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Our briefing for Friday April 23, 2021:
Apr 23, 2021 4:33:08 PM
- In the United States, Reuters is reporting giant American landlords are pursuing evictions despite the Centers for Disease Control and Prevention’s (CDC) ban against it. Comprehensive nationwide figures aren’t available, but according to the Princeton University Eviction Lab, more than 318,000 American households have faced eviction proceedings during the pandemic. The research project tracks 27 cities across the United States including Phoenix, Milwaukee and Dallas. Moody’s Analytics estimates by May, an estimated seven million renters will owe $40 billion in back rent, utilities and fees. Before the pandemic, about 900,000 American households were evicted each year.
- Canada’s Public Health Agency released their latest modeling data on Friday, and it is suggesting the stringent health measures put in place have slowed the rapid spread of COVID-19. During a news briefing, Canada’s Chief Public Health Officer Dr. Theresa Tam noted province wide lockdowns in British Columbia, Ontario and Quebec, albeit only implemented in recent weeks, are already showing results. “For the first time in many weeks, the epidemic has dropped out of a growth pattern. We have reassurance that strengthened measures can slow growth where more contagious variants are circulating, but sustained measures and individual practices are the key to keeping growth down,” said Dr. Tam.
- The United Kingdom’s emergency pandemic support measures sent the country’s annual borrowing skyrocketing to its highest level not seen since World War II. The latest data released Friday showed public sector net borrowing – the state’s preferred measure of the deficit – ballooned to a record of £303.1 billion in the year to March. The numbers are equivalent to 14.5% of the UK’s GDP – the highest proportion since 1946 when it stood at 15.2%. Prime Minister Boris Johnson’s government has spent £352 billion in emergency COVID-19 measures – most to a furlough scheme that has paid a large share of private sector wages for millions of Britons.
- After receiving the green light from all levels of government earlier in the week, Germany’s new “emergency brake” rules for areas with high COVID-19 infections rates are expected to start as early as Saturday. Due to the high rate of coronavirus spread in the country, Health Minister Jens Spahn said these new rules would affect almost the entire country. However, it was not all bad news for Germany. Spahn added the country’s vaccination campaign was now gathering pace with one in four Germans now having at least one dose of coronavirus vaccine and the health minister expects to offer inoculations to all adults by June.
- Australia’s city of Perth, as well as neighbouring Peel region will enter a snap three-day lockdown from midnight on Friday after two people tested positive for COVID-19. The snap lockdowns are nothing new for Australia as this has been the decision of choice by most state governments for months now as their vaccination program isn’t where they would like it to be. The two cases were the first signs of community transmission in the country in a week. The snap lockdown will close down most public spaces, including pubs, restaurants, places of worship, libraries and cinemas. Several sporting events though were given the green light to go ahead on Friday evening with masks being mandatory.
- India has endured its worst week since the coronavirus pandemic began. On Friday, the country reported more than 332,000 new cases, setting a world record for the second straight day. Deaths were said to be 2,263 over a 24-hour period, however that number is likely much higher. All of this suffering is causing India’s healthcare system to buckle under the pressure. Dr. Atul Gogia, a consultant at the Sir Ganga Ram hospital in Delhi, told the BBC there had been a “huge surge” in patients leaving no space in the emergency room. “We do not have that many oxygen points. Whatever oxygen points are there, they’re full. Patients are coming in with their oxygen cylinders or without oxygen. We want to help them but there are not enough beds and not enough oxygen points even to supply them oxygen if it is there,” said Dr. Gogia.
Covid-19 – Due Diligence And Asset Management
U.S. Business Output Expands Most on Record, IHS Markit says
Brief : A gauge of output at U.S. manufacturers and service providers reached a record high in April, adding to evidence of stronger demand that’s fueling inflationary pressures. The IHS Markit flash composite index of purchasing managers at manufacturers and service providers increased to 62.2, the highest in data back to 2009, from 59.7 a month earlier, the group reported Friday. Readings above 50 indicate growth. An easing of Covid-19 restrictions and robust sales are driving faster growth in business activity, including a record pace of expansion in orders placed with the nation’s factories, the group’s data showed. However, supply shortages and shipping challenges are complicating manufacturers’ efforts to meet demand while driving up materials costs at the same time. Factories and service providers are having greater success passing along higher input costs. The IHS Markit’s composite gauge of prices received rose to a record in March. “The worsening supply situation is a concern for the outlook, especially in relation to prices,” Chris Williamson, chief business economist at IHS Markit, said in a statement.
