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Our briefing for Friday February 19, 2021:
Feb 19, 2021 4:05:27 PM
- In the United States, President Joe Biden made his debut on the world stage – albeit virtually as a G-7 meeting was held on Friday. The leaders of America, Canada, United Kingdom, Germany, France, Italy and Japan agreed to pledge $4 billion to global COVID-19 vaccine initiatives, as well as sustaining government spending to help economies recover from the coronavirus pandemic. “We will continue to support our economies to protect jobs and support a strong, sustainable, balanced and inclusive recovery,” the G-7 leaders said in a statement. “Recovery from COVID-19 must build back better for all.”
- In Canada, the federal government announced on Friday it will extend the Canada Recovery Benefit (CRB) and Canada Recovery Caregiving Benefit (CRCB) by another 12 weeks, as some recipients faced a cut-off by March 31st. The leading Liberal government also extended the Recovery Sickness Benefit from two weeks to four and broadened the claimant period for employment insurance from 26 weeks to 50 weeks. Extending these programs will cost the government approximately $12.1 billion - $6.7 billion to stretch the recovery benefits and $5.4 billion for the changes to employment insurance. All of these changes as noted by Canada’s employment minister are contingent on passing new legislation and with that, support from the opposition parties as the Liberals are a minority government.
- In a ruling on a lawsuit Friday filed by three members of parliament, the United Kingdom government failed to properly disclose the details of coronavirus-related contracts. Judge Martin Chamberlain said in his ruling that Health Minister Matt Hancock failed to comply with government transparency policies, and added Hancock, “spent vast quantities of money on pandemic related procurements during 2020. The public were entitled to see who this money was going to, what it was being spent on, and how the relevant contracts were awarded.” Prime Minister Boris Johnson and his government have faced multiple lawsuits since the onset of the pandemic ranging from the availability of medical equipment to student exam results.
- In the Netherlands, the courts are expected to decide next week whether ministers lawfully used emergency powers to introduce a curfew law due to the coronavirus. The Court of Appeal in The Hague heard a government appeal on Friday after a lower court earlier in the week said the government’s curfew should be stopped. The appeals court verdict is unlikely to reverse the curfew because it was approved by MPs in parliament on Thursday. What this has done is left people in a state of confusion with police stopping to hand out fines over the past few days because the situation is so unclear.
- France’s President Emmanuel Macron is urging the rest of Europe and the United States to send enough COVID-19 vaccines to inoculate healthcare workers in Africa, or risk losing influence to Russia and China. Macron made the appeal earlier in the week, urging the rest of Europe and America to allocate up to 5% of their current vaccine supplies to developing countries in an effort to avoid acceleration of global inequality. The World Health Organization said on Thursday that nations producing COVID-19 vaccines should not distribute them unilaterally and instead donate them to the global COVAX scheme to ensure fairness.
- The Wall Street Journal (WSJ) is reporting China’s Sinopharm COVID-19 vaccine was secretly given to VIPs – months ahead of health workers and other vulnerable groups. The WSJ lists Peru, the Philippines and Uganda as countries where powerful politicians and well-connected officials jumped the line. For instance, in Peru, it was revealed that government consultants, lobbyists, cabinet ministers, the former president and his family were inoculated in September before the vaccine was even approved by Peruvian authorities. China, for their part said earlier in the week at a United Nations conference that the country never seeks economic benefits or political conditions from its vaccines.
Covid-19 – Due Diligence And Asset Management
Fed Says Policy Providing ‘Powerful Support’ to U.S. Economy
Brief : Federal Reserve actions will continue to bolster the U.S. economy as it battles the Covid-19 pandemic, the central bank said Friday in its twice-yearly update to Congress. “Monetary policy will continue to deliver powerful support to the economy until the recovery is complete,” the Fed said. The report was published on its website ahead of Chair Jerome Powell’s testimony before the Senate Banking Committee on Tuesday and the House Financial Services panel a day later. Fed officials have signaled they will hold interest rates near zero at least through 2023 and last month repeated they would keep buying bonds at a monthly pace of $120 billion until “significant further progress” had been made on employment and inflation. On an optimistic note, the Fed said data show a pickup in employment through early February in the hard-hit leisure and hospitality sector -- which includes restaurants, entertainment venues, and hotels. The Fed said data on new-business applications started to pick up in the summer. Nevertheless, other data show that services spending remains restrained, the report said. The Fed noted that job losses in the pandemic have fallen disproportionately on low-income workers, those without a college degree, Americans of color and mothers. These groups also still have the most ground left to make up as economic activity remains suppressed.
