Only Time Will Tell Whether the Revival in the Market is Too Optimistic and How Severe Any “Second Wave” of COVID-19 May Be

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After one of the worst months in stock market history, equities rebounded sharply in April, with the S&P 500 posting its largest monthly gain since January 1987 as it began to discount a phased-in reopening the economy, the massive monetary and fiscal policy response, and some encouraging COVID-19 treatment developments. The snap-back in the market is, however, fairly concentrated, with mega cap technology stocks being the prime beneficiaries.  Most small capitalization companies and businesses with any exposure to “BOTL” (banks, oil, travel & leisure) continue to trade at prices significantly lower than pre-crisis levels.

The impact of COVID-19 continues to take its toll on the US economy. Since mid-March, over 30 million Americans have filed for unemployment. The continued economic shutdown has pressured more companies to lay off or furlough employees. The ramifications of strict stay-at-home orders from state officials has forced many companies to suspend financial guidance for 2020 as they reassess their businesses. As lockdown measures ease, government officials and economists are hopeful that a large portion of these temporary unemployed Americans will be able to quickly return to paid employment.

The Fed has responded by expanding its balance sheet, with estimates that it could exceed $12 trillion by the end of the year. Congress continues to fund the coronavirus support package in order to replenish money for the Paycheck Protection Program (PPP) as well as ramp up testing for COVID-19.

Only time will tell whether the revival in the market is too optimistic and how severe any “second wave” of COVID-19 may be. In these unusual times, we remain hopeful that advancements in COVID-19 testing and treatments (and eventually a vaccine) will allow the economy to at least partially recover and operate in a greater capacity in the near-term. We continue to believe that strong companies with healthy balance sheets and positive free cash flows will be able to withstand these times of economic uncertainty.

Looking specifically at merger arbitrage for April, closed deals bolstered performance and other transactions made significant progress towards closing. These positive dynamics spurred investor confidence across the current pipeline of deals. While pending deal spreads remain wider than pre-COVID levels, they have narrowed from levels experienced in March. We are still encountering attractive opportunities to selectively deploy capital where there are clear paths to closing and we are highly confident of a deal’s success. While April was an expectedly quiet month for new deal activity, a number of new deals were announced in May, including Alexion’s acquisition of Portola Pharmaceuticals for $1.4 billion and A Menarini’s acquisition of Stemline Therapeutics for $700 million.

Column from Gabelli Funds, written by Michael Gabelli

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To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:

GAMCO MERGER ARBITRAGE

GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.

Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.

Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.

Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of  approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.

Class I USD – LU0687944552
Class I EUR – LU0687944396
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GAMCO ALL CAP VALUE

The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.

GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise.  The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach:  free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.

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Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to find out what those restrictions are and observe them.

Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reflect the manager’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.

Will CERPIs be Better Than CKDs?

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Today is too early to tell, given the short life of both. CERPIs have barely two years investing globally and are barely in the investment phase. The CKDs, for their part, only invest in Mexico and only two have expired.

Although both instruments were issued in Mexico, it is very likely that the CERPIs present results in dollars to their investors, while the CKDs do so in pesos. However, the AFOREs will record the returns in pesos for the purpose of their portfolios. The IRR in dollars or pesos must be indifferent as long as they are compared in the same currency.

Out of a total of 146 CKDs and CERPIs, 107 (73% of the total) have a net IRR positive in pesos where 30 of them (21%) have a net IRR greater than 10% and 41 (28%) have a net IRR between 5 and 10% according to data as of April 30. Many of these results are due to the fact that the assets and investments made by them reflect the movement in the peso-dollar exchange rate. Only in the last 4 months (December 31 to April 30), the exchange rate has changed by 29.4%.

The IRR that the CKDs and CERPIs carry so far may change depending on the capital calls and distributions of each one, so they only reflect the results to date.

It is important to mention that 19 of these 107, are CERPIs who invest 90% of the resources globally and 10% invest it in Mexico. 10 CERPIs observe an IRR higher than 10% and were issued between 2018 and 2019, therefore, they have benefited from the depreciation of the peso. In total, 32 CERPIs have been placed and have a market value of $1.5 billion dollars and committed resources of $7.6 billion dollars, having only called 24% of the commitment so far. The 9 CERPIs that appear with the best IRR, for example, have only called 20% of the capital and were recently placed.

There are 114 CKDs issued as of April 2020 and have a market value of $10.5 billion, totaling $21.5 billion of committed resources and have made distributions of $4.2 billion according to their own estimates as of April 30.

