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Our briefing for Friday January 8, 2021:
Jan 8, 2021 3:54:05 PM
- United States President-Elect Joe Biden will aim to release every available dose of the coronavirus vaccine when he takes office in a little less than two weeks. The strategy differs from the current Trump administration whose plan is to hold back half of the vaccine output production to ensure second doses are available, which is the case with the Pfizer and Moderna vaccines. President-Elect Biden’s strategy doesn’t come without risks. On one hand, releasing all the vaccines will obviously boost the number of people who have their first vaccine, which will provide some immunity. However, both the Pfizer and Moderna vaccines are to be administered at specific intervals, according to their already performed trials, and vaccine manufacturing has not increased to the point many health experts had hoped. A study published in the Annals of Internal Medicine appear to be on the side of President-Elect Biden stating administering the first COVID-19 doses to more people instead of withholding supply may reduce the number of new cases.
- In a news briefing on Friday, Canadian Prime Minister called the state of the pandemic in the country “frightening”. The prime minister is vowing the number of Pfizer and Moderna vaccines, the two inoculations authorized for use in Canada, will “scale up” in February. According to CTV News, 124,000 does of the Pfizer vaccine were delivered to 68 sites across the country this week, with 208,000 more doses per week expected for the rest of the month. Prime Minister Trudeau’s latest update comes as Ontario’s top public health officials are saying the pandemic curve is going the wrong way and its Premier Doug Ford says it’s the most serious situation they’ve been in since the start of the pandemic.
- In the United Kingdom, the state of the coronavirus pandemic centered around travel on Friday. A study published in the journal Science said travelers coming from Spain and France contributed to the diversity of variants in the country’s latest COVID-19 outbreak. This news is coupled with the UK now requiring all passengers arriving in the country must prove they don’t have the coronavirus by showing a negative result within 72 hours of their departure. Under the new rules, anyone failing to produce evidence they don’t have COVID-19 will be fined 500 pounds and travellers arriving from countries not on the government’s open corridor travel list, will have to isolate for 10 days, regardless of their test results.
- In a televised address on Friday, Iran’s supreme leader said he was banning the purchase of coronavirus vaccines made by the United States and United Kingdom. “If their Pfizer manufacturer can produce a vaccine, then why do they want to give it to us? They should use it themselves, so they don’t experience so many fatalities. Same with the UK,” said Ayatollah Ali Khamenei. The decision made by Iran’s supreme leader will severely limit the country’s options for a vaccine as the country experiences the worst outbreak in the Middle East. Ayatollah Khamenei also claimed western drug companies tested vaccines on other countries “to see if they work or not.”
- Brazil is showing signs of another coronavirus surge as their death toll has passed 200,000. The country reported more than 1,500 deaths on Thursday, the highest since July 29th. Year-end festivities, which included large gatherings and a more contagious variant being detected in Sao Paulo are all reasons for the rise in cases. To make matters worse, the largest country in Latin America has yet to approve the use of a vaccine. Neighbouring nations such as Chile and Argentina have already started inoculations. Brazil is close to giving the green light to China’s Sinovac vaccine, which proved 78% effective in its latest trial.
- Similar to other countries throughout the world, Australia is changing their international travel rules in an attempt to keep the coronavirus and its new variants from entering the country. Prime Minister Scott Morrison told reporters on Friday after a meeting with his cabinet that passengers must wear masks on all international flights to Australia and on domestic routes. Any international traveler must return a negative COVID-19 test before they can board and the government will reduce the number of people allowed to arrive each week, which will prolong those Australians still waiting to return home.
Covid-19 – Due Diligence And Asset Management
Record Sum of Dry Power Ready for Pandemic-Hit Firms, ICG Says
Brief: Cash-rich private debt and equity providers are hunting for viable pandemic-hit businesses to fund, according to London-listed alternative asset manager Intermediate Capital Group PLC. “If a business has a shortfall purely due to Covid-19, there is plenty of capital to support them,” said Nicholas Brooks, ICG’s head of economic and investment research in a telephone interview. European private debt managers had almost $93 billion of capital available as of December 2020, with over $295 billion in the hands of private equity, according to data provider Preqin. That cash could help out a lot of companies bearing the brunt of the pandemic that have already tapped out government-backed emergency loans. It’s a relatively expensive option, but may be the only one open to some of the hardest hit sectors as parts of Europe enter their third lockdown. That means yet more pain for many of the firms identified by ICG in their analysis of financial data for around 500 private companies. Hardest hit were automotive and components, travel, hotels, restaurants and leisure, and retail, which endured months of almost zero revenues last year. “Private debt and private equity have record levels of dry powder,” Brooks added. “Funds aren’t the issue, it’s really whether a business is viewed as viable in the long-run.” It’s also a question of whether borrowers can afford the money on offer.
