Brief: The warning was stark. It was late January, and there were just six known cases of Covid-19 in the US. A leading infectious disease specialist who previously had battled Ebola and SARS had an alarming message for a group of money managers: It was about to get a lot worse. “In the 20 or 30 years I’ve been involved in emerging infections,” Jeremy Farrar told the managers on the January 31 call, “I’ve never seen anything that has been as fast or as rapidly moving and dynamic as this has been.” The director of the Wellcome Trust, a UK health foundation, followed that up with an estimate on a February call that deaths in the US related to the spread of the new coronavirus could reach between 500,000 to 1 million within a year assuming there were no lockdowns or other restrictions. The calls held for managers of Wellcome’s $33bn endowment served as one of the earliest known warnings to investors about the coming impact of a disease for which humanity had no immunity. The information spread like a kind of samizdat among certain quarters of Wall Street, and beyond. Those who took heed of the predictions from Dr Farrar, an adviser to the UK and German governments on the virus, spread the word to friends and family and took steps to try to protect their investments from the virus’ fallout.
Brief: Apple Leisure Group has hired advisers as it contemplates raising new capital after being battered by the Covid-19 pandemic, according to people with knowledge of the matter. The travel and hospitality company, as well as owners KKR & Co. and KSL Capital Partners LLC, have hired financial and legal advisers, said some of the people, who requested anonymity because the matter is private. The company is not currently weighing restructuring or bankruptcy as an option, some of the people said. Apple Leisure has a $950 million first-lien loan due in 2024 that last traded at about 67 cents on the dollar, according to data compiled by Bloomberg. It fully drew down its $175 million revolving credit facility earlier this year, a person with knowledge of the matter said. Representatives for Apple Leisure and KKR declined to comment and a spokeswoman for KSL didn’t immediately have a comment. Apple Leisure Group focuses on trips to regions including Mexico and the Caribbean. It specializes in all-inclusive resorts, which sell lodging, food and other services for a single price. The model, once viewed primarily as a budget way to travel, was having a moment before the coronavirus, with Marriott International Inc. and Hilton Worldwide Holdings Inc. embracing the concept.
Brief: Billionaires are getting a clear message from nonprofits, lawmakers and even other billionaires: Many of you already got tax breaks for giving away your money. Now, amid the pandemic and recession, it’s time to ensure cash actually gets to charities quickly. For the past several years, wealthy Americans have poured billions of dollars into donor-advised funds, or DAFs, vehicles that have grown popular because they’re so flexible. Givers get an immediate tax break, which can equal 57 cents or more of every donated dollar, but they have unlimited time to decide where the money should go. Many nonprofits worry the surge of money into DAFs has cost them in recent years as total giving by individuals has stagnated. Some lawmakers seem to agree. Congress barred DAFs from taking advantage of new incentives for charitable giving included in the $2.2 trillion CARES Act approved in March. In California, state legislators proposed pushing major DAF providers to be more transparent. Now, the pandemic is prompting more money to flow out of DAFs and into charities where it can do some good. Fidelity Charitable, the nonprofit arm of Fidelity Investments, said in late May that giving from its DAFs was 30% higher so far this year. Vanguard Charitable and Schwab Charitable both said giving increased about 50% over similar time frames from February to mid-May.
Brief: New positioning data shows how frustrating a straight-up rally in companies with shaky finances has been for professional speculators. While they are getting a measure of recompense today, hedge funds have struggled after shunning airlines, hotels and restaurants, with exposure sitting near multiyear lows, data compiled by Morgan Stanley’s prime brokerage unit show. The aversion toward companies hit hardest during the pandemic contrasts with retail investors, who piled into stocks like American Airlines, putting all their chips on an economic reopening. It’s the latest example of the widening division between Wall Street and Main Street. Professional money managers have been reluctant to embrace the most speculative stocks amid concern that the worst is not over with the coronavirus. Hedge fund clients at Morgan Stanley have stuck to the safety of the stay-at-home trade, with holdings in technology and health-care hovering near a decade high. “I would venture to guess that hedge funds are looking at the fundamentals of investing. The typical recovery doesn’t happen this quickly,” said Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute. “Maybe retail investors saw what happened in ‘07, ‘08 and are using that as their model and realizing that had you invested when that market was down, you would have had a significant return over the past decade.” While hedge funds’ cautious stance helped them avoid deeper losses during the March selloff, it’s now pressuring returns with tech shares lately trailing cyclicals such as airlines.
Brief: Abu Dhabi state fund Mubadala said on Thursday its strong liquidity position and a diverse portfolio will help the fund tackle the challenges posed by the coronavirus outbreak and weak oil prices, as it posted a four-fold jump in its 2019 income."All of this positions us very well to handle this very extraordinary situation in the best way possible," group chief executive Khaldoon Khalifa Al Mubarak said referring to the fund's strong balance sheet and $232 billion portfolio in a video message.Mubadala Investment Co's total comprehensive income grew to 53 billion dirhams ($14.43 billion) in 2019 from 12.5 billion dirhams in 2018, helped largely by gains in its public equity portfolio and funds.Assets under management also rose 1.5% to 853 billion dirhams or $232 billion at year-end, it said in a statement.The results are also the first to consolidate the full-year results from the Abu Dhabi Investment Council, an investment arm of the Abu Dhabi government, which joinedMubadalain 2018."Not only did we deliver strong financial results, but also continued to grow our presence across multiple asset classes in key sectors and markets," Mubarak said.The Abu Dhabi sovereign investment company said it realized 63 billion dirhams in 2019 from the "monetization of mature assets and distributions from investments locally and abroad."
Brief: Emerging markets (EM) stock markets are enjoying their strongest crisis bounceback ever, as coronavirus (COVID-19) infections stabilise and governments remove two-month-long lockdowns.Economies around the world have been hit by the shock of the pandemic and many have also suffered from a concurrent oil price shock sparked when Russia walked out of the OPEC+ production cut deal on March 6. However, as economies open up again and oil prices have broken above $40 after almost halving in price in the last two months, investors have turned “risk on” again and are snapping up cheap shares ahead of their inevitable rebound. “At this point in the rebound, this EM rally is now the strongest of any of the big-5 EM sell-off rebounds (1998, 2001, 2008, 2016, 2020) and with US, DM and safer (particularly Asian) EM equity markets having less than 10% to go before reaching pre-coronavirus (Jan-Feb) 2020 peaks, investors are being forced up the risk curve in search of potential returns,” Daniel Salter, head of equity strategy at Renaissance Capital (Rencap), said in a note on June 10. Russia is in the vanguard as one of the “safe haven” markets thanks to its low debt and large reserves, and the economy is already showing signs of a rebound. Rencap saw it coming and marked the whole Russian market up to Buy in the first week of May, in what is now starting to look like a classic call, as bne IntelliNews reported at the time.