.png?width=200&height=78&name=CH%20Diligence%20(thicker%20line).png "CH Diligence (thicker line).png")
Our briefing for Monday June 8, 2020:
Jun 8, 2020 4:23:59 PM
- One hundred days after their first case of coronavirus was recorded, New York City was allowed to reopen some of its doors for business on Monday. New York City was the epicenter of the coronavirus pandemic in the United States, experiencing 21,000 related deaths due to COVID-19. America’s most populous city though is only entering their first phase of reopening, which means construction and manufacturing businesses are prioritized to resume activities. Retailers will be limited to curb-side pick-up for pre-arranged orders with few exceptions and many offices will remained closed for the time being. State governor Andrew Cuomo declared the city will carry out 35,000 tests a day to start and have opened 15 testing sites. These locations will prioritize testing for those who participated in the massive anti-racism protests over the last two weeks due to the death of George Floyd.
- Canada’s most populous province announced details of their phase two reopening plan. Ontario Premier Doug Ford said during a news briefing on Monday that 24 of the 34 public health unit regions in the province will be allowed to enter phase two as of June 12th. The remaining 10 areas, which include the Greater Toronto area and others close to the southwestern tip of the province near the Canada/US border will need to wait until daily case numbers decrease more consistently. A social gathering increase, places of worship at a 30 per cent capacity limit and restaurants and bars reopening for outdoor dining on patios are some of the additions to the province’s phase two reopening.
- Elsewhere in Canada, as of midnight tonight, the country will begin to allow immediate family members separated by temporary COVID-19 travel restrictions to enter the country. Those entering must not be showing any signs or symptoms of COVID-19, need to stay in the country for at least 15 days upon arriving, and self-quarantine for 14 days as well upon entering Canada.
- United Kingdom health secretary Matt Hancock said the coronavirus is in retreat across the country. Hancock pointed to the government’s scientific advisers estimating the reproductive rate currently below one in all regions. There were no COVID-19 related deaths in London Hospitals on Sunday and the death toll was the lowest since the lockdown began on March 23rd. As of today, travellers entering the country also have to self-isolate for 14 days under the government’s new quarantine rules.
- India is forging ahead with its reopening plan even as the country experiences 10,000 new cases of the coronavirus per day. The country’s restaurants and religious sites were allowed to reopen their doors on Monday as the country now has the 5th most cases in the world with more than 257,500 confirmed cases, passing previous European hotspots Spain and Italy. India is also thought to be underestimating their death toll from COVID-19 as they don’t count the people who die at home, or shortly after arrival at the hospital as they are frequently not tested.
- A ban of anti-racism protests enforced by the New South Wales supreme court was overturned in the 11th hour and went ahead with a few tense moments, but no major incidents according to most media reports in Australia over the weekend. However, the protests did not sit well with some in the Australian government, including Finance Minister Mathias Cormann calling those who attended the demonstrations as reckless and self-indulgent. The head of Australia’s Medical Association stated those who attended the Black Lives Matter protests should self-isolate for 14 days to be absolutely safe and limit any potential new coronavirus outbreaks.
- New Zealand announced on Monday that the last known person with coronavirus has recovered as the country appears to have eradicated the disease, at least for the time being. With no new cases in the last 17 days, New Zealand will be one of the first countries that could look as close to what people remember as normal in a long-time. Public events, retail and hospitality are back without limitations across the country of five million people.
Covid-19 – Due Diligence And Asset Management
They’re ‘Free Markets’ Guys – and They Want the Government to Intervene
Brief: When making his case for the government to rescue the oil industry, Wil VanLoh wanted Texas regulators to know that at heart he was a free-markets kind of guy. “I am a free-market person through and through,” the founder of private-equity firm Quantum Energy Partners told the Railroad Commission of Texas — the regulatory body that oversees the state’s oil and gas industry — at a mid-April meeting. Yet VanLoh was pleading with the commissioners to temporarily limit oil production, warning their inaction would lead to widespread failure of small and midsize oil companies. The reduced supply, he hoped, would raise the value of the oil taken from the ground if done in coordination with other U.S. states. “We don’t live in a world of free markets,” he lamented, pointing to the massive government intervention during the 2008 financial crisis. “The system of capitalism the world now works under is one where the markets are generally left alone, except during extraordinary times of volatility,” VanLoh said during the April 14 meeting, held online due to the coronavirus pandemic. “And that, commissioners, is exactly what we’re experiencing right now in the oil and gas industry — and why you must intervene.”
