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Brief: Respondents to Dykema’s 17th annual M&A Outlook Survey believe nothing will break the stride of US M&A dealmakers over the year to come, with most viewing the Biden administration’s legislative agenda as positively impacting activity. A resounding 75 percent of respondents expect the US M&A market will strengthen in the next 12 months, while only 7 percent anticipate it will weaken. Respondents not only predict deal volumes will be up across the board, from small to mid-market to mega-deals of USD1 billion and more, but 9 out of 10 also expect M&A activity among privately owned businesses to increase over the next year… “This might stem from ongoing supply chain and labor shortage issues associated with the pandemic as well as the general, but persistent, uncertainty it brings,” says Jeff Gifford, leader of Dykema’s Corporate Finance practice group. “That said, now even after the surge in cases, dealmakers have learned how to manage Covid-19-related uncertainties, with respondents ranking Covid-19-related delays sixth in order of the most common obstacles they experienced in deal-making last year.”
Brief: The trading desk was just embarking on a second banner year when senior executives started defecting to the likes of Bank of America Corp., Citigroup Inc. and Millennium Management. By this fall, many of the team’s heaviest hitters had gone. The setting wasn’t some struggling investment bank. It was the equity derivatives desk inside the mighty JPMorgan Chase & Co. -- one of many pockets of employee turnover that have erupted there in recent months, keeping the company’s recruiters busy. Pan out, and it’s part of a trend sweeping across Manhattan’s financial industry. Signs of a surge in Wall Street job-hopping are emerging everywhere: An independent recruiter said he’s never seen so many eight-figure hiring packages. A career coach said his banker clients aren’t basing decisions solely on money -- they’re fed up with working so much they can’t even date. An industry veteran said moves are becoming so common that some people left behind are anxious: Are they making a mistake by staying? The trend coincides with the easing of a pandemic that bottled up job changes and prompted many in the industry to question whether they want to resume old commutes, or even stay in the same city. Now, rival firms are dangling money or, in some cases, more flexible lifestyles to lure talent and capitalize on the trading and dealmaking boom. There’s also more competition for women and members of minority groups after virtually every major firm promised to improve diversity in the wake of last year’s racial equity protests.
Brief: When venture capital investor Kate Bingham was appointed to lead the UK’s coronavirus vaccine procurement effort in May 2020, Prime Minister Boris Johnson tasked her with delivering “speed, not perfection”. By December that year, the UK had approved its first Covid-19 vaccine, developed by Pfizer/BioNTech. Since then, 80 per cent of the UK population over the age of 12 have received at least one vaccine, and the jabs are working “much better than anyone expected”. “To get any vaccine from identification of pathogen through to a vaccine, the quickest historically has been five years, but that was 50 years ago,” says Bingham, managing partner of venture capital firm SV Health Investors, speaking around a virtual impact investing event, GSG Global Impact Summit in October. Bingham has 30 years’ experience in the biotechnology sector, and her investments have helped launch new treatments for inflammatory and autoimmune disease and cancer.
Brief: Ray Dalio sounded the alarm bell on Thursday after inflation in the U.S. surged to the highest level since 1990 and warned his followers that rising portfolio values don’t actually signify increasing wealth. “Some people make the mistake of thinking that they are getting richer because they are seeing their assets go up in price without seeing how their buying power is being eroded,” Dalio wrote in a post on LinkedIn. “The ones most hurt are those who have their money in cash.” Dalio, the billionaire founder of Bridgewater Associates, has long been known for his view that there are better assets to hold than cash amid central bank money printing. In periods of rising prices, he says it’s actually more important to look at what you can buy with that money. “When a lot of money and credit are created, they go down in value, so having more money won’t necessarily give one more wealth or buying power,” Dalio wrote, adding that real wealth becomes a function of production capacity over time. “Printing money and giving it away won’t make us wealthier if the money isn’t directed to raise productivity.”
Brief: While most women in asset management would like the hybrid work model to continue, not everyone thinks it will have a positive impact on their career — unless firms address some of the challenges, including helping to foster connections with colleagues and clients. According to the 2021 KPMG Women in Asset Management Survey, 89 percent of respondents said they would like the option to continue remote or flexible work. KPMG’s findings were consistent across age groups. “Although there is a perception that working mothers most desire flexibility, our survey shows that nearly everyone wants it,” according to KPMG. Employees also want flexibility to care for aging parents, for example. However, 32 percent of respondents said the flexibility at work might have a negative impact on promotions and advancement. Among the 491 surveyed professionals, 93 percent were women, representing asset classes and categories including private equity, hedge funds, real estate, and mutual funds.
Brief: The UK’s Defined Benefit (DB) pension schemes are at their healthiest since before the onset of Covid-19, as of Q3 2021, according to Legal & General Investment Management (LGIM). LGIM's DB Health Tracker, a monitor of the current health of UK DB pension schemes, found that the average1 DB scheme can expect to fund 98.3 per cent of accrued pension benefits as of 30 September 2021. This is a rise of 0.1 percentage points from the figure of 98.2 per cent recorded three months before on 30 June 2021. The health of the UK’s DB pension schemes had been gradually improving since March 2020, when it had dropped as low as 91.4 per cent as a result of the immediate impact of the pandemic on financial markets. However, while these figures suggest that the health of UK DB schemes has been improving since the initial spread of Covid-19, it is important to note that these figures may yet still understate the negative impact of the pandemic, due to weakening covenants from pension scheme sponsors, which many schemes have endured.
