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Brief: Hedge fund managers have experienced “significant” performance dispersion over the past 12 months, with the biggest funds seeing the largest gaps between gains and losses, new industry data shows, once again underlining the importance of investor due diligence in separating winners from losers. Hedge funds globally ended a tumultuous 2020 on a high, generating an average monthly gain in December of some 4 per cent, to bring full-year returns to more than 11 per cent, according to newly-published year-end performance data from eVestment. The 10 biggest hedge funds tracked by eVestment generated returns of just 3.72 per cent between January and December last year – almost three times below 2020’s hedge fund industry average. But, of that grouping of the 10 largest funds, just one was close to that average, said Peter Laurelli, global head of research at eVestment, with most scoring strong double-digit gains. “Despite the high average returns across the industry, 2020 was a year where the dispersion of returns between fund types and within those various segments was significant. This was very apparent among large funds,” Laurelli noted in a commentary on Wednesday. “There were more large funds with double-digit gains and double-digit losses than not in 2020, highlighting the importance of fund due diligence and monitoring when selecting any hedge fund.
Brief: Federal Reserve rate actions have had a coercive effect on the markets and forced investors to move into risk assets, according to Oaktree Capital Group co-founder Howard Marks. “This has required people to invest because they don’t want to sit around with their cash,” Marks said Tuesday in an interview on Bloomberg TV. “They don’t want Treasuries at less than 1% or high-grade bonds at 2%.” Global credit and equity markets have staged a dramatic rebound since March, when the Fed first took unprecedented steps to steady the economy amid the Covid-19 outbreak. This dramatically cut the amount of distressed debt outstanding and propped up companies that were ailing even before the pandemic hit, depriving value-oriented investors like Oaktree of new targets. “The greater question is, why is the market making new highs every day if we have these problems?” he said. “The political division in the country is a terrific one but the greatest one of course is the pandemic.” Discussing Tesla Inc.’s meteoric rise, Marks said the stock is so high some investors may want to sell. “If you describe an individual not of great needs, he should take some profits,” Marks said. “If he bought Tesla two years ago, he probably has a huge gain. It’s probably a very disproportionate amount of his financial net worth. He should absolutely cut back, unless he really wants to try to hit the long ball.” Oaktree is one of the largest distressed-debt investors in the world, with more than $19 billion committed to credit from troubled companies.
Brief: An unprecedented number of delays when sending out orders to market is costing hedge fund managers USD20 million per year, according to new research from TradingScreen. A combination of operational inefficiencies and trade errors cause the majority of delays, while high costs associated with IT systems maintenance is also a significant contributor. The findings show that the most unprotected trade errors cost hedge funds anywhere between 3 and 10% of trade notional, which in some cases is USD5 million a year. Time delays and execution slippage, which is the difference between the expected price and the price at which the trade is executed, impacts performance by 2 per cent of AUM, which results in costs as high as USD9.5 million annually. When it comes to IT support and administrative costs, a large hedge fund with USD5 billion AUM spends between USD3.5 and USD5 million. Varghese Thomas, President and COO at TradingScreen, says: “From computer meltdowns to human errors, erroneous trades and order delays are caused by a myriad of factors. With so much disruption facing markets right now, hedge fund managers can ill afford not to keep execution delays down, particularly now that European share trading is likely to fragment post-Brexit.
Brief: Sophos Capital Management, the largest dedicated short selling firm in the world as recently as a year ago, is scaling back its hedge fund business, according to people familiar with the plans. The move by founder Jim Carruthers — widely considered a legend in the business — comes as short sellers faced one of their worst years on record. Short-biased funds lost 47.59 percent through November, according to the HFRX Equity Hedge: Short Bias Index. This year isn't looking any better. The Goldman Sachs “most shorted” index of stocks was already up 13 percent in 2020 and more than 200 percent over the past year. Carruthers did not respond to a request for comment, and his funds’ performance details weren’t publicly available. Menlo-Park-based Sophos reported $1.16 billion in regulatory assets under management, six separate hedge funds, and nine employees at the end of 2019. That made it larger than even Jim Chanos’ Kynikos Associates, which had slipped below the $1 billion mark by that time. An individual familiar with Carruthers’ plans said the short seller had been telling people he was winding down some positions since late last year, and some employees have been looking for jobs. It's unknown how long it could take to unwind some of the positions, but people close to the situation said that he is not shutting the firm down. Carruthers launched Sophos in 2014 with about $200 million, including a seed investment from Yale University’s endowment. The move by Yale led other university endowments to invest in short sellers, according to one short-biased hedge fund manager.
Brief: Funding secured by cybersecurity start-ups since the start of lockdown in March increased by more than half compared to the same period in 2019, according to new research released today by Plexal and Beauhurst. This is in contrast to start-ups across all sectors, which saw investment volume fall by 10 per cent year-on-year. Only 23 of the 1,715 start-ups falling into administration, liquidation or dissolution since the start of lockdown were from the cybersecurity sector. The research also found that despite the overall boost in funding (52 per cent increase) and deal numbers (33 percent increase), highlighting the importance of cybersecurity companies during the pandemic, activity consisted mainly of a small number of very large deals, showing that investors continue to prioritise later stage businesses. The volume of funding secured by cybersecurity companies seeking funding for the first time fell to just GBP11.9m since lockdown, from GBP265 million in the same period in 2019 – as companies raising capital for the first time fell by 96 per cent. “While increased total funding demonstrates the relevance of cybersecurity and shows that the UK’s cyber industry has not been impacted to the same extent as others, the almost complete absence of backing for early-stage firms puts the sector’s future at risk, said Saj Huq, director of Innovation at innovation centre Plexal. “It is these companies that we will ultimately rely on to solve the inevitable new cyber challenges arising from a society that is increasingly digital-first,” he added.
Brief: Bond giant PIMCO expects the U.S. economy to return to pre-pandemic levels later this year but warned of political and economic risks that could derail the recovery, including a sooner-than-expected withdrawal of fiscal stimulus. In its 2021 outlook published Tuesday, the California-based fixed-income investor, which manages over $2 trillion in assets, predicts that U.S. economic activity will hit pre-recession peaks in the second half of the year. Global gross domestic product, PIMCO says, will grow at the fastest rate in a decade, buoyed by the worldwide rollout of COVID-19 vaccines. But a pullback in U.S. fiscal stimulus, Chinese corporate deleveraging and continued caution in U.S. spending, investment and hiring could all disrupt the expected recovery, potentially hurting investors who have already priced in a rebound, PIMCO said in the report. “Investors may have become too complacent as reflected by the bullish consensus positioning. As these risk factors underline, we see this as a time for careful portfolio positioning and not for excessive optimism or risk-taking,” the report said. PIMCO’s comments come amid a broad market rally. The promise of the coronavirus vaccine and hopes the Democratic Congress will ramp up spending have driven U.S. stocks to all-time highs and corporate credit spreads to pre-pandemic levels.
Brief: U.S. private equity firms raised “healthy” amounts of money from investors after the pandemic began last year, particularly for technology deals, even as most firms also poured cash into struggling portfolio companies, according to PitchBook’s 2020 review of the industry. Private equity firms quickly figured out how to negotiate the extremes of 2020, cannily shifting from the frozen leveraged buyout business to buying minority stakes and putting money to work in public companies, according to the report, expected to be released Tuesday. After an initial downturn early in the year, exits also rebounded as private equity firms turned to special purpose acquisition companies (SPACs), traditional listings, and other sponsors to take holdings off their hands, reported PitchBook. “What a rollercoaster 2020 was,” said Wylie Fernyhough, lead private equity analyst at PitchBook, in an interview with Institutional Investor. “Whether it was LPs having to pause allocations, or figuring out how to do due diligence online. Private equity really showed its resilience in 2020 with all these headwinds thrown at it.”
