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Our briefing for Monday November 2, 2020:
Nov 2, 2020 4:36:21 PM
- In the United Kingdom, it was a chaotic weekend to say the least. It started Saturday evening after Prime Minister Boris Johnson was forced to announce a nationwide month-long shutdown will come into effect as of Thursday after the government’s plans were leaked to numerous national newspapers Friday evening. The original plan was to announce these new measures on Monday. Instead, Prime Minister Johnson is now dealing with the fallout today from his announcement that will see a strict lockdown with the closure of pubs, restaurants and non-essential businesses, including hair salons and gyms. Prime Minister Johnson’s Conservative MPs are questioning the move, some already stating they won’t be voting in favour of the lockdown once it goes to a parliamentary vote on Wednesday. The opposition Labour Party is slamming the government for not moving on the nationwide lockdown sooner. Even the aviation industry is chiming in after finding out via the Prime Minister’s announcement on Saturday the lockdown also included a ban on leisure travel, something the industry was not consulted on or made aware of until the rushed news conference.
- In the United States, the White House administration has criticized the country’s leading infectious disease expert, Dr. Anthony Fauci after comments made to the Washington Post over the weekend. Dr. Fauci, a key member of the coronavirus task force, criticized President Donald Trump’s administration’s response to the coronavirus pandemic, along with Dr. Scott Atlas, who has taken a more prominent role in the administration’s thought process on the pandemic. “It’s unacceptable and breaking with all norms for Dr. Fauci, a senior member of the President’s Coronavirus Taskforce and someone who has praised President Trump’s actions throughout the pandemic, to choose three days before an election to play politics,” said White House deputy press secretary Judd Deere. During one of his many pre-election rallies over the weekend, President Trump tossed out the idea of firing Dr. Fauci after the election following the crowd chanting, “Fire Fauci”.
- In Canada, British Columbia’s health minister is warning of a record number of COVID-19 cases starting as of Monday, after seeing record numbers last week. The province’s latest case count will include results from Friday through Monday with the health minister already warning the cases in Metro Vancouver, the province’s most populous city and third largest in the country, will be especially high. On Halloween night over the weekend, large crowds gathered on Vancouver city streets partying and gathering, which irritated the health minister, especially after Provincial Health Officer Dr. Bonnie Henry asked people last week to avoid the exact kind of behavior that occurred.
- German Chancellor Angela Merkel is referencing back to World War II when describing the country’s ability to deal with the coronavirus pandemic. “This is a very big test of our resolve, one that we haven’t seen since World War II,” said Merkel after a meeting with the German virus task force. Chancellor Merkel called the pandemic a once-in-a-century challenge and urged Germans to remain vigilant and abide by hygiene and social distancing rules, so that their health care services have a fighting chance. The latest pandemic restrictions, which started on Monday in Germany are aimed at reducing social contact by closing bars and restaurants.
- Italy will tighten national health restrictions as of Wednesday. Prime Minister Giuseppe Conte told parliament on Monday and called for action to stop the rapid spread of the coronavirus “as quickly as possible”. The new measures include the option of night-time curfews, distance learning for middle schools, cutting back on using public transport as well as limiting movement between regions with large numbers of cases if needed.
- With all the news of oncoming restrictions for countries dealing with the second wave, the recent success of Australia can be a demonstration of what a lockdown can do to turn the tide in the pandemic. On Sunday, Australia recorded its first day with no local cases of coronavirus transmission since June. The milestone comes as some state governments ease domestic travel restrictions and Melbourne, the country’s second largest city continues to emerge from its three-month lockdown. Prime Minister Scott Morrison has a goal for Australia to be a country without domestic border restrictions by Christmas.
Covid-19 – Due Diligence And Asset Management
Ken Griffin’s Macro ‘Dream’ Propels Net Worth to $20 Billion
Brief: Ken Griffin was facing a calamity. As Covid-19 roiled the economy in March, equities tanked and bond markets went haywire. Hedge funds run by Griffin’s Citadel were taking losses as the computer models that guide some of their decisions struggled to comprehend the pandemic. For Griffin, it was also a chance to profit from some of the biggest opportunities in his 30-year career. His traders went to work scouring beaten-down credit markets, snapping up finance-company debt and taking advantage of wild fluctuations globally. “It was a macro trader’s dream,” Griffin, 52, said during an event last week for the Robin Hood Foundation, a New York-based non-profit. Citadel wanted to put money to work “when people are panicking,” he said. Like many hedge funds, Griffin’s firm suffered drops during those harrowing days in March, and, like many rivals, also benefited from unprecedented moves by the Federal Reserve and the promise of a $2 trillion stimulus package from Congress. Paul Tudor Jones, who interviewed Griffin at the event, described the Fed’s actions as “so incredible and breathtaking you almost couldn’t even believe it at the time.” So much so, even the legendary hedge fund manager said he didn’t take advantage as much as he should have.
