Brief: Alternative money managers are finding it harder to attract investments from new clients in the era of virtual meetings despite strong interest in their strategies as asset owners resume investing during the pandemic. The problem, sources said, is the reluctance in most cases for institutional investors and managers to meet face-to-face given the global COVID-19 restrictions. Despite a much-improved facility by managers in presenting their investment strategies and providing information for due diligence checks via remote communication channels, industry observers said many asset owners still are not comfortable with a digital-only acquaintance. "There's an abyss that asset owners have to jump over when it comes to getting to know potential investment managers for your fund via a Zoom meeting. There's a natural human-comfort factor that comes from meeting in person," said James Neumann, a New York-based partner and CIO of investment consultant Sussex Partners U.K. Ltd., London. "There's a bias toward expanding relationships with existing managers because it's much harder to go from an initial call to hiring a new manager, especially in this environment," Mr. Neumann added.
Brief: JPMorgan chief executive Jamie Dimon said that up to 30% of employees could work from home permanently. Dimon, who has been vocal in the past few weeks about the need to bring more staff back to the office in a bid to restore corporate culture and spur creativity, told the Sibos conference that the Covid-19 crisis is likely to lead to a proportion of JPMorgan’s staff to remain working from home on rotation. “There will be some permanent work from home, people who work from home or permanently rotate, or have a schedule of three days in and two days out, something like that,” he said during a virtual interview with Takis Georgakopoulos, global head of wholesale payments. “I don’t think it will be 100% of the population, I think it will be 20-30% ... and it’s got to work for the company and the clients. It’s not just whether we like it as employees,” he said. JPMorgan had 256,710 employees at the end of the second quarter. Daniel Pinto, the chief executive of its corporate and investment bank, told CNBC in August that staff could rotate between home and the office, but did not put a figure on his prediction. Dimon’s comments echo those of outgoing UBS chief executive Sergio Ermotti, who said in July that up to a third of the Swiss bank’s staff could stay home permanently.
Brief: The coronavirus pandemic has shown that policymakers will sacrifice business activity if it’s necessary for public safety. Climate activists have warned for years that society’s quest for growth threatens our planet, and some economists encourage using different metrics to judge an economy’s success. So we asked an array of economic policy experts whether anything has really changed. This pandemic forces us to rethink economic growth and, in many respects, the way our economies and societies function. Artificial intelligence and major structural changes have to be taken into account, including working from home and relocalization of activities. Sustainability, mobility, resilience, fairness, and inclusiveness are key policy aims with enormous challenges in the years to come. But the logic of economic growth cannot simply be dismissed. Debts, public and private, have continued to grow in the past decade. The financial crisis has not reduced the propensity to borrow around the world. The pandemic has forced governments to increase their budget deficits and, consequently, public debts. I would add that the stock of debt will not be less of an obsession. The new context for monetary policy, due to substantially lower natural rates, should not make us complacent about the size of debts. Countries need to manage their debts over the long run. Moreover, markets discriminate among economies. And one cannot take low inflation as a given forever. Especially if monetizing debts will be resorted to, increasingly.
Brief: Despite an economic downturn as a result of the pandemic, money managers are committed to their long-term technology investment plans, migrating client and investment data to the cloud, enhancing remote work capabilities and automating more business operations for better efficiency, sources said. While some firms have attempted to wring out savings by renegotiating contracts with third-party service providers offering investment market data, research and cloud-sourcing arrangements, most global money managers are ultimately spending more on technology as they strive to meet new remote work demands, said Tyler Cloherty, senior manager and head of the knowledge center for Casey Quirk, a practice of Deloitte Consulting LLP, New York. "There's been increased costs for laptops and collaborative software, like Zoom and Microsoft Teams," Mr. Cloherty said. Additionally, costs have increased as money managers continue to make longer-term investments in migrating company data to the cloud and on research portals for investment team data sharing, he added. "I think during the initial downturn in March and April, there was a hesitation to embark on substantial new investments. Since the market has bounced back … third-quarter margin numbers are going to look much better," Mr. Cloherty said.
Brief: Goldman Sachs Group Inc. foresees the European Central Bank boosting its pandemic bond-buying program by 400 billion euros ($470 billion) in December, after euro-zone inflation weakened further. The ECB is also likely to extend the emergency asset-purchase operation, known as PEPP, by six months through the end of 2021, analysts at the U.S. bank wrote in a note to investors Monday. Reinvestments of maturing assets under the plan should continue to the end of 2023, they wrote, adding that the central bank may also target high-yield bonds for purchase. “A PEPP expansion is likely to be more powerful in supporting the recovery of the euro-area economy -- particularly in southern Europe, where it is most needed -- than a rate cut or an expansion of the regular asset-purchase program,” Goldman analysts including Soeren Radde wrote. That’s because PEPP “would be more powerful in compressing credit spreads.” Speculation of further monetary easing has grown for a host of reasons -- from the recent uptick in coronavirus infection rates in Spain and France to a decline in euro-area core inflation to a record-low 0.2% in September. The latter prompted ECB officials to comment that they were uncomfortable with almost nil price growth. Goldman previously expected the PEPP -- with a current limit of 1.35 trillion euros -- to end in mid-2021 and for the ECB to provide additional support through its regular asset-purchase program launched in 2015.
Brief: The frozen mergers & acquisitions market of just a few months ago has turned into a frenzy as sellers look to lock in capital gains before year-end. Company founders and CEOs are hedging their bets against any tax law changes, including the treatment of capital gains and carried interest, that could come in 2021 if former V.P. Joe Biden, the Democratic nominee, defeats President Trump in the November election. “It’s going to be a busy three months here before year-end,” said Art Penn, founder and managing partner of PennantPark Investment Advisers, which focuses exclusively on middle market lending. “It’s a combination of good asset values for sellers and concern about potential tax law changes next year if there’s a change in administration.” Not all companies will get sold. Companies that have been hard hit by the quarantine and slowdown caused by Covid-19 likely won’t have buyers right now, even if their sector is expected to improve once the economy returns to normal. A lawyer involved in a number of M&A transactions that haven’t yet closed said there’s too much uncertainty about a potential vaccine, government aid, and companies’ future growth projections. “There’s a real unease about what will be permanently changed by the coronavirus,” she said.