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Brief: Morgan Stanley is betting on offices in New York City. The New York-based bank has signed a deal to take over space that houses the headquarters of BlackRock Inc., according to people familiar with the matter. The 15-year deal is for roughly 400,000 square feet (37,000 square meters) at Park Avenue Plaza, at 55 E. 52nd St., one of the people said. BlackRock is leaving the space and moving west to Hudson Yards in 2023. The office market in Manhattan has been battered by the pandemic, though there were positive signs in the final months of 2021 as leasing picked up. The deal comes as a surge in Covid-19 cases pushes Wall Street firms, including Goldman Sachs Group Inc., to adjust their return-to-work plans.
Brief: Macro hedge fund firm Rokos Capital Management made more than GBP900 million in profits during the early days of the coronavirus pandemic, according to a report in the Financial Times. The firm generated returns of 44 per cent in 2020 – its best annual performance to date – generating GBP914 million in profit in the 12 months to 31 March, 2021. According to a filing with Companies House, the income is available to be divided up among the hedge fund's partners with manager Chris Rokos, formerly a co-founder of Brevan Howard, eligible for the largest share of the gain, some GBP509 million.
Brief: Goldman Sachs Group Inc. strategists expect a tourism revival in the second half of 2022, with the Thai baht, New Zealand dollar and Egyptian equities among their top bets. The firm predicts that the manufacturing-led economic recovery will shift to one driven by leisure and tourism as foreign visitors return to beaches and mountains after enduring nearly two grueling years of the coronavirus pandemic. “We think you’re going to see a transition to a recovery driven by services and travel, and leisure would be an important part of that once the latest omicron wave fades,” Kamakshya Trivedi, Goldman’s co-head of global foreign exchange, rates and emerging-market strategy research, said in an interview.
Brief: Wall Street’s push to refill office towers across the country has been derailed again. This time it’s the highly transmissible omicron variant of the Covid-19 virus that’s forced executives to rethink their plans. A record 10 million people were diagnosed with Covid-19 in the seven days through Sunday, almost twice the pandemic’s previous weekly high, though weekly deaths continued to drop. “Realistically, we do not foresee us all having a safe opportunity to be together in our offices until at least Monday January 31,” Jefferies Financial Group Inc. Chief Executive Officer Richard Handler said in a memo on Instagram. “We are encouraging everyone to work remotely unless there is a very good reason to be in our office.”
Brief: U.S. investment bank Jefferies Financial Group has asked staff to work remotely until Jan. 31, according to an Instagram post on Monday from its Chief Executive Officer, in another sign that New York's banking offices looked set for an empty start to the year as the Omicron variant spreads. Banks and financial firms have been grappling with how to react to the latest variant and how to communicate to staff and retain workers amid the uncertainty. A number of other banks have asked staff to work remotely for the beginning of the year due to the latest surge in cases. "Realistically, we do not foresee us all having a safe opportunity to be together in our offices until at least Monday, January 31st," Jefferies CEO Richard Handler said in the message.
Brief: Private equity real estate investors are raising money faster than they can spend it. U.S. funds have amassed a record $287.8 billion for commercial-property deals, according to Preqin. That’s up 11% from a year earlier and 57% more than at the end of 2019. The pileup of capital affirms the bet that real estate’s rally will continue while inflation rises, stocks wobble and bond returns lag -- and despite new Covid 19 variants that could threaten a comeback for offices, hotels and malls. U.S. property investment volume is expected to rise by 5% to 10% next year as firms try to spend down their dry powder, according to CBRE Group Inc. Private equity giant Blackstone Inc. raised $33.5 billion for real estate deals in the first three quarters of this year while deploying only $25.3 billion. The challenge is that clients -- pensions, endowments, high-net-worth individuals -- are hungry for more. “Investors view real estate as a safe place to be in an inflationary and low-rate environment,” Nadeem Meghji, Blackstone’s head of America’s real estate, said in an interview. The volume of cash chasing deals helped drive up U.S. commercial-property prices an average of 18% in the 12 months through November, led by a 22% jump in warehouses and other industrial real estate, according to Real Capital Analytics Inc. An expected surge of distressed deals hasn’t materialized, freezing deployment of more than $91 billion in dry powder.
Brief: Morgan Stanley told employees who have to be in the office through the first two weeks of January to wear face coverings when not at their desks and limit large in-person meetings. “This guidance applies to all locations (even those where everyone is fully vaccinated),” the New York-based bank said in a memo to staffers this week. “Masking is always encouraged for anyone who is at increased risk or who has a household member who is unvaccinated or at increased risk.” A Morgan Stanley representative declined to comment. A surge in Covid-19 increases worldwide amid the rise of the highly contagious omicron variant has led Wall Street firms and other companies to rethink their return-to-office plans. Citigroup Inc. last week told staffers in the New York metropolitan area they could work from home again through the holidays if they are able. Earlier this month, Jefferies Financial Group Inc. asked its employees to work remotely and get a vaccine booster by the end of January, and Chief Executive Officer Rich Handler self-quarantined after testing positive for Covid-19 himself.
