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Our briefing for Wednesday April 29, 2020:
Apr 29, 2020 4:17:13 PM
- The United States economy shrank 4.8% in the first quarter of 2020, its worst performance since the 2008 financial crisis. America’s personal consumption rate dropped even lower to 7.6%; its lowest mark since 1980.
- Canada now has over 3,000 deaths due to the coronavirus with over 51,000 cases reported. However, it isn’t all bad news for the country. Manitoba was the latest province to release its plans on restarting some sectors of the economy, which will begin as early as May 4th. Canada’s chief public health officer also noted the number of cases in the country is doubling every 16 days. This is much better than the three days it took for the numbers to double in the early stages of the epidemic.
- The United Kingdom’s updated death toll numbers now has the country sitting only behind the United States and Italy. The total released on Wednesday has just over 26,000 dying from the virus, which now includes those who have passed away in nursing homes and the wider community. Prior to this number, only hospital deaths were being reported. The government also noted just over 52,000 tests were completed on Tuesday with the capacity to test just above 73,000 per day. Prime Minister Boris Johnson’s government had proposed a goal earlier in the month that the UK would be at 100,000 tests per day by the end of April.
- With restaurants and cafes being engrained in European culture, Switzerland announced on Wednesday they would be the first European nation to see what the new normal will look like. As of May 11th, restaurants and cafes will be permitted to open. However, guests in those venues will be limited to two per table, and the table must be two metres apart. Shops, museums and libraries will also be allowed to reopen on May 11th.
- India will allow millions of migrant workers to return home if they wish as the country prepares to ease its six-week lockdown. Migrant workers were stranded in cities and industrial areas, far from their hometowns when the lockdown order was quickly moved in place. Stranded migrants must show no symptoms of illness before being permitted to leave.
- As the number of deaths in Brazil surpass 5,000 from the coronavirus, President Jair Bolsonaro continues to make life difficult for himself after reporters questioned him about the spike in the death toll. Bolsonaro responded, "So what? I'm sorry, but what do you want me to do?" He added even though his middle name is “Messias,” which translates to Messiah in English, he’s not “a miracle worker.” Bolsonaro’s attempt to walk back the comments were also not smooth saying, “I’m sorry for the situation we are currently living with due to the virus. We express our solidarity to those who have lost loved ones, many of whom were elderly. But that’s life, it could be me tomorrow.” According to a recent poll, 38% of Brazilians think Bolsonaro is doing a “terrible” job as opposed to 33% who think he is doing a “good” job.
Covid-19 – Due Diligence And Asset Management
Sachem Named ‘King of the Activists’ in New Study on Performance
Brief: When Sachem Head Capital Management enters a new position, the stock normally doubles in two years. That was the largest return among 10 major activist investors, The Edge Consulting Group, a special situations research firm, told clients this week. A disastrous outlook for 2020 earnings is likely to put increased emphasis on value investing, said The Edge Chief Executive Officer Jim Osman… The study, entitled “King of the Activists,” tracked 15 years of shareholder campaigns by investors including Starboard Value LP, Blue Harbour Group LP and Icahn Enterprises LP, which respectively finished second, third and fourth in the rankings, behind Sachem.
JPMorgan Asset Sees Strong Era for Private Equity, Hedge Funds
Brief: The current difficult market environment will create fertile ground for private equity and hedge funds to boost their performance, according to JPMorgan Asset Management. Expected returns for cap-weighted private equity have risen to 9.80%, up 1 percentage point from the last forecasts issued Sept. 30, John Bilton, head of global multi-asset strategy, wrote in a note. The money manager’s projections “continue to be relatively aggressive for both hedge funds and private equity,” he said, and the pandemic-induced market volatility “actually reinforces our conviction that there is a good medium-term outlook for alpha generation.” “Dry powder on private equity balance sheets can be deployed now at lower entry multiples, broadly offsetting higher debt funding costs,” Bilton wrote.
COVID-19 has ‘Changed Everything’, RBS Chairman says
Brief: Royal Bank of Scotland (RBS.L) chairman Howard Davies said on Wednesday the coronavirus pandemic had “changed everything” and its impact on society and the economy would likely be “stark and long-lasting”.In comments to investors at the bank’s annual investor meeting — held virtually to comply with social distancing rules — Davies said the sharp fall in the bank’s share price during the crisis made it unlikely the government would sell further stock in the state-backed bank soon.Chief Executive Alison Rose said the bank was doing everything possible to support its customers, many of whom were facing — and would continue to face — extremely challenging circumstances.
Covid-19 Poses Challenges for Diversification, says AllianzGI’s Thies
Brief: The Covid-19 crisis has highlighted the challenges of diversification, which is not an exact science, according to Allianz Global Investors’ Manuela Thies. Thies, who is head of multi asset active allocation retail at the asset manager, said the current scenario doesn’t need to become a special case for going into non-traditional areas, as investors should always be looking to expand and complement their holdings. ‘The use of diversifying asset classes like alternatives in portfolios for risk mitigation purposes should be a permanent goal,’ Thies said in emailed comments sent to Citywire Selector.
AustralianSuper Reports 85,000 Early Withdrawal Requests
Brief: AustralianSuper has received "85,000 requests from members seeking early release of their retirement savings," the Melbourne-based industry superannuation fund said Tuesday. The initial tally — a week after Australians could begin applying for an initial A$10,000 drawdown of their retirement savings to help them through the COVID-19 crisis — represents over A$650 million ($413.2 million) in savings, a news release said. AustralianSuper said it had already distributed "over A$319 million to almost 40,000 members so far." The super fund reported A$180 billion in retirement assets at the start of February — before a spreading coronavirus battered markets globally. Shawn Blackmore, the fund's group executive for service and advice, in the news release said AustralianSuper wants to "help members who are in immediate financial need under the Federal Government's Early Access to superannuation program" but emphasized that withdrawals would come at a cost.
BlackRock to Close European Abs Return Equity Fund
Brief: BlackRock is set to close one of its absolute return equity funds, Citywire Selectorhas learned. The fund, formally known as the BSF European Diversified Equity Absolute Return, was managed by Robert Fisher andSimon Weinberger. A spokesperson for the firm has confirmed to Citywire Selector that the fund will officially close on 2 June 2020. The BSF European Diversified Equity Absolute Return fund had €5m in assets under management in March and was originally launched in August 2010. Commenting on the liquidation, a BlackRock spokesperson said: ‘We recently completed a review of the BSF European Diversified Equity Absolute Return Fund as part of our continual evaluation process to ensure our range remains relevant. Taking into account its current size and potential client demand, we have decided to close it.’
