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Brief: Jeffrey Gundlach, CEO of DoubleLine, said Monday that the stock market could sell off again to retest the low in March as he believes investors are too optimistic about the economic recovery from thecoronavirus pandemic. “I’m certainly in the camp that we are not out of the woods. I think a retest of the low is very plausible,” Gundlach said on CNBC’s “Halftime Report.” “I think we’d take out the low.” “People don’t understand the magnitude of ... the social unease at least that’s going to happen when ... 26 million-plus people have lost their job,” Gundlach said. “We’ve lost every single job that we created since the bottom in 2009.” The so-called bond king revealed he just initiated a short position against the stock market.
Brief: The United States Oil Fund LP again roiled oil markets as it unexpectedly starting selling all of its holdings of the most active West Texas Intermediate futures contract, triggering a massive swing in the price relationship between the June and July contracts. The changes, detailed in a regulatory filing, are the latest in a series that have have wreaked havoc on crude prices. The fund said it’s moving its money to contracts spread between July 2020 and June 2021 due to new limits imposed upon it by regulators and its broker… The largest oil ETF has changed its investment policy five times in the last two weeks. It also warned investors its valuation may deviate significantly from the underlying oil price, in effect acknowledging that it’s momentarily less focused on the price of WTI crude.
Brief: The planned capital raising, via a discounted share sale, is the biggest by an Australian company since the virus outbreak, which has killed 83 people in the country and shut down large parts of the world’s 12th-biggest economy.The bank, Australia’s third-biggest, said it had decided to pay more than A$850 million in dividends, or about a third of what it paid last year, rather than scrapping it as it did not want investors who depended on the income to dump the stock.Its decision follows a regulatory directive to consider postponing shareholder payouts until the impact of the pandemic was better known.NAB, which brought forward its results by 10 days, is the first Australian bank to report earnings since the pandemic arrived in the country and so portends what could come from the rest of the sector.
Brief: Warn potential clients about screaming kids. Clean up your house. Don’t forget to shave. These are the rules for wooing clients to a new hedge fund while in a coronavirus lockdown. As if starting a hedge fund wasn’t tough already, this year it’s going to be even harder. At least 10 firms opened on April 1, with more slated for this year. Most will begin with substantially less money than their founders were expecting before the world came to a standstill, according to people involved in fundraising… For much of the past decade, raising money has been a slog. The industry faced ridicule for high fees and low returns, and clients were more likely to pull money than to add. Now startups also have to deal with much of the world under quarantine, and a global recession or worse, creating the least welcoming money-raising environment in years.
Brief: Scott Minerd, the chief investment officer of Guggenheim Investments, thinks it may take four years before the economy regains the level of activity it had before the coronavirus pandemic triggered a global crisis. “To think that the economy is going to reaccelerate in the third quarter in a V-shaped recovery to the level where gross domestic product (GDP) was prior to the pandemic is unrealistic,” he wrote in a note published on April 26. While governments are doing all they can to aid both businesses and individuals impacted by the virus shutdowns, Minerd said the help will likely be “insufficient, misdirected, and full of unintended consequences.” Many of the 26 million people who have applied for unemployment benefits over the past five weeks won’t be going back to work immediately even if the economy fully reopens, he added.
Brief: In recent months, global macro hedge funds, which profit from trading on big economic trends, have seemed terminally out of fashion. Long-term legends of the industry, such as Moore Capital’s Louis Bacon,called time on their careerslast year while global macro funds in general struggled to perform against a backdrop of perennially stable markets. Investors carried their concerns into 2020, yanking $22bn from global macro hedge funds in the first three months of this year, out of a total of $33bn pulled from the industry, according to data provider HFR. But times could be about to change. Volatility is back. And some asset managers who allocate money across different investment strategies say that global macro could be set for a return. Macro hedge funds are “very nimble and can weather periods of volatility”, said Karen Ward, chief market strategist for Europe, the Middle East and Africa at JPMorgan Asset Management.
Brief: Hedge funds aren’t eligible for a U.S. rescue loan program, the government made clear Friday, potentially quelling a barrage of outrage over the possibility that well-heeled traders might beat out struggling small businesses for emergency funding. The Small Business Administration, in consultation with the Treasury Department, determined that because hedge funds are primarily engaged in speculative investments, the firms shouldn’t be entitled to Paycheck Protection Program loans. The prohibition also applies to private equity firms, according to guidance posted on Treasury’s website. The Trump administration does not believe that Congress intended those types of businesses, which are generally ineligible for SBA loans under existing regulations, to qualify, according to the guidance. Concern that hedge funds might tap the PPP program amid the coronavirus crisis has triggered a backlash on Capitol Hill and around the country.