Brief: U.S. consumers took a breather in November a month after an early holiday spending surge, but that pause risks becoming more lasting if Americans pull back when faced with both the fastest inflation in decades and the omicron variant. Purchases of goods and services, after adjusting for higher prices, were little changed following a solid 0.7% gain in October. The government’s figures were the marquee of a pre-holiday burst of economic reports Thursday that showed stronger orders for durable goods, increased new-home sales and firmer consumer sentiment. Underlying the spending figures are a series of crosscurrents. Buffeted by headlines about snarled supply chains, many Americans started their holiday shopping earlier than usual this year, helping to explain the strong advance in the prior month. But consumers are also facing the fastest inflation in decades. With every trip to the grocery store and gas pump eating away a little more of their paychecks, people have less left over for discretionary purchases. And the new omicron variant of Covid-19 threatens to curb the incipient rebound in outlays for services.
Brief: Canada’s economy was humming in the final weeks of 2021 at about pre-pandemic levels, before the country was hit by a wave of Covid-19 cases and fresh lockdowns. Gross domestic product rose by 0.3% last month, extending the streak of monthly gains to six, according to a preliminary estimate from Statistics Canada published Thursday. In October, the economy expanded by 0.8%, the agency said. The gains brought GDP back to about where it was before the crisis hit, amid a strong second-half rebound that came after authorities lifted most Covid restrictions. Some of those restrictions are returning because of the fast-spreading omicron variant. “Overall, these figures are stale in that they speak to conditions before uncertainties related to omicron,” Derek Holt, an economist with Bank of Nova Scotia, said by email. According to Bloomberg calculations, output in November hit levels just shy of where it was in February 2020, before the start of the pandemic. Growth is on track to reach nearly 6% annualized in the fourth quarter, similar to the strong levels recorded in the third quarter.
Brief: Hedge fund manager Bill Ackman exhorted social media users to stop living in “fear of COVID.” Ackman — who leads the firm Pershing Square Capital Management — responded to a tweet from American Enterprise Institute senior fellow Scott Gottlieb, who noted that there is a “striking decoupling” between deaths and cases due to the advent of the Omicron variant of SARS-CoV-2, the virus that causes COVID-19. “We have reached the stage in the Covid crisis where our attention needs to focus on severity and protecting those who are vulnerable rather than case counts,” Ackman said. “While unvaccinated Americans are still at risk, the vax decision is a personal one. We need to give the healthcare system the resources it needs, and we need to start living again.” “It appears that Omicron will ‘vaccinate’ everyone who isn’t already vaccinated. Let’s protect the vulnerable and continue to live our lives. The beginning of the end of living in fear of Covid is near,” Ackman added in a follow-up tweet.
Brief: Private equity real estate investors are raising money faster than they can spend it. U.S. funds have amassed a record $287.8 billion for commercial-property deals, according to Preqin. That’s up 11% from a year earlier and 57% more than at the end of 2019. The pileup of capital affirms the bet that real estate’s rally will continue while inflation rises, stocks wobble and bond returns lag -- and despite new Covid 19 variants that could threaten a comeback for offices, hotels and malls. U.S. property investment volume is expected to rise by 5% to 10% next year as firms try to spend down their dry powder, according to CBRE Group Inc. Private equity giant Blackstone Inc. raised $33.5 billion for real estate deals in the first three quarters of this year while deploying only $25.3 billion. The challenge is that clients -- pensions, endowments, high-net-worth individuals -- are hungry for more. “Investors view real estate as a safe place to be in an inflationary and low-rate environment,” Nadeem Meghji, Blackstone’s head of America’s real estate, said in an interview. The volume of cash chasing deals helped drive up U.S. commercial-property prices an average of 18% in the 12 months through November, led by a 22% jump in warehouses and other industrial real estate, according to Real Capital Analytics Inc. An expected surge of distressed deals hasn’t materialized, freezing deployment of more than $91 billion in dry powder.
Brief: The omicron variant is causing a deluge of covid cases across Wall Street but a top Cantor Fitzgerald LP executive says he expects firms to weather the storm. Pascal Bandelier, global head of equities at the brokerage, said the wave of cases hitting Wall Street workers aren’t proving too severe so far. “I’d say most banks experienced more cases last week than we’ve seen in the last six months combined,” Bandelier said in a phone interview. “The good news is all the employees are exhibiting mild symptoms, which I think is consistent with everything we’re hearing.” The number of people in financial centers has tumbled as omicron takes hold, according to an analysis by Orbital Insight, which monitors activity through satellites and mobile phone data. In the City of London, foot traffic fell on Dec. 15 to 28% of a February 2020 baseline, compared to about 50% at the start of December. Cantor has told staff they can choose to work from home or one of its remote offices until at least early January. Just weeks ago about 60% of employees were back in its New York office, Bandelier said. But he sees reasons for optimism.
