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Our briefing for Thursday October 22, 2020:
Oct 22, 2020 3:41:49 PM
- In the United States, a university study issued a damning report on the Trump administration’s handling of the coronavirus. A report from Columbia University’s Earth Institute’s National Center for Disaster Preparedness found anywhere between 130,000 and 210,000 deaths from COVID-19 in America could have been prevented. The study points to insufficient testing, a lack of national mandate, and delayed overall response as reasons for the high death rate. When comparing deaths measured by per 100,000 population, the United States’ mortality rate is 78 times higher than South Korea, 50 times higher than Japan, and twice as high as their neighbours north of the border – Canada. The study reports that South Korea and the United States both confirmed their first case of coronavirus on January 20th.
- In Canada, the federal Liberal minority government lived to see another day after surviving a confidence vote in the House of Commons on Wednesday. A vote was cast on the opposition Conservative government’s request to create a new committee to probe alleged Liberal corruption. The New Democrats, Green Party and independent members of parliament sided with the Liberals - 146 voting for the committee and 180 against. This means a snap election won’t be held in the country as Canada experiences the second wave of the pandemic. The opposition Conservatives though seem to be undeterred saying an investigation is needed so that Parliamentarians can learn from the mistakes of the first wave. Conservative Leader Erin O’Toole points to the Liberal government’s slow response to the initial first wave, reluctance to close borders to travellers earlier and relying too much on advice from the World Health Organization as reasons the committee needs to be created.
- In a news conference on Thursday, the United Kingdom’s chief scientific adviser Patrick Vallance noted while some COVID-19 vaccine doses may be available before Christmas, it will be awhile longer before a widespread rollout will be available. “I remain of the view that the possibility of a sort of wider use of vaccines isn’t going to be until spring, or so, next year by the time we get enough doses and enough understanding of the outputs to use them,” said Vallance. Elsewhere in the UK, Prime Minister Boris Johnson announced at the same news conference that the government has begun to roll-out “lateral-flow” tests to schools and universities. These tests don’t require a lab or machine and deliver results within minutes.
- France has announced the extension of a night-time curfew to curb the spread of the coronavirus to two-thirds of its population – or 46 million people. French Prime Minister Jean Castex said 38 more of the 101 departments/regions would be undergoing the 9PM-6AM curfew as of midnight on Friday. Nine of France’s largest cities – including Paris are already under the curfew. Government ministers said 44% of France intensive care beds are now filled with COVID-19 patients.
- The Philippines on Wednesday lifted a ban on non-essential foreign trips by Filipinos. Travelers wishing to go to other countries are required to show confirmed roundtrip tickets, travel and health insurance, a declaration acknowledging the risks of travel and trip delays, and a medical test within 24 hours of departure that clears them of COVID-19. The Philippines immigration bureau said the move didn’t spark immediate large numbers of tourism and leisure, which isn’t surprising since either many nations still have travel restrictions of their own, or now experiencing a second wave of the coronavirus.
- Brazil’s President Jair Bolsonaro has been fairly quiet for his standards since being diagnosed with the coronavirus himself back in the summer, but is now back with a vengeance. President Bolsonaro blasted a Chinese vaccine being tested in the country just one day after his third health minister during the pandemic announced a deal to purchase the potential coronavirus vaccine. Upon hearing the news, some of Bolsonaro’s most vocal supporters opposed the purchase of a vaccine from a foreign nation. Therefore, Bolsonaro took to social media with the following statement (capital letters included) “The Brazilian people WON’T BE ANYONE’S GUINEA PIG.” Bolsonaro added that billions can’t be spent on medication that is still being tested and his decision is not to acquire the aforementioned vaccine.
Covid-19 – Due Diligence And Asset Management
Investors Brace for Barrage of Covid Vaccine Data to Roil Market
Brief: The next month or two has the potential to wreak havoc in the health-care sector and the market as a barrage of Covid-19 vaccine test results roll in at the tail end of the U.S. presidential election. “The vaccine outlook will ultimately dwarf the election in terms of market impact,” Goldman Sachs’ strategists said. An earlier-than-expected vaccine would send equity values higher while a delay could send the market lower no matter what the election’s outcome, the bank’s analysis shows. With an emergency use authorization now expected around year end, the U.S. Food and Drug Administration is convening a meeting Thursday to set the stage. Mostly it will be the agency looking to get a public endorsement on their stance on Covid-19 vaccine safety guidance and to ease concerns over the politicization of an approval, SVB Leerink analyst Geoffrey Porges said in an interview. Results from vaccine front-runners, Pfizer Inc. and German partner BioNTech SE, are expected within the next few weeks. Moderna Inc. may follow closely behind in November. And the first late-stage data from a single-shot regimen, Johnson & Johnson’s vaccine, could have results before the end of the year. The study however, is currently paused.
