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Brief: Hg will soon stop accepting new money for three of its buyout funds after raising $11 billion for its largest ever pool of capital, according to people familiar with the matter. The U.K.-based private equity firm, which focuses on software and service businesses, will divide as much as $10 billion equally between its second large-cap fund, known as Saturn, and its ninth mid-cap fund, known as Genesis, said the people, who asked not to be identified discussing private information. An additional $1.5 billion has been raised for the firm’s third small-cap fund called Mercury, the people said. Hg’s first investment from Saturn will go to increasing its stake in Norwegian cloud software developer Visma Group, the people said. Last April, private equity firm Cinven Group sold its stake in Visma to Hg and co-investors, valuing the business at more than 6.5 billion euros ($7 billion) at the time. Hg has been invested in Visma since 2006 when it led the company’s delisting from the Oslo Stock Exchange.
Brief: Scott Minerd, the chief investment officer of Guggenheim Investments, thinks that government support of corporate America in the wake of the coronavirus pandemic will ultimately lead to the creation of a “new moral obligation” to help U.S. companies access credit. “Corporate borrowers are most likely on the way to becoming something akin to government-sponsored enterprises like Fannie Mae and Freddie Mac,” he wrote in a note dated May 10. “Many companies, including Boeing, Southwest, and Hyatt Hotels, have likely gained access to financing simply on the strength of the government’s intentions to intervene in credit markets.” Minerd, who on Friday warned that markets were sending a clear message that negative rates would soon be here, said he thought yields on 10-year Treasury notes could fall to -50 basis points in the intermediate term.
Brief: The Federal Reserve’s giant programme of corporate bond buying is about to kick in. It will hand a critical new role in propping the struggling economy to a business with increasing clout in the financial world: money management. The central bank has tapped BlackRock to help it direct money into both new and already issued corporate bonds, assisting the Fed in its recently adopted role as lender of last resort for businesses. The Fed is expected to launch the programme in coming days. The Fed also has given Pacific Investment Management Co., or Pimco, the job of helping it purchase commercial paper, or companies’ short-term borrowings. That programme is already up and running. The two firms could eventually invest hundreds of billions of central bank dollars.
Brief: Once airports and borders open again and people are able to fly freely — a process already in play as airports of all sizes around the world ready strategies to ensure healthy air travel — how much are you ready to change your flying habits? As much as was required after 9/11? Less? More? Considering some of the changes already happening and the many more recommended before airports can reopen safely to commercial routes, experts are referring to the coronavirus pandemic as ‘the new terrorism,’ triggering the biggest crisis the airline industry has ever faced. Let’s start with the entire process of checking in for flights, which some calculate that it could take up to four hours and involving social distancing, sanitation of passengers and luggage, wider spaces for various lines and waiting to board. Nine out of 10 experts expect slower turnarounds between flights due to the need of thorough cleaning of cabins and following of sanitary measures at airports.
Brief: Private-equity firm Carlyle Group Inc. and Singapore sovereign-wealth fund GIC Pte. Ltd. are backing away from a deal to take a 20% stake in American Express Global Business Travel, whose revenue has plummeted as a result of the coronavirus pandemic, according to people familiar with the matter.The deal, announced in December, values the company at $5 billion including debt. It was scheduled to close Thursday but representatives for Carlyle and GIC informed AmEx Global Business Travel on Wednesday they wouldn't participate in the closing, the people said. AmEx Global Business Travel, which is 50%-owned by American Express Co., offers airfare and hotel-booking services mostly to large and midsize businesses. In 2014 the credit-card giant sold the other half to a group led by investment firm Certares. Carlyle and GIC, along with a group of others, agreed to purchase a portion of that stake last year.An entity acting on behalf of the sellers filed a motion this past week in Delaware Chancery Court against Carlyle and GIC, calling for it to compel the duo to proceed with the purchase.
Brief: CQS is facing its worst crisis since Michael Hintze founded the London-based credit-driven multistrategy firm in 1999. At least three of its funds are among the worst-performing hedge funds this year after posting massive losses in March alone, when the global financial markets were in free fall. Other funds have posted smaller declines. These huge losses have raised questions about the future direction of the firm, which was managing $20 billion at the beginning of the year. In March alone, the CQS Directional Opportunities Fund, which Hintze manages himself, lost more than 33 percent, according to a document from investment bank HSBC that tracks hedge fund returns. As a result, it was down 35 percent for the quarter.
Brief: Indian credit risk funds suffered large redemptions in April after Franklin Templeton’s shock decision to wind up $4.1 billion of such plans triggered fresh turbulence in the nation’s debt market. The category saw a net withdrawals of 192 billion rupees ($2.5 billion) last month, up from outflows of 55.7 billion rupees in March, according to data released Friday by the Association of Mutual Funds in India. “The Franklin event intensified redemptions in credit funds that we saw in March,” said Vidya Bala, head of research and co-founder at Chennai-based Primeinvestor.in. “There’s a clear flight to safety as flows to gilt funds have jumped and a good chunk would have moved to deposits.” Equity funds received a net 62.1 billion rupees, the smallest inflow this year, as the world’s most expansive lockdown to curb the spread of coronavirus infections stalled economic activity and disrupted processes at mutual funds and their distributors.