Brief: Omicron could double the risk of catching COVID-19 during a flight according to an airline industry medical expert, who warned that the airport carries a higher likelihood that the virus could spread than on the airplane itself. The highly transmissible Omicron variant has been confirmed in more than 100 countries and has quickly become the most common cause of new COVID-19 cases in the US and South Africa."Whatever the risk was with Delta, we would have to assume the risk would be two to three times greater with Omicron, just as we've seen in other environments," Dr. David Powell, medical advisor at the International Air Transport Association, told Bloomberg Tuesday. "The relative risk has probably increased, just as the relative risk of going to the supermarket or catching a bus has increased with Omicron," Powell added. Powell said that the risk of catching COVID-19 caused by the Delta variant on a flight had been "low," though the exact level of that possibility had been unclear. Most of the data about the transmission of the virus on aircrafts was from March 2020 before there was easily available testing, masks, organized boarding procedures, and a high degree of awareness about not flying if you were unwell, he said.
Brief: Beta, delta, omicron. Each emerging variant of the SARS-COVID-2 virus (the virus that causes COVID-19) sparks some market uncertainty as investors brace for the potential impact. It’s important to pay attention to new variants, but I think investors should plan for a longer-term scenario: a prolonged transition from pandemic to endemic conditions. According to the CDC, endemic viruses maintain a constant presence in the absence of intervention. The common cold is one example. COVID-19 is likely to become endemic, but not until public health agencies can safely lift all interventions. Below, I’ll explain why this process could take a long time and share the potential implications for the global economy…
Brief: Wells Fargo & Co said on Tuesday it has delayed its plans for employees to return to the office "given the changing external environment," according to a statement, the latest bank to adjust plans as the Omicron variant spreads. The bank said it will announce new plans for a full return in the new year. Wells Fargo had earlier set Jan. 10 for a mandatory return for many employees, including those who support business lines. About 100,000 employees have been reporting to Wells Fargo locations throughout the pandemic, and offices are open to those who have been vaccinated and chose to use them, the company said. The bank had 254,000 employees at the end of September. Wells Fargo's announcement is one of the latest changes to staffing plans of U.S. financial companies for coming out of the pandemic.
Brief: Just as Americans and Europeans were eagerly awaiting their most normal holiday season in a couple of years, the omicron variant has unleashed a fresh round of fear and uncertainty — for travelers, shoppers, party-goers and their economies as a whole.The Rockettes have canceled their Christmas show in New York. Some London restaurants have emptied out as commuters avoid the downtown. Broadway shows are canceling some performances. The National Hockey League suspended its games until after Christmas. Boston plans to require diners, revelers and shoppers to show proof of vaccination to enter restaurants, bars and stores. A heightened sense of anxiety has begun to erode the willingness of some people and some businesses to carry on as usual in the face of the extraordinarily contagious omicron variant, which has fast become the dominant version of the virus in the United States.
Brief: Former United Airlines CEO Oscar Munoz is sticking with his long-time peers in the airline industry that safety is a top priority during the pandemic, even if that means you have to wear a mask on a plane or employees must be vaccinated. Shared Munoz on Yahoo Finance Live, "This is an industry where no good deed goes unpunished. There are so many viewpoints that it is hard to sort of measure everything. At United — which is all I can speak of with my successor and all those folks — the concept has always been about human safety. When you develop a principle that is paramount, that's what drives the conversations and decisions around that. So everything that we have done at United is about safety." The commentary comes after Munoz's successor as CEO of United Airlines — Scott Kirby — was grilled by Senator Ted Cruz (R, TX) at a hearing of airline industry leaders last week. United Airlines has decided to implement a COVID-19 vaccine mandate for workers, which Cruz insisted is causing job loss for those in his home state of Texas.
Brief: The major averages rebounded sharply on Tuesday following three days of losses amid fears about the fast-spreading Covid omicron variant. The Dow Jones Industrial Average gained about 530 points, helped by gains in Nike and Boeing. The S&P 500 rose about 1.6%. The technology-focused Nasdaq Composite added 2.2%. The small-cap benchmark Russell 2000 was up about 2.7%. Reopening plays, like airlines, cruise lines and entertainment stocks, saw some relief buying on Tuesday. Delta Air Lines rose 6.2%, United Airlines gained 7% and Carnival Corp. added 9%. Las Vegas Sands was up more than 8%. Caesars Entertainment added 8.4%. Boeing rose 5% and Booking Holdings popped 6%... Stocks are coming back from a three-day losing streak spurred by the omicron surge that accounted for 73% of new infections in the U.S. last week, federal health officials said Monday. The S&P 500 notched its worst three-day stretch since September on Monday.
