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Our briefing for Monday November 16, 2020:
Nov 16, 2020 3:14:27 PM
- In the United States, American biotech firm Moderna gave the markets (pardon the pun) a shot in the arm on Monday after its COVID-19 vaccine showed a 94.5% efficacy in clinical trials. Moderna’s news comes on the heels of last week when American drug company Pfizer, along with its German partner BioNTech found their vaccine to be 90% effective. Moderna’s chief executive, Stephane Bancel called the moment “pivotal”. “This positive interim analysis from our phase-3 study has given us the first clinical validation that our vaccine can prevent COVID-19 disease, including severe disease,” said Bancel. With the first vaccinations reported to be rolling out by the end of December, an advisory committee to the US Centers for Disease Control (CDC) is scheduled to meet next week to decide who will receive COVID-19 inoculations first. Health care workers, essential workers, those over the age of 65, and people with underlying conditions are among the first to be considered, but the question becomes in what order.
- Canada’s Green Party leader is calling on the federal Liberal government to appoint a national COVID-19 task force as the numbers continue to rise across the country. Speaking to reporters on Monday, Green Party Leader Annamie Paul said the country should have clear, coordinated messaging with officials speaking with one voice. “What’s happening right now doesn’t work – that’s clear. People are dying, we’re in the midst of the second wave and we’re not seeing any improvement,” said Paul. The Green Party leader pointed to Australia and United States President Elect Joe Biden as examples of leaders setting up COVID-19 advisory boards to help deal with the pandemic.
- United Kingdom Prime Minister Boris Johnson has been forced to self-isolate after meeting with a Conservative MP who later developed symptoms of COVID-19. It is well-known Prime Minister Johnson suffered through a battle with COVID-19 in April, forcing him into the hospital for several days. The news also comes as the prime minister dealt with a series of resignations from his inner circle last week. Prime Minister Johnson was hoping to turn the corner on Wednesday, making a big speech on the UK’s “green economy”, but instead will follow the rules and continue working in isolation from 10 Downing Street.
- After taking a more hands-off approach during the first wave, Sweden has unveiled its toughest restrictions yet to fight the rise of COVID-19 cases in the country. Prime Minister Stefan Lofven said the situation was going to get worse in the country and that Sweden would be limiting public gatherings from 50 people down to eight. “It is a clear and sharp signal to every person in our country as to what applies in the future. Don’t go to the gym, don’t go to the library, don’t have dinner out, don’t have parties – cancel,” said Lofven.
- The United Arab Emirates (UAE) will extend loan payment deferrals through June 2021, the central bank announced on Monday. Originally, retail and corporate customers struck hard by the pandemic had until the end of the year to tap into a $13.6 billion USD zero-cost facility the central bank made available to lenders, so customers could defer loan payments. The UAE has been hit hard in 2020 due to the combination of the pandemic, and lower oil prices.
- Japan’s gross domestic product grew by 21.4% in the third quarter, expanding at its fastest rate since 1968, but the world’s third largest economy still has a steep hill to climb from coronavirus pandemic. The strong third quarter was helped by government stimulus, which fueled consumer spending and strong pickup in trade. However, the fourth quarter is already forecasted to be not as strong as the pandemic flares up in Japan and other countries throughout the world - keeping a lid on further export and consumption gains. Prime Minister Yoshihide Suga has already called on a third extra budget, which will only add to Japan’s mounting debt, but is deemed necessary as the boost from the government’s earlier cash handout weakens and a job furlough scheme has run its course.
Covid-19 – Due Diligence And Asset Management
COVID Causing Concerns, Shifts in Recruitment
Brief: Asset manager CEOs and other senior leadership are navigating new workforce concerns caused by the pandemic, including a pause on in-person recruitment of early career professionals. Some executives say they are concerned about how the talent pipeline from colleges and universities will be impacted going forward, while others see an opportunity to broaden their recruitment to a more diverse pool of candidates, sources told Pensions & Investments. Mario J. Gabelli, founder, chairman and CEO of GAMCO Investors Inc. in Rye, N.Y., is concerned that the pipeline from which GAMCO typically recruits will be trimmed by the effects of the coronavirus. He also questions how recruitment will be affected now that firms are not able to visit cam- puses. "I don't know how effective it's going to be on Zoom recruiting," Mr. Gabelli said. GAMCO, which had $29.7 billion in assets as of Sept. 30, typically recruits from undergraduate programs at Babson College, Boston College, Yale University, Fordham University, New York University, Princeton University, Duke University, the University of Miami and Roger Williams University. The firm also recruits from MBA programs at the University of Pennsylvania's Wharton business school, Columbia University and, to a minor degree, Harvard University, Mr. Gabelli said.
