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Our briefing for Friday May 29, 2020:
May 29, 2020 3:23:38 PM
- In the United States, a new study shows more than two million New Yorkers had been infected with COVID-19 by the end of March. State data shows only 189,000 cases two months ago, which leaves a massive 1.8 million gap. The new study conducted by the University at Albany notes there are several reasons for the gap including people’s symptoms ranging from mild to none at all, and therefore they never sought medical attention. Others might have wanted to get tested, but couldn’t find a doctor to test them due to the shortage at the time of the pandemic. New York state and New York City in particular became the epicentre of the coronavirus epidemic in the United States.
- In Canada, the province of New Brunswick has seen a cluster of cases in a zoned region after easing their coronavirus restrictions. The issue isn’t so much the cluster, it’s who was responsible for the initial cause. A doctor who travelled into Quebec, came back without mandatorily isolating for two weeks, and went back to work in a local area hospital may have exposed up to 150 people (initial tracking/tracing estimate – the official number is likely much more). The doctor has been suspended and COVID-19 testing has been made available to anyone in the region of 25,000 people.
- The United Kingdom has extended its £6.8 billion stimulus package to counter the mass unemployment rate in the country until the end of October. Companies will start contributing to the government’s furloughed workers scheme starting in August, covering five per cent of the costs. The number goes up to 10 per cent in September and 20 per cent in October. According to the independent Office for Budget Responsibility, unemployment in the UK could rise by 2 million due to the coronavirus.
- As of June 15th, Greece will open its borders to 29 countries. Notable absences off the initial list of countries are people from the United States, UK, France, Spain and Italy. Chinese, German, Israeli and Australian tourists will be allowed to fly direct to Athens and the northern city of Thessaloniki. The list will be expanded on July 1st, according to the country’s tourism ministry.
- Sweden’s handling of the coronavirus epidemic has left them on the outside looking in to bordering countries as they look to reopen. Norway and Denmark have agreed to each other’s tourists to visit the country, but excluded Sweden whose death rate per capita is 10 times higher than Norway and four times higher than Denmark. Finland too haven’t opened their borders to Sweden, instead bubbling up with other Baltic countries such as Estonia, Latvia and Lithuania.
- Moscow health authorities have revised the city’s death toll for April with now more than double the amount of people dying from the coronavirus. The official number of deaths last month is 1,561, up from 636. Russia’s official number of COVID-19 deaths has been relatively low compared to other countries with similar numbers, leading many to believe the official counting methods have been misleading on purpose. In the report, Moscow’s health department noted new counting guidelines, which included even the most debatable cases in its overall figures.
- Brazil had a reported 26,417 cases of the coronavirus on Thursday, a new daily record. The nationwide total was closing in on 440,000 cases as Thursday marked the third day in a row Brazil recorded more than 1,000 deaths in a day.
Covid-19 – Due Diligence And Asset Management
Morgan Stanley is Planning to Bring Traders Back to New York Headquarters Next Month, Sources Say
Brief: Personnel to its New York headquarters in mid to late June, according to people with knowledge of the situation. The firm expects that, at least at first, only a small number of traders and workers in other departments will make use of the option, said the people, who declined to be identified speaking about the bank’s internal goals. Morgan Stanley’s plans make it one of the first Wall Street firms to bring more employees back to the trading floor after months of working from home. Rival Goldman Sachs has also said it would bring some trading personnel back to offices in the next several weeks, and together the firms will provide an early test of whether the financial capital of the world can safely reopen amid the coronavirus pandemic. Morgan Stanley managers have been plotting for weeks on how to bring employees back to its Times Square headquarters, helped in part by what they’ve learned by reopening their Asia offices, according to the people.
Alan Howard’s Hedge Fund Soars 100% in Virus-Fueled Chaos
Brief: Billionaire Alan Howard has doubled his investors’ money in the coronavirus crisis. The macro trader has returned about 100% this year in the hedge fund that he personally runs, according to people with knowledge of the matter. Most of the gain was in March when the pandemic sent the global markets into a tailspin, the people said, asking not to be identified because the information is private. A spokesman for Jersey-based Brevan Howard Asset Management declined to comment. Howard’s return marks one of the most profitable money-making phases of his investing career and is the highest achieved by a major macro hedge fund this year. The no-nonsense, fast-talking trader is leading his firm’s dramatic turnaround after years of mediocre returns and an exodus of investors. Howard’s AH Master Fund was started in 2017 to make riskier bets in order to achieve high returns. It has a handful of external investors, money from the firm’s flagship hedge fund and Howard’s own money. Every detail of the fund is kept top secret by the firm, according to people familiar with the company.