When making the investments of the CERPIs globally, they will have a strong exchange component, which will force comparisons of results not only in pesos, but also in dollars, regardless of whether the exchange hedging is done.

When wanting to make comparisons of CKDs and CERPIs with respect to global private capital funds, IRRs must be calculated in dollars in order to make comparisons and this is done by converting each of the capital calls and distributions to the corresponding exchange rate at the date of each one of them.

When doing this exercise for the 146 CKDs (114) and CERPIs (32) we have that 33 of 146 (23%) have a positive net IRR in dollars, 10 exceed 5% and only 2 have an IRR greater than 10%. Interestingly, all those who have a positive IRR in dollars are CKDs.

Whether it is a TIR in pesos or in dollars, there will now be more competition for the resources of institutional investors in Mexico.

Column by Arturo Hanono

Allianz Global Investors Relies on Active and Flexible Management in its Most Successful Bond Strategy

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Mike Riddell, courtesy photo. Allianz Global Investors apuesta por la gestión activa y flexible en su estrategia de bonos más exitoso

One of the main objectives of active asset managers is that their portfolio is able to offer attractive returns even in times of high market volatility, such as the current environment. This investment approach was discussed by Mike Riddell Portfolio Manager, Allianz Global Investors, and Jack Norris, Associate Portfolio Manager, Allianz Global Investors, during the latest webcast organised by the manager, which addressed the Allianz Strategic Bond.

Allianz Global Investors explains that Allianz Strategic Bond is an active strategy and has an unconstrained approach  to managing a portfolio designed to behave as a bond fund should during a market crisis, seeking to deliver attractive absolute returns during periods of intense volatility while providing a return stream uncorrelated to equities. Here are the key takeaways from the event

 “Allianz Strategic Bond is an actively managed fixed-income strategy designed to deliver attractive returns in any market environment. The Strategy has consistently outperformed its benchmark since its inception in 2016 and aims to target three objectives. First, it’s outperformed the Bloomberg Barclays Global Aggregate Index (hedged to US dollars) over a three-year horizon by pursuing four potential sources of alpha – rates, credit, inflation and currency. Second, it acts as a portfolio diversifier, targeting a correlation (max +0.4) with global equities (MSCI World Index) over a three- year horizon. And finally, It is asymmetric. It means that it delivers an asymmetric return profile by pursuing opportunities that have the potential to capture greater upside than downside”, explain Mike Riddell and  Jack Norris.

One of its main features is its flexibility, which allows the portfolio to be repositioned according to market conditions. Mike Riddell and Jack Norris explain that at the beginning of the year, the Strategy was positioned for rising inflation and lower rates amid strong economic momentum globally. “However, we grew increasingly concerned at the end of January and beginning of February that the coronavirus posed a material risk to the global economy and our investment thesis. In response to these concerns, we began to position the portfolio for a more “risk-off” environment, becoming more cautious toward credit, as we expected spreads to widen, inflation to fall and volatility to rise”, they claim.

Managers acknowledge that as market conditions worsened in March, their credit and currency positions contributed favorably to the strategy. “Later in the month, as the Federal Reserve (Fed), US government and policymakers in Europe and Asia launched unprecedented responses to the crisis, we aggressively shifted the Strategy to a more “risk-on” posture (outside of our currency exposure) to benefit from a potential economic recovery in the second half of 2020 (as of April 30)”, they add.

Another key element in Allianz GI’s bond strategy is liquidity. Managers recognize that liquidity is an element that has been of great concern to them during this market environment. “The International Monetary Fund’s (IMF) recent Global Financial Stability Report (October 2019) highlighted heightened risk for fixed income fund liquidity, estimating that half of the world’s high-yield funds do not have enough liquidity to meet redemptions in a stressed environment. As credit spreads have narrowed from recent peaks, we have seen some normalization in liquidity. However, we believe liquidity remains fragile in the current environment, and a resumption of fears could spark another liquidity event. Within our Strategies, liquidity remains a critical risk-management component, and we assess liquidity on an issue-by-issue basis to ensure we can meet client redemptions and change our positioning”, Mike Riddell and Jack Norris comment. 