Brief: Britain announced 1 billion pounds ($1.3 billion) in grants and other aid to help the hospitality industry survive the onslaught of the omicron variant of COVID-19, bowing to days of pressure frompubs, restaurants and other businessesthat complain public health warnings have torpedoed the vital Christmas season. Businesses in the hospitality and leisure sectors in England will be eligible for one-time grants of up to 6,000 pounds ($7,954) each. An additional 100 million pounds ($133 million) will be given to local governments to support businesses in their areas hit by the sudden spike in COVID-19 infections driven by thehighly transmissible new variant. While industry groups welcomed the funding, many said it was too narrowly focused and more assistance would be needed if the surge in infections continues or the government imposes more restrictions.
Brief: Europe has moved to implement tougher restrictions in a bid to stop the spread of Omicron, sending equities lower triggered by investors’ “renewed nervousness”. Global equities fell 1.5% last week and are down a further 1-2% today, as Omicron continues to disrupt the economic recovery, according to Rupert Thompson, chief investment officer at UK-based wealth manager Kingswood. He said that, should US markets start to follow suit, "this will leave markets off around 4-5% from their mid-November high”. The latest drop in investor optimism can be attributed to “renewed nervousness” about Omicron, and restrictions being introduced in much of Europe, with the Netherlands now being back in full lockdown, Thompson said. Nevertheless, investment experts believe Omicron presents a temporary disruption to economic recovery, as booster jabs continue to evidence their effectiveness and anti-viral pills start to be rolled out to help reduce hospitalisations, he added.
Brief: A big year in the $7 trillion U.S. ETF industry can be summed up by a single trading day in October. Before the market had even opened, a group of former BlackRock Inc. executives launched a firm looking to shake up the world of credit with seven exchange-traded funds on the way. Then, at the opening bell, the new-product machine cranked into overdrive -- ETFs debuted tracking blockchain, electric vehicles, health care, Chinese innovation, ESG, and more. And by the end of the day, an application for another high-yield credit fund had landed with the U.S. Securities and Exchange Commission. The business has never known times like these. A corner of Wall Street already enjoying a reputation for explosive growth has gone supernova, with a record 445 new products in 2021 so far, according to data compiled by Bloomberg. Behind the rapid expansion is a deluge of new cash as investors chase an economic recovery from the coronavirus, while equity mutual funds fall out of favor.
Brief: The World Economic Forum postponed its annual meeting in Davos next month, thwarted for a second year by the fresh waves of coronavirus across Switzerland and the globe. Having intended to hold the meeting Jan. 17-21, the Forum said in a statement that “continued uncertainty” over the omicron variant had forced a rethink and it now planned to host the meeting in early summer. “Current pandemic conditions make it extremely difficult to deliver a global in-person meeting,” it said. “Despite the meeting’s stringent health protocols, the transmissibility of omicron and its impact on travel and mobility have made deferral necessary.” As recently as last week, WEF officials were expressing confidence that they could host the conference given Switzerland was open to international travel and that regular testing would be provided.
Brief: Risks are said to be on the rise in emerging markets as countries struggle to manage accelerating inflation and a resurgence of Covid-19 cases threatening an already uneven recovery across the globe. Meanwhile, on the geopolitical front, "tectonic" shifts are underway, according to Polina Kurdyavko, head of emerging markets at BlueBay Asset Management. "On China, a new geopolitical landscape is being formed. The withdrawal of troops from Afghanistan and a military alliance between US, Australia and UK are all part of a long term, strategic focus on countering China's regional influence in our view," she said. "Against these top down thematic factors, a number of countries will have significant domestic developments; policy shifts in Argentina and Tunisia come to mind, as well as elections in Colombia and Brazil. "We also would be extremely carefully watching the Ukraine-Russia development. Turkey could have an early election too."Kurdyavko highlighted that 2021 was a "volatile and challenging year", and - in many ways - transitional.
Brief: U.S. Treasury yields were steady on Monday, as investors grew concerned that that omicron Covid variant will derail the recovery. The yield on the benchmark 10-year Treasury note was little changed at 1.4% at around 9:00 a.m. ET. The yield on the 30-year Treasury bond moved 1 basis point higher to 1.829%. Yields move inversely to prices and 1 basis point is equal to 0.01%.Asian equities and oil prices traded lower on Monday following the re-imposition of some Covid-19 restrictions in Europe. It comes as the rapidly-spreading omicron variant threatens to hit the economy over the holiday season and into the new year.The weekend’s news on the variant kept up pressure on investor sentiment, as the World Health Organization said that cases are doubling in 1.5 to 3 days in areas with local spread, and U.K. officials said more Covid-19 restrictions were possible.
Brief: Jefferies Financial Group Inc. Chief Executive Officer Rich Handler said he tested positive for Covid-19 earlier this month and is approaching his 10th day of isolation. “Three days after we decided at Jefferies to have our people once again work from home for safety, I tested positive and have been self-quarantining,” Handler said Sunday in a post on Instagram. “We all have much to be grateful for and every day we get closer to the sun shining brightly, so stay optimistic.” Jefferies asked staffers on Dec. 8 to start working from home amid a rise in Covid cases among its workforce. The New York-based firm is aiming to have its staff back at the office by Jan. 17, Handler and President Brian Friedman said in an Instagram post on Saturday.
