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Our briefing for Tuesday January 26, 2021:
Jan 26, 2021 4:17:30 PM
- The United States received some good news from COVID-19 vaccine maker Pfizer on Tuesday. CEO Albert Bourla said they, along with partner, BioNTech will be able to supply America 200 million COVID-19 vaccines doses by the end of May, two months sooner than previously expected due to a change in the vaccine label that allows health care providers to extract an additional dose from each vial. A Pfizer representative said the six-dose-per-vial count became effective on Monday and applies to supply contracts going forward. The drugmaker might be attempting to flip the scrip on the negative attention they have been receiving recently from other countries throughout the world who are suffering from shortages due to changes in Pfizer’s European manufacturing plant.
- Canadian Prime Minister Justin Trudeau is taking hits both domestically and now abroad when it comes to its coronavirus vaccine rollout. The prime minster reiterated the country’s vaccine rollout is in good shape even as the European Union (EU) has threatened protectionist measures to limit the export of doses abroad. The EU is set to impose export controls on vaccines leaving the 27-member bloc to ensure supply to the continent first, which means companies would have to seek approval before shipping vaccines to Canada. “That will be very disturbing of course, said Trudeau answering in French during a news briefing. We are communicating with our partners in Europe to make sure the contracts signed by Canada are respected.”
- The United Kingdom became the first country in Europe to surpass the 100,000 deaths threshold due to the coronavirus pandemic. “It’s hard to compute the sorrow in that grim statistic, said Prime Minister Boris Johnson in a televised address Tuesday. I am deeply sorry for every life lost.” The prime minister also defended his government’s actions throughout the pandemic saying they did everything they could to minimize the suffering and loss of life. The pandemic exceeded some of the worst predictions made one year ago. For instance, Patrick Vallance, the UK government’s chief scientific adviser said last March that fewer than 20,000 deaths due to COVID-19 would be a “good” outcome for Britain.
- Reuters is reporting German Chancellor Angela Merkel is considering entry restrictions to limit the COVID-19 variants from entering the country. Chancellor Merkel told her parties’ legislators Tuesday that she didn’t want a travel ban, but with the pandemic strengthening its grip through the winter months, there should be no tourism. Measures reportedly being considered are closing borders with regions where the mutant variants were more prevalent and reducing the number of flights to almost zero.
- The Netherlands is bracing for their fourth consecutive night of coronavirus anti-lockdown riots. The country imposed their first curfew since World War II over the weekend, despite weeks of falling infections. The Netherlands National Institute for Health (RIVM) said the faster-spreading UK variant was causing a third of new cases. A nationwide appeal was made by law enforcement authorities on Tuesday calling on parents to keep teenagers indoors, warning they could end up with a criminal record and forced to pay for damage of personal and public property.
- In the United Arab Emirates (UAE), the ruler of Dubai has replaced the head of the emirate’s health authority without explanation. In a statement over the weekend Sheikh Mohammed bin Rashid al-Maktoum appointed Awad Saghir al-Ketbi as the new director general of the Dubai Health Authority, replacing Humaid al-Qutami. The number of daily coronavirus cases has tripled over the past month as Dubai, the region’s business and tourism hub has seen an influx of visitors during its peak winter season. There have also been reports of “vaccine tourism” in Dubai where a luxury concierge company known as Knightsbridge Circle was offering some of the richest people in the world a luxury vacation where they would also receive the COVID-19 vaccine.
Covid-19 – Due Diligence And Asset Management
Bridgewater CEO Says Aiming for Pre-Covid ‘Normal’ is Misguided
Brief : Bridgewater Associates Chief Executive Officer David McCormick, a former U.S. Treasury undersecretary, said policymakers and business leaders are making a mistake trying to return the economy and U.S. society to a pre-pandemic “normal.” “There were some really significant underlying problems with normal,” McCormick, 55, said Tuesday during an interview at Bloomberg’s “The Year Ahead” virtual conference. He cited a lack of social mobility, political polarization, China’s rise as a global power and the U.S.’s ill-defined role in the world as reasons not to embrace the recent past as an ideal. If anything, McCormick said President Joe Biden should pursue policies that reassert American leadership and restore the nation’s sense of opportunity. McCormick, a Republican, served in the Treasury Department under President George W. Bush during the 2008 financial crisis and left in 2009. If he were in government today, he said he’d advocate for better access to education and health care for poorer Americans and collaboration between the public and private sectors that prioritizes innovation. He described both as the “building blocks of power.”
Who Needs to Sit Next to a Trader? Asset Managers Embrace Outsourcing
Brief: More pension funds, insurers and asset managers are outsourcing part or all of their dealing desks to specialist traders as they seek to cut costs and adapt their operations to deal with the coronavirus crisis, industry sources say. Last year’s volatility in markets, plunging as the pandemic took hold and rebounding as government stimulus kicked in, meant asset managers spent more time juggling trades and less time on their usual job of long-term asset allocation. Moving some or all of their trading to specialist firms offers access to a larger group of banks and brokers, making it cheaper to execute trades and allowing asset managers to cut trading staff and trading terminal costs, industry sources say. The shift to outsourcing has also been accelerated by changes in working practices brought about by the pandemic. “As we all work from home, people are realising you don’t need to be physically sitting next to the traders to be able to communicate,” said Tom Carroll, head of asset management at British fund manager Sanlam Investments, which outsourced trading to Northern Trust shortly before the pandemic. Carrol said the move meant his company’s 20 fund managers could “focus more on what they’re good at” - picking assets for the long term rather trading through short-term volatility.