Brief: Chris Rokos’s hedge fund racked up its best year since the billionaire investor started his own macro trading firm more than five years ago, joining a string of peers who posted record gains in 2020. His $14.5 billion macro fund soared 44% as the pandemic upended markets, according to people with knowledge of the matter who asked not to be identified because the information is private. The London-based fund’s previous best year was in 2016, when it rose 20%. Macro hedge funds, which trade across asset classes to capitalize on broad economic trends, ended last year up 7% on average, according to data compiled by Bloomberg. Rokos’s returns coincide with a structural overhaul at his firm in late 2019, which allowed for bigger bets as portfolios previously run by individual traders were merged into a single pool of money. A spokesman for London-based Rokos Capital Management, which started in 2015, declined to comment. Rokos joins a slew of macro fund managers that posted double-digit gains last year as market turbulence created opportunities for the firms. Brevan Howard Asset Management, Rokos’s former employer, made 27% in its master fund, the best year since 2003, while its U.S. Rates Opportunities Fund soared nearly 99%. EDL Capital and Glen Point Capital gained 23% and 14%, respectively.
Brief: The Google News Initiative on Tuesday launched a global open fund to fight misinformation about COVID-19 vaccines, worth up to $3 million. The “COVID-19 Vaccine Counter Misinformation Open Fund” aims to support journalistic efforts to effectively fact-check misinformation about the COVID-19 immunisation process, the initiative belonging to Alphabet’s Google said in a blog post. “While the COVID-19 infodemic has been global in nature, misinformation has also been used to target specific populations,” it added. “Some of the available research also suggests that the audiences coming across misinformation and those seeking fact checks don’t necessarily overlap.” The fund will accept projects looking to expand the audience of fact-checks, particularly to groups disproportionately hit by misinformation. Applications will be reviewed by team of 14 jurors from across the academic, media, medical and non-profit sectors, as well as representatives from the World Health Organisation. In December, the Google News Initiative pledged $1.5 million to fund a COVID-19 vaccine media hub to support fact-checking research.
Brief: San Francisco’s office market is being hit so hard by the pandemic that, by some measures, it’s worse than the global financial crisis or dot-com collapse. The city’s office-vacancy rate reached 16.7% at the end of 2020, up 11 percentage points from a year prior, according to a report from commercial real estate brokerage Cushman & Wakefield. That’s a higher level than in the aftermath of the 2008 recession. The vacancy rate is being driven by a record amount of sublease space, which has surpassed the worst of the dot-com bust two decades ago, said Robert Sammons, senior director of research at Cushman in San Francisco. In addition, new leasing has effectively been on pause and hit the lowest annual level in 2020 since at least the early 1990s. Companies have been reevaluating their office needs after months of pandemic lockdowns showed them that it was possible to function with employees working from home. That’s caused a spike in vacancies, especially in cities like New York and San Francisco, where the cost of renting space is higher. The technology companies that dominate the Bay Area, in particular, have embraced remote work. Pinterest Inc. last year paid almost $90 million to cancel a large San Francisco office lease, saying it is rethinking where employees are based.
Brief: The upheaval in global labour markets triggered by the coronavirus pandemic will transform the working lives of millions of employees for good, policymakers and business leaders told a Reuters virtual forum on Tuesday. Nearly a year after governments first imposed lockdowns to contain the virus, there is a growing consensus that more staff will in future be hired remotely, work from home and have an entirely different set of expectations of their managers. Yet such changes are also likely to be the preserve of white-collar workers, with new labour market entrants and the less well-educated set to face post-COVID-19 economies where most jobs growth is in low-wage sectors. “I think it would be a fallacy to think we will go back to where we were before,” Philippines central bank Governor Benjamin Diokno told the Reuters Next forum. “We were already geared towards the digital, contactless, industries ... That will define the new normal.” The pandemic, which according to a Reuters tally has so far infected at least 90.5 million people and killed around 1.9 million worldwide, has up-ended industries and workers across the globe.
Brief: It could have been a disastrous year for the European fund management industry, but policymakers rode to its rescue. Huge fiscal and monetary stimulus packages supported markets and continued to push investors away from cash. In the end, the industry ended the year close to where it began, but this headline figure masked considerable variation underneath. The European fund industry had €10.03trn (£9trn), excluding money market funds, as at 30 November 2020 according to Morningstar data, an organic growth rate of 3.2%. In aggregate, fixed income saw the strongest inflows, at €110bn, in spite of continued low yields. Equity funds saw inflows of €91.7bn, while allocation funds saw inflows of €34.8bn. The notable weak spot was in alternatives, which saw €35.5bn exit the sector – a combination of the weakness of the property sector and a growing disillusionment with the poor performance and high fees from hedge fund strategies. Commodities had a good year, drawing in an extra net €1.6bn of assets. However, this overall picture masked huge shifts in the popularity of different asset classes through the year as economic news and investor sentiment ebbed and flowed. In November, for example, equity funds were firmly in the ascendancy as vaccine news emerged and some stability returned to US politics.
Brief: Hedge funds weathered the political, social and economic shocks brought about by the global pandemic and frequent bursts of soaring volatility to score a near-12 per cent return last year – their best since 2009 – outperforming both the Dow Jones Industrial Average and FTSE 100, new data from Hedge Fund Research shows. HFRI’s main Fund Weighted Composite Index – a global, equal-weighted measure of some 1400 single-manager hedge fund strategies – finished 2020 up 11.6 per cent for the year following a 4.5 per cent rise in December. The full-year gains represent a strong rebound for the hedge fund sector as a whole, which had earlier plummeted 11.6 per cent in Q1 following three months of consecutive losses amid the initial coronavirus outbreak. The index’s annual 11.6 per cent rise builds on 2019’s 10.45 per cent annual return. The strong annual showing – the benchmark’s best since a near-20 per cent surge in 2009, at the height of the Global Financial Crisis – is likely to further draw in more yield-hungry allocators, according to HFR president Kenneth Heinz. “Hedge funds effectively navigated both December and calendar year 2020 volatility, and accelerated into 2021 with powerful, broad-based performance which continued yet broadened the high-beta equity- and crypto-driven gains to also include quantitative, trend-following macro, energy and special situations exposures,” Heinz observed.
Brief: Activist investor Elliott Management Corp. returned 12.7% on its investments in 2020, turning in one of its strongest years in the past decade, according to an investor letter reviewed by Bloomberg. The New York-based hedge fund reported the same returns for both its international and onshore funds, marking their best year since 2012 and 2016, respectively, according to a person familiar with the matter who asked to not be identified because the matter isn’t public. A representative for Elliott declined to comment. The document shows Elliott was profitable every month in 2020, including in March when it eked out a 0.1% return amid a broader selloff in the markets in the wake of the coronavirus pandemic. The S&P 500 returned 16% over 2020. Elliott’s assets under management grew to $45.2 billion from roughly $41 billion at the end of June. Elliott, which is run by billionaire Paul Singer, took at least 16 new activist positions in 2020, including at Twitter Inc., Softbank Group Corp., and others, according to data compiled by Bloomberg.
