Brief: BlackRock's 16,000 employees may continue to work remotely for the remainder of the year wherever they are located, even as the firm reopens offices around the world in the midst of the COVID-19 pandemic. "Given the uncertainty in many of our locations and to help you plan ahead, we will continue providing all employees the option of working from home for the rest of 2020. When your office is available for use, you can decide to work from the office, work from home or split your time between the two," said an Aug. 3 employee memo obtained by Pensions & Investments. Where BlackRock reopens offices based on local conditions and government guidelines, it will use a split-team model for the time being to "ensure social distancing," said the joint memo from Robert S. Kapito, director, co-founder and president; Lawrence Knafo, managing director and chief security officer; and Manish Mehta, managing director and global head of human resources. Going forward, BlackRock will increase office occupancy in areas where COVID-19 conditions have improved or reduce an office's in-person head count if pandemic conditions worsen.
Brief: BlackRock Inc. has joined a growing chorus of investors and analysts warning of resurgent inflation risks, as the global battle against the coronavirus crisis creates a convergence of ultra-easy monetary policy and expansionary budgets. The world’s largest asset manager pointed Thursday to a potential pickup in U.K. price pressures after the Bank of England held record-low interest rates and maintained its asset-purchase program. Last week, Goldman Sachs Group Inc. highlighted growing concerns over the U.S. inflation outlook, which the bank said could even threaten the dollar’s reserve-currency status. While the world’s nations are unleashing unprecedented spending to counter the economic shock from the pandemic, central banks are maintaining ultra-loose monetary conditions to cap the costs of such fiscal largess. This policy combination is now fueling fears of a spike in consumer prices down the line as more money chases fewer goods. Market-implied price expectations have climbed globally in recent months, fueling a rally in gold, and Wall Street’s heavyweights from Pacific Investment Management Co. to AllianceBernstein Holding LP have cautioned in recent months that inflation is a problem that’s bound to return.
Brief: Approvals for a potential COVID-19 vaccine later this year could threaten the recent surge in speculative investment in big U.S. technology companies and pull investors back towards more traditional growth-linked cyclical stocks, according to analysts at Goldman Sachs. Seen as "stay-at-home" winners in the coronavirus lockdowns, shares in Apple Inc (AAPL.O), Facebook Inc (FB.O), Amazon.com (AMZN.O) and Alphabet (GOOGL.O) have surged this year and now account for nearly a fifth of the S&P 500's .SPX stock market value. Bumper results from the iPhone maker last week pushed it past Saudi Aramco (2222.SE) to become the world’s most valuable publicly listed company and heading towards a $2 trillion valuation. In a global markets research note sent to clients, Goldman analysts said the current rally could last until Labor Day in early September, but would be threatened by updates on vaccines. “Approval could ... prompt the kind of rotation that started and petered out in May and early June, supporting traditional cyclicals, steeper curves and banks, and challenging tech leadership,” they argued.
Brief: The fund management sector looks set to swoop on the topic of social inequality once markets emerge from Covid-19. By now you may have read ample articles (like this) that say not only is ESG (environmental, social, governance) investing not dead, but that Covid-19 will reinforce it and, importantly, give more impetus to the ‘social’ dimension. “Whereas climate change put environmental issues front and centre, the pandemic has elevated urgency on social issues,” says Thomas Kuh (pictured below), head of ESG at Truvalue Labs in San Francisco. “Covid-19 has exposed serious, systems-level problems like inequalities of income and wealth that need to be addressed,” he says. After analysing data on information flows between January and April, Truvalue found ESG issues such as access and affordability were prominent in the context of the pandemic. Maarten Bloemen of Franklin Templeton Investments’ global equity group, echoes the finding, saying: “The coronavirus has brought a spotlight on several issues in the ‘S’ category of ESG, including social stability, employment, infrastructure, data security and keeping employees and customers safe – whether they are physically interacting or not.”
Brief: The relentless rally in American equities is emboldening hedge funds at a time their own clients are getting worried. Professional managers that make both bullish and bearish equity bets last month pushed their long positions on stocks up above their short ones by a ratio of almost 1.9-to-1, the highest reading in more than a decade, according to data compiled by Morgan Stanley’s prime brokerage unit. The S&P 500 rose 5.5% during the period, its best July since 2010, and has rallied in the first three days of August. Meanwhile, the firm’s survey of hedge fund investors showed roughly three quarters of the respondents expect the S&P 500 to finish the year lower than 3,300. The benchmark closed on Wednesday at 3,327.77, about 26 times annual earnings. People are choosing sides in a year like no other, when rebounding shares have pushed valuations to two-decade highs even as a pandemic rages. While investors in the Morgan Stanley survey cited everything from the health crisis to a weak economy and November’s presidential election as the top market risks, the people paid to ride the wave are afraid of missing out. For now, the disagreement hasn’t prompted clients to exit. In fact, interest in investing with long-short hedge funds last quarter increased to the highest level in at least two years, Morgan Stanley data showed. “Investors felt hedge funds performed well in 2Q, despite missing part of the market rally,” the firm wrote in the note to clients last week. About “90% of investors felt HF performance was in-line or better than expectations.”
Brief: COVID-19 and the associated economic crisis are set to cause the first decline in global asset management industry assets under management in a decade, according to Cerulli Associates’ latest report, Global Markets 2020: A Sharper View of the Asset Management Sector. However, moving beyond 2020, the global analytics and consulting firm expects the global asset management industry to recover and grow, fueled by increasing demand in developing countries, particularly Asia. Advances in technology and product will give global asset managers more ways to access growing investor segments. “As the coronavirus pandemic continues to impact the global economy in the second half of 2020 and beyond, asset managers will need to find ways to keep investors in their products and prevent a widespread flight to cash,” says André Schnurrenberger, managing director, Europe at Cerulli Associates. “Managers should dedicate resources to investor education on how to handle a market correction, implementing scenario analysis from the last significant global drawdown in 2008.” These resources will be especially useful in those countries where emerging middle-class investors have entered the market within the past decade and had not experienced a substantial correction before COVID-19.