Brief: Private equity funds are a major contributor in the rapid growth of the private credit market, according to global law firm Dechert. In its 2021 private equity outlook, the law firm reported that 45 percent of surveyed private equity firms have increased their use of private credit financing in buyouts over the last three years. This represents a 10 percentage point increase from last year’s survey, in which 35 percent of respondents said they had increased their use of private credit. Dechert surveyed 100 senior-level executives at private equity firms across the globe with $500 million or more in assets under management. According to the report, private credit is currently the third-largest private capital asset class after private equity and real estate. The law firm said that assets under management in private credit are projected to grow to $1.46 trillion by 2025. “People love [private credit],” Markus Bolsinger, Dechert’s private equity practice co-head, told Institutional Investor. He said that private credit also poses a strong opportunity for institutional investors chasing yields without equity risk.
Brief: DWS has held the final close of its inaugural Private Equity Solutions (PES) fund achieving USD550 million, including discretionary co-investment vehicles, which is in excess of its target and hard-cap of USD500 million and USD525 million respectively. Demonstrating significant demand for its mid-life secondaries strategy, the inaugural fund closed with a global investor base consisting of state pension plans, insurance companies, corporate institutional investors and family offices in North America, Europe and the Middle East. The fund has made a total of 12 investments, which have exhibited positive performance to date. The private equity business at DWS has focused on developing a differentiated mid-life secondaries strategy that offers a compelling risk-return profile to investors whilst allowing existing private equity sponsors to continue to back their better performing portfolio companies. Mark McDonald, Global Head of Private Equity at DWS, adds: “It is a testament to the strength of our team globally for the inaugural PES fund to be oversubscribed, and with the majority of the fundraise taking place during the current Covid-19 pandemic. We seek to deliver consistent risk-adjusted returns to our investors as we continue to build out our team and extend our reach going forward.”
Brief: As COVID-19 ripped through the world in 2020, a cluster of senior figures at Aviva Investors, the £262 billion U.K. asset manager, held a series of virtual meetings over the course of six months to discuss the other big issue looming over their portfolios: climate change. It was a bold move that dramatized a growing dispute within the US$110 trillion investment industry. Many big asset managers still routinely dismiss divestment, arguing it is better to stay invested and try to alter corporate behaviour through background conversations with companies. However, there are a growing number of large, traditional investors who are taking a tougher approach with companies over global warming, a change in attitude that could have huge ramifications for businesses around the world. Big investors including the Netherlands Stichting Pensioenfonds ABP one of the world’s largest pension funds, and Norway’s oil fund, the world’s largest sovereign wealth fund, have announced divestment plans. At the same time, some of the investors who remain as shareholders are willing to adopt more confrontational tactics — most notably, the successful campaign by an activist investor to join the board of ExxonMobil Corp.
Brief: Businesses are in limbo after a federal court halted the Biden administration’s vaccine-or-test mandate for private employers. Employers are preparing to enforce the Occupational Safety and Health Administration’s (OSHA) rule, which would require businesses with 100 or more employees to mandate COVID-19 vaccinations or weekly testing by Jan. 4. But it’s now unclear whether the requirement will survive legal challenges after the 5th U.S. Circuit Court of Appeals temporarily blocked the rule over the weekend, creating confusion among companies on how to move forward. Labor lawyers are urging businesses to continue preparing for key OSHA deadlines, given that the court’s stay, for now, is only temporary. “I think it’s prudent for employers to proceed with planning assuming that the OSHA rule, at least in some form or fashion, will be implemented pending final resolution of the various court cases,” said Michelle Strowhiro, a lawyer at McDermott Will & Emery who advises businesses on COVID-19 employment issues. While the OSHA rule requires businesses to mandate weekly testing for unvaccinated employees by January, the most important deadline is coming up soon. By Dec. 5, employers must collect employees’ proof of vaccination and provide paid leave for those getting the shot, while unvaccinated employees must begin wearing a mask.
Brief: Regeneron Pharmaceuticals Inc said on Monday a single dose of its antibody cocktail reduced the risk of contracting COVID-19 by 81.6 per cent in a late-stage trial, in the two to eight months period following the drug’s administration. Shares of the company were up about 1.2 per cent on the update as the data is expected to support the ongoing regulatory review to extend therapy’s use in preventing COVID-19 in people who are not exposed to the virus. The antibody therapy, REGEN-COV, is currently authorized in the United States to treat people with mild-to-moderate COVID-19 and for prevention of infection in those exposed to infected individuals, and others at high risk of exposure in settings such as nursing homes or prisons. The extended authorization could help boost sales of Regeneron’s antibody cocktail, in the face of competition from oral COVID-19 pills such as those being developed by Pfizer Inc and Merck & Co.