Brief: Eventus Systems, a global provider of multi-asset class trade surveillance and market risk solutions, has reported 'unprecedented growth' on multiple fronts in 2020, marking its strongest year to date in revenue and new client onboardings. The company has additional expansion plans for 2021, with deeper penetration in asset classes such as equities, foreign exchange (FX), fixed income and digital assets. Eventus CEO Travis Schwab says: “In a year full of so many challenges and hardships for us all, we are profoundly grateful that it was also the most monumental year since our launch. Our Series A funding round enabled us to make strategic investments that accelerated our growth in terms of staff, geographical presence, market coverage, client acquisition, product enhancements, scalability and efficiencies. I’m incredibly proud of our team and Board for the hard work, persistence, insights and first-class client service that made this growth possible. Our Validus platform is now a mission-critical piece of infrastructure for a wide range of leading financial market participants and exchanges. We ended 2020 on a particularly strong note, with one of the world’s largest non-bank cash FX trading firms and a major digital asset exchange both signing in the last week of the year.” Schwab says that following a year in which the firm established leadership as the trade surveillance platform used by many of the largest cryptocurrency exchanges, he expects further market penetration in this space, attracting not only more exchanges but also various other market participants active in digital assets.
Brief: When the biggest U.S. banks begin reporting fourth-quarter results on Friday some of the headlines could show profits plunged by as much as 40% from a year earlier, before the pandemic struck. But investors will be focused on digging out clues to the earnings rebound expected in 2021. “You can look at Q4 as somewhat of a transition quarter as you put some of the challenges from 2020 in the rear-view mirror and look ahead to an improved 2021,” said Barclays analyst Jason Goldberg. The pandemic caused interest rates to plunge and produced a record decline in the margin between what lenders charge for loans and what they pay for money, said Goldberg. The pandemic also pushed big U.S. banks to set aside more than $65 billion for expected loan losses. From those low points, banks could see profits more than double in first and second quarters of 2021, according to Refinitiv’s IBES estimates. Bank stocks have risen 35% since early November. Since then, effective COVID-19 vaccines started being distributed, Democrats took power in Washington, promising more economic stimulus, and the Federal Reserve said it would allow banks to repurchase stock again, which will increase earnings per share.
Brief: New strategic research from Mercer focuses on what the coming year holds for alternatives, outlining some of the issues investors may want to follow closely in an effort to optimise their portfolios. “We are seeing that though investors have been tested this year, the experiences of previous crises have made them more resilient. There were unorthodox challenges such as not being able to vet new managers in person, but clients continued to put capital to work, especially with existing investment manager relationships across all private market segments,” says Raelan Lambert, global head of alternatives at Mercer. “In 2021, investors should consider stretching their risk appetites and consider their allocation to real estate. Although the pandemic will continue to challenge the property market, 2021 is likely to be an opportune time for entering the asset class with a medium- to longer-term investment horizon. Initially, investors should prioritise allocations to the largest, most-liquid markets, where price discovery is furthest along.”
Brief: KKR & Co. raised $3.9 billion for its first Asia-Pacific infrastructure fund, amassing the largest pool of cash in the region for investments in everything from waste management and renewable energy to communication towers. In the process of raising funds, the firm boosted its initial target from $3 billion and stopped fundraising after reaching its cap. It tapped three dozens investors in the U.S., Europe, the Middle East and Asia-Pacific, said Alisa Amarosa Wood, head of KKR’s Private Markets Products Group. KKR and its employees contributed about $300 million. Accelerating its expansion across a region that’s emerging from the pandemic and bolstered by a growing middle class, the firm is also in the midst of raising at least $12.5 billion in a fourth private equity fund and planning its first real estate and credit funds in Asia. KKR declined to comment on the other fund-raisings. Institutional investors are increasingly looking for a “one-stop shop” with deal-making, operational and capital market expertise, favoring assets with a lower-risk profile that aren’t tied to public market indexes, Wood said. “Investors are looking for a safe pair of hands,” she said in an interview.
Brief: Cash-rich private debt and equity providers are hunting for viable pandemic-hit businesses to fund, according to London-listed alternative asset manager Intermediate Capital Group PLC. “If a business has a shortfall purely due to Covid-19, there is plenty of capital to support them,” said Nicholas Brooks, ICG’s head of economic and investment research in a telephone interview. European private debt managers had almost $93 billion of capital available as of December 2020, with over $295 billion in the hands of private equity, according to data provider Preqin. That cash could help out a lot of companies bearing the brunt of the pandemic that have already tapped out government-backed emergency loans. It’s a relatively expensive option, but may be the only one open to some of the hardest hit sectors as parts of Europe enter their third lockdown. That means yet more pain for many of the firms identified by ICG in their analysis of financial data for around 500 private companies. Hardest hit were automotive and components, travel, hotels, restaurants and leisure, and retail, which endured months of almost zero revenues last year. “Private debt and private equity have record levels of dry powder,” Brooks added. “Funds aren’t the issue, it’s really whether a business is viewed as viable in the long-run.” It’s also a question of whether borrowers can afford the money on offer.
Brief: The pandemic has made one thing abundantly clear for hedge funds: Trading a once-in-a-century crisis is best left to humans. Funds that survive largely on their ability to place high-conviction bets made some of their strongest returns in decades last year. Some of the industry’s best-known names such as Brevan Howard Asset Management, Millennium Management and Andurand Capital Management soared past peers as stormy markets provided rich pickings. That’s thrown a wrench into the rise of computer-driven quant funds, which gobbled up assets year after year but couldn’t protect investors or make money in 2020. Algorithms largely failed to decipher the impact of a rapidly moving virus and the response from central banks to contain economic damage. The “narrative was: stock selection is dead, the future is all about indexing and quants and the blackbox and all that,” said Craig Bergstrom, chief investment officer at the $7.5 billion Corbin Capital Partners that invests in hedge funds. “It’s another kind of arms race and there are winners, but there are definitely also losers, and it’s not the future of active management.” The market selloff in March and subsequent recovery humbled some of the most sophisticated of quants last year -- most notably behemoths such as Renaissance Technologies, Winton and Two Sigma.
Brief: Investor optimism has increased “significantly” since the start of the pandemic, according to a new survey. The Scotia Global Asset Management Investor Sentiment Index found that investor optimism spiked from a reading of 100 in May to 117 in November. The reading was even higher — 130 — among investors who use advisors. Eight-two per cent of investors who’d met with an advisor in the past six months said they felt more confident about their investments, compared to 56% of investors who hadn’t met with an advisor. The survey also found that 80% of investors who use advisors felt they were on track to meet their financial goals, and 90% were somewhat or very confident about funding their retirements. Scotia commissioned Environics to conduct an online poll of 1,024 investors with a minimum of $25,000 in household investable assets from Nov. 10 to Nov. 19, 2020. Online polls cannot be assigned a margin of error because they do not randomly sample the population.
Brief: Venture capital backed companies in the United States raised nearly $130 billion last year, setting a record despite the COVID-19 pandemic, figures from data firm CB Insight released on Friday show. While the investment total is up 14% from 2019, the number of deals is down 9% to 6,022. And so-called mega-rounds, deals that are $100 million or higher also hit a record amount and number with $63 billion raised in 318 deals. “What we’re seeing is a ‘rich get richer’ phenomenon where successful, high momentum technology companies are vacuuming up most of the financing,” CB Insights chief executive Anand Sanwal told Reuters by email. He said that data showed a big drop in a very early stage investment called seed stage, and expected some of those companies that stand out to see “insatiable investor demand” with fewer competitors for the money. The trend of big investments doesn’t look like it will slow in 2021 as there is a lot of capital chasing investments, say some venture capitalists.