Brief: The New York Stock Exchange plans to reopen its iconic trading floor, which is shuttered due to coronavirus concerns, as soon as possible, but it has not yet set a date to do so, the NYSE and people familiar with the matter said on Friday. “The NYSE will reopen its trading floors when we can do so with reduced risk and without adding strain on local healthcare systems,” exchange spokesman Farrell Kramer said in a statement, without giving further details. The exchange operator also has an options trading floor in San Francisco that is closed due to the pandemic. The NYSE, which is owned by Intercontinental Exchange Inc (ICE.N), held a conference call with NYSE staff and the traders who work on the floor on Wednesday to discuss an eventual reopening, but did not set any dates, according to two people who were on the call.
Brief: Finance workers have had to adapt to hot-desking, “smart offices” and meeting pods. Next in line: much less office space. Some of the world’s biggest finance firms are looking at slashing the size and numbers of their swanky offices as the coronavirus crisis has forced firms to radically change their working practices, Financial News can reveal. Major employers in the finance sector - including investment banks, law firms and accountancy giants - are already planning for a post-pandemic world in which fewer staff will work in the office full-time. For investment banks, which have typically relied on their employees working long and unpredictable hours in the office, the switch to remote working has been particularly radical, but some changes could stick.
Brief: Tom Barrack said the U.S. property market is in “chaos” and still on the verge of collapse because the federal government and local authorities are allowing renters and homeowners to skip payments because of the coronavirus. “We haven’t had a crisis like this,” Barrack, chief executive officer of Colony Capital Inc., said in an interview Friday on Bloomberg Television. “We’ve never had one where we just have a government taking of revenue.” The stimulus bill passed by Congress last month included a provision allowing borrowers to defer payments for as long as a year without penalty on federally backed mortgages. At the same time, cities and states throughout the country have suspended evictions and foreclosures to help the tens of millions of Americans who’ve lost their jobs.
Brief: Sixth Street Partners is seeking more than $6 billion for an evergreen fund at the onset of what could become a prolonged period of market turmoil set off by the coronavirus pandemic, according to people with knowledge of the matter. The firm, founded by former Goldman Sachs Group Inc. partner Alan Waxman and nine others, began discussing its so-called adjacent opportunities vehicle with select investors in recent weeks, said the people, asking not to be identified because the talks are private. An upper limit for the fundraising hasn’t been set, one of them said. The $12 billion fund has been closed to new capital since 2017.
Brief: Franklin Templeton will wind up $4.1 billion of Indian debt funds after a liquidity crisis compelled the firm to freeze investor withdrawals in the South Asian nation. The asset manager’s surprise announcement underscores persistent stress in credit markets as the coronavirus pandemic wreaks havoc on the global economy. It marked the biggest-ever forced closure of Indian funds and fueled worries of a renewed wave of withdrawals from similar products. Indian corporate bonds slumped on the news, while banks and fund managers paced declines in the country’s stock market… The firm said it’s shutting down the Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.
Brief: Blackstone Group Inc. plans to raise one of the biggest funds to capitalize on the turmoil in debt markets. The investment firm is looking to raise $7 billion for its fourth GSO credit opportunities fund, according to people with knowledge of the matter. Blackstone’s new fund will aim to provide capital to performing companies, said the people, who asked not to be identified because the information isn’t public… GSO, Blackstone’s credit arm, which has about $129 billion of assets under management, closed its third-capital opportunities fund in 2016 at $6.5 billion. In the first quarter, the unit posted one of its worst-ever declines for its distressed strategies. The new fund targets companies in better financial condition.
Brief: BlackRock Inc. Chief Executive Officer Larry Fink said the work-from-home revolution will have lasting effects, including pushing down demand for commercial real estate. Fink said that after businesses were forced to run from mostly remote setups during the coronavirus crisis, many companies will choose not to bring all their workers back to the office even when it is safe to do so “I don’t think any company’s going to go back to 100% of the workforce in the office,” Fink said Thursday at a virtual event from Saudi Arabia’s Future Investment Initiative Institute. “That means less congestion in cities. It means, more importantly, less need for commercial real estate. So to me that’s one of the great outcomes of this.”
Brief: Private equity’s decade-long debt binge is coming back to haunt it when it comes to obtaining the U.S. government’s coronavirus aid. Already largely shut out of the popular small business rescue loan program, the industry is now realizing that it’s likely to be excluded from the Federal Reserve’s $600 billion lending initiative because it bars companies that have loaded up on borrowed money. The prohibition strikes at the heart of the buyout-shop business model, where firms saddle the companies they purchase with debt in order to mint bigger profits on their investments. Though the Fed’s “Main Street” lending facility for mid-size businesses doesn’t specifically preclude private equity-owned companies, executives say they’ve concluded that the tough terms will prevent many of their firms from qualifying. Some politicians and investors say that may not be a bad thing, especially because taxpayer dollars are on the line.
Brief: Europe domiciled long-term funds suffered record outflows throughout March – a month defined by Covid-19 caused market volatility. Net redemptions reached €246 billion – “a staggering number that dwarfs even the darkest month of the 2007-09 financial crisis”, said Morningstar, which published the data. The worst month of the previous financial crisis was October, when investors withdrew €108 billion from long-term funds. This time round, as the Covid-19 death toll continued to rise worldwide, bond funds shed an “unprecedented” €140 billion, whilst equities suffered redemptions of €56 billion.
