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Brief: Goldman Sachs and Morgan Stanley received regulatory approval on Friday to take control of their Chinese securities joint ventures, becoming the latest foreign banks to take advantage as China opens up its financial services sector. In separate announcements on Friday night, the American banks said the China Securities Regulatory Commission had approved their bids to own majority stakes in their securities joint ventures, Goldman Sachs Gao Hua Securities Company and Morgan Stanley Huaxin Securities.
Brief: It’s the most eventful 0.2% gain of Bill Ackman’s career. The billionaire investor entered 2020 long a handful of brand name companies like Berkshire Hathaway, Hilton Worldwide and Chipotle. But his $6.5 billion in assets firm, Pershing Square, weathered what was the quickest 30% market drop in a century after Ackman decisively hedged his portfolio from the coronavirus pandemic. In late February after weeks of fretting about the effects of the pandemic, Ackman paid $27 million in premiums to buy credit default swap insurance on investment grade and high yield bond indices, judging that their tight spreads were the most mis-priced way of playing the looming financial chaos. He was right. Financial markets went haywire in March and the hedges ultimately yielded a $2.6 billion payout for Pershing Square.
Brief: Norway’s sovereign wealth fund, the world’s largest, named a London-based hedge fund manager as its new chief executive on Thursday and said it had lost $124 billion (104 billion pounds) this year as stock markets tanked due to the coronavirus pandemic. Norwegian-born Nicolai Tangen, until now chief executive of AKO Capital, which he established in 2005, will take the helm in September, succeeding Yngve Slyngstad who announced his resignation last year.
Brief: Morgan Stanley CEO James Gorman told his employees that despite the upheaval caused by the coronavirus pandemic, their jobs will be secure through this year. “I am sure some, if not many, of you are worried about your jobs,” Gorman said Thursday in a staff memo. “While long term we can’t be sure how this will play out, we want to commit to you that there will not be a reduction in force at Morgan Stanley in 2020,” Gorman said. “Aside from a performance issue or a breach of the Code of Conduct, your jobs are secure.”
Brief: Roy Niederhoffer loves a good crisis. The 54-year-old hedge fund manager’s firm, R.G. Niederhoffer Capital, which manages about $350 million in assets currently, often does best when the stock market is at its worst. His Manhattan-based firm was one of the industry’s top performers during the past decade’s global financial crisis, and it is once again leading many of its peers in the market turmoil caused by the coronavirus pandemic. So far, his company’s flagship diversified fund, which invests in stocks, bonds, commodities, and currencies, is up 27% for the year, after fees, at a time when the overall U.S. stock market is down 30%. Its second fund, which trades only currencies and bonds, is up almost 18% after fees.
Brief: A dramatic increase in defaults during the next year due to the coronavirus will create a big opportunity for distressed debt investors, according to the world’s biggest publicly listed hedge fund firm. Money managers at Man Group Plc are intrigued by what they say could be the largest global distressed credit cycle in a generation. It all happened in just a month as the public health crisis rippled through economies all over the world, prompting a sell-off in sovereign and corporate bonds. That means even some stronger countries and companies could get caught up in the process, according to Patrick Kenney and Santiago Pardo, money managers at the firm’s GLG unit.
Brief: Hedge fund manager Paul Tudor Jones said Thursday investors should commend Washington’s policy response to the economic shock from the coronavirus pandemic. “Investors can take heart that we’ve counteracted this existential shock with the greatest fiscal, monetary bazooka. It’s not even a bazooka. It’s more like a nuclear bomb,” Jones said on CNBC’s “Squawk Box.” Jones said the actions from the Federal Reserve and Congress have brought “safety” to the economic system, even as COVID-19 spreads across the U.S. and disrupts daily life. “We did in two weeks what it took the Fed eight months to do in 2009,” the billionaire investor said. “Remember, we didn’t even get quantitative easing until well after the great financial crisis had started, well into the recession.”
