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Our briefing for Wednesday June 3, 2020:
Jun 3, 2020 3:45:42 PM
- One of the United States leading infectious disease experts struck an optimistic tone believing by early 2021, America will have “a couple of hundred million doses” of a vaccine for the coronavirus. Dr. Anthony Fauci, a key figure on the White House’s coronavirus task force granted an interview to the Journal of the American Medical Association on Tuesday and said four or five trials are underway for vaccine candidates. Many public health experts, including Dr. Fauci have said previously it could take 12 to 18 months to develop a vaccine.
- Canadian Prime Minister Justin Trudeau will continue making the case for a coordinated global response to the coronavirus pandemic in order to limit the impact on some of the world’s poorest countries. Prime Minister Trudeau was set to speak on Wednesday to leaders and heads of state during a virtual summit of the Organization of African, Caribbean and Pacific States (OACPS). Prime Minister Trudeau made a similar plea last week while co-hosting a United Nations summit, alongside the UN secretary general and Jamaican Prime Minister.
- United Kingdom Prime Minister Boris Johnson has defended the government’s decision to impose a 14-day quarantine for people arriving in the UK as of June 8th. Critics of the policy note it is pointless to impose a quarantine against arrivals from countries with much lower infection rates than the UK. Meanwhile, travel and hospitality sectors believe the quarantine will leave others looking for another travel destination, significantly hurting industries already reeling from the coronavirus pandemic. During a news conference on Wednesday, Prime Minister Johnson said his government would explore the possibilities of travel corridors with countries that had low rates of infection, but only when the evidence shows that it is safe to do so.
- Germany will lift the travel ban to 29 European countries as of June 15th. The ban currently in place will be changed to travel guidelines. For instance, while travel to the UK will be allowed, it will be recommended to avoid due to the country’s upcoming 14-day quarantine for any incoming travellers.
- Sweden’s state epidemiologist has admitted for the first time that the country should have imposed more restrictions to avoid having such a high death toll from the coronavirus. During an interview on Swedish radio, Anders Tegnell admitted, “[i]f we would encounter the same disease, with exactly what we know about it today, I think we would land midway between what Sweden did and what the rest of the world did.” Sweden’s government announced earlier in the week it would appoint a commission to investigate the country’s approach to the coronavirus before the summer. Sweden has had close to 4,500 deaths due to the coronavirus, a higher death rate than countries such as France or the United States.
- The Spanish parliament granted its sixth and last state of emergency to the government, which will expire on June 21st. Spain is now in its third month of an extended state of emergency, which gives the government continued authority to restrict movement across the country. Spain is currently in stage two of its three stage approach to lift coronavirus restrictions. Once in the third stage, the country’s 17 regional governments will have the power to determine the pace and course of how they emerge from the pandemic.
- In India, 100,000 people have been evacuated, including COVID-19 patients as the region is experiencing its first cyclone in more than a century. The Indian state of Maharashtra has been hit harder due to the coronavirus than any other state in India. A total of 72,300 cases and 2,465 deaths have been recorded in the state due to the coronavirus.
Covid-19 – Due Diligence And Asset Management
Private Equity Gets Trump Administration’s Nod to Tap 401Ks
Brief: Private-equity firms notched a major win in Washington with the Trump administration paving the way for the industry to tap a massive pot of money that has long been off limits: the trillions of dollars held in Americans’ retirement accounts. The Labor Department issued guidance Wednesday effectively allowing 401(k) plans to invest in buyout firms. The agency said the move will bolster investment options for consumers and let them access an asset class that can provide better returns than stocks and bonds. In a statement, Labor Secretary Eugene Scalia said the action “will help Americans saving for retirement gain access to alternative investments that often provide strong returns.” The announcement is a significant de-regulatory decision that private-equity lobbyists have sought for years. It is sure to face harsh criticism from consumer groups and progressive Democratic lawmakers, who argue that high-fee private equity firms are inappropriate for unsophisticated investors because the industry locks-up clients’ money for years and invests in businesses seen as far more risky than a plain-vanilla bond fund.