Adapt to Survive
Brief: Adapt to survive: this was the message for the asset management sector in 2020, which turned out to be one of the most extraordinary and unpredictable years in living memory. In March, the onset of the Covid-19 crisis and national lockdowns caused stock markets to lose a third of their value in one month, and mobilised an immense digital transformation as swathes of the economy adjusted to home-working. The asset management industry weathered the storm better than most. Assets under management worldwide have risen to exceed USD110 trillion, thanks in part to a remarkable rebound in underlying financial markets, with some indexes recouping their losses in as little as six months. While vaccine roll-outs indicate the pandemic’s end may be on the horizon, many of the changes it has caused are likely to stay – including a ‘lower for longer’ interest rates landscape and competition from passive investing putting more pressure on fees. Arguably the biggest shift asset managers have faced has been the pendulum of investor preferences, which has swung decidedly in favour of sustainable investing. At the start of 2021, a third of all assets under management in the US were held in sustainable strategies, and three quarters of institutional investors in Europe said they plan to stop buying European non-ESG products within the next two years. The story for asset management in 2021 will be over whether it can keep up with the pace of change and thrive in a post–coronavirus world.
Formidable Vows to Stay Course After Hedge Fund’s 83% 2020 Gain
Brief: Formidable Asset Management LLC, which gained about 83% last year, said “now more than ever, a nimble, active approach to management is required” for investment success in 2021. “Though we are early in the year, the truly bizarre events, both societally and in terms of markets, seem to be continuing in 2021,” the hedge fund’s Chief Executive Officer William Brown and Chief Investment Officer Adam Eagleston wrote in a letter to clients, seen by Bloomberg. Stocks that were “retail favorites” in 2020 could go still higher this year, they said, “buoyed by further fiscal stimulus and gains from prior winnings rolled forward.” The main contributors to the fund’s 2020 performance were its positions in green energy and electric vehicle-related stocks. According to the letter, some of the winners for the fund in 2020 included Nano One Materials Corp., Flux Power Holdings Inc., Maxar Technologies Inc., Workhorse Group Inc. Some 2020 “heartbreakers” included a position in AMC Entertainment Holdings Inc.’s debt and put options on GSX Techedu Inc. Formidable declined to disclose the size of assets under management. Brown previously served as managing partner of BBK Capital Partners and as senior vice president at Raymond James while Eagleston was formerly a portfolio manager at Driehaus Capital Management LLC.
Cash Flows into European Funds Surged More than 60% in 2020, New Data Shows
Brief: The European fund industry saw a deluge of investment in 2020, with net inflows rising by around 61.6%, according to new figures from Refinitiv Lipper. Across the year, overall net inflows into European funds were estimated at 574.3 billion euros ($696 billion), up from 303.9 billion euros in 2019 and vastly outstripping the annual average of 192.7 billion euros between 2004 and 2019. Following a steep plunge in March as the coronavirus pandemic spread throughout the world, global stock markets recovered over the course of the year, due in part to unprecedented fiscaland monetary stimulus from governments and central banks and the later emergence of successful vaccines. The 2020 total also marks the second-highest inflows into mutual funds and ETFs (exchange-traded funds) in the history of the European fund industry. Mutual funds, which enjoyed 483.5 billion euros of inflows, are those which pool money from investors to allocate to stocks, bonds, money market instruments or other alternative assets. ETFs are baskets of securities that tend to track an underlying index and are listed on stock exchanges, trading throughout the day like ordinary stocks, and saw inflows of 90.8 billion euros in 2020.
Active Managers Kept Losing Out to Passive, Even After Markets Crashed
Brief: For years, active managers blamed a seemingly endless bull market for the rise of low-cost passive investing. But after the market finally crashed last year, investors still favored passive strategies By the end of 2020, investors had pulled more than $250 billion out of active U.S. equity funds, according to Morningstar. Passive U.S. stock funds, meanwhile, bounced back from the March sell-off, attracting a net $9.4 billion over the calendar year. Passive strategies also held steady in Europe, according to Cerulli Associates. Citing Morningstar data, the asset management research and consulting firm said that investors fled actively managed funds at a higher rate in March, causing active strategies to lose 3 percent of their start-of-year assets under management. Passive funds, by comparison, lost 1 percent of their starting assets in March. “Passively managed funds weathered the market volatility of 2020, highlighting the need for active funds to deliver better and more consistent performances in order to slow the erosion of the marketplace,” Cerulli said in a January report. By the end of November, European equity index funds had attracted €91.4 billion ($111 billion) in net flows, according to Morningstar. Passive funds as a whole increased their market share to 20.3 percent of European long-term fund assets as of November, Morningstar said.
