Brief : The global economic rebound from the pandemic has picked up speed but remains uneven across countries and faces multiple headwinds. Most worrisome: the lack of vaccines in poorer nations, which could lead to new virus variants and more stop-and-go lockdowns. Those were key points from the latest economic outlook published Monday by the Paris-based Organization for Economic Cooperation and Development. The OECD said that relief and stimulus measures in the more developed world had done much to get the economy through the pandemic recession and back on the path of growth. It forecast global output would rise 5.8%, raising its forecast from 4.8% during its previous outlook in December. This year's predicted rebound follows last year's contraction of 3.5%, and would be the fastest since 1973. The U.S. economy was expected to grow 6.9%, upgraded from a previously forecast 6.5%. The OECD cited wide-ranging support from government spending on additional unemployment benefits, financial assistance for local governments and support for low-income households.
Brief: Even as the coronavirus knocked markets and sent most money managers' assets under management sliding in March and April of 2020, the industry bounced back quickly. In 2020, growth managers came out on top in a big way, U.S. passive strategies continued to pull in assets, outcome-oriented investing fared well as factor investing floundered and ESG continued to grow at an impressive clip. Pensions & Investments annual survey of the largest managers found that global institutional assets under management of nearly 500 money managers grew 10.8% over the year ended Dec. 31 to $54.17 trillion. Overall, total worldwide assets for surveyed managers was $82.45 trillion, up 10.1% for the year and 53% for the five-year period ended Dec. 31. The gains for the year include a dismal first quarter — P&I previously reported that the AUM of 89 of the 100 largest managers declined by 10.4% during the quarter ended March 31, 2020. In terms of the big winners, BlackRock Inc. and Vanguard Group Inc. remained the largest managers in terms of total global AUM, but Fidelity Investments Inc. and State Street Global Advisors swapped positions from the prior year, with Fidelity moving up to third place and SSGA moving down to fourth.
Brief: In April, the Biden administration announced plans to share millions of COVID-19 vaccine doses with the world by the end of June. Five weeks later, nations around the globe are still waiting — with growing impatience — to learn where the vaccines will go and how they will be distributed. To President Joe Biden, the doses represent a modern-day “arsenal of democracy,” serving as the ultimate carrot for America’s partners abroad, but also as a necessary tool for global health, capable of saving millions of lives and returning a semblance of normalcy to friends and foes alike. The central question for Biden: What share of doses should be provided to those who need it most, and how many should be reserved for U.S. partners? The answer, so far at least, appears to be that the administration will provide the bulk of the doses to COVAX, the U.N.-backed global vaccine sharing program meant to meet the needs of lower income countries. While the percentage is not yet finalized, it would mark a substantial — and immediate — boost to the lagging COVAX effort, which to date has shared just 76 million doses with needy countries. The Biden administration is considering reserving about a fourth of the doses for the U.S. to dispense directly to individual nations of its choice.
Brief: India’s economy expanded faster than expected last quarter before a resurgent coronavirus pandemic unleashed a new wave of challenges. Gross domestic product rose 1.6% from a year earlier in the three months ended March, the Statistics Ministry said Monday. That was faster than the 1% median estimate in a Bloomberg survey of economists. The number marks the second straight quarter of expansion following a rare recession, which tipped the economy into an unprecedented 7.3% contraction for the full fiscal year ended March. That compares with a median 7.5% decline estimated in a Bloomberg survey. Stocks jumped 1%, the biggest advance in 10 days, before the GDP numbers were published. The yield on the benchmark 10-year government bond rose two basis points to 6.02%, while the rupee slipped 0.2% ahead of the data. While pent-up demand for everything from mobile phones to cars revived consumption in Asia’s third-largest economy after it reopened last year from one of the strictest lockdowns that lasted more than two months, India’s status now as the global virus hotspot could hurt those prospects. It could temper what will be the fastest pace of growth among major economies this year.
Brief: The pandemic has made cryptocurrencies more attractive, according to a recent survey from the Economist Intelligence Unit . As more people stayed indoors to curb the spread of the virus, they found themselves with more time on their hands, while flush with multiple rounds of stimulus money from the government. Data from the Economist Intelligence Unit showed 46% of people surveyed found the case for owing cryptocurrencies more compelling due to covid-19. "It's a function of continued demand across both retail and institutions," Mathew McDermott, managing director and global head of digital assets at Goldman Sachs, was quoted saying in the study. He added: "Given the huge amount of stimulus we're seeing across countries because of covid-19 and low-interest rates, it's the right place at the right time for companies to offer the ability for people to buy, hold, and use digital currencies and have digital wallets." The first part of the study surveyed 3,053 people in February and March from developed economies - US, UK, France, South Korea, Australia, and Singapore - as well as developing countries including Brazil, Turkey, Vietnam, South Africa, and the Philippines.
Brief: Canadian private equity giant Brookfield Asset Management Inc. is set to buy two properties in and around the City of London, the Times reported. Plantation Place, an 18-story building that houses the offices of Accenture UK Ltd. and Aspen Insurance UK Ltd, is being sold for 635 million pounds ($901 million), and Milton Gate, a glass-fronted office block, for 215 million pounds, according to the Times. The U.K. government’s work-from-home guidance is still in force, which has kept footfall in central London to only a fraction of pre-pandemic levels. That in turn has depressed investment in London offices by 53% in the first four months of 2021, the Times says citing real-estate agent Savills.
Brief : Credit Suisse Group AG is temporarily barring clients from withdrawing all their cash from a fund that invests with Renaissance Technologies after the strategy tanked and investors rushed to exit. The bank has invoked a so-called hold back clause, after assets in the CS Renaissance Alternative Access Fund slumped to about $250 million this month from approximately $700 million at the start of 2020, according to people with knowledge of the matter. While investors will receive 95% of their redemption requests after two months, the remaining 5% is expected to be paid out in January, after the fund’s year-end audit, the people said. The fund lost about 32% last year, in line with the decline in the Renaissance Institutional Diversified Alpha Fund International fund that it invests into, the people said. Renaissance, regarded as one of the most successful quant investing firms in the world, was rocked by billions of dollars in redemptions earlier this year after unprecedented losses in 2020. Three of its funds open to external investors fell by double digits last year. Credit Suisse and Renaissance declined to comment.
Brief: As COVID-19 ravaged the world last year, CEOs’ big pay packages seemed to be under as much threat as everything else.Fortunately for those CEOs, many had boards of directors willing to see the pandemic as an extraordinary event beyond their control. Across the country, boards made changes to the intricate formulas that determine their CEOs’ pay — and other moves — that helped make up for losses created by the crisis. As a result, pay packages rose yet again last year for the CEOs of the biggest companies, even though the pandemic sent the economy to its worst quarter on record and slashed corporate profits around the world. The median pay package for a CEO at an S&P 500 company hit $12.7 million in 2020, according to data analyzed by Equilar for The Associated Press. That means half the CEOs in the survey made more, and half made less. It’s 5% more than the median pay for that same group of CEOs in 2019 and an acceleration from the 4.1% climb in last year’s survey. At Advance Auto Parts, CEO Tom Greco’s pay for 2020 was in line to take a hit because of a mountain of pandemic-related costs. Extended sick-pay benefits and expenses for hand sanitizer and other safety equipment totaling $60 million dragged on two key measurements that help set his performance pay.
Brief: Most of the women running the biggest U.S. companies saw their pay increase last year, even as the pandemic hammered the economy and many of their businesses. Despite those gains, however, the median pay for female chief executives actually fell in 2020. Already a small group, they saw several high-profile women leave their ranks last year. That means changes in pay for only a few helped skew the overall figures, highlighting just how slow diversity has been to catch on in Corporate America’s corner offices. Of the 342 CEOs in the AP’s and Equilar’s compensation survey of S&P 500 companies, only 16 were women. That’s down from 20 a year earlier, as CEOs like IBM’s Virginia Rometty left their posts. The survey includes only CEOs who have served at least two full fiscal years at their companies, in order to avoid the distortions of big sign-on bonuses. The companies must have filed proxy statements between Jan. 1 and April 30. The majority of female CEOs in this year’s survey saw a raise in compensation: 81% of them (13 of 16), versus 60% of all male CEOs in the survey. But Duke Energy CEO Lynn Good saw a nearly 3% decline in compensation to $14.3 million. She’s right in the middle of the pay scale among the survey’s women CEOs, so that helped set the median pay for them last year at $13.6 million. Median means half made more than that level, and half made less.
Brief: Investors poured another +USD12.47 billion into hedge funds in April, bringing year to date (YTD) inflows to +USD28.81 billion, according to the just-released April 2021 eVestment Hedge Fund Asset Flows Report. Overall hedge fund business AUM stood at USD3.525 trillion at the end of April, according to the new report. “There were several strong underlying metrics behind the net inflow number in April,” says eVestment Global Head of Research and report author Peter Laurelli. “While net inflows alone would seem to be a positive sign, that is not always the case. In April, however, the data just looked good.” Laurelli notes there was a high proportion of reporting managers with net inflows (57 per cent) and the proportion of managers who lost large amounts of AUM during the month – 2 per cent or 5 per cent of AUM – was relatively small at just 15 per cent and 7 per cent, respectively. Additionally, the overall volume of net asset movement was relatively low, just 1.9 per cent of AUM. “This means money wasn’t swirling around wildly during the month, but rather it was just a fairly steady allocation period,” he says. Multi-Strategy hedge funds were big asset winners in April, pulling in +USD4.34 billion, bringing YTD inflows to +USD15.55 billion. April marked the sixth month in the last seven these funds have seen positive flow figures.
Brief: Britain and the rest of the world's largest nations are on the verge of agreeing to the biggest global tax reforms for a century, the UK's Daily Mail is reporting today (28 May). An agreement from the G7 group of nations - which also includes the US, Japan and Germany - could be reached as early as 4 June when finance ministers meet in London. The rate of corporation tax in the UK is 19% but this is set to rise to 25% by 2023. The countries are also expected to agree to keep business tax rates above 15%. The deal will force companies to pay tax in the countries where their consumers spend their money, rather than shift them overseas, with some claiming the changes could shift £70bn of tax globally.
Brief: The Covid-19 pandemic impacted every area of our lives, forcing investment professionals to react to ever-changing circumstances. Much has been written about the volatile financial markets and the hectic days of trading over the past 14 months, but now we’re heading into the post-pandemic world. With people across the globe getting vaccinated against this deadly virus, we are wondering, What is the new normal for asset allocators? In particular, how will due diligence evolve? Will it return to its 2019 state — or did the pandemic permanently alter how asset managers get hired? Like everyone else, asset allocators have spent countless hours using Zoom and other videoconferencing tools since the pandemic began. Adapting to the extra screen time proved challenging and definitely caused more than a few impediments to comprehensively completing due diligence. “Pre-pandemic the allocator really drove the meetings,” says Shana Orczyk Sissel, CIO of registered investment adviser Spotlight Asset Group. “In a Zoom setting the manager has much more control in access and creating the image they want.”
Brief : Treasury Secretary Janet Yellen says that the economic recovery is going to be “bumpy” with high inflation readings likely to last through the end of this year. But Yellen insisted that the inflation pressures will be temporary and if they do threaten to become embedded in the economy, the government has the tools to address that threat. In testimony before a House Appropriations subcommittee Thursday, Yellen was asked about a big jump in prices reported last week, which showed consumer price index rising by 4.2% over the past year, the largest 12-month gain since 2008. Yellen said that the April price increase was the result of a number of special factors related to the economy opening back up. She said as she has in the past that the price jump would be temporary but she indicated it would be more than a one-time gain. “I expect it to last, however, for several more months and to see high annual rates of inflation through the end of this year,” Yellen told lawmakers.
Brief: Canada’s biggest banks are signaling that financial issues from the COVID-19 crisis are largely in the rear-view mirror in North America -- and earlier than analysts had expected. After a year of stockpiling record amounts of capital to protect against a wave of loan defaults, Royal Bank of Canada and Toronto-Dominion Bank -- the country’s two largest banks -- reversed course last quarter. Toronto-Dominion on Thursday reported a surprise $377 million (US$312 million) release of provisions for credit losses for its fiscal second quarter, while Royal Bank released $96 million. Analysts had projected both lenders would continue setting aside capital to absorb potentially soured loans. With vaccination campaigns putting economic reopenings in reach in Canada and the U.S., strong housing markets fueling mortgage lending, and surging equity markets supporting capital-markets and wealth-management businesses, Toronto-Dominion and Royal Bank are asserting they have more than enough capital to handle any bumps along the road to recovery. Even after reporting smaller set-asides than analysts expected in the fiscal first quarter, bank executives still struck a cautious tone on their preparations for potential credit losses, leading many analysts to expect reserve releases wouldn’t begin until the second half of the year.
Brief: Invest Europe, an association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, has published its ‘Private Equity at Work’ report which shows that the PE sector is supporting over 10 million workers across the continent and creating over a quarter of a million jobs in sectors that will help feed the recovery from the Covid-19 crisis. A total of 10.2 million people were employed at 23,009 portfolio companies at the end of 2019, ranging from start-ups and SMEs to large multinationals, according to the second edition of Invest Europe’s ground-breaking employment study. That equates to 4.3 per cent of Europe’s active workforce and is on a par with the entire population of Sweden. Private Equity at Work demonstrates private equity’s outsized contribution to European job creation. Companies backed by private equity added 254,157 net new jobs in 2019, about the same as the working population of Tallinn. The figure represents growth of 5.5 per cent on the previous year and far outstrips the average job growth of 0.9 per cent for Europe as a whole. Around half a million people in Europe found new work with private equity backed companies in 2018 and 2019 combined.