Brief: Global law firm Dechert has published its annual Global Private Equity Outlook report in association with Mergermarket, a leading provider of M&A data and intelligence. The benchmark report, which examines how private equity (PE) firms continue to successfully navigate their way out of the pandemic, has found that the unprecedented deal activity within the sector shows no signs of letting up, with the industry on course to far exceed past previous records. Between January and September 2021 alone there has been USD1.17 trillion worth of deals recorded, already eclipsing every prior full-year total stretching back to 2015. In other words, the annual PE deal value is on course to more than double year-on-year as the industry heads into 2022, with capital still pouring in. Global PE and venture capital dry powder hit a record level of nearly USD2 trillion in 2020. "Record deal volumes, historically low interest rates and huge amounts of dry powder is a combination for explosive alternative asset industry growth, which is expected to continue for several years, and with our complementary practices, Dechert is well-positioned to take advantage of these extraordinary growth opportunities.
Brief: Jon-Michial Carter was the biggest skeptic of remote work when one of his managers suggested they test the idea in 2019. “We had a 100,000 square-foot facility full of clinicians delivering remote virtual care,” said the founder and chief executive of ChartSpan, a chronic-care provider based in Greenville, South Carolina. “It seemed inconceivable that we could send them home.” When Covid-19 arrived in 2020, that’s what the firm did. As a direct result, it’s making more money. Employees say they’re happier, and the numbers say they’re more productive. Similar, potentially seismic shifts could be under way across the business world. The pandemic has killed more than 750,000 Americans and left millions more out of work. But something else has been happening too. The shock forced managers everywhere to try doing things differently, accelerating innovation. It “opens the door to this radical newness in the way businesses are configured,” said Jason Thomas, head of global research at Carlyle Group.
Brief: Health technology company Color said on Tuesday its valuation reached $4.6 billion after a recent $100 million investment, as venture firms continue to pour money into digital health businesses that saw service demand shoot up during the pandemic. The pandemic has supercharged the sector with healthcare moving to the virtual realm. While companies are looking to expand their scale and offerings, investors are betting on continued demand even after the pandemic for the convenience of the services. With the latest investment, Color plans to widen access to screening, diagnostics and initial treatments. It has more than 6,500 COVID-19 testing and 500 vaccination sites in the United States. Besides COVID-19 testing, the California-based company also conducts genetic testing. It has tied up with nearly 1,000 organizations, including public health departments, universities and employers. It has also partnered with Thermo Fisher Scientific, Salesforce.com Inc and the State of California, among others.
Brief: Covid-19 vaccine maker BioNTech SE’s success is having a ripple effect for younger companies, drawing interest from investors who might previously have been skeptical about the biotechnology sector in Europe, one of the German company’s early backers said. “I expect more money flowing into the European, particularly German, biotechnology industry through this new excitement,” said Matthias Kromayer, a partner at Munich-based MIG Verwaltungs AG. MIG, a venture capital investor, was among the founding backers of BioNTech, providing 13.1 million euros ($15.2 million). It has returned 600 million euros on that investment in the biggest payout to investors in the firm’s history. BioNTech and partner Pfizer Inc. may reap $29 billion in sales next year for their Covid shot, the U.S. company said last week. The vaccine will most likely be this year’s best-selling drug. The race to bring it to the market has helped companies understand ways to speed up drug development, Kromayer said. Still, it may take at least a decade for enough critical mass to build for European biotechs to choose their home turf for public offerings instead of the U.S. market, Kromayer said.
Brief: Wealthy real-estate buyers from overseas are expected to descend on the nation’s luxury housing markets Monday, giving a second boost to demand for high-priced apartments and mansions. The U.S. will lift the travel ban on about 33 countries for vaccinated visitors, easing restrictions that prevented most foreign real-estate buyers from entering the country to view and buy properties. Buyers from Europe, China, Brazil, and India will now be able to enter the U.S. for the first time in 20 months. Brokers in cities popular with the overseas wealthy — New York, Miami, Los Angeles — say they have a long list of showings scheduled in the coming weeks from buyers who have been anxious to invest in U.S. property. “This represents another upside in demand that just didn’t exist over the last two years,” said Jonathan Miller, CEO of Miller Samuel. “It will be especially beneficial to the high-end and luxury market.” Sales data suggests the wave of overseas buyers could generate tens of billions of dollars in added sales. Foreign buyers spent $267 billion on U.S. real-estate in 2018 and $183 billion in 2019, before the pandemic, according to the National Association of Realtors.
Brief: Quarantine-free travel between Singapore and neighboring Malaysia will start from Nov. 29 for vaccinated travelers, the two countries announced Monday. Sweden and Finland will also be included in Singapore’s so-called “vaccinated travel lanes” from Nov. 29, the health ministry said separately in a press release Monday. Instead of serving quarantines, inoculated travelers from these countries will take Covid-19 tests to ensure they are not infected with the coronavirus. Singapore and Malaysia’s prime ministers said in a joint statement that Covid border restrictions have separated families in both countries for many months. “It is timely to progressively resume cross-border travel between both countries, in a safe manner,” the two leaders said. Singapore has already launched vaccinated travel lanes with at least 12 nations including Australia, the United Kingdom and the United States. The city-state will start its joint vaccinated travel lane arrangements with South Korea on Nov. 15.
Brief: The U.K. economy faces inflation remaining above the Bank of England's 2% target and weaker growth next year, Deutsche Bank says. "The combination of supply shocks because of Covid and Brexit, alongside lower supply via weaker migration/lower participation and investment, should see the U.K. economy experience above-target inflation for almost all of next year at the same time as economic momentum slows materially," Deutsche Bank economist Sanjay Raja says. "We continue to see U.K. GDP coming in around 7% this year but slowing to under 4% next year."