Brief: Morgan Stanley (MS.N) and Citigroup Inc (C.N) have hit pause on layoffs as the coronavirus pandemic has led to a record level of unemployment claims and unprecedented economic uncertainty, according to sources. Morgan Stanley on Thursday pledged to not cut any jobs this year, according to a memo seen by Reuters, as the Wall Street bank sought to reassure worried employees during the coronavirus pandemic. Contents of the memo were confirmed by a Morgan Stanley spokesman. Citigroup Chief Executive Michael Corbat has also ordered a suspension of any planned layoffs, a source told Reuters. Further details were not immediately available.
Brief: “Please note,” the hedge fund firm’s website warns, “the Baupost partnerships are generally closed to new capital and do not actively solicit or market to prospective investors. But right now,Seth Klarman’s firmis making an exception, along with a number of other superstar managers who are typically impossible to invest with. The massive drop in asset prices catalyzed by the novel coronavirus pandemic has some elite hedge funds quietly shopping for extra capital to invest, sources say. In addition to Baupost, which managed $29 billion at the end of last year, The Children’s Investment Fund (TCI) has selectively reopened to additional money.
Brief: Jeff Talpins’s Element Capital Management is predicting that global markets are near a turning point and has begun betting on a sharp market reversal. The $15 billion hedge fund firm told clients it has started deploying cash and is taking positions on the prospect that equities will gain. Element is also shorting the long end of the interest rate market. In a note sent to clients Monday, the day before the S&P 500 bounced back with gains of more than 9%, the firm said the stimulus packages announced across continents to soften the economic blow from the coronavirus means the worst is over.
Brief: The coronavirus (Covid-19) pandemic is an unprecedented situation but it is important to recognise that, while the reduction in activity associated with coronavirus could be sharp and large, it is likely to rebound sharply when social distancing measures are lifted. In addition, in the intervening period, while activity is disrupted, substantial and substantive government and central bank measures have been put in place in the UK and internationally to support businesses and households. These measures, which have been evolving rapidly and could evolve further, are expected to remain in place throughout the period of disruption. Successful and sustainable businesses underpin our economy and society by providing employment and creating prosperity. Equity and debt capital markets play a vital role providing finance to these businesses and will aid the recovery. Governments and regulators around the world remain focused on keeping capital markets open and orderly.
Brief: Today, the Securities and Exchange Commission announced that it is extending the filing periods covered by its previously enacted conditional reporting relief for certain public company filing obligations under the federal securities laws, and that it is also extending regulatory relief previously provided to funds and investment advisers whose operations may be affected by COVID-19. In addition, the SEC’s Division of Corporation Finance issued today its current views regarding disclosure considerations and other securities law matters related to COVID-19.
Brief: The coronavirus pandemic is shutting down entire sectors of the economy and putting millions of Americans out of work, but one corner of Wall Street may find opportunity amid the carnage: private equity. The group, which includes investment giants Blackstone, Carlyle and KKR, has a record $1.5 trillion in cash ready to deploy and has been actively seeking deals across the struggling travel, entertainment and energy industries, according to a half-dozen investment bankers who declined to be identified to speak candidly about potential clients. “They have been waiting for this type of market dislocation,” the head of mergers at a major Wall Street firm told CNBC. “I don’t think they wanted something quite this bad, but they did want a pullback in valuation.”
Brief: Brevan Howard Asset Management’s flagship macro hedge fund is surging amid the ongoing market turmoil, on course for its best monthly gain since starting in 2003. The Brevan Howard Master Fund returned 17% in the three weeks through March 20, boosting its gain for this year to 21.6%, according to a letter to investors seen by Bloomberg. The firm’s best month so far was a 9.9% gain in January 2008. A spokesman for the Jersey-based investment firm declined to comment. The returns mark a turnaround for the hedge fund that’s seen assets plunge to $3.3 billion from its 2013 peak of almost $28 billion as clients exited following underwhelming returns.
