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.