Flesh-and-Blood Hedge Fund Traders Prevailed in 2020’s Tumult
Brief: The pandemic has made one thing abundantly clear for hedge funds: Trading a once-in-a-century crisis is best left to humans. Funds that survive largely on their ability to place high-conviction bets made some of their strongest returns in decades last year. Some of the industry’s best-known names such as Brevan Howard Asset Management, Millennium Management and Andurand Capital Management soared past peers as stormy markets provided rich pickings. That’s thrown a wrench into the rise of computer-driven quant funds, which gobbled up assets year after year but couldn’t protect investors or make money in 2020. Algorithms largely failed to decipher the impact of a rapidly moving virus and the response from central banks to contain economic damage. The “narrative was: stock selection is dead, the future is all about indexing and quants and the blackbox and all that,” said Craig Bergstrom, chief investment officer at the $7.5 billion Corbin Capital Partners that invests in hedge funds. “It’s another kind of arms race and there are winners, but there are definitely also losers, and it’s not the future of active management.” The market selloff in March and subsequent recovery humbled some of the most sophisticated of quants last year -- most notably behemoths such as Renaissance Technologies, Winton and Two Sigma.
Investor Optimism Has Increased Since Start of Pandemic: Survey
Brief: Investor optimism has increased “significantly” since the start of the pandemic, according to a new survey. The Scotia Global Asset Management Investor Sentiment Index found that investor optimism spiked from a reading of 100 in May to 117 in November. The reading was even higher — 130 — among investors who use advisors. Eight-two per cent of investors who’d met with an advisor in the past six months said they felt more confident about their investments, compared to 56% of investors who hadn’t met with an advisor. The survey also found that 80% of investors who use advisors felt they were on track to meet their financial goals, and 90% were somewhat or very confident about funding their retirements. Scotia commissioned Environics to conduct an online poll of 1,024 investors with a minimum of $25,000 in household investable assets from Nov. 10 to Nov. 19, 2020. Online polls cannot be assigned a margin of error because they do not randomly sample the population.
Venture Capital Hits Record High in U.S. in 2020 Despite Pandemic
Brief: Venture capital backed companies in the United States raised nearly $130 billion last year, setting a record despite the COVID-19 pandemic, figures from data firm CB Insight released on Friday show. While the investment total is up 14% from 2019, the number of deals is down 9% to 6,022. And so-called mega-rounds, deals that are $100 million or higher also hit a record amount and number with $63 billion raised in 318 deals. “What we’re seeing is a ‘rich get richer’ phenomenon where successful, high momentum technology companies are vacuuming up most of the financing,” CB Insights chief executive Anand Sanwal told Reuters by email. He said that data showed a big drop in a very early stage investment called seed stage, and expected some of those companies that stand out to see “insatiable investor demand” with fewer competitors for the money. The trend of big investments doesn’t look like it will slow in 2021 as there is a lot of capital chasing investments, say some venture capitalists.
Commerzbank Takes Additional $2.6 Billion Hit From Pandemic
Brief: Commerzbank AG will take an additional 2.1 billion-euro ($2.6 billion) hit in the fourth quarter as the pandemic weighs on interest rates and drives up bad loans, pushing the lender deeper into the red as it readies a new turnaround plan. Commerzbank will write off 1.5 billion euros in goodwill on its books and set aside about 630 million euros for bad loans to reflect the impact of a second lockdown, according to a statement Friday. That’s on top of a 610 million-euro charge the Frankfurt-based bank announced last month to cover job cuts. Chief Executive Officer Manfred Knof, who took over this month, is preparing to unveil a radical restructuring after shareholders pushed out the previous leadership amid frustration with the slow pace of change. Knof and new Supervisory Board Chairman Hans-Joerg Vetter are now working on a more ambitious cost-cutting plan with about 10,000 jobs on the line, Bloomberg has reported. “After this balance sheet clean-up, we are well prepared for the road ahead of us,” Knof said in the statement. “Our goal is to make the bank more profitable in the long term.” Commerzbank shares fell as much as 4.1% after the announcement and were trading 3.1% lower at 12:56 p.m. in Frankfurt. They have fallen about 5% in the past 12 months.
These Are The Trends Experts Are Seeing In Hedge Funds Right Now
Brief: The COVID-19 pandemic has changed the way hedge funds do business, from raising money to investing and more. Some trends are here to stay, while others will change as the pandemic continues and eventually comes to an end. Craig Bergstrom, chief investment officer at Corbin Capital Partners, said in an email that active management had returned in 2020, exceptionally fundamental stock selection. He said results across the industry are mixed, but dispersion has meant that careful portfolio construction has been precious. "Broad hedge fund performance has certainly been disappointing in recent years," Bergstrom said. "Very low interest rates are a big part of that problem, but clearly another key factor is fund fees, which have come down, but not fast enough, which means they are consuming too much of the gross returns." He adds that it's not fair to compare hedge fund returns to stock market returns because it is nearly three times as volatile. However, in recent months, investment managers have finally started to have an easier time generating alpha. "The right hedge fund portfolio, though, has been able to deliver solid alpha, and attractive risk adjusted returns, which we think remains very attractive in a world where prospective fixed income returns are very low," Bergstrom said.