Brief: China is resolutely sticking with its zero-tolerance approach to COVID-19, even as the delta variant continues to penetrate its formidable defenses. Officials are implementing increasingly aggressive measures -- ranging from internal travel restrictions and snap lockdowns to mass testing of millions -- in an attempt to rein in the virus. Yet more parts of the country are grappling with outbreaks than at any time since the deadly pathogen first emerged in Wuhan in 2019. Hundreds of locally transmitted infections have been found in about two thirds of its provinces. The last of the major Covid Zero holdouts, China is becoming ever more isolated, and its unpredictable curbs are beginning to disruptthe world's second-largest economy. How long can the vast nation maintain its strategy as the rest of the world learns to live with Covid, and what factors might force the country to re-open? Jason Brady, chief executive officer and fund manager with Thornburg Investment Management, said the policy gap between greater China and the rest of the world "is going to become more and more stark." As the reality of endemic coronavirus sets in, "investors need to cast their minds forward to what's the world going to look like six months from now."
Brief: The UAE looks set to become a global economic centre of gravity in post-Covid era because of its successful strategy to handle the pandemic and quick rolling out of vaccination drive and it has a potential to attract up to $450 billion investments in real estate sector, according to experts at the Cityscape Summit. Sultan Butti bin Mejren, director-general of Dubai Land Department, on Sunday inaugurated the latest edition of the summit at Expo 2020 site where government, industry and thought leaders descended to take part in a number of topics defining the current and future real estate landscape from across the region and beyond. Ian Goldin, Professor of Globalisation and Development at University of Oxford, shared his thoughts about the future of the world economy and the implications for Dubai and its property sector. Identifying the Urban 2040 Plan and recent amendments to property and visa laws, Goldin believes there are very few places on earth that have achieved what the UAE has in the last 60 years.
Brief: The Globe and Mail reports in its Friday edition that the federal government is refusing to disclose how often the vaccination status of air travellers is being confirmed in what the Liberals billed as a broad vaccine mandate but which is so far only being enforced through random checks. The Globe's Marieke Walsh and Eric Atkins write that on Saturday, the first stage of the government's promised vaccine mandate for air travellers took effect, requiring all passengers to be either vaccinated or present a negative COVID-19 test. However, while passengers need to attest to being vaccinated, their actual vaccination status or test result is not always verified. "We made the decision to randomly check status for a short period in line with advice from the Public Health Agency of Canada. This also prevents further congestion in airports," said a Transport spokesperson. B.C. NDP MP and transport critic Taylor Bachrach said he took three flights to get home from Ottawa on Saturday without once being asked to prove he is vaccinated.
Brief: Emergent Biosolutions shares plunged 38.6% on Friday after the company disclosed that the federal government had canceled its multimillion-dollar contract with the Covid-19 vaccine manufacturer. Emergent, the Maryland-based company blamed in March for ruining millions of Johnson & Johnson’s Covid doses after the shots were contaminated with ingredients intended for the AstraZeneca vaccine, was awarded a $628 million U.S. government contract last year to help make the shots. An inspection by the Food and Drug Administration later found its plant in Baltimore was unsanitary and unsuitable to manufacture the shots. In a 13-page report, inspectors wrote that the facility used to manufacture the vaccine was “not maintained in a clean and sanitary condition” and was “not of suitable size, design, and location to facilitate cleaning, maintenance, and proper operations.” The U.S. would put J&J in charge of the plant and end the production of the AstraZeneca vaccine at the facility. The company will forgo $180 million due to the contract’s termination, executives told investors on a call Thursday, according to a transcript by FactSet.
Brief: HSBC Holdings Plc asked all of its Hong Kong staff to get vaccinated against the Covid virus after city authorities issued a new circular to push for higher inoculation rates. Colleagues who have not received a first dose should either get inoculated by Nov. 30 or submit to a Covid test every 14 days, the London-based bank, which counts Hong Kong as its largest market, said in a memo to staff seen by Bloomberg News. The memo was confirmed by a bank spokesman. The Hong Kong Monetary Authority and four other regulator issued circulars to financial institutions last week “strongly encouraging all employees to get vaccinated or undergo virus testing every two weeks,” according to HSBC. The circulars expanded on a June request that staff in client facing roles or support functions get vaccinated. Hong Kong has struggled to get its population vaccinated, lagging behind rival financial centers such as Singapore, London and New York. The city’s zero-Covid policy has been successful in keeping local cases at bay, and most businesses have been back to close to full capacity over the past months. HSBC opened its offices fully in June.
Brief: European markets closed marginally higher on Friday as investors reacted to promising news on Pfizer’s Covid-19 pill and a strong U.S. jobs report. The pan-European Stoxx 600 closed up by just 0.05% with most sectors finishing in the black. Pfizer announced Friday that its easy-to-administer Covid-19 pill, used in combination with a widely used HIV drug, cut the risk of hospitalization or death from the virus by 89% in high-risk adults. Stateside, stocks rallied to record levels on Friday after the October jobs report came in better than expected, boosting optimism about the economic recovery. Job gains for the month roared to 531,000 versus a consensus projection of 450,000. The Bank of England surprised markets on Thursday by holding interest rates at historic lows, after the U.S. Federal Reserve announced Wednesday that it will begin to curb the pace of its monthly bond-buying program “later this month.” British Airways parent IAG, Germany’s Uniper and Spain’s Amadeus were among the European companies reporting earnings before the bell on Friday. In other corporate news, UBS is set to ditch the rank of group managing director as CEO Ralph Hamers looks to streamline the Swiss lender’s management hierarchy.