Brief: Commerzbank AG will take an additional 2.1 billion-euro ($2.6 billion) hit in the fourth quarter as the pandemic weighs on interest rates and drives up bad loans, pushing the lender deeper into the red as it readies a new turnaround plan. Commerzbank will write off 1.5 billion euros in goodwill on its books and set aside about 630 million euros for bad loans to reflect the impact of a second lockdown, according to a statement Friday. That’s on top of a 610 million-euro charge the Frankfurt-based bank announced last month to cover job cuts. Chief Executive Officer Manfred Knof, who took over this month, is preparing to unveil a radical restructuring after shareholders pushed out the previous leadership amid frustration with the slow pace of change. Knof and new Supervisory Board Chairman Hans-Joerg Vetter are now working on a more ambitious cost-cutting plan with about 10,000 jobs on the line, Bloomberg has reported. “After this balance sheet clean-up, we are well prepared for the road ahead of us,” Knof said in the statement. “Our goal is to make the bank more profitable in the long term.” Commerzbank shares fell as much as 4.1% after the announcement and were trading 3.1% lower at 12:56 p.m. in Frankfurt. They have fallen about 5% in the past 12 months.
Brief: The COVID-19 pandemic has changed the way hedge funds do business, from raising money to investing and more. Some trends are here to stay, while others will change as the pandemic continues and eventually comes to an end. Craig Bergstrom, chief investment officer at Corbin Capital Partners, said in an email that active management had returned in 2020, exceptionally fundamental stock selection. He said results across the industry are mixed, but dispersion has meant that careful portfolio construction has been precious. "Broad hedge fund performance has certainly been disappointing in recent years," Bergstrom said. "Very low interest rates are a big part of that problem, but clearly another key factor is fund fees, which have come down, but not fast enough, which means they are consuming too much of the gross returns." He adds that it's not fair to compare hedge fund returns to stock market returns because it is nearly three times as volatile. However, in recent months, investment managers have finally started to have an easier time generating alpha. "The right hedge fund portfolio, though, has been able to deliver solid alpha, and attractive risk adjusted returns, which we think remains very attractive in a world where prospective fixed income returns are very low," Bergstrom said.
Brief: The financial regulator has warned 4,000 firms in the financial services sector are at "heightened risk" of failing as a result of the coronavirus crisis. In its most detailed financial snapshot of the market published since the pandemic began the Financial Conduct Authority said almost a third of these firms could potentially cause harm to consumers should they collapse. Within the retail investment market, which includes advisers, self-invested personal pension operators and platforms, 3,414 firms predicted the crisis would have a negative impact on income. The advice sector had one of the highest proportion of firms expecting a drop in income, equating to 66 per cent of the 5,159 firms which responded to the FCA's data request. But the impact on income was largely predicted to be minimal, with 2,973 of the firms in the retail investment market which predicted a drop estimating the reduction would sit between 1 and 25 per cent and only 26 firms saying income might plummet by more than 76 per cent. The FCA sent its financial resilience survey to 13,000 firms in the wider financial services in June and to a further 10,000 firms in August.
Brief: Brevan Howard Asset Management has recorded its best year since the hedge fund firm began investing nearly two decades ago. The main fund at billionaire Alan Howard’s firm was up 27.4% last year, the most since 2003, according to an investor letter seen by Bloomberg. That compares with a 3.4% average return for macro hedge funds through November, according to data compiled by Bloomberg. The Brevan Howard Master Fund managed $4.3 billion at the end of November. The biggest boost came in March thanks to gains from interest-rate bets, option trading in equity and credit indexes and from oil, according to an investor letter seen by Bloomberg. A spokesman for the Jersey-based investment firm declined to comment. Brevan Howard is making up lost ground after years of mediocre returns shrunk its assets by more than 80% from a 2013 peak to about $6.4 billion two years ago. Clients are now returning, lured by improved performance and as rising volatility creates money-making opportunities for macro hedge funds. Its assets rose to about $11.4 billion at the end of November. The firm’s rebound was also fueled by a more than 100% gain in a hedge fund earlier last year that Howard personally manages. Full-year returns for the AH Master Fund, which invests money for the main hedge fund, the billionaire’s own cash and for a few external investors, are not known.
Brief: Marathon Asset Management ("Marathon"), a leading global credit investment manager, today announced the final close for its Marathon Distressed Credit Fund, which was oversubscribed with approximately $2.5 billion in commitments. The fund will invest in a wide range of situations by providing capital solutions that allow companies to grow or reposition their businesses, including stressed and distressed companies in transition. The opportunities it will pursue include restructurings, debtor in possession financings, and exit financings where Marathon can bring to bear its differentiated expertise, experience and resources. "While the broader market has recovered, the K-shaped recovery has resulted in a disparate impact that requires tailored capital solutions to help companies across industries recover from the 2020 cyclical decline," said Bruce Richards, Chairman & Chief Executive Officer of Marathon. "Companies that are well positioned for future growth may need a thoughtful and sophisticated capital partner to navigate the downturn, even in the event it may require a consensual restructuring." Louis Hanover, Chief Investment Officer of Marathon, said: "Following a prolonged economic expansion marked by mispriced risk and heavily levered capital structures with weak documentation we are presented with an optimal investment environment to prudently and opportunistically deploy capital."
Brief: Canada’s economy and financial markets are moving in opposite directions as investors drive up asset prices in response to cheap-money policies. That trend will continue in the months ahead, according to Manulife’s Frances Donald. The country is grappling with a fresh set of lockdowns as governments try to quell a wave of Covid-19 infections. Quebec, the second-largest provincial economy, is likely to unveil new restrictions Wednesday that will shut down the construction sector. Less than 1% of the population has been vaccinated so far, putting Canada behind the U.S. and U.K. Meanwhile, the S&P/TSX Composite Index is near a record after rising about 8% in three months. Economically-sensitive energy and industrial stocks have surged, while bank shares are up 14% since Oct 5.While vaccines have arrived, “the economic benefits are probably not solved before the second half of the year,” Donald, global chief economist and head of macro strategy at Manulife Investment Management, said by phone. “In 2021, my suspicion is the disconnect between the economy and markets continues.” Economists are still predicting a strong recovery in the second half of the year, as vaccines allow for a rebound in travel, entertainment and other sectors that have been crushed by the pandemic. Even so, Donald doesn’t see a full recovery until 2022. That’s because there will be structural scarring to the economy from business closures, job losses and new ways of working.
Brief: The majority of family offices will not significantly alter their asset allocation strategies in 2021 despite the likely market turbulence and challenging economic conditions that lie ahead. This is the chief finding from a survey of family offices conducted by BlackRock. Of the 185 offices that were canvassed, only 23% said that they plan to make material changes to their asset allocations. BlackRock ascribes this to the long-term investment outlook adopted by most family offices. However, the asset manager also warned against viewing the events of 2020 as simply short-term volatility and ignoring the likely long-term impacts. “While we recognise Family Offices have a long-term investment horizon, we believe that the nature of the crisis will have a long lasting impact on economic growth, interest rates and corporate fundamentals leading to structural shifts across asset classes,” said Sheryl Needham, managing director, head of Emea family offices at BlackRock. “It’s important that even long-term investors consider the resilience of their portfolios by reviewing their strategic asset allocation, to ensure they are positioned to navigate current markets, protect wealth and to harness opportunities through the recovery.”