Brief: World shares fell on Friday after technology companies led Wall Street benchmarks lower as investors weighed the implications of higher interest rates, surging coronavirus cases and tensions between Beijing and Washington. Benchmarks declined in Paris, London, Frankfurt and Tokyo but rose in Shanghai. U.S. shares dropped a day after the Federal Reserve said it’s preparing to begin raising rates next year to fight inflation, and traders were also considering moves by other central banks. The Bank of Japan said Friday it would reduce some of its pandemic support measures, reducing purchases of corporate bonds to pre-crisis levels after March. It also extended by six months extra support for lending to small companies. But its board meeting otherwise kept ultra-loose monetary policy mostly unchanged.
Brief: Inflation in the UK hit 5.1% in November as the country continues to battle the latest variant of Covid-19.The 10-year high has reignited the debate among professionals as to whether rising inflation is embedded or transitory.Investors have not yet felt the full impact of the Omicron variant or the wider impact of higher energy and consumer prices, according to Nigel Sillis, client portfolio manager at Cardano. It remains to be seen how ‘temporary’ the present raft of inflation-stoking supply disruptions are,” he said, “how current trends may be aggravated by Omicron and, beyond that, we have not yet seen the full effects of higher energy prices upon consumer prices more generally.“There are still upside risks. Amidst uncertainty, pension funds should aim to fully hedge.
Brief: Wall Street banks and investment firms are retrenching from their push to get staff back to the office, with Citigroup Inc (C.N), Goldman Sachs Group Inc (GS.N), Carlyle Group Inc (CG.O), Blackstone (BX.N) and MetLife (MET.N) among the latest to adjust plans as the Omicron variant of the coronavirus spreads. The institutions are rethinking their plans to return to business-as-usual amid a spike in COVID-19 cases in New York and other financial hubs and growing concerns over the fast-spreading Omicron. "Even before Omicron, it was clear that there was not going to be a full ‘back to normal’ in most office-based jobs – some form of work from home is likely to endure into the future," Rachel Lipson, Project on Workforce at Harvard University’s Malcolm Wiener Center for Social Policy, said in a recent interview.
Brief: Citadel, Blackstone Inc. and Millennium Management are among asset managers telling staff this week that they may once again work remotely, at least for the next several weeks, in response to the latest spike of Covid cases.Ken Griffin’s Citadel, among the earliest hedge funds to require staff to return to the office during the pandemic, isn’t mandating that they stay away, a spokesman for the Chicago-based firm said Thursday in an email. The guidance also applies to Griffin’s market-making operation, Citadel Securities. Blackstone, the world’s biggest alternative asset manager, told its U.S. employees they can work from home for the rest of the year, as did rival Carlyle Group Inc., according to spokespeople for both private equity firms.
Brief: Apple told corporate staff this week that it is delaying a planned return to U.S. offices until an undetermined date, according to reports from Bloomberg News and NBC News reporter Zoe Schiffer. A memo from Apple CEO Tim Cook said workers would get advance notes a month before a new return date is set, and that each employee would receive $1,000 in order to outfit their home for remote work. Apple previously planned for most employees to return to offices on Feb. 1. An Apple spokesman confirmed that a new return-to-office date hasn’t been set. Silicon Valley neighbor Google told its employees earlier this month that they would not be required to come back into the office on Jan. 10, as planned. Other tech companies including Lyft, Uber, and Amazon have also pushed back their dates.
Brief: The economic shock of Covid-19 has left the world's largest economies grappling with rising inflation on the one hand and lower-for-longer interest rates on the other, as governments strive to control high levels of debt. At the same time, monetary and fiscal support during the pandemic has left many traditional income-generating assets with high valuations, making it harder for investors to find reliable income sources at a reasonable price. According to Alfred Murata, managing director and portfolio manager at PIMCO, fixed income investors today find themselves in a more difficult position than during the spring of 2020, when credit valuations were at attractive levels. In contrast, the current environment requires a delicate balancing act between achieving an attractive level of yield and going too far up the risk spectrum. "The more generic, plain vanilla assets have seen a lot of support from central banks over the past year, so the valuations of these assets are not as compelling today," explains Murata. "You have to work harder to generate attractive returns in this environment."
Brief: Australia's unemployment rate has dropped sharply after lockdowns, with employers scrambling to hire staff. Official ABS data shows the unemployment rate dived from 5.2 in October to 4.6 per cent in November, after lockdowns had ended in New South Wales, Victoria and the ACT. The drop came despite a massive increase in the percentage of people in work or looking for it, with a whopping 366,100 extra people estimated to have been in work last month. AMP Capital chief economist Shane Oliver said the participation rate of 66.1 per cent marked a big difference between the post-COVID recovery in Australia and the US. "The near-record participation rate contrasts with that in the US where it is running well below pre-COVID levels," he noted. Other labour market indicators were also positive, with underemployment dropping from 9.5 to 7.5 per cent and hours worked up 4.5 per cent. Dr Oliver said all the indications were that the current jobs recovery would continue, with "businesses having to scramble for workers in some industries and not wanting to let them go". "Strong levels for job postings and hiring intentions point to a continuing tightening in the labour market," he added.
