Brief: Real-estate companies are seeing clear evidence of New Yorkers and Londoners ditching city centers for suburbs as the pandemic changes the way people live and work. IWG Plc, which operates Regus-branded serviced offices in cities around the world, has seen a “a strong pick-up in demand” for suburban space versus major cities, especially in places reliant on commuting. While deals for its downtown New York offices have collapsed by 30% since the virus outbreak earlier this year, activity in southern Connecticut has surged more than 40%, according to a statement Tuesday. Across the pond, U.K. housebuilder Crest Nicholson Holdings Plc’s expected slump in full-year profit may not be as bad as previously flagged, partly thanks to developments in southern England outside of London, it said in a quarterly update. A “structural change to the balance of office and home working” featured strongly in customers’ buying decisions, it said. Shares in IWG climbed as much as 11% in Tuesday morning trading in London, while Crest Nicholson shares jumped as much as 22.5%, the most on record. The pandemic has turned the world’s financial capitals into ghost towns as nervous workers avoid mass commuting. While cities across Europe showed signs of recovery in the summer, a resurgent wave of the virus has prompted a series of new lockdowns in the region. New York is also tightening restrictions amid rising infections nationwide.
Brief: SEC enforcement officials posted a record $4.7 billion in disgorgements and penalties in fiscal year 2020, the Securities and Exchange Commission reported Monday in its annual enforcement report for the period ending Sept. 30. Parties charged by the SEC were ordered to disgorge $3.6 billion and pay penalties of $1.1 billion, an 8% increase from the previous fiscal year. More than $600 million was returned to harmed investors. The fiscal year also saw a record for the SEC's whistleblower program, which awarded $175 million. The agency's 715 enforcement actions covered a range of issues, including issuer disclosure, foreign bribery, market manipulation and insider trading. The number of actions fell 17% as agency officials adjusted to COVID-19 work restrictions. Stephanie Avakian, SEC enforcement director, said in the report that one focus during the past year was accuracy in financial statements and issuer disclosures. Along with traditional sources for such cases, SEC enforcement officials also used risk-based analysis to identify potential violations, including earnings management practices that could be masking unexpectedly weak performances and disclosure of corporate perks.
Brief: There’s a “magic bullet” for some of the biggest challenges facing the U.S. economy, according to famed value investor Jeremy Grantham. In an investor note dated October 30, the GMO co-founder called for a “new Marshall Plan” to combat problems including “depressed” economic growth, rising wealth inequality, and climate change. “The economy of the developed world has been steadily becoming less dynamic for the last 50 years and the GDP growth of the developed world has fallen from over four percent a year to less than two percent a year,” Grantham wrote. “We need a long, sustained, and massive public works program — a second coming of the Marshall Plan, if you will — to jolt the U.S. and the global economy into a few decades of accelerated growth.” The Marshall Plan, also known as the European Recovery Program, was a U.S. foreign aid initiative to help rebuild Western European cities and infrastructure that were damaged during World War II. Grantham said a similar program could be enacted now to build green infrastructure that would mitigate climate change. “We face the shorter-term economic threat from Covid-19 and the long-term economic threat from climate change,” he wrote. “We have a clear incentive, I would argue an imperative, to produce a very large and sustained public works program.”
Brief: Zoom has been the ultimate success story for 2020 as firms, globally, have adjusted to remote working. If I think about what the next best thing to Zoom will be, I would say it needs to be something that gives you the ability to walk into someone’s computer just as easily as walking into their office. At the moment, my experience of Zoom is that everything is still formalised and diarised…I’ll talk to you at 10am, let’s set the meeting for 5pm. What’s wrong with doing a quick meeting at 10.15? It still feels a bit regimented, in that regard. But Zoom and other platforms like Microsoft Teams have at least shown fund managers a glimpse into the future of how we might all be working. In the past months I have noted that firms have managed to transition far more seamlessly than they might have anticipated to being able to efficiently collaborate with their entire team connected only by their screens and telephones. One idea to help create community is conduct “office hours” on Zoom. When we are in our offices we are able to be seen either at our desk that may be in an open environment or if in an office through the glass walls. Anyone can see you as they walk by. Those spontaneous conversations are what is missing by members of the team working independently, remotely. Why should working outside of the office environment mean that no one can see us unless they arrange in advance and schedule it?
Brief: Private equity funds injected €36 billion into European companies in the first half of the year, helping them combat the “intense liquidity crisis” caused by lockdowns. The investment came as private equity funds in Europe raised €49 billion in H1, matching the previous half-year’s total. Invest Europe, an industry body, said the industry was on track to raise a sum of money for the full year that would be on a par with average fundraising levels achieved over the last three years. However, the overall figure for private equity investment was 17% lower in value . Invest Europe’s ‘Investing in Europe: Private Equity Activity H1 2020’ also shows that private equity backed 3,401 companies during the period, with about 60% of investment value going into follow-on investments. In addition, venture capital investment achieved a new half-year record with €5.6 billion invested into start-ups and scale-ups.
Brief: Oaktree Capital Management is warning credit investors to brace for unpleasant surprises in the fourth quarter, as U.S. elections loom amid the persisting pandemic. “More than ever, it is important to be wary of market exuberance and to avoid chasing risky investment opportunities to tighter levels or weaker legal protections,” Oaktree said in its third-quarter credit report, released this month. “September’s turbulence interrupted what had been a resounding recovery from the depths of the selloff in the spring, and markets now look to have entered a sideways period.” The alternative investment firm, co-founded by Howard Marks, cited its concerns over the rising cases of Covid-19, the U.S. elections, and Brexit. Industries are under stress as business activities fall off in the pandemic, while companies are shouldering heavier debt loads, the firm said. “The economic strain produced by Covid-19 will be felt for several more quarters, if not years,” Oaktree said in the report. “We remain focused on protecting the downside in our investments.”