Brief: Macquarie Group chief executive Shemara Wikramanayake has signalled the bank could pounce on assets that come up for sale in the pandemic crisis, after slashing dividends and warning of a highly uncertain outlook. As the banking group on Friday delivered an 8 per cent slide in profit to $2.7 billion, it also highlighted a strong balance sheet and $20 billion in "dry powder" for investment by its infrastructure-focused managed funds. Markets cheered the result, with Macquarie shares gaining 5.7 per cent to $105.19 amid predictions the bank would emerge from the crisis in relatively good shape, despite taking a short-term hit. The company known as the "Millionaires' Factory" on Friday also released its remuneration report for the financial year, which showed Ms Wikramanayake was awarded $18.1 million for the year, her first full 12 months as CEO, up from $17 million last year. She was not the highest paid senior executive at Macquarie, with head of Macquarie Asset Management Martin Stanley awarded $18.9 million for the year after a surge in profit in his division.
Brief: Bondholders in one of Sweden’s biggest property firms say they fear their investment might soon be labeled junk after learning of a criminal probe with wide-reaching ramifications. The company in question is Samhallsbyggnadsbolaget i Norden AB, also known as SBB. Its chief executive, Ilija Batljan, was this week detained by police for questioning amid reports of insider trading tied to a recent acquisition. The news sent SBB’s share price and bonds plunging. The episode has struck a nerve in a market already shaken by panic selling. Back in March, 35 credit funds slammed shut to halt a client exodus as the bond market tanked. Real estate bonds played a big role in the rout, and the financial watchdog has since signaled concern over the sector’s dominance in credit markets, following its conspicuous growth.
Brief: Brookfield Asset Management Inc. (“Brookfield”) (TSX: BAM.A, NYSE: BAM) today announced the launch of a Retail Revitalization Program (“the Program”) to bring much needed capital and assist with the recapitalization of retail businesses with operations in the major markets in which Brookfield operates globally. The Program, which will be funded by Brookfield and its institutional partners, will focus on non-control investments in retail businesses to assist with their capital needs during this period of dislocation. Brookfield is targeting $5 billion to be put toward this Program. This Program will be led by Ron Bloom, Managing Partner and Vice Chairman of Brookfield’s Private Equity Group, who was a principal architect of the restructuring and rejuvenation of the automobile industry on behalf of the U.S. government during the 2008 financial crisis. “This initiative is being designed to assist medium sized enterprises in getting back on their feet. We believe this is a critical component to getting the economy moving again, and we would like to partner with companies and entrepreneurs that can draw on our capital and expertise to stabilize and grow their business,” stated Bloom.
Brief: The Covid-19 pandemic has sparked dramatic changes to the wealth management industry, making clients more cautious, more digitally savvy and more interested in sustainable investments, according to a UBS Group AG executive in Hong Kong. “The whole pandemic has transformed the business and also the way we operate,” said Amy Lo, co-head of Asia Pacific wealth for the Swiss bank. “The world has become more digital, less global and more local.” Lo says clients across the region have become more cautious, concerned about preserving their wealth and re-balancing portfolios as the global economy heads into its steepest contraction since the Great Depression. “Diversify and navigate volatility,” is the goal for many clients, said Lo, whose firm manages more than $400 billion in the region. UBS’s investments in its digital platform are paying dividends amid the pandemic, allowing clients to interact with the bank through online conferences, chats, and trading, she said.
Brief: Amundi, Europe's largest listed asset manager, has lifted a hiring freeze it imposed shortly after the onset of the coronavirus pandemic, making it one of the first major investment firms to ease recruitment related restrictions. A spokesperson for the Paris-headquartered asset manager, which put a hold on making new hires globally at the end of March, toldFinancial Newsit has "resumed recruitment on a case-by-case basis". Amundi, which employs around 4,500 people and manages €1.5tn globally, previously told FNthat the onset of the Covid-19 outbreak and subsequent government containment measures put in place hadprompted it to pause new hires. The lifting of Amundi's hiring freeze comes as predictions point to an uncertain future for those working in the financial services sector. According torecent figures from recruitment firm Morgan McKinley, jobs available in the City have dropped by 51% since March 2019 – a drop which has coincided with the onset of the Covid-19 pandemic.
Brief: Hedge funds rose 4.2% in April, the most in data going back to January 2014, as U.S. stocks rebounded to their best return in more than 30 years. Equity managers led the gains, posting a 6.5% advance in the month, according to preliminary figures from the Bloomberg Hedge Fund Indices. So far this year, hedge funds are down 6.7%. That still has outpaced the S&P 500 Index, which sunk about 9% for the first four months of the year, including reinvested dividends, as the coronavirus outbreak and measures to contain it rocked global markets. But equities were less volatile in April, with the S&P 500 jumping almost 13% -- its best month since 1987.
