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Our briefing for Wednesday May 6, 2020:
May 6, 2020 4:26:59 PM
- United Kingdom Prime Minister Boris Johnson announced Wednesday the initial plans to ease the country out of its lockdown will start this coming Monday. The prime minister will make a televised address on Sunday with more details on what the first steps will look like. Johnson also announced his government’s new goal to conduct 200,000 tests a day by the end of May after meeting its goal of 100,000 tests at the end of last month.
- In the United States, the government coronavirus task force went from being phased out by the end of the month, to being continued “indefinitely” in the span of a 24-hour period. The confusion began on Tuesday when Vice President Mike Pence said they were phasing out the health-focused panel in favour of a group focused on reopening the economy. President Donald Trump then noted on Wednesday the task force would instead adopt a new focus on vaccines and is considering naming a person who will lead the way on treatment and vaccine efforts. CNN is reporting by this weekend, 43 states will be in some form of reopening.
- In Canada, British Columbia Premier John Horgan will be the latest province to outline their plans of what a new normal will look like as they ease some of their restrictions. The country has 62,000+ coronavirus cases, with 4,100+ deaths. British Columbia accounts for 2,232 of the known cases, along with 121 deaths.
- A Financial Times article is reporting German Chancellor Angela Merkel is having some issues having leaders of its 16 federal states moving in lockstep as they try to determine their next move. Merkel had a conference with its country’s regional leaders on Wednesday aimed at having a coordinated exit from the lockdown. An “emergency brake” was created, allowing restrictions to be reintroduced if the pandemic flares up again. However, some regional leaders have already decided to go it alone, opening restaurants and hotels this month without waiting instruction from Berlin.
- Spain’s parliament voted in favour of a two-week lockdown extension. The vote continues giving the government sweeping powers to rule by decree and set limitations on citizens mobility throughout the country if they choose to do so. This is the fourth two-week extension parliament has allowed. The country has started easing its lockdown restrictions and Prime Minister Pedro Sanchez argued the state of alert is a tool to be used right now as a shield against the pandemic.
Covid-19 – Due Diligence And Asset Management
BlackRock’s Fink Delivers Grim Outlook With Tax Hikes for Corporate America
Brief: BlackRock Inc. Chief Executive Officer Larry Fink had a stark message for a private audience: As bad as things have been for corporate America in recent weeks, they’re likely to get worse. Mass bankruptcies, empty planes, cautious consumers and an increase in the corporate tax rate to as high as 29% were part of a vision Fink sketched out on a call this week. The message from the leader of the world’s biggest asset manager contrasts with the ebullient tones of a stock market that has snapped back from recent lows. Even among Wall Street luminaries, Fink speaks with particular clout. He has been advising President Donald Trump on how to navigate the effects of the coronavirus pandemic. And BlackRock is playing a key role in the Federal Reserve’s efforts to stabilize markets, helping the central bank buy billions of dollars in assets.
Bank Bosses Urge Regulatory Pass Through the Covid-19 Crisis
Brief: City grandee Lord Blackwell has called for leniency from the UK's regulators as financial services workers navigate the "great pressure" of the Covid-19 crisis. Lord Blackwell, the chairman of Lloyds Banking Group, said staff at the UK lender "are having to make many decisions under great pressure every day": "My... ask of regulators is to recognise that, under this pressure, some of our colleagues, while trying their hardest, may not get every detail of the compliance requirements right and to be tolerant of some errors so long as bank staff are genuinely trying to do the right thing," he said, during a session of the City Week Covid-19 Webinar series on May 6. His comments come as UK banks facecalls to speed up lending to businessesunder the UK government's various coronavirus business interruption schemes, introduced to help companies weather the coronavirus crisis.
Volatility Clobbered These Hedge Funds – and More Shocks Mean Some May go Under
Brief: The wild swings in market volatility has been a blessing for many hedge funds this year. But for others, it's been a curse. The Cboe Volatility index, the fear tracker known as the Vix, has more than halved in the six weeks since it hit an all-time high on 16 March. Long-volatility funds have reaped big rewards — the Cboe Eurekahedge Long Volatility Hedge Fund Index returned about 40% in the first three months of 2020. Yet systematic volatility-focused hedge funds, which theoretically should be profiting at times like these, have instead endured performance meltdowns. In March, 9 out of the 38 volatility and options funds ranked in Société Générale’s Nelson Report, published last week, posted declines. Losers include Chicago-based hedge fund Wolverine Asset Management. Named after the fictional co-leader of the X-Men superhero team in Marvel Comics, Wolverine has lately more resembled Dr. Doom. The firm's volatility-focused Wolverine Intrinsic Fund was down 13.7% in March and 12% in the first quarter, according to the Nelson Report.
Natixis Joins French Equities with $140 Million Hit
Brief: Natixis SA joined its French peers in taking a hit from equities trading as market turmoil and dividend cancellations following the outbreak of the coronavirus forced it to mark down assets. Equities trading revenue was more than erased by a 130 million-euro ($140 million) writedown when companies started to pull their dividends, contributing to a 204 million-euro net loss for the first quarter. Income from debt trading rose 46%, the bank said late Wednesday, beating peers BNP Paribas SA and Société Générale SA as well as the Wall Street average. The quarter ends a brief respite for Chief Executive Officer Francois Riahi, who had been trying to draw a line under a series of missteps since taking over in June 2018, including trading losses on Korean securities, a liquidity scare at its H2O Asset Management subsidiary and oversight problems. The bank put aside 193 million euros for credit losses, mainly to account for loans to oil and gas companies.
Fiera Capital Limits Redemptions on $1.1 Billion Credit Fund
Brief: One of Canada’s biggest money managers is freezing redemptions in a large debt fund and warning that some borrowers may miss interest payments. Fiera Capital Corp. has called investors to inform them it has gated its Diversified Lending Fund, which has about C$1.5 billion ($1.1 billion) under management, according to people familiar with the situation. The fund is managed by chief investment officer Francois Bourdon and two others. The fund invests in the residential and commercial construction sector through limited partnerships (LPs) with various partners that specialize in lending solutions. The fund also puts money into partnerships that offer private loans to companies and other types of loans.
Citadel Waiving Redemption Fees for Fund Clients Seeking Cash
Brief: Ken Griffin’s Citadel will allow investors to pull a total of $1 billion from its main hedge funds without incurring fees or penalties, a sign that clients are grappling with the economic fallout from the coronavirus pandemic. The move, an exception from the firm’s usual practice, is aimed at providing relief to those invested in Citadel’s flagship Wellington and Kensington funds, according to an investor letter seen by Bloomberg. Such clients are primarily institutions like pension funds. Citadel manages about $30 billion. “In the wake of the unprecedented conditions created by the Covid-19 pandemic, we recognize that our investors may have different capital needs, both in size and timing, than originally anticipated at the beginning of the year,” according to the Citadel letter dated Monday. “In response to these potential demands, we are offering $1 billion of additional liquidity to investors in our multi-strategy funds on June 30, 2020 without being subject to any redemption fees or other restrictions.”