Brief: Cerberus Capital Management, demonstrating the rewards of Wall Street’s rush into health care, made a roughly $800 million profit on its investment in struggling Catholic hospitals, records show. The New York private equity firm quadrupled its money over a decade, according to internal documents and a federal filing this month. Co-founded by billionaire Stephen Feinberg, Cerberus executed an unusual exit. It offloaded its remaining interest to doctors who work in its hospital company, rather than pursue an initial public offering or sale to a rival. Cerberus bought Caritas Christi Health Care in 2010, paying $246 million in cash for Massachusetts hospitals that included flagship St. Elizabeth’s Medical Center in Boston. The company that Cerberus created, Steward Health Care, expanded into a major hospital chain as it also became saddled with a heavy debt load. Private equity firms, saying they are bringing corporate efficiency to an outdated industry, struck $288 billion worth of health care deals over the past five years, according to a report by consultant Bain & Co. Such investments have drawn scrutiny from members of Congress, consumer groups and academics, who say the firms’ use of debt puts pressure on medical providers to cut costs and hurts quality.
Brief: Investors are pouring a record amount of money into young companies trying to transform U.S. health care at an accelerating pace. Spurred by the pandemic, private funding for health-care companies has reached new highs every quarter since Covid-19 emerged. Investors steered a record $6.7 billion to U.S. digital health startups in the first three months of 2021, according to venture firm and researcher Rock Health. In 2011, Rock Health tracked $1.1 billion invested in digital health for the entire year. The flood of money is getting attention from new corners. JPMorgan Chase & Co. last week announced a new business with a $250 million investment arm to transform employer health coverage. Young startups have closed giant deals like the $500 million that online pharmacy Ro, founded in 2017, raised in March. And venture-backed health companies are reaching the public markets: Upstart insurer Bright Health Group, founded in 2015, filed for an initial public offering last week. Sustained low interest rates have investors searching for returns in new arenas, pushing money into assets from junk bonds to Dogecoin. Venture capital is no exception -- with funds raising $32.7 billion in the first quarter, on pace to exceed last year’s record, according to data from the PitchBook-NVCA Venture Monitor. All that money has to go somewhere. As the pandemic eases in the U.S., a growing chunk of venture capital has decided that the upheaval spurred by Covid-19 is accelerating shifts already underway in the notoriously inefficient $4 trillion U.S. health-care sector.
Brief: Venture capital is back, better, and younger than ever. Start-ups that survived the pandemic are raising venture financing rounds at valuations well above the period before the coronavirus shut down global economies. At the same time, investors are increasingly placing capital in early-stage deals, according to a new PitchBook report. Although there's a bump in interest in younger companies, venture capital activity is strong for deals in all stages. According to the report, both early- and late-stage venture capital deals experienced growth in pre-money valuations – the value before companies go public or get other kinds of financing. The median and average pre-money valuations for early stage companies hit $40 million and $96.3 million, respectively, in the first quarter. Both are records. For later stage companies, a number of huge deals increased the median and average pre-money valuations to $122.5 million and $1.03 billion, respectively. These were also peaks. Venture capital has had a good run recently, according to multiple third parties looking at different data sets. Returns reached an all-time high in 2020, even as global economies were decimated by the coronavirus pandemic.
Brief : Hedge fund assets under management reached an all-time high of $4.146 trillion at the end of the first quarter of 2021, according to a Preqin report expected to be published Wednesday. Commodity trading advisors, which saw the biggest net redemptions to in the first half of 2020, saw significant improvement in the first quarter of 2021. In fact, CTAs experienced the highest quarterly net inflows of $5.8 billion at the start of 2021. So-called niche strategies followed closely behind, ending the quarter with $5.75 billion of inflows. “We see a bit of a shift towards the top level strategies that didn’t receive the attention in the pre-Covid-19 environment, because risk wasn’t a major factor,” said Sam Monfared, Preqin’s hedge fund expert and author of the report. “It seems like allocators are paying more attention to risk management and putting money into buckets that are there to protect capital.” Event-driven strategies — which experienced the second-most redemptions in the first half of 2020 — also saw improvements in flows in the first quarter. However, the category still ended the three-month period with outflows of $3.9 billion. Macro-strategies experienced a similar trajectory, ending the quarter with outflows of $2.3 billion. Fifty-six percent of marco-strategy funds experienced outflows, the worst performance among all hedge fund strategy categories.
Brief: Private equity firms are snapping up U.K. companies at a rate not seen since before the 2008 financial crisis. Buyout firms have spent $18.3 billion on takeovers of publicly-traded British targets this year, according to data compiled by Bloomberg. At this rate of investment, they will surpass the $27.5 billion of such transactions struck in 2019, which was a post-crisis high, the data show. The tally has been fueled by a surge of take-privates in May, the latest of which came Wednesday when Carlyle Group Inc. said it would buy drugmaker Vectura Group Plc for about 958 million pounds ($1.4 billion) in cash. Already this month, KKR & Co. had agreed to buy infrastructure firm John Laing Group Plc for about 2 billion pounds and Blackstone Group Inc. confirmed a 1.2 billion-pound offer for St. Modwen Properties Plc. Clayton, Dubilier & Rice also struck a deal for UDG Healthcare Plc at 2.6 billion pounds. These deals all came after a brief lull in U.K. take-privates in April. Private equity firms remain flush with record amounts of unspent investor money and continue to come to market to raise new funds. Buyout funds are offering shareholders of their U.K. targets an average 33.2% premium this year, the Bloomberg-compiled data show. That’s the third-highest level of the last 10 years.
Brief: There are clear signs of a forthcoming revival in global dividends following the first quarter of 2021, according to the latest Janus Henderson Global Dividend Index. Compared against pre-pandemic Q1 2020 levels, payouts were only 2.9 per cent lower year-on-year at USD275.8 billion. On an underlying basis, dividends were just 1.7 per cent lower than the same period last year, a far more modest decline than in any of the preceding three quarters, all of which saw double-digit falls. Janus Henderson’s index of dividends ended the quarter at 171.3, its lowest level since 2017, but growth is now likely. For the full year 2021, the stronger first quarter along with a better outlook for the rest of the year have enabled Janus Henderson to upgrade its expectations for global dividends. The new central-case forecast is USD1.36 trillion, up 8.4 per cent year-on-year on a headline basis, equivalent to an underlying rise of 7.3 per cent. This compares to January’s best-case forecast of USD1.32 trillion. Over the four pandemic quarters to date, companies cut dividends worth USD247 billion, equivalent to a 14 per cent year-on-year reduction, wiping out almost four years’ worth of growth.
Brief: Senate Banking Committee Chairman Sherrod Brown ripped Wall Street at a high-profile hearing featuring the top executives at the six largest U.S. banks, saying it’s “past time” for the industry to step up and help struggling workers. Brown, a Ohio Democrat, opened the proceedings Wednesday with a blistering attack on how banks operate, arguing that their business model is “built on short-term profits at the expense of long-term growth for everyone.” He challenged the chief executive officers to “be as good to the American people as the nation has been to you,” noting that taxpayers spent billions to rescue banks during the 2008 financial crisis. When employees get sick or lose their jobs, they “don’t get a taxpayer bailout.” Brown said. “And they all remember that Wall Street did.” The remarks set the tone for what’s expected to be hours of tough questions over issues ranging from workforce diversity to minority lending and executive pay. The hearing is the first time the CEOs have been called before the panel -- and, much to the chagrin of some in the industry, it may also not be the last. Brown’s title for the event: ”Annual Oversight of Wall Street Firms.” Among the CEOS testifying is Citigroup Inc.’s Jane Fraser, the first women to lead one of the U.S.’s biggest banks. Appearing with her are JPMorgan Chase & Co.’s Jamie Dimon, Goldman Sachs Group Inc.’s David Solomon, Bank of America Corp.’s Brian Moynihan, Morgan Stanley’s James Gorman and Wells Fargo & Co.’s Charles Scharf.
Brief: Masked, desk-bound and unable to recognize their colleagues in an elevator, people are starting to return to offices in cities around the world where the pandemic is receding. Many will find their offices transformed, too. In the challenge to make offices both Covid-safe and attractive places to work, firms have been experimenting with working arrangements and space while employees toiled at home. Some gave up floor space to adjust to less rigid schedules, others introduced movable walls to create flexible areas. Many installed safety innovations such as touchless lifts and worked to improve air quality. Lockdowns have provided a “fantastic opportunity to create and recreate a new world for each of us, which may, for each company, be slightly different,” said Neil McLocklin, a Knight Frank LLP partner. Employees of Arcadis NV, a design and engineering consultancy, will be able to choose one of 20 different types of workspace via an app when they move into new offices in the City of London next month. The company’s Building Intelligence app, developed during the pandemic, provides options for meeting spaces, focused work and collaboration, as well as social and wellbeing areas such as a winter garden.
Brief: The U.S. labor market will take about a year and a half to return to full steam after the economic blow from the Covid-19 pandemic, according to Fitch Ratings. Federal stimulus and a gradual reopening of service industries that were hit hardest will help boost demand for workers, Fitch said in a report released Wednesday. Still, analysts led by Chief Economist Brian Coulton don’t expect unemployment levels to reach their natural rate, about 4.3% in Fitch’s view, until the fourth quarter of 2022. Doing so would require the creation of about 7 million jobs. The massive disruption last year will cause some “scarring” because some older workers were permanently discouraged from working, dampening the labor supply. Even so, Fitch sees persistent supply and demand imbalances in the months ahead, limiting upward pressure on wages. “Many office workers in large cities in New York and California successfully worked remotely during the pandemic,” Olu Sonola, a Fitch senior director, said in a statement. “The likelihood that many will continue remote work, in some form, may also prove to be a drag on the pace of labor market recovery in New York and California.”
Brief : When countries went into lockdown to stop transmission of the coronavirus, travel— particularly business travel — took a brutal hit. And though demand for travel is slowly picking up as the country heads into the summer, business travel will still face an excruciating uphill struggle, according to a new Barclays report. "Global business travel — especially long haul — will likely be among the last markets to recover," Barclays economists wrote in a special report on May 25. "Companies were quick to halt international travel as the pandemic struck, and businesses will also be careful when it comes to restarting travel for work purposes." Pre-pandemic, business tourism-related spending accounted for 21.4% of the global travel and tourism industry in 2019, with bigger contributions in countries like Canada, Japan, the United Kingdom, and the U.S., the authors stated. Business tourism contributed to 1.5% of global GDP, and had been growing at an average of 3.6% over the last five years, they added, with the U.S. and China accounting for nearly 45% of all global business travel. But between April and the end of December 2020, global spending on business travel fell 68% and is estimated to have fallen more than 50% year-over-year. (In contrast, in 2001, business travel fell around 11%; in 2009, it fell around 7.5%).
Brief: Markets are paying less attention to geopolitical risks as focus has shifted to inflation prospects and economic restarts, according to BlackRock Investment Institute. The research arm of the world’s largest asset manager said in a note on Monday that its Geopolitical Risk Indicator is currently at a four-year low, signalling below-average attention on geopolitics. “We believe this is justified, as investors appear more focused on the economic restart and inflation outlook and less concerned about geopolitics since the change in US administration,” write BlackRock’s analysts. “Yet it’s worth watching specific risks as flare-ups can catch investors off guard when attention is low.” Risks including US-China strategic competition, Covid-19 resurgence and Gulf tensions have receded in the minds of investors over the past year, write the analysts. BlackRock’s Geopolitical Risk Indicator ranks the top 10 geopolitical risks, based on mentions of different geopolitical risks in brokerage reports and financial news stories, coupled with the firm’s model for the potential impact on global assets from specific geopolitical events. Two of these risks, a global technology decoupling and a major cyber-attack, remain ‘high’, according to BlackRock.
Brief: Emerging-market nations’ struggle to claw out of the pandemic-induced economic crisis can spill over to hurt the developed world, which should be doing all it can to ensure better access to vaccines and a more equitable recovery, the head of the International Monetary Fund said. Poorer nations are faced with the risk of interest rates increasing while their economies aren’t growing, and may find themselves “really strangled” to service debt, especially if it’s dollar-denominated, Managing Director Kristalina Georgieva said Tuesday in a virtual event hosted by the Washington Post. “That is not only danger for them, it is a danger for global supply chains, it’s a danger for investor confidence -- in other words, it has a ricochet impact on advanced economies,” she said. “Closing our eyes to this divergence can harm not only those countries and their people, which is bad enough, but it can harm the global recovery and it can harm investor sentiment in a way that we see to be significant and requiring very close attention.” Measures taken to stimulate the U.S. economy are, on balance, translating into “good news” for other countries because of the spillover effect of demand, the IMF chief said.