Brief: Neiman Marcus Group Inc. filed for bankruptcy after efforts to manage its crushing debt load unraveled amid the spreading coronavirus pandemic. Creditors will take control of the luxury department store chain, according to plans outlined in a Chapter 11 petition filed in Houston. The move gives the Dallas-based chain a break by letting it stay in business while management works out a recovery plan. The company, led by Chief Executive Officer Geoffroy van Raemdonck, said it has support from a substantial majority of its creditors, who agreed to put up $675 million to get Neiman Marcus through the court process. They’ll also provide $750 million in exit financing. When the company emerges from bankruptcy in early autumn, management expects to see about $4 billion cut from its existing debt load -- the legacy of a 2013 leveraged buyout by current owners Ares Management Corp. and the Canada Pension Plan Investment Board. Neiman listed debt obligations of about $5.5 billion in its filing.
Brief: Legendary trader Paul Tudor Jones is reportedly buying bitcoin as an inflation hedge as central banks around the globe print money to relieve coronavirus-battered economies.Jones, one of Wall Street’s most-successful and seasoned hedge fund managers, revealed in a message that one of his funds holds a low single-digit percentage infutures on the cryptocurrency, Bloomberg Newsreported. He compared it to the gold trade in the 1970s, according to the report. Bitcoin futures trading on the CME jumped 5% on Thursday. Jones, founder and chief executive at Tudor Investment Corp., told CNBC in March thathe thought the stock market could be higher by Juneif coronavirus cases began to peak. The investor said at the time that he expected stocks to endure a choppy April but that, ultimately, equities would again climb.
Brief: JPMorgan could join the ranks of big investment banks shrinking their office space as its investment banking boss predicts a portion of its staff may continue to work from home after the coronavirus crisis. Daniel Pinto, who runs JPMorgan's corporate and investment bank, told Citigroup analysts that he could "envision a scenario" where employees continue to work from home on a rotational basis, according to a note seen by Financial News, as the coronavirus looks set to permanently impact how large financial services organisations work. Pinto suggested that such a move would fall in line with the bank's sustainability targets "as well as reducing square footage" of its office space. He cautioned that the bank would need new methods of measuring employees productivity in such a scenario. Around 90% of JPMorgan's corporate and investment bank employees are currently working from home - compared to a firmwide figure of 75% - and the experience could change the way the bank does business, the note said.
Brief: Conduct issues created by home working with a flatmate who works for a competitor firm has become such a worry for financial services firms that employees' living conditions could be scrutinised in the future, according to KPMG’s vice chair for financial services Kay Swinburne. Swinburne made the comments about conduct issues emerging as a result of homeworking during the coronavirus lockdown, at the City Week Covid-19 Operational resilience for financial institutions webinar series on May 5. “We’re also finding some very strange ones where you suddenly realise there are people sharing houses in a way that normally wouldn’t cause difficulty,” Swinburne said. “If you have several young investment bankers sharing a house in Chelsea it’s a problem when they’re trading portfolios they shouldn’t have knowledge of.”
Brief: Goldman Sachs is in talks to buy a big portfolio of company stakes being sold by the asset manager Invesco in a race to shift illiquid holdings whose value has been hit by the coronavirus pandemic. Sky News can reveal that a unit of Goldman Sachs Asset Management (GSAM) is closing in on a deal to acquire the positions, which include a holding in Oxford Nanopore, a gene sequencing specialist. City sources said that an agreement to buy the private company stakes, which are nominally valued at hundreds of millions of pounds, could be finalised within weeks. One added that a team within GSAM which manages private equity portfolios was leading the transaction at the Wall Street giant.
Brief: BlackRock Inc. Chief Executive Officer Larry Fink had a stark message for a private audience: As bad as things have been for corporate America in recent weeks, they’re likely to get worse. Mass bankruptcies, empty planes, cautious consumers and an increase in the corporate tax rate to as high as 29% were part of a vision Fink sketched out on a call this week. The message from the leader of the world’s biggest asset manager contrasts with the ebullient tones of a stock market that has snapped back from recent lows. Even among Wall Street luminaries, Fink speaks with particular clout. He has been advising President Donald Trump on how to navigate the effects of the coronavirus pandemic. And BlackRock is playing a key role in the Federal Reserve’s efforts to stabilize markets, helping the central bank buy billions of dollars in assets.
Brief: City grandee Lord Blackwell has called for leniency from the UK's regulators as financial services workers navigate the "great pressure" of the Covid-19 crisis. Lord Blackwell, the chairman of Lloyds Banking Group, said staff at the UK lender "are having to make many decisions under great pressure every day": "My... ask of regulators is to recognise that, under this pressure, some of our colleagues, while trying their hardest, may not get every detail of the compliance requirements right and to be tolerant of some errors so long as bank staff are genuinely trying to do the right thing," he said, during a session of the City Week Covid-19 Webinar series on May 6. His comments come as UK banks facecalls to speed up lending to businessesunder the UK government's various coronavirus business interruption schemes, introduced to help companies weather the coronavirus crisis.
Brief: The wild swings in market volatility has been a blessing for many hedge funds this year. But for others, it's been a curse. The Cboe Volatility index, the fear tracker known as the Vix, has more than halved in the six weeks since it hit an all-time high on 16 March. Long-volatility funds have reaped big rewards — the Cboe Eurekahedge Long Volatility Hedge Fund Index returned about 40% in the first three months of 2020. Yet systematic volatility-focused hedge funds, which theoretically should be profiting at times like these, have instead endured performance meltdowns. In March, 9 out of the 38 volatility and options funds ranked in Société Générale’s Nelson Report, published last week, posted declines. Losers include Chicago-based hedge fund Wolverine Asset Management. Named after the fictional co-leader of the X-Men superhero team in Marvel Comics, Wolverine has lately more resembled Dr. Doom. The firm's volatility-focused Wolverine Intrinsic Fund was down 13.7% in March and 12% in the first quarter, according to the Nelson Report.
