Brief :The world economy is facing a tougher start to 2021 than expected as coronavirus infections surge and it takes time to roll out vaccinations. While global growth is still on course to rebound quickly from the recession of last year at some point, it may take longer to ignite and not be as healthy as previously forecast. The World Bank already this month trimmed its prediction to 4% in 2021 and the International Monetary Fund will this week update its own outlook. Double-dip recessions are now expected in Japan, the euro area and U.K. as restrictions to curb the virus’s spread are enforced. Record cases in the U.S. are dragging on retail spending and hiring, prompting President Joe Biden’s new administration to seek an extra $1.9 trillion worth of fiscal stimulus. Only China has managed a V-shaped recovery after containing the disease early, but even there consumers remain wary with Beijing partly locked down. High frequency indicators tracked by Bloomberg Economics point to a troubling start to the year with advanced economies beginning on a weak note and emerging economies diverging. “That’s a reflection of the hard reality that, ahead of widespread distribution of the vaccine, a return to normality is an unlikely prospect,” said Tom Orlik, chief economist at Bloomberg Economics. It’s a stark outlook facing policy makers after $12 trillion worth of fiscal support and trillions in central bank money printing failed to cement a recovery. Those from the Federal Reserve meet this week.
Brief: AMC Entertainment Holdings Inc. got support from private investment firms including Oaktree Capital Management and Centerbridge Partners for a loan that will help the cinema chain avert bankruptcy, according to people with knowledge of the situation. Oaktree and Centerbridge, which specialize in lending to troubled companies, led firms providing the 400-million-pound loan (about $547 million) tied to AMC’s Odeon Cinemas in Europe, the people said, asking not to be identified discussing a private matter. The new loan will be used to refinance existing debt and provide liquidity to cash-strapped AMC, whose audiences have all but vanished amid the Covid-19 pandemic. The deal is part of $917 million of funds assembled since mid-December by the world’s largest movie theater chain as it tries to stay solvent until vaccines bring back customers. Talks are underway with creditors about more financing and waivers, and while AMC said it has enough cash to stay in business through July, company filings show it still may face default claims from lenders and landlords. Representatives for Leawood, Kansas-based AMC didn’t immediately provide a comment. Oaktree and Centerbridge declined to comment. “Success breeds success,” AMC Chief Executive Officer Adam Aron said in an interview Monday. “The reason bankruptcy was on the table was because people were afraid that we would run out of cash. Now that we’ve raised so much cash, bankruptcy is no longer an option.”
Brief: The world’s 20 best-performing hedge funds earned $63.5 billion for clients in 2020, setting a record for the last 10 years during a chaotic time when technology oriented stocks led a dramatic rebound from a pandemic induced sell-off, LCH Investments data show. As a group, the most successful managers earned half of the $127 billion that all hedge funds made last year, LCH Investments, a fund of funds firm that tracks returns and is part of the Edmond de Rothschild group, reported. Despite the pandemic that triggered a historic stock market sell-off in March, shut down large sectors of the economy and swallowed up millions of jobs, the 20 best hedge funds topped their 2019 returns of $59.3 billion. That was despite 2020 not being as profitable as the previous year for hedge funds as a whole, which saw earnings fall from $178 billion in 2019. The average hedge fund returned 11.6% in 2020, according to Hedge Fund Research data, lagging behind the S&P 500 index’ 16% gain. “The net gains generated by the top 20 managers for their investors of $63.5 billion were the highest in a decade. In that sense, 2020 was the year of the hedge fund,” Rick Sopher, LCH’s chairman, said in a statement. Last year’s biggest earners include Chase Coleman’s Tiger Global, which earned $10.4 billion, Israel Englander’s Millennium, which earned $10.2 billion and Steve Mandel’s Lone Pine with $9.1 billion. Andreas Halvorsen’s Viking Global Investors earned $7.0 billion and Ken Griffin’s Citadel earned $6.2 billion, according to LCH data.
Brief: Bridgewater Associates founder Ray Dalio wrote on Twitter on Sunday that the United States is still in a “terrible financial state” and remains “terribly divided”, but added he liked what he heard from President Joe Biden at his inauguration. The hedge fund billionaire wrote that the question was whether the president and both parties in Congress would work together “for peace and prosperity that addresses the big wealth, values, and opportunity gaps we’re now seeing.” Dalio has previously criticized here a widening wealth gap and under-investment in public education in the United States, which he has linked to lower high school graduation rates, greater disparity in test scores, and lower teacher pay.
Brief: The world is witnessing the greatest rise in inequality on record, with the poorest likely to feel the effects of the COVID-19 pandemic for years to come while the “mega rich” have already bounced back, according to Oxfam. That’s the conclusion from a report by the charity, which charts the wealth effects of the deepest slump since the Global Financial Crisis as widespread shutdowns of businesses lead to rising unemployment. “The pandemic has hurt people living in poverty far harder than the rich, and has had particularly severe impacts on women, Black people, Afro-descendants, indigenous peoples, and historically marginalized and oppressed communities around the world,” Oxfam said on Monday. “It is likely that almost every country will see an increase in inequality, the first time since records began.” The report follows in the footsteps of similar analysis by the World Bank, which has warned that the economic crisis is sending a new generation into poverty and debt turmoil. The International Monetary Fund has warned that developing nations may be set back by a decade. Oxfam is urging governments to do more to address inequality, including making tax policies more equitable and canceling developing countries’ debts. The study -- entitled ‘The Inequality Virus’ -- is being published in tandem with the World Economic Forum’s virtual conference, at which politicians and business executives are set to discuss the state of the global economy.
Brief: Not many people would want to leave a steady job to start a new business during a global pandemic. For former Fir Tree partner Aaron Stern, that kind of counterintuitive thinking is par for the course. Stern, who ran distressed, special situations, and event-driven investments at Fir Tree before launching Converium Capital Management last year, says he’s been a contrarian since his father introduced him to investing and let Stern manage the family’s college savings when Stern was still in his teens. “I’m a contrarian and problem solver by nature,” said Stern, in his first interview about Converium, a multistrategy and opportunistic manager based in Montreal. “I’m drawn to companies and situations that are going through changes. When something bad happens, the folks who are closest to the situation, the experts, tend to be the most negatively impacted and don’t want to touch it.” That creates a vacuum that investors like Stern can fill, and it’s a perspective that shapes the new firm’s investment philosophy, he said. Converium has the flexibility to make event-driven investments around the globe, depending on where the team sees opportunities at any particular time. Investments could include, among others, activist situations, distressed debt, and sovereign debt.