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Our briefing for Thursday February 4, 2021:
Feb 4, 2021 3:40:13 PM
- In the United States, Democrats in the Senate are poised to take their first step Thursday in passing President Joe Biden’s $1.9 trillion COVID-19 relief proposal. Senate Democrats need to pass a budget resolution to unlock a legislative tool called reconciliation, which would allow them to approve President Biden’s proposal with a simple majority. Most legislation requires at least 60 votes in the 100 seat Senate to pass. If everyone were to vote along party lines, there would be a 50-50 split with Vice President Kamala Harris providing the tie-breaking vote. Republican lawmakers have already said they could offer up to 20 amendments on the bill which would include a reverse to the cancellation of the Keystone pipeline, block a higher minimum wage, stimulus checks for illegal immigrants and tax hikes on businesses during the pandemic.
- Canada received some troubling news on Thursday during a news briefing as the man in charge of leading vaccine logistics admitted he doesn’t know how many Moderna doses will arrive in the weeks ahead. Speaking to reporters, Major-General Dany Fortin said 180,000 Moderna COVID-19 vaccines arrived on Thursday, but the drugmaker hasn’t made clear to the government why it has reduced shipments to Canada. Despite the unknowns, Fortin is still in line with Prime Minister Justin Trudeau’s assessment that the country expects to have two million Moderna doses delivered by the end of March. According to data collected by the University of Oxford, Canada ranks 33rd in the number of shots administered per capita, trailing middle income nations such as Poland, Serbia, Romania and Slovenia, along with G7 counterparts the United States, United Kingdom and Germany.
- The United Kingdom is conducting the first world trial of mixing vaccine doses to see if they can find faster ways to inoculate their population against new mutated variants. British researchers will mix the Pfizer and AstraZeneca vaccine shots with initial data expected to be generated around June. Infectious disease experts believe there are around 4,000 mutations of the coronavirus around the world right now and the hope is that mixing two different vaccine types will lead to a better understanding of whether inoculations can be rolled out with greater flexibility.
- Denmark plans to introduce a digital “vaccine passport” in order to reopen their society. The plan would initially apply to business travellers, but authorities believe it could help reopen the rest of the country with citizens able to freely go to restaurants, conferences, musical festivals and sporting events. All these activities are currently restricted with current lockdowns in place until at least February 28th. According to Denmark’s finance minister, over the next three to four months, the “passport” could be become available on mobile phones with other information, such as whether or not someone tested positive for antibodies, to come in later iterations.
- CNBC is reporting the United Arab Emirates (UAE) and Dubai in particular, are rejecting the “superspreader” label after the region’s recent surge in cases. The report notes record breaking infection rates in recent weeks have forced Dubai to ban its popular brunches and close pubs and bars. Statistics from the UK Civil Aviation Authority show almost 300,000 people traveled between the UAE and UK during November and December 2020, with thousands flocking to Dubai hotspots to escape lockdowns. Cases have tripled since November, but UAE authorities deny the community has been put at risk and reject the idea they have played a key role in spreading the virus throughout the world.
- In Australia, professional tennis players have taken center stage again as more than 500 players and officials were ordered into isolation in Melbourne after a worker at a quarantine hotel tested positive for COVID-19. Melbourne officials have reinstated an order for masks indoors and a limit of gatherings to 15 people after Victoria’s state 28-day run of no local cases came to an end thanks to the infected worker. About 1,200 players, coaching staff and officials are in Australia for the Australian Open – professional tennis’ first major championship of the year, which is set to begin in just a few days. Australian government officials are set to meet on Friday to consider the quarantine hotel programme should use more remote, regional centers given the tendency for the virus to escape and spread into the community.
Covid-19 – Due Diligence And Asset Management
January Blues Cause Investors to Shun Equity Funds as Surging Coronavirus Pandemic Prompts Tighter Curbs Around the World
Brief : The vaccine-induced euphoria that saw equity funds enjoy their second-best month on record in December evaporated in January as contagious new Covid-19 variants prompted surging infection rates around the world. The latest Fund Flow Index from Calastone shows that net inflows fell by 97.5 per cent month-on-month to just GBP64.6 million, no more than a rounding error in the context of busy trading volumes well above average at GBP21.8 billion. As the UK descended into a full national lockdown with no prospect of release for months to come, outflows from funds focused on UK equities accelerated to GBP179 million, the eighth consecutive month in which investors have shed UK equities. Equity income funds, which are heavily weighed to UK shares, had their second-worst month on record, in effect a vote against UK equities too. Meanwhile, Europe’s vaccine debacle prompted a U-turn in investor sentiment towards funds focused on European shares. After months of accelerating inflows culminating in a record month in December, January saw investors once again bail out of European funds, selling down GBP141m. All other regions saw modest inflows. Global funds, however, had another good month, in line with the average for the last year. Two thirds of global fund inflows are driven by ESG. There was bad news for traditional active equity funds (ie those without an ESG mandate), as they gave up almost all the new capital they had garnered in December. Investors shed holdings to the tune of GBP965m in January, having added GBP1.0 billion the previous month. The return to outflows marks a return to trend.