Brief: Natixis SA joined its French peers in taking a hit from equities trading as market turmoil and dividend cancellations following the outbreak of the coronavirus forced it to mark down assets. Equities trading revenue was more than erased by a 130 million-euro ($140 million) writedown when companies started to pull their dividends, contributing to a 204 million-euro net loss for the first quarter. Income from debt trading rose 46%, the bank said late Wednesday, beating peers BNP Paribas SA and Société Générale SA as well as the Wall Street average. The quarter ends a brief respite for Chief Executive Officer Francois Riahi, who had been trying to draw a line under a series of missteps since taking over in June 2018, including trading losses on Korean securities, a liquidity scare at its H2O Asset Management subsidiary and oversight problems. The bank put aside 193 million euros for credit losses, mainly to account for loans to oil and gas companies.
Brief: One of Canada’s biggest money managers is freezing redemptions in a large debt fund and warning that some borrowers may miss interest payments. Fiera Capital Corp. has called investors to inform them it has gated its Diversified Lending Fund, which has about C$1.5 billion ($1.1 billion) under management, according to people familiar with the situation. The fund is managed by chief investment officer Francois Bourdon and two others. The fund invests in the residential and commercial construction sector through limited partnerships (LPs) with various partners that specialize in lending solutions. The fund also puts money into partnerships that offer private loans to companies and other types of loans.
Brief: Ken Griffin’s Citadel will allow investors to pull a total of $1 billion from its main hedge funds without incurring fees or penalties, a sign that clients are grappling with the economic fallout from the coronavirus pandemic. The move, an exception from the firm’s usual practice, is aimed at providing relief to those invested in Citadel’s flagship Wellington and Kensington funds, according to an investor letter seen by Bloomberg. Such clients are primarily institutions like pension funds. Citadel manages about $30 billion. “In the wake of the unprecedented conditions created by the Covid-19 pandemic, we recognize that our investors may have different capital needs, both in size and timing, than originally anticipated at the beginning of the year,” according to the Citadel letter dated Monday. “In response to these potential demands, we are offering $1 billion of additional liquidity to investors in our multi-strategy funds on June 30, 2020 without being subject to any redemption fees or other restrictions.”
Brief: Goldman Sachs Group Inc is working on a strategy to gradually return staff to working in offices worldwide, the bank’s chief executive told staff on Tuesday in an internal memo viewed by Reuters. Goldman Sachs staff in Hong Kong, mainland China, Sweden and Israel have already started returning to work in phases, according to the memo, which was verified by a Goldman spokeswoman. “However, in certain cities, such as New York and London, it will take longer before we start to slowly increase the number of people in our offices,” stated the memo, which was signed by Chief Executive Officer David Solomon, President John Waldron and Chief Financial Officer Stephen Scherr.
Brief: The thought of a single banker spilling company secrets on a personal phone is a compliance worker’s worst nightmare. The Covid-19 lockdown and the sudden surge in makeshift home-working setups has multiplied those fears by hundreds of thousands. The coronavirus outbreak is taking its toll on the City’s compliance workers tasked with tracking the behaviour of employees scattered throughout the UK. The crisis has placed huge pressure on already stretched financial services compliance teams to get the right systems and controls in place. And it’s reigniting old tensions with bankers in the front line. Financial News spoke with several senior compliance officers and traders. All asked to remain anonymous to avoid a backlash from their colleagues or regulators.
Brief: Sycamore Partners was all set to acquire a majority stake in Victoria's Secret. For the lingerie brand's parent company L Brands, it was all part of the plan to spin off one of its most recognizable properties.But now, after a global pandemic and a lawsuit filing, the deal with Sycamore has officially fallen apart, according to a statement retail holding company L Brands sent out Monday In a statement sent to Business Insider, L Brands announced that it had come to a "mutual agreement" with Sycamore to "terminate" the company's previously agreed-upon sale of Victoria's Secret. Private equity firm Sycamore Partners had previously been interested in acquiring a 55% stake in the apparel and lingerie brand for $525 million. The private equity firm valued Victoria's Secret at $1.1 billion in February.
Brief: The market convulsions caused by the coronavirus pandemic and efforts to halt its spread might offer some answers to one of fund managers’ biggest questions: What’s the affect on financial performance of investing in companies that make a positive contribution to society and the environment? Allianz Global Investors, which oversees about $615 billion for clients, offered some insights with an analysis of how its sustainable and responsible investment mutual funds performed. The asset manager reviewed the “downturn resilience” of its funds and found that the vast majority of its sustainable strategies outperformed broad market benchmarks in the first quarter. In the past decade, fund managers who consider environmental, social and governance issues alongside regular financial metrics have gone from outliers to the mainstream with more than $30 trillion of assets now managed using a broad definition of the ESG approach.