Brief: The U.S. Federal Reserve has hired asset management giant BlackRock to help it execute the purchase of commercial mortgage-backed securities announced this week as part of the central bank’s aggressive efforts to shore up the U.S. economy.Over the past week, the central bank has released a volley of measures to boost liquidity in the financial markets and get cash into the hands of small businesses and consumers amid growing worries the coronavirus outbreak would wreak economic havoc across the country.
Brief: The UK’s Financial Conduct Authority last night (23 March) ruled out a ban on short selling, as many major hedge fund firms continue to weigh in with bearish bets to capitalise on the recent global market turmoil. The UK market watchdog said on Monday there is “no evidence” that short selling – a core component of most hedge fund strategies – had driven recent market falls, adding aggregate net short selling activity is low as a percentage of total market activity and has decreased in recent days. The notice comes as many well-known hedge fund firms including as Crispin Odey’s Odey Asset Management, Gladstone Capital Management, Man GLG, and Marshall Wace have made gains with successfully shorts in a range of names amid the recent downturn.
Brief: Bill Ackman said he has invested a portion of his personal wealth to help manufacture antibody testing kits produced by Covaxx, a newly formed subsidiary of closely-held United Biomedical Inc., amid the outbreak of the coronavirus. Ackman has repeatedly called for a complete shutdown of the U.S. for 30-days to help combat the spread of the Covid-19 virus. He has also called for antibody testing, like the one Covaxx develops, across the country to determine who has been contracted the virus. “The key to a successful reopening beyond the maintenance of social distancing, hand washing, mask use and other related practices is a broad-based testing regime and tracing program,” Ackman said in a letter on Wednesday to investors in his hedge fund, Pershing Square Capital Management.
Brief: If you’re already tired of the coronavirus lockdown and its subsequent trashing of the world economy, you have something in common withLloyd Blankfein, the billionaire former CEO of Goldman Sachs—especially if you’re itching to return the work and resume interacting with the public, as Blankfein would like you to do, as soon as possible. Over the weekend, presumably watching the value of his investments vanish—along with the savings andjobs of millions of “normie” Americans—Blankfein took to Twitter to suggest that, maybe, we don’t need to social distance that much after all.
Brief: President Donald Trump and Vice President Mike Pence held a call to discuss the coronavirus impact on the economy, according to sources. Investors on the call included Third Point’s Dan Loeb, Blackstone’s Stephen Schwarzman, Vista Equity’s Robert Smith, Intercontinental Exchange’s Jeffrey Sprecher and Paul Tudor Jones, hedge fund manager and co-founder of JUST Capital. The call with some of Wall Street’s top investors and hedge fund leaders was less focused on potential actions the administration could take to mitigate the impact of the novel coronavirus. Instead, it was more focused on how America’s top money managers are viewing markets and the U.S. economy, the people familiar with the matter said.
Brief: Citadel, the Chicago-based hedge fund giant led by billionaire Ken Griffin, has so far weathered the coronavirus market storm well, turning a slight profit in its flagship Wellington hedge fund for the year through Monday, according to a person familiar with the situation.The fund, which practices a so-called multi-strategy array of bets on stocks, bonds, commodities and other securities using teams of traders, was as of Friday down 5.25% for March, the person said, who requested anonymity because the information is private. The exact year-to-date gain, which is net of fees, was not finalized.
Brief: JPMorgan Chase froze hiring across most of the firm as millions of people stay at home to help stem the spread of the coronavirus, according to people familiar with the matter. The bank asked managers in businesses including the corporate and investment bank, the consumer unit, and the asset- and wealth-management group to review job postings and pull listings for roles that don’t need to be filled immediately, said the people, who asked not to be identified discussing the private plans.
