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Our briefing for Friday May 28, 2021:
May 28, 2021 3:22:42 PM
- The United States’ Homeland Security Secretary stated on Friday the Biden administration is taking a close look at vaccine “passports” for international travel. Homeland Security Secretary Alejandro Mayorkas was speaking to ABC’s Good Morning America ahead of the Memorial Day long weekend in the country and said if such a passport is made available – it should be accessible to all, so that no one is disenfranchised. After the interview, a spokesperson for the department said Mayorkas was referring to work already underway and that there will no federal vaccination database or a federal requirement for Americans to prove they’ve been vaccinated.
- In Canada, an advisory body is looking for the federal government to relax its border rules for vaccinated travelers and scrap the requirement that international air passengers quarantine in a hotel when they arrive. In a report released Thursday, the COVID-19 Testing and Screening Expert Advisory Panel stated people who have received two COVID-19 vaccine shots should be exempt from quarantine and pre-departure virus tests. As of right now, the majority entering Canada have to go through a 14-day quarantine and those arriving via air, are supposed to spend as long as three days in government mandated hotels while they await test results. In a joint statement from the federal Health Minister and Public Safety Minister, both defended the government’s border measures, calling them “effective” and that they would review data and “be prudent in its approach” to changing measures.
- The United Kingdom has approved the single-shot coronavirus vaccine from Johnson & Johnson. The vaccine developed by J&J subsidiary, Janssen, will be available in the UK later in the year and has been proven to be 67% effective in preventing moderate to severe COVID-19 symptoms and 85% effective in preventing severe disease or admission to hospital. The UK has ordered 20 million doses and is now the fourth vaccine approved for use in the country’s largest vaccination program in history.
- Australia’s second largest city, Melbourne entered its fourth lockdown on Thursday due to a rapid spread of infections from a coronavirus variant. The lockdown for Melbourne and the rest of Victoria state is set for at least a week after city infection rates rose to 26 confirmed cases and another 10,000 people having some degree of contact with those already infected. The federal government has declared the city a hot spot entitling it to additional resources, which is coming in the form of 218 military personnel that will help with pandemic operations. Prime Minister Scott Morrison said more can be sent if acting Victoria state Premier James Merlino asks for them.
- Japan’s government has extended its state of emergency that includes Olympic host Tokyo and other major cities. Prime Minister Yoshihide Suga said the state of emergency was set to expire on May 31st, but has extended to at least June 20th, which would make it a little more than a month out of the already once postponed Tokyo Summer Olympic Games. The extension to Tokyo, Osaka and several other prefectures comprises about half of the world’s third largest economy. Prime Minster Suga said in a news conference he is aware of the concerns of Japanese citizens in holding a worldwide event but will continue with the preparations and seek further cuts in the number of people visiting Japan in connection with the Olympic Games.
- Hong Kong is dangling a carrot in the form of a $1.4 million apartment as a prize for those who have been vaccinated for COVID-19. The catch is that it is only open to residents who have received both shots of an approved vaccine. Local authorities are grappling with widespread reluctance of residents not wanting to get inoculated and are fearful that the current surplus of shots could hurt future procurement of vaccines. Hong Kong’s government has also been working to encourage residents to get their shots by providing policy incentives such as reopening bars and shortening quarantines.
Covid-19 – Due Diligence And Asset Management
Credit Suisse’s RenTech Fund Holds Back Some Client Withdrawals
Brief : Credit Suisse Group AG is temporarily barring clients from withdrawing all their cash from a fund that invests with Renaissance Technologies after the strategy tanked and investors rushed to exit. The bank has invoked a so-called hold back clause, after assets in the CS Renaissance Alternative Access Fund slumped to about $250 million this month from approximately $700 million at the start of 2020, according to people with knowledge of the matter. While investors will receive 95% of their redemption requests after two months, the remaining 5% is expected to be paid out in January, after the fund’s year-end audit, the people said. The fund lost about 32% last year, in line with the decline in the Renaissance Institutional Diversified Alpha Fund International fund that it invests into, the people said. Renaissance, regarded as one of the most successful quant investing firms in the world, was rocked by billions of dollars in redemptions earlier this year after unprecedented losses in 2020. Three of its funds open to external investors fell by double digits last year. Credit Suisse and Renaissance declined to comment.