Brief: The number of acquisitions made by private equity backed businesses in the UK hit record levels in the first quarter of 2021, with 168 transactions completed in just three months, according to Rickitt Mitchell’s Buy and Build Barometer. The latest analysis from the corporate finance firm, conducted in partnership with Experian Market iQ, reveals an 85 per cent rise in the figures seen in the corresponding quarter last year. Q1 2020 saw 91 deals completed, prior to the first Covid-19 lockdown, with the latest figures nearly triple the 57 deals in Q1 2019. On a local level, the majority of regions saw a significant boom in activity. The South West saw the highest number of transactions, with 18 deals completed in the first quarter. This was followed closely by London and the East of England (both 17), the South East (16), with the North West the first of the Northern regions with 11 bolt-on deals in this period. This was also the third successive quarter that transactions hit triple figures, with the GBP980 million value in Q1 2021 also the highest levels for a quarter since the end of 2018.
Brief: Whistleblowing reports to the FCA dropped by 9 per cent between 2019 and 2020, likely because the majority of the UK’s workforce left the office and operated remotely, according to new research from Kroll, a provider of services and digital products related to governance, risk and transparency. Data obtained by Kroll from the FCA under Freedom of Information Act shows that there were 1,073 whistleblower reports to the FCA last year, down from 1,179 in 2019. Anonymous reports experienced a larger drop of 29 per cent, with just 206 reports compared to 291 in 2019. This is the first year-on-year fall since 2016, with steady growth in reports between then and 2019. Last year brought significant disruption to working patterns across the world, and the majority of UK financial services teams worked from home for most of 2020. It is likely that home working also increased isolation and limited accidental discovery of questionable and illicit business practices.
Brief: Even as India is attracting all the global attention for the worst virus outbreak, the pandemic has done little to dent the confidence of overseas investors who are betting on a strong rebound. BlackRock Inc. plans to use any weakness in the rupee to add to a modest long position while GW&K Investment Management LLC is boosting its stock holdings following a recent selloff. Invesco Hong Kong Ltd. and Lombard Odier favor debt linked to India’s sustainable investing and renewable energy sectors. Portfolio managers are attempting to navigate India’s pandemic by focusing on the nation’s long-term growth prospects, with consumption expected to drive a recovery once the virus crisis passes. While the outbreak has fueled the world’s worst health crisis, limited stock outflows and a rebound in the currency attest to investors’ confidence in the South Asian economy. “Economic growth will be tempered by the second wave in 2021, but growth will be strong this year and the long-term outlook is quite positive,” said Tom Masi and Nuno Fernandes, co-portfolio managers at GW&K Investment Management. “Short-term investors will be compelled to step aside, but long-term oriented investors understand the opportunity.”
Brief : The increased frequency of client communications during the pandemic has been a “game-changer” for the hedge fund manager-allocator dynamic, according to speakers on the fundraising and investor relations panel at this year’s hedgeweekLIVE Technology Summit. The discussion explored how investor relations and fundraising has been reshaped by the Covid-19 pandemic, and weighed up how the past 15 months of virtual networking may have permanently altered client communications, capital introduction, investor appetite and more. Greg Zaffiro, partner and head of IR and marketing at Electron Capital, a global long/short equity manager which manages more than USD2 billion and focuses on mainly on public utilities, said the frequency of investor updates has been a seismic shift. “It’s much more than just your quarterly update, or even monthly update,” Zaffiro observed, adding the change is underpinned by a greater degree of transparency which was boosted by an early switch from dial-in telephone calls to video conferencing. He believes that move has empowered investors to more closely probe managers on portfolio decisions and opportunity sets. “That sort of feedback has really never been omnipresent as it is today,” he added. “It’s been a game-changer in terms of the level of transparency.”
Brief: The Group of Seven nations will next month discuss ways to recognize Covid-19 vaccination certifications internationally, according to a person familiar with the matter. The group of major economies aims to support the creation of a global framework for mutual recognition of documents showing proof of inoculation, said the person, who asked not to be identified. Such an endorsement, if it leads to the creation of concrete measures, would ease the revival of global travel as more people get the coronavirus jab. It would be especially welcomed by the airline and tourism industries, among the hardest hit by the pandemic. The European Union announced this week that it will soon allow quarantine-free travel to the bloc for vaccinated visitors. The move hasn’t been matched by other G-7 members, with the U.S. yet to loosen rules for European visitors. The U.K. requires travelers from the vast majority of the EU to quarantine and is advising against travel to several nations. The EU is also in the final stages of approving a framework for member states and their vaccination certificates. As part of a declaration that G-7 health ministers will adopt when they meet in Oxford in early June, the group is expected to set out the need for multilateral collaboration on an inter-operable, standards-based solution that can be used internationally to verify vaccinations.
Brief: Wealthy investors and highly-skilled workers are very much on New Zealand's radar as it outlined this week a post Covid-19 immigration plan to reduce the economy's dependence on low wage migrants. The Government's economic development minister Stuart Nash said the new border exceptions would allow more than 200 wealthy international investors to come to New Zealand over the next 12 months, the New Zealand Herald reported. In a speech about the Government's intentions for immigration policy, Nash said that it would include making it harder for employers to take on workers from overseas, other than in areas of genuine skills shortages. Chris Moorcroft, of law firm Harbottle & Lewis said in a briefing note that the speech outlining plans to actively seek to court wealthy investor through reforms to its immigration rules, was "light on detail but setting out a clear direction of travel". "They are not alone. In the UK, the non-dom regime and investor regime look to be more secure than for many years. The Italian and Portuguese regimes are now firmly bedded in and attracting the wealthy in greater numbers. 'Golden visa' schemes exist across the globe and continue to thrive."
Brief: Canada Pension Plan Investment Board is bullish on U.S. consumer credit and sees good opportunities in emerging markets, despite the devastating toll the Covid-19 pandemic has taken on leading countries such as Brazil and India. U.S. households are flush with savings and central banks will continue to prime the economy with easy money for a while, new Chief Executive Officer John Graham said in an interview. That’s positive for returns in consumer-oriented investments, he said. “A year ago there was a lot of uncertainty with high unemployment, but with the stimulus that came in the U.S., consumer credit performed very well. Our investment in home improvement loans really exceeded our expectations,” Graham said Thursday. CPPIB returned 20.4% for the year ended March 31, its best showing since it was created in the late 1990s, helped by base effects: Global equity markets were just starting their climb back from the crash of early 2020 as the new fiscal year began. The fund’s holdings of Canadian stocks advanced 40.8% for the year and emerging markets stocks gained 34%, the fund said in a statement. Private-equity investments outside of Canada returned well over 30%.
Brief: Foreigners opening a company in the UAE will no longer need an Emirati shareholder or agent under changes to the UAE company law that will take effect on June 1, said the state news agency WAM. "The amended Business Companies Law aims to boost the country's competitive advantage and is part of the UAE government's efforts to facilitate business," said Economy Minister Abdulla bin Touq Al Marri. The UAE announced the law allowing 100% foreign ownership of companies last year, one of several measures to attract investment and foreigners to the Gulf state. A previous foreign investment law in 2018 allowed foreigners to own up to 100% of some companies, and foreigners could already own up to 100% of those registered in designated business parks known as "free zones."
Brief: To say investing is tricky during the pandemic would be an understatement. And so it has proved for many hedge-fund managers since last year’s Sohn Investment Conference in Hong Kong. Among those who made investment calls at the September event, Quintessential Capital Management’s Gabriel Grego was a winner after vouching for Japan’s Sun Corp., which owns an Israeli cybersecurity firm that’s going public via one of the trends of the times: a SPAC. Asia Research & Capital Management’s Alp Ercil cashed in on a rally in lower-rated investment-grade bonds issued by U.S. energy companies that were sold off in the March 2020 rout. Meanwhile, some bearish bets have flopped, as stock markets continue to rise on the back of unprecedented global economic stimulus. Anatole Investment Management’s George Yang made a short call against Zara parent Inditex SA, only to see the stock soar. Egerton Capital’s Jay Huck expected similar declines from Arista Networks Inc., which benefited from the migration to cloud computing.
Brief : Private equity is making a comeback from its pandemic lows — and firms have big plans to capitalize on the booming exit environment. In the second quarter of 2020, private equity exit activity dropped to decade lows, according to the 2021 global private equity divestment study from Ernst & Young. Then, it sprung back, as private equity leaders saw opportunities to produce stronger valuations. From March 2020 to March 2021, PE exits jumped nearly 40 percent to $600 billion, higher than it had been since before 2010. Firms hope to ride this wave of increased capital access and maximize deal valuations along the way. In the next 18 to 24 months, about half of surveyed PE executives said they are planning exits to public markets through initial public offerings or special-purpose acquisition companies. “I think there are a few dynamics here,” said Pete Witte, EY’s lead analyst for global private equity. “You’ve still got your traditional trade buyers; you’ve got secondaries where PE firms have all this dry powder that they’re looking to put to work. Those buyers are still out there, and they’re still very active. The IPO markets have clearly rebounded, and now you’ve got SPAC buyers in the mix as well.”
Brief: Many fund managers are to recruit chief data officers after the Covid-19 pandemic caused firms to focus on fixing data problems, research suggests. According to a study by Alpha FMC, a consultancy, 19% of firms surveyed will make the chief data appointments and the research also found that just over half will adopt enterprise data models. Alpha’s report, ‘2021 Data Strategy & Operating Models’, found that the majority of firms are focused on implementing firm-wide data initiatives in recognition of a lack of enterprise-wide data management in many firms. As many as 68% of respondents said that data governance remained siloed by function within their companies. But the focus on firm-wide data projects is likely to come as the expense of experimenting with alternative data. The study found that alternative data usage had fallen since last year with social media and the web being the only sources still commonly used. The survey also revealed some familiar frustrations among asset managers about data capture from third-party sources. The rising cost of market data was one, and the lack of consistency among ESG data providers was cited by 80% of respondents.
Brief: When the Gherkin tower opened 17 years ago, its skyline-defining silhouette heralded a new era in the low-rise City of London. Now, a spate of new planned skyscrapers threaten to erase it from view and from relevance. As one of the Gherkin’s main residents weighs a move, even iconic buildings risk struggling to keep or replace tenants in London’s premier financial district. While the pandemic is emptying City offices at the fastest pace in more than a decade, it hasn’t slowed the coming wave of towers. That carries a warning for landlords: if there is a return to the office, it won’t be to drab buildings that only feature endless rows of desks. It all augurs another period of change for the City, a geographical area of just over one square mile with a 2,000-year track record of reinvention. For property firms that have seen the district as a cash cow for decades, the challenge is daunting: how to refill, revamp or sell hundreds of aging offices vulnerable to the twin blows of Brexit and the pandemic. In a financial hub that draws more international capital than any other, the fate of the older buildings could hit the fortunes of some of the world’s biggest real-estate investors, from China Investment Corp. to Norway’s sovereign wealth fund and Malaysia’s biggest pension fund.
Brief: Mizuho Financial Group Inc. is requiring that staff who choose to return to its U.S. offices are vaccinated, according to a spokesman for the Japanese lender. Employees can return to the office through August on a voluntary basis and those who do must have had shots, subject to some limited exceptions, spokesman Jim Gorman said in an emailed statement. Protocols after August are still under evaluation, according to Gorman. Wall Street is seeking to bring staff back as vaccines help the U.S. recover from a pandemic that forced most employees to work from home. JPMorgan Chase & Co., which mandated a return to office for its entire U.S. workforce by early July on a rotational schedule, said in April that it wouldn’t require returning staff be vaccinated, though it strongly encouraged employees to get the shots. Blackstone Group Inc. earlier this month asked U.S. investment professionals to return to the office full-time on June 7 provided they are fully vaccinated. Mizuho’s U.S. offices include locations in New York, Los Angeles, Houston, Dallas, Chicago, Boston and Atlanta, according to its website.
Brief: Aviva Investors has decided to shut down its UK Property fund after a near 15-month suspension period. The £367m fund was forced to close its doors last March along with all the major UK property funds after the Covid crisis made it impossible to determine the value of their underlying holdings. Following the re-opening of the M&G Property Portfolio earlier this month, Aviva Investors UK Property and Aegon Property Income were the last funds in the sector to remain shuttered. Aviva Investors explained since the fund’s suspension it had become “increasingly challenging to generate positive returns while also providing the necessary liquidity to re-open the fund” and had made the decision to close the fund and two feeder funds. In its second assessment of value report published in January the fund board recommended the three funds be placed under review to “ensure investors’ long-term interests could continue to be served”. But after taking the review and projected levels of redemptions upon re-opening into account, the asset manager concluded UK Property’s “ability to fully benefit from the economies of scale and diversification of investments that collective investment schemes normally bring would soon be limited”.
Brief: Most workers in Canada want to return to the office, but about three quarters prefer a “hybrid” model that allows some flexibility to work remotely, according to a survey of about 2,000 people done for KPMG. Half of respondents said they’re more productive and effective in a virtual work environment. That was a drop from 59 per cent in a similar survey a year ago, suggesting that 14 months of work-from-home arrangements are taking a toll on some employees. Canadian office workers in finance, government and other sectors haven’t returned to their places of work as quickly as their U.S. counterparts, in part because the country’s COVID-19 vaccination campaign got off to a slow start. Less than 4 per cent of the population is fully vaccinated, according to the Bloomberg Vaccine Tracker. But Canada’s vaccine supply is improving and Prime Minister Justin Trudeau has pledged that all Canadians who want a vaccine will be able to get two shots by September, providing companies with an impetus to solidify their back-to-the-office plans. Some firms including Manulife Financial Corp. have already committed to retaining some form of flexible work policy when the pandemic is over.