Citi Breaks with Rivals on Whether Work From Home is Permanent
Brief: Citigroup Inc. plans to bring its workers back to the office when the Covid-19 pandemic ends, breaking with a raft of competitors planning to make remote operations permanent for many staff. “Our goal is to get our employees back,” Chief Executive Officer Mike Corbat said Friday at a virtual investor conference. Working remotely has definite advantages, Corbat said, including giving him the ability to meet with clients and employees from around the world all in the same week. But he said the firm doesn’t plan to leave employees at home permanently. The pandemic has forced companies to send thousands of employees to their home offices as a way to slow the spread of the deadly virus. For some workers, including those at Citigroup competitors Bank of New York Mellon Corp. and Synchrony Financial, the changes may be permanent, officials there have said. Citigroup, with roughly 200,000 employees around the world, has already begun bringing staff back to some of its offices in Asia, with the Hong Kong office at 50% capacity and Taiwan at 75%, Corbat said.
Poorly-Timed Healthcare Buyouts Bruise KKR and Blackstone
Brief: Two big health-care buyouts are shaping up to be among the worst-performing private-equity investments in recent years. The coronavirus pandemic is only the latest reason why. Physician-staffing firms Envision Healthcare Corp. and TeamHealth Holdings Inc., whose emergency-room workers are ubiquitous throughout the country, were purchased by KKR & Co. and Blackstone Group Inc. in 2018 and 2017 for roughly $6bn and $3bn, respectively. The private-equity firms bought the companies, which contract with hospitals to provide them with an array of medical professionals, with plans to boost revenue and accelerate growth through acquisitions. As is typical in leveraged buyouts, they funded the deals with ample debt, which would accelerate their returns if plans worked out. But things didn’t go according to plans. Instead, the companies have faced a litany of problems, including bruising contract battles with insurance company UnitedHealth Group Inc. and a costly lobbying fight in Washington over legislation to curb what are known as surprise medical bills, which arise when patients are treated at hospitals in their insurance networks by out-of-network doctors.
Private Equity Requests for Flexibility may Backfire During Pandemic
Brief: The unprecedented coronavirus crisis may have become a headache for private equity sponsors that have pushed for loose lending terms to finance leveraged buyouts as they saddled their portfolio companies with debt. At the heart of the matter is a provision in credit agreements that allows additional time to deliver audited financial reports. The language may allow businesses to delay reporting a potential covenant breach if one arose. Now, during the global health crisis, the added flexibility is forcing auditors to take a harder look at companies’ financial well-being. Most credit agreements require the delivery of ‘clean’ audited year-end financial statements certified by an independent accountant without doubts regarding a company’s ability to continue operations. According to Moody’s Investors Service, the failure to deliver financial statements that meet this requirement may constitute an event of default.
The Dirty Secret of Asset Management: It’s Doing… Okay?
Brief: Asset managers that run traditional stock and bond funds suffered far less than many investors in the first quarter. The median revenue at traditional publicly traded asset managers declined 6.7 percent in the first quarter of 2020, according to an analysis by Casey Quirk, the asset management strategy consultant that is part of Deloitte. The Standard & Poor’s 500 stock index fell almost 20 percent in the first quarter as economies around the world shut down in response to the coronavirus. Amid the shutdown, asset managers shelled out less to keep their businesses going. Operating expenses fell 3.9 percent, according to Casey Quirk, which analyzed 19 firms with approximately $16 trillion assets under management. Investors also stayed put. Net flows declined less than 1 percent, with retail investors representing most of the outflows, according to the consultant. Operating margins declined 1.9 percent for the median firm. With markets rising during 2019 and into early 2020, asset managers had a positive quarter when compared with the year-earlier period.
