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Our briefing for Tuesday October 13, 2020:
Oct 13, 2020 3:29:50 PM
- In the United States, drugmaker Johnson & Johnson has paused its Phase 3 coronavirus vaccine trial because of an unexplained illness in one of the volunteers. Johnson & Johnson would not say what the unexplained illness was stating they respect the participant’s privacy and want to learn more about the illness before they share additional information. This marks the second Phase 3 coronavirus vaccine trial to be paused in the United States. AstraZeneca’s vaccine trial was paused last month due to a neurological complication in a volunteer in Britain. The AstraZeneca trial has continued in other countries but remains paused in America as the US Food and Drug Administration (FDA) investigates.
- In Canada, the Atlantic bubble is in danger of being popped as New Brunswick is dealing with two coronavirus outbreaks. Back in the early summer, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador agreed to open up to each other with the mandatory 14-day self-quarantine waived, so that an area heavily focused on tourism could at least have a shot at economic survival. While the summer went well with few cases, a recent outbreak has New Brunswick closing in on 100 active cases, focused mainly on the Moncton and Campbellton regions. Nova Scotia, Prince Edward Island and Newfoundland and Labrador all reported no new cases on Tuesday.
- The United Kingdom’s Labour Party, the main opposition, has changed its course asking the Boris Johnson government to impose a full lockdown of two to three weeks to prevent the National Health Service from being overwhelmed. The “circuit breaker” idea was pitched last month by the government’s “Sage” group, which is composed of scientific advisers. Johnson’s government wanting to avoid the optics of a full lockdown yet again, has opted for more softer options, such as curfews and stricter restrictions for harder hit localized regions. Labour leader Keir Starmer said, “there is no longer time to give the prime minister the benefit of the doubt. The government’s plan simply isn’t working. Another course is needed.”
- After seeing cases rise to around 5,000 per day, Italy has ordered strict new anti-coronavirus measures. Prime Minister Giuseppe Conte has ordered parties in closed spaces to be banned and strong recommendations are being made against private gatherings in homes with more than six people who don’t live under the same roof. Bars and restaurants must close by midnight and any contact sports not organized by an association will no longer take place – so no more pick-up soccer/football games. Prime Minister Conte negotiated the new measures with governors who were objecting to some of the new rules, especially those on private gatherings.
- A coronavirus outbreak in a Chinese coastal city has prompted municipal health authorities to pledge a COVID-19 test for all 9.5 million of its residents. Over the weekend, about 12 people tested positive for the virus in Qingdao - with a number of those being tied to the local hospital, which has now been closed. Close to 150 people are under medical observation in quarantine and the health commission in the southern Guizhou province has asked anyone who had travelled to Qingdao over a recent national holiday, to report to neighbourhood communities for testing.
- Australia is looking to expand its travel bubble beyond New Zealand. Over the weekend, Australian Prime Minister Scott Morrison said his government has held discussions with Japan, South Korea and Singapore in the hope of reopening international travel. Similar to New Zealand, if these deals go through, there would be no need to undergo quarantine. “We have to go cautiously on this, very, very cautiously, Morrison said. “COVID-19 hasn’t gone anywhere. It’s still there, and it is no less aggressive today than it was six months ago.”
Covid-19 – Due Diligence And Asset Management
BlackRock is Soaring as Investors Plow Money into ETFs
Brief: BlackRock, the owner of the wildly popular iShares family of exchange-traded funds and the world's largest asset manager, has gotten even bigger during the Covid-19 pandemic. BlackRock said Tuesday that it now has $7.8 trillion in assets under management, a 12% increase from last year. The continued allure of passively managed index funds is a big reason why BlackRock is thriving during these volatile times for the market. BlackRock said that iShares had a total of $2.3 trillion in assets during the third quarter — and nearly 70% of that total was for stock funds. BlackRock disclosed the numbers in its latest earnings report Tuesday. Revenue and profit easily surpassed Wall Street's forecasts. "As investors around the world navigate current uncertainty, including the pandemic and uneven economic recovery, BlackRock is serving clients' needs with global insights, strategic advice and whole-portfolio solutions," said BlackRock CEO Larry Fink in a press release. Shares of BlackRock (BLK) rose 3% on the news. BlackRock's stock has now surged more than 25% in 2020 thanks to its strong results. BlackRock, like most major Wall Street firms, has had to adapt during the coronavirus outbreak.
JPMorgan Sticks with Plan to Build Giant New York Headquarters
Brief: JPMorgan Chase & Co is forging ahead with plans to build a mammoth new headquarters in New York, Chief Executive Jamie Dimon said on Tuesday, despite the coronavirus pandemic casting serious doubt on the future of office buildings. “We’re building that headquarters for 50 years! It is not a short-term decision,” Dimon said during a call with reporters after posting quarterly results. Slated to open in 2024, for a price tag of as much as $3 billion, the building at 270 Park Avenue is to house about 14,000 employees. At 1,425 feet, it would be the second-tallest office building in Manhattan behind One World Trade Center, nearly 200 feet higher than the Empire State Building and more than 400 feet above the nearby Bank of America Tower, according to the Council on Tall Buildings and Urban Habitat. An illustration by Lewis Garrison, a 3-D architectural illustrator who likes to make video flyovers of skylines, here envisions JPMorgan's new headquarters towering over Midtown Manhattan, a T-Rex in what might seem like a field of dinosaurs. But since pandemic lockdowns happened in March, far fewer workers have been going into offices, making it unclear why such a big skyscraper is necessary.