 

 

 

 

 

 

 

 

FIBA is hosting its second Regulation Best Interest webinar with members of the SEC

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Reg BI will shake up the private wealth securities industry and goes effective in June. FIBA has been instrumental in its advocacy on behalf of the cross-border industry in the implementation of Reg BI. From its advocacy in effecting change from Proposed Rule to Adopting Release and most recently in procuring clarity through the FAQ process, FIBA has been the cross-border industry’s leading voice on Reg BI, and on May 29, FIBA is hosting its second Regulation Best Interest webinar with members of the SEC.

Lourdes Gonzalez, a leading author of Regulation Best Interest and a Miami native will be on the panel. She will be joined by Ben Tecmire from the SEC who will address issues pertinent to family offices, asset managers and other non-broker dealers who are impacted by Reg BI.

Kim Prior and Greta Trotman from Shutts & Bowen and Sergio Alvarez-Mena from Jones Day, will guide the audience through CRS requirements, Investment Advisor impact and the four core requirements of Reg BI compliance. Special attention will be given to the cross-border business and how cross-border firms of all sizes can meet the Reg BI challenge.

Topics in the timely one hour webinar which will recap the latest developments for Regulation Best Interest compliance, include:

  • How introducing firms can satisfy CRS.
  • Is the Plain English requirement  really English-Only?
  • Are PIC’s and similar structures excluded?
  • What is a recommendation?
  • Are commissions inherently a conflict?
  • How can firms recruit in the Reg BI era?
  • Are offshore securities exempt from Reg BI?
  • … and more.

To subscribe to Regulation Best Interest Countdown: What you absolutely, positively must have in place!, follow this link.

UNCDF and Artesian Launch Impact Partnership to Support Investments in Gender Equality

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Pixabay CC0 Public Domain. UNCDF and Artesian launch impact partnership to support investments in gender equality

The United Nations Capital Development Fund (UNCDF) and Artesian launched an impact partnership to support gender-lens investing, boost female leaders in the corporate workplace and support women’s economic empowerment in the world’s 47 Least Developed Countries (LDCs).

The Artesian Women’s Economic Empowerment Bond Fund (WE Fund) will invest in public companies with women in management and board positions, fair compensation and work-life balance policies including parental leave and flexible work options, and commitment to gender equality. The fund will donate one-third of the management fee to a nonprofit organization, SheSyndicate, and UNCDF, to support women’s economic empowerment around the world.

“We are proud to work with Artesian and SheSyndicate on an innovative impact partnership. Pension funds and socially-conscious investors globally are seeking ways to use their investment dollars to support the UN Sustainable Development Goals. The WE Fund offers an innovative mechanism to recognize and reward companies with accountable business practices and gender-positive management policies, while also making a donation to support UNCDF’s work in LDCs”, said UNCDF Executive Secretary, Judith Karl.

Through a fixed income strategy using Equileap’s screening and guidance, the WE Fund will seek to produce market rate returns tracking the Bloomberg Barclays Global Aggregate Corporate Index. “With the launch of our Women’s Economic Empowerment Bond Fund, we are making it easier for gender lens investors and stakeholders to support global economic equality,” said John McCartney, Managing Partner at Artesian.

This fee donation will support the UNCDF’s work in LDCs, including helping poor women access savings and credit, lending to small and mid-size businesses run by female entrepreneurs in frontier markets and supporting local governments as they build climate-resilient infrastructure and manage their public finances in transparent and accountable ways.

SheSyndicate will use its donation to fund education and mentoring programs that benefit female entrepreneurs, investors, directors, and future leaders. A portion of the funding will also be used to set up a dedicated foundation to support non-governmental organizations that help the world’s most vulnerable and marginalized women, particularly those affected by COVID-19.

Esther Pan Sloane, Head of Partnerships, Policy and Communications at UNCDF claims that this partnership shows the promise of new ways of doing business: “It’s getting more difficult for investors to differentiate between the many new vehicles aimed at supporting sustainability or achieving impact. Artesian is demonstrating its commitment by putting money on the table to support women around the world. Their donation to UNCDF will help us support a new generation of female entrepreneurs in developing countries”.

UNCDF is a UN agency with specialized expertise in making finance work for the poor in the world’s LDCs. Artesian is a global alternative investment management firm specializing in debt, venture capital and impact investment strategies.

However, Vicky Lay, SheSyndicate Founder and Artesian Head of Impact Investing, states that the global economic gender gap has complex causes and is widening each year. “It will require concerted effort, ingenuity and resources to solve. Innovative public private partnerships like the WE Fund are necessary in order to unlock impact capital at scale and drive real change.”

