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Our briefing for Wednesday January 6, 2021:
Jan 6, 2021 4:09:57 PM
- In the United States, two Senate seat run-offs in the state of Georgia appear to be going in favour of the Democrats. As long as both of these results stay the same, the Democrats would have control of both the House of Representatives and the Senate. Media are already reporting this could open up the possibility of passing the $2,000 checks for Americans in the latest coronavirus stimulus relief, which was suggested by President Donald Trump, but met with opposition by his fellow Republicans. Both Democratic Senators in Georgia ran on the premise of passing the $2,000 checks once President Elect Joe Biden is sworn in as America’s 46th leader on January 20th.
- In Canada, the CBC is reporting new air traveller restrictions set to come into effect on Thursday are tighter than expected. Speaking on the condition of anonymity because the regulations weren’t yet finalized, airline industry officials received briefings from government officials on Tuesday. One of the items to come out of the meeting was that airlines were not expected to be given the power to exercise their own discretion and allow travellers to board planes to Canada if they are unable to get a negative COVID-19 test abroad. The only exception is if the standard PCR test (the standard nose swab test) is not widely available to travellers in the area. CBC says Canada’s consular services around the world are still determining the availability of testing in different regions, which could leave some stranded if they can’t provide the negative PCR test.
- The United Kingdom plans on vaccinating 13 million people against the coronavirus by the middle of next month in what a government health spokesperson said would be “Herculean” but can be achieved. “It’s a stretching target no doubt. Very stretching target,” said Nadhim Zahawi, the minister responsible for the program’s deployment. However, Zahawi went on to say with the plan put together by the National Health Service (NHS), they can deliver. Since December 8th, the NHS has administered more than 1.3 million COVID-19 vaccine doses with one-in-four adults over the age of 80 receiving at least their first shot.
- Germany has urged patience among its citizens as the government has received some heat from the rollout of the COVID-19 vaccine. Chancellor Angela Merkel had a contentious meeting with state leaders on Tuesday and agreed to lengthen controversial limits on movement, private gatherings and hard lockdown measures until at least January 31st. During the meeting, Chancellor Merkel defended the vaccination strategy, saying more supply is coming soon.
- The European Union (EU) has approved Moderna’s COVID-19 vaccine, making it the second vaccination authorized for the European bloc of countries. Under a contract the EU has with the American biotech firm, they have secured up to 160 million doses of the vaccine, which due to the two-dose process, will vaccinate 80 million people. The European Commission says Moderna has promised to deliver all of their doses between now and September. The EU has 448 million citizens and have noted they secured up to two billion of potential COVID-19 vaccines.
- The Philippines is negotiating with seven vaccine manufacturers to procure at least 148 million COVID-19 vaccinations, which would account for close to two-thirds of their population. The news came from Carlito Galvez, a former military general who now has the unenviable task of leading the country’s vaccination strategy against the coronavirus. Galvez says the government hopes to close deals with Novamax, Moderna, AstraZeneca, Pfizer, Johnson & Johnson, Sinovac Biotech and the Gamaleya Institute this month. Although, availability of these vaccines will be hard to come by as the competition throughout the world is fierce.
Covid-19 – Due Diligence And Asset Management
Billionaire Christopher Hohn Hedge Fund Recoups Pandemic Losses
Brief: Billionaire activist investor Christopher Hohn’s hedge fund has racked up a 12th straight year of gains, overcoming record losses at the onset of the pandemic. The Children’s Investment Fund made about 14% in 2020 as its concentrated stock portfolio rose amid surging markets, according to people with knowledge of the details. That took the fund’s assets to about $35 billion, a separate person said, asking not to be identified because the information is private. Hohn hasn’t lost money in a year since the last financial crisis. Last year, the fund recovered from losing 19% in March, the most in a month since it started trading in 2004, as the coronavirus roiled global markets. Bets on firms such as Microsoft Corp., Canadian Pacific Railway Ltd. and Charter Communications Inc. contributed to the fund’s 2020 gains. Still, while Hohn outperformed activist hedge funds that were up an average 6.2% through November, he fell short of the 18.4% gain in the S&P 500 Index. A spokesman for the London-based investment firm, which manages about $45 billion, declined to comment on the returns. Hohn is famous for building large stakes in companies and pushing for change to boost their share prices. He runs a long-biased portfolio spread over a small number of stocks, making it susceptible to sharp drops in values. The strategy has worked for his investors over the years, with the fund losing money only in 2008 when it dropped 43%.
New Listings on TISE up 27 Per Cent in 2020, Despite COVID-19
Brief : The International Stock Exchange (TISE) listed 831 securities during 2020 against the backdrop of the coronavirus (Covid-19) global pandemic. This is the second highest annual total of new listings since the inception of the Exchange – eclipsed only by a bumper 2018 – and represents a 27 per cent increase on 2019. It means that there was a total of 3,162 securities listed on TISE at the end of December 2020, which is a rise of 6 per cent year on year. Cees Vermaas, CEO of The International Stock Exchange Group, says: “It is really pleasing that our business flows have held up so well this year, despite the impact of Covid-19 across the world. What we have seen is that while Covid-19 may have disrupted or slowed some market activity, it has also generated other new listings business as companies refinance, whether opportunistically or essentially, in the face of the changing economic conditions.” During 2020, TISE has maintained its position as a leader in the European high yield bond market. There were 124 high yield securities issued by companies such as telecommunications firms Altice and eircom, luxury car manufacturer Aston Martin, LEGOLAND owners Merlin Entertainments, transport operator Stena and US digital content platform and producer Netflix, which were listed on TISE during the year. This also included three of the largest 10 transactions in the third quarter of the year: the largest being the Liberty Global and Telefónica financing vehicle for the merger of Virgin Media and O2; the UK’s largest pub chain, Stonegate Pubs; and debut issuer First Quantum Minerals. Overall, the total number of high yield bonds listed on TISE reached 291 at the end of December 2020.