Brief: As the COVID-19 pandemic continued to sow uncertainty and volatility in the financial markets over the last year, participants in the hedge fund industry took refuge in familiar deal terms and experienced managers, but also hedged their bets and allocated to newer managers, according to a study by the law firm Seward & Kissel LLP that examines the industry’s use of side letters. The Seward & Kissel 2020/2021 Hedge Fund Side Letter Study, released today, revealed strong side letter activity in the midst of the pandemic, with investors continuing to allocate funds to mature managers, whose average regulatory assets under management in the study increased from $5.1 billion last year to $6.3 billion this year—while still engaging with newer managers (those with less than two years of experience), as it appears investors have become comfortable with the "new" fundraising environment and leveraged virtual manager and diligence meetings. The study also indicates that in a return to past form, funds of funds once again became the most common type of side letter investor, reversing a downward trend of recent years. Additionally, the consistently popular fee discount clauses continued to be a common term used in side letters, tied this year with most-favored-nation clauses.
Brief: Most hedge funds are now moving to a permanent hybrid working environment as a result of the Covid-19 pandemic, but concerns over team-building, collaboration and decision-making remain, as more managers look to expand their product offering into new areas and strategies, a wide-ranging new study published by the Alternative Investment Management Association and KPMG has found. AIMA, the global industry trade association for hedge funds, and KPMG quizzed 162 hedge fund managers collectively representing USD1 trillion in assets under management – roughly quarter of the total global industry assets – on how their businesses are pivoting to the new working environment that has resulted from the coronavirus pandemic. The report, titled ‘Accelerating out of the Pandemic’, follows last year’s survey, ‘Agile and Resilient’, which gauged how managers of all sizes were grappling with the range of challenges thrown up by the crisis. For this year’s report, respondents were questioned on how they are now optimising collaboration within the challenging hybrid work environment, the ways in which they are navigating the virtual capital raising process, and what new investment opportunities are emerging from the events of the past two years, among other things.
Brief: The Securities and Exchange Commission today voted to propose amendments to certain rules that govern money market funds under the Investment Company Act of 1940. In March 2020, growing economic concerns about the impact of the COVID-19 pandemic led investors to reallocate their assets into cash and short-term government securities. Prime and tax-exempt money market funds, particularly institutional funds, experienced large outflows, which contributed to stress on short-term funding markets. The Commission’s proposed amendments are designed, in part, to address concerns about prime and tax-exempt money market funds highlighted by these events. “Together, these amendments are designed to reduce the likelihood of runs on money market funds during periods of stress,” said SEC Chair Gary Gensler. “They also would equip funds to better meet large redemptions, addressing concerns about redemption costs and liquidity. Given the broad reach of short-term funding markets, these proposals speak to our remit to maintain fair, orderly, and efficient markets.”
Brief: National Bank of Canada (NA.TO) said Wednesday it had asked staff to work remotely, if possible, making it the second large Canadian lender to return to work from home amid growing concerns over the Omicron coronavirus variant. Canada's top health official Theresa Tam warned on Monday that COVID-19 cases in the country could rise rapidly in the coming days. That has led Canadian banks and financial firms to rethink return-to-office plans. The decision impacts the bank's nearly 20,000 staff in Canada.The rapid spread of the Omicron strain has wreaked havoc with companies plans to return to normalcy. Bank of Nova Scotia (BNS.TO), Canada's third largest lender, said Monday it would pause its plan for employees working remotely to return to its Toronto head office starting on Jan. 17.
Brief: Like most firms, hedge funds have made a generally smooth transition to both the digital environment and the hybrid office/home work model since the first wave of the pandemic hit in March 2020. As the hybrid model becomes the “new normal,” however, some of these companies have begun to take a harder look at some of the challenges they now face in a highly decentralized environment. To get a sense of where firms actually stand when it comes to preferred work location, KPMG and the Alternative Investment Management Association surveyed 162 hedge fund managers representing approximately $1 trillion in assets under management. The results, published in a report entitled, “Global Hedge Fund Industry: Accelerating Out of the Pandemic,” show that 46 percent of hedge fund managers expect to spend two to four days a week in the office.
