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Our briefing for Wednesday, October 27, 2021:
Oct 27, 2021 2:44:02 PM
- In the United States, Pfizer’s request to start vaccinating American children from 5-to-12 years of age cleared a significant hurdle on Tuesday. A panel of the U.S. Food and Drug Administration (FDA) voted by majority to back the drugmaker’s request. The next steps will likely involve the FDA formally authorizing the vaccine, followed by the Centers for Disease Control and Prevention (CDC) also weighing in with its own recommendations before inoculations can be rolled out. Seventeen members of the committee voted in favour of authorizing the shots while one abstained.
- In Canada, Conservative Leader Erin O’Toole met with his caucus on Wednesday to discuss what to do about its position around mandatory vaccinations, and what it means to members who may not be fully vaccinated. The issue is at the top of list for Conservatives as an all-party committee decided last week that all members of Canadian parliament need to be double vaccinated against COVID-19 or have a medical exemption to take their seat in the House of Commons. O’Toole refuses to disclose how many of his 118 members are fully vaccinated, but he also opposes any return to a hybrid Parliament, putting him in a tough position.
- The United Kingdom’s Rishi Sunak delivered his third budget since becoming Chancellor, announcing a £150 billion boost for government departments as the economy showed a better-than-expected recovery from the COVID-19 pandemic. The Chancellor also announced £2 billion to help families with the cost of living through changes to the Universal Credit and pledged to deliver lower taxes for working people by the end of Parliament in 2024. Sunak insisted the budget and three-year spending review for government departments set out a vision for post-pandemic Britain and would give families “the tools to build a better life for themselves”.
- In Brazil, the Senate committee voted 7-4 in favour of recommendations that President Jair Bolsonaro face a series of criminal indictments for actions and omissions related to the world’s 2nd largest death toll due to COVID-19. President Bolsonaro has denied any wrongdoing and as mentioned in Tuesday’s COVID-19 Diligence Briefing, it is unlikely prosecutor general, Augusto Aras, a Bolsonaro appointee, will file any charges against him. For what it’s worth, Aras’s office said the report would be carefully reviewed as soon as it was received.
- With Japan’s long ruling Liberal Democratic Party and its junior coalition partner expected to keep their parliamentary majority ahead of this Sunday’s general election, Prime Minister Fumio Kishida is already thinking long-term. The Japanese leader wants to draw up key economic proposals shortly after the election with the number one aim helping those who have suffered an economic hit from the coronavirus. Kishida, who only took office last month, has been busy trying to win Japanese voters over with his pledges on building a “new capitalism” in which economic growth will be spread more widely.
- Australian government officials announced on Wednesday they plan to lift a ban on citizens travelling overseas. As of November 1st, Home Affairs Minister Karen Andrews said fully vaccinated Australians will no longer have to seek an exemption to leave the country. The move marks an end to more than 18 months of Australia having its international borders closed. Andrews said Australian citizens are currently being prioritized but plans are in the works to ease more travel restrictions to include non-citizens as vaccination rates increase. Quarantine arrangements for returning vaccinated residents will depend on where they arrive in Australia.
Covid-19 – Due Diligence And Asset Management
Large Private Capital Firms Pioneer New Technology in the Industry
Brief: A majority (62 per cent) of private capital fund managers in the UK, Europe, North America and Asia will increase the amount of automation and new technologies used to administer their funds over the next five years.According to a new global study commissioned by Intertrust Group, of these, over two thirds (67 per cent) said they plan to invest in Big Data capabilities while just under two thirds (63 per cent) expect to invest in distributed ledgers such as blockchain.The study, The Future of Fund Technology, found that business size is key in shaping technology investment decisions. Nearly half (47 per cent) of those with AUM of USD3 billion or more stated that it is “very likely” that they will invest in more automation and tech over the next five years. A majority (90 per cent) said they were also more likely to pioneer new technologies and work to utilise new technological advances as soon as they become available.