Brief: Should a public utility be compensated like a hedge fund? When the average businessperson thinks of alternative lending, the notion of direct lending platforms — business development companies, private debt funds and other specialty lenders — serving a public utility function does not likely come to mind. Ask these same people whether they believe commercial banks provide a necessary service to a modern economy, however, and one can expect nodding agreement. It is well-established among academics, policymakers and practitioners that the allocation of credit from savers to borrowers is essential financial "plumbing," directing capital to its best uses, and that regulated lenders (along with functioning capital markets) exist in order to provide this service. Since the 2008 financial crisis, a change in market architecture for the allocation of credit (particularly but not exclusively in the middle market) has occurred, with a considerable shift of market share away from traditional commercial banks to alternative lenders. This trend has accelerated further in the COVID-19 era. Preqin reported in February that fundraising for direct lending vehicles had increased 62% from January 2020; funds with direct lending investment mandates were targeting $150.3 billion as of January, compared to a target of $93 billion in January 2020.
Brief: Canada’s banks will be able to resume buying back shares and increasing their dividends after regulators removed restrictions put in place to protect the financial system during the pandemic. Banks may immediately begin increasing regular dividends and executive compensation, the Office of the Superintendent of Financial Institutions, said in a statement Thursday. Subject to approval by the superintendent, they may once again repurchase their stock as well, OSFI said. The risks associated with capital distributions “have abated somewhat,” Peter Routledge, head of OSFI, said during a virtual event Thursday. “I believe that now is the time for OSFI to lift this expectation.” The move, which comes months after the Federal Reserve lifted similar constraints on U.S. firms, lets Canada’s banks start releasing the stockpile of capital they amassed to protect against a wave of pandemic-induced defaults that never occurred. Canada’s six largest banks could return a combined C$47 billion ($38 billion) in cash to shareholders and still exceed regulators’ capital requirements, according to an analysis by Bloomberg Intelligence.
Brief: Carlyle Group Inc. is in advanced discussions to invest in Resonetics, a health-care asset owned by fellow private equity firm GTCR, according to people familiar with the matter. Carlyle is in talks to buy half of Resonetics in a deal that will value the medical-device manufacturing company at about $2.3 billion, including debt, the people said, asking not be identified because the matter is private. The deal isn’t finalized and talks could still fall apart. Representatives for Carlyle and GTCR declined to comment. A representative for Resonetics didn’t respond to a request for comment. Resonetics, based in Nashua, New Hampshire, was founded in 1987 and focuses on laser technology for the life-sciences industry, according to its website. GTCR first invested in it in 2018 through its portfolio company Regatta Medical, a statement showed.
Brief: Moderna is scaling back expectations for the number of COVID-19 vaccine deliveries it expects to make this year and the revenue it will record from them. Issues including longer delivery lead times for exports and a temporary impact from expanding the company’s capacity to fill vials with vaccine and package them for shipping, which may shift some deliveries to early 2022, the drugmaker said Thursday. The company now expects full-year, 2021 product sales of between $15 billion and $18 billion. That’s down from a prediction for $20 billion in sales that it made in August. CEO Stephane Bancel told analysts on Thursday that his company’s issues stemmed from scaling up production so quickly. He also said the problems are short-term and can be fixed.
Brief: Canada's two biggest life insurance companies, Manulife Financial and Sun Life Financial, reported a rise in third-quarter profits on Wednesday, driven by growth in new business and higher assets under management. Sun Life beat analysts' expectations, helped by a 23% surge in earnings from its asset management business that offset losses in the U.S. and Asia from COVID-related claims, but Manulife missed estimates due to weather-related charges. While the pandemic and related claims, largely outside of Canada, have weighed on parts of insurers' businesses, the growth in wealth, lifted by lockdown-induced savings and government stimulus has proved a boon for their wealth management units. Core earnings at Manulife, Canada's biggest life insurer, rose to C$1.5 billion ($1.2 billion), or 76 Canadian cents a share, in the three months ended Sept. 30, from C$1.45 billion, or 73 cents, a year earlier. Analysts had expected 79 Canadian cents.
Brief: Since the second half of 2020, institutional investors in Asia have been changing their strategic asset allocation and shuffling their portfolios to reflect the new policies, research from Cerulli Associates shows. They’ve also been seeking investment strategies to meet what Cerulli called “pent up demand” for yield. Over the next 12 to 18 months pension funds are most interested in allocating to Asian equity, global equity, Asian high-yield bonds, global high-yield bonds, infrastructure, and hedge funds, according to a newly released Cerulli report. Triggered by the low-yield environment, asset owners and managers in Asia are going after growth opportunities using stocks as well as alternatives, including private credit, real estate, and infrastructure. About 30 percent of asset owners in the region have been looking to incorporate alternatives into their portfolio in 2021, according to data from the report. Even with the demand for alternatives, allocators in Asia also have a growing interest in passive investment strategies.
