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Our briefing for Wednesday June 23, 2021:
Jun 23, 2021 3:31:22 PM
- In the United States, the latest data from the Centers for Disease Control and Prevention (CDC) is showing the faster spreading Delta variant is gaining a foothold in the country. Speaking at the Milken Institute Future of Health Summit on Wednesday, CDC Director Rochelle Walensky said the variant first discovered in India now accounts for a fifth of recent coronavirus cases in America. Several weeks ago, the Delta variant accounted for just 3% of new cases and not surprisingly appears to be growing faster in states and counties with lower vaccination rates than in areas that have higher levels. Despite the latest data, Walensky did note coronavirus cases are at their lowest levels since March 2020.
- In Canada, the Atlantic bubble was supposed to take shape again on Wednesday, but Nova Scotia appears to have tried to pop it before it even begins. Less than 24 hours when the citizens of Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador believed they were going to be able to travel freely throughout the four provinces free of quarantine, Nova Scotia Premier Iain Rankin announced those coming from New Brunswick would have to continue to self-isolate upon arrival. The reason given by Premier Rankin was that New Brunswick opened its borders to Canadian travellers outside the Atlantic region without the requirement of self-isolating; provided they have at least one dose of a COVID-19 vaccine. Needless to say, this isn’t going over well with most citizens in Nova Scotia and New Brunswick as protestors are currently occupying the land border between the two provinces and say they aren’t leaving until police force them to, or Premier Rankin changes his mind on self-isolation, whichever comes first.
- The United Kingdom is seeing a worrying trend: the faster spreading Delta variant is apparently mutating. Public Health England (PHE) have notified Downing Street officials that at least 41 cases have now been identified in the last week in England of what is now being called the Delta plus variant. The new variant is also being reported in India. The discovery now has British scientists racing to discover whether current COVID-19 vaccines can combat the variant of the disease. What has health experts concerned are three trends in the Delta plus variant: increased transmissibility; stronger binding in receptors of lung cells and potential reduction in monoclonal antibody response.
- Bloomberg is reporting Italy is laying down the economic gauntlet to Germany noting euro-area fiscal rules can’t return to how they were before the pandemic. Speaking in Parliament on Wednesday, Italian Premier Mario Draghi said he has been saying for three years that things need to be changed and the discussion is just the beginning. During the pandemic, the budget rules, with limits on debt and deficits, were suspended to allow emergency spending. In Germany, Armin Laschet, the front runner to replace Chancellor Angela Merkel later this year said recently that stability policies will have to reinstated when the effects of the pandemic on the global economy are over. The EU is currently split with Germany and other northern nations preaching balanced budgets with Italy and other nations in the south, countering that spending will fuel faster growth which can in turn, reduce debt burdens.
- In Latin America, a development bank is trying to help countries secure COVID-19 vaccines and deploy around $500 million USD to fight the pandemic. Based out of Washington D.C., the Inter-American Development Bank (IDB) is in talks with Argentina and Panama, along with vaccine makers to provide credit for purchases of about $50 million to $100 million for each country. If so, Argentina and Panama would be the first two countries to use an initiative rolled out by IDB in March to help resolve legal liability obligations in contract negotiations with vaccine makers. The bank has already supported Argentina, Belize, Ecuador and Trinidad and Tobago with advances to buy vaccines from the World Health Organization led-COVAX initiative for shots for low- and middle-income countries.
- New Zealand is on high alert after a COVID-19 passenger from Australia entered the country and was positive for the virus. The infectious traveler arrived over the weekend and has caused the country’s capital city – Wellington – to ask their people who were at more than a dozen locations to self-isolate for two weeks and get tested. So far, there were no immediate cases confirmed because of the travel, but New Zealand is taking no chances and have taken a zero-tolerance approach to the virus and continues to pursue an elimination strategy. New Zealand – the small island nation of five million – have enjoyed nearly four months without any community transmission of the coronavirus.
Covid-19 – Due Diligence And Asset Management
Big US Banks to Employees: Return to the Office Vaccinated
Brief : Wall Street's big investment banks are sending a message to their employees this summer: Get back into the office and bring your vaccination card. New York-based Morgan Stanley said this week that all employees will be required to attest to their vaccination status. Those who are not vaccinated will be required to work remotely, which could potentially put their jobs at risk, since the bank's top executives have said they want everyone back in the office by September. “If you can go into a restaurant in New York City, you can come into the office,” said Morgan Stanley CEO James Gorman at an industry conference earlier this month. Morgan Stanley is one of several big banks requiring employees to return to the office and also provide documentation of having received a coronavirus vaccine or making a formal declaration confirming vaccination. Goldman Sachs required most of its employees to return to the office on June 14, with some exceptions extending that deadline to Sept. 30. It requires every employee to state their vaccine status, but does not require proof. JPMorgan is asking employees to submit their vaccination records as well, in the form of an internal portal. The return-to-office push has its roots in banking-industry culture.