Institutional Investors Continue to Build Real Assets Exposure, says Aviva Investors Report
Brief: Global institutional investors are set to prioritise investments into real assets over the next 12 months, as the Covid-19 pandemic continues to have a lasting impact on global economies and financial markets, according to the latest edition of Aviva Investors’ Real Assets Study. The Study, based on responses from over 1,000 decision-makers at insurers and pension funds representing over EUR2 trillion of assets under management, found that 49 per cent of insurers and 37 per cent of pension funds are expecting to increase their allocation to real assets investment strategies. When asked which real asset markets they expect to increase allocation to over the next 12 months, both insurers and pension funds (54 per cent and 45 per cent respectively) identified real estate long income as their preferred asset class. Beyond this, insurers highlighted the desire to increase their exposure to debt strategies, with infrastructure debt (48 per cent), real estate debt (46 per cent) and private corporate debt (46 per cent) all expected to see increased investment. Pension funds demonstrated a similar view, expecting to increase their exposure to real estate debt (39 per cent), private corporate debt (39 per cent) and infrastructure debt (37 per cent).
Oaktree, Reef Technology Launch $300 Million Property Fund
Brief: Reef Technology Inc., a startup that manages hubs in parking lots used for food delivery and other services such as Covid-19 testing, launched a $300 million fund in partnership with Oaktree Capital Management LP. Reef and Oaktree’s infrastructure arm have formed the Neighborhood Property Group to acquire strategic real estate assets, the companies told Bloomberg News on Monday. The new business will partly target areas experiencing population booms after people left cities such as New York and San Francisco because of the pandemic. Miami-based Reef is also exploring a capital raise to fund its expansion, according to people familiar with the matter. The targeted valuation of the startup, formerly known as ParkJockey, couldn’t immediately be learned, but Reef was valued at $1 billion when SoftBank Group Corp. acquired a stake in 2018. “Reef fits our thesis that core parking facilities should be augmented with technology to transform these core assets into mobility infrastructure hubs,” Josh Connor, co-portfolio manager of Oaktree’s infrastructure investing strategy and chairman of Neighborhood Property Group, said in an emailed statement. “These alternative uses support communities with critical last block logistics solutions such as food delivery, micro-mobility, same-day parcel delivery, essential groceries and electric charging infrastructure.”
Lazard Snaps up PJT Restructuring Banker as COVID Second Wave Hits
Brief: Lazard Ltd has hired restructuring banker Sam Whittaker from PJT Partners to oversee negotiations between companies and their creditors across Europe, the Middle East and Africa as a second wave of COVID-19 leaves many businesses fighting for survival. Whittaker, who started his banking career at Lazard LAZ.N in 2005 and then moved to fellow investment bank PJT in 2015, will re-join Lazard as a London-based managing director in its EMEA restructuring franchise The 45-year old Briton will work closely with David Burlison, who co-heads Lazard’s EMEA restructuring practice, and Chris Mallon, who joined Lazard in April as a senior adviser. “One of the many benefits of having Sam back is that he has an extensive network of relationships with banks, hedge funds and lawyers which clearly is a big plus for us,” Burlison told Reuters. The U.S. bank, which leads Refinitiv’s league tables for this year’s global restructurings ahead of PJT Partners and Houlihan Lokey, has also hired James Simpson as a director in October as part of a push to win business on behalf of companies with liquidity issues and their creditors.
Assessing the Impact of COVID-19 Across Real Estate Sectors
Brief: The COVID-19 pandemic has had a devasting toll on human life, and has impacted economies and industries globally. The effect on real estate is significant, as real estate can be considered a service sector that fulfills end-user demand. But the sectors within real estate have not been equally affected. So which are the sectors that have shown to be more resilient during the pandemic and could potentially provide downside protection to a real estate portfolio? It is important to determine whether the negative impacts we have already experienced are short term and temporary in nature, or if they are part of longer lasting structural changes in real estate demands. Recently, CAIA Association and MSCI Real Estate discussed some of the long-term trends in real estate, as well as the pandemic’s impact on various real estate sectors. In this article, I explore two perspectives to further understand the pandemic’s effect. The S&P 500, a key US stock market index, has made a V-shaped recovery and has since posted a YTD return of 7.9%[i]. Other US indexes have also rebounded. This robust recovery shown by US equity markets is largely fueled by the unprecedented central bank stimulus and government fiscal policies. Importantly, the recovery is led by the technology sector, while many other sectors continue to languish.
Family Offices Increasingly Popular in Mainland China, Hong Kong
Brief: More high-net-worth (HNW) families in Hong Kong and mainland China are setting up family offices as a way to manage their assets and address any potential challenges of passing these assets down to the next generation, according to a recent KPMG report. “An increasing trend in mainland China, and even more so in Hong Kong, is establishing a family office to operate the family business and manage assets,” says Karmen Yeung, partner, KPMG Private Enterprise in China. “Family members often don’t have the knowledge to work through governance, legal, tax and succession issues and, therefore, are looking for outside expertise. Especially for families that have assets in multiple countries, the family office model can help them to better understand and manage the complex rules they are subject to around the world.” The report also highlights how the impact of the Covid-19 pandemic could increase the pressure on families in the coming years and argues that the pandemic has added to the urgency of managing family businesses and carefully planning generational transfers.
