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Our briefing for Wednesday February 10, 2021:
Feb 10, 2021 8:09:59 PM
- In the United States, the Centers for Disease Control and Prevention (CDC) issued a new report noting that double masking – using a cloth mask over a procedure mask – like a disposable blue surgical mask - can significantly improve protection against COVID-19. While that does seem like common sense, researchers found the combination of the two masks can block 92.5% of potentially infectious particles from escaping by creating a tighter fit around the face. Media reports are noting it is unclear how or if the CDC will incorporate these findings into its new mask recommendations. The White House at this time isn’t recommending that people wear two masks to prevent the coronavirus but is considering a “range of options” when it comes to getting masks to Americans.
- A recent survey from polling firm Ipsos revealed that close to two-thirds of Canadians believe that governments should have acted sooner to reduce the number of coronavirus cases in the country. Around 63% of Canadians said that governments should have been more proactive with stricter measures that included travel bans, curfews and lockdowns, in a bid to slow down the virus. As in who is to blame overall for the situation Canadians are facing? Just over three in ten (31%) blame each other – believing that many people didn’t follow rules like physical distancing very well. Sixteen percent blamed federal government, while just five percent blamed leaders at the provincial level.
- In an interview on United Kingdom radio on Wednesday, Transport Secretary Grant Shapps became the first cabinet minister to reveal the government is considering a “vaccine” or “digital health” passport. Shapps reveled on BBC radio that talks are under way with the United States, Singapore, and the United Nations aviation body about an international system to help people who have had COVID-19 inoculations to fly. However, Shapps was quick to point out that it is “too soon” to book summer holidays yet and even suggested staycations in the UK could be in doubt due to not knowing how the virus will respond to the vaccines. The transport secretary also said nobody would be forced to get a digital health passport and one will not be required to travel within Britain.
- The European Union (EU) said that it has approved a further 23 requests to ship COVID-19 vaccines to other parts of the world, bringing the total to 27 since enforcing the bloc’s new export-licensing regime. Over the last week, the EU has authorized COVID-19 vaccine shipments to the United States, Canada, Japan, Australia and China just to name a few. Under the export authorization system, drug companies must notify EU national authorities in advance of the amounts and destination of any vaccine shipments to other parts of the world. So far, the EU haven’t rejected any export requests and the system is expected to last until the end of March.
- Reuters is reporting Israel’s swift vaccination rollout is making the country the world’s first real study of Pfizer’s COVID-19 vaccine and the early results are promising. More than 3.5 million eligible Israelis have been fully or partially vaccinated. The older and at-risk groups were the first to be vaccinated and according to statistics, there have seen a 53% reduction in new cases, a 39% decline in hospitalizations and 31% drop in severe illnesses from mid-January until February 6th. In the same time period, people under the age of 60 who became eligible for shots later, new cases dropped 20%, but hospitalizations and sever illnesses rose 15% and 29% respectively.
- A group of independent experts advising the World Health Organization (WHO) recommended the use of AstraZeneca’s vaccine even in countries that have coronavirus variants in their populations. As noted in Castle Hall’s COVID-19 Diligence briefing earlier in the week, South Africa halted its use of the AstraZeneca vaccine after a study showed it was less effective against the South African virus variant. This move threw South Africa’s coronavirus vaccination program into disarray as the AstraZeneca vaccine was the only one authorized for general use in the country. However, SAGE chair Alejandro Cravioto, the independent group responsible for advising the WHO, said “we have made a recommendation that even if there is a reduction in the possibility of this vaccine having a full impact in its protection capacity, especially against severe disease, there is no reason not to recommend its use even in countries that have circulation of the variant.”
Covid-19 – Due Diligence And Asset Management
Varde Partners Bets on Housing Market Boom in Sun Belt Suburbs
Brief : Varde Partners is investing more than $250 million to fund development of single-family homes in Arizona, Florida and Texas in a bet on Sun Belt suburbs. With historically low mortgage rates driving a housing rally during the pandemic, Varde is putting money into the real estate market through a trio of transactions as Americans shift away from coastal cities in a search for larger properties. The fund, which manages more than $14 billion, is acquiring a master-planned community in Austin, according to a statement. It’s also purchasing an active-adult community in Scottsdale, Arizona, where it will partner with builder Shea Homes to complete hundreds of houses for residents 55 and older. In a third transaction, Varde is investing $100 million to develop land in Florida and Colorado. The firm is making the investments as “traditional lenders continue to retrench,” according to a statement. The transactions come at a time when the Covid-19 pandemic is accelerating demographic shifts to the suburbs. Wall Street firms have sought to invest behind those trends, placing bets on single-family rentals, suburban apartment buildings and land for developing new subdivisions.