Brief: The Federal Reserve announced Wednesday it soon will begin reducing the pace of its monthly bond purchases, the first step towards pulling back on the massive amount of help it had been providing markets and the economy. Tapering of bond purchases will start “later this month,” the policymaking Federal Open Market Committee said in its post-meeting statement. The process will see reductions of $15 billion each month -- $10 billion in Treasurys and $5 billion in mortgage-backed securities – from the current $120 billion a month that the Fed is buying. The committee said the move came “in light of the substantial further progress the economy has made toward the Committee’s goals since last December.” The statement, approved unanimously, stressed that the Fed is not on a preset course and will make adjustments to the process if necessary. “The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook,” the committee said.
Brief: The hedge fund traders watched as a nightmare scenario played out in the world’s bond markets. From Australia to the U.K. to the U.S., government bond yields abruptly moved against them last week amid growing speculation that central banks will accelerate plans for raising interest rates in the face of persistent inflation. The losses piled up -- and for a few became so big that the firms halted some trading to contain the damage. Balyasny Asset Management, BlueCrest Capital Management and ExodusPoint Capital Management each curtailed the betting of two to four traders after they hit maximum loss levels, according to people with knowledge of the matter, who asked not to be identified because the information is private. That step stopped traders from changing their positions, an extraordinary risk-management move used so firms can reassess trades or unwind them. ExodusPoint lost about $400 million last month, leaving it down 2% in October, people said. The fund is still up 2.8% year-to-date.
Brief: The S&P 500 just capped its best year ever following a U.S. presidential election, surging 37% since Joe Biden won the vote. The benchmark index gained more in the past year since the 2020 election than any other modern president has seen in their first year in office. But the advance has more to do with the “everything rally” following the vaccine rollout than any specific policy decision, Charles Schwab UK Managing Director Richard Flynn said in a note. “While presidents are always quick to take credit for strong performance and quick to blame their predecessor for poor performance, it is likely that they are responsible for neither,” Flynn wrote. The gains come as the results of Tuesday’s elections offered a warning shot to Biden and the Democrats after Republicans won in key races. While the stock market has rallied to all-time highs, the nation’s mood has been less bullish amid rising prices and mixed economic reports. The last time the S&P 500 recorded a post-election day annual gain above 30% was after Bill Clinton’s re-election in 1996. The index gained 21% during Donald Trump’s first year.
Brief: The rate of expansion in the U.S. services sector, where most Americans work, hit a record high in October as demand remained strong even as supply chain problems persisted. The Institute for Supply Management reported Wednesday that its monthly survey of service industries — which includes restaurants and bars, trucking companies, hotels and many other businesses — jumped to a reading of 66.7 from September’s reading of 61.9. Although business activity, new orders, supplier deliveries and backlog of orders all surpassed previous records, sticky issues that have plagued almost every kind of economic activity since infections began to ease in the U.S. continued: labor shortages, supply chain bottlenecks and higher prices. “The broad picture painted by this report is that the economy is overheating,” said Stephen Stanley, chief economist for Amherst Pierpont Securities. “Demand is overwhelmingly strong at the same time that supply is constrained. Still, I am not sure that even a fully-functioning supply side, with more labor and a resolution of snags would be able to handle the pace of demand right now.”
Brief: Private market investments reign supreme with a sharp increase in interest in this area over the past five years to top position of importance, according to Global wealth manager Julius Baer's just published 2nd Annual Family Barometer 2021 which highlights the top priorities for UHNW families right now. The survey covered more than 800 wealth management industry experts who work with and advise UHNW clients and their families. However, it is sustainable and impact investing and ESG-related topics which have grown the most (17%) in terms of importance over the past five years when it comes to investing… Against the backdrop of Covid-19, health has replaced regulatory aspects as the third most important topic when it comes to topics ‘beyond investments' for families, with 19% of respondents citing it as the most important topic for their clients. Guy Simonius, head of family office service at Julius Baer, said: "Perhaps now is the right time to think about starting a meaningful dialogue with your family and your chosen experts. Experience shows that doing so can bring greater peace of mind and contentment, and can also help to mitigate conflict and bring a family closer together.
Brief: Even with five million fewer people employed in the U.S. than before the start of the Covid-19 pandemic, the economy’s recovery has been so robust and thethreat of inflationso high that hedge fund manager Bill Ackman thinks the Federal Reserve should “begin raising rates as soon as possible.” “A ‘wait and see’ approach to raising interest rates creates significant risks given the substantial progress to date on employment and inflation combined with the unprecedented economic backdrop,” Ackman wrote in an extensive presentation of the Investor Advisory Committee on Financial Markets to the New York Federal Reserve on Oct. 20. Ackman, a member of the investor committee, acknowledged on Twitter — where he posted his PowerPoint presentation — that “as we have previously disclosed, we have put our money where our mouth is in hedging our exposure to an upward move in rates, as we believe that a rise in rates could negatively impact our long-only equity portfolio.”
