Brief: The European asset management industry is back on track for another year of growth, according to industry body The European Fund and Asset Management Association (EFAMA) – with assets under management rebounding strongly after being hit by the coronavirus crisis in the first quarter of 2020. In its yearly report, EFAMA estimates that total assets under management in Europe stood at EUR25.8 trillion at the end of 2019, a figure that fell by 11 per cent to EUR23 trillion by the end of the first quarter of 2020. A rebound of 8.3 per cent in the second quarter took assets back up to EUR24.9 trillion. “Thanks to the positive news on the Covid-19 vaccine front, it is likely that the value of assets under management will reach another historical height by the end of 2020”, comments Bernard Delbecque, senior director for economics and research at EFAMA. The amount of assets managed within Europe has more than doubled in a decade, starting from EUR10.8 trillion in 2008 and going up to EUR23.1 trillion by the end of 2018. EFAMA’s report also looked at the asset management industry’s contribution to the real economy, and found that asset managers in Europe held an estimated 25 per cent of all debt securities and 30 per cent of listed shares issued by Eurozone residents at the end of 2018.
Brief : European investor confidence fell to its lowest level this year due to Brexit concerns and an EU budget impasse, while risk appetite overall increased at a global level. The latest State Street Investor Confidence Index saw European investors register a reading of 92, down 1.8 points on the revised total for October, marking a second consecutive month of declining sentiment. Any reading on the scale below 100 means investors are selling more risk assets than buying. Marvin Loh, senior macro strategist at State Street Global Markets, said: “Risk appetite fell to its lowest levels of the year in Europe, as surging virus cases resulted in another round of lockdowns and restrictions.” He added: “Ongoing Brexit negotiations and an EU budget impasse further sapped investor confidence, although most European bourses are set to report double-digit gains for the month.” At a global level, however, investor confidence overall was on the rise, increasing to 90.7 – up over 10 points on October’s final total. This, according to State Street, was primarily driven by a “jump” in the North American confidence index to 87.4 points. The Asian investor confidence index also increased, rising from 91.8 to 95.1.
Brief: Through the use of repeated COVID-19 testing, Europe and the U.S. are going to establish the first quarantine-free air corridors since the coronavirus pandemic led countries to isolate arrivals. Delta and Alitalia will be operating the flights from next month. However, with both the U.S. and Europe maintaining heavy restrictions on who can enter from the other side, these are still just trials of procedures that are only likely to be widely rolled out in the summer of 2021. From December 19, Delta said Thursday, it will start operating test flights between Atlanta and Rome in which passengers do not have to go into quarantine on either end. However, they will have to take a series of tests to make this possible. Those travelling from Hartsfield–Jackson Atlanta International Airport to Rome-Fiumicino International Airport will first need to take a high-assurance PCR test, up to 72 hours before departure. If the result is negative, they'll get a rapid test at the Atlanta airport, and another on arrival in Rome. Travelling in the other direction will require a rapid test at Rome-Fiumicino.
Brief: As coronavirus infections in Japan spark increasing alarm, the government has left investors guessing on how much money it will pump into the economy through a third extra budget. This presents a huge challenge for the bond market trying to gauge how much additional debt will be issued in the current fiscal year through March, along with which maturities will be in focus and the likely impact on yields. Primary dealers told the government that the market has the capacity to absorb more 20- and 40-year bonds, an official at the Finance Ministry said after a meeting on Thursday. Here are some of the main scenarios seen by interest-rate strategists in Tokyo. The issuance pipeline for this fiscal year is already at a record 212.3 trillion yen ($2 trillion), which puts pressure on the government to limit additional sales, if it can. But the risk of a big jump is very real if virus infections increase significantly. Tokyo last week raised its Covid-19 alert to the highest of four levels amid a resurgence of the pathogen across the country -- a spike that’s come after Prime Minister Yoshihide Suga called on officials to prepare the third extra budget.
Brief: A recent surge in COVID-19 cases is derailing Canadian banks’ plans to bring employees back to offices, with one lender even asking some workers who had already returned to go back home. Canada is now facing about 5,000 new COVID-19 cases a day, prompting provinces and cities including Toronto -- home to the country’s five biggest banks -- to implement new restrictions to limit the virus spread. Even Prime Minister Justin Trudeau recently returned to working from home in an attempt to set a national tone of caution. Bank of Montreal and Canadian Imperial Bank of Commerce are extending work-from-home plans for some employees until at least April, while National Bank of Canada is prolonging such measures for corporate-office staff until the end of June. Toronto-Dominion Bank hasn’t set a firm date for a return, but said in a memo last week that most people working from home won’t come back “until at least the spring.” Royal Bank of Canada even encouraged employees who had gone back to offices to return to working at home as of Nov. 16, according to a memo from Chief Human Resources Officer Helena Gottschling. Canada’s second-largest lender by assets said it will continue pre-screening and requiring masks and distancing for those who can’t work remotely.
Brief: The coronavirus pandemic and resulting economic conditions have presented a “once-in-a-decade” opportunity for distressed debt investors, according to SVPGlobal. The high yield, leveraged loan, and direct lending markets in the United States are worth $4.5 trillion, according to a new paper from the distressed debt and private equity firm. With a projected 10 percent default rate for 2020, distressed investors will have many options to choose from. “If you use the default rate as a proxy, we think that for us and people who do what we do, we are going to be feasting for the next two or three years,” said Victor Khosla, SVPGlobal’s founder and chief investment officer, by phone. Khosla’s $9.8 billion SVPGlobal, previously known as Strategic Value Partners, has the dry powder available to do it: the firm closed a $1.7 billion distressed debt fund in late October, Institutional Investor previously reported. When the pandemic came stateside in March, a wave of debt holders unloaded their now-distressed investments following downgrades. “In almost all markets, the first 60 days of the pandemic were bedlam,” Khosla said. Then, the Federal Reserve stepped in with an open market buying program that injected liquidity into the debt markets, slowing the sale of debt.