Brief: AMP says coronavirus-fuelled market volatility has wiped about $20 billion from its beleaguered wealth portfolio, while its global investment fund has also copped a whack. The finance giant told the ASX on Thursday its Australian wealth funds under management declined 13.5 per cent to $116.3 billion in the three months to March 31, a drop of $18.2 billion from $134.5 billion at the end of 2019. The company's New Zealand wealth business lost $1.2 billion, or 9.8 per cent in total AUM. Total assets under management at fund manager AMP Capital fell 5.3 per cent to $192.4 billion, down $10.7 billion from $203.1 billion in the fourth quarter of FY19. AMP chief executive Francesco De Ferrari said his firm had witnessed some recovery since the end of the quarter but expected volatility across equities, commodities and fixed income to continue as the coronavirus crisis rolls on.
Brief: The hedge fund industry gets its name from the premise it can generate gains even when markets fall. That didn’t happen in Canada during the first quarter, one of the most volatile trading periods in history. Only five of 61 hedge funds, or about 8%, posted gains during the first three months of the year, according to Venator Capital Management Ltd., a Toronto-based investment firm that tracks the industry. The top performer was CC&L Market Neutral Fund, with a 9.8% gain; the worst was Lawrence Park Enhanced Preferred with a 38.5% loss. Canada’s stock market reached a record in February before tumbling in March amid the coronavirus pandemic and then rebounding again, with days featuring both the biggest drop and surge on record. Corporate bonds also plunged, while government yields hit new lows.
Brief: Shares of Expedia Group Inc (EXPE.O) rose 9% on Wednesday after a report that the online travel services company was in advanced talks to sell a stake to private-equity firms Silver Lake Partners and Apollo Global Management Inc (APO.N) for about $1 billion. The talks, which were reported here by the Wall Street Journal on Tuesday, come as companies across sectors look to shore up their finances in a bid to weather the raging coronavirus crisis. Expedia shares have fallen about 47% this year, taking a hard knock from the pandemic as lockdowns in many countries have decimated travel demand. “The biggest overhang on Expedia’s stock over the last month has been fears regarding its liquidity position,” Atlantic Equities analyst James Cordwell. “The news that it may be nearing a deal with Silver Lake and Apollo raises confidence that it will be able to make it through this current crisis relatively unscathed.”
Brief: Investors pulled a net $33 billion from hedge funds in the first quarter, the most in more than a decade. The total is about 1% of of industry capital, and the largest quarterly outflow since investors yanked about $42 billion in the second quarter of 2009, according to a report Wednesday from Hedge Fund Research Inc. In all of 2019, investors pulled $43.1 billion. Some of the industry’s largest names took a hit in last month’s market tumult, including funds run by Ray Dalio, Michael Hintze and Adam Levinson. The managers suffered losses as the coronavirus crisis brought much of the global economy to a standstill. Still, a slew of firms are welcoming fresh money, hoping to buy the market dip and capitalize on those investors that may be ready to open their wallets to take advantage of the market dislocations.
Brief: The private-equity firm Sycamore Partners is looking to back out of its deal to take over Victoria’s Secret fromL Brands, according to a lawsuit filed in a Delaware court on Wednesday. The deal for Victoria’s Secret to be taken private was reached in February, just weeks before thecoronavirus pandemicstarted hammering the U.S. economy and forced the closure of thousands of retailers’ stores. Sycamore said in the filing that L Brands’ decision to close its stores and skip rent payments in April violated the transaction. Sycamore is now seeking the court’s approval to break the deal, according to the filing. Representatives from Sycamore and L Brands were not immediately available to respond to CNBC’s requests for comment.
Brief: Top asset manager BlackRock Inc, which has vowed to put more focus on climate issues, said that companies might give a lower priority to sustainability reports as they struggle with the COVID-19 pandemic. In a stewardship document provided by a BlackRock (BLK.N) spokesman late on Tuesday, the firm suggested it would tolerate the change. BlackRock also took a neutral stance on the question of whether companies should continue to pay dividends or buy back shares, and said it expected companies to provide shareholders the chance for “meaningful participation” when they move annual meetings to cyberspace. The details marked some early specifics from the world’s largest asset manager about its expectations for companies dealing with the sudden economic shock stemming from the deadly respiratory virus.
Brief: Hedge fundinvestorAnthony Scaramuccion Tuesday refuted reports that Citibank has cut ties with his investment firm. “When they say ‘cut ties,’ the Wall Street Journal actually got that wrong. They issued a ‘sell’ on the fund,” the founder and managing partner of SkyBridge said. The Journal on Saturday published a reportthatCitigroup’s private bank decided to discontinue its relationship with SkyBridge after the company’s flagship fund suffered a loss of more than 20% in March. It cited a person familiar with the matter, who said Citigroup thinks the fund has “too much exposure to credit and mortgage-related securities.”
