Brief: Bain Capital Credit has closed a new distressed debt and special situations fund, with more than $3.2 billion in commitments, according to Jeff Robinson, one of the firm’s managing directors. About 50% of that total has been invested and committed, with the majority being deployed in the last three months, Robinson said. “While we do this in all market environments, now is one of the most attractive ones we’ve seen,” Robinson said in an interview. “On the distressed side, in any 10-year period, there are maybe two great years to be a distressed investor, and we’re in the midst of those two great years.” The firm raised capital from existing and new investors for the program called Bain Capital Distressed and Special Situations Fund 2019. It invests globally, including in North America, Europe, Asia and Australia. Bain joins firms like Blackstone Group Inc., Oaktree Capital Group LLC and Carlyle Group Inc. in looking to capitalize on potential opportunities created by the coronavirus pandemic that has hammered businesses. The first wave of deal flow early in the crisis included companies that needed to raise liquidity as they contended with high levels of cash burn and an erosion of enterprise value, according to Robinson.
Brief: HSBC is resuming plans to cut around 35,000 jobs which it put on ice after the coronavirus outbreak, as Europe’s biggest bank grapples with the impact on its already falling profits. It will also maintain a freeze on almost all external hiring, Chief Executive Noel Quinn said in a memo sent to HSBC’s 235,000 staff worldwide on Wednesday and seen by Reuters. “We could not pause the job losses indefinitely - it was always a question of ‘not if, but when’,” Quinn said, adding that the measures first announced in February were “even more necessary today”. An HSBC spokeswoman confirmed the contents of the memo. HSBC (HSBA.L) had postponed the job cuts, part of a wider restructuring to cut $4.5 billion in costs, in March saying the extraordinary circumstances meant it would be wrong to push staff out.However, Quinn said it now had to resume the programme as profits fall and economic forecasts point to a challenging time ahead, adding that he had asked senior executives to look at ways to cut more costs in the second half of 2020.The bulk of the job cuts are likely in the back office at Global Banking and Markets (GBM), which houses HSBC’s investment banking and trading, a senior executive familiar with the plans said.
Brief: Another four years of President Trump may not excite everyone, but it could be way better than having what’s known as a ‘blue wave’ of Democrats taking control over the House and Senate in November — at least from an investor standpoint. “I think the markets will be most concerned of what they call the blue wave, not just the executive branch going Democratic but certainly the Senate swings as well,” said Wells Fargo Investment Institute chief investment officer for wealth and investment managementDarrell Cronk on Yahoo Finance’s The First Trade. “I think why they would be concerned of that, mostly, is because it would put in jeopardy the 2017 Tax Reform Act. There are discussions that certainly the Democrats would like to repeal that legislation and bring the tax rates back up somewhere around 28% to 29%, which would be pre-2017 levels. That would certainly challenge margins and earnings growth in an environment where it’s already challenged.” Of note is that there are 35 seats identified as up for grabs in the Senate in November, according to polling tracker 270toWin. Currently the Senate has 53 Republicans and 47 Democrats. In the House, Ballotpedia estimates 74 of the 435 House races are in play. The Democrats control the House, 233 to 197. But a blue wave must not be ruled out amid dissatisfaction among voters with how Trump has handled the twin crises of the COVID-19 pandemic and racial injustice.
Brief: Covid-19 continues to take its toll on financial markets, presenting major challenges for asset managers, from active funds to passive investments. The implications have been significant and central banks have now injected close to $100 billion to prop up investment funds hit by the market turmoil, raising questions about the systemic risks posed by the sector. With the effects of the crisis likely to be felt for several years ahead, how can asset managers adapt to this ‘new normal’ and begin to prepare for future challenges? Given the scale of Covid-19 and its impact on the global economy, asset managers were always likely to face high levels of volatility and challenging market conditions. However, the immediate reaction to the crisis produced varying results for different investment strategies and approaches. Passive funds tracking equity and bond indexes, which have proved highly popular with investors in recent years, have been exposed to the full extent of market volatility from the very beginning of the crisis. These funds suffered significant losses in value throughout February and March, but they weren’t the only immediate losers. Funds managed with traditional quantitative methods have experienced a similar struggle. These funds typically work on the assumption that patterns can be found in historical data and then used to inform investment choices.
Brief: Most hedge fund industry employees have been working remotely during the coronavirus pandemic, but now firms are split over when staff should return to work and when businesses can resume face-to-face contact with investors and other clients, a new study by the Alternative Investment Management Association has found. The survey data suggests firms with smaller headcounts are more confident on resuming client contact and overseas travel later this year. But firms with larger staff numbers do not expect to return to normal until 2021, suggesting they face bigger practical challenges in ensuring social distancing among employees. AIMA, the trade body for the globally hedge fund industry, recently surveyed 240 members – two-thirds of which were hedge fund management firms, with the remaining third comprising service providers and investors - altogether representing more than 67,000 employees. The survey found that some 92 per cent of hedge fund industry employees have been working either entirely (67 per cent) or mostly (25 per cent) from home throughout the Covid-19 lockdown. As countries begin to ease lockdown measures, AIMA’s study has found that the hedge fund industry is divided over how to proceed back to work.
Brief: Asset managers M&G, Legal & General, Standard Life and Janus Henderson said they were keeping their property funds frozen as valuers continue to struggle to assess real estate assets due to the coronavirus crisis. M&G froze its $3.2 billion UK Property Portfolio in December, as uncertainty over Brexit and weakness in Britain’s retail commercial property sector prompted redemption requests. Most other UK property funds also halted redemptions in March, as valuers said there was “material uncertainty” about property values at the end of the first quarter due to the coronavirus pandemic. As the second quarter draws to a close, M&G said its valuers were still applying a material uncertainty clause due to the lack of property deals. However, it said its clause did not apply to the industrial and logistics property sectors where there had been transactions. Legal & General said there was no change to the lock-up of its 2.9 billion pound ($3.7 billion) fund. Standard Life said two funds totalling about 500 million pounds remained frozen due to valuation difficulties, while Janus Henderson said the material uncertainty clause still applied to its 500 million pound fund. The funds are expected to remain frozen till at least September due to the valuation challenges, and some of those which usually offer daily redemptions may need to change structure to survive, industry sources say.