Brief: When Hannah Olson was in college, she was diagnosed with chronic Lyme disease. The severity of her case required Olson to have a PICC line — essentially, a permanent IV that funnels antibiotics into the patient eight hours a day — inserted in her arm. As a young woman hoping to start her career in marketing, Olson felt anxious about telling her new boss about her condition and its impact on her day-to-day life. “I felt so much fear and shame and stigma,” Olson told Institutional Investor. “No one wants to go into their first job ever and have to be hooked up to an IV all day. I ultimately ended up at a company that wasn’t inclusive and didn't allow me to administer my meds at work, so I was forced to choose between my health and my work.” In 2020, Olson founded Chronically Capable, a job-matching platform that connects people with disabilities and chronic illnesses to jobs with accommodations. A month after the platform launched, the Covid-19 pandemic hit.
Brief: Pfizer is hiking sales expectations for its top-selling COVID-19 vaccine again, and its early look at 2022 also falls well above Wall Street forecasts. The drugmaker said Tuesday that it now expects to book about $36 billion in revenue from Comirnaty this year. That’s about 7% higher than what Pfizer forecast in July and more than twice what the company expected at the start of the year, shortly after distribution of the two-shot vaccine began. Next year, Pfizer says global vaccine sales could total around $29 billion or more, and there’s room for growth. The company expects to recognize revenue for 1.7 billion doses in 2022, but it could produce 4 billion. “We continue to believe the vaccine has durability, and there will continue to be significant revenue beyond 2022,” Chief Financial Officer Frank D’Amelio told analysts. Analysts forecast, on average, $24 billion in sales from the vaccine next year, according to FactSet. They also expect revenue from the shots to start waning in the following years, depending on how the pandemic plays out.
Brief: Air Canada sees hope on the horizon as revenues soared over 2020 levels last quarter, despite continuing to operate far below pre-pandemic capacity and at a loss of hundreds of millions of dollars. Domestic leisure bookings have started to rebound, but business travel remains down across the board amid the persistence of remote work. "We're witnessing a strong rebound in VFR (visiting friends and relatives), and leisure traffic remains strong, specifically within North America, across the Atlantic and to sun destinations," chief operating officer Lucie Guillemette told investors on a conference call Tuesday. "We were pretty confident that come 2022 corporate Canada returns to their offices and business travel should return. But no doubt that for us, business has lagged a little bit." Revenue nearly tripled year over year to $2.10 billion in the quarter ended Sept. 30 alongside an 87 per cent boost in capacity. But revenue and capacity remained more than 60 per cent and two-thirds below Air Canada's third-quarter figures in 2019 respectively as COVID-19 fallout continues to damage carriers' bottom lines.
Brief: An overwhelming majority of UK renters aged 25-40 want desk space for working from home, according to new research from M&G Real Estate, the real estate investment division of M&G plc – a leading savings and investments business. Almost nine out of ten (87 per cent) of those who have experienced home working questioned in M&G’s 2021 Home Renters Survey said that, in the wake of the Covid-19 pandemic, dedicated home workspace is ‘quite’ or ‘very’ important to them. Furthermore, three quarters (75 per cent) of these home renters stated they were now using rooms and spaces at home differently. More than a third have improved garden or balcony spaces or rearranged internal areas for ‘living or relaxing’ during the various restrictions, while 34 per cent of respondents had used the time to allocate more space for exercising or to improve sleeping areas. When asked if the pandemic had made them more or less likely to continue renting in the future, just over a quarter (26 per cent) said they were less likely to continue renting, rising to 37 per cent among those on higher incomes (GBP50,000 plus per annum). Nearly two thirds (64 per cent) said that Covid-19 has had no impact on their attitude towards renting.
Brief: For years, U.S. businesses could rely on a steady flow of workers arriving from around the world on various types of visas. The pandemic has slowed that to a trickle -– making the current labor shortages even worse. And the shortfall of migrant workers will likely persist even after U.S. borders reopen, as they’re scheduled to do next week. The State Department issued about 850,000 non-immigrant work visas between March 2020, when Covid-19 forced borders and consulates to shut down, and July 2021, according to research by Alex Nowrasteh at the Cato Institute. That’s less than half the number in the previous 17 months. The slowdown is having an impact across the economy, from seasonal work in agriculture to high-paying tech companies. It’s especially challenging for U.S. manufacturers, who say they’ve long struggled to fill mid-skilled positions that require some level of technical training, like machine operators or welders.
Brief: With inflation at its highest point in three decades, the Federal Reserve is set this week to begin winding down the extraordinary stimulus it has given the economy since the pandemic recession struck early last year, a process that could prove to be a risky balancing act. Chair Jerome Powell has signaled that the Fed will announce after its policy meeting Wednesday that it will start paring its $120 billion in monthly bond purchases as soon as this month. Those purchases are intended to keep long-term loan rates low to encourage borrowing and spending. Once the Fed has ended its bond purchases by mid-2022, it will then turn to a more difficult decision: When to raise its benchmark short-term rate from zero, where it’s been since COVID-19 hammered the economy in March 2020.
Brief: Hong Kong will end quarantine exemptions for senior executives, bankers and most entitled groups starting Nov. 12, tightening what is already one of the world’s strictest Covid-19 policies as it works to open the border with mainland China. Exemptions for directors of listed companies and senior executives from the banking, insurance, securities and futures sectors will be canceled, Hong Kong’s government said. Consular and diplomatic officers will need to self-isolate at designated quarantine hotels, it said, with home isolation not allowed except for consuls general or representatives at an equivalent or higher level. Only members of some essential groups linked to the city’s daily operations will get exemptions, including airline crew, sea crew working on cargo vessels, government officials and drivers of cross-border buses.