Brief: Hong Kong’s wealth fund suffered a HK$86.1 billion ($11 billion) loss in the first quarter, its biggest ever, as stocks tumbled globally. The Exchange Fund, managed in its current form by the Hong Kong Monetary Authority since 1998, lost HK$111.5 billion on its portfolio of domestic and foreign stocks, while bonds gained HK$54.4 billion in the quarter, according to a presentation by HKMA Deputy Chief Executive Howard Lee to lawmakers Monday. The HK$4 trillion fund acts as a backstop to ensure the stability of Hong Kong’s currency and as a stabilizer in times of crisis. It joins other funds around the world in posting losses at the start of the year as markets tumbled due to the coronavirus outbreak. The MSCI global stock index slumped 22% in the first three months of the year. The fund clawed back some losses in April, seeing gains of about HK$30 billion to HK$40 billion, according to Lee.
Brief: Michel Andre Heller is looking to lend when credit is tight. The London-based real estate adviser to a billionaire family from the Middle East is lining up deals of as much as 5 million pounds ($6.2 million) for U.K. residential developments and more than double that amount alongside other investors for bigger properties, such as hotels or offices. The private debt market “is more than trickling along for us,” Heller said. “From a family office perspective, you don’t want to take on too much risk, but you still want to deploy capital.” As the coronavirus upends financial markets, family offices with money to spend are boosting private debt and credit holdings to take advantage of cheaper valuations and avoid the volatility of stock markets. Meanwhile, central banks are keeping economies afloat with cheap-money policies and negative yields, making assets that used to preserve and grow family fortunes less effective.
Brief: Hedge funds have seen their net stock exposures jump to the highest in at least three years in a spate of short covering and bullish bets on cyclical companies. U.S. long-short funds have assumed a more risk-on posture amid the $4.6 trillion trough-to-peak rally across some of the industries most exposed to the coronavirus fallout, according to Credit Suisse Group AG. The data through April 30 sheds light on how professional speculators are tip-toeing back into the likes of financials and industrials which have been trading at multi-year discounts. Now, violent rotations between riskier equities and defensive names could inject fresh pain on this breed of stock picker. The S&P 500 is heading for a three-session slump led by cyclical sectors following a barrage of poor data and renewed U.S.-China tensions. Fund managers are grappling with “the opposing pulls of deteriorating fundamentals set against Fed-inspired optimism,” said Mark Connors, global head of risk advisory at Credit Suisse, in a report dated Friday.
Brief: Most private equity firms are currently concerned about restructuring costs and re-engineering their portfolios impacted by the coronavirus pandemic, however a new survey suggests deal activity can restart in three months’ time. Nearly 90% of buyout groups said they expect to deploy capital in the next three to six months, responding to a survey by consultancy firm New Street Group. But for now they are working on shoring up their holdings’ balance sheets. More than 70% of respondents to New Street said they plan on investing into their existing portfolio. Meanwhile, a failure to source funding and increasing pressure to meet operating expenses is expected to lead to a rise in demand for specialists. New Street said it is likely that firms will look to bring on chief restructuring officers and other CFOs who can restructure companies.
Brief: Is Wall Street blind? The global economy is in shambles, the coronavirus pandemic has killed more than 237,000 worldwide and 30 million Americans have lost their jobs as collateral damage in the fight against COVID-19, with the tallies all rising by the day. Yet, the U.S stock market just rocketed to its best month in a generation. While it’s most definitely wild, Wall Street is also a collection of investors who are continually looking ahead, setting prices for stocks at the moment based on where they expect corporate profits and the economy will be a quarter or two into the future. From February into late March, investors sent the S&P 500 down by nearly 34%, anticipating that the number of jobless workers would explode and the economy would tumble into recession. Then in April, as gruesome economic figures confirmed those fears, investors instead focused on a few strands of optimism for the future.
Brief: Asset owners and money managers are adapting their engagement efforts as the workers and suppliers of their portfolio companies feel the impact of the coronavirus crisis. Investors said they have refocused their engagement activities to ensure that executives at their portfolio companies are protecting the health and the safety of workers and are not, for example, keeping non-essential employees at retail, office or even mining sites unnecessarily. Investors added they are putting pressure on top executives to continue to employ workers and honor existing contracts by paying for goods already produced to keep smaller suppliers in business. Some asset owners are working with portfolio company executives to help them access governmental loans and subsidies for workers who have been furloughed.
Brief: Chicago Equity Partnersis closing and returning assets to its institutional clientele. The active manager is in the process of winding down the firm's operations, although a timetable for the firm's closure has not been set, said Daniel Gagnier, a spokesman for the firm. Chicago Equity Partners publicly announced the move in an April 17 update to its SEC ADV filing noting that "CEP has decided to wind up its operations, including liquidating all private funds. CEP has notified its clients of its decision and provided a description of the process." Affiliated Managers Group acquired a 60% stake in CEP in October of 2006. AMG spokesman Jonathan Freedman declined to comment.
Brief: Unless you’re the Governor of Georgia, you know we are not going back to normal. But where are we going? If you’re an allocator, probably nowhere. Contrary to the beliefs of some right-wing ideologs, Covid-19 is highly contagious and is killing people. It will continue to kill people for some time. I begin with the assumption that Boards of Trustees and sponsoring organizations recognize that a critical part of their fiduciary duty is to ensure the people to whom they have delegated the management and administration of their pool of beneficial assets are fully not dead. This means they must be healthy. Given the current pandemic and its long tail, I cannot imagine a Board or Trustees or sponsor permitting its CIO and investment staff to participate in non-essential external business meetings.