Brief: Some investors including William Ackman and Glenn Welling, who push corporations to perform better, posted record-breaking returns in 2020 when activist investors generally backed off demands during a year marked by wild and unexpected business conditions. Ackman’s publicly traded Pershing Square Holdings fund rose 70.2%, marking the best-ever return at his 16-year-old firm Pershing Square Capital Management and one of the best in the hedge fund industry. In 2019, the fund rose 58%, also a record. Welling’s Engaged Capital, founded in 2012 and known for pushing companies like Medifast Inc and Hain Celestial Group Inc to make changes, returned 51%. That tops the firm’s previous record return set in 2019 with a 34% gain. And Andrew Left, who has targeted companies he thinks are over-valued through his work at Citron Research, told investors that his hedge fund returned 155% in 2020, after gaining 43% in 2019, the fund’s first year in business. The gains reflect a late-year rebound among activists - fueled partly by strong stock market gains - with the average fund up 6.7% in the first 11 months of 2020 after a 27% drop in the first quarter, Hedge Fund Research data shows. Activist campaigns were down 20% in 2020 from the previous year, Lazard data shows.
Brief: Billionaire activist investor Christopher Hohn’s hedge fund has racked up a 12th straight year of gains, overcoming record losses at the onset of the pandemic. The Children’s Investment Fund made about 14% in 2020 as its concentrated stock portfolio rose amid surging markets, according to people with knowledge of the details. That took the fund’s assets to about $35 billion, a separate person said, asking not to be identified because the information is private. Hohn hasn’t lost money in a year since the last financial crisis. Last year, the fund recovered from losing 19% in March, the most in a month since it started trading in 2004, as the coronavirus roiled global markets. Bets on firms such as Microsoft Corp., Canadian Pacific Railway Ltd. and Charter Communications Inc. contributed to the fund’s 2020 gains. Still, while Hohn outperformed activist hedge funds that were up an average 6.2% through November, he fell short of the 18.4% gain in the S&P 500 Index. A spokesman for the London-based investment firm, which manages about $45 billion, declined to comment on the returns. Hohn is famous for building large stakes in companies and pushing for change to boost their share prices. He runs a long-biased portfolio spread over a small number of stocks, making it susceptible to sharp drops in values. The strategy has worked for his investors over the years, with the fund losing money only in 2008 when it dropped 43%.
Brief : The International Stock Exchange (TISE) listed 831 securities during 2020 against the backdrop of the coronavirus (Covid-19) global pandemic. This is the second highest annual total of new listings since the inception of the Exchange – eclipsed only by a bumper 2018 – and represents a 27 per cent increase on 2019. It means that there was a total of 3,162 securities listed on TISE at the end of December 2020, which is a rise of 6 per cent year on year. Cees Vermaas, CEO of The International Stock Exchange Group, says: “It is really pleasing that our business flows have held up so well this year, despite the impact of Covid-19 across the world. What we have seen is that while Covid-19 may have disrupted or slowed some market activity, it has also generated other new listings business as companies refinance, whether opportunistically or essentially, in the face of the changing economic conditions.” During 2020, TISE has maintained its position as a leader in the European high yield bond market. There were 124 high yield securities issued by companies such as telecommunications firms Altice and eircom, luxury car manufacturer Aston Martin, LEGOLAND owners Merlin Entertainments, transport operator Stena and US digital content platform and producer Netflix, which were listed on TISE during the year. This also included three of the largest 10 transactions in the third quarter of the year: the largest being the Liberty Global and Telefónica financing vehicle for the merger of Virgin Media and O2; the UK’s largest pub chain, Stonegate Pubs; and debut issuer First Quantum Minerals. Overall, the total number of high yield bonds listed on TISE reached 291 at the end of December 2020.
Brief: As a growing number of Wall Street firms plan to move New York employees to cheaper U.S. hubs and even let rainmakers work from faraway homes, BlackRock Inc. is planting its feet firmly in Manhattan. Executives at the world’s largest asset manager have privately urged employees not to get too attached to doing their jobs remotely full-time, while it awaits a move to a new office tower in New York, where it’s based. With the pandemic surging across the U.S., the company extended the work-from-home period through this year’s first quarter. But that won’t be the new normal. “The office will remain our primary work location longer-term,” senior executives including Chief Operating Officer Rob Goldstein wrote in one memo sent to staff in November. “Employees will have increased flexibility to work remotely part-time, but full-time remote work will be done very selectively and with approval.” Returning to offices on a larger scale will take time, they wrote, and the company is working on making regular Covid-19 testing available to “as many people as practicable.” BlackRock still plans to move its New York staff into 50 Hudson Yards, a new skyscraper on Manhattan’s west side, in late 2022 or early 2023, a spokesman confirmed this week. The relocation, first announced in 2016, came with a lucrative incentive: BlackRock secured $25 million in state tax credits to create hundreds of new jobs and keep staff there.
Brief: Once believers, professional investors are getting antsy about stock bets tied to a smooth reopening of the American economy. Hedge funds that make both bullish and bearish equity bets spent Monday -- the worst opening day in five years -- leaning back into what has come to be known as the stay-at-home trade, buying lots of online tech companies optimized for lockdown commerce. Their preferences showed a shift away from the travel-leisure-retail group they’d favored in the second half of 2020, data compiled by Goldman Sachs’s prime brokerage show. It happened as virus angst mounted, with infections surging and vaccine distribution short of hopes. “When we think of what could possibly derail these lofty expectations of a second-half economic boom, it has to do with the race between the vaccines and the virus,” said David Rosenberg, founder of Rosenberg Research & Associates Inc. “Nobody said it’s not a big bull market. It’s just one premised on cheap money rather than solid fundamentals. Hence the speculative fervor.” When the S&P 500 dropped 1.5% Monday, hedge-fund clients tracked by Goldman reduced short positions in companies that cater to at-home demand, such as internet and software shares, with a basket of such stocks seeing the biggest net buying in three weeks. Meanwhile, reopening companies, like airlines and cruise operators, experienced the largest net selling in two weeks.
Brief: U.S. private companies shed workers in December for the first time in eight months as out-of-control COVID-19 infections unleashed a fresh wave of business restrictions, setting the tone for what is likely to be a brutal winter for the economy. The ADP National Employment Report on Wednesday showed job losses across all industries last month as the coronavirus outbreak kept many consumers and workers at home. While the report underscored the magnitude of the crisis, the economy was unlikely to slide back into recession, thanks to additional fiscal stimulus approved in late December. The ADP report added to slumping consumer spending and persistently high layoffs in suggesting that the economy lost significant momentum at the end of 2020. “America’s great jobs machine ran into a wall of rising coronavirus cases and state lockdowns which puts the entire economic recovery from recession at risk,” said Chris Rupkey, chief economist at MUFG in New York. “The heart of every recession is job losses and right now the decline in jobs at year end is hinting that the dark days of the labor market last spring have returned.” Private payrolls decreased by 123,000 jobs last month, the first decline since April, after increasing 304,000 in November. Economists polled by Reuters had forecast private payrolls would rise by 88,000 in December.
Brief: Family offices are heading back to hedge funds. More than a third of 185 investment firms for wealthy clans plan to boost allocations amid the economic upheaval caused by the Covid-19 pandemic, according to survey released Wednesday by BlackRock Inc. and Juniper Place, a London-based firm that helps asset managers raise capital. Family offices and other investors soured on hedge funds in recent years, bemoaning high fees and lackluster returns. But the health crisis has given some of those managers a boost, particularly stock-pickers who benefited from aggressive bets on technology stocks and copious economic stimulus that drove equities to new heights. “Recent market turmoil and the expectation of sustained volatility in the medium term has re-invigorated hedge fund appeal,” New York-based BlackRock and Juniper Place said in their report. Family offices have proliferated in recent years along with a surge in personal wealth derived from tech, finance and real estate. Some of the largest include Bill Gates’s Cascade Investment and Sergey Brin’s Bayshore Global Management. There are now more than 10,000 single-family offices globally, according to accounting firm EY. Single family offices, which have just one client, had average assets of $802 million, according to research published in 2019 by Campden Wealth and UBS Group AG. More than three-quarters of family offices said they preferred long-short equity hedge funds, according to research BlackRock conducted in July and August. Such funds were the best performing broad strategy last year, gaining about 4% through November on an asset-weighted basis, according to data from Hedge Fund Research Inc.