Brief : As the world begins to emerge from lockdown, some hedge funds are slashing technology investments that thrived in the work-from-home era. Philippe Laffont’s Coatue Management slashed many of its tech holdings that have benefited from the pandemic-induced lockdowns, including most of its stake in fitness-equipment maker Peloton Interactive Inc. The fund cut its exposure to cyber-security solutions company Crowdstrike Holdings Inc. and Zoom Video Communications Inc. in half. Overall, its exposure to technology stocks fell by about 8%, data compiled by Bloomberg show. Alex Sacerdote’s Whale Rock Capital Management exited its investment in Zoom, and decreased stakes in Peloton and Crowdstrike. The hedge fund trimmed its overall exposure to tech stocks by about 5%, Bloomberg data show. The filings offer a glimpse into the maneuvering by major hedge fund managers and other investors during the first quarter of 2021, a tumultuous period for the industry marked by a Reddit-fueled trading frenzy and the implosion of Bill Hwang’s Archegos Capital Management. At the same time, investors are looking toward a post-Covid 19 economic recovery where the world gradually reopens and people return to work.
Brief: Event driven strategies topped the hedge fund performance chart during the first three months of the year, as the industry drew some USD9 billion in new capital in Q1 and saw trading volumes surge, new analysis by hedge fund asset administrator Citco shows. Citco Fund Services’ ‘2021 Q1 Hedge Fund Report’ probed strategy performance, investor flows and trading volumes, among other things. The study found that close to three-quarters – 73.4 per cent – of hedge funds delivered a positive return during Q1 as the strong performances at the end of 2020 carried through into the new year. The quarterly report noted that event driven strategies led the pack during the three months to the end of March, with a weighted average return of 8.25 per cent for the quarter. Overall, the industry notched up a 2.75 per cent weighted average gain. Positive outliers across event driven, commodities and macro strategies drove average gains higher, Citco said. As oil markets spiked in the early months of the year, commodities strategies rose 7.24 per cent, as global macro funds climbed 5.31 per cent during the three-month period. Though equity-based funds were bottom of the pile, they still managed to generate a 1.65 per cent gain. Within equities, long bias performed better at 5.45 per cent, while equity long/short managers scraped a 0.42 per cent gain.
Brief: White House officials are seeking to quell anxiety about inflation and the pace of hiring — issuing a memo Tuesday that highlights robust economic gains as the United States gets vaccinated and recovers from the coronavirus pandemic. The memo, obtained by The Associated Press, said the administration is “focused on an economic strategy of containing the virus and growing the economy from the bottom-up and middle-out. Data suggest that this strategy is working.” It is from Brian Deese, director of the White House National Economic Council, and Cecilia Rouse, chair of the Council of Economic Advisers. The memo makes the case to senior administration officials and members of Congress that the government’s $1.9 trillion relief package has helped boost growth and that workers will return to jobs with “fair wages and safe work environments.” It also argues that President Joe Biden’s $4 trillion infrastructure and families plan will lay “the groundwork for strong, durable growth for decades to come.” The administration had until recently been basking in optimism about the economy, only to face a worrisome set of reports that showed a jump in consumer prices and a disappointing level of hiring in April. The memo is an attempt to promote a sunnier narrative and stress the need for additional spending to be paid for with higher taxes on corporations and the wealthy.
Brief: Thailand plans to borrow an additional 700 billion baht ($22.3 billion) to fund measures to counter the worst Covid-19 outbreak to hit Southeast Asia’s second-largest economy, people familiar with the matter said. A meeting of the cabinet chaired by Prime Minister Prayuth Chan-Ocha on Tuesday approved the new borrowing plan from the finance ministry, the people said, declining to be identified before a public announcement. The government proposes to spend 400 billion baht of the new borrowing to help various sections of the society affected by the new outbreak, while 270 billion baht will be used to revive the economy, the people said. About 30 billion baht will be set aside to finance medical supplies and vaccines to contain the latest outbreak, they said. The fresh borrowing can be completed before Sept. 30 next year, and is on top of an ongoing 1-trillion baht debt plan authorized by the cabinet last year to fund pandemic relief measures, they said. Thailand’s public debt-to-gross domestic product ratio may rise to 58.6% by September with the additional borrowing, but would still be below the nation’s 60% debt ceiling, the people said. The government will need to issue an emergency law that needs to be endorsed by the king before the public debt management office can begin raising fresh debt, they said. Kulaya Tantitemit, a spokesperson for the Finance Ministry and head of its Fiscal Policy Office, declined to comment. Anucha Burapachaisri, a government spokesman also declined to comment.
Brief: A growing chorus of analysts is warning that high-quality company debt may have nowhere to go but down as investment-grade spreads approach levels last seen in the lead-up to the dot-com bubble. “The best days are behind” for corporate credit, Morgan Stanley strategists led by Srikanth Sankaran wrote in a May 16 midyear outlook. “The combination of extended valuations, less favorable technicals and a slower pace of balance sheet repair suggests that credit markets have progressed to a mid-cycle environment.” Spreads on BBB rated bonds, which account for more than half of the high-grade universe, narrowed to an average of 106 basis points over Treasuries on Monday, fueled by investor demand for the lowest-rated yet highest-yielding part of the asset class. Should spreads breach 100 basis points, it would be the first time since the dot-com era of the late 1990s. Morgan Stanley is calling for 17 basis points of widening for U.S. investment-grade bonds through the first half of 2022, and downgraded its credit outlook to neutral.
Brief: The European Union’s final bond sales for its regional jobs program failed to live up to the hype of previous editions, a concerning sign for its landmark borrowing spree that’s due to start in the second half of the year. Investors placed 88.7 billion euros ($108 billion) of orders for eight- and 25-year securities tied to the SURE social program, little more than a third of the record set for a dual-tranche issue last year. It comes as yields across the region climb as investors prepare for European Central Bank to scale back its bond purchases in the face of growing inflationary pressures. The bloc is ready to start sales for its 800 billion-euro recovery fund by July. It marks a stark turnaround for one of the hottest new triple-A rated bond markets in town. When the EU launched the securities last year, Europe was still firmly in the throes of lockdowns, the ECB was committed to pumping money into debt markets and investor demand for the securities was enormous. Now, with economies reopening and consumer prices expected to accelerate, they’re becoming a less attractive asset. “We had been used to some very strong demand for the EU bonds,” said Jens Peter Sorensen, chief analyst at Danske Bank AS. “Why buy today, if you can buy cheaper tomorrow? That’s becoming a self-fulfilling prophecy.”
Brief :Millennium Management will trial a hybrid working arrangement as it seeks to find a best-of-both-worlds approach for staff in the wake of the pandemic. Employees at Izzy Englander’s hedge fund firm will be required to come into the office three days a week and can work the remainder from home, according to a person with knowledge of the matter. The approach will start on Sept. 7 and apply to most of the firm’s offices globally, said the person, who asked not to be identified because the information is private. Firms around the world are grappling with whether to bring all staff back to their offices full time after the global spread of the deadly coronavirus showed that many could effectively do their jobs from home. Millennium plans to monitor the viability of its plan and will settle on a longer-term solution at a later stage, the person said. Millennium, which manages more than $51 billion and employs more than 3,500 people globally, had sent all but a few key people home to work last year as the pandemic spread around the world.
Brief: The World Economic Forum has cancelled its annual meeting - the blue riband event for the global elite to discuss the world's problems - due to be held in Singapore later this year, the organisers said on Monday. The COVID-19 pandemic meant it was not possible to hold such a large event as planned on Aug. 17-20, they said. "Regretfully, the tragic circumstances unfolding across geographies, an uncertain travel outlook, differing speeds of vaccination roll out and the uncertainty around new variants combine to make it impossible to realise a global meeting with business, government and civil society leaders from all over the world at the scale which was planned," the WEF said in a statement. The event, which attracts VIPs from the worlds of politics and business, has been held since 1971. It was originally shifted from the Swiss Alpine resort of Davos last December due to concerns about safeguarding the health of participants. Singapore has in recent days imposed some of the tightest restrictions since it exited a lockdown last year to combat a spike in local COVID-19 infections.
Brief: Using data from HFR and Eurekahedge, AlternativeSoft selected five funds with the highest 2020 returns to see if simple momentum has generated strong returns in 2021. The five funds generated returns between 149 per cent and 300 per cent in 2020, with the best performing, SYWLP, returning 300.45 per cent was SYWLP. However, when AlternativeSoft analysed the performance of the same funds in the first quarter of 2021, it found that their momentum were not carried over. SYWLP, for example, has a negative return of 28.47 per cent so far this year, while overall, the top five funds in 2020 generated an average return of 203.81 per cent, the same five funds in Q1 of 2021 generated an average return of 13.26 per cent. When comparing the 2021 top-ranked funds, they all ranked very low in terms of returns in 2020. For example, the best performing fund in Q1-2021, Loyola Capital Fund Ltd was ranked 82nd in 2020.
Brief: A robust short base has formed in the Treasury market, expecting an economic recovery, and it’s willing to overlook data points that contradict its preferred narrative. “Investors seem to take the view that what matters is that the U.S. economy is recovering, rather than worry too much about the precise strength of the recovery at any particular moment in time,” Bank of America strategist Ralf Preusser said in a note. Positioning has become a “sea of uncertainty,” he said. Response to the weak U.S. employment report for April, released May 7, was a case in point. Bank of America’s FX and Rates Sentiment Survey for May -- which polls 70-80 institutional investors who combined manage more than $1 trillion -- found that duration underweights increased over the month. Similarly, in JPMorgan’s Treasury client survey, short positioning is most stretched since 2017.
Brief: BlackRock Inc. will ask U.S. employees to return to offices in September, when it will begin a trial period allowing some remote work each week. The world’s largest asset manager will allow up to two days a week of remote work on average for U.S. staff, a spokesman for New York-based BlackRock said Friday. BlackRock will ask employees to start “re-acclimating” to office work periodically in July and August if they feel comfortable doing so, the spokesman said. Staff will be divided into groups, with office access on a two-week rotational basis during those months. Employees can continue working from home full-time through June 30. The company will use its findings from the trial period that begins in September to decide how to shape its staffing plans for next year. Money managers are experimenting with expanding remote-work arrangements as vaccination rates climb. Vanguard Group is adopting a hybrid work model for the majority of its staff. Hedge funds Two Sigma Investments and Bridgewater Associates are also planning to allow employees to continue to work remotely at least part-time.
Brief : Investors in exchange-traded funds are abandoning junk bonds as riskier assets come under pressure from inflation fears. About $1.2 billion was pulled from BlackRock’s iShares iBoxx High Yield Corporate Bond (HYG) on Thursday in its worst day of outflows since February 2020, according to data compiled by Bloomberg. Traders have withdrawn about $5.6 billion from the ETF so far in 2021, putting it on track for its worst year since its inception in 2007. Meanwhile, the rival $9.6 billion SPDR Bloomberg Barclays High Yield Bond fund (JNK) is on pace for its second week of outflows, totaling more than $970 million. With interest rates at rock-bottom lows, investors had previously favored the high-yield market. But that calculation could now be changing, said Matt Maley, chief market strategist for Miller Tabak + Co. “Investors are taking some risk out of their portfolio,” he said. “With inflation fears growing, that means the yields on some safer assets will be rising as well. That will provide at least some competition for a high-yield market that hasn’t seen any competition for a long time.”
Brief: When London’s Science Museum reopens next week, it will have some new artifacts: empty vaccine vials, testing kits and other items collected during the pandemic, to be featured in a new COVID-19 display. Britain isn’t quite ready to consign the coronavirus to a museum — the outbreak is far from over. But there is a definite feeling that the U.K. has turned a corner, and the mood in the country is upbeat. “The end is in sight,” one newspaper front page claimed. “Free at last!” read another. Thanks to an efficient vaccine rollout program, Britain is finally saying goodbye to months of tough lockdown restrictions. Starting Monday, all restaurants and bars in England can reopen with some precautions in place, as can hotels, theaters and museums. And Britons will be able to hug friends and family again, with the easing of social distancing rules that have been in place since the pandemic began. It’s the biggest step yet to reopen the country following an easing of the crisis blamed for nearly 128,000 deaths, the highest reported COVID-19 toll in Europe. Deaths in Britain have come down to single digits in recent days. It’s a far cry from January, when deaths topped 1,800 in a single day amid a brutal second wave driven by a more infectious variant first found in southeastern England.
Brief: Remote workers in Canada are logging more hours, experiencing more stress, and feeling less engaged with their work, according to a new survey. The online survey, conducted by ADP Canada and Angus Reid, asked 1,501 Canadians working remotely and in person to evaluate their experience working during the pandemic, including their work hours, productivity, engagement, stress levels, and quality of their work. The survey found that 44 per cent of remote workers reported they were logging more hours of work than they were in pre-pandemic times. Of those, one in ten reported working an additional day, or more than eight extra hours per week. In contrast, only 15 per cent reported working fewer hours and 38 per cent said there was no change in the hours they worked. Janet Candido, a human resources professional of 20 years and founder and principal of Candido Consulting Group, said she thinks people are working longer hours because they’re not as busy in the evenings or on weekends due to pandemic-related restrictions. “I heard this from my own team a year ago: ‘Well, I don't have anything else to do so I might as well get this done,’” she told CTVNews.ca during a telephone interview on Thursday.