Harvard Posts $10 Million Loss with More Financial Strife Ahead
Brief: Harvard University posted a $10 million operating loss in fiscal 2020 and said it’s likely revenue will decline for a second straight year due to the Covid-19 crisis. That would be a first for the school since the 1930s, Harvard said in its annual financial report Thursday, adding that measures including coronavirus testing and tracing and reconfiguring classrooms and dorms have driven up costs. “The financial effects on Harvard from the onset of the pandemic in March of this year were significant and sudden,” Thomas Hollister, vice president for finance, and Treasurer Paul Finnegan said in the report. “The hardest part likely lies ahead with ongoing challenges” from the virus, they said. Higher education has been hit hard by Covid’s economic fallout as schools have been forced to empty campuses, offer courses remotely and close facilities. That has led to a sharp drop in enrollment across the U.S., especially among first year students. Yet even with the bleak outlook, Harvard said its net assets increased by $893 million to $50.2 billion as of June 30 due to the strong performance of the endowment under N.P. “Narv” Narvekar. The endowment, valued at $41.9 billion, returned 7.3% in the last fiscal year and distributed $2 billion of revenue for university operations, according to the report.
Big Name Asia Hedge Funds Raise Billions, Startups Struggle
Brief: Established Asian hedge funds have attracted the lion’s share of new money this year, while startups have been hamstrung by global travel curbs that have made it impossible for face-to-face meetings with European and U.S. asset allocators. Well-known firms including Tribeca Investment Partners Pty, Pleiad Investment Advisors Ltd., Dymon Asia Capital (Singapore) Pte. and Sylebra Capital have drawn more than $3 billion of new money among them this year. That contrasts with the net $3.1 billion that flowed out of regional funds in the first eight months of 2020, according to Eurekahedge Pte. Meantime, the median raising for new Asia funds this year is just $20 million. “Asset raising has been possible this year, but it has been materially more challenging,” said Matthew Whitehead, chief operating officer of Hong Kong-based Sylebra… With a shortage of local institutional allocators to hedge funds, Asian managers rely on U.S. and Europe sovereign wealth funds, university endowments, charitable foundations and pensions for stickier money. That makes them particularly vulnerable to the Covid-19 travel restrictions.
Financial Crime Compliance Costs Top $42B in U.S./Canada
Brief: A new study of financial crime compliance costs found spending by American and Canadian financial institutions is up sharply in 2020, driven in part by the coronavirus pandemic. The True Cost of Financial Crime Compliance Study, released Wednesday and compiled by LexisNexis Risk Solutions, projected the cost of financial crime compliance at $42 billion across U.S. and Canadian financial firms this year. The costs break down to $35.2 billion for U.S. firms and $6.8 billion for Canadian firms. Total costs are up 33 percent over 2019, the report said. Survey respondents included 150 financial crime decision makers (120 American, 30 Canadian) polled via telephone during August. The individuals worked in financial crime compliance at banks, insurance companies, investment firms, and asset management firms. The total annual cost of compliance across firms was calculated using survey data on financial crime costs as a percent of total assets and secondary data that provides the total assets for all financial institutions in the United States and Canada. The spend amount was generated by multiplying the average percent allocated to financial crime costs by the reported total asset amount, according to the survey’s methodology.
DWS Donates More Than GBP370,000 to UK-Based Covid-19 Research Effort and Relief
Brief: Earlier this year DWS announced it would donate EUR1 million (GBP905,000) to charitable organisations in countries around the world where DWS is active, and which have been particularly hard hit by the pandemic. In order to show commitment as a firm and to achieve the greatest possible impact, DWS also encouraged employees to make their own donations to these organisations. Nominated by DWS employees, GBP370,000 (EUR400,000) of this total has now been donated to three UK-based charities that provide services for socially disadvantaged people – especially the homeless and children, and a UK-based social enterprise to support research efforts to combat Covid-19 as well as other global epidemics and disease. “The Akshaya Patra Foundation UK” strives to tackle the issues of hunger, malnutrition and education by providing freshly cooked and nourishing meals to children in India and the UK. With the help of DWS, 170,000 meals and 5,250 dry grocery kits were distributed to vulnerable families, providing a total of 390,500 meals since the pandemic lockdown in India.
Wall Street Forecasts More Asset Managers Will Merge to Survive
Brief: Asset managers are at a crossroads. Having faced the COVID-19 pandemic on top of years of pressure from shrinking fees and shifting investor preferences toward the industry's giants, money managers are debating whether to stick it out on their own or enter the deal market in search of scale or complementary products, Wall Street investment bankers, analysts and other experts say. All the while, the likes of BlackRock Inc. and Vanguard Group Inc. keep gobbling up assets. "The stars seem to be lining up for more [deals]," said Mark Timperman, a managing director and head of asset management investment banking at Hovde Group who recently joined the Chicago-based company from Wells Fargo Securities LLC, in an interview. "After having been through a real scare with the COVID cycle, when there was another big market correction, people realized that it's time to think about where the industry ends up in five years." M&A has played a critical role in the investment management industry's evolution in recent years. Inexpensive passive investment vehicles and exchange-traded funds have driven down fees for the entire industry, with the race to the bottom going so far that some ETFs dabbled in paying investors, not the other way around. Asset managers have been buying up their peers in an effort to expand their offerings and asset bases so they can more competitively price their products.