Brief: Activist investor Bill Ackman said he has made a “recovery bet” on the economy, investing $2.5 billion in equities, including upping his positions in several of his portfolio companies and reinvesting in others like Starbucks Corp. The billionaire investor said he has taken off all the hedges that he put in place for his Pershing Square Capital Management, through shorts in the credit market. Those hedges were put in place to offset the effects of the coronavirus, he said. Ackman said his hedge fund has used the proceeds to reinvest over the past 10 to 12 days in several of his portfolio companies, including Lowe’s Cos., Hilton Worldwide Holdings Inc. and Warren Buffett’s Berkshire Hathaway Inc.
Brief: Germany quickly wants to get aid to companies struggling with the impact of coronavirus, Economy Minister Peter Altmaier said on Monday, adding that Berlin was ready to protect firms from unwanted takeovers with a new fund during the crisis. “Make no mistake, we’re determined to protect our companies and jobs,” Altmaier said during a joint news conference with Finance Minister Olaf Scholz, adding that this message was directed at hedge funds.
Brief: Short-sellers cannot be blamed for the rout in stocks and markets should be kept open during the coronavirus epidemic, regulators in Europe said on Monday. Europe’s STOXX 600 index has fallen to around a seven-year low as investors price a likely recession into markets after the virus shut down swathes of the economy.A handful of European Union states have introduced temporary curbs on short-sellers in a bid to quell volatility, fanning talk of a suspension across the market as the next step.
Brief: The head of Brookfield Asset Management Inc. said markets volatility created in the wake of the coronavirus pandemic is much more manageable than previous meltdowns. “For us, compared to the direct hit we took on 9/11, this uncertainty and volatility feels manageable,” Bruce Flatt, Brookfield Chief Executive Officer, said in a letter to shareholders Monday. “In 2008, with the banking system failing, real asset owners didn’t know if many lenders were going to exist in the future. Today, the banking system is in far better shape. It never feels very good to have this degree of chaos, but this will pass.”
Brief: With most of the sectors on a sharp downward spiral, the main consideration for most fund managers right now is the strength of a company’s balance sheet, according to Peter Toogood. The chief investment officer at Embark Group, who has the same role at The Adviser Centre consultancy, said the current crisis was "far worse" than 2008 because the whole chain of economic activity was broken. He said: “There has been an almost complete cessation of economic activity, no one has seen this before.
Brief: In coordination with the Council of Financial Regulators, ASIC will focus its regulatory efforts on challenges created by the COVID-19 pandemic. Until at least 30 September 2020, the other matters that ASIC will afford priority are where there is the risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters. ASIC is committed to working constructively and pragmatically with the firms we regulate, mindful they may encounter difficulties in complying with their regulatory obligations due to the impact of COVID-19.
Brief: First they lost money. Now hedge funds want clients to risk even more cash on the bets that caused the pain. LMR Partners, Citadel, Baupost Group and Capital Four Management are trying to persuade clients to inject money into their funds after taking a hit in the coronavirus-fueled market turmoil. Capula Investment Management has had talks with some investors as it considers raising fresh capital, according to people familiar with the matter.
Brief: Goldman Sachs Group Inc (GS.N) poured more than $1 billion into two of its prime money-market portfolios this week due to heavy investor withdrawals, according to a filing with the U.S. securities regulator. The Wall Street bank purchased $722.4 million in assets from its Goldman Sachs Financial Square Money Market Fund (GPMXX.O) and $301.2 million from its Goldman Sachs Fund Square Prime Obligations Fund.
Brief: An employee of T. Rowe Price Group in Baltimore has tested positive for the new coronavirus and efforts to sanitize the Baltimore headquarters are underway, a spokesman said Friday. "We are in regular communication with this associate and are supporting them during this time,” said Brian Lewbart, a spokesman for the global money management firm. The company said it notified all of its employees of the positive case. It’s requiring all those who work near or who had been in direct contact with the employee to self-quarantine for 14 days, he said.
