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Our briefing for Wednesday May 26, 2021:
May 26, 2021 3:36:21 PM
- In the United States, President Joe Biden is tasking his intelligence community team to “redouble their efforts” in assessing the origins of COVID-19 and report back with their findings within 90 days. In a statement released on Wednesday, President Biden said the following: “The United States will also keep working with like-minded partners around the world to press China to participate in a full, transparent, evidence-based international investigation and to provide access to all relevant data and evidence.” The president also noted he asked National Security Adviser Jake Sullivan in March to prepare a report on their most up-to-date analysis on the origins of COVID-19 and whether or not it emerged from human contact with an infected animal or from a laboratory accident.
- In Canada, a recent Angus Reid poll suggests Canadians are on board with Prime Minister Justin Trudeau’s handling of the border closure with the United States. The poll results released Wednesday noted nearly half of Canadians (48%) don’t want the land border with the United States to reopen until at least September and when it does, more than three quarters would support a vaccine passport. Canada’s land border has been closed for non-essential travel to their southern neighbours for more than a year now and Prime Minister Trudeau is facing increasing calls from business groups and the main opposition – the Conservative Party – to release a concrete reopening plan.
- Former United Kingdom senior official Dominic Cummings gave a damning report of the government’s handling of the coronavirus pandemic. Cummings made the comments to the health and science select committees that are holding a joint inquiry into the handling of the pandemic and what lessons can be learned. Cummings alleged Prime Minister Boris Johnson didn’t take the coronavirus serious enough at first jump, treating it is as a “scare story”. Health Secretary Matt Hancock should have been fired 15 to 20 times, including lying on multiple occasions and noted one aide’s colourful comments describing the situation the country was in when realizing there was no real plan to deal with the pandemic. Those still in the government were quick to come out against the maverick former aide, calling Cummings appearance at the joint committee a “sideshow” and suggested he “has his own agenda”.
- France has decided to move ahead with extra restrictions for passengers coming from the UK to defend against the coronavirus variant first discovered in India. France will request mandatory isolation for all passengers coming across the Channel, a government spokesperson said after a cabinet meeting. At the moment, people from the UK arriving in France don’t need to justify the reason for their trip but must show a negative COVID test and commit to self-isolate for a week, even if they had been vaccinated. Under the new proposed rules, such travelers quarantine would be extended to 10 days and subject to controls at hotels or homes, and fines. Not surprisingly, UK officials aren’t happy with France’s decision calling the move a knee-jerk reaction to headlines in the newspapers.
- In Italy, whistleblower protection groups urged the World Health Organization (WHO) on Wednesday to launch an independent review into the case of an Italian researcher who reported being pressured to falsify data into a WHO report about the country’s coronavirus response. Dr. Francesco Zambon said he was pressured by then WHO assistant-general director, Dr. Ranieri Guerra, to falsify data about Italy’s preparedness going into the pandemic in a report he and other researchers were writing to help other countries prepare for COVID-19 as it swept around the world last year.
- In Australia, the next 24 hours are considered critical to see if Melbourne will have to enter a hard coronavirus lockdown. The number of new cases in the cluster reached 15 and exposure sites passed 70, sparking an emergency cabinet meeting on Wednesday. According to The Age and the Sydney Morning Herald, two Victorian state government sources said a decision on additional restrictions would rest on whether any new cases indicated rapid spread or uncontrolled community transmission.
Covid-19 – Due Diligence And Asset Management
Hedge Funds Surpass $4 Trillion in Assets
Brief : Hedge fund assets under management reached an all-time high of $4.146 trillion at the end of the first quarter of 2021, according to a Preqin report expected to be published Wednesday. Commodity trading advisors, which saw the biggest net redemptions to in the first half of 2020, saw significant improvement in the first quarter of 2021. In fact, CTAs experienced the highest quarterly net inflows of $5.8 billion at the start of 2021. So-called niche strategies followed closely behind, ending the quarter with $5.75 billion of inflows. “We see a bit of a shift towards the top level strategies that didn’t receive the attention in the pre-Covid-19 environment, because risk wasn’t a major factor,” said Sam Monfared, Preqin’s hedge fund expert and author of the report. “It seems like allocators are paying more attention to risk management and putting money into buckets that are there to protect capital.” Event-driven strategies — which experienced the second-most redemptions in the first half of 2020 — also saw improvements in flows in the first quarter. However, the category still ended the three-month period with outflows of $3.9 billion. Macro-strategies experienced a similar trajectory, ending the quarter with outflows of $2.3 billion. Fifty-six percent of marco-strategy funds experienced outflows, the worst performance among all hedge fund strategy categories.
Private Equity Targets U.K. Firms at Fastest Pace Since 2008 Crisis
Brief: Private equity firms are snapping up U.K. companies at a rate not seen since before the 2008 financial crisis. Buyout firms have spent $18.3 billion on takeovers of publicly-traded British targets this year, according to data compiled by Bloomberg. At this rate of investment, they will surpass the $27.5 billion of such transactions struck in 2019, which was a post-crisis high, the data show. The tally has been fueled by a surge of take-privates in May, the latest of which came Wednesday when Carlyle Group Inc. said it would buy drugmaker Vectura Group Plc for about 958 million pounds ($1.4 billion) in cash. Already this month, KKR & Co. had agreed to buy infrastructure firm John Laing Group Plc for about 2 billion pounds and Blackstone Group Inc. confirmed a 1.2 billion-pound offer for St. Modwen Properties Plc. Clayton, Dubilier & Rice also struck a deal for UDG Healthcare Plc at 2.6 billion pounds. These deals all came after a brief lull in U.K. take-privates in April. Private equity firms remain flush with record amounts of unspent investor money and continue to come to market to raise new funds. Buyout funds are offering shareholders of their U.K. targets an average 33.2% premium this year, the Bloomberg-compiled data show. That’s the third-highest level of the last 10 years.
