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Our briefing for Friday November 13, 2020:
Nov 13, 2020 3:31:16 PM
- In the United States, CNN is reporting President Elect Joe Biden’s transition team is using back channels such as governors, the private sector and the medical community to prepare its COVID-19 response as the Trump administration continues to block Biden’s access to key information. As President Trump has still refused to concede the election, President Elect Biden’s team doesn’t have access to key COVID-19 pandemic data and government agency contacts. Elsewhere, other members of President Elect Biden’s COVID-19 advisory committee are trying to pour cold water on comments made by one of their colleagues earlier in the week. Dr. Michael Osterholm suggested a four-to-six-week national lockdown would be good for the country, however Dr. Celine Gounder said it was “not of the opinion” of the group to institute such widespread restrictions across America. While Dr. Vivek Murphy, another member of the advisory group, said national lockdowns were recommended in the spring when scientists knowledge about the coronavirus was less well known.
- In Canada, Ontario Premier Doug Ford will meet with his health minister and top doctor after learning updated COVID-19 modelling showed the province could be dealing with 6,000 cases a day within weeks if more isn’t done to add more public health restrictions. Premier Ford has been facing an onslaught of backlash from the medical community in the province from his new colour coding system after he allegedly ignored their suggestions. Speaking at a news conference on Thursday, Premier Ford was quick to defend his government’s decision, calling the claims totally inaccurate and adding the following: “The easy thing to do, folks, is just shut down the whole province. How do you deal with the mental health again of people? It’s easy for people to say, shut everything down, when they’re guaranteed a paycheck every week.”
- In the United Kingdom, another member of Prime Minister Boris Johnson’s inner circle will be leaving. The Financial Times is reporting Dominic Cummings, the prime minister’s chief adviser and person recognized as the architect of the 2016 Brexit vote confirmed his departure late Thursday night. The article noted Cummings initially intended to leave by the end of 2020. Senior government officials claim it was Cummings and Lee Cain, who resigned earlier in the week, that leaked the government’s plan to introduce a lockdown to England last week to the media. The leak infuriated Prime Minister Johnson, but both men have categorically denied they were the members behind the leak.
- Despite expressing “cautious optimism”, Germany will not be easing their coronavirus restrictions anytime soon. A spokesperson for the Angela Merkel government made that announcement on Friday after the country’s Robert Koch Institute said Thursday the COVID-19 infection rate was flattening. Germany has been in partial lockdown since November 2nd and Chancellor Merkel is set to meet with state leaders this Monday to review the lockdown, but the government spokesperson said the easing of restrictions is not to be expected.
- Japan recorded a new daily high of 1,651 COVID-19 cases on Thursday. The new daily record issued a response from Economy Minister Yasutoshi Nishimura, who also doubles as the country’s leader in the coronavirus response, warning stricter measures might be introduced if numbers continue to spike. “We are not at a point where a state of emergency must be declared, but we need to have the strongest sense of caution,” said Nishimura. Health experts are particularly worried as most socioeconomic activity has returned to pre-pandemic days in Japan. For instance, health officials are worried about infections risks posed by after-work drinking parties that are common at workplaces, or among friends.
- A senior official at China’s national health authority said the country is facing an increased risk of local transmission of the coronavirus in the winter due to imported cases. While other countries across the world are dealing with surges, China has largely controlled the spread of COVID-19 since the early summer, with some clusters of community infections periodically hitting parts of the country. China has continued to stop issuing visas to some foreign nationals while restricting non-urgent outbound movements by Chinese citizens. While Hong Kong and Singapore agreed to a travel bubble earlier in the week, China has no plans to arrange a travel bubble with any country saying right now is not the time.
Covid-19 – Due Diligence And Asset Management
“Radical Change”: Covid-19 is Ultimate Stress Test for Hedge Funds’ Cybersecurity
Brief: The shift to remote working as a result of the coronavirus pandemic proved to be the ultimate stress test for hedge funds’ cybersecurity and business continuity processes – but speakers at this year’s Hedgeweek LIVE Europe digital summit believe the industry has coped well with the unprecedented disruption. Opening day two of this year’s summit, the cybersecurity and business resilience panel fleshed out the many practical challenges thrown up by the remote working environment. These include data access, monitoring and protection, dealing with increased call volumes in a home environment, video conferencing, the potential software and hardware headaches, as well as staff wellbeing. Patrick Trew, chief risk and compliance officer at Maniyar Capital, described how his firm, which spun out of Tudor Investment Corporation, was in the unique position of launching right in the middle of lockdown. “We spent plenty of time preparing for the launch which, pre-March, would have been a fairly routine launch,” Trew said. “But the dynamic changed quite dramatically as events unfolded.”
