Our briefing for Wednesday March 31, 2021:

Mar 31, 2021 3:37:37 PM

In the United States, a government report released on Wednesday stated COVID-19 was the primary or contributing cause of 377,883 deaths in the country in 2020. The Centers for Disease Control and Prevention (CDC) said the COVID-19 mortality rate was the third leading cause of death in the United States in 2020 – trailing only heart disease and cancer. The pandemic took its hardest toll on those 75 and above – accounting for close to 225,000 deaths. The CDC also pointed out that limited availability to testing for the coronavirus at the beginning of the pandemic might have resulted in an underestimation of COVID-19 associated deaths.
In Canada, three levels of government announced joint funding to expand the country’s vaccine manufacturing capacity on Wednesday. The federal government will spend $415 million on the partnership with French pharmaceutical company Sanofi Pasteur Ltd., with the Ontario provincial government chipping in $55 million. For its part, Sanofi will spend more than $455 million, to bring the total price tag to close to $1 billion. The end goal is to have a new facility up and running in the Toronto area by 2027 that will have the capacity to produce “enough vaccine doses to support the entire Canadian population”, according to a federal news release. “We are now never going to have to rely on any country, any leader, we will be self-sufficient,” said Ontario Premier Doug Ford.
In the United Kingdom, the Evening Standard updated a survey regarding a number of FTSE 100 companies’ latest plans for what a return to the office will look like, or if they plan to embrace flexible working going forward. Private equity firm 3i said they have around 150 staff in London and occupy around 35,000 square feet of office space. A final decision has not yet been made, but 3i said it is likely to “maintain our existing set-up.” ICG, a global alternative manager also responded and said they plan to keep their same amount of space (47,000 square feet in London) for the next three years. Standard Life Aberdeen employees can expect a new look when they return to the office – a re-calibrated area to create more open-zones for people to interact and generate ideas, according to CEO Stephen Bird.
Italy will impose a five-day coronavirus quarantine for people arriving from European Union (EU) countries or returning trips from within the bloc until April 6^th. Italy is under tight coronavirus restrictions as it goes through a deadly third wave and are facing a three-day lockdown of their own citizens over the Easter weekend, starting on Saturday. Travellers must also take a COVID-19 test at the end of the quarantine period. Similar measures were already put in place for trips to countries outside of the EU.
China has come to the defense of their scientists and called on the World Health Organization (WHO) to take the lead in respecting their conclusions. “We need to respect science and respect the opinions and the conclusions reached by scientists,” said Chinese Foreign Ministry spokeswoman Hua Chunying. China’s comments come one day after multiple countries criticized the findings from the WHO report, calling it incomplete and overly controlled by the Beijing government. Hua had an answer for that criticism too: “They [other countries] want to spread rumours and push their political agenda. The experts said they went to the places they wanted to, and they met with the people they wanted to.”
Australia has fallen 3.4 million doses short, or 85% shy of its original targeted goal of vaccinating 4 million of its citizens by March 31^st. Australia has fared well compared to other countries when dealing with the pandemic, but this development, coupled with sporadic outbreaks leading to lockdowns in six cities over recent months, has prompted criticism of the government. In January, Prime Minster Scott Morrison promised to have four million inoculated by the end of March but pushed that back earlier this month to mid-April. The prime minister also dialed back his promise to have every Australian fully vaccinated by October – instead saying everyone will have their first shot by then.

Covid-19 – Due Diligence And Asset Management

In Next Pandemic, Buyout Firms Want Reprieve in Debt Deals

Brief : Private equity is already positioning for the next deadly virus. Some buyout firms are seeking new terms in loan agreements to help their companies avoid defaults if earnings drop in a future pandemic, according to lawyers with knowledge of the discussions. They’re getting resistance from banks concerned the proposals allow borrowers too much flexibility and would scare away investors. Fights over the fine print in credit agreements became particularly bitter during the Covid-19 outbreak, with companies strapped for cash as business withered. Those tensions are making creditors wary of giving away any bargaining power. Proposed terms vary, but the most aggressive version would allow a company to exclude the effect of a future pandemic from the calculation of earnings used to determine whether it’s in compliance with creditor covenants. The covenants typically rely on earnings-based financial metrics to determine whether a company can take on additional debt, sell assets or distribute dividends.