Brief: Biotech giants Moderna Inc. and Amgen Inc. said they won’t attend JPMorgan Chase & Co.’s annual health-care conference in San Francisco in January, decisions that come as Covid-19 cases surge in the U.S. and the omicron variant poses a threat of increased transmission. The event, known for its overcrowded panels and late-night parties, usually draws thousands to San Francisco’s Westin St. Francis hotel every winter. This year marks its 40th anniversary, and many industry players have been eager to return after last year’s event was forced online amid a winter surge in virus infections. However, the recent climb in new Covid cases across the country, coupled with concern that omicron could add to those totals, has caused some industry leaders to call for holding the conference online again. The J.P. Morgan Healthcare Conference “should go virtual and avoid a super-spreader event and a PR disaster for our industry!” said John Maraganore, chief executive officer of Alnylam Pharmaceuticals Inc., in a tweet.
Brief: Fund managers are increasingly bullish about the outlook for both Europe’s economy and its stock markets, according to the latest Bank of America European fund manager survey. It reveals 37% of respondents expect a stronger European economy over the next year, while 28% believe the current equity rally will last until at least the fourth quarter of 2022. The study also showed inflation concerns were fading and an increasing number of investors see Covid as the biggest tail-risk since the emergence of the Omicron variant. According to the survey, a net 30% of respondents expect lower inflation over the coming year, while there’s been a fall in the proportion of investors seeing it as the key downside risk.“Despite the more sanguine inflation outlook, investors expect central banks to start tightening policy, with a net 59% of respondents regarding global monetary policy as too stimulative,” it stated.
Brief: Google has told its employees they will lose pay — and will eventually be fired — if they don’t comply with the company’s Covid-19 vaccination policy, according to internal documents viewed by CNBC.A memo circulated by leadership said employees had until Dec. 3 to declare their vaccination status and upload documentation showing proof, or to apply for a medical or religious exemption. The company said after that date it would start contacting employees who hadn’t uploaded their status or were unvaccinated, as well as those whose exemption requests weren’t approved. The document said employees who haven’t complied with the vaccination rules by the Jan. 18 deadline will be placed on “paid administrative leave” for 30 days. After that, the company will put them on “unpaid personal leave” for up to six months, followed by termination.
Brief: Increasingly frequent spikes in the VIX volatility index could offer hedge funds and other investment managers strong return opportunities amid the resulting equity market gyrations, new analysis published by Man Group suggests. Probing various trends emerging from the biggest VIX surges over the past 30 years, Man’s ‘Views From The Floor’ commentary noted that four of the top 10 spikes have occurred since the Covid-19 pandemic. At the end of last month, the volatility index soared by some 11 points – a 10-month high – as a result of growing fears over the emerging Omicron Covid-19 variant. The note, which explored the merits of investors buying into a VIX spike, observed that if the S&P 500 is up in the week after the VIX spike, history shows most forward returns come during that first week – generating a median return of 1.4 per cent. “As time goes on, returns drop, persisting into the second week less than half of the time,” noted Ed Cole, managing director, discretionary investments at Man GLG, adding that while the average return in the second week is negative, although this improves over a 3-month basis.
Brief: Asset management firm Fidelity Investments on Monday said it had paused some voluntary return-to-office plans while Morgan Stanley (NYSE:MS)'s CEO said he expects COVID-19 to be an issue through the next year, in a further sign that America's financial industry is rethinking its return to "business as usual." U.S. financial firms have been more proactive than other industries in encouraging employees to return to offices. Those plans have come under renewed scrutiny with COVID-19 cases again on the rise and as the Omicron variant of the coronavirus spreads swiftly. Some financial firms are now choosing to pull back on holiday parties, recommend booster shots, or even advise returning to work from home. "The private acknowledgement is that return to work plans set for January need another look," said Neal Mills, chief medical officer for professional services firm Aon (NYSE:AON), who advises corporations on their return-to-work plans. Mills said he received calls every day last week from companies experiencing COVID-19 outbreaks seeking advice on whether to delay bringing employees back or reinstate mitigation measures, like social distancing. Cases surged after Thanksgiving and are expected to continue rising and peak in January, he said. Family-controlled Fidelity, headquartered in Boston, paused pilot return-to-office programs at its offices in Boston, Smithfield, Rhode Island, and Merrimack, New Hampshire "due to rising COVID risk scores," spokesman Michael Aalto said.
Brief: The Asian Development Bank (ABD) has cut its economic growth forecast for developing Asia for this year and next due to the emergence of the Omicron coronavirus variant. In its latest outlook published on Tuesday, the Manila-based development bank forecast the region’s emerging economies would grow 7 percent in 2021 and 5.3 percent in 2022, down 0.1 percent from its previous estimate. The bank cited a resurgence of COVID-19 cases due to the Omicron variant as the biggest risk to the region’s recovery, with other dangers including a prolonged slowdown in China’s housing market, rising inflation and global supply chain disruptions. Among the major economies looked at, the ABD trimmed China’s growth forecast to 8 percent in 2021 and 5.3 percent next year, down 0.1 percent and 0.2, respectively, from its September estimate. The bank cut India’s growth estimate to 9.7 percent for 2021, compared with 10 percent in September, with its 2022 estimate of 7.5 percent growth remaining unchanged. Growth for Southeast Asia was cut to 3.1 percent for 2021, down 0.1 percent, but raised 0.1 percent to 5.1 percent for next year.