U.K. Fund Liquidity Rule Breaches Soared in Covid Early Days
Brief: British money managers ran afoul of liquidity regulations 13 times at the height of this year’s market volatility, exposing their investors to the kinds of risks that can trap billions of pounds for months. Nine funds, whose names were kept confidential, breached the 10% limit on holdings of unquoted securities between March and May, according to Financial Conduct Authority data obtained by Bloomberg through a public records request. Most of the breaches occurred in March, when Covid-19 spread to Western economies and the value of investors’ more easily tradeable securities plunged. While the breaches subsided by June, the revelation may increase pressure on investment managers to reduce their stakes in upstart companies and thinly-traded shares, which became more popular in an ultra-low-interest-rate environment. More attention has been paid to the issue after illiquid investments tripped up money managers Neil Woodford and H2O Asset Management. “Should funds that offer daily liquidity have 10% in unquoted stocks in the first place? My answer is no,” said Ben Yearsley, investment director at Shore Financial Planning. “It comes back to a failure of regulation. It’s been 18 months since Woodford blew up and still nothing has happened.”
Goldman Sees Strong Economy in 2021, but it’s Going ‘To Get Worse Before it Gets Better’
Brief: Goldman Sachs sees a prosperous 2021 but is cautious about the bumpy road the U.S. economy will ride before it gets there. In a forecast that is well above Wall Street consensus, the bank’s economists see gross domestic product accelerating at a 5.3% pace next year, considerably stronger than the 4% median forecast from the Federal Reserve. However, the firm sees several obstacles along the way, particularly the damage that quickly accelerating coronavirus cases will have on the recovery. “The pace of recovery is likely to get worse before it gets better,” Goldman economist David Mericle wrote in a report. “Fiscal support has largely dried up for now, leaving disposable income lower in the final months of the year. But the largest risk is that the third wave of the coronavirus is likely to worsen with colder temperatures.” Indeed, the pandemic’s toll has swelled in recent weeks, with new daily cases eclipsing the 150,000 mark on Thursday and poised to continue rising as winter weather sets in. Few states have reimposed major restrictions yet, but are more likely to do so as the virus spreads.
Onex Earns US$501 Million in Third Quarter as it Shakes Up Portfolio
Brief: Onex Corp. says its private equity investments increased in value this year, despite the economic volatility caused by the COVID-19 pandemic. The company, which manages a fund that bought WestJet Airlines Ltd. in a $5-billion deal last December, didn't announce details about the Calgary-based airline. Overall, the Toronto-based investment firm says it earned US$501 million, or US$5.29 per fully diluted share, in the three months ended Sept. 30. In the same period last year, the company reported earnings of US$100 million, or 99 cents US per diluted share. The company, which makes money in several ways including buying and selling companies, lending and fees for managing assets for clients, declared a dividend of 10 cents per share for the fourth quarter — unchanged since mid-2019. Despite recent hardships for airlines, including WestJet, Onex says its private equity investments yielded gross returns of 14 per cent during the third quarter, while shareholder capital rose by about 10 per cent. Chief executive Gerry Schwartz says Onex has been improving its portfolio, making investments in benefit insurer OneDigital, trade-show company Emerald Holdings and a clinical services group.
Pining for Peers, Majority of Investors Are Comfortable With Local Events Next Spring
Brief: After eight months of virtual meetings and Zoom conferences, institutional investors are looking to ease back to in-person events next year, according to an Institutional Investor survey of nearly 300 allocators and consultants. The majority — 53 percent — said they would feel either somewhat or entirely comfortable attending outdoor regional events in the spring, even as most said they would still not want to travel for more traditional indoor conferences. Respondents from consulting firms, endowments, and foundations were among those who were most willing to attend regional events, while health care investors expressed the least amenability. II conducted the survey over the last four weeks, as coronavirus infections rose once again in the U.S. Most of the responses came in before this weekend, when Pfizer and BioNTech reported promising preliminary results on their Covid-19 vaccine. Participants in the survey were asked to describe their level of comfort about attending three types of events: regional, “resort-style,” and traditional. Regional events were defined as local, outdoor gatherings with no air travel, while resort-style events would take place outside at destinations like Miami or Aspen. Traditional events described indoor gatherings in major cities.
The Giant Schism in Asset Management Paychecks
Brief: Experts see a small pay cut coming for executives at traditional asset managers, hedge funds, and private equity shops, particularly at smaller firms, given disruption in the underlying economy because of the coronavirus. The predicted five-to-10 percent compensation drop would make for two down years in a row, according to Johnson Associates’ third-quarter report on year-end incentives. But that average belies striking differences between the haves and have-nots in asset management. The consultant expects compensation changes to range widely, from 20 percent cuts to 7.5 percent hikes. Costs have continued to grow as investors want more hand-holding, data, and analytics, while compliance burdens expand, according to Johnson Associates. At the same time, investors continue to pressure managers for fee deals. Some asset managers are still cutting staff given shrinking asset bases or only modest inflows as the industry consolidates. Last month, for example, Morgan Stanley announced plans to buy asset manager Eaton Vance.