CEO Pay Rises to $12.7M Even as Pandemic Ravages Economy
Brief: As COVID-19 ravaged the world last year, CEOs’ big pay packages seemed to be under as much threat as everything else.Fortunately for those CEOs, many had boards of directors willing to see the pandemic as an extraordinary event beyond their control. Across the country, boards made changes to the intricate formulas that determine their CEOs’ pay — and other moves — that helped make up for losses created by the crisis. As a result, pay packages rose yet again last year for the CEOs of the biggest companies, even though the pandemic sent the economy to its worst quarter on record and slashed corporate profits around the world. The median pay package for a CEO at an S&P 500 company hit $12.7 million in 2020, according to data analyzed by Equilar for The Associated Press. That means half the CEOs in the survey made more, and half made less. It’s 5% more than the median pay for that same group of CEOs in 2019 and an acceleration from the 4.1% climb in last year’s survey. At Advance Auto Parts, CEO Tom Greco’s pay for 2020 was in line to take a hit because of a mountain of pandemic-related costs. Extended sick-pay benefits and expenses for hand sanitizer and other safety equipment totaling $60 million dragged on two key measurements that help set his performance pay.
Female CEOs saw Ranks Dwindle in 2020: Median Pay Fell 2%
Brief: Most of the women running the biggest U.S. companies saw their pay increase last year, even as the pandemic hammered the economy and many of their businesses. Despite those gains, however, the median pay for female chief executives actually fell in 2020. Already a small group, they saw several high-profile women leave their ranks last year. That means changes in pay for only a few helped skew the overall figures, highlighting just how slow diversity has been to catch on in Corporate America’s corner offices. Of the 342 CEOs in the AP’s and Equilar’s compensation survey of S&P 500 companies, only 16 were women. That’s down from 20 a year earlier, as CEOs like IBM’s Virginia Rometty left their posts. The survey includes only CEOs who have served at least two full fiscal years at their companies, in order to avoid the distortions of big sign-on bonuses. The companies must have filed proxy statements between Jan. 1 and April 30. The majority of female CEOs in this year’s survey saw a raise in compensation: 81% of them (13 of 16), versus 60% of all male CEOs in the survey. But Duke Energy CEO Lynn Good saw a nearly 3% decline in compensation to $14.3 million. She’s right in the middle of the pay scale among the survey’s women CEOs, so that helped set the median pay for them last year at $13.6 million. Median means half made more than that level, and half made less.
Money Continues to Pour into Hedge Funds as Investor Interest Remains Strong
Brief: Investors poured another +USD12.47 billion into hedge funds in April, bringing year to date (YTD) inflows to +USD28.81 billion, according to the just-released April 2021 eVestment Hedge Fund Asset Flows Report. Overall hedge fund business AUM stood at USD3.525 trillion at the end of April, according to the new report. “There were several strong underlying metrics behind the net inflow number in April,” says eVestment Global Head of Research and report author Peter Laurelli. “While net inflows alone would seem to be a positive sign, that is not always the case. In April, however, the data just looked good.” Laurelli notes there was a high proportion of reporting managers with net inflows (57 per cent) and the proportion of managers who lost large amounts of AUM during the month – 2 per cent or 5 per cent of AUM – was relatively small at just 15 per cent and 7 per cent, respectively. Additionally, the overall volume of net asset movement was relatively low, just 1.9 per cent of AUM. “This means money wasn’t swirling around wildly during the month, but rather it was just a fairly steady allocation period,” he says. Multi-Strategy hedge funds were big asset winners in April, pulling in +USD4.34 billion, bringing YTD inflows to +USD15.55 billion. April marked the sixth month in the last seven these funds have seen positive flow figures.
World on Brink of Biggest Tax Reforms in a Century
Brief: Britain and the rest of the world's largest nations are on the verge of agreeing to the biggest global tax reforms for a century, the UK's Daily Mail is reporting today (28 May). An agreement from the G7 group of nations - which also includes the US, Japan and Germany - could be reached as early as 4 June when finance ministers meet in London. The rate of corporation tax in the UK is 19% but this is set to rise to 25% by 2023. The countries are also expected to agree to keep business tax rates above 15%. The deal will force companies to pay tax in the countries where their consumers spend their money, rather than shift them overseas, with some claiming the changes could shift £70bn of tax globally.
The Old Era of Due Diligence is Over: Here’s What the Post-Pandemic Future Might Hold
Brief: The Covid-19 pandemic impacted every area of our lives, forcing investment professionals to react to ever-changing circumstances. Much has been written about the volatile financial markets and the hectic days of trading over the past 14 months, but now we’re heading into the post-pandemic world. With people across the globe getting vaccinated against this deadly virus, we are wondering, What is the new normal for asset allocators? In particular, how will due diligence evolve? Will it return to its 2019 state — or did the pandemic permanently alter how asset managers get hired? Like everyone else, asset allocators have spent countless hours using Zoom and other videoconferencing tools since the pandemic began. Adapting to the extra screen time proved challenging and definitely caused more than a few impediments to comprehensively completing due diligence. “Pre-pandemic the allocator really drove the meetings,” says Shana Orczyk Sissel, CIO of registered investment adviser Spotlight Asset Group. “In a Zoom setting the manager has much more control in access and creating the image they want.”