Brief: President Donald Trump is exploring blocking a government retirement fund from investing in Chinese equities considered a national security risk, a person familiar with the internal deliberations said. The Thrift Savings Plan -- the federal government’s retirement savings fund -- is scheduled to transfer roughly $50 billion of its international fund to mirror an MSCI All Country World Index, which captures emerging markets, including China. The Federal Retirement Thrift Investment Board overseeing the fund made a decision in 2017 that the money should be moved by mid-2020. Opponents of the transfer in recent weeks have engaged in a last-minute effort to stop it.
Brief: Apollo Global Management Inc. faces the prospect of having to hand back earlier profits from several of its funds as its holdings were hit hard by the economic fallout from the coronavirus pandemic. The firm, together with some current and former employees and partners, were potentially on the hook to give back $965.4 million in profit taken as of the end of March, New York-based Apollo said Friday. Apollo is the first major alternative asset manager to suggest it may have to pay back profits, known as clawbacks -- a possible harbinger for an industry that’s thrived over the past decade. Many of its biggest bets have been on economic bellwethers such as the travel, energy and retail sectors that have been devastated by the outbreak.
Brief: Options investors are preparing for more volatility ahead despite last month’s sharp rebound in U.S. stocks, reflecting doubts that markets will be quick to return to their former highs in the middle of the coronavirus pandemic. Market turbulence has plunged alongside stocks' climb since late March, with the Cboe Volatility Index , known as "Wall Street's fear gauge," last at 37.19 on Friday after peaking above 80 in mid-March. The S&P 500.SPXrose 12.7% in April, its biggest monthly percentage gain since 1987, and has climbed more than 27% from its March 23 closing low.In another bullish sign, the front end of the S&P 500 volatility term structure, which plots volatility expectations over time, is no longer inverted, suggesting that worries over a near-term stock reversal are subsiding.
Brief: Pershing Square CEO Bill Ackman’s “very negative view” and “good sense of timing” powered the firm’s stellar USD2.6 billion gain last month but the high-profile activist hedge fund manager does not fear a protracted 1930s-style depression as a result of the Covid-19 shutdown. Pershing Square Capital generated the remarkable return in March with a USD27 million credit hedge as the impact of the coronavirus pandemic sent global markets into a tailspin. In a podcast interview released this week, Ackman explained how growing concerns over the Covid-19 spread early in the year, and the subsequent economic implications of the US shutdown, formed the basis of his lucrative bet.
Brief: A UBS consulting unit's advice to clients on returning to work gives an eye-opening road map for how the new normal in City working life might play out. A 13-page document put together by UBS's Capital and Consulting services division, seen by Financial News, recommends that firms come back to work in phases, prioritising key employees over others. Top of the list are traders, which are in the “highest operational risk category”, it said. While UBS's unit advises hedge funds, it lays out a model for returning to work in the wake of the pandemic that could be applied to any financial services organisation. Traders, portfolio managers and analysts should be brought back into the office during what the document describes as "risk level two", when new cases of Covid-19 have been trending down for two weeks, schools re-open or some lockdown restrictions are lifted.
Brief: Fulcrum Asset Management, the multi-asset £5bn investment manager co-founded by former Goldman Sachs partners Gavyn Davies and Andrew Stevens, is reaping gains from riding the coronavirus-driven market turbulence. Fulcrum's flagship Diversified Absolute Return fund was up 7.5% until 20 April, according to a person familiar with the situation. While much of that gain came off the spike in volatility in March, Fulcrum CIO Suhail Shaikh told Financial News it capitalised on active "tailwind" hedging choices which included so-called dispersion strategies, or capitalising on differences in volatility between an index and index component stocks. The fund is also trading in gold and currencies.
Brief: Amundi, Europe's largest asset manager, said its assets under management dropped by more than 7% during the first three months of the year due to onset of volatile markets prompted by the Covid-19 pandemic. According to its 30 April first quarter results, assets under management at the Paris-headquartered fund manager fell to €1.53tn at the end of March, down from €1.65tn at the end of last year — a drop which Amundi attributed to “a significant negative market effect at the end of March”. Outflows were heaviest across Amundi's institutional and corporate clients, which pulled a net €15.4bn during the quarter in what chief executive Yves Perrier called “crisis-related outflows”. However, more than €12bn of new money coming from retail clients and Amundi’s joint ventures helped limit total net outflows across the group to €3.2bn between January and the end of March.
Brief: Stephen Lansdown is paring his stake in Hargreaves Lansdown Plc, the financial firm he co-founded with fellow British billionaire Peter Hargreaves, to support other investments and give him the flexibility to pursue new ones. “Markets are defying a little bit of gravity at the moment, so I thought if I could see the opportunity to take some off it the table I would -- to spread the risk,” Lansdown, 67, said in a phone interview, referring to the sharp rebound in equities from their March lows. “We’re not out of the woods yet and won’t be for a long time, and you need to keep your powder dry to support what you’ve got and to take advantage of opportunities. It’s all about positioning.” A Guernsey-based company that Lansdown controls sold 160 million pounds ($202 million) of shares of Hargreaves Lansdown in an accelerated offering through Barclays Plc, according to terms seen by Bloomberg. He has sold more than $550 million of stock over the past five years, leaving him with a 7% stake worth about $600 million.