Brief: Blackrock, the world’s largest asset manager, will freeze global hiring for “a few weeks,” a source familiar with the situation said on condition of anonymity. As the new coronavirus has swept across the globe, killing thousands of people, companies have cut their investment plans, withdrawn financial outlooks and laid off employees in response to the economic impact. With $7.4 trillion of assets under management as of December 2019, making it the world’s biggest investment manager, Blackrock’s hiring freeze underlines how painful the impact of the global market selloff and the coronavirus will be for the real economy. A spokesman was not immediately available for comment.
Brief: Colony Capital, Inc. (NYSE: CLNY) (“Colony Capital” or the “Company”) today announced a number of updates in connection with the impact of COVID-19 on its assets and business operations… “Since our earnings call on February 28, 2020, the coronavirus has been declared a pandemic and has fundamentally altered the global economy,” said Thomas. J. Barrack, Jr., Executive Chairman and Chief Executive Officer.
Brief: Private equity firms are taking steps to help their portfolio companies survive the coronavirus onslaught of forced closures, scattered workforces and upended markets. From providing millions of dollars in emergency aid to more mundane things like phone calls designed to boost managers’ morale, professionals in buyout shops around the US are trying to ensure the new coronavirus doesn’t bring down their investments.
Brief: Back in February, Kevin Smith, chief investment officer at Crescat Capital, urged investors to resist the temptation to buy the dip as he pushed his “macro trade of the century. “We certainly did not predict the coronavirus,” he wrote at the time. “But it may prove to be the catalyst to tip this market [into] a brutal bear market….We are looking for a 56% drop from the top in February. That just gets us to a reversion to the mean for historical market valuation,” he told MarketWatch. “Honestly, we think a more reasonable target for this global recession that is only beginning is at least a 74% decline from February’s highs to mark the bottom. There were just too many excesses in this one. The purging... has only just begun.”
Brief: Billionaire hedge fund manager Ray Dalio believes that policymakers and other leaders could be downplaying the impact of the coronavirus outbreak, a pandemic that he expects to result in “many trillions of dollars” in lost profits and “enormous” spending on relief efforts. “I believe that the health, economic, and market impact of the coronavirus will be much greater than most people are now conveying,” the Bridgewater Associates founder said in a LinkedIn post Wednesday evening. According to Dalio, the realities of the ongoing pandemic are “so bad that conveying them accurately could provoke panic.” To prevent that panic, he argued that “some leaders and knowledgeable researchers who are in the position to know are inclined to withhold the facts.”
Brief: Partners at the hedge fund and securities firms founded by Ken Griffin are donating$2.5 millionfor public schools and food insecurity relief efforts in Chicago as the effects of the coronavirus pandemic take hold. In early February, Citadel and Citadel Securitiesdonated$7.5 millionto help contain the virus in China. The money helped send medical supplies to a hospital in Wuhan, support humanitarian aid there and fund the development of a vaccine. The firm’s latest effort is in partnership with Chicago Public Schools and the Greater Chicago Food Depository. As of 3 p.m. Central Standard Time, there had been 422 confirmed cases of COVID-19 in Illinois and four deaths.
Brief: A hedge fund manager in Hong Kong has publicly apologized after a parody video of him licking his finger and wiping it on a hand rail in a metro car went viral, sparking anger in the city which is grappling to contain an outbreak of the new coronavirus… “I made light of the COVID-19 situation in a parody video that was only intended for a handful of friends,” Joel Werner, chief investment officer at Solitude Capital Management said in a public Facebook post. “But I now realize that I shouldn’t have done that. A global pandemic is no laughing matter.”
Brief: Millennium Management has closed many of its "pods" run by teams of traders, as violent market swings caused by jitters over the economic fallout of the coronavirus led to losses, the Financial Times reportedhere citing two sources.Millennium, one of the industry’s biggest hedge funds, has closed “trading pods” in double-digit numbers, the report said, adding that job cuts at the firm that runs between 150 and 200 pods are expected.
Brief: Boaz Weinstein was waiting for this. The New York hedge fund manager, seasoned by past financial crises and spooked by seemingly endless quarters of ever-higher markets, had for years set up for financial calamity, even if it meant sometimes poor returns. When panic over the coronavirus spread to global financial markets in late February, Weinstein swung into action.
