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Our briefing for Wednesday April 8, 2020:
Apr 8, 2020 4:33:14 PM
- United Kingdom Prime Minster Boris Johnson remains in the intensive care unit of a London hospital, although his condition is said to be “improving”, according to Downing Street officials. The noted improvements have Johnson sitting up in his bed and engaging positively with staff. Meanwhile, the country has close to 7,100 positive cases for the virus and 938 people died, the largest daily increase so far in the UK.
- United States President Donald Trump has seemingly turned his frustration to the World Health Organization (WHO). During a media briefing on Tuesday, the President said WHO mishandled the coronavirus, stating they were too close to China, and was considering putting a freeze on funding to them. WHO Director-General Tedros Adhanom Ghebreyesus responded on Wednesday noting the focus should be on fighting the virus and urging critics to “please quarantine COVID politics.” President Trump might be looking to divert attention as his own health officials dire predictions of this being a really bad week for America seem to be coming true. The national daily total of deaths on Tuesday reached 1,858, according to Johns Hopkins University, a new record high.
- Canadian Prime Minster Justin Trudeau again proposed new changes to his government’s wage subsidy program. After some start-ups and new businesses complained they could not show a 30% drop in revenues compared to this time last year, companies now can compare their lost revenue to what they made in January and February 2020 and will only need to show a 15% decline in March 2020. Trudeau and his government aim to have the wage subsidy program up and running in three weeks.
- France’s first quarter output has fallen to its lowest level since the second world war. The country’s gross domestic product contracted by six per cent during the first three months of 2020. More than 10,000 people have died from the virus so far in France as it enters its fourth week of lockdowns.
- In an attempt to curb the spread of coronavirus in Israel during Passover, the country has imposed a strict curfew over the next four days. The police and thousands of soldiers have been deployed to different travel checkpoints between cities. All businesses, including supermarkets have been closed and people are not allowed more than 100 metres from their home until Saturday morning.
Covid-19 – Due Diligence And Asset Management
Blackstone Raises $10.7 Billion for European Property Fund
Brief: Blackstone Group Inc. has finished raising a 9.8 billion-euro ($10.7 billion) fund that will target European real estate. The fund swells the firm’s uninvested capital for opportunistic property bets to about $30 billion just as the coronavirus roils markets worldwide. It’s also the largest private equity capital raising to complete since the pandemic’s outbreak, according to data compiled by Bloomberg. “Our scale and reach allow us to put capital to work strategically during this period of elevated volatility,” James Seppala, Head of Real Estate Europe, said in an emailed statement. “The significant demand for the fund is testament to the confidence our investors have in our ability to deploy strategic long-term capital to assets and businesses across Europe.”
Hedge Fund: World is ‘Very Much Trapped in the Mother of all Global Financial Bubbles’
Brief: Universa Investments posted an astonishing year-to-date return of more than 4,000% in March following “one of the scariest months on record,” even as the firm issued a stark warning about a still-overinflated market. According to a client letter obtained by Yahoo Finance, Universa’s investors in the Black Swan Protection Protocol (BSPP) strategy saw a staggering +3,612% net return on capital in March, based on required invested capital at the start of the year. Year-to-date, the fund’s investors reaped an even more eye-popping +4,144% net return on capital. The contents of the letter were first reported by the Wall Street Journal. The hedge fund founded by Mark Spitznagel specializes in convex tail hedging and investing. Universa’s specific brand of tail-risk hedging limits losses from an outsized market event. When markets go down, this tail hedge acts like insurance for a portfolio. And since its inception, investors have seen a +239% net return on capital, according to the report.
Aurelius Management Cut Salaries by 25% as Covid-19 Hits Portfolio Companies
Brief: The management board of listed private equity group Aurelius Equity Opportunities has decided to reduce their total salaries for the second quarter of 2020 by 25%. In a letter to shareholders, chief executive officer Dirk Markus said the management wants to shoulder some of the burden and that over the coming weeks or months, they might have to make some difficult decisions for some portfolio companies. “Each and every loss of a portfolio company is unfortunate, but, to a certain extent, part of private equity in general and special situations investing in particular,” he said. He added that a number of the firm’s portfolio companies are struggling to stay on top of things and deal with dramatic changes in their respective markets.
Howard Marks says it’s Time to Stop Playing Defense: ‘We’re Buying Today When We Find Good Value’
Brief: Investing heavyweight Howard Marks, who only a few months ago was telling investors to use extreme caution, now thinks the time for playing defense is over. In the latest chapter of his evolving market views, Marks said a number of conditions have changed recently that argue for more risk-taking as the coronavirus crisis evolves. “Given these new conditions, I no longer feel defense should be favored,” the Oaktree Capital founder said in the latest of his “memos” that are read widely on Wall Street. Specifically, he points notes that “the risks in the environment are recognized and largely understood.” Also, he pointed out that potential returns are rising, specifically citing the typical yield for high-yield bonds rising from 3.5% to about 9%.
Famed Hedge Fund’s Decline Deepens After Worst-Ever Loss
Brief: Hedge fund Lansdowne Partners, formerly revered as one of the world’s star stock pickers, was wrong-footed by the historic bull-run. It fared even worse in last month’s bear market. The firm’s main hedge fund run by Peter Davies and Jonathon Regis tumbled 13% in March’s rout, the biggest monthly decline since it started trading almost two decades ago, according to an investor update seen by Bloomberg. Its smaller Princay Fund suffered a 35% drop. The sharp losses pile pressure on London-based Lansdowne, which has seen an investor exodus after lagging both rising and falling markets since 2016.
KKR Billionaires Henry Kravis and George Roberts Create $50 Million Coronavirus Relief Fund
Brief: The coronavirus pandemic has hit Wall Street hard as banks, hedge funds and private equity firms navigate an unprecedented business stoppage. As the biggest firms on the Street work to pump money into the economy, and manage their mammoth portfolios of assets through the tumult, they’re also putting big money towards relief efforts.KKR & Co, co-founded by billionaires Henry Kravis and George Roberts, has created a $50 million fund dedicated to supporting frontline workers and mitigating the financial hardship created by the pandemic.The fund will be used to help first responders and health workers, and in various financial relief efforts aimed workers and small businesses in the communities where it invests.