CQS Rocked by Pandemic Losses
Brief: The outsiders that Michael Hintze brought in to his secretive hedge fund firm didn't last long. Nor did their growth plans. The billionaire's firm, known as CQS, a bastion of money-making whose flagship fund has returned more than three times the average of hedge fund peers since it opened in 2005, is now headed in reverse. The Hintze-managed fund plunged as much as 45% in March and April — its worst-ever loss — missing the rebound that followed the initial shock from the coronavirus pandemic even as peers recovered to post gains in April. More than $3 billion of assets were erased, leaving the firm with $16 billion. And that doesn't include potential withdrawals from the fund's clients, who are required to give six months' notice. "It's going to be very difficult for them to attract new assets," said Don Steinbrugge, head of Agecroft Partners, a Richmond, Va.-based consultant that helps hedge funds gather assets. "If I was an existing investor, I would be concerned about significant redemptions from the fund over time, which could potentially cause the quality of the fund to erode."
Hong Kong Hedge Fund Offers 100% Coverage on Losses. For a Fee
Brief: A Hong Kong hedge fund is offering to cover 100% of any losses in a bid to attract investors that have been avoiding the sector amid the Covid-19 pandemic. Infini Capital Management Ltd. is gauging investor interest for full loss insurance on a new class of shares in a fund it launched last year. In exchange, the firm would charge a performance fee as high as 50%, more than double the industry standard. Although Infini says the offer isn’t linked to growing tension in Hong Kong sparked by China’s new security law, it shows the extent to which hedge funds are willing to boost enticements to attract fresh money. Investors yanked $31 billion in the first four months from the global hedge fund industry as the spread of the Covid-19 virus triggered market selloffs in March and led to the worst monthly performance since the 2008 global financial crisis, according to eVestment. Capital raising has been especially challenging for younger funds. “This offering is to hopefully get some investors over the edge who might still have some concerns about being an early investor in Infini,” Chief Operating Officer Michael Friedlander said in an interview.
Covid-19: How Fund Managers Mitigated Systemic Risks
Brief: Once considered damaging for fund manager reputations, liquidity management tools - such as redemptions on restrictions - have gained further acceptance amid the Covid-19 crisis. And what’s more, these tools have slowed the spread of market contagion, says Xavier Parain, CEO of FundRock Management Company. The Covid-19 crisis has changed so much about daily and commercial life - and the fund management industry is no exception. Business continuity plans and procedures - tested more frequently than ever implemented in the past - have been deployed universally. Portfolio managers, risk officers, due diligence professionals and others immediately and seamlessly transitioned to working from home, crucially, without any major impact for investors. This crisis has caused a rethink on redemption restrictions and other liquidity management tools. As the global financial crisis (GFC) of 2007-2008 reminded us, a “run” on a financial institution takes different forms and frequently occurs hidden from public sight.
Fiera Capital Chief Optimistic COVID-19 Vaccine Can be Found in Next 12 Months
Brief: Quebec’s largest independent asset manager is ready to bet one or more COVID-19 treatments will be found in the next 12 months, pushing global stock markets higher. Fiera Capital chief executive officer Jean-Guy Desjardins says there’s an almost two-thirds probability that a vaccine will be found by June 2021. In the meantime, odds are that an existing drug can lessen COVID-19’s effects and reduce mortality rates, said Desjardins, a veteran money manager who founded Montreal-based Fiera in 2003 and counts four decades of experience in the investment industry. After plunging in March amid the pandemic’s global spread, stock markets in North America and elsewhere have rebounded on optimism over a second-half economic recovery. Canada’s benchmark S&P/TSX Composite Index has gained more than 30 per cent since hitting a multiyear low in late March, though it’s still down about 10 per cent for the year.
The II Fear Index: No Business-as-Usual Anytime Soon
Brief: Around the world, businesses are beginning to reopen from the coronavirus pandemic. But asset owners and investment managers won’t be returning to normal anytime soon, according to the latest II Fear Index. Institutional investors participating in the weekly poll broadly indicated they would continue to stay home for at least the next month, with just 15 percent planning to return to the office in June. However, a majority believed they would be back at their workplace by fall: Thirty percent said day-to-day office work would resume in July or August, while another 30 percent predicted it would happen in September or October. There was less consensus on the subject of in-person meetings. While the highest proportion — 31 percent — indicated they would begin meeting with clients or asset managers in September or October, another 28 percent anticipated that they would not have any face-to-face meetings until 2021. Respondents were least optimistic on the prospects of business travel, with the plurality — 38 percent — predicting they would not resume traveling for work until next year.