Brief: Brevan Howard Asset Management is moving to a new London headquarters that’s almost three times larger than the hedge-fund firm’s existing office, signaling an expansion plan after a record year of gains. The company has taken over a lease from French advertising giant Publicis Groupe SA in the city’s West End, according to people familiar with the matter. The building at 82 Baker Street, which is near the firm’s current headquarters, has more than 70,000 square feet (6,500 square meters) of office space, the people said, asking not to be identified because the deal is private. It’s not clear if Brevan Howard will occupy the entire space itself or sublease parts of the office. A spokesman for the firm declined to comment and a spokeswoman for Publicis didn’t respond to emails seeking comment. Brevan Howard, which managed $14.6 billion at the end of March, and other hedge funds have been on a hiring spree as market volatility creates more trading opportunities. The company co-founded by billionaire Alan Howard last year posted the best returns in its near two-decade history, with its main fund up more than 27% and its U.S. Rates Opportunities Fund soaring nearly 99%.
Brief: Global equity funds enjoyed a second consecutive month of record inflows as UK investors added nearly £3 billion to the asset class. According to the latest fund flow data from Calastone, investors favoured global, UK and North American funds. Demand for European equity products waned, perhaps as the continent lags the UK and US in its Covid-19 vaccine drive, Calastone said. UK investors also added over £880 billion to bond funds. Total inflows across all asset classes hit £6.1 billion by the end of the month. Edward Glyn, head of global markets at Calastone, highlighted that the pandemic is “claiming more lives than ever around the world, but in the UK and North America it is in retreat. “The situation in Europe is improving, and it remains under control in most parts of Asia. Stock markets have been on a gently rising trend, while bond yields which are bad for share prices when they rise, have been steady,” he said, adding that investors are looking to the post-pandemic boom.
Brief: Ethereum’s co-founder Vitalik Buterin, who became the world’s youngest known crypto billionaire less than two weeks ago, has donated over $1 billion in crypto to the India Covid Relief Fund and a range of other charities. He made the donation by offloading massive amounts of dog-themed meme tokens, which he was gifted by the creators of Shiba Inu coin (SHIB), Dogelon (ELON) and Akita Inu (AKITA). These cryptocurrencies have taken off following Dogecoin’s staggering rally of the last few months. Though built around similar memes, these copycats have much larger token supplies. In a single transaction, Buterin donated 50 trillion SHIB tokens worth $1.2 billion as of May 12, 16:37 pm E.T. to the India Covid Relief Fund set up by Indian tech entrepreneur Sandeep Nailwal. Nailwal is best known as the co-founder and COO of Polygon, a protocol which aggregates scalable solutions on Ethereum in a multi-chain system. Earlier in April, Buterin donated about $600,000 in ether and maker (MKR) tokens to the fund. Nailwal immediately took to Twitter to thank Buterin and assure SHIB investors the funds will be spent responsibly. “We will not do anything which hurts any community specially the retail community involved with SHIB,” wrote Nailwal.
Brief : Almost two-thirds of managers in the finance sector have experienced burnout at work because of the Covid-19 pandemic, with a quarter having considered quitting their job as a result, according to new research from not-for-profit healthcare provider, Benenden Health. Assessing the impact of the coronavirus pandemic on the nation’s workforce one year on, research has found that as many as 63 per cent of managers in the finance sector have suffered from burnout at work since the UK was first placed into lockdown, with a quarter (26 per cent) of all managers either considering, or actually quitting their job as a result of the strain on their mental wellbeing. With the Office for National Statistics reporting that the number of individuals experiencing symptoms of depression has almost doubled since the start of the pandemic, Benenden Health has examined the impact on the nation’s workforce. This has revealed the effect of Covid-19 on the working lives of managers and their subsequent experiences of burnout, which is the occurrence of exhaustion, stress, cynicism and/or feelings of reduced professional ability due to demands at work. The main causes of burnout at work for those in the finance sector in the past year were shown to be anxiety about the future (36 per cent), a lack of sleep (35 per cent) and increased demands from management (32 per cent), whilst a third of burnout sufferers in finance (30 per cent) revealed that working longer hours had contributed.
Brief: Brookfield Asset Management Inc. reported a profit in its latest quarter compared with a loss a year ago as its funds from operations hit a record high. The asset manager, which keeps its books in U.S. dollars, reported net income attributable to common shareholders of US$1.24 billion or 77 cents per diluted share for the quarter ended March 31. The profit compared with a loss attributable to common shareholders of US$293 million or 20 cents per share in the same quarter last year. Revenue totalled US$16.41billion, down from $16.59 billion in the first three months of 2020. Funds from operations were a record US$2.82 billion or US$1.80 per share, up from US$884 million or 55 cents per share a year ago. Brookfield says it realized $6.4 billion in disposition gains in the quarter, split $1.8 billion for Brookfield and $4.6 billion for its clients.
Brief: Howard Marks, co-founder of Oaktree Capital Management, says making money in today’s environment is nearly impossible, particularly for “bargain hunters” that saw last year’s selloff come and go so quickly. “In the short term, I worry about not having great things to buy,” Marks said during a MacroMinds virtual event moderated by Bloomberg’s Alix Steel. The safer plays aren’t especially attractive, according to Marks. “You can keep the portfolio you’ve historically had and expect that the return will be lower than it used to be,” he said. “You can say the market is a little high,” reduce risk if you’re wary of a correction, “and then your return will be even lower,” Marks continued. Or you can get out of the market entirely, and “your return will be zero.” Investors who don’t like the safer scenarios can take on more risk, Marks said, or find a niche money manager who “drives people to illiquid or so-called alternative investments,” which then introduces “manager risk.” “The answer is that there is no, and can be no safe, dependable way to make a high return in a low-return world,” Marks said. “It’s too good to be true.” Global credit and equity markets have staged a dramatic rebound since last year, when the Federal Reserve took unprecedented steps to steady the economy amid the pandemic.
Brief: Global investor Barry Sternlicht told CNBC on Thursday he has some long-term concerns about the U.S. economy, saying there are risks beyond the immediate boom from the Covid recovery. In a wide-ranging interview on “Squawk Box,” the billionaire businessman worried about numerous shortages in the economy and criticized the Federal Reserve’s highly accommodative monetary policy and legislative proposals in Washington. “I do think the Fed, interest rates, are being suppressed by the government. .... We have to get off of this sugar-cane and Fluffernutter economy and get to the meat-and-the-potatoes economy,” Sternlicht said. “We have to get back to a sustainable economy and people coming back to work.” The chairman and CEO of Starwood Capital Group pointed to recent Labor Department data that showed a record number of job openings in March. “Something is wrong,” he said. Sternlicht, whose firm operates hotels as part of its broader portfolio, said hiring challenges for businesses are largely the result of enhanced unemployment benefits that were included in a federal coronavirus relief package. However, economists say the reason people may still be hesitant to return to work is due to many factors, including Covid concerns and a lack of reliable child care.
Brief: Africa’s biggest lender sees opportunity in both its core South African market and the rest of the continent amid a recovery from the Covid-19 pandemic. “South Africa is fiercely competitive,” Standard Bank Group Ltd. Chief Executive Officer Sim Tshabalala said in an interview on Thursday. “We have to continue making investments” there. The Johannesburg-based lender is also ready to take advantage of consolidation throughout Africa, where it has a presence in 20 countries, he said. Standard Bank has increasingly turned its focus outward in recent years, with Africa producing the fastest-growing parts of its business last year and contributing about a quarter of its total income. “We are going to go where the returns are highest and the risks are lowest,” Tshabalala said. Geographically, Ethiopia and the West African Economic and Monetary Union -- including Côte D’Ivoire, Mali and Senegal -- are attractive, he said. The lender expects growth in South Africa to rebound by 4.6% this year, Tshabalala said.
Brief: As the U.S. economy and stock market recover from the Covid-19 pandemic, investors are returning to their pre-pandemic expectations for how companies report financial results. While investors have maintained their pandemic-driven focus on companies making long-term investments, they have shifted their expectations for earnings and guidance back to “less permissive pre-pandemic norms,” according to Boston Consulting Group’s most recent Covid-19 investor pulse survey. Investors’ recovery-driven mindsets are also evident in their shifting approach to capital allocation, with survey respondents focusing less on capital preservation and more on capital distribution. From April 29 to April 30, BCG surveyed “leading” investors, representing investment firms with over $5 trillion in combined assets under management, about their expectations for the U.S. economy and stock market and their perspectives on impending decisions from corporate executives and boards of directors. When asked whether it is important for the management of financially healthy companies to provide or revise guidance within the next 90 days, 87 percent of investors answered “yes,” the highest proportion to say so since BCG began conducting the periodic surveys in March 2020.
Brief : The U.S. budget deficit surged to a record of $1.9 trillion for the first seven months of this budget year, bloated by the billions of dollars being spent in coronavirus relief packages. In its monthly budget report, the Treasury Department said Wednesday that the shortfall so far this year is 30.3% higher than the $1.48 trillion deficit run up over the same period a year ago. The oceans of red ink in both years are largely due to the impact of the coronavirus pandemic, which led the government to approve trillions of dollars in relief to cover three rounds of individual payments, extra unemployment benefits and support for small businesses. The deficit for the budget year that ended Sept. 30 totaled a record $3.1 trillion and many private economists believe this year’s total will surpass that amount. Some are forecasting a deficit of $3.3 trillion. For April, the deficit totaled $225.6 billion, down from a deficit in April 2020 of $738 billion. That improvement reflected the fact that fewer relief payments were made this year and individuals making quarterly tax payments had to meet the normal April deadline. Last year, all tax payments were delayed at the onset of the pandemic.
Brief: The Bank of England is pushing for a shakeup of the $6.9 trillion money market fund industry, saying the business amplified strains during the financial crisis and in the Covid-19 pandemic. The U.K. central bank’s Governor Andrew Bailey said the Financial Stability Board soon will consult on changes to the market, which covers short-term debt securities like commercial paper. At the height of turmoil in the early days of the pandemic, those funds were not resilient, he said. The remarks including some detailed options for what regulators could do are the clearest sign yet that action is coming for money market funds, which are supposed to have cash-like liquidity but instead froze up when the global system was under strain. “We are very much in the world of having a second chance to deal with the issue of how to structure money market funds consistent with their role,” Bailey said in a text of a speech to the International Swaps & Derivatives Association. Bailey said there’s a need to improve the resilience and functioning of the funds so they didn’t contribute to stress in short-term funding markets. Sterling money market funds saw outflows of around 25 billion pounds ($35 billion), or 10% of their total assets, in the eight days between March 12 and 20 last year -- a period known as the dash for cash.
Brief: British investors added record new capital to equity funds for the second month in a row, according to the latest Fund Flow Index from Calastone. Net inflows hit a record GBP2.98 billion in April and took the year-to-date total to GBP6.93 billion, easily the best start to a year since Calastone began recording figures in 2015. The last six months have seen four of the best months of inflows to equity funds on record. At 55.7, Calastone’s FFI:Equity was the most positive reading since April 2020. This does not mean buying has been indiscriminate. Investors were most enthusiastic about global funds, which absorbed GBP1.59 billion, North American funds, which saw record inflows of GBP576 million and UK equity funds [ie funds focused on UK equities] which enjoyed inflows of GBP303 million. In the last three months, a turnaround in sentiment towards the UK means UK equity funds have recouped all the outflows from the previous six. European equity and equity income funds are out of favour, although equity income funds are seeing a marked slowdown of outflows.
Brief: Having seen inflows of close to £2.3bn ($3.25bn, €2.7bn) in 2020, funds invested in US equities witnessed net outflows of £1.6bn in the first quarter of 2021, according to the Investment Association. The bulk of those outflows took place in March, with the IA revealing investors redeemed a net £1.09bn from the IA North America sector. This made it the second least popular peer group behind Sterling Corporate Bond – which witnessed an outflow of £1.47bn for the month. While some of this may be a result of profit taking following a very strong run for the US market, Laith Khalaf, financial analyst at AJ Bell Investments, said another factor may also be at work. “Investors might also be concerned about the prospects for interest rate rises to dent the share prices of the big US tech firms that now make up such a large part of the S&P 500,” said Khalaf. “This could be a pretty significant turning point, as investors reflect on what’s performed well in the past, and where opportunities lie for the future,” he added. “The global sector continues to attract inflows, so investors aren’t totally downbeat on the US, seeing as these funds have a high weighting to the US, which now makes up around two thirds of the global developed stock market.”
Brief: Private equity firm Clayton, Dubilier & Rice (CD&R) has agreed to buy London-listed UDG Healthcare for 2.6 billion pounds ($3.7 billion), the pharmaceuticals services company said on Wednesday. CD&R will pay 10.23 pounds in cash per share in UDG, representing a premium of 21.5% to Tuesday’s close. By 0735 GMT the London-listed shares were up 22.2% at 10.30 pounds. UDG, which has its headquarters in Dublin, specialises in healthcare advisory, communications, commercial, clinical and packaging services. “We believe that this is an attractive offer for UDG shareholders, which secures the delivery of future value for shareholders in cash today,” UDG Chairman Shane Cooke said in a statement. UDG has two divisions - Ashfield and Sharp - and employs about 9,000 people in 29 countries. “UDG has long established itself as a leading provider of high-value services to pharma and biotech companies globally, supported by a highly skilled workforce,” said CD&R partner Eric Rouzier. The deal is expected to be declared effective during the third quarter of 2021, subject to shareholder and regulatory approvals.
