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Our briefing for Tuesday December 15, 2020:
Dec 15, 2020 3:46:54 PM
- The United States Food and Drug Administration (FDA) has found Moderna’s COVID-19 vaccine to be safe and highly effective, which clears the way for a second vaccine to receive emergency use authorization later this week. Elsewhere in the country, support is growing for the $748 billion COVID-19 stimulus legislation put together by a bipartisan group of Senators. Lawmakers stripped out the highly contested provision regarding liability protections for businesses and assistance for states and local governments. With those clauses in, the price tag of the package was $908 billion. On Tuesday, the $748 billion plan received the backing of the Center for American Progress, a think tank group that is influential within the Democratic party.
- In a news conference on Tuesday, Canadian Prime Minister Justin Trudeau announced the country will be receiving up to 200,000 more doses of the Pfizer vaccine next week and potentially up to 168,000 Moderna vaccines by the end of December. The Moderna vaccine has yet to receive regulatory approval from Health Canada, but secure delivery can start within 48 hours of approval. Prime Minister Trudeau confirmed that doses of the Moderna vaccine will be directed to the North, as well as remote and Indigenous communities due to easier transfer of the product. Elsewhere in the country, Quebec is expected to announce a two-week shutdown for non-essential businesses starting on Christmas Day in an effort to slow down COVID-19 spread. As a compromise, the government will allow some outdoor gatherings in public places.
- In the United Kingdom, two health journals have published a rare joint article warning a relaxation of COVID-19 restrictions over the Christmas holidays would be a “blunder into another major error that will cost many lives.” The message came from the BMJ and the Health Service Journal marking only the second time the two have come together to deliver a joint message. However, as of right now, Prime Minister Boris Johnson’s government still plans to move ahead with its plans to allow households to mix with people from two other households over a five-day period during the holidays.
- The European Union (EU) medicines regulator is planning to approve the Pfizer/BioNTech vaccine a week earlier than previously suggested. The European Medicines Agency (EMA) said it hopes to sign off on the inoculation for EU member states during a meeting on December 21st instead of December 29th after receiving additional data it had requested from the firms. Some EU nations, such as Germany, have questioned the speed of the EMA after seeing the United Kingdom, United States and Canada all have the Pfizer vaccine approved for use.
- In an effort to reopen its borders, Singapore will start a new travel lane for business. The plan will allow high-economic value travelers to visit the city-state without quarantine for short-term stays and reside in a dedicated bubble facility near the airport. The travel lane was announced by Singapore’s Minister of Trade on Tuesday. According to a report from Bloomberg, Singapore government authorities are keen to position the country as a prime spot for meetings, events, conferences and exhibitions. Earlier this month it was announced the World Economic Forum was being moved from Davos, Switzerland to Singapore.
- In Australia, a commission review said it is unlikely the first generation of COVID-19 vaccines set for the country in early 2021 will prevent virus transmission. The Australian Academy of Health and Medical Sciences stated in their review ongoing high levels of testing, strong contact tracing, isolation and quarantine will remain crucial for the foreseeable future. “Announcements of interim results from vaccine trials are promising, but even a vaccine that is 90% effective at reducing disease will take time to manufacture, distribute and administer, and may have limited impact on SARS-COV-2 (COVID-19) transmission and spread, or protection may be short-lived,” the review said.
Covid-19 – Due Diligence And Asset Management
Ponzi Schemes, Other Investment Fraud on Rise During Pandemic, SEC says
Brief: Criminals are defrauding investors in rising numbers as they try to exploit chaos unleashed by the Covid pandemic, the Securities and Exchange Commission said Monday. Investors should be on high alert for Ponzi schemes, fake certificates of deposit, bogus stock promotions and community-based financial scams, the SEC warned in an investor alert. “The SEC has recently experienced a significant uptick in tips, complaints and referrals involving investment scams,” the federal agency said. ″Fraudsters use times of uncertainty and change, such as the current Covid-19 pandemic, to lure victims into investment scams,” it continued. The extent of the increase in fraud documented by the SEC is unclear. A spokesperson for the agency did not return a request for comment. Investment scams promising high returns are a type of “income scam,” whereby con artists target victims who are trying to bring in extra income, according to the Federal Trade Commission. Other examples include work-from-home and employment scams and pyramid schemes. There was a 70% jump in income scams in the second quarter this year compared with the same period in 2019, according to an FTC analysis of consumer complaint data published Thursday.
Apollo Group in $2.3 Billion Deal for ATM Firm Aided by Pandemic
Brief : A pair of investment firms agreed to shell out $2.3 billion for an ATM operator that’s benefiting from the wave of bank-branch closures during the pandemic. Cardtronics Plc agreed to be acquired for $35 a share by Hudson Executive Capital LP and Apollo Global Management Inc. on Tuesday. The all-cash deal is expected to be completed in the first half of next year, according to a statement Tuesday. Banks have shuttered almost 3,000 branches in the past 12 months, according to data compiled by S&P Global Market Intelligence. Cardtronics has benefited from the trend by partnering with lenders looking to offer their customers’ access to cash even when a full-scale branch isn’t available. Tuesday’s sale price was 35% higher than Cardtronics’ closing level on Dec. 8, the day before the company disclosed that Apollo and Hudson had proposed a deal at $31 a share. “Cardtronics faces a secular headwind on the one hand -- reduction of cash usage/ATM transactions -- offset by a secular tailwind -- banks closing branches, making its convenient ATM locations more attractive,” Robert Napoli, an analyst at William Blair & Co., said in a note to clients. Cardtronics, with a network of 285,000 ATMs across 10 countries, operates 10% of the world’s ATMs, but handles only about 1% of withdrawals made from cash machines.