Brief: Goldman Sachs Group Inc (GS.N) said on Thursday that 71% of shareholders voted to approve the bank’s executive pay packages, according to preliminary tallies. The vote, taken at the bank’s annual shareholder meeting, is significant, as it comes after the influential proxy adviser Institutional Shareholder Services (ISS) recommended investors cast their votes against the pay of top bank leaders earlier this month. Early in the meeting, which was conducted by conference call online, bank director M. Michele Burns defended the board’s reasoning for executive compensation. The board awarded Chief Executive David Solomon $24.7 million for 2019, a 19.4% raise over his total 2018 pay.
Brief: The coronavirus pandemic has hit theCarlyle Grouphard. It reported a first-quarter net loss of $612 million, or $1.76 a share.Carlyle (ticker: CG) reported a profit of $137 million, or $1.18 diluted earnings per share, a year earlier.The Washington, D.C., firm said it posted a loss in revenue of $745.7 million for the period ended in March. In the first quarter of 2019, Carlyle reported nearly $1.1 billion in revenue.The global investment firm declared a quarterly dividend of 25 cents per share. Assets under management were $217 billion, a 3% drop from the fourth quarter and 2% decrease from the same period in 2019. Fee-earning AUM slid 1% to $158 billion, driven by a 6% drop in real assets, which include real estate and natural resources.
Brief: The Abu Dhabi Investment Authority (ADIA) is delaying the sale of $2bn in private-equity fund stakes after the outbreak of the deadly coronavirus. The sovereign wealth fund, which is estimated to have about $580bn under management, was in talks with several investors including money manager Ardian about selling chunks of the portfolio, according to people familiar with the discussions. The market turmoil triggered by the crisis made it difficult for them to agree on how much the stakes were worth, said the people, who asked not to be identified because the talks are private. ADIA plans to restart the sales process in the second half of the year, one of the people said. Spokespeople for ADIA and Ardian declined to comment.
Brief: When Sachem Head Capital Management enters a new position, the stock normally doubles in two years. That was the largest return among 10 major activist investors, The Edge Consulting Group, a special situations research firm, told clients this week. A disastrous outlook for 2020 earnings is likely to put increased emphasis on value investing, said The Edge Chief Executive Officer Jim Osman… The study, entitled “King of the Activists,” tracked 15 years of shareholder campaigns by investors including Starboard Value LP, Blue Harbour Group LP and Icahn Enterprises LP, which respectively finished second, third and fourth in the rankings, behind Sachem.
Brief: The current difficult market environment will create fertile ground for private equity and hedge funds to boost their performance, according to JPMorgan Asset Management. Expected returns for cap-weighted private equity have risen to 9.80%, up 1 percentage point from the last forecasts issued Sept. 30, John Bilton, head of global multi-asset strategy, wrote in a note. The money manager’s projections “continue to be relatively aggressive for both hedge funds and private equity,” he said, and the pandemic-induced market volatility “actually reinforces our conviction that there is a good medium-term outlook for alpha generation.” “Dry powder on private equity balance sheets can be deployed now at lower entry multiples, broadly offsetting higher debt funding costs,” Bilton wrote.
Brief: Royal Bank of Scotland (RBS.L) chairman Howard Davies said on Wednesday the coronavirus pandemic had “changed everything” and its impact on society and the economy would likely be “stark and long-lasting”.In comments to investors at the bank’s annual investor meeting — held virtually to comply with social distancing rules — Davies said the sharp fall in the bank’s share price during the crisis made it unlikely the government would sell further stock in the state-backed bank soon.Chief Executive Alison Rose said the bank was doing everything possible to support its customers, many of whom were facing — and would continue to face — extremely challenging circumstances.
Brief: The Covid-19 crisis has highlighted the challenges of diversification, which is not an exact science, according to Allianz Global Investors’ Manuela Thies. Thies, who is head of multi asset active allocation retail at the asset manager, said the current scenario doesn’t need to become a special case for going into non-traditional areas, as investors should always be looking to expand and complement their holdings. ‘The use of diversifying asset classes like alternatives in portfolios for risk mitigation purposes should be a permanent goal,’ Thies said in emailed comments sent to Citywire Selector.
Brief: AustralianSuper has received "85,000 requests from members seeking early release of their retirement savings," the Melbourne-based industry superannuation fund said Tuesday. The initial tally — a week after Australians could begin applying for an initial A$10,000 drawdown of their retirement savings to help them through the COVID-19 crisis — represents over A$650 million ($413.2 million) in savings, a news release said. AustralianSuper said it had already distributed "over A$319 million to almost 40,000 members so far." The super fund reported A$180 billion in retirement assets at the start of February — before a spreading coronavirus battered markets globally. Shawn Blackmore, the fund's group executive for service and advice, in the news release said AustralianSuper wants to "help members who are in immediate financial need under the Federal Government's Early Access to superannuation program" but emphasized that withdrawals would come at a cost.
