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Our briefing for Wednesday September 16, 2020:
Sep 16, 2020 4:01:19 PM
- The United States Centers for Disease Control and Prevention (CDC) said the country should have enough COVID-19 doses for Americans to return to “regular life” by around this time next year. The statement came from Dr. Robert Redfield, Director of the CDC on Wednesday appearing in front of a Senate panel. Dr. Redfield also claimed he expects vaccinations to begin in November or December, which seemed to echo claims made by United States President Donald Trump in a town hall discussion on Tuesday telling undecided voters a vaccine should be ready in four weeks. The CDC director noted the first batches will be limited and made available to those most in need, such as healthcare workers.
- In Canada, multiple media sources are reporting the current agreement on the US-Canada border closure to non-essential travel will be extended into November. The current agreement is set to expire September 21st, but CTV News is citing sources the border will remain closed until it is felt that the COVID-19 pandemic is under control on both sides of the border. Elsewhere in the country, Ontario Premier Doug Ford will be pushing to rollback social gathering limits in high populated areas such as Toronto, Peel (Mississauga & Brampton) and Ottawa after 315 new cases were confirmed on Wednesday; most occurring in the regions mentioned. The current limit in the province on social gatherings is 50 people indoors and 100 outdoors.
- In the United Kingdom, Prime Minister Boris Johnson admitted on Wednesday what most Britons already know: the country does not have the capacity to cope with the current demand for COVID-19 testing. “Demand has massively accelerated in the last two weeks. We don’t have enough testing capacity right now. In an ideal world I would like to test absolutely everybody who wants a test,” said Johnson to a committee of members of Parliament. Prime Minster Johnson blamed the surge in demand for virus tests on people trying to prove they didn’t have the disease so they could return to normal life but would like Britons to follow the guidance in place that states people should only be seeking a test when they have symptoms.
- In Ireland, the government had a scare on Tuesday after Premier Micheal Martin and his entire cabinet were directed to restrict their movements for several hours after the health minister fell ill. The minister completed a COVID-19 test, which came back negative allowing the restrictions to be lifted late in the evening. The chaotic scene happened on the same day Martin and his government were setting out their plan to tackle the pandemic across Ireland as they see rising COVID-19 infections.
- Spain’s death total from COVID-19 has now moved past 30,000 – the most of any European country. Figures for hospitalizations and deaths are steadily rising in the country, but officials argue that detection rates are much higher and those infected are much younger than the initial first wave back in the spring. At its peak back in March and April, Spain was seeing close to 1,000 deaths per day. In the last 24 hours, there were 234 deaths and close to 12,000 active COVID-19 cases across the country.
- Brazil’s epidemiologists are concerned the beaches and bars of Rio de Janeiro are reopening too early as the country heads into its summer season. World renowned for its coastline, which always attracts large crowds, the country’s second largest city could experience a second wave just as its dismantling much of its emergency healthcare capacity. The epidemiologists are saying that Rio is basing their decision to ease restrictions on incorrect data, which seemed to point to a decline in deaths. However, the deaths aren’t declining; instead they are sitting at a high plateau and the numbers that the decisions were based on were due to a bureaucratic delay in notifications. If Rio were deemed to be a country, they would have the worst mortality rate in the world due to COVID-19.
Covid-19 – Due Diligence And Asset Management
When to Stop Working From Home? How About Never, Workers Say
Brief: U.S. workers who are being shepherded back to the office would rather continue doing their jobs from home, at least a few days a week. It’s not that they hate the idea of returning, but more that they’ve grown to really like the work-from-home life. It’s becoming the big topic of conversation across virtual workplaces, as companies try to get employees to leave their makeshift desks in bedrooms, kitchen counters, porches or backyards for the once-familiar surroundings of the good old office. A Wells Fargo/Gallup survey released Wednesday found 42% of 1,094 workers surveyed in August had a positive view of working remotely, versus 14% who viewed it negatively. Almost a third of the 1,200 U.S. office workers surveyed by consultancy PricewaterhouseCoopers in June said they’d prefer to never go back to the office, while 72% said they’d like to work away from the office at least two days a week. Until recently, for those lucky enough to still have a job and to be able to do it from home, the question of whether they wanted to return to the office was theoretical. Now the prospect’s real. JPMorgan Chase & Co. has told its most senior sales and trading staff that they need to be in the office by Sept. 21. (There are exceptions for those with health or childcare issues.) At other firms, workers are being encouraged rather than commanded to come back, and employees are debating whether that means they have a choice to opt out of returning. A June survey of 1,000 professionals by management consulting firm Korn Ferry asked a simple question: “What are you most looking forward to when you return to the office?” About half pointed to camaraderie with colleagues, though 20% said they looked forward to nothing at all.
