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Our briefing for Thursday April 23, 2020:
Apr 23, 2020 3:56:06 PM
- In the United States, 4.4 million more Americans filed for unemployment in the last week. The most recent addition means 26.5 people are out of work in the United States. A CNBC report notes it only took five weeks of the coronavirus pandemic to wipe out all the jobs created since the Great Recession. The United States had created 22.4 million jobs since November 2009. On Wednesday evening, President Donald Trump signed his executive order barring some immigration into America for the next 60 days. The order doesn't apply to spouses and minor children of US citizens; health care professionals; any member of the US Armed Forces and their spouses and children; and anyone entering for law enforcement or national security reasons.
- The Canadian province of Saskatchewan is the first area in the country that has laid out its plan to reopen. Saskatchewan Premier Scott Moe unveiled his government’s plan that will be rolled out in five phases starting on May 4th. The first phase will see certain restrictions lifted on medical practices such as dentistry, optometry and physical therapy. Facilities that accommodate low-risk outdoor activities like boating and fishing will be allowed to open and golfers will be allowed to hit the course beginning May 15th.
- As the end of the month grows near, the United Kingdom government are realizing they are well short of their testing capacity of 100,000 per day goal they set. Health Secretary Matt Hancock announced on Thursday the country is only producing up to 51,000 tests a day. However, John Newton, the man in charge of the testing programs says the government is still on track to reach the 100,000 per day by the end of April. The three T’s for this epidemic in England – testing, tracking and tracing are key to having the lockdown eased and stay that way.
- The European Union and its leaders have agreed to work on a recovery fund to help rebuild Europe’s economy after the pandemic. However, having 27 nations within the union generate consensus on how to raise and spend the money was difficult. The Financial Times reported France and southern European countries pushed for a program based on grants, while northern member states insisted on loans.
- Dubai is preparing to ease their lockdowns, such as having shopping malls and offices operate at 30% capacity and allowing small gatherings. The region has been in a notable restrictive lockdown for a month now. Residents were only allowed out of their home once every three days for groceries or emergencies, and only if they obtained a permit to do so from the police.
- After the United States said they would suspend their contributions to the World Health Organization (WHO), China, the country at the centre of the controversy has tried to fill the void. China announced an additional $30 million in funding to the WHO in fighting the coronavirus pandemic. The country had already given $20 million last month to the organization. This is all still a far cry from what America gave to the WHO, which was $900 million in its 2018-19 budget cycle. The United States was the organization’s largest donor.
Covid-19 – Due Diligence And Asset Management
Blackstone Joins Debt Frenzy in Seeking $7 Billion for New Fund
Brief: Blackstone Group Inc. plans to raise one of the biggest funds to capitalize on the turmoil in debt markets. The investment firm is looking to raise $7 billion for its fourth GSO credit opportunities fund, according to people with knowledge of the matter. Blackstone’s new fund will aim to provide capital to performing companies, said the people, who asked not to be identified because the information isn’t public… GSO, Blackstone’s credit arm, which has about $129 billion of assets under management, closed its third-capital opportunities fund in 2016 at $6.5 billion. In the first quarter, the unit posted one of its worst-ever declines for its distressed strategies. The new fund targets companies in better financial condition.
Larry Fink Sees More Remote Work Hampering Commercial Real Estate
Brief: BlackRock Inc. Chief Executive Officer Larry Fink said the work-from-home revolution will have lasting effects, including pushing down demand for commercial real estate. Fink said that after businesses were forced to run from mostly remote setups during the coronavirus crisis, many companies will choose not to bring all their workers back to the office even when it is safe to do so “I don’t think any company’s going to go back to 100% of the workforce in the office,” Fink said Thursday at a virtual event from Saudi Arabia’s Future Investment Initiative Institute. “That means less congestion in cities. It means, more importantly, less need for commercial real estate. So to me that’s one of the great outcomes of this.”
Private Equity to Get Squeezed Out of Another Stimulus Program
Brief: Private equity’s decade-long debt binge is coming back to haunt it when it comes to obtaining the U.S. government’s coronavirus aid. Already largely shut out of the popular small business rescue loan program, the industry is now realizing that it’s likely to be excluded from the Federal Reserve’s $600 billion lending initiative because it bars companies that have loaded up on borrowed money. The prohibition strikes at the heart of the buyout-shop business model, where firms saddle the companies they purchase with debt in order to mint bigger profits on their investments. Though the Fed’s “Main Street” lending facility for mid-size businesses doesn’t specifically preclude private equity-owned companies, executives say they’ve concluded that the tough terms will prevent many of their firms from qualifying. Some politicians and investors say that may not be a bad thing, especially because taxpayer dollars are on the line.
European Funds Suffer Worst Month Since Financial Crisis
Brief: Europe domiciled long-term funds suffered record outflows throughout March – a month defined by Covid-19 caused market volatility. Net redemptions reached €246 billion – “a staggering number that dwarfs even the darkest month of the 2007-09 financial crisis”, said Morningstar, which published the data. The worst month of the previous financial crisis was October, when investors withdrew €108 billion from long-term funds. This time round, as the Covid-19 death toll continued to rise worldwide, bond funds shed an “unprecedented” €140 billion, whilst equities suffered redemptions of €56 billion.
Volatility Wipes $20bn From AMP Wealth
Brief: AMP says coronavirus-fuelled market volatility has wiped about $20 billion from its beleaguered wealth portfolio, while its global investment fund has also copped a whack. The finance giant told the ASX on Thursday its Australian wealth funds under management declined 13.5 per cent to $116.3 billion in the three months to March 31, a drop of $18.2 billion from $134.5 billion at the end of 2019. The company's New Zealand wealth business lost $1.2 billion, or 9.8 per cent in total AUM. Total assets under management at fund manager AMP Capital fell 5.3 per cent to $192.4 billion, down $10.7 billion from $203.1 billion in the fourth quarter of FY19. AMP chief executive Francesco De Ferrari said his firm had witnessed some recovery since the end of the quarter but expected volatility across equities, commodities and fixed income to continue as the coronavirus crisis rolls on.
Only Tiny Fraction of Canada Hedge Funds Gain in First Quarter
Brief: The hedge fund industry gets its name from the premise it can generate gains even when markets fall. That didn’t happen in Canada during the first quarter, one of the most volatile trading periods in history. Only five of 61 hedge funds, or about 8%, posted gains during the first three months of the year, according to Venator Capital Management Ltd., a Toronto-based investment firm that tracks the industry. The top performer was CC&L Market Neutral Fund, with a 9.8% gain; the worst was Lawrence Park Enhanced Preferred with a 38.5% loss. Canada’s stock market reached a record in February before tumbling in March amid the coronavirus pandemic and then rebounding again, with days featuring both the biggest drop and surge on record. Corporate bonds also plunged, while government yields hit new lows.