How Women-Led Hedge Fund Firms Can Gain Value
Brief: The hedge fund industry is dominated by men, with women and minorities controlling only a small fraction of US-based assets. Some financial observers say fixing this gender imbalance is long overdue. They bolster their argument with data showing hedge funds run by women have performed well in recent years, including during the pandemic, when they out-performed those managed by men. “Embracing a culture of inclusion and diversity in an organisation is not just the right thing to do,” says Allison Nolan (www.athena.ky), founder and managing director of Athena International Management Limited and author of the upcoming book, Madam Chair, about how women are transforming the hedge fund industry and why more women are needed. “The benefits of gender balance within investment management firms are clear and irrefutable. Not only does gender diversity and inclusion within a firm improve decision-making and enhance the business culture, but evidence shows that it is sound business sense, creating value and improving returns.” Studies reveal that part of the reason female investors fare well compared to men is due to behavioural differentiators, such as showing more discipline than men in investing decisions, being less overconfident and trading less, and focusing more on protecting investments from risk.
RXR Realty Eyes $1 Billion to Tackle Property Market Dislocation
Brief: RXR Realty is seeking $1 billion for a vehicle dedicated to making bets on real estate with the expectation that valuations may tumble as a result of the Covid-19 pandemic, according to a person with knowledge of the matter. The firm is discussing the RXR Real Estate Market Dislocation & Mega-Trends Fund with potential investors, said the person, who requested anonymity because the talks aren’t public. RXR plans to find “pockets of distress” such as non-performing debt and opportunities for rescue financing. It’ll focus on logistics, telehealth and residential wagers -- areas of the property market that the firm believes will thrive in a post-Covid 19 world, a presentation reviewed by Bloomberg News shows. The pandemic may have permanently altered the way companies and consumers use real estate, according to the presentation. RXR foresees demand for transit-linked suburban downtown areas and conversion of obsolete buildings including hotels and malls into multifamily, industrial or film-studio properties. The firm has forecast underperformance for office properties in 2021 and 2022, before a rebound begins in 2023.
Buyout Activity Up Again After Pandemic-Induced Pause
Brief: U.S. corporate pension plan buyout volume is picking up again after a drop in activity in the second quarter as plan sponsors shifted their attention to addressing the economic effects of the pandemic, industry experts said. Still, even with a spate of recent activity, overall volume for 2020 should total about $25 billion, down from $28 billion in 2019, according to experts. Much of that expected drop is the result of a slow second quarter. Buyout sales totaled $2.3 billion in the quarter ended June 30, down from $4.2 billion in the second quarter of 2019, according to the LIMRA Secure Retirement Institute's most recent survey of the 17 insurers that make up the U.S. pension risk transfer market. For the first half of 2020, deal volume totaled $7 billion compared with $9 billion in the first half of 2019."The effect of COVID-19 on the economy has clearly had a negative impact on pension risk transfer sales, both in terms of volume and dollars," said Mark Paracer, assistant research director, LIMRA Secure Retirement Institute, in a Sept. 2 news release. "Fluctuating funding levels and the uncertain timing of the recovery have given employers reason to pause. While we believe social distancing and work-from-home transitions have also contributed to the sales decline, we expect increasing PBGC premiums and other administration costs will drive employers to seek PRT deals in the future."
Over 40 Per Cent of Institutional Investors Say Global Pandemic Has Accelerated Deployment of Capital Into European VC Funds
Brief: Mountside Ventures and ALLOCATE, today released their inaugural annual report entitled, "Capital Behind Venture 2020." The report provides insights on Venture Capital (VC) firms looking to raise funds from Limited Partners (LPs) such as pension funds, university endowments, government agencies, fund-of-funds, and high net worth (HNW) individuals or family offices who actively invest in Europe's growing VC ecosystem. "There is very little information in the public domain on best practices, preferred terms and practical advice on raising a VC Fund in Europe, even less so for emerging fund managers," says Jonathan Hollis, Managing Partner at Mountside Ventures. "Our goal in writing this report was to reduce barriers for VC fund managers, but also show LPs how their peers are exploring investing in this space." Mountside Ventures and ALLOCATE surveyed over 60 LPs that invest in European Venture Capital funds. No one size fits all when it comes to what LPs are looking for in their next VC fund manager, however, some trends rose to the top of the survey's findings.
Morgan Stanley Says Go Risk-On and ‘Trust the Recovery’ in 2021
Brief: Morgan Stanley strategists said an expected “V-shaped” economic recovery, greater clarity on Covid-19 vaccines and continued policy support offer a favorable environment for stocks and credit next year. In an outlook for 2021, a team including Andrew Sheets recommended investors overweight equities and corporate bonds against cash and government debt, and sell the U.S. dollar. Volatility is set to decline, and investors should be “patient” in commodity markets, the strategists said. “This global recovery is sustainable, synchronous and supported by policy, following much of the ‘normal’ post-recession playbook,” they wrote. “Keep the faith, trust the recovery.” A gauge of global stocks headed toward a record Monday amid optimism that the expected roll-out of vaccines and additional U.S. fiscal stimulus will bolster the world economy. Still, skeptics argue the short-term outlook is challenging as nations resort to lockdowns to fight a resurgence in virus cases and lawmakers bicker over the size of U.S. relief spending. Morgan Stanley joins JPMorgan Chase & Co. and Goldman Sachs Group Inc. in painting a positive outlook for equities. JPMorgan strategist Marko Kolanovic said U.S. election results create a bull case for markets, while David Kostin at Goldman Sachs expects society to normalize gradually next year.
