Brief: Goldman Sachs is bullish on the world’s hardest-hit stock market. Down more than 48% this year when measured in dollars, Brazilian stocks will benefit from growing appetite for risky assets and a recovery in commodities prices during the second half of 2020, strategists led by Kamakshya Trivedi wrote in a report dated May 20. “Brazilian equities are an ideal bounceback candidate,” the strategists said. They recommended investors go long the benchmark Ibovespa index with a target of 90,000 points, or about 9% above current levels. Investors have fled from Brazilian stocks and its currency this year as the Covid-19 pandemic battered the economy and worsened the nation’s already-fragile fiscal outlook. Assets have been further undermined by political turbulence and a lack of confidence in President Jair Bolsonaro as he downplays the coronavirus threat even as Brazil becomes the world’s hotspot for new infections.
Brief: The 2008 financial crisis exposed many deficiencies in corporate governance practices in the alternative funds industry. Not only was it revealed that a lot of offshore boards failed to prevent managers from succumbing to style drift and investment mandate breaches, but when the crisis hit, many directors simply permitted firms arbitrarily to impose gates and suspend redemptions without proper consideration being given to the best interests of investors. Many were left trapped in funds for long periods as a result. As markets stabilised, investors made it clear that some directors had neglected their fiduciary responsibilities and promptly demanded reform. Twelve years on from the financial crisis, Covid-19 is causing a different set of challenges.
Brief: Forescout Technologies Inc (FSCT.O) sued Advent International Corp on Wednesday, after the private equity firm pulled out of a deal to buy the U.S. cybersecurity company for $1.9 billion.Forescout shares fell 5.2% to close at $19.84.Companies are walking away from acquisitions agreed to before the global coronavirus outbreak as economies suffer from lockdowns and recovery prospects are unclear.Forescout asked the Delaware Court of Chancery to force Advent to complete the deal after the buyout firm notified it last Friday it would back out. The agreement was signed in early February and scheduled to close on Monday.In a statement, Advent responded that it had informed Forescout of the company’s failure to maintain operations and financial resources as required under the agreement.
Brief: The largest managers will tighten their grip on private capital markets during the coronavirus pandemic, according to PitchBook. “Covid-19’s impact on in-person due diligence is thwarting fundraising attempts by nearly every GP and further exacerbating the bifurcation between mega-fund managers and everybody else,” Wylie Fernyhough, a senior analyst for private equity at PitchBook, wrote in a new report analyzing fundraising trends. “Business travel and in-person due diligence will likely be inadvisable for LPs for several months, meaning mega-funds and more established firms will continue to assume the lion’s share of capital.” According to the report, private equity firms Thoma Bravo, Silver Lake Management, New Mountain Capital, and Francisco Partners have either launched mega-buyout funds — defined by PitchBook as vehicles targeting $5 billion or more — or are nearing first closes in spite of the coronavirus pandemic. Smaller firms, meanwhile, “have had to push out fundraising efforts indefinitely,” according to Fernyhough.
Brief: Investors pulled more than £100m from the Schroder Income fund in March and April of this year as UK companies began culling their dividends and leaving investors bereft of income amid the coronavirus crisis. Estimates from Morningstar showed the Schroder Income fund suffered the largest net outflows out of the Morningstar UK Equity Income sector in the two months, with £106m withdrawn from the portfolio. The Miton UK Multi-Cap Income fund, the Marlborough Multi-Cap Income fund and the Schroder Income Maximiser fund also saw large outflows of around £50m in March and April, while the Majedie UK Income fund saw £46m of net outflows. UK Equity Income funds have had a tough few months as companies scrapped payouts to shareholders during the crisis. The first major blow for income came as the UK’s biggest banks scrapped their payments for the rest of the year following pressure from the Bank of England to maintain a cash buffer to help them through the coronavirus crisis.
Brief: Northern Trust Corp. is shutting down a money-market mutual fund after volatility in March spurred redemptions that sent it below a regulatory threshold for maintaining liquidity. The $1.7 billion Northern Institutional Prime Obligations Portfolio will stop accepting new investments next month and start selling its holdings under a liquidation plan set for July 10, according to a filing Monday. As a prime fund, it can invest in riskier securities than traditional money-market funds, including commercial paper, the term for short-dated bank debt and corporate IOUs. “The Board of Trustees has determined, after consideration of a number of factors, that it is in the best interests of the Prime Obligations Portfolio and its shareholders that the portfolio be liquidated and terminated,” the company said in its filing with the U.S. Securities and Exchange Commission. A spokesman for Chicago-based Northern Trust didn’t immediately have a comment.