Brief: JPMorgan Chase & Co, the largest U.S. lender, said on Tuesday it was working on a plan to bring thousands of employees who have been working from home for more than five weeks back onsite in stages, according to an internal memo seen by Reuters. JPMorgan is the first big bank to announce steps to return to normal as debate grows over reopening the U.S. economy after the novel coronavirus shuttered businesses across the country and put a record 22 million people out of work. “Two considerations are paramount as we plan for this across the firm: We want to do it at the right time — which may differ by region, country and state — and in a manner that prioritizes your health and safety,” the bank’s Operating Committee said in the memo. Around 180,000 of JPMorgan’s more than 200,000 employees have been working from home, with around 25% of its bank branches closed, in an effort to protect employees from the virus, bank executives said last week.
Brief: The possible destruction of the U.S. economy must be weighed against the diminishing health risks from the coronavirus, real estate mogul Barry Sternlicht told CNBC on Tuesday. “I actually think we have to reopen the economy. We have to do it ZIP code by ZIP code,” said Sternlicht, whose $60 billion Starwood Capital Group has interests in luxury hotels and malls among its many other businesses. “We have to get going. The cost is too great. The government can’t carry a $23 trillion economy.” Sternlicht’s call to action comes as more states run by Republican governors are announcing plans to reopen parts of their economies as new daily virus cases in the U.S. continue to slow. Georgia’s timetable — one of the most aggressive in the nation — would allow gyms, hair salons, bowling alleys and tattoo parlors to reopen Friday. Elective medical procedures would also resume. By Monday, movie theaters and restaurants could start up again.
Brief: Dwindling assets under management have forced AMP Capital to close a global equities fund for wholesale investors on platforms. AMP Capital's wholesale global equity - growth fund for platform investors (Class M) was closed last Friday. The decision was taken by the fund's responsible entity, National Mutual Funds Management Limited. "A reduction in the fund's size over time combined with certain fixed costs associated with operating the fund will have the result of increasing management costs for investors, and may compromise the ability to efficiently manage the fund and deliver cost-effective returns in line with the funds' objectives," it said in a notice to investors. "Therefore, we believe it is in the best interests of the fund's investors to terminate the fund."
Brief: Institutional investors in Pennsylvania and Alaska are taking a dim view of hedge funds and other asset managers seeking to tap emergency U.S. government money designed for struggling small businesses. Pennsylvania’s Public School Employees’ Retirement System is monitoring its managers -- as well as potential new ones -- to see if they took advantage of the rescue program. The Alaska Permanent Fund Corp. said it would view any manager taking assistance “quite negatively.” Some funds have already applied, Bloomberg earlier reported. “It is ethically questionable and likely not in the best interest of the industry as a whole, long term,” said Marcus Frampton, chief investment officer at Alaska’s $60 billion sovereign wealth fund. “Alternatives managers, from a fiduciary standpoint, should be exploring federal assistance for portfolio companies where it is needed to preserve value and help employees.”
Brief: Hedge fund manager Ali Lumsden gained 73% the last time the mortgage-bond market went into meltdown. This time around, the veteran investor is on the wrong side of the crisis. East Lodge Capital, the firm Lumsden set up in 2013, saw its main hedge fund plunge 26% in March, according to people with knowledge of its performance. Another East Lodge fund fell 16%, said the people, who asked not to be identified because the information is private. London-based East Lodge specializes in securitized credit, which has taken a hammering in recent weeks as the near-shutdown of the global economy threatens a surge of delinquencies among borrowers. Lumsden, who has spent over 30 years in the structured-credit markets, made his name as chief investment officer of an asset-backed securities fund at Michael Hintze’s CQS. He averaged gains of 28% annually at the firm’s ABS fund from October 2006 through November 2012, highlighted by the big gain in 2008 when he bet against subprime mortgages and the banks that had loaded up on them.
Brief: KKR & Co. is rebooting an unsuccessful credit fund with a new name for the coronavirus era. The firm has rebranded the Special Situations Fund III as the Dislocation Opportunities Fund, refocused its strategy and swapped managers in the hope of raising new money to scoop up bonds and loans battered by the Covid-19 pandemic. Instead of just seeking out distressed situations, the fund has a wide mandate to buy corporate and asset-backed debt, according to a marketing document seen by Bloomberg. KKR is marketing the vehicle to potential investors and plans to close the current round of fundraising on May 15. The firm is contributing $400 million of its own capital and seeking approval from clients to repurpose at least $217 million that was committed to the special situations fund, said a person familiar with the effort, asking not to be identified because the information is private.
Brief: The main bond fund run by Franklin Templeton’s Michael Hasenstab posted a $4.3 billion decline in assets in the first three months of the year, its worst quarter since 2016. Total net assets in the Templeton Global Bond Fund slumped to $22.6 billion as of March 31, public filings show, down from $26.9 billion at the end of 2019. It was the fourth consecutive quarter of declines and takes the drop in holdings in the past year to $11 billion. Hasenstab has famously been caught on the wrong side of a huge bet against Treasuries and was forced to pare that back last year after yields plunged. Stimulus measures to fight the fallout from coronavirus have pushed yields even lower since.