Brief: Cashed-up as the crisis began, many sovereign funds took the opportunity to invest heavily through the coronavirus pandemic. But while some looked to international markets for contrarian positions, more looked to see what they could do at home. The world’s sovereign wealth funds (SWF) almost doubled their direct investments during 2020, as funds found opportunity during the Covid-19 global pandemic. The latest annual review by the International Forum of Sovereign Wealth Funds (IFSWF), whose membership includes sovereign vehicles in nearly 40 countries, shows a mixture of opportunism and duty in fund behaviour during 2020. Publicly disclosed direct investments were $65.9 billion in 2020, up from $35.9 billion in 2019, with a particular focus on sectors such as renewable energy, food production, e-commerce and logistics. The year before, 2019, had represented something of a low for direct investment, the lowest level since 2015, and one consequence of this was that institutional investors – particularly sovereign funds – entered the pandemic crisis with high levels of cash.
Brief : Asset management firms have been accused of overlooking the wellbeing of their employees as a recent survey from Howden reveals that most firms have no strategy in place for addressing issues including mental health and work/life balance. Howden surveyed over 160 asset management firms on their employee benefits, wellbeing, and reward programmes. The survey found that while most asset managers offered generous benefits to employees, including private medical insurance, life insurance, and income protection, many were lagging behind on mental wellbeing. Only 12 per cent of asset managers were found to have a standalone strategy in place for employee wellbeing. However, more than a third, 35 per cent, said they plan to address this and create a wellbeing strategy in the next twelve months. This is much lower than the average across industries. According research by CIPD, a professional body for HR managers, 44 per cent of employers have a standalone wellbeing strategy. “Employee wellbeing has tended to be overlooked by many asset management firms in favour of high value insurance benefits, but as we move beyond the Covid-19 it must become a priority,” says Robbie Weston, executive director of Asset Management and Workplace Savings at Howden.
Brief: A top Federal Reserve official says the outlook for the U.S. economy is bright but the recent jobs report is a reminder that the path of the recovery is likely to be uneven and difficult to predict. Lael Brainard, a member of the Fed's board, said Tuesday in a virtual conference sponsored by the Society for Advancing Business Editing and Writing, that employment and inflation remain far from the Fed's goals. The Fed has said it will not start raising interest rates until it has achieved maximum employment and annual prices gains that have not only hit the Fed's 2% target, but exceeded that target for a period of time. “While more balanced than earlier this year, risks remain from vaccine hesitancy, deadlier variants and a resurgence of cases in some foreign countries,” Brainard said. The Fed has kept its key interest rate at 0 percent to 0.25% for more than a year and signaled that it will keep rates at this level at least through 2023. Brainard's comments Tuesday backed up the view that the Fed has no intention to change course in interest rates. Brainard referred to last week's job report that showed the economy created 266,000 jobs last month, sharply lower than March and far fewer than economists had been expecting. She said this was a signal that the Fed needs to proceed with caution before withdrawing its support.
Brief: While fundraising and deal activity in the $975 billion private debt market is ramping back up, the industry is still “not out of the woods” of the pandemic, according to Walter Owens, chief executive officer of Varagon Capital Partners. “We have to be very careful of complacency, because complacency is what gets you into trouble,” Owens said in an interview. “We’re hopeful that the economy fully recovers, but we’re certainly not depending on a full economic recovery when we’re underwriting deals today.” The asset class has largely recovered from the pandemic-fueled selloff in global financial markets last year as economies reopen and wider swaths of the U.S. population become vaccinated. Yet concerns remain with unemployment still stubbornly high, and uncertainty hanging over some industries that were hit hard during Covid-19. The firm sees opportunities in more resistant sectors like business services, healthcare and software services, according to Owens. “Most of those businesses came through 2020 in really good shape,” he said. Demand for the debt, which can offer higher returns than elsewhere in credit, is also helping to drive a pick up in deal activity. And firms are currently looking to raise a record $301.4 billion for 586 vehicles, according to London-based research firm Preqin Ltd.
Brief: The chief executives of major U.S. and UK passenger airlines on Tuesday called for a summit with the two governments to speed the reopening of transatlantic travel. "The airline industry needs adequate lead time to establish a plan for restarting air services, including scheduling aircraft and crews for these routes as well as for marketing and selling tickets," said the letter signed by the CEOs of American Airlines , Delta Air Lines, United Airlines, British Airways , Virgin Atlantic and JetBlue Airways in a letter to the transport chiefs of both countries. A spokesman for Transportation Secretary Pete Buttigieg and the British Embassy in Washington did not immediately comment. Since March 2020, the United States has barred nearly all non-U.S. citizens who have recently been in the UK. The letter said U.S. and UK citizens "would benefit from the significant testing capability and the successful trials of digital applications to verify health credentials." The U.S. government has said it will not require digital vaccine passports and it is unclear if the U.S. government will set standards or issue guidance to help Americans prove to foreign governments they have been vaccinated.
Brief: Funding to venture-backed travel and tourism startups fell to a five-year low in 2020, a year defined by the COVID-19 pandemic and the stay-at-home mandates that came with it. But that trend may be turning around, if early funding data and investor enthusiasm are any indication. Funding to venture-backed startups in the travel and tourism sector amounted to around $4.8 billion across 629 deals in 2020, Crunchbase data shows. Both the dollar amount and deal count hit a five-year low. And that followed a record in 2019, when funding to travel and tourism startups in the past five years hit a record $10.8 billion. So far this year, companies in the sector have raised about $3.4 billion across 173 deals, according to Crunchbase data. “It’s a really exciting time to be investing in the space,” said Kristi Choi, an investor at Plug and Play Ventures. “And we talk a lot about this because I really feel like travel is at an inflection point for a couple different reasons.” Companies that have survived the pandemic have learned how to stay resilient and have used the time to tailor their value proposition, Choi said, pointing to how travel startup Sherpa added travel restriction monitoring and guidelines on top of its visa application offerings. And with the crisis, new travel habits have emerged and evolved.
Brief: Blackstone Group Inc. is asking some U.S. staff to return to the office full-time on June 7 provided they are fully vaccinated. The world’s largest alternative asset manager announced the move internally on Monday. A Blackstone spokesman confirmed the decision. Financial firms have been preparing for an end to remote work since the earliest months of the Covid-19 pandemic. JPMorgan Chase & Co. became the first major U.S. bank to mandate a return to offices for its entire U.S. workforce. Last month staffers were told that they would be expected to return by early July on a rotational basis. Citigroup Inc. has said it will start inviting more workers into the office beginning in July. Goldman Sachs Group Inc. told staff they should be prepared to work from offices by mid-June. Insider earlier reported the Blackstone news on Monday.
Brief : The European Union’s huge post-pandemic recovery fund could become a more permanent feature if it is successful in firing up growth and fostering a greener and more digital economy, the European Commission’s top economic officials said on Monday. The 27 EU nations made an unprecedented agreement last year to jointly borrow 750 billion euros for a fund to help fight the economic slump caused by COVID-19 and address the challenges of climate change. To overcome the opposition of the EU’s frugal northern states, which have long opposed joint borrowing for fear of financing less strict fiscal policy in the south, the scheme was clearly described as an extraordinary, one-off measure. But many economists seen it as a foot in the door for more regular joint debt issuance by the AAA-rated EU in future and top Commission officials echoed that view before the European Parliament’s economic and monetary affairs committee. “The more successful we are in the implementation of this facility the more scope there will be for discussions on having a permanent instrument, probably of a similar nature,” Commission Vice President Valdis Dombrovskis said.
Brief: Hedge funds are on a roll this year, with the industry recording its best January-to-April performance in more than 20 years, as managers profited from tech gains, commodities moves, strong earnings, and renewed optimism over the reopening US economy.Overall, hedge funds added 2.74 per cent in April, and have returned 8.68 per cent in the four months since the start of 2021, as measured by Hedge Fund Research’s Fund Weighted Composite Index, a global equal-weighted benchmark of some 1400 single-manager hedge funds. That was strongest year-to-date return through April since 1999, when it rose 8.56 per cent. April’s gain was also the index’s seventh consecutive monthly advance, with all but one hedge fund sub-strategy finishing the month in positive territory. Technology, quantitative directional equities, and commodities-focused macro funds were among the strategies that posted the biggest gains. HFR president Kenneth Heinz said: “Through the seven consecutive months of gains, hedge funds have navigated multiple market cycles (both positive and negative), including a new US political administration, unprecedented fiscal stimulus initiatives, additional virus mutations/variants, and a sharp increase in heavily-shorted, deep value equities driven by retail trading platforms.” The industry is now in its longest period of consecutive monthly gains since the HFR’s FWC index produced 15 consecutive months up to January 2018.
Brief: Hospitals acquired by PE firms tend to have higher operating margins than those that are not acquired — and that gap widens over time, a new study shows. But it is too early to say whether these glowing financial figures equate to better support for clinical care. Hospitals that were acquired by private equity companies had operating margins that were 5.6 percentage points higher than nonacquired hospitals in 2003, and that gap widened to 8.6 percentage points by 2017, according to the study published in Health Affairs. However, it is unclear whether private equity firms’ varied promises, like improved efficiency, have resulted in better support for clinical care. The study — which aims to describe the hospitals acquired by private equity firms and their finances — compared facilities that had been acquired to those that were never acquired between 2003 and 2017, said Dr. Marcelo Cerullo, a study author and general surgery resident at Duke University Medical Center, in an email. In total, researchers examined 42 private equity deals, involving 282 hospitals across 36 states. Of the 282 hospitals studied, data for 233 was available from the Healthcare Cost Report Information System and American Hospital Association. In general, the researchers found that hospitals acquired by private equity firms tended to be better off and larger than average across several measures than those that were not, Cerullo said. Acquired hospitals were significantly larger than nonacquired hospitals in terms of number of beds and discharges in both 2003 and 2007.
Brief: The Sydney Covid-19 patient dubbed "BBQ Man" after he visited an extensive list of BBQ stores while infectious has been named, finally providing an explanation for his curious shopping spree. Investment company Apollo Global Management managing director Tom Pizzey has been identified by the Australian Financial Review as the man linked to Sydney's latest Covid-19 scare. Pizzey contracted the virus earlier this month, with his wife later testing positive for Covid-19 as well. AFR understands Pizzey is still suffering coronavirus symptoms, with Apollo confirming it is assisting NSW Health in relation to a positive virus case. "The employee has not travelled outside Australia this year," an Apollo spokesperson told the publication. Pizzey, who is one of Apollo's only two full-time employees in Australia, is understood to be the mystery Covid-19 case who visited multiple venues on May 1 while unknowingly infectious, including several BBQ stores. Two of those trips were to different Barbeques Galore stores in Casula and Annandale. The chain is in its early stages of auction and, while Pizzey was searching for a new BBQ, AFR reports he was also checking out the stores for Apollo, with reports the company is considering acquiring the chain. In the same day, Pizzey also visited Joe's Barbeques & Heating in Silverwater, Tucker Barbecues in Silverwater and The Meat Store in Bondi Junction.
Brief: The popularity of passive strategies hasn’t died down during the pandemic — meaning European asset managers, like their U.S. counterparts, will need to brace for more pressure on their operating margins this year. According to a new report from Fitch in London, the asset managers that the group rates, including Amundi, Azimut Holding, Man Group, and Schroders, among others, are in a position to weather the challenges, in part because they have strong brands, enough assets under management to be able to continue to invest in the business, and have used only a moderate amount of leverage. Still, Fitch said they and other traditional managers around the world face pressure on margins “in 2021 and beyond due to fee compression driven by fierce competition.” Fitch expects investors to continue to prefer low-cost index funds over active strategies. In aggregate, active managers have failed to prove their worth to investors by outperforming common benchmarks in 2020. For years, active managers have argued they would shine when volatility spiked, as their passive peers simply reflected the market’s fluctuations. But that didn’t happen last year, in part because the downturn was short-lived. The markets fell dramatically in March and early April, but then roared back when governments and central banks stepped in with trillions of dollars in stimulus.
Brief : About 8,300 miles east of Wall Street, on a stretch of Bangalore’s Outer Ring Road, sits what was once the heart of the global financial industry’s back office. Before the pandemic, this cluster of glass-and-steel towers housed thousands of employees at firms like Goldman Sachs Group Inc. and UBS Group AG who played critical roles in everything from risk management to customer service and compliance. Now the buildings are eerily empty. And with case counts soaring across Bangalore and much of India, work-from-home arrangements that have sustained Wall Street’s back-office operations for months are coming under intense strain. A growing number of employees are either sick or scrambling to find critical medical supplies such as oxygen for relatives or friends. Standard Chartered Plc said last week that about 800 of its 20,000 staffers in India were infected. As many as 25% of employees in some teams at UBS are absent, said an executive at the firm who spoke on condition of anonymity for fear of losing his job. At Wells Fargo & Co.’s offices in Bangalore and Hyderabad, work on co-branded cards, balance transfers and reward programs is running behind schedule, an executive said.