BlackRock Bucks New York Departure Trend With Plans to Stay Put
Brief: As a growing number of Wall Street firms plan to move New York employees to cheaper U.S. hubs and even let rainmakers work from faraway homes, BlackRock Inc. is planting its feet firmly in Manhattan. Executives at the world’s largest asset manager have privately urged employees not to get too attached to doing their jobs remotely full-time, while it awaits a move to a new office tower in New York, where it’s based. With the pandemic surging across the U.S., the company extended the work-from-home period through this year’s first quarter. But that won’t be the new normal. “The office will remain our primary work location longer-term,” senior executives including Chief Operating Officer Rob Goldstein wrote in one memo sent to staff in November. “Employees will have increased flexibility to work remotely part-time, but full-time remote work will be done very selectively and with approval.” Returning to offices on a larger scale will take time, they wrote, and the company is working on making regular Covid-19 testing available to “as many people as practicable.” BlackRock still plans to move its New York staff into 50 Hudson Yards, a new skyscraper on Manhattan’s west side, in late 2022 or early 2023, a spokesman confirmed this week. The relocation, first announced in 2016, came with a lucrative incentive: BlackRock secured $25 million in state tax credits to create hundreds of new jobs and keep staff there.
Hedge Funds Turning Doubtful on Staying Power of Recovery Trade
Brief: Once believers, professional investors are getting antsy about stock bets tied to a smooth reopening of the American economy. Hedge funds that make both bullish and bearish equity bets spent Monday -- the worst opening day in five years -- leaning back into what has come to be known as the stay-at-home trade, buying lots of online tech companies optimized for lockdown commerce. Their preferences showed a shift away from the travel-leisure-retail group they’d favored in the second half of 2020, data compiled by Goldman Sachs’s prime brokerage show. It happened as virus angst mounted, with infections surging and vaccine distribution short of hopes. “When we think of what could possibly derail these lofty expectations of a second-half economic boom, it has to do with the race between the vaccines and the virus,” said David Rosenberg, founder of Rosenberg Research & Associates Inc. “Nobody said it’s not a big bull market. It’s just one premised on cheap money rather than solid fundamentals. Hence the speculative fervor.” When the S&P 500 dropped 1.5% Monday, hedge-fund clients tracked by Goldman reduced short positions in companies that cater to at-home demand, such as internet and software shares, with a basket of such stocks seeing the biggest net buying in three weeks. Meanwhile, reopening companies, like airlines and cruise operators, experienced the largest net selling in two weeks.
U.S. Private Payrolls Post First Decline in Eight Months as COVID-19 Cases Soar
Brief: U.S. private companies shed workers in December for the first time in eight months as out-of-control COVID-19 infections unleashed a fresh wave of business restrictions, setting the tone for what is likely to be a brutal winter for the economy. The ADP National Employment Report on Wednesday showed job losses across all industries last month as the coronavirus outbreak kept many consumers and workers at home. While the report underscored the magnitude of the crisis, the economy was unlikely to slide back into recession, thanks to additional fiscal stimulus approved in late December. The ADP report added to slumping consumer spending and persistently high layoffs in suggesting that the economy lost significant momentum at the end of 2020. “America’s great jobs machine ran into a wall of rising coronavirus cases and state lockdowns which puts the entire economic recovery from recession at risk,” said Chris Rupkey, chief economist at MUFG in New York. “The heart of every recession is job losses and right now the decline in jobs at year end is hinting that the dark days of the labor market last spring have returned.” Private payrolls decreased by 123,000 jobs last month, the first decline since April, after increasing 304,000 in November. Economists polled by Reuters had forecast private payrolls would rise by 88,000 in December.
World’s Super-Rich Families Want More Hedge Funds, Survey Finds
Brief: Family offices are heading back to hedge funds. More than a third of 185 investment firms for wealthy clans plan to boost allocations amid the economic upheaval caused by the Covid-19 pandemic, according to survey released Wednesday by BlackRock Inc. and Juniper Place, a London-based firm that helps asset managers raise capital. Family offices and other investors soured on hedge funds in recent years, bemoaning high fees and lackluster returns. But the health crisis has given some of those managers a boost, particularly stock-pickers who benefited from aggressive bets on technology stocks and copious economic stimulus that drove equities to new heights. “Recent market turmoil and the expectation of sustained volatility in the medium term has re-invigorated hedge fund appeal,” New York-based BlackRock and Juniper Place said in their report. Family offices have proliferated in recent years along with a surge in personal wealth derived from tech, finance and real estate. Some of the largest include Bill Gates’s Cascade Investment and Sergey Brin’s Bayshore Global Management. There are now more than 10,000 single-family offices globally, according to accounting firm EY. Single family offices, which have just one client, had average assets of $802 million, according to research published in 2019 by Campden Wealth and UBS Group AG. More than three-quarters of family offices said they preferred long-short equity hedge funds, according to research BlackRock conducted in July and August. Such funds were the best performing broad strategy last year, gaining about 4% through November on an asset-weighted basis, according to data from Hedge Fund Research Inc.