Brief: A new joint venture between alternative investment firm Arcapita Group Holdings and Arden Group plans to acquire $2 billion worth of industrial property assets in the U.S. as capital pours into niche real estate sectors amid the global pandemic. The venture already completed the purchase of multi-tenant industrial properties in urban centers valued at over $550 million, with an additional $250 million of real estate closing in the near term, according to a statement on Monday. The goal is to grow the portfolio to as much as $2 billion in gross asset value across the top 25 U.S. industrial markets, it added. The shift toward online shopping is altering supply chains and giving a boost to industrial landlords, especially those with space around major cities. While hotels and retail properties have been battered by the pandemic, investors have flocked to warehouses as an e-commerce boom that was flourishing before the pandemic accelerates with consumers increasingly shopping online.
Brief: Thailand is ending quarantine for vaccinated visitors from more than 60 countries, the biggest reopening gamble in Asia and one that could mark a turning point for the revival of mass tourism during the pandemic. Starting Monday, fully-vaccinated travelers flying in from the U.S., China, Singapore, Japan, India and most of Europe will be able to freely tour Thailand’s sandy beaches, temples and tropical islands after testing negative for Covid on arrival. Inoculated visitors from countries not on the list can travel to Bangkok and 16 other regions, but they will be confined to their initial destination for the first seven days before being allowed to travel elsewhere. It’s the biggest step Thailand has taken to welcome back a slice of the nearly 40 million visitors it hosted the year before the pandemic, and is billed as a “fight to win foreign tourists” as countries from Australia to the U.K. also loosen Covid curbs.
Brief: You can’t do private equity by Zoom.That’s the view of Michael Psaros, co-founder of $13.5 billion private equity firm KPS Capital Partners. Forget flexible days, don’t even think about remote work and please don’t mention video calls. KPS, which invests in manufacturing companies, has required all its New York staff to be in the office five days a week since early September, provided they’re vaccinated. It’s the only approach that makes sense in the buyout world, according to Psaros, a former Bear Stearns banker who noted that most employees had already returned by June. “I’m sure flexible work is good for certain industries, but not in private equity,” Psaros, 54, said in an interview. “Private equity is an apprenticeship and relationship business, and you cannot apprentice by Zoom. You cannot learn by Zoom.”
Brief: Air Canada said employees working remotely must gradually return to the office starting Nov. 15 and be fully vaccinated, as COVID-19 cases ebb across Canada. The country’s biggest airline described its plan on Friday as “a balanced approach” that allows employees to keep working some “set days” remotely. In a statement, Chief Executive Officer Michael Rousseau cited Canada’s high vaccination rate as part of the company’s rationale for bringing workers back. “For individuals, companies or any organization to achieve their full potential requires personal connections and interactions,” Rousseau said. “This makes the return of Canadians to the workplace a necessary step in the recovery of our society and economy from the pandemic’s isolating effects.”
Brief: The Securities and Exchange Commission is seeking to force U.S. Senator Richard Burr’s brother-in-law to testify about their stock sales just before the beginning of the coronavirus pandemic, according to court records. Gerald Fauth has “waged a relentless battle” to avoid complying with a subpoena issued to him in May of 2020, the SEC said in court filings. “The Commission is investigating possible insider trading by Fauth’s brother-in-law, Senator Richard M. Burr, and respondent’s own sales of stock in the minutes after speaking with Senator Burr on the day the senator sold the vast majority of his own portfolio.” Fauth, a holdover Donald Trump appointee to the National Mediation Board, which governs labor relations in the rail and airline industries, has said he’s too ill to answer questions from investigators.
Brief: Citigroup Inc. will require all U.S. employees be vaccinated against Covid-19 as a condition of their employment, citing new orders from President Joe Biden. The Wall Street giant asked staffers to submit proof of vaccination by Dec. 8, and said those who comply will receive $200 as a “thank you,” according to a memo to staff Thursday seen by Bloomberg News. Citigroup set Jan. 14 as the final cut-off for workers to upload vaccine cards, to give unvaccinated staff more time to get shots. “Our medical teams have consulted with top experts at some of the most prestigious medical institutions in the country, and are confident about the safety and efficacy of the vaccines available to us,” Sara Wechter, who leads human resources at New York-based Citigroup, said in the memo.
Brief: Merck & Co.’s closely watched Covid-19 antiviral molnupiravir could bring in as much as $7 billion in global sales through 2022, according to the drugmaker. The figure includes up to $1 billion in revenue this year if the experimental drug is authorized in December, Chief Financial Officer Caroline Litchfield said early Thursday on a conference call. She projected at least $5 billion in sales by the end of next year, provided it’s cleared. Merck rose as much as 5.4% to $85.96 as of 11:12 a.m. in New York, its highest intraday price since January 2020. Molnupiravir has become one of the most highly anticipated coronavirus medications, as the pill is relatively cheap to make and easy to transport. Merck has taken steps to make sure that it will be distributed widely, including in low-income countries.and Event Driven funds brought in USD2.28 billion, 0.8 per cent of assets.
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