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Our briefing for Monday May 25, 2020:
May 25, 2020 4:03:50 PM
- The United States have suspended entry for anyone who has been to Brazil in the previous 14 days as both countries are now one-two when it comes to coronavirus cases. President Donald Trump’s administration had previous banned travel from other coronavirus hotspots in the world including China and Europe. Not on the banned travel list for America is Russia though, who have the third most coronavirus cases in the world.
- The World Health Organization (WHO) have temporarily suspended studying hydroxychloroquine as a potential Covid-19 treatment due to safety concerns. This comes after a medical journal published last week described how Covid-19 patients who were treated with hydroxychloroquine and chloroquine were more likely to die. President Trump and Brazil President Jair Bolsonaro have both pushed the drugs as potential treatments for the virus, with President Trump stating he has taken the drug himself.
- United Kingdom Prime Minister Boris Johnson finds himself in hot water as he tries to defend the actions of his top adviser. Dominic Cummings is facing widespread criticism for traveling more than 250 miles from his London home during the nationwide coronavirus lockdown. Cummings left with his wife and child to seek support from family members after his wife contracted Covid-19 and he started showing symptoms. Cummings defended his actions saying he did what he did to ensure the welfare of his child. Cummings is best known as the man who ran the successful BREXIT campaign and is credited with helping Johnson become Prime Minister.
- In Canada, the province of Ontario didn’t have a banner weekend in the eyes of public opinion. On Saturday, multiple media reports displayed images of a Toronto area park looking like a mini-Woodstock with people caring little for social distancing. Even the mayor of Toronto, John Tory had to apologize after images of him circulated visiting the park trying to understand what happened. The problem for Tory was he did so with a protective mask sitting below his chin while talking to others in close proximity. In Quebec, Montreal-area retail stores (shopping malls still closed) were allowed to reopen for the first time on Monday since they were forced to close in late March. Montreal was the hardest hit city in the country and was the last region in Quebec to ease out of its lockdown.
- Spain continues to ease its lockdown restrictions, announcing as of July 1st the country will lift quarantine measures for arriving international tourists. As of right now, Spain currently enforces a two-week quarantine for all international travelers into the country whether they are Spanish citizens, or foreign arrivals. Spain is looking to revive the tourism and hospitality sectors of its economy as it accounts for 12% of its GDP and 2.6 million jobs.
- Japan’s Prime Minister Shinzo Abe lifted the coronavirus state of emergency for Tokyo and four other remaining areas, ending the restrictions nationwide. Japan has been fairly lucky compared to other densely populated areas with about 16,600 confirmed cases and about 850 deaths, despite its softer restrictions. However, to keep balancing protective measures with the economy, Prime Minister Abe will extend its travel ban to 111 countries as of Wednesday. The ban will now include the United States, India and South Africa, and forbids foreign nationals who stayed in those countries from entering Japan. Japanese citizens can still enter the country as long as they undergo medical testing and a 14-day self-quarantine.
Covid-19 – Due Diligence And Asset Management
UBS to Start Own Venture Capital Fund in Effort to Digitize Bank
Brief: UBS Group AG is setting aside hundreds of millions of dollars of its own money to invest in fintech companies, joining peers in financing startups that are upending traditional banking. The Swiss wealth manager is planning a corporate venture capital fund to make investments between $10 million and $20 million in dozens of companies, according to a person familiar with the matter. UBS plans to hold the stakes for at least five years, the person said, asking for anonymity because details haven’t been finalized. A UBS spokeswoman confirmed the bank is starting such a fund, while declining to comment on specifics. The venture fund comes just months after UBS named ING Groep NV’s Ralph Hamers, an outspoken champion of digital banking, to succeed Sergio Ermotti as chief executive officer from October. While wealth management -- UBS’s biggest business -- is traditionally a high-touch operation, with clients valuing personal contact, the coronavirus pandemic has accelerated a shift toward digital services.
