Brief: Wall Street CEOs expressed horror, anger and empathy in staff emails and messages posted to social media as protests continued to roil U.S. cities in the week after the death of George Floyd in Minneapolis. The May 25 death of Floyd, who had been handcuffed when a police officer kneeled on his neck for more than eight minutes, sparked introspection and calls to fight racism by the biggest American financial firms. Floyd’s death followed the recent deaths of other black citizens including Ahmaud Arbery in Georgia and Breonna Taylor in Kentucky. Here’s what they said…
Brief: U.S. financial regulators, banks and their investors will get their first glimpse into the health of the nation’s banking system as it confronts soaring corporate and consumer defaults in the economic crisis sparked by the novel coronavirus. And no-one, including the U.S. Federal Reserve which sets the annual bank “stress test” exams, has a clue what to expect. “That is the $100,000 question. Actually, it’s much bigger than that and I am sure the Fed is working hard to get it right. We’re curious, and we don’t have clarity,” said Kevin Fromer, CEO of the Financial Services Forum, which represents the biggest banks in the U.S. That could mean banks may be on the hook for billions more in capital than they had anticipated, which could ultimately force them to slash dividends, slim down their balance sheets or reduce lending.
Brief: Daniel Pinto checked into a hotel in midtown Manhattan around 2 a.m. on a Friday in early March, hoping to get a little rest after an epically hard day. Things were about to get much worse. His slog that day had begun in London with a routine call with his boss, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon. But just a few hours later Dimon was rushed into emergency heart surgery, and the board named Pinto — who oversees the firm’s Wall Street operations — to temporarily run the bank alongside Gordon Smith, the head of its consumer business. Pinto flew to New York for what he thought would be a brief stay. Then markets began panicking over the coronavirus pandemic. He didn’t check out until a month later. “I’ve seen crises my whole life,” Pinto said in an interview. Yet “we haven’t seen a crisis of this magnitude. It’s probably short-lived but very deep, and it’s everywhere around the world.”
Brief: When will the Covid-19 pandemic end? What’s going to happen to the economy? Investors have a lot of questions about the future — but no one, according to Howard Marks, has the answers. In his most recent client memo, the Oaktree Capital chairman addressed the current state of uncertainty and what he described as the “futility of forecasting,” arguing that not even expertise in a given field necessarily equips a person to predict what will happen. It’s an argument the credit investor has made before, including in his last missive to clients in early May. In this newest letter, released publicly on Thursday, Marks explained that forecasting is impossible because the future is path-dependent — in other words, whatever happens between now and then can affect the ultimate outcome. “Not only how will the virus behave, morph, travel, react to warm weather and infect, but also how fast will we reopen the economy, how will people behave when we reopen it, and what will the virus do at that time?” he wrote.
Brief: Increased information flow, more transparency and informal settings have mitigated a lack of in-person meetings as investors and fund managers find ways to overcome roadblocks resulting from the coronavirus pandemic. Face-to-face meetings, a traditional linchpin in the process of checking out fund managers before investors make commitments, have been prevented by government restrictions aimed at reining in the pandemic. Investors, placement agents and fund managers say virtual meetings using video conferencing and presentations using other technologies have kept fundraising largely on track. In addition, the adaptations often lead general partners to offer greater stores of information on investments, returns, deals in the pipeline and strategy to prospective limited partners, helping to compensate for the lack of in-person visits and to increase investor confidence. “I had never had the opportunity to see these general partners in a time of stress, how on top they are of what private equity can do with and for their portfolio companies,” said a limited partner who is considering a follow-up capital commitment with a fund manager.
Brief: Nordea has liquidated one of its Alt Ucits strategies following the decision of its sub-adviser Madrague Capital Partners to close the firm.In a statement to shareholders, Nordea said Madrague Capital Partners’ decision to withdraw its asset management licence led to the termination of the Nordea 1 – European Long Short EquityFund.The fund was first launched in December 2018 and was the first fund since Nordea tool 40% stake in the investment boutique. Madrague Capital Partners’ investment team consisted of five members, including CIO Lars Franstedt and portfolio manager and CEO Martin Persson.‘The board of directors of Nordea 1 Sicav considers that this event is detrimental to the fund’s performance and therefore to the interest of the fund’s shareholders and has consequently decided to put the Fund into liquidation with immediate effect,’ the firm stated. Madrague Capital Partners was approached for a comment but didn’t respond at the time of the publication.