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Our briefing for Tuesday April 20, 2021:
Apr 20, 2021 5:02:29 PM
- In the United States, as more and more people become fully vaccinated and get the itch to travel, the state department is updating their advice on international travel. It is looking like a “staycation”, or domestic travel for most in the foreseeable future, with the department having approximately 80% of countries worldwide in the highest, “Level 4: Do Not Travel” category. Anyone planning to travel to a country in the remaining 20% is advised to reconsider before proceeding. Currently only three places in the world are in the United States’ lowest tier of travel (safest) – level one – they are Macau, Taiwan and New Zealand.
- As Canada is currently dealing with the largest wave of coronavirus cases, it should come as no surprise the federal government has extended border restrictions for at least another month with the United States. Public Safety Minister Bill Blair announced on Tuesday that Canadian and United States officials have agreed to keep the border between the countries closed to non-essential travel, as well as the existing restrictions on non-U.S. international travel into Canada until May 21st. Blair and the federal government also extended testing and quarantine requirements for those entering Canada via air, including minimum stays in quarantine hotels until May 21st.
- United Kingdom Prime Minister Boris Johnson has set up a coronavirus task force designed to search for simple treatments, such as a pill that could be taken at home for people who have tested positive for the virus or exposed to someone who has. Prime Minister Johnson has the ambitious hope that this solution could be made available by the autumn even though there is no such treatment identified that could be used for even a trial run currently. Even though the UK is in the best shape in terms of COVID-19 numbers in months, the prime minister has acknowledged soaring cases elsewhere and his scientists’ warnings of yet another wave has him concerned and planning ahead as much as possible.
- France has become the first European Union (EU) nation to begin testing a digital coronavirus travel certificate as part of a European-wide scheme. The TousAntiCovid app, part of France’s contract tracing program, has been upgraded to store negative COVID-19 test results on travellers’ mobile phones. The hopes are the travel certificate will allow people to travel freely through EU nations by the summer. Le Monde is reporting the system could eventually be adopted for public events such as concerts, festivals and trade fairs, although not for bars and restaurants.
- In the Philippines, a senior government official said the country will begin clinical trials of several drugs, including the anti-parasite medication ivermectin, in patients with COVID-19 to determine their efficacy in battling the virus. The country’s food and drug regulator are in conflict with some politicians who have started promoting the use of ivermectin for the coronavirus and giving out free doses while the regulator counters there is a lack of evidence supporting the use of the drug as a treatment. The Philippines is seeing a renewed surge in coronavirus cases and are looking for anything to help out with a vaccination drive that has only inoculated 1.3 million people out of a population of more than 108 million.
- The Australia-New Zealand travel bubble was thrown a scare just a few days after its start when a New Zealand airport worker tested positive for COVID-19. Speaking to the press, New Zealand Prime Minister Jacinda Ardern said the worker had been fully vaccinated early in the rollout and had tested positive as part of routine screening. The worker was assigned to cleaning planes from “red zone”, or “high-risk countries” and all signs point to this case having no connections with new Australian arrivals. Prime Minister Ardern said these kinds of cases had been anticipated by both Australia and New Zealand when they announced the quarantine-free travel bubble rules.
Covid-19 – Due Diligence And Asset Management
M&G to Reopen Property Fund After 17-Month Suspension
Brief : M&G Investments will reopen the M&G Property Portfolio and its feeder fund at midday on 10 May 2021, more than 17 months after it first pulled down the shutters. Over the course of the suspension, the managers have exchanged or sold 38 properties for a combined discount to net asset value of 0.1%, of which more than a third were retail properties. This has brought the cash level to 33.2%, which the authorised corporate director and depositary of the fund believe is a "suitable liquidity position" to meet redemption requests and protect investors who wish to remain invested. Due to the rebalancing caused by an attempt to raise liquidity, the fund is now overweight to industrials and has seen its retail exposure fall from 38.4% to 28.1%. From 25 June, the portfolio will change to dual pricing on a full spread basis to "provide greater clarity, reduce the potential for large price fluctuations and provide stronger alignment with the fund's long-term horizon". It will also seek to maintain a 20% cash weighting during normal market conditions to "enhance liquidity management".