Brief: Oil plunged into negative territory for the first time on record. The commodity's latest round of sharp selling comes as uncertainty mounts around storage for excess oil. Demand for crude has plummeted since the coronavirus outbreak has frozen activity worldwide.The price of West Texas Intermediate crude oil futures expiring in May plunged 321% to negative $40.32 cents a barrel, the lowest level ever recorded. Brent crude losses were muted by comparison, with the commodity sliding 9.5% to $25.41 a barrel at intrasession lows. The price of oil has continued to slide even after OPEC and its allies agreed to the biggest-ever production cut — one intended to backstop prices. Investors remain unconvinced the cuts can offset cratering demand for the commodity as the novel coronavirus keeps society from operating normally.
Brief: One of Australia's most prominent investment outfits, Regal Funds Management, has posted a shock 59 per cent slide in its high-performance hedge fund during March, leaving some investors fuming. Regal's chief investment officer Phil King told clients in a note distributed late last week that he had "underestimated the speed and scale" of the coronavirus pandemic, leaving a portfolio of stocks owned by the company's Atlantic Absolute Returns Fund exposed to savage share price falls. March was a difficult month for investors, with the ASX 200 falling more than 20 per cent and Wall Street sliding 18 per cent. But Regal's performance was significantly worse than some of Mr King's competitors, with local hedge fund VGI Partners posting a 1.4 per cent return and Totus Capital's Alpha Fund rising 10.4 per cent.
Brief: The coronavirus sell-off is prompting big Australian superannuation funds to mark down their allocations to real estate, infrastructure and private equity to ensure defined contribution participants taking out money now to pay bills and cover expenses don't disadvantage those staying put. The move is the latest iteration of an ongoing fiduciary conundrum: Investing with a medium- to long-term investment horizon while participants retain the ability to move their money to competing funds on a short-term basis, said Nick Kelly, a Sydney-based senior investment consultant with Willis Towers Watson PLC.
Brief: Money management firms and their senior executives have ramped up their philanthropic efforts in response to the devastation COVID-19 has wrought on communities around the world. The collective support of the 20-plus managers or their parent companies tracked by Pensions & Investments totaled $483 million as of April 16. Projects funded by investment firms range from providing first responders and health-care workers with protective supplies, food and child care through non-profits and government agencies, and funding research for a vaccine to combat COVID-19 to direct financial support for struggling small businesses. The largest amount aimed at COVID-19 relief efforts wasn't a donation, but an investment.
Brief: Wells Fargo & Co., Bank of America Corp., JPMorgan Chase & Co. and US Bancorp were sued by small businesses that accused the lenders of prioritizing large loans distributed as part of the virus rescue package, shutting out the smallest firms that sought money. The four banks processed applications for the largest loan amounts because they generated the highest fees, rather than processing them on a first-come-first-served basis as the government promised, according to lawsuits filed Sunday in federal court in Los Angeles. As a result, thousands of small businesses that were entitled to loans under the program administered by the Small Business Administration, known as the Paycheck Protection Program, were left with nothing, the plaintiffs said. JPMorgan declined to comment on the lawsuit. The bank said in a FAQ that its smallest business clients received more than twice as many loans as the rest of its clients combined. Representatives for the other lenders didn’t immediately respond to requests seeking comment.
Brief: The founder and director of Singapore oil-trading company Hin Leong Trading Pte Ltd (HLT) directed the firm not to disclose hundreds of millions of dollars in losses over several years, he said in a court filing reviewed by Reuters. The affidavit signed by Lim Oon Kuin, a Singaporean in his 70s widely known as O.K. Lim, is part of a Friday filing to the Singapore High Court by HLT and subsidiary Ocean Tankers (Pte) Ltd, seeking a six-month moratorium on debts of $3.85 billion to 23 banks. The filing cites a collapse in the oil price and the coronavirus pandemic, which has hammered oil demand and pushed up costs for HLT, one of Asia’s largest oil traders. Despite reporting net profit of $78.2 million for the business year ended in October, “HLT has not been making profits in the last few years,” Lim said in the filing, which has not been made public.
Brief: For Jim Simons, history is repeating itself, at least when it comes to meltdowns in the quant fund world. Computer models at Renaissance Technologies, the firm founded by the mathematician and former codebreaker, misfired when volatility surged this year, contributing to a first-quarter loss at its largest hedge fund. The beta models, which help determine portfolio exposure at funds for outside investors, “in recent volatile markets have not performed as expected,” Renaissance said in a March 30 filing. The setback for one of the industry’s best known hedge funds is another example of the turmoil wrought by the coronavirus. The pandemic has stalled global commerce, ended a record bull run for stocks and forced the Federal Reserve into an unprecedented multitrillion-dollar rescue of financial markets.
