Brief : The U.S. securities regulator on Friday said it would review actions that may “unduly inhibit” trading of certain securities and said it was closely monitoring potential wrongdoing amid recent price volatility in the U.S. stock market. Securities and Exchange Commission (SEC) officials warned against illegal “manipulative trading activity” and said they were working closely with other regulators to monitor the situation after a wild week of trading during which an army of small investors have driven a dramatic squeeze of Wall Street hedge funds in shares of GameStop Corp and other hot companies. “The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities,” the SEC said on Friday, following a statement earlier in the week it was monitoring market volatility. Online broker Robinhood earlier in the week placed disputed trading restrictions on certain shares, drawing ire from lawmakers and scrutiny from regulators. The firm had eased restrictions on Friday. “Our core market infrastructure has proven resilient under the weight of this week’s extraordinary trading volumes. Nevertheless, extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence,” the SEC said on Friday.
Brief: Canada’s economy showed surprising strength in the final two months of 2020, even amid a new wave of Covid-19 restrictions. Gross domestic product expanded 0.7% in November from a month earlier, Statistics Canada reported Friday in Ottawa, topping the 0.4% forecast of economists in a Bloomberg survey. A preliminary estimate from the agency showed GDP grew 0.3% in December, defying expectations for a contraction. Friday’s report is helping to ease concern about the economic costs from a second wave of lockdowns that has closed large parts of the country. Some analysts are even questioning whether a first-quarter contraction, which had been almost taken for granted, will even happen. “Today’s result for November and early read on December do indeed suggest that the economy overall is managing much, much better with this second stage of lockdowns,” Doug Porter, chief economist at Bank of Montreal, wrote in a report to investors. Porter said he’s raising his 2021 GDP forecast to 5%, from 4.8%, “as a direct result of this high-side surprise.” The unexpected resilience largely reflected gains in resource production and manufacturing. Growth in the fourth-quarter came in at about 8% annualized, according to Bloomberg calculations, above the 4.8% pace projected by the Bank of Canada. The Canadian dollar jumped on Friday’s report, gaining 0.7% to C$1.2740 against the U.S. currency at 10:31 a.m. Toronto time.
Brief: Demand to invest in funds which focus on environmental, social and governance (ESG) issues jumped in 2020, driving assets under management up 29% in the fourth quarter to nearly $1.7 trillion, industry tracker Morningstar said on Thursday. In a turbulent year marked by the effects of the COVID-19 pandemic, the surge in ESG assets was bolstered by a stimulus-driven market recovery and as investors increasingly looked for more resilient investments. Covering everything from how a company handles climate change or boardroom diversity to how a country is positioned to withstand the impact of changing weather patterns, the belief is that those with a good ESG score will perform better over time. The flows have also been helped by an accelerating push from governments globally to transition to a low-carbon economy, changing market rules and tax regimes to encourage climate-friendly investments, many of which are held by ESG funds. Given the strong demand, inflows into sustainable funds hit a record high during the fourth quarter, up 88% to $152.3 billion, with Europe-domiciled funds accounting for almost 80% of the total inflows, or $120.8 billion.
Brief: Real estate has proven resilient throughout the Covid-19 pandemic so far. Over the course of last year, global direct property funds saw their net assets grow, despite ripples of market turbulence felt across the investment industry. Data from Morningstar shows total net assets in ‘bricks and mortar’ funds reached nearly €247 billion in 2020 compared to around €243.5 billion in 2019. Meanwhile, assets invested in European ‘sustainable landscape’ direct property funds have increased from €2.5 billion in 2015 to nearly €12 billion by the end of last year. ESG is becoming an increasingly core focus in the real estate industry, with sustainability set to be a megatrend. There is a lot of space for improvement in the sector in terms of aligning structures with sustainability targets, however. A report by the Buildings Performance Institute Europe found that 97% of buildings in the EU need to be upgraded if they are to meet energy targets. Earlier in January, Aviva Investors announced plans to reach net zero emissions across its £47.3 billion real estate platform over the next 20 years, bringing green real estate goals further into the mainstream.
Brief: For Kuok Meng Xiong’s family office, 2020 was a bumper year with investments in technology startups like Bytedance Inc. doing well throughout the pandemic. Despite this good fortune and promises of a vaccine, the grandson of billionaire Robert Kuok remains wary about private deals in the year ahead. “We anticipate Covid may be protracted even with the vaccine, and travel may not go back to pre-March 2020 days so the early-stage startups would be challenging,” he said, stipulating that he only spoke for his tech-focused remit at K3 Ventures Pte and not his family’s Shangri-La hotel empire. It’s a view shared by many of his Asian family office peers. Government subsidies for jobs and loans that have helped prevent broader meltdowns are set to end in the coming months, and vaccines may take years to be fully deployed. When combined with continuing geopolitical strife between China and the U.S., that’s left many of the region’s wealthiest clans feeling anxious. “The key word is ‘uncertain,’” said Ben J Benjamin, co-founder at Genesis Alternative Ventures, which provides debt funding to startups. “A lot of the pain and the shock that was brought about by Covid-19 is going to come to the fore in 2021.” Their caution comes even as Asian economies begin to bounce back, led by China and India, and as the region’s stocks rally. It contrasts with the bullish forecasts of many capital markets specialists and Western family offices, with some even getting into risky assets such as Bitcoin. JPMorgan Chase & Co. is predicting the strongest global recovery in a decade if vaccine distribution plays out as expected.
Brief: Given the economic instability generated by the ongoing Covid-19 pandemic, European private equity deal activity showed remarkable resilience last year, according to Pitchbook’s 2020 European PE Breakdown. The report found that private equity deal volume rose to a new quarterly peak in Q4 last year, closing more than 1,200 deals for the first time. Both deal value and volume recorded third- and fourth-quarter decade-raging records, respectively, during what proved to be the worst economic climate since the Great Depression in Q2 2020, with 4,179 deals closing for a total of EUR449.1 billion. The European private equity industry held back towards the end of Q1 2020 after starting the year off on a high. As economic and political shocks including the Covid-19 crisis, world wide protests and Brexit chaos ensued, deal activity slowed down in March throughout June last year as GPs paused to reflect and review current portfolios, while holding off temporarily on looking at new deals. Year on year deal volume decreased by more than 30 percent during the second quarter in 2020 as managers focused elsewhere, such as PIPE and minority stake deals, due to lockdowns, restrictions on social gatherings and a sharp drop in global travel.