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Our briefing for Thursday September 17, 2020:
Sep 17, 2020 4:10:09 PM
- United States President Donald Trump is urging Senate Republicans to increase the size of the stimulus proposal. Ahead of the upcoming election, President Trump is trying to channel his dealmaker persona that was key to him winning the election the first time around and is keen to reach a deal with Democrats before November 3rd. In a tweet on Wednesday, Trump urged Republicans to “go for much higher numbers” than the $500 billion plan, which was blocked by Democrats last week. Earlier this week, a 50-member group of House Democrats and Republicans put together a $1.52 trillion stimulus plan.
- In Canada, the new federal Conservative leader who is in self-isolation after being exposed to COVID-19, via a staff member, is blasting the leading Liberal government for the current state in testing. “The Trudeau Liberals have created this mess by refusing to approve other testing methods – despite all our allies having, for months, multiple tests including much faster and invasive methods,” said Erin O’Toole. The opposition leader and his family were turned away from an Ottawa testing site on Wednesday after waiting hours because of capacity issues.
- In the United Kingdom, seven areas in Northeast England have been placed under strict pandemic restrictions amid a “concerning rise” in COVID-19 infection rates. The announcement was made by Health Secretary Matt Hancock on Thursday and affects 1.5 million people overall, including the cities of Newcastle, Sunderland and Durham. The restrictions will include a ban on socializing outside households, or support bubbles, and a mandated closing time of 10 PM for all bars, pubs, restaurants and leisure centres. The measures will come into effect as of midnight Friday morning.
- France is following a similar plan as the UK, applying new restrictions soon to the cities of Lyon and Nice, while Marseille could face even tighter measures than those already in place, including the closures of bars and bans on public meetings. The new restriction call was made by Health Minister Olivier Veran and also said the pandemic course in other major cities such as Paris, Toulouse, Rennes and Lille are being watched with concern. “This is now a reality. The epidemic is once more very active in our country. We have to learn to live with the virus for several months,” said Veran.
- India’s city of Mumbai, considered to be the commercial capital of the country, is set to see new enforced restrictions from its police department. As of midnight local time on Friday, and continuing until the end of September, Mumbai city residents’ movement across the city will be prohibited. The order will stunt any movement in containment zones – sections of the city deemed “hot” spots – except for essential activities. For the rest of the city, certain exemptions pertaining to the last order will be in place. A list issued by state government gives exemptions to government offices, service providers, banks, ports and essential service providers.
- Ahead of an election next month, New Zealand’s finance minister was left trying to defend the government’s decision on one the world’s toughest COVID-19 lockdowns. The result to the economy was a 12.2% drop in GDP from April to June, compared to the previous three months. The contraction, similar to a lot of other countries in the world now has New Zealand in its first recession in a decade. However, the country’s finance minister, Grant Robertson is pointing to an outbreak in Auckland, the nation’s largest city last month. The situation was brought under control fairly quickly and according to Robertson, highlighted the benefits of sticking with a policy to eliminate, rather than suppress COVID-19.
Covid-19 – Due Diligence And Asset Management
Fink Laments Eroding Corporate Culture in Work-at-Home Era
Brief: BlackRock Inc. Chief Executive Officer Larry Fink said he worries that working remotely results in a lack of productivity and collaboration. “The most difficult issue for all of us is retention of a culture,” Fink said Thursday during a virtual conference hosted by Morningstar Inc. “Cultures were not meant to be done in a remote fashion.” Fink said that although he’s proud of how the New York-based company has performed through the Covid-19 pandemic, he’s concerned about 400 new young hires who joined in July, who have never been to the office. BlackRock, the world’s biggest asset manager, said last month that it would allow employees to work remotely for the rest of the year. While some big Wall Street firms are seeking to get staff back to the office, there are already signs of how challenging that could be. JPMorgan Chase & Co. sent some workers home this week after an employee in equities trading tested positive for Covid-19. JPMorgan CEO Jamie Dimon said this week that he sees prolonged remote work inflicting serious social and economic damage. “Going back to work is a good thing,” Dimon said in a panel discussion Tuesday.
Nuveen CEO Says Staff Will Not Return to Offices Until 2021
Brief: Nuveen’s staff will not return to its offices until 2021, Chief Executive Officer Jose Minaya said. That decision was “heavily debated” and so far the company has found that its operations have fared well with staff working remotely, he said at the FT Future of Asset Management virtual conference Thursday. Chicago-based Nuveen is the investment arm of retirement savings giant TIAA. “The engagement with clients is the highest ever,” Minaya said. Minaya also said about 4% of Nuveen’s investment staff took voluntary buyouts and the company expects no layoffs for the foreseeable future. The rate is comparable to the company’s turnover for investment personnel in 2019, he said. In May, TIAA offered a voluntary separation program for most of its global workforce. The buyout offer went to 75% of the company’s 16,500 employees. Asset management firms have been closely scrutinizing expenses as investors have flocked to low-cost index funds. The move has cut into profit for some firms and made it difficult for smaller investment companies to compete against behemoths including BlackRock Inc.