M&A Surge Boosts Event Driven and Merger Arb Hedge Funds Amid Potential Q4 Risk Aversion
Brief: Merger arbitrage and event driven hedge fund strategies can capitalise on the recent pick-up in M&A activity globally, and help cushion investors’ portfolios amid potential risk aversion as a result of the US election, Brexit and a fresh Covid-19 surge in Q4, industry strategists say. The volume of M&A deals plummeted to USD96 billion in April this year – the lowest level since August 2009 during the height of the global financial crisis – as a result of heightened concerns over the coronavirus pandemic, said Man Group in a market commentary on Tuesday. In recent weeks, though, activity has surged across a wide range of sectors globally as deals that had been put on ice because of Covid-19 began flowing back into the market. More than USD1 trillion of deals across the world reportedly came to market during the third quarter, and in a market commentary on Tuesday, London-listed global hedge fund giant Man said volumes bounced back “both in terms of volumes, but also as a proportion of market cap.” Against that backdrop, Lyxor Asset Management believes that merger arbitrage-focused hedge fund strategies will offer “diversification and protection” for investor portfolios during the fourth quarter of 2020…
Commentary: Crisis Alpha – Everyone Likes the Alpha, no one Likes the Crisis
Brief: History doesn't repeat itself, but it does tend to rhyme. Each crisis period in financial markets is unique with some aspects in common. In 2020, equity markets endured a devastating fall in the wake of concerns about the novel coronavirus followed by a miraculous recovery. To date, many investors are still asking: Was this recent period of turbulence a crisis that may continue or was this crisis a simple V-shaped correction, albeit rather painful? In a recent paper, we take a look at this spectacular market fall from the perspective of a trend-following strategy to determine what is similar and what is different from the crisis periods that came before. Trend-following strategies take long and short positions following prevailing market trends across a wide range of asset classes, e.g., equity indexes, bond index futures, rates, currencies and commodities. These strategies have often been some of the few known to sometimes capture ever-coveted "crisis alpha." A correction is a short-term loss that recovers relatively quickly. A crisis, on the other hand, is a prolonged period of market stress with sustained losses, which can occasionally come in waves. Using peak-to-trough losses in equity markets, we examined the speed (measured as total drawdown divided by time in a drawdown) for crisis periods since 1992. During this period, the tech crisis and (depending on how you look at it) the global financial crisis consist of several waves of drawdowns.
Venture Capital Funds on Track for Record Fundraising Year
Brief: The coronavirus pandemic isn’t keeping investors from pouring billions into venture capital. As of September 30, U.S. venture capital funds closed this year had raised $56.6 billion, according to a report from PitchBook and the National Venture Capital Association that’s expected to be released Tuesday. This is more than $54.9 raised in all of 2019, and less than $12 billion shy of 2018’s record fundraising total of $68.1 billion. According to PitchBook, investors have continued to make “robust” commitments to venture capital funds this year despite the fundraising challenges and market uncertainty brought by the pandemic. This is in contrast to the slowdown seen in the larger private equity industry, with Preqin reporting last week that global fundraising had dropped to its lowest quarterly total since at least 2015. “Despite continued uncertainty throughout the year, the rebound in public markets has given investors confidence,” John Gabbert, founder and chief executive officer of PitchBook, said in a statement on the VC report. “As investors seek growth opportunities in a low-rate environment, the growth potential of the venture strategy continues to entice both traditional LPs and nontraditional investors.” Most of the fundraising has been driven by large funds, with the average fund size increasing to $257.2 million — nearly double the average last year.
Pandemic Takes Big Toll on Private Markets Fundraising
Brief: The asset management industry has reached a critical period for nurturing gender diversity, industry experts have advised, as investment firms choose how they will adapt to new challenges caused by the coronavirus pandemic. Baroness Helena Morrissey says the investment industry has always been “slow to shift gears” in the face of problems, including gender diversity and transparency over fees. Baroness Morrissey founded the campaign group the 30% Club in 2010, which targeted a minimum 30 per cent female board members, in addition to being the former chief executive of Newton Investment Management and chair of the Investment Association. She now chairs the Diversity Project, which works to improve diversity in all dimensions in the investment and savings industry and serves as a peer in the House of Lords. Recent progress has been “very tentative”, with the share of women in fund management roles reaching 11 per cent in 2020. In 2016, women accounted for 10.3 per cent of fund managers. Citywire estimates that at the current rate of promoting women to senior roles, it will take two centuries before female fund managers achieve parity with their male colleagues. Baroness Morrissey believes that even the slow progress the industry has made to hire and promote more women could slide backwards, if firms fail to make positive efforts now. “It's too soon for it to withstand a body blow in the form of people just taking their eye off the ball at this point,” she says.