Yankee Stadium Will Turn Into a Giant Drive-In Movie Theater and Concert Venue

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This summer, drive-in movie theaters are making a comeback as the new way to safely enjoy movies and get a little bit of fresh air. NY state gave them the green light to re-open on May 15, so popular drive-ins like the Warwick Drive-In or Hyde Park Drive-In Theatre, already operate and offer online ticketing.

However, in an exclusive, Time Out New York announced that New Yorkers will be able to flock to none other than Yankee Stadium this summer for movie nights, concerts, and a new festival-like event known as Uptown Drive-In that will take place in their parking lot.

MASC Hospitality Group, the New York-based company behind the Bronx Night Market and the Bronx Beer Festival will be in charge of hosting this July’s Fridays through Sundays, an event where attendees can roll up in their vehicles and enjoy either a movie or live performance, while enjoying the festival’s car side dinner service, catered by popular city street vendors.

Marco Shalma of MASC Hospitality Group told Time Out New York that the stage will be elevated for live performances so attendees can watch from their car. In addition, the MC, performers, and hosts will stream from a PA system that can be listened to through car radios. MASC Hospitality is also planning to implement live interactive games, raffles, giveaways, date-night experiences, and a family-friendly brunch series.

 

Asset Managers Need to Improve On Their ESG Related Communications

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Although there has been a significant increase in both the supply and demand for ESG related content created by asset managers in the last 12 months, there remains a significant gap between the content that investors are looking for and the content the managers are actually providing, according to new research from Peregrine Communications, ‘Making a Difference, Marketing a Difference´.

Peregrine’s research shows that while there has been a 67% increase globally in ESG related content from asset managers across top tier media in the last 12 months, asset managers routinely provide generic, derivative content to their audiences. The research shows that 34% of the 70 topics assessed in the report are significantly “over-indexed” by the market, with more content provided on these themes than there is organic demand.

In contrast, this latest ESG research also shows where there is unmet investor demand for information – i.e. “White Space”. Issues where there is significantly more demand for content than there is supply include: measurement and materiality, supply chain transparency, active ownership and private equity.

Other key findings include:

  • The average increase in brand interest for firms with significant ESG exposure is 80% over the last five years – demonstrating a very real ‘brand dividend’ for firms that communicate effectively around ESG.
  • Output in specialist ESG and sustainability media outlets has increased by 76%
  • There has been a 63% increase in searches globally for ESG-related content in the last 12 months
  • There has been a 36% increase in social media engagement globally around ESG issues

Anthony Payne, CEO, Peregrine Communications said:

“In this report we have sought to provide a framework by which asset managers can better contribute to the complex ESG conversation in a more meaningful way, a way that better reflects the interests and needs of investors.

“It has become increasingly clear that most asset managers’ audience are not served well by the ESG content provided them. This is why we have built our White Space framework so that asset managers can have more data about which topics their audiences are actually looking for, and ultimately, so that  they can build genuine category authority around these topics.”

Max Hilton, Managing Director, Peregrine Communications said:

“Our latest research confirms what a lot of people will have already suspected, that the majority of ESG content provided by asset managers is generic and hugely mismatched to the information that their increasingly well-versed audiences need.”

Investors Continue to Rely on Alternative Assets for Their Long-Term Strategies

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Pixabay CC0 Public Domain. El 66% de los gestores europeos de gran capitalización superaron a su índice de referencia

COVID-19 is having a sizeable impact on the business operations of both fund managers and investors, according to Preqin’s latest release, disruption caused by travel restrictions and social distancing will lead to dampened activity through the remainder of 2020, and possibly into 2021. However, they believe that alternatives funds proved to be resilient in previous cycles, and in the longer term, investors seem set to increase their allocations as a result of the pandemic, accelerating future AUM growth.

“A dispassionate analysis based on previous financial crises would suggest that we will see three major outcomes for alternative assets,” said Preqin CEO, Mark O’Hare. “A significant short-term slowdown in activity; a medium-term resumption of the established growth trend; and a long-term outperformance of those funds which were able to capitalize on advantages being presented now. We are already seeing this start to be borne out, with activity in 2020 down from previous years and operators telling us they expect this to characterize the year ahead. Overall, it’s unlikely that COVID-19 will fundamentally alter investors’ attitudes to alternatives, but it may well accelerate some long-term trends and moderate others.”

