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.
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.
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.
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.
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.
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.