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Our briefing for Wednesday September 2, 2020:
Sep 2, 2020 3:15:19 PM
- In the United States, the Trump administration’s “America First” slogan seems to be more than just a political catchphrase. The American government announced they will not join a global effort to develop, manufacture and equitably distribute a coronavirus vaccine. Their reason: the World Health Organization (WHO) is involved. The WHO is part of the coalition which has more than 170 countries in talks to participate in the Covid-19 Vaccines Global Access (Covax) Facility. The White House said in a statement: “The United States will continue to engage our international partners to ensure we defeat the virus, but we will not be constrained by multilateral organizations influenced by the corrupt World Health Organization and China.”
- In Canada, Quebec’s premier tossed out the idea of re-imposing lockdown measures if citizens don’t start obeying the public health rules more closely. Premier Francois Legault issued the warning earlier in the week as the number of new cases have been rising for two weeks in the province. The uptick is concerning as the weather starts to get a little cooler, moving more people indoors and children returning to school. The premier pointed to the resumption of sports, the reopening of bars and indoor private gatherings for the recent spike. Elsewhere in the country, Ontario has reported 133 new COVID-19 cases on Wednesday, making it now a week-long stretch for new daily case counts in the triple digits. However, the province’s health minister pointed out the majority of cases are concentrated in four densely populated regions. Twenty-one of the 34 health regions in Ontario have reported no new infections at all on Wednesday.
- In the United Kingdom, the media are calling out Prime Minister Boris Johnson on his claims that “huge numbers” of people have returned to work in the office. In pre-recorded comments, Prime Minister Johnson told his weekly cabinet meeting, “people are going back to the office in huge numbers across our country – and quite right, too.” However, figures from the Transport of London note ridership is down 72% compared to the same time last year. Downing Street officials noted they have no numbers to back up the Prime Minister’s claims. The government last month urged people to get back into the office, but many civil servants and private sector employees continue to work from home.
- The European Union and its Centre for Disease Prevention and Control (ECDC) is urging its bloc members not to reduce the 14-day quarantine for COVID-19. The ECDC is citing data that new cases across Europe are at 46 cases per 100,000 people, which almost reflect the numbers seen in March – the beginning of the peak phase of the pandemic. EU nations such as Germany, Netherlands and Norway were already making or have made plans to shorten their quarantine length.
- Media is citing sources close to the matter that Japan’s government is considering offering free COVID-19 vaccinations to all residents. The sources say the government wants to secure vaccines for all of its citizens by the first half of 2021 and is considering prioritizing medical workers, the elderly and those who have underlying illnesses. Elsewhere in the country, the ruling Liberal Democratic Party is pushing ahead and have decided that September 14th will be the vote for a new party leader after Prime Minister Shinzo Abe announced last week he would step down due to health reasons.
- Issuing its first guidance on treating COVID-19, the World Health Organization (WHO) has signalled two anti-inflammatory steroids that significantly reduced the rate of death in patients requiring oxygen support. A WHO-led report reinforced conclusions of an Oxford University study earlier this summer that the drug dexamethasone cut mortality rates in severe COVID-19 patients. The WHO-led analysis also found the everyday steroid hydrocortisone was equally successful. To date, these are the only treatments with a proven effect on coronavirus death rates and the health regulatory body doesn’t recommend using steroids in non-severe coronavirus patients, a group that the drugs might cause harm.
Covid-19 – Due Diligence And Asset Management
German Finance Watchdog Says Worst of Coronavirus Crisis to Come
Brief: Germany’s financial regulator expects the worst of the coronavirus crisis is still to come, although there was no immediate threat to financial stability from the pandemic. But as many countries in Europe and beyond see rising coronavirus infection rates and governments grapple with how to respond, BaFin president Felix Hufeld said he was concerned about the weakest 20% or 30% of institutions he monitors. We will not get out of this thing painlessly. That much is for sure. The hard part is still to come,” Hufeld said on Wednesday at a banking conference at which he and other panelists were separated on stage by plastic screens. Earlier, Deutsche Bank (DBKGn.DE) Chief Executive Christian Sewing forecast that the economy would not return to normal this year or next, and that many sectors will be running at 70%-90% capacity, with “serious consequences”. “Many companies will have to adjust to this and manage to be profitable with longer-term lower revenues,” Sewing said.
