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.
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.
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.
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.
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.
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.”