Brief: British hedge fund manager Man Group (EMG.L) said on Friday that its funds under management fell 11.5% to $104.2 billion in the first quarter as the novel coronavirus hit global markets.Man Group said the firm lost $10.7 billion on negative investment performance and $3.3 billion from currency and other movements.The firm’s long-only computer-driven and discretionary strategies, which bet on stocks rising, suffered the most during the quarter, losing $10 billion in investment movement and another $1.1 billion in outflows.Three of Man’s computer-driven long-only strategies were down more than 20% for the three months to March 31.
Brief: As President Donald Trump grappled with the coronavirus outbreak last month, he boasted at a press conference of tapping a secret weapon for advice: Larry Fink. The chief executive of BlackRock Inc. provided insight to Trump on coping with the fallout from the pandemic -- and once again put his firm at center of a white-hot economic emergency. BlackRock is no stranger to stepping in during a financial crisis cleanup. It played a similar role in 2008. But back then, it was a smaller firm with a focus on fixed income, closer to Pacific Investment Management Co., which had renowned money managers Mohamed El-Erian and Bill Gross at the helm. More than a decade later, the investing landscape has shifted. BlackRock has a premiere role in helping the Federal Reserve stabilize markets. The central bank has hired the firm to help manage its economic relief efforts. Beyond U.S. borders, the Bank of Canada has called on the asset manager as it shapes its response to the meltdown.
Brief: The energy fund at Zimmer Partners posted its worst quarter ever after sinking about 46% in March as oil markets plunged.The fund dropped 55% in the first quarter after losing money each month, according to an investor letter seen by Bloomberg. The fund, which ran $1 billion at the end of January, now has about $500 million in assets. The oil price war between Russia and Saudi Arabia ravaged the energy industry last month and helped send Brent crude to its lowest in nearly two decades. Making matters worse, the coronavirus pandemic has wiped out demand for crude amid an oversupply threatening the survival of oil producers and the economies of oil-dependent nations.
Brief: Vanguard Group said on Thursday it closed its $39.5 billion Treasury Money Market Fund to new investors, becoming the latest big asset manager looking to protect the returns of existing clients. Restricting the flow of new money helps reduce the amount of new securities paying lower yields that Vanguard will need to purchase, slowing the rate of dilution to returns for current shareholders. “Vanguard is taking this prudent step to temper cash flows and will continue to monitor the Fund and employ additional measures if needed,” the company said in a statement. New money market investors would still have access to other funds in its $414 billion lineup, Vanguard said. Other fund companies have taken similar steps including Fidelity Investments on March 31.
Brief: The UK accounting industry has been plunged into its worst crisis in over a decade as the “Big Four” firms slash partners’ pay by up to a quarter and their mid-tier rivals furlough junior staff to cope with the fallout from the coronavirus pandemic. London-headquarteredKPMG,PwC,Deloitteand EY have reduced the amount of profits that are distributed to their partners each month by between 20 and 25 per cent to build up cash reserves and help survive a downturn in work. Partners at the UK arms of the four firms, which between them employ about 74,000 people, earned an average of £720,000 last year and undertake activities including company audits, tax and restructuring advice, and consulting on transactions.
Brief: Algebris Investments, the London-based hedge fund, is liquidating its Quant Arbitrage fund following prolonged poor performance in 2020.The $12bn hedge fund firm, which manages credit and equity market-focused strategies, launched the Quant Arbitrage fund in May 2019 to take advantage of spikes in volatility. But according to data on MorningStar.com, the €26m fund was down 48% in 2020 until 14 April, having fallen foul of the Coronavirus-induced market turmoil and with its equity portfolio suffering as a result of recent marked declines in equity markets. A person close to the situation said the Quant Arbitrage fund, managed by Gianluca Lobefalo, the firm’s head of quant strategies, was in the process of being liquidated. “It was an experiment that didn’t work,” they said, adding Algebris didn’t want the “contagion effect to spread to other funds” run by the firm.
Brief: Morgan StanleyCEOJames Gormansees the coronavirus-induced global recession lasting for the entirety of this year and 2021. When asked about how a potential economic recovery expected in the second half of this year would take shape, Gorman said that while he hopes it will be a sharp “V” recovery, in reality it will probably take longer to reopen cities and factories. “If I were a betting man, it’s somewhere between a `U’ or ‘L’” shaped recovery, Gorman told CNBC Thursday in an interview. “I would say through the end of next year, we’re going to be working through the global recession.”
Brief: Billionaire Paul Singer’s Elliott Management said global stocks could tumble more — ultimately losing half of their value from February’s high— as the world braces for the deepest recession since the 1930s-era Great Depression, according to a letter sent to clients on Wednesday and reviewed by Reuters. The New York-based hedge fund firm, which controls $40.4 billion in assets and whose views on markets and economics are closely watched by investors, wrote that the sharp market decline seen between late February and late March “provided a heavy bookend to a dozen years of basically nonstop positive returns in global stocks, bonds and real estate.“ And the rout is likely not yet over.
