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Our briefing for Friday April 16, 2021:
Apr 16, 2021 4:08:18 PM
- In the United States, the Biden administration announced Friday it would spend $1.7 billion to expand the country’s ability to track coronavirus variants. “At this critical juncture in the pandemic, these new resources will help ensure states and the CDC have the support they need to fight back against dangerous variants and slow spread of the virus,” White House COVID-19 Testing Coordinator Carole Johnson said. The money, which will be taken from the last pandemic relief package, will go toward sequencing the genomes of coronavirus samples, creating six new genomic epidemiology centers and building an infrastructure to unify how sequencing data is shared an analyzed.
- In Canada, CTV news is reporting Ontario Premier Doug Ford’s government, via their ministry of health, has sent a letter to every other province and territory asking for help with health-care resources. However, it appears mixed messaging is being sent as during a news briefing on Friday, Prime Minister Justin Trudeau said the federal government was willing to offer that help in the form of the Canadian Red Cross with their mobile vaccination teams and sending aid to hospitals and long-term care homes. Almost immediately, the Ford government responded, forgoing the help offered, stating unless it came with more supply (vaccines) the Red Cross wasn’t needed. “We do not have a capacity issue, we have a supply issue,” said Premier Ford’s office in a statement. The latest modelling was released for Ontario in regard to their COVID-19 cases and it doesn’t look good – even with ongoing vaccination efforts – the province could see a worst-case scenario of 18,000 new infections per day by the end of May if current trends continue. Ontario reported just over 4,800 cases on Friday.
- The United Kingdom government is insisting the red list of countries is under “constant review” amid concerns of a new variant popping up in the country that was first identified in India. The variant, known as B.1617, has been confirmed in 77 cases in the UK, including some in London. Prime Minister Boris Johnson is set to visit India later this month, despite concerns over the variant and surging case numbers in India. Elsewhere, The Guardian is reporting senior government officials are raising concerns about the mass expansion of rapid coronavirus testing as England opened up earlier this week. Figures produced by government officials estimate only 38% of self-reported tests are thought to be accurate, based on the current prevalence of the disease. Last week, Prime Minister Johnson urged everyone in England to take two rapid-turnaround tests a week.
- In Germany, Chancellor Angela Merkel is reported to be facing an uphill battle in her push for the widening of powers as COVID-19 cases surge in the country. Addressing legislators in the lower house on Friday, Chancellor Merkel was interrupted by heckling from Germany’s far-right AfD party, which has vocally and persistently opposed COVID-19 lockdowns. The 16 state governments are also reluctant to cede authority over healthcare to the federal administration. If the bill is passed, Chancellor Merkel’s government can tighten restrictions, even if regional leaders resist them.
- China posted a 18.3% first quarter year-to-year growth, the strongest since the country began keeping records in 1992. The large jump reflects the deep slump the world’s second largest economy suffered when Wuhan became ground zero for the coronavirus pandemic a little over a year ago. First quarter retail sales jumped by 34% compared to 12 months ago, while fixed-asset investment in urban areas gained nearly 26% and industrial production increased by more than 24%. Economists have forecasted China’s GDP should grow by 8.9% in 2021.
- Reuters is reporting a vocal critic of Brazil’s President Jair Bolsonaro is expected to lead a congressional inquiry on the government’s handling of the coronavirus pandemic. Sources, requesting anonymity because the decision is not final, are saying Renan Calherios, a former president of the Senate, is expected to lead the inquiry. Calherios will be in charge in suggesting what hearings take place and ultimately be responsible for drafting the final report, with proceedings expected to start in the next week or two. Brazil currently has the world’s second-worst death toll from the pandemic overall and currently the highest number of daily deaths anywhere.
Covid-19 – Due Diligence And Asset Management
Wall Street Can’t Stop Smashing Records While Pandemic Lingers
Brief : The U.S. struggled to emerge from the pandemic, and its biggest bank broke an earnings record. JPMorgan wasn’t alone -- Citigroup and Morgan Stanley did the same. And Goldman Sachs? Yes, Goldman too. Wall Street thrived during 2020’s year of global catastrophe, and it’s doing even better in 2021. JPMorgan Chase & Co.’s soaring investment-banking fees boosted profit to US$14.3 billion, the most the centuries-old firm has ever earned in a single quarter. Citigroup Inc., where fees from underwriting shares quadrupled, saw record quarterly profit of US$7.94 billion. And Morgan Stanley posted its highest net revenue yet. And Goldman Sachs Group Inc.’s US$17.7 billion of revenue and US$6.84 billion of earnings both set records in a quarter of Reddit-fueled stock-market mania. Fees from putting together deals for companies helped lift investment-banking revenue to a record US$3.77 billion, while revenue for Goldman’s asset-management arm reached a high of US$4.61 billion. Other lenders had records too. Bank of America Corp.’s investment-banking fees climbed more than 60 per cent to a record US$2.25 billion. It also helped that banks released money from the stockpiles they had set aside for loan losses. Even at Wells Fargo & Co., plagued for years by scandal, profit soared sevenfold -- but not to a record.
