Brief: Izzy Englander’s Millennium Management plans to return at least $5 billion to investors at year-end as part of an effort to create a more stable capital base. The money will come from a share class that can be redeemed in full after a year, people familiar with the matter said. The share class represents about $37 billion of the firm’s $45.4 billion in assets. In a new twist, any additional money raised will now be deemed committed capital, with the firm having three years to call the pledged money from investors, who learned of the change in a letter Wednesday. Once that happens, clients will be able to withdraw only 5% each quarter, meaning it would take five years to cash out completely. A spokesman for New York-based Millennium declined to comment. Englander’s firm has sought to lock up capital for longer ever since the 2008 financial crisis, when investors in need of cash pulled money, cutting Millennium’s assets in half. Other hedge funds had halted redemptions. Millennium, which climbed 12% this year through July, has produced steady returns over its three-decade history, making the new structure an easier sell. Two years ago, the firm started a 5%-a-quarter share class that now accounts for about $8.5 billion of assets.
Brief: Blackstone Group Inc., which led Wall Street’s initial foray into the single-family rental business, is making a new investment in suburban houses at a time when the Covid-19 pandemic is pressuring traditional commercial real estate. The private equity giant, which exited its stake in landlord Invitation Homes Inc. last year, is leading a group of investors in a $300 million minority investment in Tricon Residential Inc., which owns and manages more than 30,000 single-family rental homes and multifamily units in North America… The suburbs are in high demand as city-dwellers seek quarantine comforts such as backyards and room for home offices. At the same time, with more than 16 million Americans out of work, many renters have said they lack confidence in their ability to pay for housing, and experts are warning that the country is headed for a massive wave of evictions. Shares of single-family landlords have been rewarded during the pandemic as their rent collections have held up better than those of multifamily landlords. Tricon’s stock has surged 91% since March 23, compared with a 24% gain for a Bloomberg index of apartment REITs.
Brief: Emerging Markets and Asian hedge funds surged in Q2 2020, recovering from steep losses experienced in late 1Q, with many indices posting gains for YTD 2020 through July. The HFRI China Index gained 6.8 per cent in July, which followed a 14.5 per cent gain in Q2, the best quarterly performance since Q1 2019, to bring YTD performance to +13.1 per cent, as reported in the HFR Asian Hedge Fund Industry Report and the HFR Emerging Markets Hedge Fund Industry Report. Hedge fund capital invested in Emerging Markets also surged concurrent with the record performance gains, ending Q2 at USD244.4 billion (CNY1.55 trillion, BRL1.24 trillion, INR16.6 trillion, RUB16.9 trillion, SAR842 billion), an increase of nearly USD13 billion from the prior quarter. Hedge fund capital invested in Asian markets also increased to USD115.5 billion (CNY798 billion, INR8.57 trillion, JPY12.28 trillion, KRW1.09 trillion).
Brief: Even before Covid-19 crushed the economy, the Fed was worried about low inflation and was working on ways to let it run slightly hotter temporarily in order avoid the trap of long-term sluggish growth and weak pricing power. Chairman Jerome Powell, in a much-anticipated speech Thursday, is expected to discuss the Fed’s policy framework and specifically how it will alter its posture on inflation. The Fed has had a 2% inflation target, but in the decade since the financial crisis it has more often than not seen inflation fall below its target… The Fed has taken extraordinary actions to fight the impact of the coronavirus. It has vowed to keep rates at zero for a long time; it also has provided more liquidity, purchased assets and inserted itself in different markets to assure they run smoothly. The Fed already had been reviewing its policy framework, and inflation was part of it. Even before the virus, Fed officials had said they would allow inflation to overshoot their 2% target but they didn’t formalize it. “This is longer running than just Covid. If they had wrapped this up last year, Powell would have to signal this policy shift with rates above zero, ” said Jon Hill, senior fixed income strategist at BMO. “Since we’re already at zero, it means we’ll be at zero even longer and the central bank is going to be even more aggressive about trying to meet its inflation mandate. In the past they pre-emptively hiked to get ahead of inflation pressures. What they’ve shifted to is actually waiting until they get sustained inflation.”
Brief: The email, formal and foreboding, landed at 9:38 a.m. on Monday, March 2. “Can you please call me when you have a second to talk?” the Bridgewater Associates employee asked. The call, the email’s recipient knew, would not be good: Karen Karniol-Tambour, the hedge fund’s head of investment research, was scheduled to be a lunchtime speaker at an investment conference at Washington, D.C.’s Watergate Hotel just over 24 hours later. But at that moment, on March 2, a man in Westchester County — a mere 30 miles from Bridgewater’s two main campuses in Westport, Connecticut — was undergoing treatment as the first Eastern Seaboard case of Covid-19 with an unknown origin. Karniol-Tambour wasn’t going to make it, the conference organizer feared. Bridgewater had been on high alert all weekend. The firm’s health security “posture” was the subject of ongoing discussions. Already, anyone who had traveled to certain areas — including the West Coast of the U.S., where Covid-19 had already killed individuals in Washington state — or lived with someone who had traveled, was barred from the offices.
Brief: Sixty-three percent of investors in alternatives do not anticipate changes to their investment plans in response to the COVID-19 crisis, the results of a Preqin survey show. And 29% expect to invest more in alternative investments in the long term than they would have prior to the pandemic, the survey indicated. Meanwhile, 72% of private equity investors surveyed indicated that returns have met their expectations. Seventy-four percent of private debt investors, 72% of infrastructure investors and 66% of real estate investors said that returns have met their expectations. Forty-seven percent of hedge fund and 58% of natural resources investors said that returns are below expectations, according to the survey. However, 42% expect returns to decline due to the COVID-19 crisis, the survey indicated.