Equity Hedge Index led strategy performance in November with a +7.5 per cent return, bringing YTD performance to +10.9 per cent. Over the first eleven months of the year, the HFRI 500 EH: Technology Index led all strategy performance with a +23.5 per cent return. In addition to strong performance of the HFRI Indices, the HFR Cryptocurrency Index surged +52 per cent in November, bringing the YTD return to +156 per cent.