Brief: BlackRock Inc’s (BLK.N) assets under management dipped sharply in the first quarter amid turmoil in global markets caused by concerns about the economic fallout of the coronavirus outbreak. BlackRock’s assets fell to $6.47 trillion from $7.43 trillion at the end of the fourth quarter. “We had vast de-risking from February 21 to the end of the quarter,” Chief Executive Officer Larry Fink said on a conference call with analysts. Worries about the economic fallout of the coronavirus pandemic hammered global financial markets in the first quarter and soured investor appetite for riskier assets like stocks. The benchmark S&P 500 index fell 20% during the period.
Brief: Fortress Investment Group is talking to investors about raising at least $3 billion for a new credit fund as it anticipates forced selling and broader illiquidity as companies around the world grapple with the Covid-19 pandemic. The New York-based firm this week began sounding out interest in a vehicle known as Fortress Credit Opportunities Fund V Expansion, according to people with knowledge of the matter, who requested anonymity because the information is private. The firm could raise $5 billion or more depending on demand, one of the people said. Gordon Runte, a spokesman for the firm, declined to comment. The credit arm of Fortress is led by co-founder Pete Briger and fared well in the prior financial crisis. Its first credit opportunities fund, launched in 2008 at $3 billion, delivered an annualized gross internal rate of return of 34% through the end of last year, according to a document sent to investors this week.
Brief: Investment companies should make every effort to deliver timely financial information and risk disclosures to investors despite the disruptive effect of the coronavirus pandemic, U.S. Securities and Exchange Commissionstaff said.While the SEC has worked to provide selective relief to companies affected by COVID-19, investment companies should remain mindful of their obligations to provide key information to investors, Division of Investment Management staff said in a statement Tuesday.“In light of the current uncertainties and market disruptions, investors need high-quality financial information more than ever,” the statement said. “We are committed to promoting the updating and delivery of such information, which is particularly important to keep Main Street investors up to date about their investments.”Investment companies must update information in their prospectuses, including the underlying financial statements, SEC staff said. Companies should also weigh whether to update their risk disclosures in light of the pandemic, the statement said.
Brief: Oaktree Capital Group LLC is seeking $15 billion to start the largest-ever distressed-debt fund, aiming to profit from companies damaged by the coronavirus pandemic. Oaktree Opportunities Fund XI will buy up debt in struggling companies and in some cases may seek control of businesses in restructurings, according to an investor presentation reviewed by Bloomberg. The sum is almost as much as the $19.4 billion in assets that Oaktree has already devoted to that strategy. The firm co-founded by Howard Marks plans to gather a larger fund than what it raised during the financial crisis more than a decade ago because it sees even more opportunities this time around, according to the presentation.
Brief: Most activist shareholders have refrained from challenging the boards of U.S. companies during this season of annual shareholder meetings, as businesses reel from the economic fallout of the coronavirus outbreak. Not Starboard Value LP. The New York-based hedge fund, which Jeffrey Smith spun out of investment firm Ramius in 2011, is pursuing proxy contests against five U.S. companies, even as rivals remain largely silent, according to a review of regulatory filings. Starboard, which built its reputation as a powerful player by winning more board seats than any other activist, is betting companies will be willing to settle during the crisis, so they can concentrate on their business and the safety of their employees.
Brief: Polar Capital has confirmed it is winding up its UK Absolute Equity fund due to the poor health of its fund manager. The fund, managed by Guy Rushton, had been among the top-performers in the Investment Association Targeted Absolute Return sector but its performance has faltered during the coronavirus sell-off. It had held £472.17m at the time of its February factsheet but that has since fallen to £292.2m. Polar Capital has now sent a letter to investors informing them the fund has been suspended with immediate effect so that an orderly wind down of the fund can occur. “The decision to terminate the fund has been prompted by the poor health of the individual fund manager,” the letter said. “Over the past few weeks and due to the unprecedented market turmoil caused by the Covid-19 pandemic, Polar’s risk team and central dealing desk has, at the request and with the consent of the fund manager, stepped in to provide assistance and support to the fund manager as he decided to reduce the fund’s risk.
Brief: Hedge fund tycoons have made £1.5 billion in profits by shorting UK shares during the financial crisis, according to Evening Standard calculations that triggered calls for curbs on their activities and a windfall tax. Firms such as Citadel, owned by billionaire US investor Ken Griffin, AQR Capital, co-founded by billionaire hedge funder Cliff Asness, wealthy London financier Crispin Odey’s Odey Asset Management and Sir Paul Marshall and Ian Wace’s Marshall Wace were the most prolific winners from the market crash… An analysis of the 50 most shorted stocks show hedge funds made gains of £1.48 billion during March’s stock market rout betting against under-pressure firms like easyJet and Premier Oil. On the fall of easyJet alone, AQR made a paper profit of £48 million and Citadel £43 million. Odey made more than £4 million on Metro Bank, while every one of Marshall Wace’s 30 short positions will have paid off. Marshall Wace has one of the biggest number of shorts in London.