Mental Health Tech Startups Fetch Record Investments with COVID-19
Brief: The COVID-19 pandemic has put the spotlight on mental health tech startups, globally marking a record year for venture capital investment in the sector, according to data firm PitchBook. PitchBook data showed 146 deals raked in nearly $1.6 billion in venture capital investments as of Dec. 10. Last year the total was $893 million from 111 deals. A decade ago there were only 3 deals, worth $6.6 million. The investments come as employers are increasingly seen as customers for these startups. Consulting firm McKinsey reported last month that 52% of companies offer mental-health and bereavement counseling. Sleep and mediation app Calm, which raised $75 million last week, said one primary driver for its business was from employer partnerships. It was valued at $2 billion, making it the top valued mental health startup, according to PitchBook. Mental health and wellness platform Modern Health on Tuesday said it raised $51 million, with a valuation above half a billion dollars. Its services are offered through employers as well. Founder and Chief Executive Alyson Watson said since the onset of the pandemic, Modern Health doubled the number of customers to over 190 enterprises. “The way that we think about this is the fourth pillar,” said Watson, adding that employers are increasingly offering mental health care in addition to medical, dental and vision benefits.
How Global Macro Hedge Funds Can Capitalise on the “Looming” Economic Normalisation
Brief: Global macro hedge funds from across the emerging market, systematic and discretionary spectrum may be well-placed to capitalise on prevailing equity valuations amid economic “normalisation”, Lyxor Asset Management strategists said this week. While discretionary global macro funds offer a tactical bias, which appears relevant “at the trough of the business cycle”, emerging market-focused macro managers benefit from stronger credit profiles of energy and metal exporters amid rising commodity prices. Risk assets have been setting new records in the US recently, Lyxor said in a note this week, with the S&P500 now up 13 per cent since the end of October, before the results of the Pfizer/BioNTech Covid-19 vaccine were announced. But the vaccine roll-out, and the subsequent economic “normalisation”, is preventing investors from being too defensive, despite rich equity valuations, strategists explained. Against this backdrop, certain alternative strategies which offer both performance and diversification would prove attractive. “Global macro strategies can deliver on both fronts,” senior strategists Philippe Ferreira and Jean-Baptiste Berthon, and hedge fund analyst Pierre Carreyn, wrote in the market commentary. “Global macro strategies are quite heterogeneous, from pure fixed income players to multi-asset strategies, discretionary or systematic, invested in developed or emerging markets, or both.” Splitting the universe into EM, systematic and discretionary, Lyxor’s analysis noted that strategies normalised their equity market beta at “higher levels but in moderate proportions”, particularly for discretionary funds.
Credit Suisse Cuts Asset Management Headcount by 10% in Revamp
Brief: Credit Suisse Group AG cut 10% of the staff at its asset management business this year as it seeks to turn around a unit that has been hit by fund implosions in the wake of the pandemic. Switzerland’s second largest lender, which oversees 438 billion Swiss francs ($494 billion) in assets at the fund business, made the reductions as it closed some investment vehicles and wrote down the value of others, Eric Varvel, head of Credit Suisse asset management, said at the bank’s investor day. Varvel said that the unit has had a difficult year, with setbacks including a scandal involving a large client and a $450 million impairment to its stake in York Capital Management this quarter. He’s pledging to add 10 billion francs of net new assets in higher-fee alternatives and private markets offerings over the next two to three years while increasing sales to wealth-management clients. The business has 1,100 employees, according to a presentation on Tuesday.
Last week, the lender announced that two reinsurers it had backed through the asset management unit would stop underwriting new business after investors decided to pull their money from the funds. The bank has also shuttered a quantitative strategy and took a 24 million-franc charge on seed capital for a U.S. real estate vehicle in the third quarter. In addition, a joint venture with the Qatar Investment Authority is closing two groups of funds and returning capital to investors.
The Asset Manager Arms Race Has Only Just Begun
Brief: For years, the asset-management industry has braced itself for shocks. In 2018, $369 billion poured out of long-term mutual funds in favor of exchange-traded funds, a record at the time. In 2019, the case for traditional actively managed mutual funds became even harder to make when Charles Schwab Corp. jump-started a race to the bottom among online brokerages by eliminating commissions for ETFs along with U.S. stocks and options. If those were tremors, 2020 will go down in history as an earthquake. Even before Covid-19 roiled global markets and brought the Robinhood crowd and Dave Portnoy of Barstool Sports into the Wall Street zeitgeist, there were already signs of seismic change. On Feb. 18, just a day before the S&P 500 Index set a pre-pandemic record, Franklin Resources Inc. announced a deal to acquire asset manager Legg Mason Inc. for almost $4.5 billion, a move that would bring its combined assets under management to $1.5 trillion. For both Franklin, an iconic investment manager that started in 1947, and Legg Mason, whose precursor firm dates to the 19th century, it was a tacit admission that they could no longer compete with BlackRock Inc. and Vanguard Group Inc. on their own. The global pandemic could only constrain this consolidation for so long. In early October, Morgan Stanley announced it was acquiring Eaton Vance Corp. for about $7 billion. Bringing in the Boston-based company’s more than $500 billion in assets meant Morgan Stanley Investment Management would manage about $1.2 trillion, finally reaching Chief Executive Officer James Gorman’s goal to join the $1 trillion club.