The alternatives industry is not a single entity, and within each asset class the pandemic is likely to be felt to different degrees and in different ways. Preqin has been surveying and interviewing fund managers and investors across the industry, looking at 2020’s activity so far, and drawing comparisons with previous financial cycles. For this edition, the firm notes:

  • Private Equity: Accelerating Digital Transformation. Private equity firms have almost $1.5tn in dry powder to deploy into deal opportunities, so they are well-placed to take advantage of opportunities presented by a downturn. However, in the short-term the reality of social distancing will hamper deal closing. Retail, leisure and hospitality assets are set to be hit hard, although supermarket retail specifically will benefit. Digital technologies will benefit, particularly in non-cyclical sectors like healthtech and remote working – accelerating interest in already-growing areas.
  • Private Debt: The Difficult Second Album. The 2008 Global Financial Crisis was the making of the modern private debt industry, putting the spotlight on distressed debt funds and spawning the direct lending sector. 2020 will see if the asset class can repeat that feat – interest in distressed debt has spiked in Q1, and more than a third of investors are now targeting the strategy. Direct lending, meanwhile, is untested in the face of a crisis, and COVID-19 may put a stumbling block in the path of the sector’s expansion.
  • Real Estate: Logistical Opportunity. Rental income from businesses and private housing has seen a sharp drop since the start of March, impacting the short-term cash flow of real estate fund managers. Deal activity is likely to be particularly depressed through the rest of 2020, given the practical challenges in evaluating properties. In the longer term, COVID-19 will exacerbate the challenges already faced in the retail sector, and may deflate the market for city-center offices. Demand for logistics assets, though, is likely to spike – last-mile delivery has emerged as a particular opportunity for expansion.
  • Real Assets: Do Not Pass Go. Toll-based assets and travel-related assets have been hit hard by travel restrictions, with the impact increasing the longer that restrictions are in place. Government-backed bailouts in the travel and shipping sectors are currently aimed at operators rather than asset-owners, so recompense is uncertain. Conversely, social and digital infrastructure have significant growth opportunities as demand for healthcare infrastructure and broadband networks rises. Oil price volatility continues to disrupt the natural resources industry, and more than a quarter of investors are avoiding conventional energy investments in 2020 as a result.
  • Hedge Funds: Time to Shine. Losses in Q1 2020 wiped out gains made by hedge funds in 2019. But the asset class did act to protect investors from worse downturns in equity markets, showing their value as a defensive strategy. This may reverse recent negative sentiment from investors as the downturn extends. However, it will also likely lead to a flight to safety, benefiting large managers and prompting more consolidation in the sector. New launches will fall as new managers are deterred from raising vehicles to seek investment. Strategy-wise, equities funds are more likely to see outflows, while macro and multi-strategy funds could benefit on the basis of their defensive credentials.

Howard S Marks Believes That a Good Investor is Confident in His Views, And His Are All About Distressed Assets

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Foto cedidaHoward S Marks, director y co-presidente de Oaktree Capital Management.. Howard S Marks (Oaktree Capital Management): "Estamos ante un mercado respaldado artificialmente por las compras de la Fed”

In order to be a good investor you have to be confident in your views says Howard S Marks from Oaktree Capital Management.

In the 1980s, he became one of the first investors to specialize in beaten-down bonds. He is now trying to raise $15 billion for what would be the biggest-ever fund to invest in distressed debt. He is also raising a separate $3.5 billion fund designated for underwater real estate assets.

During the 73rd annual CFA Institute conference, he also mentioned that in this environment, where returns will be lower for longer, the secret to prevailing is to produce better returns than your peers. “The market is what it is, rates, and the return environment is what it is, so superior investors control their emotions to deviate from the herd and outperform.”

 The billionaire contrarian investor reminded the viewers that “in order to combat the virus we put the economy into a deep freeze… Investors are not experts on the virus, we are just taking ideas from experts which you have to pick according to your bias, but all are cautious to varying degrees.”

Although he agrees with Mr Powell in that extreme and unprecedented actions are called for, he is also aware that stocks and bonds are selling at prices they wouldn’t sell at if the Fed were not the dominant force.

More than once he has quoted that “capitalism without bankruptcy is like Catholicism without hell” and he believes that today’s, is a market which is artificially supported by Fed buying, so he expects plenty of debt defaults and bankruptcies when corporate borrowers start running out of cash in the months ahead.

Marks is not alone, according to Preqin, as of mid-May , distressed real estate funds have already accumulated nearly $10 billion worth of dry powder, waiting to invest once the Fed inevitably steps back.