Pressure for Hedge Funds Scrutiny Builds as Yellen Leads her First U.S. Financial Stability Meeting

Brief: U.S. Treasury Secretary Janet Yellen is facing pressure from Democrats to revive tougher scrutiny of hedge funds and other large pools of capital as she heads her first meeting of the premier grouping of U.S. financial regulators on Wednesday. The meltdown of leveraged hedge fund Archegos Capital Management this week, which inflicted losses on Credit Suisse, Nomura and other intermediaries, gives the Financial Stability Oversight Council fresh evidence to review. The council, led by Treasury and including heads of the Fed, the Securities and Exchange Commission and other major financial regulators, is scheduled to meet at 3 p.m. EDT (1900 GMT) to privately discuss hedge fund activity and the performance of open-end mutual funds during the coronavirus pandemic. It also will hold a rare public session to discuss financial system risks from climate change for the first time. Archegos’ failure to meet margin calls is the third significant market episode in the space of a year involving faltering hedge funds or open-end mutual funds.

Carlyle Seeks Staff’s Return by September, Many in Hybrid Roles

Brief: Carlyle Group Inc. plans to bring most staff back to its offices on a regular basis by September, although many will continue working remotely part of every week for the foreseeable future. “By the fall, we’ll be able to sort of open all of our offices in a more fulsome way,” Reggie Van Lee, Carlyle’s chief transformation officer, said Wednesday during a Bloomberg Live event. “We are hoping for the fall and being agile in the meantime.” The private-equity firm is trying “not to be overly prescriptive” when it comes to remote work, Van Lee said. He expects some staff to come in daily, while others do so periodically -- perhaps as infrequently as once a quarter -- to ensure that Washington-based Carlyle is able to keep up with “community building.” Wall Street is diverging in its staffing expectations, with some executives at the largest banks anxious to get employees back to the office to foster more collaboration and win business. Other firms, like Apollo Global Management Inc. and Two Sigma Investments, have been testing plans for their staffs to work remotely a few days a week as pandemic restrictions ease.

Blending Home and Office Working a Priority for 2021

Brief: Fund managers must manage a seamless integration between office and home working in order to avoid damaging silos. They should also adopt agile methodologies used in the technology market in order to speed up their operations and cope with a likely acceleration in the use of digital technology. These were some of the priorities and predictions for 2021 made by some of the industry’s leading technology and operations figures in the recently published FundsTech quarterly report. Andrew Hampshire, chief operating officer and chief technology officer at specialist fund manager Gresham House, said: “If businesses don’t have a slick mechanism for bringing office and remote workers together, businesses could see silos start to develop between those in the office and those working at home. Getting both the cultural aspects and technological aspects right therefore is very important.”

Covid-19 and Threat of Climate Change Drives Increase in LGIM’s Company Engagements

Brief: Legal & General Investment Management (LGIM), one of the world’s largest asset managers, has released its tenth annual ‘Active Ownership’ report, which reveals that over the course of 2020, it increased company engagements by 21 per cent and continued to vote globally, opposing the election of more than 4,700 company directors, as it sought to effect positive change at companies in which it invests. 2020 was an exceptional year for engagement. In March 2020 LGIM wrote to companies with constructive suggestions about how they could cope with the unfolding pandemic and resulting lockdowns, from supporting employees to raising capital. In addition to increasing focus on topics such as executive pay, board governance and income inequality, stewardship efforts have continued to shine a light on companies’ gender and ethnic diversity as well as the longer-term threat of climate change.

FTSE 100 Dividend Yields Forecast to 24 Per Cent This Year as Economy Bounces Back from Covid-19 Crisis

Brief: UK equity analysts forecast that the dividend yields on FTSE 100 shares will rise by 24 per cent from 2.56 per cent to 3.17 per cent this year as the economy begins its recovery from the coronavirus recession, according to new research from Bowmore Asset Management. Bowmore Asset Management’s research is based on a consensus of analysts’ views on how dividends will increase over the next year. Bowmore Asset Management says many FTSE 100 companies took conservative approaches to dividends in 2020 to ensure their balance sheets weren’t put under too much pressure during the early stages of the coronavirus crisis. Banks and oil & gas companies, two of the UK’s largest dividend paying sectors historically, were among the sectors to cut dividends the most aggressively in 2020, alongside the industries hardest hit by the lockdown restrictions, such as travel & leisure and commercial property. Banks were forced to suspend dividends at the height of Covid-19 crisis last March, with regulators believing they could have difficulty lending if dividends were continued to be paid. HSBC and BT were among the largest FTSE 100 dividend payers to cut dividends in 2020, with each cancelling payments totalling more than GBP3 billion.

Coronavirus Diligence Briefing