How to Launch a Hedge Fund in a Pandemic
Brief: New manager Hickory Lane Capital Management has launched a $100 million equity long-short fund with seed money from Investcorp-Tages, a joint venture formed in May, as well as capital from outside investors, including family offices and peer hedge fund managers. Investcorp and European asset manager Tages earlier this year consolidated their absolute return businesses to form a new venture that includes customized portfolios, a hedge fund seeding business, and multi-manager portfolios in private debt and other alternative investments. Prior to forming the joint venture, the two firms had deployed $2 billion in assets between them and seeded 42 emerging managers, mostly hedge funds. Hickory Lane founder and chief investment officer Joshua Pearl, who spent nine years investing in stocks as a partner at Brahman Capital, never expected that he’d build his first hedge fund firm in a pandemic. But shortly after leaving Brahman, the spread of Covid-19 shut down economies around the globe.
The Richest Got $37 Billion Richer During COVID-19, While Millions Lost Their Jobs
Brief: As millions of Canadians lost their jobs during the COVID-19 pandemic and the economy collapsed, the country’s richest got richer — more proof that the economy and the stock market do not always move in lockstep. Canada’s 20 richest have collectively added $37 billion to their fortunes since March, according to a new report from the Canadian Centre for Policy Alternatives. None of them experienced a drop in net worth. David Thomson and family, who’s consistently at the top of the country’s richest lists with their media and publishing empire, led the way with a $8.8 billion increase in wealth. Shopify’s skyrocketing stock price gave founder and CEO Tobi Lutke a $6.6 billion increase. The continued rise in e-commerce helped Alibaba’s Joseph Tsai come in fourth place, with a $4.5 billion increase. Lululemon founder Chip Wilson was next with a nearly $3 billion gain — evidence that the pandemic has kept athleisure in vogue. And 92 year old James Irving, head of the J.D. Irving conglomerate, rounded out the top five by adding $2.1 billion. But as their wealth grew COVID-19 took a record toll on Canada’s economy and the unemployment rate hit an all-time high of 13.7 per cent in May, 1.1 million people are still out of work. “At the same time as billionaires like Loblaws owner Galen Weston have seen their wealth balloon, front-line workers stocking shelves and scanning groceries at his stores have continued to risk their health and that of their loved ones by coming into work,” said Alex Hemingway and Michal Rozworski in the report.
Fund Managers Confident of a Recovery in Next 12 Months, says Bank of America Survey
Brief: Following a historic rally from March lows, Bank of America Securities' latest Fund Manager Survey showed that a majority of the respondents believed a new bull market had started. The survey, conducted between September 3 and 10, involved 224 managers with assets worth $646 billion under management. Around 58% percent managers said that the market is bullish, compared to 25 percent in March. However, 29 percent were of the view that the market is still bearish. While 41 percent of those surveyed said that COVID-19 vaccine could trigger higher bond yields, 37 percent said that inflation would be responsible for higher bond yields. On recovery, 37 percent said that it would be U-shaped or W-shaped and 20 percent said that recovery charts would be V-shaped. Around 51 percent of fund managers preferred the balance sheet discipline, whereas 37 percent wanted increased capital expenditure as compared to 13 percent in April. While most managers believed that a vaccine announcement would be made in the first quarter of 2021, some 32 percent were optimistic of an announcement in the Q4 of 2020.Around 84 percent of the managers said they expected global growth to go up within the next 12 months.
Vast Majority of Managers Still on Lockdown – Survey
Brief: The number of money management firms with employees working from home has barely budged over the summer, a Callan survey released Wednesday showed. Callan said 81% had not opened their offices as of Aug. 15, nearly the same as the 84% that had reported keeping their doors closed in June. The investment consultant's second "Coping with COVID-19" survey report said 44% of the 98 responding firms have not set a date for returning to the office. Of the remaining universe of managers surveyed in August, 36% said they don't expect to go back until 2021. Just 2% of firms picked that time frame in the June survey. A September opening date was named by 12% of August respondents vs. 25% in June; an October date was picked by 7% in the recent survey, compared to 1% in the previous survey; and just 1% of those recently surveyed cited November as the month they might reopen vs. zero in the June survey. By region, more managers — 38% each — in the U.K. and Southeastern U.S. now have staff in the office. The level of office openings was 20% on the U.S. West Coast, 12% in the Northeast and 9% in the center of the country. The offices for the two managers surveyed in the Mountain West are both closed.