Events Show Risk Management is “Inextricable” from Alpha Generation, says Man Group CIO Sandy Rattray
Brief: Hedge funds and asset managers must design portfolios to successfully weather volatile markets, and “invest heavily” in technology, rather than focus on predicting the next downturn, says Man Group chief investment officer Sandy Rattray. Rattray – who has co-authored a new book on strategic risk management along with Man Group strategy advisor Professor Campbell Harvey, and Otto Van Hemert, director of core strategies at quant-focused Man AHL – believes the upheaval of the past 12 months have rendered tail event predictions “nearly impossible.” Their new book, titled Strategic Risk Management: Designing Portfolios and Managing Risk, explores how risk management should be incorporated into the core design of investment portfolios, and examines how portfolio balancing and balanced return streams can be achieved through volatility targeting of higher-risk asset classes, and which defensive strategies offer capital protection. In the book, Harvey, Rattray and Van Hemert argue that risk management is “inextricable” from alpha generation.
BlackRock Sees Distress Still Lurking Despite Drop in Bankruptcies
Brief: Availability of cheap credit has masked distress, but it’s still out there, says BlackRock managing director Mark Kronfeld. You just have to know where to look. “Just because you’re not seeing bankruptcy filings doesn’t mean there isn’t distress,” said Kronfeld, a member of the global credit platform at BlackRock Inc., which manages $9 trillion in assets. There will be fewer traditional bankruptcies -- besides pre-packaged filings -- as long as there’s enough liquidity to ride out the pandemic, according to Kronfeld, who focuses on special situations and distressed investments. Still, there may be more bankruptcy filings in the sectors most impacted by the pandemic, including retail and energy, Kronfeld said. “Companies, even with increased leverage, are able to get cheap financing,” but risks remain, he said on a virtual panel hosted by SierraConstellation Partners. There was about $90 billion of distressed debt trading as of April 16, down from almost $1 trillion in March 2020, according to data compiled by Bloomberg. That includes nearly $5 billion in retail bonds and loans, and $15 billion from oil and gas companies.
New ICON Report Predicts Record Deal Activity for Cybersecurity Sector
Brief: Cybersecurity fundraising activity is on track for another record year, according to ICON Corporate Finance’s April 2021 cybersecurity sector report, which reveals that sector valuations have hit historic highs over the past 12 months. In Q1 2021 USD3.7 billion was invested by VCs globally, an increase of +35 per cent. That looks set to shatter 2020’s record USD8.3 billion (+22 per cent). The resilience of the market was demonstrated as more than USD22 billion in M&A deal value was transacted, despite the challenges of a global pandemic Public cybersecurity stocks have traded at all-time highs, seeing the sector more than double in value since lockdown restrictions began in March 2020. ICON’s Cybersecurity Sector Index, meanwhile, shows that the sector is now trading at 11x revenues and company is predicting that a wave of cybersecurity businesses are ready to capitalise on the extraordinary market opportunity, boosted by VCs flooding the industry with necessary funding.
Logistics Investment: “Unsellable Properties”
Brief: Money has been pouring into the logistics sector from a variety of different sources, including US banks, institutions, private equity, and firms in the Middle East and Far East. “That has driven down yield considerably over the last six months,” according to Legal & General Investment Management senior fund manager Jonathan Holland, speaking to Funds Europe for the April issue. A lot of the new capital can come with a lack of knowledge, according to Thomas Karmann, head of logistics at Axa Investment Managers’ alternatives division, Axa IM Alts. “Risk is often not correctly priced anymore and there is hardly any differentiation of location and market depth for (re)letting. There seem to be less single asset sales and more portfolios, containing some less attractive buildings which would almost be unsellable on a standalone basis,” he said.
Private Equity Risks a Hit From Trudeau’s Interest-Deduction Cap
Brief: The budget unveiled by Canadian Prime Minister Justin Trudeau’s government on Monday includes a tax provision that could affect enterprises that rely heavily on debt financing, including private-equity firms and natural-resource companies. The change affects tax deductions that certain businesses can take for the interest they pay on loans. Trudeau’s government wants to limit those deductions to an amount equal to 40% of a company’s earnings starting in 2023, and 30% after that. It estimates the measure would raise C$5.3 billion ($4.2 billion) in additional revenue over five years. The measure is meant to prevent companies from minimizing their tax burden by having their Canadian units hold a disproportionate amount of debt. Several other countries in the Group of Seven and European Union are introducing similar limits on interest deductibility as part of a tax-fairness plan by the Organization for Economic Cooperation and Development.