Pensions Need a ‘Safety Valve’, Says JPMorgan
Brief: Pensions entered the Covid-19 pandemic significantly exposed to corporate credit risk, relying on a traditional investment strategy that may be heading for failure, according to JPMorgan Chase & Co.’s asset management group. They’ve been hedging the volatility of their pension liabilities by taking on “a very concentrated exposure to corporate credit,” Jared Gross, the head of institutional portfolio strategy at J.P. Morgan Asset Management, said in a phone interview. Largely holding corporate bonds at risk of being downgraded to junk in the downturn, plus Treasuries with historically low yields, won’t work well for ensuring workers receive the pension benefits they’re owed, according to Gross. “If a classic fixed-income portfolio is yielding 2 percent, that’s not going to get the job done,” he said. “You have a concentrated exposure in investment-grade corporate credit, which is both relatively low-yielding today and likely to be exposed to higher than normal levels of credit volatility.”
Australia’s Wealth Fund Posts First Annual Loss Since Global Financial Crisis
Brief: Australia’s sovereign wealth fund has posted its first annual loss since the global financial crisis, and is holding more cash in preparation for further market volatility. The Future Fund lost 0.9% in the 12 months ended June 30, the first annual decline since 2009, it said in a statement Wednesday. It’s cash allocation increased to the highest in almost three years in preparation for "what will be a challenging and volatile environment in the future, ” Chairman Peter Costello said. "The factors that have fueled strong performance in the past may not be there any longer, ” Costello said in the statement. "We will need to be ever more strategic in how we pursue long-term returns in the future.” The Future Fund echoed Norway’s sovereign wealth fund, which is expecting more volatility given the coronavirus pandemic isn’t under control. The world’s biggest wealth fund lost 3.5% in the first half of 2020 as the rebound in stock markets wasn’t enough to erase the record decline earlier this year. The Future Fund’s cash holdings rose to 17% of the portfolio in June, the most since the third quarter of 2017 as it reduced exposure to private equity firms and sold its stake in Gatwick Airport. It made bets in "new infrastructure” such as fiber and data centers, Chief Executive Raphael Arndt said.
U.S. Economy Needs Over $1 Trillion in Fresh Coronavirus Stimulus, says World’s Biggest Hedge Fund
Brief: The co-CIO of the world’s largest hedge fund told CNBC on Tuesday that the U.S. economy continues to need significant fiscal support in order to sustain its recovery from the coronavirus-induced devastation. Greg Jensen of Bridgewater Associates said the firm estimates that the price tag for another coronavirus relief bill is between $1.3 trillion and $1.7 trillion in order for the U.S. economy to continue “in the way that it’s been going.” “And it depends what it’s used for. ... The policy that gets directly spent in the economy is much more effective per dollar than the dollar that’s preventing more bad things from happening,” Jensen said in a “Squawk on the Street” interview. “The money for states is going to prevent negatives. The stimulus checks will be direct positives.” Jensen’s comments come as Republicans and Democrats in Washington continue to squabble over the size and scope of another piece of Covid-19 stimulus legislation while millions of Americans remain out of work and businesses grapple with continued disruption.
Can Steve Cohen Fix America’s Health Care Problem?
Brief: Steve Cohen’s Point72 Ventures is getting into the health care game. The venture firm announced Tuesday that it has created a new investment team focused specifically on health care. The firm hired Scott Barclay, previously a partner at Data Collective Venture Capital, to lead the group. Hedge fund firms like Deerfield Management and Renaissance Capital have been raking in returns after investing in health care companies, Institutional Investor has previously reported. There are major profits to be made in the health care industry, particularly during the pandemic, but Point72 Ventures is positioning this launch as an altruistic one. “The current health care system is broken, particularly in the United States,” said Matthew Granade, managing partner at Point72 Ventures, in a statement. “We believe that these problems will be solved by technical founders who are dedicated to reimagining how the health care system should function at scale.” According to a spokesperson for the company, Point72 Ventures plans to invest across the health care space, without specifically focusing on biotech or pharmaceuticals. Early on, the venture fund will focus on investing in better models of paying for care and improving health care access. Point72 Ventures will specifically look to invest in technology and data-driven products as solutions to these problems, the spokesperson said.
More Asset Owners Worldwide Turning to Alternatives
Brief: A broad survey of institutional investors found that 40% of the universe will increase their allocations to alternative investment strategies over the next three to five years, said CoreData Research in a report on its findings released Tuesday. The research firm surveyed 459 asset owners in North America, Europe and Asia in June and July and found that European investors have the largest appetite for alternatives with 46% of those surveyed responding that they intend to ramp up their commitments in this area. In contrast, 30% of Asia-based asset owners said they will increase their exposure to strategies including private equity, private credit and real estate over the three- to five-year period vs. 35% of North American institutional investors. "Our findings indicate that institutional investors have looked to weather the COVID-19 storm by seeking shelter in alternatives, which can enhance diversification and risk-adjusted returns," said Andrew Inwood, founder and principal of CoreData Research, in the report. Allocations to alternative investment strategies in institutional portfolios overall now average 26% of plan assets compared with 24% in 2019, CoreData's survey data showed.