Pandemic Destroyed Fewer U.S. Firms than Feared, Fed Study Shows
Brief: Fewer than 200,000 businesses in the United States may have failed during the first year of the COVID-19 pandemic, a lighter toll than initially feared and one that may have had relatively little impact on unemployment, according to Federal Reserve research. The figure contrasts with the early forecasts that the pandemic would leave America’s “Main Street” desolate as well as with polls that continue to show large percentages of U.S. small business owners are worried about their survival. Perhaps 600,000 businesses, most of them small firms, fail in any given year, and U.S. central bank researchers estimated that from March 2020 through February of this year the figure has been perhaps a quarter to a third higher. That included 100,000 “excess” failures among firms engaged in close-contact services such as barbershops and nail salons, a sector described by the Fed research group as the sector hardest hit by the economic fallout from the pandemic. While potentially devastating for the owners and employees of those firms, “relative to popular discussion … our results may represent an optimistic update to views about pandemic-related business failure,” the authors wrote.
The Biggest Alternative Firms Will Make More Money From Fees in 2021
Brief: Major alternative asset managers will rake in higher fees over the next couple of years as investors continue to flock to alternative investments, according to Morgan Stanley equity analysts. In their preview of publicly-traded alternative asset managers’ first quarter earnings on Friday, the analysts predicted fundraising will drive 17 to 18 percent of average fee-related earnings growth in 2021 and 2022. In addition, they anticipated an increase in gross realized performance fees of 56 percent in 2021 and 33 percent in 2022. According to the Morgan Stanley analysts, alternative investment firms are better positioned to benefit from the economy recovery compared to traditional asset managers, given the acceleration in mergers and acquisitions, initial public offerings, and SPACs, or special-purpose acquisition companies. “The structural growth story of alts weathered the pandemic much better than feared, and now as the economy transitions into a growth stage, demand for alternatives remains intact driven by a low-rate backdrop and asset owners struggling to meet return targets that’s leading to an increasing willingness to trade liquidity for returns that could drive fundraising above our base case,” wrote analysts Michael Cyprys, Peter Kaloostian, and Ian Buchanan.
Fed’s Waller says U.S. Economy ‘Ready to Rip’ with Strong Growth
Brief: The U.S. central bank should continue to maintain monetary stimulus even as the U.S. economy is starting to experience rapid growth, said Federal Reserve Governor Christopher Waller. “Just because the growth rates are really good and everything’s looking like we’re heading out in the right direction, we’re still trying to make up a lot of ground,” the most recent addition to the Fed’s board told CNBC in an interview on Friday. “We’ve got a long way to go. There’s no reason to be pulling the plug on our support until we’re really through this.” Waller, the former research director of the St. Louis Federal Reserve, was sworn onto the board in December after the U.S. Senate confirmed his nomination by former President Donald Trump. Waller’s remarks follow comments earlier this week by Chair Jerome Powell that have reinforced the message that policy makers will not be in a hurry to withdraw support even as the economy rebounds. They enter their blackout on public comment at midnight Friday ahead of the April 27-28 meeting of the Federal Open Market Committee.
Polar Capital Bounces Back From Covid Lows as Assets Surge to £21bn
Brief: Polar Capital has bounced back from its Covid lows with assets surging to a record £20.9bn in the last 12 months. In an update ahead of its final results the Aim-listed manager said assets under management had jumped 10% over the quarter to 31 March and 71% from £12.2bn a year ago after the Covid crisis wiped £2bn from its total. It has now doubled the size of its business over three and half years which chief executive Gavin Rochussen said was “ttestament to our strategic focus of offering a diversified range of funds whilst maintaining a rigorous focus on performance and active management”. Polar’s shares were up 1.6% at the time of writing, hitting a record high of 734p. The £8.7bn boost to AUM over the past 12 months was driven by £2.1bn in net flows, a stark contrast to 2019’s £1.2bn worth of redemptions, as well as £5.2bn from market movement and fund performance and £1.7bn from acquisition-related activity. This more than offset the £301m loss from the closure of the Polar UK Absolute Equity fund which was wound down due to the poor health of manager, Guy Rushton, who subsequently passed away.
Apollo Weighs Florida Outposts as Escape from New York Heats Up
Brief: Apollo Global Management Inc. is considering opening additional offices in Florida and elsewhere as it seeks to lure and retain talent in a world upended by the pandemic. The private equity firm is weighing outposts in Miami and West Palm Beach, as well as an office elsewhere in the U.S., and another in Europe, said spokeswoman Joanna Rose. Apollo, which will retain its New York headquarters, recently surveyed employees about where they prefer to work as part of a strategy to attract a broader talent pool, she said. Apollo, with 1,729 employees at year-end, has been gathering feedback over the past year as the pandemic forced companies to rethink how their employees work. Many are relocating or experimenting with more flexible work arrangements. Apollo is among those to test giving employees the option of working remotely two days a week. The pandemic has also prompted Wall Street firms to consider moving staff to locales with no state income taxes, such as Florida and Texas. This year, Goldman Sachs Group Inc. asked managers to identify employees who wish to relocate to West Palm Beach. Several hedge fund firms, including Elliott Management Corp., Citadel and Point72 Asset Management, announced plans to establish offices in Florida.
