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Our briefing for Wednesday May 20, 2020:
May 20, 2020 3:08:29 PM
- In the United States, all 50 states have at least partially reopened as of Tuesday with America heading into its Memorial Day long weekend. President Donald Trump has said he is planning to host the G7 leaders conference at Camp David instead of video conferencing from June 10th-12th. The summit’s in-person gathering was cancelled back in March by President Trump as the coronavirus spread throughout the world making safe international travel next to impossible. The G7 conference was originally set at one of President Trump’s golf resorts in Miami, Florida, but that idea was scratched when public sentiment balked at President Trump potentially making a profit by holding it at one of his money-making properties.
- During a news briefing on Wednesday, Canadian Prime Minister Justin Trudeau was non-committal, only saying “there are lots of discussions to come” when it relates to United States President Donald Trump’s proposal to hold the G7 summit at Camp David. Elsewhere, the country’s chief medical officer has asked the Canadian public to wear a mask as an added layer of protection whenever physical distancing is not possible. Dr. Theresa Tam said the new guidelines come as provinces begin to allow businesses and services to reopen.
- United Kingdom Prime Minister Boris Johnson has pledged the government will have a track and trace coronavirus system implemented by June 1st as the country looks to ease lockdown restrictions. Speaking in the House of Commons, Prime Minister Johnson hopes to have 25,000 coronavirus trackers recruited by the start of next month that will be capable of tracking the contacts of up to 10,000 new cases a day. The UK government’s nationwide rollout of its tracing app missed its mid-May deadline and officials noted earlier in the week the technology may not be ready for several weeks.
- Spain has issued a formal order that citizens must wear face coverings in all public spaces where people cannot observe a safe social distance of at least two metres. Previously, it was only necessary to wear masks on public transport. The new system will be enforced as of Thursday for anyone over the age of six with exceptions for people with respiratory problems or other disability issues.
- Greece’s Prime Minister said the country will be reopened for international tourism by June 15th. Prime Minister Kyriakos Mitsotakis said the country would reopen its borders to tourists from a group of 20 countries with a good track record of containing the coronavirus. Prime Minister Mitsotakis mentioned Germany and Bulgaria by name as two of the nations that will be included in the group of 20.
- A Dubai survey of companies has found close to three-quarters believe they expect to close within the next six months due to the economic toll of the coronavirus. The survey conducted by Dubai’s chamber of commerce found 27% of respondents expected to go out of business within the next month, while 43% fear the same outcome within the next six months. Dubai has eased its restrictions since late April, but with one of the strictest lockdowns in the world, which included a 24-hour curfew for the majority of last month, the result was a severe economic blow to the private sector.
- China and Australia are locking horns in a coronavirus battle that will affect the imports and exports of the two key trading partners. Australia has publicly criticized China and its handling of the coronavirus pandemic – something that obviously isn’t sitting well with China. The country is considering targeting Australian exports of wine and dairy in retaliation and have already slapped on tariffs and restrictions of other exports such as meat and barley. Australia is the world’s most-China dependant developed economy.
Covid-19 – Due Diligence And Asset Management
BlackRock’s Biggest Credit ETF Swells to Record Amid Fed Pledge
Brief: The world’s largest credit ETF has ballooned since the Federal Reserve said it will backstop the market. Total assets in BlackRock’s iShares iBoxx $ Investment Grade Corporate Bond exchange-traded fund, ticker LQD, touched a record $46.7 billion on Tuesday, according to data compiled by Bloomberg. That compares to $28.2 billion on March 19, just days before the central bank said it would purchase investment-grade corporate bonds and certain ETFs that tracked them. The Fed’s move spurred a rally in high-grade bond markets, where investors were shedding their holdings in an effort to raise cash amid dire economic data. The central bank’s pledge combined with the asset class’s strong fundamentals makes investment-grade bonds look appealing, according to Columbia Threadneedle’s Ed Al-Hussainy.