UK Equities Set to Revive as Vaccine Roll-Out Boosts Economic Recovery
Brief: Asset managers are preparing for a rebound in UK equities, as an easing of coronavirus restrictions is expected to follow a swift roll-out of vaccinations. Last week, the chief economist of the Bank of England Andy Haldane said that the UK economy is “like a coiled spring” with “enormous amounts of pent-up financial energy waiting to be released” once the effects of the mass vaccination programme kick in. The UK economy shrank by almost 10 per cent last year, resulting in a contraction more than twice as large as any on record, said the Office for National Statistics. The IMF expects the UK economy to expand by 4.5 per cent this year, and another 5 per cent in 2022. At the end of January, London-headquartered asset manager Schroders, upgraded its outlook on UK equities to ‘positive’. “We upgraded UK equities as we expect it to benefit as the global recovery broadens into multinational and commodity-sensitive markets,” wrote Schroders, noting strong recent gains from oil and gas and basic materials companies. The FTSE All-Share index posted negative returns in January as companies in the financials, industrials, and consumer goods sectors all weakened.
Sovereign, Pension Funds Double Down on Private Debt Amid Pandemic
Brief: Sovereign wealth and public. pension funds are bolstering their funding of private debt, with close to $9 billion committed since the COVID-19 crisis as they hunt for yield and their ample liquidity allows them to take on more risk than banks. Most recently, Saudi Arabia's Public Investment Fund said last week it had become an anchor investor in a new $300 million shariah credit fund. Queensland Investment Corp (QIC), an investment arm of the Australian state, last month became the latest state-owned investor to launch a private debt team. Last year marked a tricky time for the asset class. Private-debt fundraising declined substantially and commitments to direct lending, the largest chunk of it, fell by more than half. But as the uncertainty surrounding the pandemic lifts, activity is expected to pick up in 2021. State-owned investors with their deep pockets and long-term investment horizons are at the forefront. "Now we are seeing real interest from sovereign and pension funds that wasn't there a couple of years ago," said Antoine Josserand, head of business development at pan-European private credit manager Pemberton Asset Management, which counts both types of investors as clients. "It's a reflection of the fact that they recognise the merit in terms of diversification of their alternative asset bucket. Others, as part of their fixed-income portfolio, are trying to find the best relative value they can in the current negative rate environment."
Hamilton Lane’s CEO Sees ‘No Chance’ of a Recession This Year
Brief: Hamilton Lane Inc. is putting the probability of an economic downturn this year at zero, according to Chief Executive Officer Mario Giannini. “There is virtually no chance that there is a recession in 2021,” Giannini said Thursday during the firm’s annual market overview. “We’re not going into a downturn, and in fact we may have an even stronger environment than people expect.” The Bala Cynwyd, Pennsylvania-based alternative-asset manager, which oversees about $657 billion, believes that central banks will continue to plow more money into the system to hold up markets. “When you look at what governments are doing in the U.S., in Europe, everywhere -- they are saying this pandemic was no one’s fault and we are not going to allow economies to turn down and not do something about it,” said Giannini. “So we think they are going to continue to provide enormous fiscal stimulus through this year.” Giannini said interest rates will remain low for a longer period of time than expected. He did predict one wild card: the possibility of an inflation scare from pent-up demand for a return to pre-pandemic life with outings such as eating at restaurants and taking trips driving “an enormous amount of activity.”
Ackman Details 2020 Performance, Names Female Investment Team Member
Brief: Activist hedge fund manager William Ackman, whose bets on companies are closely watched, updated investors on how his flagship fund earned a record 70.2% return in 2020 on Thursday in a socially distanced way by sending out a 57-page presentation. Normally this would be one of the rare occasions where investors could pepper the billionaire investor and his partners in person with questions about markets and individual companies over dinner in New York. Ackman has plenty to celebrate after his Pershing Square Capital Management put up a second straight year of record returns in 2020. In 2019 the fund returned 58.1%. And 2021 is off to a strong start with an 8.1% return. Because of the COVID-19 pandemic however, Ackman and his team continue to work remotely, something they started over a year ago, and there will be no public champagne cork popping or dinner tonight. It was only in 2018, over dinner, that Ackman told investors that he would stop jetting around the world to meet with investors throughout the year. He was going to focus more on researching new ideas instead of acting as his firm’s chief marketer. For investors, the shift has paid off, and Ackman called 2020 and “outstanding year” in the presentation.
