Brief: Increasingly frequent spikes in the VIX volatility index could offer hedge funds and other investment managers strong return opportunities amid the resulting equity market gyrations, new analysis published by Man Group suggests. Probing various trends emerging from the biggest VIX surges over the past 30 years, Man’s ‘Views From The Floor’ commentary noted that four of the top 10 spikes have occurred since the Covid-19 pandemic. At the end of last month, the volatility index soared by some 11 points – a 10-month high – as a result of growing fears over the emerging Omicron Covid-19 variant. The note, which explored the merits of investors buying into a VIX spike, observed that if the S&P 500 is up in the week after the VIX spike, history shows most forward returns come during that first week – generating a median return of 1.4 per cent. “As time goes on, returns drop, persisting into the second week less than half of the time,” noted Ed Cole, managing director, discretionary investments at Man GLG, adding that while the average return in the second week is negative, although this improves over a 3-month basis.
Brief: Asset management firm Fidelity Investments on Monday said it had paused some voluntary return-to-office plans while Morgan Stanley (NYSE:MS)'s CEO said he expects COVID-19 to be an issue through the next year, in a further sign that America's financial industry is rethinking its return to "business as usual." U.S. financial firms have been more proactive than other industries in encouraging employees to return to offices. Those plans have come under renewed scrutiny with COVID-19 cases again on the rise and as the Omicron variant of the coronavirus spreads swiftly. Some financial firms are now choosing to pull back on holiday parties, recommend booster shots, or even advise returning to work from home. "The private acknowledgement is that return to work plans set for January need another look," said Neal Mills, chief medical officer for professional services firm Aon (NYSE:AON), who advises corporations on their return-to-work plans. Mills said he received calls every day last week from companies experiencing COVID-19 outbreaks seeking advice on whether to delay bringing employees back or reinstate mitigation measures, like social distancing. Cases surged after Thanksgiving and are expected to continue rising and peak in January, he said. Family-controlled Fidelity, headquartered in Boston, paused pilot return-to-office programs at its offices in Boston, Smithfield, Rhode Island, and Merrimack, New Hampshire "due to rising COVID risk scores," spokesman Michael Aalto said.
Brief: The Asian Development Bank (ABD) has cut its economic growth forecast for developing Asia for this year and next due to the emergence of the Omicron coronavirus variant. In its latest outlook published on Tuesday, the Manila-based development bank forecast the region’s emerging economies would grow 7 percent in 2021 and 5.3 percent in 2022, down 0.1 percent from its previous estimate. The bank cited a resurgence of COVID-19 cases due to the Omicron variant as the biggest risk to the region’s recovery, with other dangers including a prolonged slowdown in China’s housing market, rising inflation and global supply chain disruptions. Among the major economies looked at, the ABD trimmed China’s growth forecast to 8 percent in 2021 and 5.3 percent next year, down 0.1 percent and 0.2, respectively, from its September estimate. The bank cut India’s growth estimate to 9.7 percent for 2021, compared with 10 percent in September, with its 2022 estimate of 7.5 percent growth remaining unchanged. Growth for Southeast Asia was cut to 3.1 percent for 2021, down 0.1 percent, but raised 0.1 percent to 5.1 percent for next year.
Brief: Despite facing an array of both economic and competitive challenges, the outlook for the global investment management business in 2022 is neutral, says Fitch Ratings. In a new report, the rating agency said global investment managers are facing competitive pressures and obstacles such as high inflation and elevated valuations. But firms in the sector are prepared to face down these threats through a combination of scale, strategic diversification and robust finances. “Fitch expects rated global investment managers to be more resilient to continuing competition and potential market volatility given enhanced scale and strong franchises,” said Nalini Kaladeen, director with Fitch, in the report. “Overall, we believe alternative [managers] are better placed to withstand challenges than traditional [managers], given stronger active flow dynamics and locked-in fee streams that are largely insulated from fair value changes on investments,” she added. Fitch predicted traditional investment managers would likely use mergers and acquisitions to help fend off competitive threats.
Brief: JPMorgan Chase & Co on Tuesday instructed unvaccinated staff in Manhattan to work from home, a further sign that banks and other financial firms are tightening protocols as COVID-19 infections rise and the Omicron coronavirus variant spreads. The U.S. bank, one of the most aggressive in bringing employees back to the office, had previously allowed unvaccinated staff to work in its Manhattan offices provided they were tested twice a week. In a memo to staff seen by Reuters, the bank urged unvaccinated staff to get vaccinated and for those who are eligible to get booster shots. It also relaxed mask requirements for vaccinated staff working in its Manhattan offices. "We continue to agree with health authorities that being vaccinated against COVID-19 is the best way to keep ourselves and our loved ones safe - especially as we face the winter months and a new variant - so please consider getting vaccinated if you aren't already, and getting your booster if you are," the memo said. More than 90% of JPMorgan staff based in Manhattan are vaccinated, according to the memo.