Brief: BlackRock is set to close one of its absolute return equity funds, Citywire Selectorhas learned. The fund, formally known as the BSF European Diversified Equity Absolute Return, was managed by Robert Fisher andSimon Weinberger. A spokesperson for the firm has confirmed to Citywire Selector that the fund will officially close on 2 June 2020. The BSF European Diversified Equity Absolute Return fund had €5m in assets under management in March and was originally launched in August 2010. Commenting on the liquidation, a BlackRock spokesperson said: ‘We recently completed a review of the BSF European Diversified Equity Absolute Return Fund as part of our continual evaluation process to ensure our range remains relevant. Taking into account its current size and potential client demand, we have decided to close it.’
Brief: Private equity firm Blackstone said on Tuesday its proposed 1.36 billion euro ($1.47 billion) takeover of NIBC Holding NV might not win regulatory approval, sending shares in the Dutch bank 12% lower. “There is substantial uncertainty concerning the business plan and it continuing to be a realistic basis for obtaining regulatory clearance,” Blackstone said. “The relevant regulators have not yet given any indication of their views in this respect.” NIBC shares traded down 12% at 0900 GMT in Amsterdam. Blackstone also warned that NIBC’s decision to postpone its dividend payments meant it could no longer guarantee the financing of the deal. NIBC this month decided to postpone dividend payments at least until the second half of the year, as European banks came under pressure to improve their capital positions to be able to weather losses caused by the coronavirus pandemic.
Brief: The investment chief of Veritas Pension Insurance Co. says he doesn’t understand why there are glimmers of hope in equity markets, as he sells stocks and buys government bonds to protect his portfolio. “There is a lot of optimism at the moment in the equity market that the crisis will soon be over, but I don’t believe it will,” said Kari Vatanen, who oversees 3.3 billion euros ($3.6 billion) as chief investment officer of Veritas in Finland. “In the real economy, we are going to see data getting worse, week after week.” Vatanen, who spoke after delivering first-quarter results that showed a 10% loss due to the rout triggered by Covid-19, says he’s been busy cutting risk in his portfolio since he started last month.
Brief: HSBC Holdings PLC (HSBA.L) on Tuesday warned of more earnings pain ahead after first-quarter profit nearly halved as it set aside a hefty $3 billion in bad loan provisions due to the coronavirus pandemic. Europe’s biggest bank said the outbreak would mean sustained pressure on its revenues as customer activity declined and lower interest rates squeezed margins, while noting increased fraudulent activity could lead to “potentially significant” credit losses. The bleak outlook, shared by many lenders reporting earnings this season, underscored the scale of the problems facing the sector as it grapples with corporate borrowers in crisis, plunging stock and oil prices, as well as low interest rates. HSBC’s new Chief Executive Officer Noel Quinn faces additional hurdles as plans to cut costs through layoffs - part of a wider restructuring unveiled in February - have been put on hold due to the pandemic.
Brief: The world’s largest wealth manager, UBS (UBSG.S), reported a 40% rise in quarterly profit on Tuesday, with its core business enjoying its best three months since 2008, thanks to a restructure and rich clients reshuffling portfolios to respond to the coronavirus outbreak. The bank booked net profit of $1.595 billion, slightly ahead of its previous guidance of around $1.5 billion. It reported strong operating growth across all but one of its business divisions, even after accounting for the risk of increased defaults resulting from the virus. “This quarter, I can comfortably say, you saw UBS at its best,” Chief Executive Sergio Ermotti said on a call to analysts and journalists, sounding a confident note on the bank’s preparedness as it braces for headwinds from a fall in asset valuations, sinking interest rates and a slowdown from bumper client activity levels.
Brief: The economic aftermath of the 2008 financial crisis was so tepid it was referred to as the “Great Recession”. In the wake of the coronavirus catastrophe, investors need to brace for the “Great Repression”, which may be even uglier than the downturn of a decade ago. That is the takeaway from an analysis out on 27 April from economist David Rosenberg. Rosenberg is often considered a “perma-bear”, but that is not entirely fair. He has had his optimistic spurts. This just isn’t one of them. In the “base case” for the US economy, published by his firm, Rosenberg Research, the economy “reopens” in May, in a staggered approach across industries and regions. There are “periodic setbacks in terms of COVID-19 case counts…sufficient to make people less comfortable and confident about spending then they did prior to the crisis. A vaccine is not developed in this forecast, but treatment that alleviates the worst respiratory symptoms” is developed within the next six months, he writes.
Brief: MFS Investment Management has closed its global energy fund after assets dropped to around $2m with limited prospect of further growth, Citywire Selector has learned.The specialist fund, which was formally called theMFS Meridian Funds – Global Energyfund, was overseen by James Neale. It was officially liquidated on 15 April 2020. MFS IM wrote to investors at the end of February about its plans to close the fund when it had around $6.8m in assets under management. It originally launched the strategy as a Luxembourg-domiciled fund in February 2009. In a short statement toCitywire Selector, a spokesperson for MFS IM said: ‘As MFS does not believe the fund will grow to a viable size, we believe that liquidation best serves the interests of Funds shareholders. The liquidation took place on the 15 April 2020.’
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