Brief: Fears of rising interest rates and warnings over bond valuations have made junk- and investment-grade rated bonds a popular short bet among hedge funds. Speculators are predicting fresh pain for the bond market, especially for longer-dated bonds with sovereign yields being tipped to rise due to an increase in inflation forecasts. This comes amid warnings from market experts regarding the “over-extended” valuations of CCC-rated bonds, the riskiest class of debt. Global high-yield bonds worth as much as $55 billion are on loan to traders seeking to profit if prices drop, according to data from IHS Markit Ltd., by a narrow margin the largest balance since the fall of 2008. This compares with about $35 billion at the start of the year. In the euro-denominated investment-grade market, roughly $30 billion equivalent of bonds have been borrowed, the largest loan balance since early 2014. “I would expect that list to get bigger as spreads tighten and/or people get worried about rates rising,” said Tim Winstone, a portfolio manager at Janus Henderson, which oversees 294 billion pounds ($409 billion). “At these levels of valuations, I’m not surprised more people, such as hedge funds, are setting shorts.”
Brief: A new report from technology-focused investment bank ICON Corporate Finance, has revealed record-breaking tech deal activity in the first quarter of 2021, up 28 per cent on Q1 2020, with 268 deals announced. Evidencing resilience within the sector and a huge appetite for Vertical and Enterprise Software organisations, ICON believes M&A activity is yet to see its peak, and could easily surpass the UK total of 711 tech M&A deals completed last year. Digital transformation, fast-tracked by lockdowns across the world, has created a plethora of new digital solution providers that are grabbing the attention of overseas PE backed acquirers. Among these, UK Vertical Software providers are proving flavour of the month as PE houses look to buy, build and eventually sell. Corporate acquirers too are playing their part in an effort to gain an edge over rivals or to provide new revenue streams. The result has been valuations rising to near record levels. ICON believes that Digital Transformation across all industry sectors, including Vertical and Enterprise Software will continue to accelerate, boosted in no small part by appetite from overseas investors. Last year a record-breaking 48% of all UK deals involved cross-border backing, a figure which could yet be surpassed in 2021.
Brief: Canada's labour market lost 207,000 jobs last month as a spike in COVID-19 variant cases led to renewed public health restrictions and raised concerns about longer-term economic consequences from the pandemic. The unemployment rate rose to 8.1 per cent from 7.5 per cent in March, Statistics Canada reported. It would have been 10.5 per cent had it included in calculations Canadians who wanted to work but didn’t search for a job. Ontario led the way on losses regionally with a drop of 153,000, and British Columbia witnessed its first decrease in employment since a historic one-month plunge in the labour market in April 2020. Nationally, losses were heavier in full-time than part-time work, with retail and young workers hit hardest as a resurgence of the virus and its variants forced a new round of restrictions and lockdowns. With lockdowns continuing into May, CIBC senior economist Royce Mendes said more losses this month are possible. Leah Nord, senior director of workforce strategies with the Canadian Chamber of Commerce, said the latest setback in the labour market will carry a long-term impact on the workers and businesses affected, particularly in high-touch sectors that are falling further behind.
Brief: Abu Dhabi state investor Mubadala's total income rose nearly 36% to a record high last year, driven by growth in its public equities portfolio and funds while it accelerated investment during the COVID-19 pandemic. Mubadala Investment Co posted total comprehensive income attributable to the owner of 72 billion dirhams ($19.60 billion), up from 53 billion dirhams a year earlier, it said in a statement. Comprehensive income includes net income and unrealised gains such as hedges on financial instruments or foreign currency transactions. Assets under management rose 4.8% to 894 billion dirhams. It also invested 108 billion dirhams of capital in 2020, the most it has invested in a single year. Deals included 4.3 billion dirhams in Reliance Industries-owned Jio, 2.7 billion dirhams in private equity investor Silver Lake and 7.5 billion dirhams through partnerships with CVC, Citadel, iSquared Capital and Apax Partners. "We navigated our portfolio through the dramatic macroeconomic decline of early 2020 and decided to accelerate the pace of our capital deployment, ending the year with record profit and growth," said Mubadala CEO Khaldoon al-Mubarak.
Brief: For women in the financial services industry, the Covid-19 pandemic exacerbated the challenges they face in their jobs, resulting in a significant exodus from the field. In a survey conducted by Accenture, a global technology and business consulting firm, 29 percent of women working in financial services said they left their job either permanently or temporarily during the pandemic, while 34 percent of women who hadn’t left their jobs said they were considering leaving their current firms. Almost half of the women who were considering leaving their firms held entry-level positions, meaning they have fewer than five years of industry experience. In an already male-dominated sector, improving gender diversity is a priority for many firms, but current initiatives may not have been effective enough to combat the pandemic’s toll on non-male employees. Across all career levels — senior, supervisory, and entry-level — over half of the women in the survey said they faced “increased pressure” as the main caregivers in their households, a dynamic they attributed to the pandemic. Among the most affected by the pandemic were executive and senior management respondents, 59 percent of whom believed the pandemic had adversely affected their career progression. As Gema Zamarro, a professor at the University of Arkansas, senior economist at the University of Southern California Dornsife Center for Economic and Social Research, and mother of two kids, summed it up: “You’re doing three jobs: mom, teacher, and your own work.”
Brief : As U.S. retailers celebrate a boom lifting one of the pandemic’s hardest-hit sectors, scars left by a year of bankruptcies and delayed vendor payments could threaten to undermine their recovery -- just as the crucial back-to-school shopping season begins. After watching their receivables mount last year, vendors of apparel and other goods demanded change. In order to ship, many began requiring payment upon delivery of the goods or even in advance, according to people with knowledge of the demands, which were made of distressed and healthy clients alike. For merchants, that’s a big cash drain at a time of great uncertainty. The shift comes after retailers spent much of last year delaying payments to preserve cash. Such maneuvers have long been used by struggling chains, but amid the pandemic, even more stable merchants like Macy’s Inc. and Gap Inc. followed suit. An analysis of company financial data showed such buyers took at least two weeks longer to pay their suppliers than the same period the prior year. Vendors are “shell-shocked” after a string of Covid-era bankruptcies left them with large losses, and more concerned about guaranteeing they’ll be paid, said Perry Mandarino, head of restructuring and investment banking at B. Riley. “Late payments are not being tolerated,” Mandarino said.
Brief: Financial institutions and their directors have to navigate a rapidly changing world, marked by new and emerging risks driven by cyber exposures based on the sector’s reliance on technology, a growing burden of compliance, and the turbulence of Covid-19, according to a new report Financial Services Risk Trends: An Insurer’s Perspective from Allianz Global Corporate & Specialty (AGCS). At the same time, the behaviour and culture of financial institutions is under growing scrutiny from a wide range of stakeholders in areas such as sustainability, employment practices, diversity and inclusion and executive pay. “The financial services sector faces a period of heightened risks. Covid-19 has caused one of the largest ever shocks to the global economy, triggering unprecedented economic and fiscal stimulus and record levels of government debt,” says Paul Schiavone, Global Industry Solutions Director Financial Services at AGCS. “Despite an improved economic outlook, considerable uncertainty remains. The threat of economic and market volatility still lies ahead while the sector is also increasingly needing to focus on so-called ‘non-financial’ risks such as cyber resilience, management of third parties and supply chains, as well as the impact of climate change and other Environmental Social and Governance (ESG) trends.”
Brief: Many are predicting a bright future for biotech firms involved in the production of Covid-19 vaccines as they are rolled out across the globe, but US President Joe Biden’s proposal that vaccine producers should temporarily waive patent protection has dampened this rosy outlook and is likely to result in significant pushback from firms in the sector. On Wednesday (5 May), Biden announced his support for waiving intellectual property rights for Covid-19 vaccines, bowing to increasingly pressure from within his own administration and other nations to help the rollout of the vaccine in less developed countries, such as India and South Africa. The news sent some pharmaceutical stocks plummeting. Moderna's stock was down 6.2% to $163 following the announcement while the Novavax share price fell 5% to $172, though Pfizer's stock price dropped only slightly. Healthcare shares in China were also affected by the news, with the CSI Health Care index falling nearly 4% to 15,727 points. Industry experts speculate that the decision was prompted in no small measure by Pfizer's Q1 earnings update, announced the same day, where it revealed it had recorded vaccine sales of $3.5bn in the first quarter of the year and expects full year sales of $26bn. As Jim Wood-Smith, CIO private clients & head of research at Hawksmoor Investment Management puts it, this situation raises "profound moral and financial problems".
Brief: Sculptor Capital Management’s flagship hedge fund is finally beginning to turn around. The firm’s multistrategy vehicle scored its first quarter of net inflows since 2014, marking the end of years of client withdrawals that totaled about $30 billion. The fund and its associated portfolios attracted a net $78 million of fresh cash, bringing total assets in those products to $10.9 billion as of March 31, the firm said in a statement Wednesday. The results, achieved in the last months of Chief Executive Officer Robert Shafir’s tenure, are a vindication of his promise and efforts to reverse the asset bleed. Last month, Chief Investment Officer Jimmy Levin succeeded him. Addressing the hedge fund inflows on Sculptor’s earnings call Thursday, Levin said that the new cash came from a broad range of investors. “It’s from all types of allocators all around the world: consultant-advised, non-consultant advised, institutional, non-institutional,” he said. “It’s been a bit of everything, which is why we described it as feeling healthy.”
Brief: Citadel Securities’ outsize role in the capital markers has gotten the attention of regulators. Gary Gensler, the new chairman of the Securities and Exchange Commission, honed in on Citadel in prepared remarks to be delivered to a Thursday hearing of the House Financial Services Committee, which is looking into the GameStop trading fracas in January. The GameStop debacle resulted in sharp price hikes in so-called meme stocks, leading to restrictions on trading by broker dealers and resulting in losses among hedge funds and retail investors alike. In the process, the trading frenzy also raised questions about market structure and those who benefit from it. Citadel Securities, a market maker, emerged as a key player in January’s market events because of its acknowledged role in buying order flow from Robinhood, a retail trading app, whose customers sent GameStop shares temporarily soaring from $20 to $480. Payment for order flow is a controversial practice and has been banned in Canada and the U.K. In the U.S., Robinhood has already settled one SEC enforcement action on the practice.
Brief : Uncertainty about the speed and sustainability of the economic recovery are at the forefront of industry concerns, Funds Europe research shows. The finding comes at a time when firms are designing strategies for growth and innovation after the Covid-19 pandemic. The research, conducted in association with Caceis, ranges cross many themes in asset management. We found that decision makers also feel challenged by the continuing pressure of adapting to regulations, for example rules to do with ESG. Technology is also a pain point, with managers feeling a need to redesign technology ‘stacks’ and communication interfaces because they want to fulfil the digital needs of the funds industry for current and future generations. The survey had a total of 172 responses from investment fund professionals and was conducted online during February 2021. The report confirms that ESG and climate change is moving to the forefront of the regulatory and policy agenda in Europe. As a component of the European Commission’s Sustainable Finance Action Plan, the Sustainable Finance Disclosure Regulation (SFDR) requires fund managers, financial advisers, and some other categories of regulated firms with activities in the EU, to disclose information on ESG implications of their investment strategies to investors.
Brief: Kroll, a provider of services and digital products related to governance, risk and transparency, has revealed the number of data breaches reported to the FCA fell by 30 per cent between 2019-2020. This is a direct contradiction to Kroll’s own data which, looking at all industries, showed a 56 per cent average rise in incidents over the same timeframe, with the financial services industry being slightly above that average. Freedom of Information data obtained by Kroll from the FCA shows that the number of reportable cyber incidents where company or personal data was potentially compromised or breached dropped 30 per cent to 76 in 2020, compared to 108 during the same time period in 2019. In reality, the number of data breaches is expected to be far higher, with Kroll’s proprietary data showing that during the same period the overall number of incidents impacting UK organisations rose 56 per cent, leading to an increase in consumer notifications of more than 41 per cent when compared to 2019. This disparity between official FCA statistics and the reality of the current cyber threat landscape means the increase in the sophistication and volume of attacks is in danger of going unaddressed, and is likely to be linked with changes to data breach reporting as a result of GDPR.
Brief: The program, which has run out of cash and refunded by Congress twice before, was scheduled to expire May 31. It’s not yet known if lawmakers will approve another round of funding. The SBA said in a statement it will still fund applications that have been approved. New applications made through Community Financial Institutions, which are financial lenders that serve underserved communities, would also be funded. More than half the loans and nearly a third of the loan money were distributed this year. The average loan size was $46,000, less than half the $101,000 average loan in 2020. That is a sign that smaller companies unable to get loans last year were now getting funding. Companies have been drawn to the loans because they promised forgiveness if the money is used for payroll and other essentials. But, while the PPP helped save many companies devastated by the pandemic, the Biden administration has estimated that more than 400,000 U.S. businesses have permanently closed due to the virus.
Brief: U.S. inflation is unlikely to get out of control despite the unprecedented government spending that’s been authorized in response to the coronavirus pandemic, Federal Reserve Bank of Chicago President Charles Evans said. “I think the risk of this scenario is remote,” Evans said Wednesday in remarks prepared for a virtual speech. The Chicago Fed chief, who has long been one of the central bank’s biggest worriers about inflation being too low, was responding to critics of the Biden administration’s fiscal programs, which include not only Republicans but also some economists associated with the Democratic party. Most of Evans’s colleagues at the Fed, including Chair Jerome Powell, have pushed back forcefully against such criticisms in recent months. Instead, they’ve highlighted the importance of the fiscal support in speeding the labor market back to full employment. “With these developments, my outlook for growth and unemployment is much more positive today than it was just a few months ago,” Evans said, referring to the measures.