Early Backers of Vaccine Maker BioNTech In $719 Million Payday
Brief: German venture capital firm MIG AG, which was among the first backers of COVID-19 vaccine developer BioNTech, has paid 600 million euros ($719 million) to its investors, cashing out parts of an initial investment of 13.5 million euros. MIG said on Thursday that investors in its funds would now receive 340 million euros from the sale of an unspecified stake in BioNTech, following a payout of 260 million euros last year. MIG’s funds have provided funding to BioNTech, which developed the vaccine with U.S. drugmaker Pfizer, since the German biotech company’s inception in 2008. BioNTech now has a market capitalisation of around $28.4 billion, more than eight times its valuation of $3.4 billion when it made its stock market debut on the Nasdaq exchange in October 2019. MIG AG general partner Kristian Schmidt-Garve said the investment firm was proud of BioNTech’s role in fighting the pandemic. “We are also very pleased that we could realise considerable returns for the shareholders in the involved funds, which amount to a multiple of the initial deposits,” he added. MIG did not say how many BioNTech shares were sold and how many it still holds in the company.
Carlyle Reports USD518.8 Million Fourth-Quarter Profit
Brief: Washington-based Carlyle Group reported a USD518.8 million fourth-quarter profit on the back of strong asset sales at the end of last year, including its divestment of a 50 percent stake in streetwear fashion brand Supreme to VF Corporation as part of a USD2.1 billion deal in November. VF Corporation already includes the brands Vans, The North Face, Timberland and Dickies, and the company said that it expects Supreme to contribute at least USD500 million of revenue and USD0.20 of adjusted EPS in the fiscal year 2022. Carlyle's December results swung upwards from a loss of USD8.3 million, or 8 cents per share, in the same period of 2019. The better-than-expected figures came largely on the back of the disposal of assets in the global PE-firm's private equity division and credit businesses. Carlyle’s private-equity portfolio increased in value by 11 per cent during the period, compared with an 11.7 percent gain by the S&P 500 stock market index. The private equity group recorded total assets under management at USD246 billion, an increase of 10 per cent year-over-year. Meanwhile, fee-earning assets under management stood at USD170 billion, up 6 per cent year-over-year. It also has a remaining USD76 billion of capital available for investment.
Asia’s Family-Owned Business Founders Seek Private Equity Exit
Brief: Dealmakers across Asia are busy fielding calls from company founders who are mulling letting go of their life’s work as the Covid-19 pandemic has upended how global business is done. After riding the region’s rise over the past decades, family firms that dominate the economic landscape are now also looking for bigger partners, help to modernize management teams and in succession planning, according to consultants, bankers and private equity firms. “We’ve seen founders, particularly the older entrepreneurs, saying there are more challenges in the world now and that they’re thinking about succession issues and management issues,” said Ed Huang, co-head of Asia acquisitions in private equity at Blackstone Group Inc. “Private equity is better understood now as either a potential strategic partner or as an exit path.” The shifting sentiment could spell seismic moves in capital. Just publicly listed family firms in Asia have a market capitalization of more than $5.56 trillion, according to Credit Suisse Group AG. In Hong Kong and Singapore 70% and 60% of listed firms, respectively, are family-backed businesses, a report from the Family Firm Institute showed. Recent deals include a CVC Capital Partners-led privatization of Hong Kong fashion chain I.T Ltd. as well as a takeover by TPG and Northstar Group of a unit of Singapore-based food company Japfa Ltd. Pankaj Goel, Credit Suisse’s co-head of investment banking and capital markets for Southeast Asia and frontier markets, said the region could be in line for a “many-fold” increase in deals already this year. He singled out sectors such as consumer, health care and technology as key areas.
Man FRM: Why These Hedge Fund Strategies Stand to Gain From a Miscellany of Market Opportunities
Brief: Man FRM is optimistic on what it describes as an “unusually large” spectrum of hedge fund strategies amid a growing medley of investment opportunities and themes arising from the fledgling economic recovery. In its Q1 strategy outlook published on Thursday, Man Group’s funds-of-funds unit spelled out how a spring economic recovery, coupled with dovish central bank stances and ongoing fiscal support, will help sustain and extend the market rally, particularly in equities. That, in turn, will likely strengthen the hand of a range of hedge fund strategies including credit, equity long/short, macro and relative value, during the first quarter. Stronger earnings and multiple expansions are underpinning an increasingly bullish investor sentiment for 2021, particularly in US equities, with low interest rates and abundant liquidity helping to support expensive valuations. At the same time, though, Jens Foehrenbach, Man FRM’s CIO, also acknowledged how certain “speculative excesses” in the market may potentially throw up risks further down the line this year - including sharp interest rate hikes, rotations, and policy mistakes such as a premature withdrawal of stimulus amid the Covid recovery. “Cognisant of this bullish expectation for equity markets, we believe investors should remain disciplined around the goal of portfolio positioning, which is to provide diversification if this expectation turns out to be wrong – not to beat the market if we experience a strong year for equities,” Foehrenbach wrote in the outlook.
Vaccine Passports: Path Back to Normality or Problem in the Making?
Brief: Governments and developers around the world are exploring the potential use of “vaccine passports” as a way of reopening the economy by identifying those protected against the coronavirus. Those developing the technologies however, say such tools come with consequences such as potentially excluding whole groups from social participation, and are urging lawmakers to think seriously about how they are used. The travel and entertainment industries, which have struggled to operate at a profit while imposing social distancing regulations, are particularly interested in a way of swiftly checking who has protection. Among those developing passports are biometrics company iProov and cyber security firm Mvine which have built a vaccine pass now being tested within Britain’s National Health Service after receiving UK government funding. iProov founder and chief executive Andrew Bud believes such vaccine passports only really need to hold two pieces of information. “One is, has this person been vaccinated? And the other is, what does this person look like?” You need only match a face to a vaccination status, you don’t need to know a person’s identity, he added. Confirmation of patrons’ vaccination status could help the night-time economy, which employs some 420,000 people in the northern English city of Manchester, off its knees, experts say.
