Brief: Business travel is typically the most lucrative for the leisure and hospitality industry, but the coronavirus pandemic may have changed that forever. Corporate trips taken by Americans contributed $334 billion to the entire travel industry's $1.1 trillion in revenue last year, according to Bank of America research. That revenue dried up when the pandemic hit. “Whenever this [pandemic] is over, we will have practiced for more than one year how to interact across very, very big distances. So, we do expect a structural reduction of the business travel market,” Trivago CEO Axel Hefer told Yahoo Finance Live. Hefer’s comments echo sentiments from business leaders across industries as many major companies re-imagine the future of work. Microsoft founder and philanthropist Bill Gates predicted in a recent interview that business travel will shrink by 50% and office work will be reduced by a third post-pandemic… Even the most optimistic predictions estimate it will take several years for business travel to return to pre-pandemic levels. According to Bank of America research, corporate travel is unlikely to rebound until 2024.
Brief: Man Group has raised the alarm over elevated risk appetite and potentially hazardous market positioning following the recent seismic factor reversal, with some hedge fund strategies potentially gambling on “prior winners continuing to win”. In a market commentary on Tuesday, the London-listed hedge fund giant pointed to a continued close correlation between hedge funds’ positions and momentum and value factors – a positioning that shows “little sign of shifting after the dramatic factor reversal two weeks ago.” This positioning – coupled with gross and net exposures for equity long/short hedge funds now “comfortably” at five-year highs – suggests “funds remain fully committed to prior winners continuing to win, and markets continuing their march higher,” Ed Cole, managing director, equities at Man GLG, wrote in the company’s weekly ‘View From The Floor’ note. A number of hedge fund strategy types were rocked by the recent sell-off in momentum stocks as investors piled into value companies, a rapid market rotation driven partly by the positive announcements regarding a Covid-19 vaccine breakthrough earlier in the month.
Brief: The biggest private equity firms in the U.S. are unleashing a flurry of new leveraged buyouts and debt-funded dividends, seeking to make up for lost time after staying on the sidelines for much of 2020. From Blackstone Group Inc. to KKR & Co., firms have been pivoting from repairing the balance sheets of companies they own to hunting for new investments and realizing gains on businesses that performed well during the pandemic. North American buyout activity, which was 57% off last year’s pace at the end of June, is now only 32% behind, according to data compiled by Bloomberg. Of course, any number of adverse developments -- from a worsening economic outlook to setbacks in Covid-19 vaccine production -- could upend the trend. But with interest rates at record lows, seemingly insatiable demand from bond and loan buyers and almost $1.6 trillion of pent-up cash, industry watchers say the ramp up in deal making might just be getting started. “Private equity firms don’t get paid to sit on cash,” said Harold Varah, global co-head of financial sponsors at RBC Capital Markets. “You’ve seen a tempering of the storm, a desire to deploy capital and a leveraged finance market that has recovered pretty remarkably. All the elements that you need for deal making are there.”
Brief: After more than seven months of investigating the oil price collapse of April 20, the U.S. Commodity Futures Trading Commission, the top futures watchdog, released an interim report Monday outlining the day’s events, but would not provide any definitive reasons for the price plunge, nor any final conclusions or recommendations as to how to prevent a future oil price crash. The report drew immediate criticism from within the CFTC’s own ranks, with Dan Berkovitz, one of the agency’s commissioners, blasting the probe as “incomplete and inadequate.” In an interview late Monday with Institutional Investor, Berkovitz, who pushed hard for the investigation, noted the report merely offers a basic, if detailed, overview of various facts and statistics about the market and trading as oil prices bottomed out, but does not provide the public with any suggestion as to the cause. “Providing statistics that may or may not have contributed to the oil price collapse is not enough,” he said. “That should be just the start of our analysis, not the end. Intelligent readers and members of the public are going to say, ‘What’s my takeaway from this?’ The report makes it impossible to draw any conclusions.”
Brief: Goldman Sachs has cut its US growth forecasts for the next two quarters, pegging their gloomier outlook on the "rapid and broad-based resurgence of the coronavirus." The bank lowered its fourth-quarter gross domestic product forecast to 3.5% from 4.5%. Growth in the first quarter of 2021 will slow to just 1% from the prior estimate of 3.5%, the team added. The third wave of infections and cities' implementation of new lockdown measures cuts into an already weakening economic recovery, economists led by Jan Hatzius said in a note to clients. Data from virus-sensitive sectors show "clear signs of a growing hit," according to the team. The US sits squarely in its worst phase of the coronavirus pandemic yet. New cases totaled 150,098 on Sunday, bringing the 7-day average to 167,568, according to The COVID Tracking Project. Total deaths neared 250,000, and the number of Americans currently hospitalized with COVID-19 hit 83,782. "The public health and economic situation is likely to get worse before it gets better, in our view," Goldman said, adding that various high-frequency indicators of consumer activity show an economic slowdown coinciding with "the national deterioration in public health."
Brief: U.S. venture capital funds have raked in record assets this year, despite a global pandemic that was expected to drag down fundraising. On Friday, two Andreessen Horowitz funds closed with a combined $4.5 billion in commitments, bringing the year-to-date fundraising total for the asset class to almost $70 billion, according to PitchBook. “US venture capital funds have raised a combined $69.1 billion in 2020, edging past a 2018 record and defying the odds amid a pandemic-rattled economy,” PitchBook said in a blog post Friday.The record fundraising in U.S. venture capital contrasts with slower asset gathering in other alternative asset classes, including the larger private equity industry. As of the third quarter, private equity funds had raised about $400 billion globally — trailing behind the $481 billion raised over the same period in 2019, according to Preqin data. Other private capital managers, including hard-hit real estate funds, have also struggled to raise money this year, according to Preqin. However, while U.S. venture capital fundraising has hit a new high in terms of total assets, the number of fund closes have plummeted this year. PitchBook reported that just 287 funds have closed so far in 2020, less than half the number that closed during the previous record year of 2018.