Canada’s Banks to Cement Status as Solid Investments in a Crisis
Brief: Canadian banks, whose dividends yields climbed during the financial crisis, are again gaining favor with investors, as their pledges to maintain payouts gives them an edge over global counterparts who have shunned them. Canadian banks are currently offering dividend yields of 5.7% versus U.S. banks’ 4.2% and European lenders’ 1.7%, according to Datastream. Dividends are seen as evidence of good financial health and encourage loyalty from investors, particularly in the current low-yield environment. Canadian lenders have seen the smallest declines in share prices versus peers in Europe and the United States in the past three months. “Globally, there continues to be a pursuit for yield … and there are simply not many places where you can get yield anymore,” said Kash Pashootan, Chief Executive Officer of First Avenue Investment Counsel.
Consultants Revisit how to Assess Managers Amid Pandemic
Brief: The remote-working environment is forcing investment consultants to rethink the way they assess money managers on behalf of institutional investors, leading to concerns over the ability of firms to get onto all-important recommended lists. The coronavirus pandemic and subsequent lockdowns worldwide have not stopped investment strategy search activity. And with institutional investors back up and running when it comes to hiring — and perhaps terminating — managers as they pick over market opportunities, consultants now have to keep up with any changes within existing relationships, and in some cases familiarize themselves with new firms and strategies, in a virtual manner. "Can we build the same level of conviction virtually? The answer is probably no, but it's not quite as bad as we feared," said Nick Samuels, London-based head of manager research at investment consultant Redington Ltd. "It's a little more efficient, you can get through more in a shorter space of time, and we don't have the travel time we used to, which can instead be used by meeting more people, or further desk-based quantitative work."
Covid-19 Could Force Private Capital Managers to Lower Their Fees
Brief: Asset allocators are likely to have the upper hand over managers in any near-term commitments to private capital funds, if recent history is any indication. Preqin data from 2009 indicates that limited partners were better able to negotiate lower fees and other favorable terms in the wake of the 2008 financial crisis. In the 2009 survey of private equity investors, 43 percent said the balance of power had shifted toward LPs, while just 2 percent believed that general partners had gained power. Thirty-six percent said their position had not changed, while the rest reported that they weren’t investing in private equity at the moment. “The few LPs with fresh capital to commit found themselves in a stronger position to negotiate fund terms and conditions in their favor,” Preqin analyst Ashish Chauhan wrote in a new blog post discussing the 2009 data. “Some fund managers were able to compete for this investor capital by offering more LP-friendly terms and conditions.”
U.S. Charges Ousted Hollywood Executive with Defrauding Pandemic Loan Program, BlackRock Fund
Brief: U.S. prosecutors have charged the recently ousted owner of a Hollywood movie distributor with defrauding a federal coronavirus Prosecutors said William Sadleir, 66, diverted much of the $1.7 million of loans he received on May 1 from the Paycheck Protection Program for personal expenses. He allegedly did this after falsely telling JPMorgan Chase & Co and the Small Business Administration the funds were meant for his former company Aviron Group, which had terminated him in December and where he has no current role. The PPP was meant “to help small businesses stay afloat during the financial crisis, and we will act swiftly against those who abuse the program for their own personal gain,” U.S. Attorney Nick Hanna in Los Angeles said in a statement. Sadleir was also accused of having previously induced the closed-end BlackRock Multi-Sector Income Trust Fund to invest $75 million in Aviron to support its films.
Sculptor Credit Funds Draw Cash After Deep March Losses
Brief: Sculptor Capital Management’s (SCU.N) credit funds drew inflows from investors even as losses piled up at its SCU Credit Opportunities fund after weeks of coronavirus-fueled market swings.Credit funds operated by Sculptor, formerly known as Och-Ziff Capital Management, received around $1 billion in new money in recent weeks, a person familiar with the fund said.Those inflows come despite a rocky March in which the fund badly underperformed its peers. The SCU Credit Opportunities Fund, part of Sculptor’s $6 billion lineup of credit portfolios, was down 19.2% in the year to date through April after a 21.5% drop in March, according to investors in the fund.By contrast, the credit-sensitive HFRI Event Driven Index was down 9.32% in the same time frame.A representative for Sculptor, which manages a total of $35 billion in assets for pension funds and other wealthy clients and is one of the industry’s few publicly-listed firms, declined to comment.
