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Our briefing for Monday April 19, 2021:
Apr 19, 2021 3:28:55 PM
- In the United States, as half of Americans have already received at least one dose of a coronavirus vaccine, the Centers for Disease Control and Prevention (CDC) director had one message on Monday: the vaccines are working. CDC Director Dr. Rochelle Walensky said data compiled by the governing body, shows out of 84 million fully vaccinated Americans, there have been less than 6,000 reports (less than one percent) of breakthrough cases, which were people that contracted COVID-19 even after being fully vaccinated. “Here’s the bottom line, getting a vaccine will help protect you. It will help protect others and it will help us end this pandemic…,” said Dr. Walensky.
- In Canada, the Ontario provincial government is busy trying to clean up a coronavirus restriction mess, created by themselves. Over the weekend, Ontario Premier Doug Ford had to backtrack on some controversial restrictions laid out Friday afternoon by his government – reopening playgrounds and rescinding enhanced police powers after multiple police forces wanted no part of the responsibility and potential backlash of randomly stopping people and asking them where they were going, and if their trip was essential. Ontario health officials are continuing the call for essential workers needing paid sick days, so they don’t go to work sick and potentially spread more of the virus. However, the provincial government has yet to budge on this request. Prime Minister Justin Trudeau has called on other provinces to help out either with vaccines and/or essential health care staff if they can. While some are considering the call for health care staff, no other provincial premier is willing to share their vaccine allotment currently.
- In the United Kingdom, a first of its kind study is being launched at the University of Oxford. People who have already beaten COVID-19 will be deliberately reinfected to shed some light on how to develop more effective vaccines against the virus. On Monday, the university said it is looking for 64 healthy, previously infected volunteers from 18 to 30 years old to be studied under a controlled, quarantined environment for at least 17 days. Participants will be infected with the original strain from Wuhan, China and followed for a year. Elsewhere in the UK, Prime Minister Boris Johnson has cancelled his trip to India where he was to meet with Prime Minister Narendra Modi next week amid record-high COVID-19 cases in India over the weekend. The UK has also put the country on its red list for travel bans.
- As mentioned, India is experiencing an explosive surge in COVID-19 cases, which has caused the government to send its capital, New Delhi, into a weeklong lockdown as of Monday night. The city of 29 million people has fewer than 100 beds with ventilators and fewer than 150 beds available for patients with critical care. India reported over 270,000 new infections on Monday, the highest daily rise since the pandemic began. The country is also behind on inoculations with only 120 million doses administered so far to a population of nearly 1.4 billion – however announced a plan to start vaccinating everyone over the age of 18 as of May 1st.
- Israel’s government eased restrictions, allowing its citizens out into the streets without a mask for the first time in a year over the weekend. The government is pointing to its successful vaccination drive on its reasoning for relaxing the mask-wearing rule. Close to 62% of Israel’s 9.3 million citizens have received a first dose of the vaccine – with full vaccination not far behind at 57.4%. Israel has also fully reopened all schools and universities.
- In what is being called a major reset of Australia’s COVID-19 vaccination program, people over the age of 50 will now receive their vaccine dose from their doctor, or state-run mass vaccination hub. The news was made after Prime Minister Scott Morrison had the first of what will now be bi-weekly national cabinet meetings to address vaccine rollouts and coronavirus concerns. The state hubs will be using the country’s stock of AstraZeneca vaccines, which was mostly shelved recently due to blood clotting concerns. Australia’s vaccine rollout is well behind other commonwealth countries and according to national media outlet, ABC – at its current rate – Australians wouldn’t be fully vaccinated until August 2023.
Covid-19 – Due Diligence And Asset Management
Private Equity’s Health-Care Role Draws Spotlight
Brief : Health care is too large a part of the economy for private equity investors to ignore, but a burning spotlight on how managers run some hospitals and nursing homes is prompting a few asset owners that generally prefer to quietly engage with general partners to speak up. Demand for health care is rising: In the U.S., health-care spending grew 4.6% to $3.8 trillion in 2019, amounting to 17.7% of gross domestic product, according to the Centers for Medicare & Medicaid Services. In an attempt to ride the wave of this growth, private equity investment in health care has grown, to $120.1 billion in 874 deals in 2019 and $95.6 billion in 938 transactions in 2020, from $58.2 billion in 2007, according to PitchBook Data Inc. At the end of the first quarter, private equity firms had invested $20.2 billion in 182 deals. Private equity health-care funds outperformed the internal rate of return of all private equity for funds raised between 2006 and 2017, PitchBook data shows. The median IRR for health-care fund vintages 2006 through 2008 was 10.3% compared with a 9% IRR for all funds of the same vintages. Health-care funds raised from 2015 to 2017 earned a 16.8% median IRR, out- performing the median IRR for the same vintages of all private equity funds of 13.1%.
UK National Debt Jumped by a Quarter in 2020 to Fight the Pandemic
Brief: The world’s governments took on eight years’ worth of borrowing in 2020 to fight the global pandemic, increasing their debts by over a sixth (17.4 per cent) according to the first edition of Janus Henderson’s Sovereign Debt Index. As eight in ten countries in the index slipped into recession, governments added USD9.3 trillion to their tab. This is equivalent to one seventh (14.8 per cent) of the world’s GDP, a bigger slice than was needed to shore up the economy in the aftermath of the global financial crisis. The world’s government-debt tally ended the year at a record USD62.5 trillion, almost four times its 1995 total (+273 per cent) and equivalent to USD13,050 per person. The biggest economies took on the biggest debts in 2020, but the UK had the highest budget deficit Some countries have taken on more debt than others to meet the challenges of the last year. In absolute terms the biggest economies naturally borrowed most. The US, Japan and China alone accounted for more than half of the world’s new government borrowing in 2020. Compared to the size of its economy, the biggest borrower was the UK with a government budget deficit worth one fifth of its GDP, but the US, Brazil, South Africa, Spain, Canada, Japan and Singapore all ran deficits at least one eighth the size of their economies too.