London Firms Are Dumping Office Space as Workers Resist Return
Brief: London firms are dumping their unwanted office space as the pandemic forces tenants to review their real-estate needs. Excess space being offered for rent by companies in the capital has surged to the most in at least 15 years as businesses look to cut costs and shift more staff to long-term home working, according to research by real-estate data company CoStar Group Inc. More than 1 million square feet (92,900 square meters) has become available for sublet since June, the equivalent of two Gherkin skyscrapers. The trend is so far limited to London: the city’s second-hand space surged by 21% in the period, compared with just a 1% increase for the rest of the U.K…. Second-hand space poses a threat to developers building new offices, offering tenants seeking to move a cheaper alternative. While newly developed space that has yet to be leased in London remains relatively scarce, overall vacancy rates are increasing due to the buildings being offered up by companies that no longer need them. Banks including Credit Suisse Group AG, HSBC Holdings Plc and Nomura Holdings Inc. are among those companies currently trying to rent out excess space they no longer need, Bloomberg News reported.
Antares Raises Over $3 Billion for Latest Private Credit Fund
Brief: Middle-market lender Antares Capital has raised just over $3 billion for its latest credit fund, which will focus on providing financing to mainly mid-sized private equity-backed companies. The vehicle, which held its final close this week, raised cash from sovereign wealth funds, public and private pensions, asset managers, banks and insurance companies, according to head of asset management Vivek Mathew. The fund, which attracted institutional investors from the U.S., Canada, Asia and the Middle East, exceeded its $1.5 billion target, Mathew said… The vehicle’s close comes as fundraising in the $850 billion private credit universe rallied in the second quarter, buoyed in part by appetite for opportunistic and distressed strategies. Investors have also been lured by juicy yields in the rapidly growing market… Mid-sized companies and their private equity backers are likely to find the flexibility of private credit even more appealing amid the uncertainty caused by the Covid-19 pandemic, according to John Graham. “At the end of the day, there is a large, scalable opportunity set there,” he said.
Blackstone Warns of a ‘Lost Decade’ Where Stock Market Returns are ‘Anemic’
Brief: The coming years could be a “lost decade” for equity returns as companies struggle to grow their earnings, Blackstone’s Executive Vice Chairman, Tony James, told CNBC on Wednesday. James, who’s attending the virtual Singapore Summit, told CNBC’s “Squawk Box Asia” that stock prices may not rise further after becoming fully valued over a “five- to 10-year horizon.” “I think this could be a lost decade in terms of equity appreciation,” he said, referring to a term commonly used to describe a period in the 1990s when Japan experienced economic stagnation. He explained that current low interest rates may not dip further and may instead rise to more normal levels in the coming years.Higher interest rates, in many instances, tend to negatively affect corporate earnings and stock prices. High borrowing costs will eat into company profits and hurt share prices. In addition, companies will face “plenty of headwinds” that put pressure on earnings, he said. That include higher taxes, increase in operating costs, less efficient supply chains and “deglobalization” that will hurt productivity, explained James. “All of that will be economic headwinds for companies. So I think you can have disappointing long term earnings growth with multiples coming in a little bit, and I can see anemic equity returns over the next five to 10 years,” he added.
Singapore Family Offices Tackle Covid-19 Challenges
Brief: During times of disruption it can be expedient to be tactical and strategic. Crises can also provide a significant reminder on the need for good planning. And, family offices, unlike some other more cumbersome financial institutions, have the advantage of being dexterous and efficient, a key capability for investors in the turbulence of 2020. The Asset recently spoke with two Singapore-based family office groups – Golden Equator Wealth and Maitri Asset Management – about how they have managed their way through the Covid-19 pandemic, what they have learned, and which themes have emerged. Gary Tiernan, managing partner at Golden Equator Wealth, believes there is no doubt that well-run multi-family offices (MFOs) and single-family offices typically have clear decision-making processes and responsibilities that allow for quick decisions when required. “From an investment perspective, the short lines of decision-making responsibility made it easier to execute buying decisions in March when volatility was so large that slow action could have had a high opportunity cost,” Tiernan says. “The sense of responsibility for client family wealth sharpens the focus on doing the right things to steward and grow that wealth.”
Truth and Misconceptions Surrounding Private Equity, Dry Powder and Recovery
Brief: As the Coronavirus pandemic continues to cut through our lives, the urgency of robust public assistance for businesses remains a matter of vital economic importance. And yet, since the earliest days of the crisis, certain critics have taken exception to the role of private equity in the recovery. Much outrage has been directed at a perceived conflict between private investment firms who hold large quantities of dry powder (unused capital) and petitions to include their portfolio companies in public business stimulus packages such as the Paycheck Protection Program. Some critics might wonder why loans are given to those who don’t put their dry powder towards portfolio company support. But this stance not only over-simplifies and mischaracterises the role of dry powder, it is emblematic of much wider misconceptions about the significant contributions private equity makes both to portfolio companies and the economy as a whole. As governments around the globe consider additional stimulus spending in the face of COVID-19, it’s especially relevant to reconsider these misconceptions about the industry, recognise the value private equity provides during a downturn, and offer support instead of resistance. Regardless of what the critics think they know about private equity, the simple fact is that the industry supports 843,000 jobs and 4,300 businesses in the UK alone – and the US paints a similar picture. Negative attitudes about dry powder should not be permitted to overshadow such numbers.