Brief: Glade Brook Capital Partners LLC, the venture capital firm led by Paul Hudson, is pitching a new fund to investors targeting the debt of private technology companies impacted by economic disruption from COVID-19. The $1.5 billion Greenwich, Connecticut-based firm began marketing the Special Situations Fund last week and is targeting $100 million for it by the end of April, according to a pitch document seen by Reuters. The fund will invest in preferred stock, convertible bonds and senior debt, in primary and secondary markets, in what Glade Brook sees as “high quality” but “dislocated” private technology companies, according to the materials.
Brief: Private equity firm Silver Lake built its reputation on the back of investments in technology companies such as internet phone service provider Skype and chip maker Broadcom. But in recent years, the firm, which manages more than $40bn in assets, has established itself as a major player in the sports and entertainment arena as well, investing billions of dollars in businesses that include cinema chain AMC Entertainment Holdings and the parent company of UK soccer team Manchester City. Now, some of these deals are coming under pressure. Companies in the sports, media and entertainment sectors are facing declining revenue as social-distancing guidelines and curbs on public gatherings have shut down sports leagues and the movie industry and led to concerts and cinema screenings being cancelled worldwide.
Brief: Private equity firm General Atlantic is teaming up with veteran credit investor Tripp Smith to launch a roughly $5bn fund that will provide financing to companies hit by the new coronavirus pandemic, according to people familiar with the matter. General Atlantic, which typically takes minority equity stakes in rapidly growing companies, is forming a joint venture with Smith’s credit-focused firm Iron Park Capital Partners LP, the people said. Atlantic Park, as they have dubbed the venture, will provide structured equity and debt financing to previously healthy companies now facing distress because of the pandemic. Founded in 1980, General Atlantic has $35bn in assets and offices around the world. Under chief executive Bill Ford, the firm has made its name by investing in successful technology companies, such as Alibaba Group Holding, before their initial public offerings.
Brief: Swiss asset manager GAM has stepped up its cost cutting initiatives after recording outflows as it gets hit by the Covid-19 pandemic. The firm has now unveiled plans to make at least CHF65m ($67m) in cost cuts by the end of 2020. This is more than twice the amount of cost cuts originally targeted by the end of this year. In February, GAMannounced a strategy overhaulthat was centred on three pillars – efficiency, transparency and growth. According to that policy, the firm aimed for CHF30m in cost savings by the end of 2020. The firm’s assets under management (AuM) totalled CHF112.1bn at the end of March 2020, versus CHF132.7bn at the end of 2019.
Brief: Free money. That’s the enticing prospect hedge funds and other trading firms are pondering after realizing they too might be able to participate in a historic U.S. stimulus package to keep small businesses alive through the coronavirus pandemic. Since early April, law firms have hosted Webinars and sent out alerts, and accounting firms have reached out to clients, all with the goal of explaining how they might be able to tap into the Paycheck Protection Program. The $349 billion package administered by the Small Business Administration provides loans to cover payroll, rent and utilities for up to eight weeks. The loans can convert to grants if recipients retain or rehire their workers.
Brief: AMP Capital's wholesale Australian property fund is moving asset valuations from quarterly to monthly, has fixed the distribution payouts for this year and is altering withdrawals during the COVID-19 pandemic. The fund, which currently allows monthly redemptions, allows only 5% of the funds' total net asset value for withdrawals every quarter. It has deferred its April 15 withdrawal date to May 15. The fund's constitution allows it to widen payment times beyond the 12-month processing time. "It's not considered in the best interests of all investors to maintain monthly redemptions in the current economic environment. However, the changes we have announced provide investors with an ability to redeem up to 20% of their holding in the short term, with full payment made for any redeemed units over and above this threshold within 12 months," AMP Capital said in a letter to investors last week.
Brief: One of Canada’s largest private lenders is freezing redemptions. Bridging Finance Inc. said in an letter to investors Monday that it has gated its funds indefinitely “to maintain investor value and limit pandemic effects.” The non-bank lender has C$1.6 billion ($1.2 billion) in assets under management with the most of its direct lending funds invested in collateral-based bridging loans, inventory and accounts-receivables financing. Request for redemptions spiked to about 15% of the assets from the usual 5%, which prompted the gating, Chief Executive Officer David Sharpe said by phone. The news was first reported by the Globe and Mail newspaper.
Brief: Founder of the once-mighty Middle Eastern private equity firm Abraaj has tested positive for COVID-19, it emerged on Monday. Naqvi has said that he is undergoing treatment at a private hospital and that he is “on the road to recovery”. “Today is my fourth day in the hospital and I am praying that they [hospital staff] will let me go home soon; my cough is definitely better, my oxygen saturation is heading in the right direction,” he said. Naqvi said that he was still low on energy but understood that it was due to the fact that his body was taking up a lot of strength to recover from the virus. He praised the doctors and nurses at the hospital for taking care of him.
