Brief: Credit Suisse Group AG is closing down funds and laying off employees at its alternative asset management business after several of the strategies struggled to perform in the volatility caused by the Covid-19 pandemic. The bank’s actions include shuttering a quantitative fund and taking a 24 million Swiss franc ($26 million) charge on seed capital in a U.S. real estate fund in the third quarter, Chief Financial Officer David Mathers said in an interview, declining to name the funds or detail the extent of the layoffs. Asset managers are facing challenging market conditions amid the pandemic, with hundreds shuttering or in the process of closing down, including AJO Partners, a $10 billion quantitative fund manager, and macro hedge fund firm Tse Capital Management. Credit Suisse earlier this month said that Aventicum Capital Management, a joint venture with the Qatar Investment Authority, will close two groups of funds and return capital to investors. “We have seen some of these funds struggling in this environment -- their strategies have not succeeded in the volatility that has happened with Covid-19,” Mathers said Thursday. “The credit business is doing fine, it’s some of the smaller ones.”
Brief: At a time when governments around the world are burning through billions attempting to rescue citizens from the financial pain of coronavirus, which has created severe crises in healthcare and employment, Big Society Capital says there is a crucial opportunity to use private money to fund social causes.Big Society Capital was one of the first institutions to champion impact investing in the UK. It was established in April 2012 as a private company with the purpose of building the social impact investment market, under a pledge made by former Prime Minister David Cameron. “There's no doubt that the Covid crisis has really reinforced the momentum that was already there,” says its chairman, Sir Harvey McGrath, adding that there has been a “fairly strong flow” of recent inbound inquiries from investors. Some of this interest is “directly a function of the crisis”, but McGrath also considers this to be part of a broader paradigm shift taking place in the finance industry at large, as generational change boosts demand for value-aligned money management.
Brief: U.S. high-yield bond funds suffered the biggest outflows since the end of September, as investors sought to limit their risk exposure amid growing coronavirus infections across the world and ahead of the upcoming U.S. election. High-yield investors pulled $2.5 billion out of retail funds during the week ended Oct. 28, according to data compiled by Refinitiv Lipper. It’s the first withdrawal since the $3.59 billion yanked in the reporting period ended Sept. 30, and follows an inflow of $150.9 million last week. Investors fleeing the asset class to seek safety elsewhere are also taking out cash from high-yield exchange-traded funds. Two junk-bond sales were pulled from the primary market this week, and other borrowers are sweetening terms to get deals done. High-yield spreads had widened 47 basis points this week through Wednesday, the most since the week ended Sept. 25, according to Bloomberg Barclays index data. Junk bonds sold off alongside stocks and oil, which both fell to new lows this week.
Brief: ServiceNow CEO Bill McDermott told CNBC on Thursday that business leaders are making preparations for their employees to work remotely through next year due to the coronavirus pandemic. McDermott, whose company provides cloud-based software that automates IT and employee workflow, was responding to a question about his conversations with fellow chief executives as they seek to navigate a world upended by Covid-19. There will undoubtedly be a long-term shift with a larger percentage of employees who can work remotely doing so, McDermott said on “Squawk on the Street.” He predicated a “hybrid world,” where employees routinely split time between working in the office and at home. But more near term, he said, “the other thing I’m hearing is people are already preparing for working from home or working from anywhere through 2021, because even if you do get a vaccine, it’s obviously not going to get through the global population for somewhere upwards of a year, probably a year and a half from now.”
Brief: Few things divide opinion on Wall Street like the outlook for small-cap stocks or the fate of the value strategy. Yet most market players would probably agree it’s a tough time to launch a product combining the two. That’s exactly what BlackRock Inc. is doing with a new exchange-traded fund. The iShares Factors US Small Cap Value ETF began trading on the New York Stock Exchange under the ticker SVAL on Thursday. The fund screens for value-oriented stocks in the Russell 2000 Index based on liquidity, volatility, leverage and analyst sentiment and then weights securities equally. It’s an eye-catching arrival given the backdrop. Small-cap shares and value strategies have been battered anew this year as the coronavirus sparked an economic crisis. U.S. equities endured yet another bout of volatility this week, a broad selloff that has spared few sectors. Even after those declines, the S&P 500 Index has still gained 1.2 per cent year-to-date. The Russell 2000 Index, by contrast, is roughly 7.5 per cent lower and value stocks -- those that look cheap relative to fundamentals -- are down more than 15 per cent.
Brief: Wells Fargo Securities’ Michael Schumacher has a message for investors: Buckle up. The firm’s head of macro strategy warns Wednesday’s market turbulence may just be a preview of what’s ahead. “When you think about the U.S. elections, Covid worsening [and] all sorts of other news items coming out in the next couple of weeks, it could be a fairly scary time,” Schumacher told CNBC’s “Trading Nation.” On Wednesday, the S&P 500 and Dow had their worst days since June 11 due to growing fears over rising coronavirus cases across the nation. There’s speculation they could spark new containment measures and closures. While jitters over rising virus cases drove the latest sell-off, Schumacher warns election uncertainty has the potential to pummel stocks even more. “One thing we pointed to for a while at Wells Fargo is the chance the election results are delayed. In that case, it’s almost certainly risk-off. So, a lot of reasons to be concerned over the next week to ten days,” he said. “Right now, it seems the virus has the upper hand, but it’s a very close call. And, frankly, these things are intertwined.”