Brief: Bridgewater Associates’ main strategies posted strong gains in April, putting them solidly in the black for the year. The strong monthly performance also capped a double-digit gain for the 12 months following the sharp losses Bridgewater suffered at the beginning of the pandemic. Bridgewater’s flagship Pure Alpha macro strategy, sometimes referred to as PA 18 Percent, was up 5.34 percent in April and 4 percent year-to-date, according to a person familiar with the results as well as a private database. PA 12 Percent, which takes on less risk than the main Pure Alpha strategy, was up 3.5 percent for the month and 2.8 percent for the year. Pure Alpha has now posted a 14.23 percent gain over the past 12 months. All Weather, the firm’s beta strategy, was up 4.38 percent in April and 1.35 percent year-to-date. It was also up 18.81 percent over the past 12 months. Bridgewater, the world’s largest hedge fund firm which is headed by Ray Dalio, generally points out that clients employ Pure Alpha as an overlay strategy, placing it on top of the benchmark of their choosing. For example, in the 12 months through April 30, the S&P 500 was up 47.7 percent, while Pure Alpha was up an additional 14.23 percent.
Brief: For the first time in history, global venture investments surpassed USD100 billion in Q1 2021. According to the research data analysed and published by Sijoitusrahastot, worldwide VC funding in Q1 2021 rose by 94 per cent YoY to USD125 billion. During the period, two unicorns on average were created daily, raising the quarterly total to 112. Based on a CNBC report citing Ernst & Young, VC funding in the US during the quarter hit USD64 billion. It was the highest quarterly figure on record, and it was equivalent to 43 per cent of total VC funding raised in 2020. Late-stage funding dominated the global VC market accounting for 68 per cent of the total. The segment, together with technology growth, soared by 122 per cent to USD85.6 billion. Some 79 per cent of the funds went into rounds worth at least USD100 million, up from 63 per cent in Q1 2021. Early-stage funding shot up by 63 per cent YoY to USD35.5 billion. Seed and angel investment held steady at USD4.1 billion while acquisitions rose by 44 per cent YoY to 631 deals worth USD57.1 billion. In Europe, total funding rose by 130 per cent YoY from USD9.3 billion to a record USD21.4 billion. Late-stage and technology funding surged 202 per cent to USD14.3 billion. Early-stage funding rose by 62 per cent YoY to USD5.8 billion. There were a record 54 rounds worth at least USD100 million as well as two billion-dollar rounds by Klarna and Cazoo.
Brief : Ken Griffin’s Citadel expects to have most of its U.S. employees back in its offices in New York, Chicago and Greenwich, Connecticut, by June 1, according to a person familiar with the matter. The $38 billion hedge fund, Citadel, and market-maker Citadel Securities anticipate that regular in-office operations in those locales will resume by that date, said the person, who asked not to be identified. Operations in Texas, meanwhile, will get back to normal in mid-May. Citadel’s expectation for workers’ return is earlier than some of its hedge fund peers, with many employees expressing an eagerness to get back to their desks. Bridgewater Associates and Two Sigma Investments plan to have employees back in offices in September while still allowing them to work remotely a few days a week. Major financial firms are stepping up efforts to bring workers back as Covid-19 vaccines become more broadly available and in-person schooling resumes. Goldman Sachs Group Inc. plans to tell staff they should be prepared to work from offices by mid-June, and JPMorgan Chase & Co. told employees to expect a return in early July.
Brief: Vanguard Group is adopting a hybrid work model for the majority of its staff, making it the latest company to rethink the primacy of offices in the aftermath of the pandemic. The world’s second-biggest asset manager plans to allow many employees to work remotely on Mondays and Fridays. With a staff of 17,300, Vanguard’s move represents a middle ground that other financial firms are seeking. “The pandemic has affected so many aspects of our lives, and how we work is one of them,” the company said in an emailed statement. “Vanguard will pursue a working model that will blend increased flexibility with the known benefits of in-person collaboration.” As Covid-19 vaccines become more readily available and cities reopen, U.S. companies are grappling with whether to bring employees back to offices full-time or embrace remote arrangements for the long haul. Vanguard, based in Valley Forge, Pennsylvania, joins money managers Two Sigma Investments and Bridgewater Associates in planning to allow employees to continue to work remotely at least part-time.
Brief: As global economies prepare to unlock, potentially driving up inflation and interest rates, hedge funds’ low sensitivity to rate moves can help bolster investors’ portfolio performance, says K2 Advisors, the hedge fund investing unit of Franklin Templeton. With economic growth tipped to trend higher, fuelling inflation, hedge fund strategies can deliver a diversifier to certain fixed income assets that may face a squeeze during inflationary or rising rate environments, said Brooks Ritchey, K2’s co-head of investment research and management. Hedge funds and other alternative investment strategies have traditionally been seen to thrive against equities and fixed income in low interest rate environments. But falling Covid cases and an accelerating vaccine roll-out across developed markets may now send consumer and industrial demand soaring, pushing global inflation trends and interest rates higher – carrying a knock-on effect for bonds and equities. As a result, hedge funds now look “particularly interesting” as a fixed income diversifier, Ritchey explained. “These strategies help to diversify one’s portfolio in a rising rate environment given the resultant increase in performance dispersion across regions, sectors and asset classes,” Ritchey wrote in a note on Tuesday.
Brief: The world’s most powerful economies agreed to back plans for so-called vaccine passports in a bid to pull the travel and tourism industry out of a pandemic-fueled slump. Tourism ministers from the Group of 20 threw their weight behind the new certificates, stressing that a resumption of normal activity for the sector is crucial to global economic recovery, according to Italian Tourism Minister Massimo Garavaglia. A virtual gathering on Tuesday, the first such meeting under the Italian presidency of the forum, backed efforts for safe mobility, coordinating with initiatives including the European Union’s Digital Green Certificate. That document will show the bearer has been fully vaccinated, has immunity via recovery, or recently tested negative. Garavaglia told a press conference in Rome that he had requested, and obtained from European Union Commissioner Thierry Breton, a commitment to accelerate introduction of the EU green certificate as much as possible. “Tourism will be the key to recovery once the pandemic is defeated,” Garavaglia said. Travel and tourism has been one of the industries hit hardest by restrictions on activity to contain the coronavirus.
Brief: Foreign ministers from the Group of Seven wealthy industrialized nations gathered Tuesday in London for their first face-to-face meeting in more than two years, to grapple with how to respond to the military coup in Myanmar and whether to challenge or coax a surging China. Host nation Britain was keen to show that the rich countries' club still has clout in a fast-changing world, and has warned that the increasingly aggressive stances of Russia, China and Iran pose a challenge to democratic societies and the international rule of law. U.K. Foreign Secretary Dominic Raab said the meeting “demonstrates diplomacy is back.” The two days of talks involving top diplomats from the U.K., the United States, Canada, France, Germany, Italy and Japan also were to discuss the humanitarian crisis in Syria, the Tigray crisis in Ethiopia and the precarious situation in Afghanistan, where U.S. troops and their NATO allies are winding down a two-decade deployment. The U.K. Foreign Office said the group would also discuss “Russia’s ongoing malign activity,” including Moscow's earlier troop buildup on the border with Ukraine and the imprisonment of opposition politician Alexei Navalny.
Brief: The value of UK buyout deals by high-net worth investors (HNWs) shot up by 626 per cent in 2020, rising from GBP132 million in 2019 to GBP958 million, says Boodle Hatfield, the leading private wealth law firm. The increasing number of buyout deals led or co-funded by HNWs goes against the overall decline in deal value across the wider private equity market over the same period. Whilst many trade buyers and to a lesser extent PE firms have stepped back from making acquisitions during the worst of the Covid crisis, HNW investors have used the crisis to buy distressed businesses at a substantial discount. Private equity deals by HNWs increased from 26 deals in 2019 to 27 deals in 2020. In contrast, last year there was a 26 per cent decline in combined deal value for UK private equity deals, according to research from a KPMG report. Overall UK private equity deal volume hit its lowest level since the 2008 economic crisis, falling from 1,200 deals in 2019 to 899 in 2020. Boodle Hatfield explains that HNWs have been increasingly interested in leading PE transactions themselves as a way to get access to the asset class without having to pay the management and performance fees that investing through a private equity fund would involve.
Brief : The Covid-19 pandemic didn’t hit all U.S. public pensions funds equally. Funds that were in the best financial health at the start of the pandemic took the hardest hit to their funded statuses over the course of the past year — but they’ve also benefitted most from the speedy recovery over the past 12 months, according to Goldman Sachs Asset Management’s public pension fund report for the first quarter of 2021. The report, which is based on a performance sample of 99 public plans representing approximately $3 trillion of assets under management, found that a majority of the pensions experienced funded status declines of 10.1 to 12.5 percent in March 2020. Retirement plans which were well funded to begin with — at over 90 percent funded — experienced the largest decline in funded statuses from December 2019 to March 2020. Meanwhile, pensions that started off the pandemic with funding ratios below 70 percent experienced a single-digit median decline in funded status. GSAM suggested that the trend in funded status declines was “likely influenced by varying allocations to fixed income.” Plans with the highest rates of decline in funded positions also allocated the lowest percentages of assets to fixed income.
Brief: Norway’s sovereign wealth fund, the world’s biggest, will let its employees continue working from home a couple of days a week once the pandemic is over, Chief Executive Officer Nicolai Tangen said. Staff at the Oslo-based investor, which oversees $1.3 trillion in assets, will be allowed to spend “up to two days” a week working from home, Tangen told lawmakers in Norway’s parliament during a hearing on Monday. But there will also be “two set office days for everyone,” he said, so that “we can have the meetings we need to have in the office.” Tangen, a former London-based hedge-fund manager, is the latest prominent member of the financial industry to acknowledge that life won’t return to pre-pandemic norms even after the Covid crisis subsides. Barclays Plc CEO Jes Staley recently said he won’t force employees to return to the office, while Deutsche Bank AG is working on plans to let staff work from home up to three days a week. At Norway’s wealth fund, Tangen said he was considering requiring staff to be in the office on Tuesdays and Thursdays. He also said no one would ever be forced to work from home, but said he thinks granting employees the option on a voluntary basis “can be positive.”
Brief: Markets have been obsessed -- and sometimes roiled -- for months over whether higher inflation is coming. The latest batch of quarterly reports suggests it’s already here and helping corporate America. Faced with rising prices for everything from lumber to oil to labor and computer chips, chief executive officers have cut costs and boosted prices for their products. The strategy appears to be working, with first-quarter income from S&P 500 companies jumping five times as fast as sales, data compiled by Bloomberg Intelligence show. As a result, their net margin -- which measures how much profit companies are squeezing from their revenue -- has risen to a record high, according to Bank of America Corp. Executives mentioned “inflation” more than any time since 2011 during earnings conference calls last month, according to Bank of America. Warren Buffett joined the chorus two days ago, saying price increases are more intense “than people would have anticipated six months ago.” The billionaire added that as his Berkshire Hathaway Inc. boosted prices, customers have accepted them.
Brief: Thousands of restaurants and bars decimated by the COVID-19 outbreak have a better chance at survival as the government begins handing out $28.6 billion in grants ¬— money to help these small businesses stay afloat while they wait for customers to return. Laurie Thomas is applying for grants for her two San Francisco restaurants that have closed and reopened several times as coronavirus cases surged and declined; she’s still at just 50% of capacity. Rose’s Cafe and Terzo are operating at a loss but grant money will help them stay open. “This allows you to go back to February 2020 and apply these funds to help pay down debt, catch up on past due rent, etc.,” she says. The Small Business Administration is accepting applications for grants from the Restaurant Revitalization Fund as of Monday. For the first three weeks only applications from restaurants that are majority-owned by women, veterans and “socially and economically disadvantaged” applicants will be processed and paid out, although any restaurant can apply. After that, grants will be funded in the order that they’ve been approved by the SBA.
Brief: A coalition of airline and travel groups urged the U.S. and the U.K. governments to lift travel restrictions between the two nations, citing the growth in vaccinations and other tools that limit the spread of Covid-19. Officials should announce reopening before the Group of Seven economic talks scheduled for June, the groups said Monday in joint letters to President Joe Biden and Prime Minister Boris Johnson. “We are confident that the right tools now exist to enable a safe and meaningful restart to transatlantic travel,” said the letter from 49 industry groups and unions on both sides of the Atlantic. “Safely reopening borders between the U.S. and U.K. is essential for both countries’ economic recovery from Covid-19.” Exports between the two countries and tourism represent have a significant impact on each nation’s economy, highlighting the importance of resuming more normal travel, the group said. Industry officials in the U.K. have been saying that travel could begin to reopen as soon as this month, but the White House has been mum on when that might happen or what steps are needed to trigger such a move.
Brief: When a pandemic was declared last spring, Paul Aversano feared the worst. Aversano leads the global transaction advisory group at Alvarez & Marsal, which works with dealmakers across the corporate world and private equity. As stock markets plunged, investors turned their attention away from new acquisitions and toward shoring up their existing portfolio companies. It seemed like the industry-wide pipeline of deals was in danger of drying up. “I remember last year telling my CEOs, best estimate, I think our business will be down 50%, and I’d be thrilled if that was the case,” Aversano said. Rarely has he been happier to be proven so wrong. Deal activity did tick down during the second quarter of last year. But sooner than anyone expected, the market began to recover. In the end, Aversano’s business actually increased in 2020. And in 2021, acquisition activity of every kind is soaring to unprecedented heights.