Bankers Return Downtown Just in Time for Brookfield Dubai Tower
Brief: ICD-Brookfield has had to ride Dubai’s economic roller-coaster since opening the largest standalone office tower in the city last September when the worst of the coronavirus outbreak appeared over. More than half a year and another spike in infections later, regular office life remains a way off. Even without the pandemic casting a shadow over commercial real estate, the $1.5 billion high-rise arrived at a time when about a quarter of all offices stood vacant despite rental prices dropping by over 35% in the past six years. After initially halting lease negotiations, many multinationals are now coming back and looking to conclude deals, according to Rob Devereux, chief executive officer of ICD-Brookfield. Seven firms finalized contracts in the first quarter of this year, following agreements with 11 companies including UBS Group AG in the previous three months. Julius Baer, Natixis and EY signed before the tower opened. The building’s occupancy rate is approaching 55% in terms of signed leases, Devereux said. For Devereux, who leads a venture equally owned by Brookfield Asset Management Inc. and Dubai’s sovereign wealth fund, the outlook is upbeat as firms look to rebuild their work culture, with the vaccination rates suggesting the city could be near herd immunity.
Regtech Industry Backs FCA Calls for ‘Purposeful’ AML Policies
Brief: Regtech industry experts have spoken out in support for the FCA’s recent call for ‘purposeful’ AML controls and financial fraud action. Speaking at the AML & ABC Forum 2021 at the end of March, Mark Steward, Executive Director of Enforcement and Market Oversight and a member of the Executive Committee at the FCA addressed some of the investigations, legal cases and challenges facing recent money laundering activity in the UK, and called for better systems and controls that are “purposeful, efficient and courageous in identifying suspicious activity.” Steward went on to state that system and controls currently in place are flawed. Reference to the GBP37.8 million fine imposed on Commerzbank AG’s London Branch and the GBP96.6 million fine against Goldman Sachs for systematic AML failures were used to showcase inadequate screening and fraud detection systems. No comment was made towards the most recent criminal case against NatWest due to ongoing investigations. Interestingly, Mark Steward also stated that AML systems are at significant risk of becoming overly complicated, bureaucratized, vulnerable to gaming by less scrupulous players, and expensive. He therefore suggested that AML systems and controls “must be focussed explicitly on the activating purpose and function of those controls, to ensure the system is not just a bureaucratic process and to ensure it cannot be gamed.”
Banks Bet on Wealthy Clients Who Got Even Richer During Pandemic
Brief: As the nation’s banking giants steer their way out of the pandemic, they’re focused on a key category of clients: wealthy people. Citigroup Inc. plans to “double down on wealth” and concentrate its efforts on international hubs popular among high earners: Singapore, Hong Kong, the United Arab Emirates and London, the company said when it announced earnings last week. At Bank of America Corp., affluent clients’ account balances surged 31% to a record $3.5 trillion, lifted by a buoyant stock market, and it added more than 7,000 households in the first quarter. New assets at Morgan Stanley jumped. “I could talk for hours on this one -- I think we’re incredibly well-positioned in wealth,” Jane Fraser, Citigroup’s new chief executive officer, told analysts last week. Focusing on major markets means “our capital, investment dollars and other resources are better-deployed against higher-returning opportunities in wealth management,” she said. The world’s 500 richest people added $1.8 trillion to their combined net worth last year, lifting the total to $7.6 trillion, according to the Bloomberg Billionaires Index. In the U.S., the economic resurgence has affected people in wildly uneven ways, with many Americans growing wealthier amid roaring stock and home prices even as almost 10 million people remain unemployed. Some are calling it a “K-shaped recovery.”
UK M&A Remained Active in Opening Quarter of 2021
Brief: After a collapse in cross-border dealmaking in the first half of 2020 in the wake of the pandemic, foreign investment into the UK has risen considerably in recent months, according to the latest UK M&A data from Mergermarket. Inbound M&A reached GBP58.7 billion (196 deals), over 3x higher than during the first quarter of 2020 (GBP18.6 billion). This also represents the highest quarterly inbound deal count since 3Q17 (200 deals). Private equity buyouts in the UK grew to highest quarterly deal count on Mergermarket record in the first quarter of 2020, with sponsors spending a total of GBP20.5 billion across 132 deals. As a result, private equity firms have now spent at least GBP10 billion in six of the last eight quarters. After a significant decrease in the first half of last year, private equity exits have also increased considerably. There were 75 exits worth a combined GBP10 billion in 1Q21, the highest number of exits seen in a quarter in the UK on Mergermarket record. As a result of the GBP14.2 billion tie-up between National Grid and Western Power Distribution, energy, mining and utilities was the most active sector by value at GBP20.7 billion across 28 deals. Investment in tech, meanwhile, continues to grow. The GBP20.4 billion deployed in the sector accounts for just over a quarter of UK dealmaking in 1Q21. Business services remains the most active sector by deal count, recording 100 deals (GBP2.3 billion) this year – up from 93 (GBP1.4 billion) in the equivalent period last year.
