Brief : President-elect Joe Biden has picked a pair of veteran regulators strongly backed by progressive Democrats to lead two key Wall Street watchdogs, signaling that his administration is planning tough oversight after four years of light-touch policies under appointees of President Donald Trump. Former Commodity Futures Trading Commission Chairman Gary Gensler will be nominated to lead the Securities and Exchange Commission and Federal Trade Commission member Rohit Chopra is being tapped to lead the Consumer Financial Protection Bureau, Biden’s transition team said Monday… The selections follow weeks of intra-party wrangling over the financial regulation posts between moderate Democrats and those on the party’s left wing who want to see a sharp departure from business-friendly policies advanced during the Trump administration. They are bad news for the banking industry, which has been bracing for the prospect of stiffer rules since Biden was elected in November. Gensler, 63, is a former Goldman Sachs Group Inc. partner who gained a reputation as a Wall Street scourge when he engaged in bruising battles while advancing derivatives regulation at the CFTC during the Obama administration. Chopra, 38, is an acolyte of Massachusetts Senator Elizabeth Warren who helped her set up the CFPB before she ran for office.
Brief: Investment in biotech is booming. In Europe, the biotechnology and healthcare sector accounted for 20% of overall private equity investment in the first half of 2020, according to data from funds trade body Invest Europe. Investors in the field are faced not only with financial and ethical dilemmas, but the risks posed by the presence of bad actors. Andrew Hessel, a microbiologist, tells the latest issue of Funds Europe that, as with all developing technologies, the risks entailed are ever-evolving. “The core of the technology is agnostic, it’s human intention,” he says. “There’s always the potential for harm.” Hessel is chairman of Genome Project-write, a collaborative research effort focusing on large-scale synthesis and editing of genomes. A geneticist himself, he says molecular science is evolving dramatically, with scientists able to write genetic code to their own design, for example, and the programming of synthesised viruses to destroy cancer cells using computer-aided design. 20 years on since scientists sequenced the human genome, and concepts such as designer babies are no longer science-fiction. Agustin Mohedas, senior research analyst specialising in biotechnology at Janus Henderson, highlights that a moral line in the ground has been drawn when it comes to ‘biohacking’ embryos.
Brief: K2 Advisors, the hedge fund investing unit of Franklin Templeton, says active-management alpha will be critical to hedge funds’ success this year, as the global economy mounts a tentative recovery from the coronavirus pandemic. Brooks Ritchey and Robert Christian, co-heads of investment research and management at K2, said the Covid-driven economic slowdown appears to be nearing an end, as individuals and corporations have been able to weather the economic storm partly due to “enormous stimulus” from governments. But they warned that vaccination challenges, virus mutations, subsequent waves of new infections, and renewed lockdowns could derail the recovery. That, in turn, could keep volatility and dispersion elevated, creating opportunities for active management. K2 Advisors’ first-quarter Q1 hedge fund strategy outlook suggested inflation “will inevitably surface” if earnings, growth and sentiment jump the gun on the recovery, though a period of reflation without inflation could boost equities. “Our underlying hedge fund managers are identifying many opportunities, both on the long and short side, and think that active-management alpha will be key to success in 2021 as beta-driven momentum slows,” the pair observed in the commentary.
Brief: To find out how finance executives are getting through the pandemic, Bloomberg Markets asked three leaders about some of their habits and recommendations. Here are their responses. Lori Heinel: Deputy global chief investment officer, State Street Global Advisors What is your morning routine? I’m generally awake at 5 a.m. On a good day, I hop on the stationary bike or elliptical trainer while I am reading through the news or catching the morning broadcast. What did you get to do during the pandemic that you wouldn’t have done otherwise? I’ve been doing a lot more cooking—baking bread, trying new recipes, and cooking (and delivering) meals for family members and close friends. Where are you most eager to travel for nonwork reasons? I can’t wait to go to Colorado or Utah to ski! A very close second is Iceland. When the pandemic is over, how will your life be different than it was before? I’ve learned to slow down a bit. I got a bird feeder a few months back, and every time I look out the window, watching the birds dive in, seeing the different species, it makes me smile.
Brief: China’s economy picked up speed in the fourth quarter, with growth beating expectations as it ended a rough coronavirus-stricken 2020 in remarkably good shape and remained poised to expand further this year even as the global pandemic rages unabated. Gross domestic product grew 2.3% in 2020, official data showed on Monday, making China the only major economy in the world to avoid a contraction last year as many nations struggled to contain the COVID-19 pandemic. And China is expected to continue to power ahead of its peers this year, with GDP set to expand at the fastest pace in a decade at 8.4%, according to a Reuters poll. The world’s second-largest economy has surprised many with the speed of its recovery from the coronavirus jolt, especially as policymakers have also had to navigate tense U.S.-China relations on trade and other fronts. Beijing’s strict virus curbs enabled it to largely contain the COVID-19 outbreak much quicker than most countries, while government-led policy stimulus and local manufacturers stepping up production to supply goods to many countries crippled by the pandemic have also helped fire up momentum. GDP expanded 6.5% year-on-year in the fourth quarter, data from the National Bureau of Statistics showed, quicker than the 6.1% forecast by economists in a Reuters poll, and followed the third quarter’s solid 4.9% growth.
Brief: Prophet Capital Asset Management LP, an investor in loans and structured credit securities with $2.5 billion in assets, has restructured a hedge fund that had been rocked by March’s market turmoil, a company executive said on Friday. Reuters reported in March that Prophet Capital, based in New York and Austin, Texas, had temporarily blocked investor withdrawals from its Prophet Opportunity Partners LP fund with a view to ultimately dissolving it, amid extreme volatility sparked by the onset of the coronavirus. The fund primarily held high-yield collateralized loan obligations (CLO), which were hard hit amid fears over the widespread risk of corporate loan defaults stemming from pandemic lockdowns. The CLO market has since rebounded dramatically, allowing Prophet Capital to raise new cash for the fund and let investors redeem their money, said the firm’s partner David Rosenblum. Effective Jan. 1, the fund has allowed investors three options: to cash out at net asset value, remain invested but sell their legacy assets over time, or reinvest with a two-year lockup that would make it easier to manage the fund through times of extreme volatility, said Rosenblum. The restructuring underscores how default rates in the leveraged loan market have been far lower than feared, thanks largely to extraordinary interventions by the U.S. Federal Reserve.