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Our briefing for Wednesday May 12, 2021:
May 12, 2021 3:48:36 PM
- In the United States, CBS is reporting government regulators are targeting evictions by some of America’s biggest landlords – two of which are owned by a private equity company. The Federal Trade Commission and Consumer Financial Protection Bureau earlier this month sent a letter reminding major landlords of the Centers for Disease Control and Prevention’s (CDC) limits on evictions. According to PESP, a non-profit advocacy group, as of April, 31,000 eviction cases have been filed in 2021 and the top two on the list – Progress Residential and Front Yard Residential are owned by PE firm Pretium Partners. Since September 2020, entities owned by Pretium have filed nearly 1,300 eviction actions in court, more than any corporate landlord tracked by PESP.
- CTV News is reporting a Canadian drug maker has posted promising Phase 1 trial results for its own COVID-19 vaccine but is threatening to move its future trials and production out of the country if it doesn’t receive further support from the federal government. Calgary-based Providence Therapeutics noted on Wednesday that its first trial of 60 participants aged 18-64 shows “strong virus neutralization capability” with no serious side-effects reported. Brad Sorensen, CEO of Providence, said while he is happy and vindicated by the results so far, he stated dealing with the federal government has been trying. For instance, Sorensen points to asking the leading Liberal government to supply Providence with 500 doses of Pfizer to compare results, but to date, has received no answer. “At the end of the day, if Canada has no inclination to purchase vaccines that are made in Canada, which they’ve so far given no indication that they are prepared to do that, then why would we spend the resources to seek approval in Canada,” said Sorensen.
- The United Kingdom could be back to normal by the end of the year if the vaccine rollout continues to succeed, according to the government’s chief pandemic modeller. Speaking on BBC Radio Wednesday, Professor Graham Medley of the London School of Hygiene and Tropical Medicine said it all depends on the variants and the vaccines impact on them. The news comes as Health Minister Matt Hancock said on Tuesday that the government will be giving more freedom to the public in the days and months ahead to make their own judgements about risk as the pandemic eases. In the House of Commons on Wednesday, Prime Minister Johnson said work-from-home guidance is set to be lifted on June 21st after being warned London is “hurting” due to the lack of commuters and visitors from abroad.
- Italian Prime Minister Mario Draghi stated that the European Union’s framework for controlling debt must be changed to help overcome the economic damage caused by the coronavirus pandemic. “The current fiscal rules were inadequate and are even more inadequate for an economy existing in a pandemic,” Prime Minister Draghi told Italian lawmakers in Rome on Wednesday. “Revision of the rules needs to ensure more ample margins for fiscal policy to work as an anti-cyclical stabilizing force.” Prime Minister Draghi previously served as the President of the European Central Bank from 2011 to 2019.
- The Philippines economy shrank more than expected in the first quarter of 2021, marking the fifth straight quarter of declines amid pandemic-induced lockdowns. The Philippine GDP fell 4.2% in the March quarter from a year earlier. Economists had predicted a 3% drop for the March quarter. The Philippines is expected to manage Southeast Asia’s slowest recovery this year from the pandemic-driven recession. The current lockdown in Manila and other key economic areas threatens the government’s goal – currently up for review – of at least 6.5% growth by the end of this year.
- An independent panel set up by the World Health Organization (WHO) has concluded the COVID-19 pandemic was preventable. The panel was not kind to the WHO, saying the health body, along with the combined response of global governments was a “toxic cocktail”. The report said the WHO should have declared a global emergency earlier than it did, adding that without urgent change the world was vulnerable to another major disease outbreak. The panel added Europe and the United States wasted the entire month of February 2020 and acted only when their hospitals began to fill up.
Covid-19 – Due Diligence And Asset Management
US Budget Deficit Hits Record $1.9 Trillion so far This Year
Brief : The U.S. budget deficit surged to a record of $1.9 trillion for the first seven months of this budget year, bloated by the billions of dollars being spent in coronavirus relief packages. In its monthly budget report, the Treasury Department said Wednesday that the shortfall so far this year is 30.3% higher than the $1.48 trillion deficit run up over the same period a year ago. The oceans of red ink in both years are largely due to the impact of the coronavirus pandemic, which led the government to approve trillions of dollars in relief to cover three rounds of individual payments, extra unemployment benefits and support for small businesses. The deficit for the budget year that ended Sept. 30 totaled a record $3.1 trillion and many private economists believe this year’s total will surpass that amount. Some are forecasting a deficit of $3.3 trillion. For April, the deficit totaled $225.6 billion, down from a deficit in April 2020 of $738 billion. That improvement reflected the fact that fewer relief payments were made this year and individuals making quarterly tax payments had to meet the normal April deadline. Last year, all tax payments were delayed at the onset of the pandemic.
