Brief: President Trump on Friday lauded the nation's biggest bank for calling its top trading staff back to the office after months of remote work. "Congratulations to JPMorgan Chase for ordering everyone BACK TO OFFICE on September 21st," Trump tweeted. "Will always be better than working from home!" JPMorgan told senior employees of the sales and trading operation in London and New York that they and their teams must return to the office by Sept. 21, a person familiar with the matter told FOX Business. The Wall Street Journal first reported the news Thursday. Employees who have medical conditions that make them more vulnerable to COVID-19 complications, or who live with someone considered at increased risk of severe illness, can continue working from home. That exemption also applies to employees with child-care issues Companies that have permitted their employees to work virtually for the majority of the year face a challenge in calling them back. Colleges and universities that welcomed back thousands of students to their campuses are now beset by COVID-19 cases.
Brief: Money managers are selling collateralized loan obligations at yields that would have been unthinkably low just a few days ago, signaling that one of the more battered corners of the credit market may be healing amid the Federal Reserve’s unprecedented support for company debt. Ares Management Corp. is marketing a CLO that is expected to carry a risk premium, or spread, of just 1.28 percentage point more than the benchmark on its highest-rated portion, according to people with knowledge of the transaction. BlackRock Inc. sold a deal on Thursday with AAA notes yielding 1.27 percentage point more than the London interbank offered rate. Collateralized loan obligations, or bonds backed by portfolios of leveraged loans, have been one of the last areas of corporate debt market to recover after security prices broadly plunged in March. As the Covid-19 pandemic weighed on company revenues, ratings firms began downgrading leveraged loans, which in turn spooked investors in CLOs. Even as recently as earlier this week, the risk premiums on KKR & Co.’s AAA notes priced at 1.5 percentage point more than Libor. Spreads in Europe are similarly narrowing, with AAA risk premiums as much as 0.2 percentage point tighter than they were in August. For U.S. deals, the healing in recent weeks has come in part because asset managers have sold so few new CLOs, according to a Wells Fargo & Co. report dated September 9.
Brief: It surely goes without saying that COVID-19 has disrupted businesses of all types. And the Alternative Investment sector has not been immune. KPMG International and AIMA (Alternative Investment Management Association) surveyed 144 hedge fund managers globally, representing an estimated US$840 billion in assets under management (AUM), more than one-quarter of the industry’s total. The research examines in detail the effects of the pandemic on the alternative investment industry. In addition, KPMG International and AIMA canvassed the views of the industry via one-to-one interviews with Hedge Funds, investors and key ecosystem players including technology companies, prime brokers, fund administrators and law firms to provide additional insights to the survey findings. Through the various discussions and survey results it highlighted that in times of market volatility and business uncertainty – alternative investments fulfil an important role in an investor’s portfolio. Throughout the pandemic, the Hedge Fund industry has proven its ability to manage risk and volatility while still producing above-market returns for investors. Significant uncertainty may remain, but in conversations with fund managers and the data suggests the industry remains agile and resilient and is taking prudent steps in order to embrace the new reality.
Brief: Just 27% of private equity and venture capital fund managers globally expect investment activity to remain flat or rise in the coming months, with the remaining 73% taking a more pessimistic view, as managers grapple with uncertainty following the spread of coronavirus, according to an S&P Global Market Intelligence survey. Of the 142 managers polled globally, 30% expect dealmaking to slow by between a quarter and a half, with 29% expecting a volume dip of one-quarter and 13% taking a more negative view, predicting a drop of over 50%. The largest proportion of North American and Latin American respondents expect activity to decrease by between 25% to 50% in their regions. There was more optimism from respondents in Europe, the Middle East and Africa, with the majority of respondents expecting activity to dip by less than 25%. Asia-Pacific respondents were particularly upbeat, with the largest proportion expecting investment activity to remain flat or decrease. But that does not mean managers expect their own investment pipelines to come to a halt. More than half — 58% — of respondents globally will focus on making new, selective investments over the coming months, with 23% indicating they will focus on stabilizing their portfolios.
Brief: According to Ray Dalio, the coronavirus pandemic was a blow to the system. But in his view, Covid-19 isn’t the biggest game changer. Instead, the Bridgewater Associates founder said Thursday that he sees the convergence of monetary policy, social and economic gaps, and the rise of China as forces that could change the world. Dalio shared his views on these changes — and how history informs them — Thursday at a digital event held by the Economic Club of New York. “It was the shock,” Dalio said of the pandemic. He added that history has shown that these shocks — whether they’re natural disasters, pandemics, or other calamities — become stress tests for a country’s health, financial and otherwise. But when the pandemic recedes, Dalio said he believes that these issues will remain. “How do you pay the bills?” he asked. “Are we going to be at each other’s throats? And what do the five wars, the conflicts with China, look like?” According to Dalio, those conflicts could include a trade war, a technology war, a geopolitical war, a capital war, or a military war.
Brief: Asset manager MKP Capital Management has placed a 70 percent probability on a Covid-19 vaccine being approved in 2020, with a smaller chance of that happening before the U.S. presidential election. MKP Capital, an alternative asset manager focused on global macro and fixed-income relative value strategies, sees a 40 percent chance that a vaccine will be approved before the election on November 3, according to a report from the firm dated September 9. “It is now MKP’s strong base case that we will have at least one successful vaccine by the end of the year,” the firm said in the report. “A major question mark remains around whether a vaccine will be available ahead of this date and potentially provide a boost to President Trump’s campaign.” Stocks and bonds were initially rocked by the Covid-19 pandemic this year, tanking during the first quarter before the Federal Reserve stepped in with a series of emergency measures. While markets have rebounded as investors look beyond the economic recession prompted by the deadly disease, some companies and sectors remain battered by the downturn. While the world is beginning to “learn to live with the virus,” Covid-19 is still causing a significant break in economic activity, Michael Hume, MKP’s head of strategy and research, said Thursday in a phone interview.