Private Equity Could Help British Businesses Stuck with £36bn in Toxic Debt – Report
Brief: Lobby group TheCityUK has warned that up to £36bn in government-backed loans could turn toxic by next year, as companies impacted by the Covid-19 pandemic struggle to pay back the debt.The Recapitalisation Group, a taskforce led by TheCityUK and accountancy firm EY, found that companies would be left with approximately £100bn of unsustainable loans by the end of March 2021 in aninterim updatepublished on 8 June. Of this, nearly a third has been provided by the government's coronavirus business interruption schemes.The report suggested that the government could encourage buyout firms, insurers and pension funds to provide longer-term capital to struggling businesses in order to help them pay off the debt they took on to survive past the coronavirus crisis.The private equity industry in the UK, which has more than £150bn of dry powder, “could support equity financing to address the UK SME recapitalisation challenge”, the taskforce said.
Stanley Druckenmiller Says He’s Been ‘Humbled’ by Market Comeback, Underestimated the Fed
Brief: Longtime hedge fund manager Stanley Druckenmiller told CNBC on Monday the market’s strong performance over the last three weeks has “humbled” him and that he underestimated the power of the Federal Reserve.“I had long-term concerns for the last few years that because of easy money, too much debt was being built up in the corporate sector,” Druckenmiller said on “Squawk Box.” “When Covid hit, I was pretty much of the view that there was a good chance that the credit bubble had finally burst and the unwinding of that leverage would take years.”That concern prevented the investor from capitalizing on the market’s robust rebound since the March 23 low: Druckenmiller said he has returned just 3% during the market’s 40% rally since the S&P 500′s springtime bottom.“Well I’ve been humbled many times in my career, and I’m sure I’ll be many times in the future. And the last three weeks certainly fits that category,” he said.
Sustainable Investing is Set to Surge in the Wake of the Coronavirus Pandemic
Brief: The coronavirus pandemic has altered society in immeasurable ways, including, of course, investing. Stocks that benefited from people staying home, such as Netflix and Zoom Video, outperformed expectations in the past few months, while retailers and airline companies, among others, saw their stocks fall off a cliff. And now some of those worst-performing stocks of March and April are staging a comeback, as economies begin to reopen. But there could be a more long-lasting effect on Wall Street: Covid-19 may well prove to be a major turning point for ESG investing as the pandemic alters society’s values. This investing approach, which evaluates a company’s environmental, social and governance ratings alongside traditional financial metrics, was already coming off a banner year, and its reach continues to expand. So far this year, U.S.-listed sustainable funds are seeing record inflows, despite the market turmoil.
Hedge Funds Continue Fightback, as Equity Managers Soar Amid Lockdown-Easing and Activists Seize on Dislocation
Brief: Hedge funds are continuing to recover from sharp losses suffered earlier this year, notching up positive returns for the second successive month in May as economies slowly reopen following the coronavirus lockdown, new data from Hedge Fund Research shows. All long/short equity hedge fund strategies clawed back profits last month, including sector-specialist managers such as technology and materials, while activist and special situations funds are making hay amid widespread global market dislocations. The HFRI Fund Weighted Composite Index – which tracks the performance of more than 1,400 single manager funds of various strategies globally – gained 2.5 per cent in May, with equity hedge funds and event driven strategies leading the pack. The rise follows a 4.79 per cent advance in April – the index’s first positive return of 2020 and its biggest monthly rise since the 5.15 per cent gain in May 2009.
For Private Assets, the Pandemic Repricing is Just Getting Started
Brief: Things move quickly in our digital world. An email sent from Vancouver is received in Mumbai in seconds. Rumours spread on Twitter in a heartbeat. And stocks and bonds react instantly to new information. In March, price declines were head-spinning as investors reacted to a deteriorating outlook. There’s a category of investments, however, that was slower to react. Prices for private investments such as commercial real estate and mortgages, private equity, infrastructure and private debt take time to adjust. The post-COVID reality will filter into their valuations over the course of the year. This sorting-out process will be fascinating to watch. Some private assets will skate through without a wobble while others will surprise us with bad news and writedowns. Here’s a sneak preview. Real Estate Investment Trusts (REITs) trade on the stock exchange. So far this year, buyers and sellers have taken the sector down over 20 per cent. Private real estate funds work differently. They rely on independent valuations to set a price, a process done over the course of the year outside the emotion and volatility of the stock market.
