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Our briefing for Friday June 11, 2021:
Jun 11, 2021 3:43:54 PM
- In the United States, the New York Times reported on Friday that federal regulators are forcing Johnson & Johnson to scrap about 60 million COVID-19 doses at a troubled Baltimore, Maryland plant due to contamination. Back in April, the same Baltimore plant was shuttered after an inspection revealed several violations, including possible contamination of J&J’s vaccines with a key ingredient from AstraZeneca’s COVID-19 vaccine. According to the Times, about 170 million doses at the time were in question after the April inspection. The 10 million doses that could be salvaged this time around aren’t going to come with a ringing endorsement either. They will be distributed across the United States and other countries with a warning federal regulators couldn’t guarantee that the manufacturing plant’s operator, Emergent BioSolutions, followed good manufacturing practices.
- In Canada, the country’s most populous province, Ontario, was able to move into its first phase of reopening on Friday. Outdoor gatherings of up to 10 people and patio dining up to four per table are now permitted. Non-essential stores can also reopen, although with a 15% capacity and outdoor fitness classes are allowed. Ontario reported 574 new cases of COVID-19 on Friday, but a new record for vaccinations with close to 200,000. Elsewhere in the country, CBC is reporting, citing a government official, that Canada would share up to 100 million COVID-19 vaccine doses with the rest of the world that is struggling to meet their demands, as per the G7 agreement. More details are expected over the weekend on how the government plans to meet this target.
- In the United Kingdom, the British Medical Association (BMA) are calling on the government to delay the planned easing of restrictions on June 21st. The UK have seen almost 30,000 new cases of the Delta variant in the past week, with 8,125 recorded on Friday alone, the most since February. Dr. Chaand Nagpual, chair of the BMA Council, said that “relaxing all restrictions will undo the excellent work of the vaccine programme and lead to a surge in infections.” Britons will now sit through an anxious weekend and await word from Prime Minister Boris Johnson on Monday if he still plans to go through what has been dubbed “Freedom Day” on June 21st.
- During the G7 Summit, China remains top of mind as the leaders of the United States and the UK have vowed to support an independent investigation into the origins of COVID-19, “including in China”. United States President Joe Biden and UK Prime Minister Boris Johnson issued a joint statement, adding to comments made earlier by European Union leaders, urging China to permit inspectors “complete access” to all relevant sites and information related to the pandemic. Although China said it supported further research of the origins of the virus last month, Beijing officials have made it clear they feel as if they complied with World Health Organization investigators earlier in the year and that the “China” part of the investigation is over.
- In the Middle East, the International Air Transport Association (IATA) announced on Thursday its digital travel pass will go live in the region in the coming weeks. The news comes as Europe and the United States look to ease their travel restrictions. Qatar Airways, Emirates and Etihad Airways were among the first companies to start testing the IATA app back in January. The app would enable passengers to create a ‘digital passport’ to provide proof of their testing and vaccination history that can be shared with airlines and immigration officials. There has yet to be one vaccine certification system that has been universally accepted or recognized, which shows how this will definitely be a work-in-progress type project.
- Australia, as part of the G7 nations that have agreed to supplying at least 1 billion shots for developing nations, will commit at least 20 million of their own doses to struggling countries around the world. The 20 million doses will be a combination of AstraZeneca, Pfizer and Moderna and will be provided by the middle of 2022. The Australian government has entered into five separate agreements to secure more than 195 million doses of COVID-19 vaccines for its own population. Of the more than 1 billion pledged by the G7 nations, half will be coming from the United States, with the UK contributing 100 million.
Covid-19 – Due Diligence And Asset Management
Rising Financial Risks Should Make the Fed Wary of Loosening Rules
Brief : In the annals of financial crises, perhaps there is no better predictor of impending doom than when financial regulators start loosening regulations. Throughout history, they have shown a remarkably consistent tendency to ease up during economic booms, facilitating reckless lending and asset bubbles. Then they crack down after the inevitable crises ensue, starving households and businesses of credit when they need it the most. Last year, in response to the economic devastation wrought by COVID-19, regulators wisely broke that mold. As the economy went into freefall, they gave banks flexibility to deal with distressed borrowers and allowed them to dip into capital buffers to expand lending capacity. But now, with recovery at hand, the economy is flashing warning signs of over-heating: accelerating consumer price inflation; ever-rising equity, commodity, and home prices; and irrational speculation (Dogecoin, meme stocks). In this environment, one would hope regulators would see the wisdom of tightening standards. Unfortunately, the Fed’s leadership seems to be headed in the opposite direction.
