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Our briefing for Friday April 17, 2020:
Apr 17, 2020 3:51:41 PM
- United States President Donald Trump outlined his government’s plan of reopening the country. President Trump stated the federal government has three levels of guidelines for reopening, but it will be completely up to individual states on how and when they want to reopen. Phase one of the government’s plan includes schools that are closed, should remain closed and people who can work from home, should continue to work from home. Venues like restaurants and gyms can open as long as social distancing measures remain in place, but bars should remain closed. Phases two and three gradually decrease the recommended restrictions. President Trump noted the guidelines aren’t mandatory and some states could usher in phase one as early as Friday if they’d like. However, New York State Governor Andrew Cuomo lashed out at the federal government Friday during his news briefing saying states like his have received no federal funding and need more help when it comes to coordinated testing.
- In Canada, Prime Minister Justin Trudeau announced the government will spend $1.7B to clean up abandoned oil and gas wells. This move covers two bases for the government; it checks off an environmental focus and maintains jobs in the provinces of Alberta, Saskatchewan and British Columbia. Energy jobs in Alberta, an oil rich province, have especially taken a hit during the coronavirus pandemic.
- A professor of International Child Health and Director of the UCL Institute for Global Health said the United Kingdom government moved too slow on the coronavirus outbreak. Anthony Costello said the government’s indecision could cause up to 40,000 deaths in the UK once the first wave of the pandemic is over. Government officials have defended their response to the coronavirus, citing they followed scientific advice and responded with urgency. The UK’s death toll is closing in on 15,000.
- Wuhan China, ground zero of the epidemic, has revised its death total adding nearly 1,300 new deaths due to the coronavirus. This number doubles the initial number given and provides ammunition to those who believed China were not very forthcoming in their totals and how serious the situation was. The coronavirus also caused the Chinese economy to contract by 6.8% in the first quarter of 2020. This is the first time China has seen its economy shrink in the first three months of the year since it started recording quarterly figures in 1992.
- After weeks of infighting, Brazil’s President Jair Bolsonaro has fired his Health Minister, Luiz Henrique Mandetta in the midst of the coronavirus pandemic. Mandetta was one of Brazil’s biggest endorsers of social distancing, supporting governors’ decisions to shut down schools and businesses. This was in direct contrast to what Bolsonaro wanted, believing the economic fallout would be far worse. Bolsonaro has described the coronavirus as nothing more than a “little flu”. The president has replaced Mandetta with oncologist Nelson Teich, a man who supported Bolsonaro during his campaign to become leader of the country.
Covid-19 – Due Diligence And Asset Management
Renaissance Says Quant Models Misfired During March Mayhem
Brief: For Jim Simons, history is repeating itself, at least when it comes to meltdowns in the quant fund world. Computer models at Renaissance Technologies, the firm founded by the mathematician and former codebreaker, misfired when volatility surged this year, contributing to a first-quarter loss at its largest hedge fund. The beta models, which help determine portfolio exposure at funds for outside investors, “in recent volatile markets have not performed as expected,” Renaissance said in a March 30 filing. The setback for one of the industry’s best known hedge funds is another example of the turmoil wrought by the coronavirus. The pandemic has stalled global commerce, ended a record bull run for stocks and forced the Federal Reserve into an unprecedented multitrillion-dollar rescue of financial markets.
British Hedge Fund Man Group says Assets Fell 11.5% in Q1
Brief: British hedge fund manager Man Group (EMG.L) said on Friday that its funds under management fell 11.5% to $104.2 billion in the first quarter as the novel coronavirus hit global markets.Man Group said the firm lost $10.7 billion on negative investment performance and $3.3 billion from currency and other movements.The firm’s long-only computer-driven and discretionary strategies, which bet on stocks rising, suffered the most during the quarter, losing $10 billion in investment movement and another $1.1 billion in outflows.Three of Man’s computer-driven long-only strategies were down more than 20% for the three months to March 31.
BlackRock Becomes Key Players in Crisis Response for Trump and the Fed
Brief: As President Donald Trump grappled with the coronavirus outbreak last month, he boasted at a press conference of tapping a secret weapon for advice: Larry Fink. The chief executive of BlackRock Inc. provided insight to Trump on coping with the fallout from the pandemic -- and once again put his firm at center of a white-hot economic emergency. BlackRock is no stranger to stepping in during a financial crisis cleanup. It played a similar role in 2008. But back then, it was a smaller firm with a focus on fixed income, closer to Pacific Investment Management Co., which had renowned money managers Mohamed El-Erian and Bill Gross at the helm. More than a decade later, the investing landscape has shifted. BlackRock has a premiere role in helping the Federal Reserve stabilize markets. The central bank has hired the firm to help manage its economic relief efforts. Beyond U.S. borders, the Bank of Canada has called on the asset manager as it shapes its response to the meltdown.
Zimmer’s Energy Hedge Fund Down 55% This Year After March Plunge
Brief: The energy fund at Zimmer Partners posted its worst quarter ever after sinking about 46% in March as oil markets plunged.The fund dropped 55% in the first quarter after losing money each month, according to an investor letter seen by Bloomberg. The fund, which ran $1 billion at the end of January, now has about $500 million in assets. The oil price war between Russia and Saudi Arabia ravaged the energy industry last month and helped send Brent crude to its lowest in nearly two decades. Making matters worse, the coronavirus pandemic has wiped out demand for crude amid an oversupply threatening the survival of oil producers and the economies of oil-dependent nations.
Vanguard Latest to Close Money Fund to New Investors
Brief: Vanguard Group said on Thursday it closed its $39.5 billion Treasury Money Market Fund to new investors, becoming the latest big asset manager looking to protect the returns of existing clients. Restricting the flow of new money helps reduce the amount of new securities paying lower yields that Vanguard will need to purchase, slowing the rate of dilution to returns for current shareholders. “Vanguard is taking this prudent step to temper cash flows and will continue to monitor the Fund and employ additional measures if needed,” the company said in a statement. New money market investors would still have access to other funds in its $414 billion lineup, Vanguard said. Other fund companies have taken similar steps including Fidelity Investments on March 31.
UK Accounting Industry Cuts Partner Pay and Furloughs Staff
Brief: The UK accounting industry has been plunged into its worst crisis in over a decade as the “Big Four” firms slash partners’ pay by up to a quarter and their mid-tier rivals furlough junior staff to cope with the fallout from the coronavirus pandemic. London-headquarteredKPMG,PwC,Deloitteand EY have reduced the amount of profits that are distributed to their partners each month by between 20 and 25 per cent to build up cash reserves and help survive a downturn in work. Partners at the UK arms of the four firms, which between them employ about 74,000 people, earned an average of £720,000 last year and undertake activities including company audits, tax and restructuring advice, and consulting on transactions.