Brief: "The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble,” says GMO’s Jeremy Grantham. “Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history,” wrote the investor. He compares this period the South Sea bubble, the 1929 market crash, and the dot-com boom of 2000. “These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part,” he wrote. He warns the bubble will burst in due time, “no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios.” The markets had a wild ride in 2020, briefly going into a bear market after COVID-19 lockdowns were set in place. Soon after they recovered as the Federal Reserve made unprecedented moves to support the economy, and Congress passed a stimulus bill. “I am not at all surprised that since the summer the market has advanced at an accelerating rate and with increasing speculative excesses,” wrote Grantham.
Brief : Goldman Sachs Group Inc. Chief Executive Officer David Solomon said he expects to have all his employees back at their offices by the end of the year as the vaccine rollout ramps up. “The big focus right now is we’ve got to get people vaccinated -- we’ve got to get to the other side,” Solomon said in a Bloomberg Television interview Tuesday. “I certainly would expect a lot of Goldman Sachs employees back in full by the end of the year. We will get through this, and I’m really hopeful that over the course of the next six months we see a real improvement.” The Goldman CEO said he’s encouraged by the amount of vaccine production, but flexible, efficient ways need to be found to get shots distributed, which he believes will be the biggest challenge facing President-elect Joe Biden’s administration. In addition to government actions, the private sector can play a role in speeding up vaccinations, he said. “There’s still work to be done,” he said. “And once we deal with the vaccine and the virus, and people feel safe, we’re still going to have to deal with the economic consequence of the shutdowns and the impact on our economy that this pandemic’s had.”
Brief: The world’s largest asset manager, BlackRock, has predicted that the “revolution” in monetary and fiscal policy spurred by the Covid-19 pandemic will dampen government bond real yields in 2021. The asset manager favours inflation-linked bonds, as well as risk assets such as equities and high-yield credit. Central banks across the world responded to the coronavirus crisis last spring by lowering interest rates and buying bonds, totalling 190 rate cuts and USD1.3 billion spent every hour since March 2020 on asset purchases. Interest rates are expected to enter an era of “lower for longer”, despite the potential for rising inflation as vaccination programmes are rolled out and the global economy continues its recovery in 2021. BlackRock Investment Institute writes in a recent market note: “A key takeaway is how swiftly macro policies can evolve and the lasting impact this can have on market dynamics. The policy revolution that started in 2020 is still a key driver of our investment views for this year.” The Federal Reserve has already outlined plans to allow US inflation to exceed the 2 per cent target temporarily, without hiking rates, in a new monetary policy framework.
Brief: No one in the investment world appears to have mastered the tumultuous pandemic year as well as Bill Ackman, who banked more than $1 billion in 2020. Ackman’s billion-dollar pay day is based on the gains of the shares he owns of Pershing Square Holdings — his publicly traded hedge fund — as well as estimates of performance fees and a few private investments. The 54-year-old hedge fund manager declined to comment on his spectacular year, saying he did not want to “gloat.” “Happy New Year,” he added, on the record. Pershing Square’s publicly-traded fund, now its largest, gained a net 70.2 percent in 2020, a record for the firm and multiples of the returns of the broader market and other hedge fund legends, many of whom nursed steep losses until markets began to recover from their March swoon. Ackman owns 45 million shares, or 23 percent, of that fund, earning him $720 million on the gain in the stock alone. It gained 86 percent, including dividends, for the year. But he's been uncharacteristically shy about his winnings. “It’s hard to talk about success when a lot of people are suffering, and many more have died,” Ackman told investors in a recent call.
Brief: Hedge funds increased bets against major gold miners, filings reviewed by Reuters showed, as COVID-19 vaccines weakened expectations for the yellow metal after a year of record gains. Gold prices have dipped from last year’s record highs above US$2,000 per ounce as vaccines deployed against the coronavirus encouraged investment in assets that perform well during periods of economic growth. “While we are by no means out of the woods in our view, the light at the end of the tunnel means that gold markets should begin to see an unwind of the trends that became quite exaggerated over the course of 2020,” Royal Bank of Canada analysts said last month. The bank cut its 2021 forecast for gold to US$1,810 per ounce from US$1,893. Short trades as a percentage of total traded volume for Barrick Gold rose to 24.8 per cent for the second half of last month, from approximately 14.9 per cent for the first half of December, according to filings reviewed by Reuters. Newmont Corp. saw an increase to 11.4 per cent, from 8.8 per cent, over the same period, while trades in Kinross Gold rose to 20.6 per cent, from 18.2 per cent, according to the data.
Brief: Testing financial conditions during 2020 have added to the pressure on Australia’s superannuation industry to deliver better investment outcomes and greater cost efficiency, according to Funds Global Asia’s 2020 Australia survey conducted in partnership with Calastone. Respondents predict that this will accelerate mergers between superannuation funds, while placing fresh demands on fund providers to offer wider product choice to scheme members. The Australian pension fund, or “superannuation”, sector, has been under scrutiny from financial regulators over the past four years as part of a far-reaching review of pensions and wealth management provision. The Australian Royal Commission on Misconduct in the Banking, Superannuation and Financial Services was established in 2017 to investigate misconduct and poor standards in the financial services industry. Publishing its findings in February 2019, the Commission identified “cultural failings” in the superannuation, banking and wealth management sectors and highlighted a need to reform governance, fee structures and remuneration policies which often worked to the “financial detriment” of scheme members.
Brief: Hedge funds, which use leverage and employ more aggressive, often riskier strategies than other investors, believe many previously undesirable sectors, ranging from energy to retail, will rebound in 2021. Accounting for roughly $3 trillion in assets, hedge funds showed resilience in 2020, with many outperforming the market, according to investors. “We think 2021 is going to be a really positive year for the markets,” said Jason Donville, president and CEO at Toronto-based hedge fund Donville Kent Asset Management. He forecasts an explosion of pent-up demand for travel and leisure producing a period of “super growth.” “I think it will take a little while for the vaccines to roll out and then somewhere around March, April, May, you’re going to get a confluence of the vaccines getting to a certain critical mass... and infection rates dropping.” For 2020 as a whole, the S&P 500 unofficially rose 16.26%, a stunning rally from a bear market that kicked off when the pandemic spread rapidly earlier in the year. “What I would say about 2021 is it looks like it’s going to be a year of recovery,” said Robert Sears, chief investment officer at UK-based Capital Generation Partners, which invests in hedge funds globally. “That’s the consensus view.”