Goldman Bankers Lead City of London’s Uneven Return to Office
Brief: After more than a year of near-empty skyscrapers and virtual conferences, the City of London is hoping the U.K. government’s latest lockdown guidance next week will help kickstart a more widespread return to the office. Banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. have told U.K.-based staff that workers should ready themselves for a gradual return to office from later this month. Those plans could change if Prime Minister Boris Johnson announces an extension of the remaining lockdown restrictions in England on Monday. Even if Johnson unlocks, those hoping for a speedy return to pre-pandemic norms may be disappointed. The scale of any return is unlikely to be consistent across the same firm, let alone the broader industry, according to estimates of foot traffic levels since the onset of the pandemic by data platform Orbital Insight. If you’re a trader or an investment banker, you’re more likely to soon find yourself commuting in -- if you haven’t already returned. But other areas of finance may stay quieter. Foot traffic levels in the main London offices of Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley, which have a substantial proportion of traders and investment bankers among their headcount, were estimated on average to be about a fifth of the pre-pandemic norm as of May 24, according to Orbital’s analysis, which monitors activity levels through satellites and mobile phone data.
Healthcare Drivers that Private Equity Should be Aware of
Brief: A positive repercussion of Covid-19 has been the massive uptick in the interest in healthy activities and healthy living. Exercise equipment sales in the UK have spiked 5,800 percent during the pandemic, while corporate wellbeing investments, ranging from free gym memberships through to mental health and general wellness services, are on the rise too. It’s not all been positive though. The NHS and private practitioners found themselves unprepared for remote and digital servicing when the lockdown restrictions were first introduced. As the vaccine roll out continues and the light at the end of the tunnel shines just that little bit brighter, it’s never been more important to consider what’s driving demand in healthcare and what a sustainable, winning approach may be. Whether it is focusing on preventative care as the preferred prescription, or the changing needs of an ever-increasing elderly population, investors need to be aware. National lockdowns, health panics and homeworking created an overnight shift in demand for remote and digital servicing. The healthcare sector, however, was one of the least prepared, with both the NHS and private care providers rushing to find workable digital solutions.
Broker Satisfaction with Lenders Edges Close to Pre-Pandemic Levels
Brief: Brokers’ satisfaction with their mortgage lenders has grown 2.5 percentage points since the end of last year. Satisfaction now sits at 80.3 per cent, compared with 77.8 per cent six months ago. The last 12 months have seen the broker-lender market endeavour to recover from the strain put on its relationships by the pandemic. “Lenders were making significant changes to their product criteria and taking far longer than usual to process cases because of the need to tackle the application backlog that had emerged,” Craig Hall, Legal & General Mortgage Club’s broker relationships head, told FTAdviser. Pre-pandemic, broker-lender satisfaction levels were at 82.70 per cent, according to data from Smart Money People. The research is based on 597 mortgage brokers’ responses concerning 44 mortgage lenders. “I don’t think anyone was happy with lenders early in the pandemic,” said Chris Sykes, associate director and mortgage consultant at Private Finance.
How Private Credit Survived its First Test
Brief: For at least a year even before the pandemic, investors were alarmed about a possible bubble forming in private credit, an asset class that barely existed until a decade ago when banks stepped back from lending to smaller and riskier businesses. They were right to be concerned: In the years after the financial crisis, investors committed billions to private credit, scores of new asset managers entered the business to meet the demand, and competition for deals became manic. With the pandemic, the asset class got its first real test. While there were bumps in the road, including a big downdraft in publicly traded business development companies, the sector emerged in good shape. “All through 2019, there was lots of chatter about private debt. Everyone was piling on, saying, ‘Wait until the first credit event and then we’ll see what happens.’ But the industry held up well,” said Art Penn, founder of PennantPark Investment Advisers. Before founding PennantPark, Penn was, among other things, chief operating officer of Apollo Investment Corp, Apollo’s business development company, and was managing partner of Apollo Value Fund, a distressed fund.
Managers Must Have a Strong 360-Degree View of Their Data
Brief: Most hedge fund managers have taken action to protect their firm’s data from external attacks. However, there is a growing recognition of the importance of shielding the firm from risks which can breed within the firm itself, and also protecting data in transit particularly in the hybrid working environment most of the world currently finds itself in. “In a hybrid working environment it is important to use tools not only to protect users and data, but also to ultimately safeguard the firm,” highlights George Ralph, Global Managing Director & CRO at RFA. “Understanding the way data is being used by people within a firm is critical to protect against potential internal bad actors.” For example, when the data arrives at the endpoint, firms need to know how that data is being used and kept secure by the user. “There are several questions managers need to consider, such as – Should the user be able to send the data on? Is there is two factor authentication process in place to access the data? Should the data be sent as a read only file or so that the document expires after a certain amount of time?” Having a detailed understanding of the answers to these questions will help outline a robust data management strategy.