Private Equity Racing to Close Deals, says new BDO Survey
Brief: Private equity fund managers are accelerating deal timelines in an effort to win bids, and more than half say uncovering risk during due diligence is a main challenge to closing deals, according to BDO’s Fall 2021 Private Capital Pulse Survey. The findings of the survey, which polled 200 US private equity fund managers, underscore the frenzied state of deal making. Forty-two per cent of fund managers say they are directing the most capital to new deals (up from 19 per cent a year ago and 26 per cent in the spring) and deal flow drivers are up across the board. Meanwhile, their pursuit of add-on acquisitions has fallen to 16 per cent from 24 per cent a year ago and 29 per cent in the spring. “To compensate for the slowdown in deal activity at the beginning of the pandemic, fund managers are racing to put committed capital to work and get deals done,” says Scott Hendon, Co-Leader of BDO’s National Private Equity practice. “Everything from private company sales to corporate divestitures is driving more deal flow. Add to that a healthy dose of external influences, such as a potential capital gains tax rate increase and a limited number of attractive targets to absorb all the dry powder on the sidelines, and you have a healthy amount of M&A deal activity—and competition—to contend with.”
Surveillance of Investment Switching by Super Fund Executives Identifies Concerns with Trustees’ Conflicts Arrangements
Brief: An ASIC surveillance about personal investment switching by directors and senior executives of superannuation trustees has identified concerns with trustees’ management of conflicts of interest. ASIC looked at a sample of 23 trustees (including trustees of industry and retail funds), and focused on conduct during the time of increased market volatility arising from the COVID-19 pandemic. Directors and senior executives of superannuation funds are potentially privy to price-sensitive valuation information. ASIC undertook this surveillance to look into concerns about whether fund executives were using this information for personal gain by switching investment options based on their knowledge of the timing of the revaluation of unlisted assets. The surveillance revealed conduct that fell below ASIC’s expectations. ASIC Commissioner Danielle Press said, ‘We expected superannuation trustees to have robust conflict of interest policies that dealt adequately with investment switching, including by their directors and executives. What we found instead was often a clear failure to identify investment switching as a source of potential conflict, resulting in a lack of restrictive measures and oversight to adequately counter this risk.
The Pandemic’s hit to Global Employment is Much Worse than Anticipated
Brief: The number of working hours lost due to the COVID-19 crisis will be “significantly higher” than projected just a few months ago, according to the International Labor Organization. In what it termed a “dramatic revision,” the Geneva-based group now estimates that global hours worked this year will be 4.3 per cent below their pre-pandemic level, the equivalent of 125 million full-time jobs. Africa, the Americas and Arab States were the regions that experienced the biggest declines. “A two-speed recovery between developed and developing nations threatens the global economy,” said the ILO, which had forecast a loss of 3.5 per cent in June. “This great divergence is largely driven by the major differences in the roll-out of vaccinations and fiscal stimulus packages.” The organization cited estimates showing that a full-time job was added to the global labour market for every 14 people fully vaccinated. “However, the highly uneven roll-out of vaccinations means that the positive effect was largest in high-income countries, negligible in lower-middle-income countries and almost zero in low-income countries,” it said.
Hedge Funds Defy Major Indices with Record Outperformance Last Month
Brief: Hedge funds protected investors in September, even as traditional investments suffered in last month’s declining markets. Almost every global equity market index lost ground in September. But PivotalPath’s composite index, which represents more than 40 hedge fund strategies, was up 0.1 percent for the month. That puts September’s outperformance of 4.7 percent, relative to the S&P 500’s decline of 4.6 percent, in the top 10 percent of all months since January 1998, according to the hedge fund research and data firm. Hedge funds also held their own as the Nasdaq declined 5.3 percent and the health care and technology sectors lost approximately 6 percent. Hedge funds have been on a good run. PivotalPath’s composite index, which includes all of the hedge fund strategies the firm tracks, was up 11.3 percent in 2020, its best year since 2013. Traditional long-only strategies were hit hard by fears of inflation, rising energy prices, and supply chain hiccups. “But as worries about inflation became frenzied, energy, utilities and industrials hedge fund strategies were the second-best performer for the month, exactly as predicted,” Jon Caplis, CEO of PivotalPath, told Institutional Investor. The energy, utilities, and industrials category was up 1.8 percent last month and was the fifth best performer of all 40 strategies covered by the firm.