Brief: Despite facing an array of both economic and competitive challenges, the outlook for the global investment management business in 2022 is neutral, says Fitch Ratings. In a new report, the rating agency said global investment managers are facing competitive pressures and obstacles such as high inflation and elevated valuations. But firms in the sector are prepared to face down these threats through a combination of scale, strategic diversification and robust finances. “Fitch expects rated global investment managers to be more resilient to continuing competition and potential market volatility given enhanced scale and strong franchises,” said Nalini Kaladeen, director with Fitch, in the report. “Overall, we believe alternative [managers] are better placed to withstand challenges than traditional [managers], given stronger active flow dynamics and locked-in fee streams that are largely insulated from fair value changes on investments,” she added. Fitch predicted traditional investment managers would likely use mergers and acquisitions to help fend off competitive threats.
Brief: JPMorgan Chase & Co on Tuesday instructed unvaccinated staff in Manhattan to work from home, a further sign that banks and other financial firms are tightening protocols as COVID-19 infections rise and the Omicron coronavirus variant spreads. The U.S. bank, one of the most aggressive in bringing employees back to the office, had previously allowed unvaccinated staff to work in its Manhattan offices provided they were tested twice a week. In a memo to staff seen by Reuters, the bank urged unvaccinated staff to get vaccinated and for those who are eligible to get booster shots. It also relaxed mask requirements for vaccinated staff working in its Manhattan offices. "We continue to agree with health authorities that being vaccinated against COVID-19 is the best way to keep ourselves and our loved ones safe - especially as we face the winter months and a new variant - so please consider getting vaccinated if you aren't already, and getting your booster if you are," the memo said. More than 90% of JPMorgan staff based in Manhattan are vaccinated, according to the memo.
Brief: Goldman Sachs Group Inc. has told its London staff to work from home if they can, as the City of London’s biggest firms adjust to the latest government guidance. “Those of you who are able to work from home effectively should do so from Monday,” the lender said last week in an internal memo. The bank’s offices will remain open for those who still need to come in. Safety protocols including an on-site testing program and the wearing of masks away from desks remain in place. The guidance mirrors moves from firms across the City of London after U.K. Prime Minister Boris Johnson tightened pandemic rules to curb the spread of the omicron variant.HSBC Holdings Plc, Deutsche Bank AG and Citigroup Inc. have all told staff to return to home working if they could.
Brief: New research from the charity investment arm of independent investment manager James Hambro & Partners reveals 64 per cent of charities with at least GBP1 million of investable assets have had to sell or cash in some of their investments during the Coronavirus crisis because they have suffered from a fall in income from for example, fewer fund-raising events. Also, four out of ten (42 per cent) say they have been forced to do this to meet growing demand for their services during the pandemic. Charities with investible assets rely heavily on them to generate an income, but 18 per cent said the income they generate has fallen dramatically since the Coronavirus crisis started, and a further 52 per cent said they have fallen slightly.
Brief: Bonds get battered in run-it-hot economies. Stocks march higher. And it’s a good idea to hedge inflation, according to BlackRock Inc. If those forecasts for 2022 sound like a replay of 2021 it’s no coincidence. The world’s biggest asset manager says markets are in a “new nominal” where equity is favored over fixed-income. Two consecutive annual losses for bonds and gains for stocks is an occurrence so rare it last happened almost 50 years ago.“This was the new nominal in action and marked the start of a regime shift,” BlackRock strategists including Wei Li and Scott Thiel wrote in a report published Monday. “We see the forces that drove stocks up and bonds down in 2021 to still be at play in 2022 as inflation settles at higher levels than pre-Covid.”
Brief: The end of November saw the largest one-day fall in stock prices globally since June 2020, as investors reacted to the potential economic impact of a possible fourth wave of Covid-19, manifest in the new and ominously named Omicron variant of the Sars-Cov-2 virus. But the panic selling was not entirely across the board: on the same day, the US biotech firm Moderna, one of three main suppliers of a Covid vaccine, saw its share price jump by 25%, adding a tidy $35bn to its market capitalisation. Moderna is an obvious beneficiary of any new round of pandemic panic, but the extent of the share price reaction was helped by news that it expects to have a new version of its Spikevax product out soon specifically addressing Omicron.
Brief: The tepid trade for U.S. tech behemoths in the last couple of months is a “sign of things to come” in 2022, according to David Neuhauser, chief investment officer at U.S. hedge fund Livermore Partners. With inflation running extremely hot and central banks under pressure to tighten monetary policy, along with the emergence of the omicron Covid-19 variant in recent weeks, global stock markets face a unique confluence of uncertainties. The U.S. Labor Department will release November’s consumer price index reading on Friday, which is expected to show annual inflation notching an almost 40-year high. Neuhauser believes this upward trend in prices is going to continue as new Covid variants emerge and supply chain bottlenecks persist.
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