Brief : Eighty three per cent of institutional investors believe that a global financial crisis is a possibility, with 60 per cent expecting the next severe crisis to occur in the next one-to-three years, according to Block-Builders.net. A new infographic - https://block-builders.net/crash-alert-83-of-major-investors-believe-gl… - highlights that around 80 per cent of major investors believe that markets have not yet sufficiently priced in the long-term risks posed by the Corona crisis, while more than half see the advantage of a defensively oriented portfolio. Institutional investors remain largely unanimous in their view that, despite all the risks, securities from the Asian region have great growth potential. One of the reasons for this is the fact that countries such as China have got a better grip on the pandemic and their economies are now correspondingly growing much faster. Meanwhile, the scars left by the pandemic on business owners' coffers are becoming ever clearer. The situation is most critical in the case of the hospitality industry, where 19 per cent of businesses report having only 4 weeks of cash reserves. Across all sectors, 11 per cent of entrepreneurs say they only have reserves for just under 4 weeks. "Despite all the risks, many stocks are still trading at all-time highs," says Block-Builders analyst Raphael Lulay. "Whether we are already in the midst of a speculative bubble remains to be seen. Many market participants continue to see the stock market as almost without alternative".
Brief: Airlines say a slew of questions remain about the federal government's decision to require passengers returning to Canada to show negative results on COVID-19 tests taken abroad. Transport Minister Marc Garneau announced Thursday that air travellers overseas will have to present proof of a negative molecular test — known as a PCR test, conducted with a nasal swab — that was taken within 72 hours of departure, unless the testing is unavailable in that country. National Airlines Council of Canada chief executive Mike McNaney says the Transport Department has yet to provide a list of foreign agencies whose tests are considered acceptable or to establish how airline employees should determine whether a test document is valid. He says the new rule, which mandates a 14-day quarantine in Canada regardless of the test result, will cause "confusion" and "frustration" for carriers and passengers alike. Air Transat vice-president Christophe Hennebelle says Ottawa announced the requirement, which takes effect this Thursday, "out of the blue" without any prior consultation or notice to industry. Transport Canada did not immediately respond to questions Monday. The rule comes as a devastated airline sector continues to bleed cash following a collapse in demand caused by the pandemic. It also arrives amid growing criticism of the federal sick-leave benefit that pays $500 per week for up to two weeks to Canadians quarantined after touching down from abroad, including after vacations.
Brief: The new year is expected to be a mergers and acquisitions bonanza as deal makers attempt to put the pandemic behind them, meaning attorneys must be on top of trends like the continued use of special purpose acquisition companies and an anticipated increase in distressed M&A. The coronavirus pandemic caused a short-term slowdown in the pace of deal-making last year, but players in the M&A space didn't spend too much time on the sidelines; after initial shockwaves from the virus-induced shutdowns decimated figures for the second quarter, the third and fourth quarters of 2020 were relatively strong. As of Dec. 10, the total value of U.S.-targeted M&A deals announced in the third and fourth quarters totaled $915 billion, far greater than the $378.4 billion overall value of deals across quarters one and two, according to data provided by Dealogic. "There was a slowdown in the first two months post-shutdown," said Susan Oakes, an M&A partner at Holland & Hart LLP. "But once things settled into place, the deals that were on hold restarted, and we've been really extraordinarily busy." In 2021, clients will look to build on the momentum from the end of 2020, but they'll have to do so in a landscape that has been significantly altered because of the once-in-a-century pandemic.
Brief: Big Apple billionaires are booming — with a collective wealth that ballooned by $81 billion to more than $600 billion during the pandemic, according to an analysis. That 16 percent surge among Gotham fat cats since mid-March included big gains for former Mayor Mike Bloomberg, the city’s richest person, whose financial data and media empire shot up by $6.8 billion to some $55 billion, a 14 percent spike, says Americans for Tax Fairness and the Institute for Policy Studies, which crunched the Forbes data. President Trump also did quite well, as his net worth grew by $420 million, jumping from $2.1 billion to $2.5 billion, a 20 percent increase, the data shows. New Mets owner and hedge fund titan Steve Cohen is also among the metro-area billionaires — a class of 141 — who had a great 2020, adding $700 million to his pile, which now totals $14.6 billion, a 5 percent uptick. Buoyed by trillions in federal COVID-relief largesse, Wall Street powerbrokers notched some of the largest gains. Stephen Schwarzman of Blackstone Group fattened his wallet by some $5 billion to about $21 billion, a 34 percent gain. JPMorgan’s Jamie Dimon’s holdings went from $1.2 billion million to $1.5 billion, about a 29 percent increase.
Brief: New hedge fund launches increased to the highest level in five quarters in Q3 2020 on optimism in the US economy, as managers and investors positioned for acceleration of performance gains and capital growth into 2021, according to the latest HFR Market Microstructure Report, released today by HFR. New hedge fund launches increased to an estimated 151 in Q3 2020, the highest quarterly launch total since 2Q19 and exceeded the estimated quarterly liquidations for the first time since 2Q18. Launches in the most recent quarter exceeded the 2Q estimate of 129 new funds, bringing the YTD 2020 launches to 364 through Q3, a period which included a record low number of fund launches in 1Q as the global pandemic began. Fund liquidations fell to an estimated 137 in Q3 2020, the lowest liquidation total since 2Q18 and marked a decline of over 50 percent from the 304 liquidations in Q1 2020. Through Q3 2020, an estimated 619 funds liquidated in 2020, with nearly half of those occurring in Q1 2020. The investable HFRI 500 Fund Weighted Composite Index® advanced +5.1 per cent in November, increasing its YTD return to +6.1 percent and topping the +3.9 per cent YTD gain of the DJIA. The HFRI 500 Equity Hedge Index led strategy performance in November with a +7.5 per cent return, bringing YTD performance to +10.9 per cent. Over the first eleven months of the year, the HFRI 500 EH: Technology Index led all strategy performance with a +23.5 per cent return. In addition to strong performance of the HFRI Indices, the HFR Cryptocurrency Index surged +52 per cent in November, bringing the YTD return to +156 per cent.
Brief: Johnson & Johnson said on Thursday it has enrolled about 45,000 participants for the first late-stage trial of its Covid-19 single-dose vaccine candidate and that it expects interim data by late-January. The company, however, is lagging rivals Pfizer and Moderna in the race for a vaccine to combat the Covid-19 pandemic that has infected about 75 million people globally. J&J’s study, named Ensemble, is being conducted by its unit Janssen, the drugmaker said in a statement. While seven countries have already authorized the emergency use of Pfizer and German firm BioNTech’s candidates, Moderna’s rival vaccine was set for regulatory authorization this week in the United States.
Brief : Staff at Lloyds Bank won't be receiving bonuses for this year after the pandemic hit profits at the lender. It said the decision was not a reflection of the work its employees had done this year and that lower-paid staff will get pay rises above inflation. Bankers were told in a memo on Thursday first reported by the Financial Times. The bank will not meet the minimum threshold of profit for 2020 to make the payouts. The bank has said before that if profit for 2020 was more than 20% below its target bonuses would be cancelled. The lender will announce 2020's earnings on 24 February. "In 2021 we're making above-inflation pay increases for most of our people and these will be geared toward those colleagues on lower pay," the bank said in a statement. "Given our expected levels of profitability for 2020, we are unable to pay group performance share (or bonus) awards to our people for this year.
Brief: Canadians are stuffing savings into bank deposits at some of the fastest rates since the global financial crisis, but smaller lenders are losing out to bigger rivals, facing a tough time when the economy and lending begin to recover. The biggest banks grew personal deposits by 21 per cent in the three months to Oct. 31 from a year earlier to a record $1.7 trillion (US$1.3 trillion), driven by government stimulus and business closures that have crimped spending. Smaller lenders, however, struggled to record growth figures in the single digits, despite offering higher interest rates, as savers stuck with familiarity and size in an uncertain economic climate, analysts said. “If you have to pay more for deposits in a weak lending environment, it makes it tough,” said Avenue Investment Management Portfolio Manager Bryden Teich.