Commentary: Maintaining Corporate Culture in an Era of Remote Work
Brief: As I speak to senior executives in financial firms, I hear a lot of concerns about the difficulties of maintaining corporate culture in an era of remote work. Employees used to absorb the organization's culture by coming to the office and observing the behavior of its leaders — how they dress, how they talk and how they treat their subordinates. But subtle nuances of body language and voice intonation can easily be lost on remote workers facing a day of back-to-back video calls. The cultural paradigm of remote work is still being defined. However, if you follow the four steps below for remote work, plus periodic requirements for in-person meetings, you can create a vibrant culture well designed for your organization. While company culture is hard to define, it is clearly different from organization to organization. Some companies put a high priority on spending time with family. Other companies encourage employees to be entrepreneurial and take calculated risks. Still, other companies are dedicated to building long-term relations with their customers, even at the expense of lower quarterly profits. As companies recognize that remote work is here to stay, either full or part time, managers need to proactively take actions to preserve and reinforce the key elements of their corporate culture.
Finding New Ways of Navigating the Changing Landscape
Brief: “As hedge funds continue to adapt to changes caused by Covid-19, the infrastructure firms employ will have to continue to be relevant and sufficient. Alongside this, firms will have to keep up with the increased levels of reporting and regulatory requirements that institutional investors expect,” comments Craig Stanley, CFA, Chief Operating Officer, Enko Capital. In fact, from an operational standpoint, the firm has deepened and extended its operational and IT infrastructure to ensure the team is able to work remotely for as long as necessary. Although Enko made a seamless transition to remote working, it has posed challenges to capital raising. “In-person meetings and due diligence are now conducted virtually. This has caused a decline in progress with certain investors who wish to complete their due diligence in-person. Having said this, Enko was still able to onboard a number of new investors, including a NYSE-listed US corporate pension fund, in 2020,” observes Stanley. From an investment perspective, Enko adapted to the uncertainty caused by the pandemic. In terms of strategy, the investment team sought new ways to navigate the ever-changing market conditions and took advantage of the opportunities resulting from these changes. In 2020, this led to the Enko Africa Debt Fund producing its best annual return since inception.
M&G Property Portfolio Re-Opening Leaves Two Still Frozen Property Funds in the Spotlight
Brief: Managers of listed property vehicles have spied an opportunity to flag the benefits of the closed-ended structure as two open-ended property funds remain frozen and the industry awaits the outcome of the Financial Conduct Authority’s consultation on liquidity. Earlier this week, the authorised corporate director of the M&G Property Portfolio announced the fund will reopen on 10 May after almost 17 months of being frozen. The fund was shut to trading in December 2019 due to liquidity reasons after its independent valuer slashed the value of its retail holdings, prompting a wave of redemptions. M&G’s fund reopening leaves just the Aegon Property Income and the Aviva Investors UK Property funds still closed – the only two out of the raft of funds forced to suspend trading last March as the Covid pandemic made it difficult to value underlying assets. Aegon Asset Management says the fund remains on course to reopen in Q2 and the managers continue to make good progress with asset sales in order to raise liquidity. Aviva Investors says the fund remains closed while it takes action to ensure a flow of liquidity. “We are mindful that the fund could experience a higher-than-usual volume of redemption requests if it was to reopen for dealing,” it says.
€123 (US$150.7) Billion Capital Raised for Global Non-Listed Real Estate Investment in 2020
Brief: Despite the outbreak of the COVID-19 pandemic, global real estate investment managers raised at least €123 billion (US$150.7 billion) of new capital for non-listed real estate in 2020, according to the Capital Raising Survey 2021, published today by ANREV, INREV and NCREIF. However, total capital raised in 2020 fell relative to the record high of €196 billion (US$220.3 billion) attained in 2019, largely as a consequence of the pandemic. Nearly a third of managers said they hadn’t raised any new capital in 2020, with many citing a lack of available product as the main reason. The number of vehicles raising capital also dropped year-on-year from a record 982 in 2019 to 699 in 2020. Despite this slowdown, on average the capital raised by individual vehicles was higher than in 2019 except for those with a North American regional strategy. The average capital raised for each vehicle with a global strategy was €0.8 billion (US$ 1 billion) versus €0.5 billion (US$0.6 billion) in 2019. Similarly, investment activity remained robust with 52%% of capital raised in 2020 already deployed. Furthermore, more than two thirds (76%) of investment managers expect an increase in capital raising activity over the next two years.
Research and Development: An Investment Thesis for UK Recovery
Brief: But despite the UK’s strengths, Research & Development (R&D) spending lags many peers and draws attention to the opportunity to invest smarter and benefit from the economic recovery. Government support, eg, through R&D tax credits, is a timely lever to help drive higher returns. The economic benefits of R&D can be sizeable and persistent. For example, every pound spent on medical research delivers an annual return of about 25 pence, forever. These benefits flow through the economy, and so the government policy is to support R&D. But businesses benefit too, for example the UK government’s Innovation Report estimated that firms that consistently invest in R&D are 13 per cent more productive. So the opportunity is for investors to leverage this as part of their investment thesis. Currently, the UK only invests the equivalent of just 1.7 percent of GDP on R&D – well below the OECD average of just over 2.3 per cent. The British government has set a target of 2.4 percent by 2027. But even then, the UK would still fall short of leading nations Israel (4.9 per cent), South Korea (4.3 per cent) and even the US (2.7 per cent). The UK needs to set its sights higher to deliver more economic benefit.
