Brief: A world economy that’s still recovering from Covid-19 faces new risks from an energy-price spike as the standoff between the West and Russia escalates. The U.S. and its European allies unveiled limited sanctions on Tuesday, in response to Russian President Vladimir Putin’s decision to recognize two breakaway republics in eastern Ukraine, and warned that tougher penalties may follow. Russia, whose troops are massed around Ukraine, says it has no plans for a full-scale invasion. The crisis has driven oil prices toward $100 a barrel and sent tremors through other commodity markets too, threatening another wave of price pressures on top of already-high pandemic inflation. Russia is a commodities powerhouse and a key supplier of energy to Europe. Western nations are caught between the desire for harsh sanctions to deter Putin, and concern that they’ll suffer blowback themselves. For now, Europe and the U.S. have shied away from blocking Russia’s energy exports, or freezing it out of dollar-based finance. Even so, U.S. President Joe Biden warned Americans Tuesday that there’ll be a price to pay at gasoline pumps back home.
Brief: Fraud and error on the U.K.’s coronavirus support programs is expected to cost British taxpayers as much as 15.7 billion pounds ($21.4 billion), an influential panel of lawmakers said, calling on the government to ensure transparency around ongoing costs associated with the pandemic. Some 5.3 billion pounds of cash lost through fraudulent or mistaken claims is estimated to have been in Chancellor of the Exchequer Rishi Sunak’s flagship furlough program, the cross-party Public Accounts Committee said in a report published Wednesday. That’s 8.7% of payments made under the program, which paid idled workers as much as 80% of their wages. Other loans and grants programs added to what the panel branded as “unacceptable” losses. The government has spent 261 billion pounds on 374 different measures tackling Covid so far, according to the panel. That is expected to reach 370 billion pounds over the lifetime of the measures, with some loan repayments not due for two decades. It pointed also to other losses, including 21 billion pounds of loans that the government doesn’t expect to ever be repaid.
Brief: There are two things that give Marko Kolanovic confidence in his bullish stocks call for 2022, even after a difficult start to the year for financial markets, with rising inflation and Russia-Ukraine tensions. The co-head of global research at JPMorgan Chase & Co. has been asserting for some time that investors should buy dips in stocks -- but now he sees the acute pandemic phase of Covid nearing an end and better times ahead from China, which he expects to offset Federal Reserve tightening. And he sees scope for significant rotation within equities as these changes take place. “Our base case is the end of the pandemic completely,” Kolanovic said in an interview. “During the spring and summer we will have a very strong recovery because omicron is in fast decline and now the immunity rates are really, really high.” He added that when looking at pandemics in the last century, they lasted about two years and maybe three to four waves, “and then for the next 10 to 20 years nothing. We think we’re basically at that point, two-plus years of pandemic, we’ve had the four major waves. And so we think now maybe we’ll be fine for the next 10 or 20 years.”
Brief: Fiera Real Estate UK (FRE UK) has held the final close of Fiera Real Estate Opportunity Fund V (FREOF V) at GBP180 million. FREOF V is the fifth and largest Fund in the Firm’s value add series which has raised over GBP780 million to date. The firm launched FREOF V in November 2019 to take advantage of the unprecedented transitional buying opportunities created by Brexit and the Covid-19 pandemic. The fund is targeted to deliver a 15 per cent total net IRR to investors with little to no leverage. The GBP180 million came from both UK and overseas investors, which, coupled with its successful close during the pandemic, reflects the resilience of UK real estate as an asset class and increased global investor confidence in the UK market.
Brief: As competition in private credit heats up, larger managers have begun to squeeze their smaller and newer competitors out of the market. While private credit funds reached a new fundraising record in 2021, less established managers generally had to settle for a smaller piece of the pie. Forty-two percent of capital raised by private credit managers last year was taken in by the ten largest funds, according to Charles McGrath, author of Preqin’s latest Global Private Debt report. The private debt industry has seen continued growth in assets under management since the onset of the pandemic. Distressed debt, for example, was a big hit for investors interested in betting on a wave of corporate defaults caused by Covid-19. As the market matures, however, the rules of the game are being rewritten by the bigger players. “Just as we see in private equity, experience is a big draw for investors,” McGrath said. “Experienced managers generally raise larger funds and also take a larger share of the market.”