Brief: International Finance Corporation, a member of the World Bank Group, on Thursday said it is providing a loan of up to USD 30 million (around Rs 220 crore) to pharma company Biological E Limited. The loan will support the pharmaceutical firm's expansion of low-priced, generic vaccines for routine immunisation of children and to boost capacity for manufacturing any future COVID-19 vaccine, it added. An investment in one of India's top vaccine manufacturers BioE will expand access to low-cost vaccines for children in developing countries and help increase the production of a COVID-19 vaccine when developed, a key step in saving lives and restarting economies, IFC said in a statement. "IFC, a member of the World Bank Group, is providing a senior loan of up to USD30 million to BioE to support the Hyderabad-based company's expansion of its range of low-priced, generic vaccines for routine immunisation of children," it added.
Brief: When Niklas Ringby spots a stock worth buying, he ignores decades of diversification advice that most investors live and die by. In the words of hedge fund legend Stanley Druckenmiller, he bets the ranch. The EQT AB money manager’s approach of wagering on just a handful of stocks may sound like excessive risk-taking to a generation of punters warned against chucking all their eggs in one basket, but it’s churning out bumper profits. The $1 billion fund he runs from Stockholm with Fredrik Atting for the private equity giant has gained 35% this year, while European stocks are down 5%, according to an investor letter. That’s on top of the 45% it returned last year. Ringby’s high-stakes strategy may offer a potential way forward for an industry in crisis. Stockpickers are persistently failing to beat their benchmarks and rapidly ceding ground to low-cost passive funds that just mimic an index. In a world awash with data and computer-driven trading where price-sensitive information is instantly factored into share values, active funds must find a way to stay relevant. That means depth instead of breadth in stockpicking and bolder, high-conviction long-term bets.
Brief: Although emerging markets had a difficult start to the year because of COVID-19's source in China, they have rebounded nicely, giving emerging markets (EM) hedge funds a boost. Hedge funds, in general, had a rough October, as the Eurekahedge Hedge Fund Index declined 0.5%. However, they beat the MSCI ACWI, which fell by 2.29%. Morning commuters wearing protective masks walk past Chinese flags displayed along Nanjing Road in Shanghai, China, on Friday, October 9, 2020. China's yuan strengthened, and stocks rose on mainland exchanges in a positive start to the month for traders. Emerging markets hedge funds are outperforming their developed markets (DM) counterparts this year, according to data from Eurekahedge. EM hedge funds gained 5.11% during the first nine months of the year. For comparison, North American hedge funds were up 3.00%, while European funds were down 1.51%, and Japanese funds were down 3.37%.
Brief: The pandemic’s slowdown in real estate deals has cost New York City $1.2 billion in lost revenue so far this year. Sales of commercial and residential properties -- everything from office buildings to hotels and condo units -- are down 49% this year through November, according to a report Thursday by the Real Estate Board of New York. That’s led to a 42% decline in city tax revenue, compared with the same 11-month period in 2019, the trade group said. The money comes from a long list of levies that each transaction generates. A dearth of deals means fewer collections of transfer and mansion taxes, and less income from newly recorded mortgages. Real estate investors are taking a pause amid a pandemic that’s reordered how and where New Yorkers live and work -- and, in turn, undermined property values. The pullback has dealt a crippling blow to the city’s economy, which relied on the real estate industry for 53% of its annual tax revenue in the last fiscal year, the real estate group said. While vaccines offer some optimism, “New York’s economic crisis grows,” James Whelan, the group’s president, said in a statement. “From rental assistance and unemployment benefits to state and local aid, New York needs federal relief.”
Brief : The Swiss National Bank paid no heed to being branded a currency manipulator by the United States, promising on Thursday to continue an expansive monetary policy and forex interventions it said were vital to cushion the impact of the coronavirus pandemic. The central bank kept its policy interest rate locked at minus 0.75%, the world’s lowest, and said it remained willing to buy foreign currencies “more strongly”, as unanimously forecast by economists in a Reuters poll. SNB Chairman Thomas Jordan said the central bank had made “considerable foreign exchange purchases this year,” but declined to give details on the level of interventions during the second half of the year. The SNB said the interventions were necessary to relieve pressure on the franc, which has attracted safe-haven inflows during the crisis. During the first half of 2020, it bought 90 billion Swiss francs ($101.94 billion) worth of foreign currencies, dwarfing the level of interventions in previous years. Those interventions have brought the SNB into the cross-hairs of the U.S. Treasury, which labelled Switzerland a currency manipulator on Wednesday.
Brief: The vast majority of pension schemes say that Covid-19 is not having a detrimental effect on them running their schemes and helping savers achieve a better income in retirement, but have warned against the ending of regulatory easements too soon, a PLSA survey can reveal. In the survey, the PLSA heard that over four fifths of pension schemes (81 per cent) believe Covid-19 is having only little or no impact on the day-to-day running of their scheme; a figure that is up from 67 per cent in April and 42 per cent in March. Furthermore, nine out of ten schemes (91 per cent) say they are currently operating all business processes smoothly to suit the current environment. Impressively, all (100 per cent) Master Trusts and LGPS members surveyed said that their contingency plans are dealing with Covid-19 either very well or fairly well. Since the start of restrictions in the UK due to Covid-19 back in March, most schemes (85 per cent) have reported that they have not seen an increase in member queries. In fact, under one in ten (8 per cent) have said that they have seen a substantial increase since the start of the crisis, while the same proportion have seen a slight decrease. Amongst those who have seen an increase in queries, most say that this has been driven by new retirements while a smaller number report queries around changes in employment or transfers out.
Brief: “Now months into the pandemic, with a dark winter ahead of us, we are seeing the evidence of an increase in depression, anxiety, and worker burnout everywhere, both among those of us who have the luxury of being able to work from home and the frontline workers,” Huffington told Yahoo Finance Live. Huffington founded Thrive Global four years ago as a behavior change platform that combines data, storytelling, and an action plan to improve work culture and support staff. It serves mostly Fortune 500 companies, including Walmart and Accenture. “For the first time, we are seeing an unprecedented interest from the C-suite on this issue of mental health,” said Huffington. “So, it's not just a matter for HR professionals. The recognition is now clear, that the well-being and mental resilience of your employees is going to be crucial to productivity and the bottom line.”
Brief: Wells Fargo & Co has extended the ability to work from home for employees until at least March 1 amid the ongoing coronavirus outbreak, a spokeswoman for the bank said on Wednesday. “Through at least March 1, we will continue with our current operating model, which includes about 200,000 employees working from home and maintaining safety measures in locations that remain open”, the spokeswoman said in an emailed statement. The statement added that it was not known when the bank would return to a more “traditional operating model” and that it would give employees “sufficient notice” before any changes.
Brief: The $20 trillion U.S. Treasury market is set to come under intense scrutiny by President-elect Joe Biden’s regulators, after seizing-up amid rising pandemic fears in March and threatening the stability of the broader financial system. A review of what went wrong and measures to boost the market’s resilience could be among the first regulatory challenges for incoming Treasury Secretary Janet Yellen, according to half a dozen regulatory and industry sources. After March’s massive sell-off prompted the Federal Reserve to buy $1.6 trillion of Treasuries to stabilize the market, consensus is growing in Washington that a review is urgently needed. But potential changes on the table, including loosening trading rules, allowing new players into the market, or introducing central clearing, could prove risky to implement and unleash industry infighting over the benefits and costs. “This is the most important financial market in the world. That fact demands policymakers exhibit both urgency and extreme care,” said Gregg Gelzinis, senior policy analyst at think tank the Center for American Progress.
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