Brief: Activist shareholders are giving up on some of their campaigns amid historic market volatility. Elliott Management Corp. dropped its opposition Wednesday to Altran Technologies SA’s $4 billion takeover by Capgemini SE, citing “current market conditions.” The investment firm led by Paul Singer said it will sell its stake in Altran to Capgemini, after arguing for months that the deal undervalued the French technology consulting firm. Robert Tchenguiz, who had been challenging FirstGroup Plc’s management for at least four months, announced Wednesday that he no longer holds a material interest in the transport operator.
Brief: Aberdeen Standard Investments (ASI) is the latest to gate property funds as total assets in funds suspended reaches £8bn. The fund manager said dealing was suspended in the £1.7bn Standard Life Investments UK Real Estate fund and £1.1bn Aberdeen UK Property fund. The news follows the suspension of the £2bn Janus Henderson UK Property and the Kames Property Income and Aviva UK property funds as Covid-19 takes its toll. ASI said it would lift the suspension ‘as soon as confidence has returns to the market’.
Brief: The chairman of $100 billion investment house Magellan Financial Group, Hamish Douglass, has warned of a near total shutdown of the world economy over the next two to six months, calling on governments to increase stimulus packages while taking emergency measures to avoid a depression. In a note to clients, Mr. Douglass said the impact of the deadly coronavirus was a "fast-moving and fluid" situation, as theAustralian dollar plummeted to US55¢and the ASX continued to slide, having lost more than $665 billion in value over the past four weeks.
Brief: The changing landscape caused by the Coronavirus will lead to the largest shake out in the hedge fund industry since the 2008 market crash. Below are some of the ways we believe the Coronavirus will impact the hedge fund industry.
Brief: The Commodity Futures Trading Commission's Division of Market Oversight (DMO) has issued three no-action letters providing temporary, targeted relief to swap execution facilities (SEFs) and certain designated contract markets (DCMs) in response to the COVID-19 (coronavirus) pandemic. The spread of coronavirus has caused compliance with certain CFTC requirements to be particularly challenging or impossible because of displacement of personnel from normal business sites due to social distancing and other measures.
Brief: Janus Henderson has suspended its £2bn (€2.19bn)UK Propertyfund, becoming the second such mandate to be gated over uncertainty of the valuation of its holdings as Coronavirus takes its toll. It comes after Kames Capital suspended its £501m (€548m)Property Incomefund and its feeder funds yesterday citing ‘difficult market conditions’ on the face of the pandemic. Both the Janus Henderson and Kames funds have the same independent property valuer, CBRE.
Brief: A top Senate Democrat is calling for federal financial regulators to shelve all their rulemaking projects that aren't directly related to the COVID-19 pandemic, saying their attentions right now need to be on protecting the financial system and mitigating economic fallout from the outbreak. In a letter dated Tuesday, the Senate Banking Committee's ranking member Sherrod Brown, D-Ohio, urged the Federal Reserve Board to halt its pre-existing rulemaking work and "instead focus and prioritize actions on activities related to the economic risks posed to markets" by the novel coronavirus.
Brief: Billionaire activist investor Bill Ackman, the CEO of $11 billion Pershing Square Capital, called on President Trump to shut the U.S. down for the next month to save lives as the coronavirus (COVID-19) spreads. “Mr. President, the only answer is to shut down the country for the next 30 days and close the borders. Tell All Americans that you are putting us on an extended Spring Break at home with family. Keep only essential services open. The government pays wages until we reopen,” Ackman Tweeted.
Brief: Goldman Sachs (GS.N) said it has instructed most of its staff in the Americas, Europe, the Middle East and Africa to work from home from Wednesday until further notice, according to an internal notice the bank posted on its website late on Tuesday. The announcement comes after the bank said two employees at one of its Salt Lake City, Utah, office buildings tested positive for COVID-19 on Monday.
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