Southwest CEO, Unions Urge Biden not to Mandate Domestic Air COVID-19 Testing
Brief: Southwest Airlines Chief Executive Gary Kelly and the leaders of the airline’s unions urged President Joe Biden not to mandate COVID-19 testing before domestic flights, warning it would put “jobs at risk.” The letter dated Tuesday and released by the airline on Wednesday said “such a mandate would be counterproductive, costly, and have serious unintended consequences.” The Centers for Disease Control and Prevention (CDC) last month said the Biden administration was “actively looking” at expanding mandatory COVID-19 testing to travelers on U.S. domestic flights, which has sparked push back from the aviation, aerospace and travel industries.
Jim Simons Makes Billions While Renaissance Investors Fume at Losses
Brief: Jim Simons added $2.6 billion to his vast wealth in 2020. His clients weren’t so fortunate. Investors in three hedge funds run by Simons’s Renaissance Technologies lost billions of dollars as the firm’s computer models were flummoxed by the market’s gyrations. Meanwhile, Simons ranked second on Bloomberg’s list of the highest-paid managers, and was the only one in the top 15 whose clients didn’t make money last year. The secret to his success: access to a Renaissance strategy that’s closed to outsiders. The legendary Medallion fund gained 76% last year, according to Institutional Investor, while the public offerings racked up double-digit losses. It’s a stark disparity that has led some observers to wonder if Simons’s 15-year experiment to bring his brand of quantitative investing to the masses no longer works. Investors, including some employees, have yanked at least $5 billion from the three public funds since Dec. 1. After a further 9.5% dip in the $26 billion Renaissance Institutional Equities Fund in January, investors said they expect more will follow. Investors said they were surprised by the firm’s reaction to the losses.
Macquarie Taps Renewables Trend with $2 Billion Infrastructure Fund
Brief: Macquarie, the world’s largest infrastructure investor, has raised 1.6 billion euros ($1.93 billion) for its second global renewables fund, driven by strong demand from institutional investors in Britain and Germany. Countries and companies are seeking to increase their usage of renewable energy to lower carbon emissions and fight climate change. At the same time, record low interest rates have crimped fixed income returns and boosted the allure of alternative assets. Macquarie Infrastructure and Real Assets (MIRA), manager of the fund, said it had drawn investment from 32 institutions, including pension schemes, insurers and sovereign wealth funds, helping it exceed a minimum target of 1 billion euros. While Europe-based investors contributed most of the capital - German and British investors accounting for 30% each - the fund, Macquarie Green Investment Group Renewable Energy Fund 2, also attracted interest from Asia Pacific and North America. It will target wind and solar projects in Western Europe, the United States, Canada, Mexico, Japan, Taiwan, Australia and New Zealand.
Global Investors Accelerate ESG Investments in Response to Pandemic, says MSCI Survey
Brief: The global pandemic has highlighted both the importance of ESG issues and is accelerating ESG integration by institutional investors, according to the respondents of MSCI’s 2021 Global Institutional Investor Survey, a survey of 200 asset owner institutions with assets totalling approximately USD18 trillion. The survey of sovereign wealth funds, insurers, endowments/foundations, and pension funds found that over three-quarters (77 per cent) of investors increased ESG investments “significantly” or “moderately” in response to Covid-19, with this figure rising to 90 per cent for the largest institutions (over USD200 billion of assets). “The combination of climate-related events, such as devastating wildfires, floods and droughts, and a global pandemic have accelerated the paradigm shift on ESG and climate change. Once an issue for ‘green funds’ and side-pockets, ESG and Climate are now firmly established as high priority issues,” says Baer Pettit, President and Chief Operating Officer, MSCI. “2020 marked a profound shift in the way institutions invest as many investors have recognised that many companies with strong environmental, social and governance practices outperformed during the pandemic.” The survey reveals that while US investors in general have been lukewarm about ESG in the past, with some high-profile exceptions, 2020 dramatically shifted their views closer to those of their international counterparts. Of US respondents, 78 per cent said they said they would increase ESG investment either significantly or moderately as a response to Covid-19, while the figure was 79 per cent and 68 per cent in Asia-Pacific and EMEA, respectively.
Pimco Sees Risk in Premature Calls on Pandemic and Inflation
Brief: One of the biggest risks in 2021 is betting that vaccines will bring a quick end to the coronavirus pandemic, according to Pacific Investment Management Co. With growth-linked assets at or near records, “the biggest risk is probably the market prematurely pricing the end of the pandemic,” said Robert Mead, Pimco’s co-head of Asia-Pacific portfolio management. “It’s easy for markets to get a little too optimistic.” Mead is also sanguine about the chances of a breakout in inflation and interest-rate risks, while remaining broadly upbeat about the prospects for growth across developed and emerging economies this year. The money manager expresses his view through bets on steeper yield curves in Australia and the U.S. -- though his positions are less aggressive than they were last year. Mead’s strategy is based on the premise that although economies are seeing some pick up in prices, inflation targets remain stubbornly out of reach and major central banks are unlikely to raise borrowing costs for at least three to four years. His views are in contrast to the vibe in markets this week, with bond traders seeing the strongest inflation outlook in years and warnings from BlackRock Inc. and JPMorgan Asset Management on resurgent price risks.