Brookfield, Tishman Bet Billions on Workers Returning to Office
Brief: The pandemic has created a once-in-a-generation buying opportunity for investors willing to bet on the long-term prospects of workers returning to the hearts of global cities. That’s the view of real estate titans including Tishman Speyer Properties President Rob Speyer and Brookfield Asset Management Inc. Chief Executive Officer Bruce Flatt, who have invested billions snapping up discounted offices and other commercial buildings since the start of the pandemic. “There are extraordinary opportunistic things to buy in major cities around the world,” Speyer said during a panel at the Qatar Economic Forum Wednesday. “We have been active during Covid in Paris, in Washington D.C., in San Francisco, in London and people are just selling off real estate at 25%, 30%, 40% discounts.” Even as others fret about the future demand for workspace, Tishman has spent about $12 billion since March last year on deals it expects “to be some of the best investments we have ever made,” Speyer said. “If you have a long-term view of things reverting anywhere near where they were pre-Covid, these are generational buying opportunities.”
Brevan Howard Shuts Main Fund to New Cash as Fortunes Improve
Brief: Brevan Howard Asset Management has stopped accepting new cash into its two biggest multi-manager funds after the firm’s record year of performance swelled the money pools. Assets in the Brevan Howard Master Fund, its main strategy, have more than doubled since the start of last year to more than $7 billion, and the money manager wants to control the size to maintain returns, according to people with knowledge of the matter. The firm has also closed the Brevan Howard Alpha Strategies Master Fund to new investment for similar reasons, said the people, who asked not to be identified as the information is private. The move marks a change of fortunes for the macro trading firm, which up until three years ago was fighting to stem an exodus of client money after several years of mediocre returns. Total assets had collapsed to about $6 billion from more than $40 billion in 2013. They have since risen to about $16 billion, one of the people said. A spokesman for the Jersey, Channel Islands-based investment firm declined to comment.
Compliance Faced Rocky Start to 2021 as COVID Rolled On
Brief : COVID-19 remained a top concern for chief compliance officers in the first half of 2021 as they continued to confront the challenges of monitoring a remote work environment. In March, industry experts cautioned that compliance officers were stretched desperately thin amid the pandemic, a sentiment that was backed by industry research showing that compliance and legal teams were having trouble keeping pace with investigations and audits. The challenges felt no less daunting as President Joe Biden issued a series of orders and memos that outlined a stiffer regulatory agenda, beginning in January with his calls for "regulations that promote the public interest." Conservatives warned this could lead to "hyper-regulation." Experts suggested compliance departments undertake a wholesale review of compliance policies and procedures to consider the new president's priorities, a recommendation that was renewed more recently as sweeping new anti-money-laundering rules edged closer to reality and Biden issued a memo signaling an even tougher U.S. stance on anti-corruption. Experts say there has been a perfect storm of challenges for compliance teams to juggle. And there's been no shortage of compliance news so far this year as companies seek to navigate a radically different risk and regulatory environment.
Net Inflows of USD23.3bn in April put Hedge Fund Assets up Nearly 40 Per Cent Year-on-Year
Brief: Net Inflows of USD23.3 billion in April signaled a continued vote of investor confidence in the hedge fund industry. This result represented an increase in industry AUM of .6 per cent on the month and built momentum on the previous month’s USD19.1 billion increase in assets, according to the Barclay Fund Flow Indicator published by BarclayHedge. Industry trading profits exceeded USD55.5 billion in April and carried the industry’s aggregate AUM figure past the USD4.18 trillion mark. “In the midst of a brightening economic outlook across the globe, it might be easy to miss the fact that hedge funds have delivered four strong quarters in a row and through a pandemic, no less,” says Ben Crawford, Head of Research at Backstop BarclayHedge. “Yet when you put that fact into conversation with the stories about glowing economic forecasts, new equity market records and the arrival of an additional USD1.9 trillion in US stimulus — then you have a representative set of factors playing out.” The increase in net inflows was broad-based, with most fund sectors attracting new assets in April. The strongest activity was among Fixed Income hedge funds which reaped an estimated USD8.2 billion, followed closely by Multi-Strategy funds which added another USD7.1 billion.
A Discerning View on EMD Opportunities
Brief: The benefits of diversification have been highlighted in the past 18 months and in this context, institutional investor appetite for emerging markets has increased. As they hunt for returns in a low interest environment and seek to take advantage of dislocations resulting from the Covid-19 turbulence, investors and asset managers have underscored the role an allocation to developing markets can play within portfolios. Although investment in emerging markets typically represents greater levels of risk, the opportunity identified is currently considered worthwhile, according to managers and institutional investors. “Conditions for emerging market debt outperformance in 2021 appear to be in place. First, a global backdrop of steady, extended monetary accommodation, prospects of a large-scale deployment of Covid-19 vaccines, and, to a lesser extent, expectations of fiscal stimulus in the US, should boost the growth-sensitive segments of the asset class,” wrote the Morgan Stanley global fixed income team in an outlook briefing. “Therefore, high yield credit, emerging market FX and local currency high-yielders should outperform investment grade, which has less of a valuation cushion, and is vulnerable to potentially steepening yield curves in our opinion.”