BOE Pushes Shakeup of $6.9 Trillion Money Market Funds Business
Brief: The Bank of England is pushing for a shakeup of the $6.9 trillion money market fund industry, saying the business amplified strains during the financial crisis and in the Covid-19 pandemic. The U.K. central bank’s Governor Andrew Bailey said the Financial Stability Board soon will consult on changes to the market, which covers short-term debt securities like commercial paper. At the height of turmoil in the early days of the pandemic, those funds were not resilient, he said. The remarks including some detailed options for what regulators could do are the clearest sign yet that action is coming for money market funds, which are supposed to have cash-like liquidity but instead froze up when the global system was under strain. “We are very much in the world of having a second chance to deal with the issue of how to structure money market funds consistent with their role,” Bailey said in a text of a speech to the International Swaps & Derivatives Association. Bailey said there’s a need to improve the resilience and functioning of the funds so they didn’t contribute to stress in short-term funding markets. Sterling money market funds saw outflows of around 25 billion pounds ($35 billion), or 10% of their total assets, in the eight days between March 12 and 20 last year -- a period known as the dash for cash.
Equity Funds See Record Inflows as Investors Target Vaccine Hotspots in High Hopes for Post-Pandemic Boom
Brief: British investors added record new capital to equity funds for the second month in a row, according to the latest Fund Flow Index from Calastone. Net inflows hit a record GBP2.98 billion in April and took the year-to-date total to GBP6.93 billion, easily the best start to a year since Calastone began recording figures in 2015. The last six months have seen four of the best months of inflows to equity funds on record. At 55.7, Calastone’s FFI:Equity was the most positive reading since April 2020. This does not mean buying has been indiscriminate. Investors were most enthusiastic about global funds, which absorbed GBP1.59 billion, North American funds, which saw record inflows of GBP576 million and UK equity funds [ie funds focused on UK equities] which enjoyed inflows of GBP303 million. In the last three months, a turnaround in sentiment towards the UK means UK equity funds have recouped all the outflows from the previous six. European equity and equity income funds are out of favour, although equity income funds are seeing a marked slowdown of outflows.
Investors Still Clinging to Their US ‘Security Blankets’
Brief: Having seen inflows of close to £2.3bn ($3.25bn, €2.7bn) in 2020, funds invested in US equities witnessed net outflows of £1.6bn in the first quarter of 2021, according to the Investment Association. The bulk of those outflows took place in March, with the IA revealing investors redeemed a net £1.09bn from the IA North America sector. This made it the second least popular peer group behind Sterling Corporate Bond – which witnessed an outflow of £1.47bn for the month. While some of this may be a result of profit taking following a very strong run for the US market, Laith Khalaf, financial analyst at AJ Bell Investments, said another factor may also be at work. “Investors might also be concerned about the prospects for interest rate rises to dent the share prices of the big US tech firms that now make up such a large part of the S&P 500,” said Khalaf. “This could be a pretty significant turning point, as investors reflect on what’s performed well in the past, and where opportunities lie for the future,” he added. “The global sector continues to attract inflows, so investors aren’t totally downbeat on the US, seeing as these funds have a high weighting to the US, which now makes up around two thirds of the global developed stock market.”
Private Equity Firm to buy UDG Healthcare in $3.7 bln Deal
Brief: Private equity firm Clayton, Dubilier & Rice (CD&R) has agreed to buy London-listed UDG Healthcare for 2.6 billion pounds ($3.7 billion), the pharmaceuticals services company said on Wednesday. CD&R will pay 10.23 pounds in cash per share in UDG, representing a premium of 21.5% to Tuesday’s close. By 0735 GMT the London-listed shares were up 22.2% at 10.30 pounds. UDG, which has its headquarters in Dublin, specialises in healthcare advisory, communications, commercial, clinical and packaging services. “We believe that this is an attractive offer for UDG shareholders, which secures the delivery of future value for shareholders in cash today,” UDG Chairman Shane Cooke said in a statement. UDG has two divisions - Ashfield and Sharp - and employs about 9,000 people in 29 countries. “UDG has long established itself as a leading provider of high-value services to pharma and biotech companies globally, supported by a highly skilled workforce,” said CD&R partner Eric Rouzier. The deal is expected to be declared effective during the third quarter of 2021, subject to shareholder and regulatory approvals.
Sovereign Wealth Funds Turn to Home as Covid Bites
Brief: Cashed-up as the crisis began, many sovereign funds took the opportunity to invest heavily through the coronavirus pandemic. But while some looked to international markets for contrarian positions, more looked to see what they could do at home. The world’s sovereign wealth funds (SWF) almost doubled their direct investments during 2020, as funds found opportunity during the Covid-19 global pandemic. The latest annual review by the International Forum of Sovereign Wealth Funds (IFSWF), whose membership includes sovereign vehicles in nearly 40 countries, shows a mixture of opportunism and duty in fund behaviour during 2020. Publicly disclosed direct investments were $65.9 billion in 2020, up from $35.9 billion in 2019, with a particular focus on sectors such as renewable energy, food production, e-commerce and logistics. The year before, 2019, had represented something of a low for direct investment, the lowest level since 2015, and one consequence of this was that institutional investors – particularly sovereign funds – entered the pandemic crisis with high levels of cash.