Global Dividends Show Signs of Revival in the First Quarter as Economic Growth Accelerates
Brief: There are clear signs of a forthcoming revival in global dividends following the first quarter of 2021, according to the latest Janus Henderson Global Dividend Index. Compared against pre-pandemic Q1 2020 levels, payouts were only 2.9 per cent lower year-on-year at USD275.8 billion. On an underlying basis, dividends were just 1.7 per cent lower than the same period last year, a far more modest decline than in any of the preceding three quarters, all of which saw double-digit falls. Janus Henderson’s index of dividends ended the quarter at 171.3, its lowest level since 2017, but growth is now likely. For the full year 2021, the stronger first quarter along with a better outlook for the rest of the year have enabled Janus Henderson to upgrade its expectations for global dividends. The new central-case forecast is USD1.36 trillion, up 8.4 per cent year-on-year on a headline basis, equivalent to an underlying rise of 7.3 per cent. This compares to January’s best-case forecast of USD1.32 trillion. Over the four pandemic quarters to date, companies cut dividends worth USD247 billion, equivalent to a 14 per cent year-on-year reduction, wiping out almost four years’ worth of growth.
Brown Rips Bank CEOs for Putting Profits Before Helping Workers
Brief: Senate Banking Committee Chairman Sherrod Brown ripped Wall Street at a high-profile hearing featuring the top executives at the six largest U.S. banks, saying it’s “past time” for the industry to step up and help struggling workers. Brown, a Ohio Democrat, opened the proceedings Wednesday with a blistering attack on how banks operate, arguing that their business model is “built on short-term profits at the expense of long-term growth for everyone.” He challenged the chief executive officers to “be as good to the American people as the nation has been to you,” noting that taxpayers spent billions to rescue banks during the 2008 financial crisis. When employees get sick or lose their jobs, they “don’t get a taxpayer bailout.” Brown said. “And they all remember that Wall Street did.” The remarks set the tone for what’s expected to be hours of tough questions over issues ranging from workforce diversity to minority lending and executive pay. The hearing is the first time the CEOs have been called before the panel -- and, much to the chagrin of some in the industry, it may also not be the last. Brown’s title for the event: ”Annual Oversight of Wall Street Firms.” Among the CEOS testifying is Citigroup Inc.’s Jane Fraser, the first women to lead one of the U.S.’s biggest banks. Appearing with her are JPMorgan Chase & Co.’s Jamie Dimon, Goldman Sachs Group Inc.’s David Solomon, Bank of America Corp.’s Brian Moynihan, Morgan Stanley’s James Gorman and Wells Fargo & Co.’s Charles Scharf.
Workers Return to Weirder Offices with Moveable Walls and Touchless Elevators
Brief: Masked, desk-bound and unable to recognize their colleagues in an elevator, people are starting to return to offices in cities around the world where the pandemic is receding. Many will find their offices transformed, too. In the challenge to make offices both Covid-safe and attractive places to work, firms have been experimenting with working arrangements and space while employees toiled at home. Some gave up floor space to adjust to less rigid schedules, others introduced movable walls to create flexible areas. Many installed safety innovations such as touchless lifts and worked to improve air quality. Lockdowns have provided a “fantastic opportunity to create and recreate a new world for each of us, which may, for each company, be slightly different,” said Neil McLocklin, a Knight Frank LLP partner. Employees of Arcadis NV, a design and engineering consultancy, will be able to choose one of 20 different types of workspace via an app when they move into new offices in the City of London next month. The company’s Building Intelligence app, developed during the pandemic, provides options for meeting spaces, focused work and collaboration, as well as social and wellbeing areas such as a winter garden.
U.S. Labor Market Needs 18 More Months to Recover, Fitch says
Brief: The U.S. labor market will take about a year and a half to return to full steam after the economic blow from the Covid-19 pandemic, according to Fitch Ratings. Federal stimulus and a gradual reopening of service industries that were hit hardest will help boost demand for workers, Fitch said in a report released Wednesday. Still, analysts led by Chief Economist Brian Coulton don’t expect unemployment levels to reach their natural rate, about 4.3% in Fitch’s view, until the fourth quarter of 2022. Doing so would require the creation of about 7 million jobs. The massive disruption last year will cause some “scarring” because some older workers were permanently discouraged from working, dampening the labor supply. Even so, Fitch sees persistent supply and demand imbalances in the months ahead, limiting upward pressure on wages. “Many office workers in large cities in New York and California successfully worked remotely during the pandemic,” Olu Sonola, a Fitch senior director, said in a statement. “The likelihood that many will continue remote work, in some form, may also prove to be a drag on the pace of labor market recovery in New York and California.”