Investor Ricky Sandler Pushes for Herd Immunity Approach to Coronavirus after his Hedge Fund Loses Billions
Brief: A hedge fund chief who had a bullish view of the stock market when social distancing restrictions began is now supporting the idea of herd immunity to coronavirus as states begin to reopen. Ricky Sandler, founder and CEO of Eminence Capital, recently told friends in a letter obtained by CNBC that he believes there should be a widespread attempt at protecting the vulnerable while large portions of the population develop herd immunity. Sandler, who lost billions on his stock market positions nearly two months ago, writes: “With proper coordination, I can envision Artists hosting virus relief concerts where young and healthy people go and hopefully get the virus and then the antibodies which allow them to donate blood to be used as a treatment or a prophylactic.” He went on to say that this proposal, which he calls “Plan B,” also would include “citizens that are comfortable go back to life as we know it with no restrictions.
JPMorgan to use Common Desks to Make Offices Easier to Clean after Pandemic
Brief: When JPMorgan Chase & Co (JPM.N) staff return to offices in regions slowly re-opening from the coronavirus lockdown, some may be required to sit at common desks, or “hot desks,” a temporary seating arrangement that management hopes will make it easier to clean, according to a memo seen by Reuters. The memo, sent on Wednesday to staff in Europe, the Middle East and Africa, said the bank has no timeline for returning staff to offices, but that it is working on a plan that will limit the number of staff in buildings to about 50% at any one time. A JPMorgan spokesman verified the contents of the memo. That puts JPMorgan's plans in line with Goldman Sachs and other global banks, which are working out plans to return staff to offices while avoiding the kind of close social contact that could lead to a resurgence in the novel coronavirus.
Did Hedge Funds Score on Masks and Sanitizer? Not so Much
Brief: What would seem like a sure win for elite investors - early bets on companies racing to make face masks, hand sanitizer and other coronavirus-related protective products - turned out to be a relatively unpopular strategy and one with surprisingly mixed results. Few hedge funds increased their holdings over the first quarter in companies associated with so-called personal protective equipment (PPE) such as 3M Co. (MMM.N), Kimberly-Clark Corp (KMB.N) and Honeywell International Inc (HON.N), according to a Reuters review of regulatory filings compiled by research firm Symmetric.io showing stock positions as of March 31. Hedge funds, on a net basis, sold off more than $760 million in those three stocks over the first quarter, according to Symmetric.io data, bringing the number of funds that own them down to 225 from 230.
Hedge Fund Redemptions Skyrocket in March as Investors Pull USD85bn Amid Covid-19 Pandemic Fears, New Data Shows
Brief: Investors pulled more than USD85 billion out of hedge funds during March – some 2.7 per cent of total industry assets globally – amid growing fears over the economic impact of the coronavirus pandemic, new data from BarclayHedge shows. Investor redemptions skyrocketed from USD8.1 billion in February to USD85.6 billion the following month, with hedge funds in continental Europe the hardest hit, according to BarclayHedge’s Barclay Fund Flow Indicator. Continental European hedge fund managers suffered outflows of USD38.3 billion, while across the Atlantic US hedge funds recorded USD31.6 billion in redemptions. Funds in the UK meanwhile lost USD24.7 billion in redemptions. The withdrawals piled on further agony in what was a miserable Q1 for the hedge fund industry, with hedge fund strategies of all stripes suffering steep falls in performance during the market maelstrom.
Lighthaven Capital to Donate 25 per cent of Performance fees to Fund Covid-19 Research
Brief: Traditional long/short fund Lighthaven Capital has committed to help in the fight against coronavirus by donating 25 per cent of its performance fees to fund research into Covid-19. Here, Founder and CIO Eric Cheung explains how a forward-thinking outlook is key to the firm’s investment philosophy… Back in 2018, the warning signs that the US stock market was getting toppish were picked up on by Eric Chung, CIO and founder of San Francisco-based Lighthaven Capital Management, a traditional equity long/short fund. At the time, Chung noticed that the Shiller P/E ration of the S&P 500 was as high as it had ever been, other than during the ‘Dot Com’ boom. “That gave us some pause and we readied ourselves in the event there was some catalyst for a downturn. One such catalyst was the US China trade war. We hedged significantly in 2018 which helped us when the market fell in Q4; we ended the year up over 26 per cent,” says Chung.