Preparing to Re-Open after COVID-19

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Courtesy photo. ,,

“Sheltering in place” is like the cocoon stage in the life cycle of a butterfly. I think we would all agree being inside a cocoon feels boring, disheartening, and simply unmotivating—it’s like being frozen in place.

Don’t be fooled. While in the cocoon the soon to be butterfly is burning the midnight oil. Its body is engaged in the hard work of metamorphosis that will allow it to emerge stronger and more beautiful than its larval form.

Cocooned in our homes during the COVID-19 crisis, it’s tempting to hit the “pause” button—switch on Netflix, and wait for the crisis to pass.

Not so! This intermission in our professional lives is the perfect time to prepare for the next act in our careers—more robust and fulfilling than the last. Now is the time to work more, not less! Now is the time to stop being a caterpillar and turn your business into a butterfly.

After a much-needed season of rest and reflection, here are four critical action steps to help your insurance business emerge from the coronavirus crisis stronger than ever.

1.   Prepare For the Changes Coming to your Industry.

Like many of my colleagues, I have watched my international business come to a screeching halt, while U.S. business adapts quickly to digital platforms. Life insurance companies are open for business, but the industry is making adjustments to its product portfolio, underwriting guidelines, and implementation processes to keep bringing in new business.

While we are all accustomed to doing business a certain way, being forced to step out of your comfort zone can tap into unforeseen opportunities. Here’s how to turn this to your advantage …

  • Contact your underwriters and stay abreast of any product changes or limitations.
  • Reach out to leaders in the industry to understand their short, middle and long term strategies
  •  Carefully analyze your pipeline and redirect your strategy and find viable solutions for each prospect.

2.   Call Everyone!

Review every client folder, think about what they might need, and then start dialing! Check in on their health, their family, their morale in the face of shutdowns and quarantines. Your international clients may face much more strict lockdowns or dire healthcare conditions. Forget about making the sale and check that everyone is safe. By making the effort, you will stand out— a butterfly amid caterpillars.

I have spent my mandated shelter-in-place downtime calling every client on my list. Many of them are grateful for the outreach, and lo and behold: “I’m so glad you called.

This crisis has highlighted the fact that I absolutely need more insurance.” Win-win-win!

3.   Revamp your Online Presence

The insurance industry moves like molasses in response to technological advances, preferring to rely on handshakes and in-person meetings. Ironically, these are exactly the avenues of connection COVID-19 has cut off!

The COVID-19 interregnum is a perfect opportunity to get ahead of the pack in terms of your digital footprint:

  •  Invest in a professional and accesible video conferencing software platform that will allow you to meet with your clients “face-to-face,” even if you can’t meet in person. PRO TIP: Don’t rely on the built-in webcam. A good camera and professional backdrop will enhance the meeting experience.
  •  If your website is more than two years old, consider updating it. A sleek appearance and user interface will facilitate digital marketing and sales.
  •  Bring your social media accounts into alignment with your brand across all channels (Facebook, Twitter, LinkedIn, Instagram, YouTube, etc.)
  •  Invest in content! YouTube videos, photographs, blogs, social media content, etc. Online, robust content denotes authority.

Outsource anything and everything that you tend to procrastinate or that falls outside your realm of expertise … but consider getting in front of the camera yourself. You are the face of your brand. Get it out there!

4.   Shift to a Digital Sales Approach

Insurance agencies also tend to lag behind other industries in the implementation of digital systems. This becomes a bottleneck, slowing their growth and (again) closing them off to underserved foreign markets. New opportunities.

Digital initiatives should include a:

  • New way to generate leads. You can only be at so many networking events at once … and right now, networking events are all on hold until further notice. Explore avenues of lead capture that don’t require your physical presence, like social media  and content marketing. Make sure you have a targeted marketing strategy which allows to reach out to your contacts with valuable content that will capture their attention.
  • New way to organize your marketing strategy. A digital client relationship management (CRM) system and a marketing automation platform can supercharge your business, allowing you to manage more clients with less effort. These tools can help you keep track of where each client is in the buyers’ journey, and allow you to fire off proposals, and email communications with one click.

5. Prepare to Reopen

Many businesses operate on thin margins with minimal safety nets, and insurance agencies are no exception. We have all felt the branch creak during this crisis, which makes now a perfect time to address the reopening of your agency.

This may not even be the last time we face shutdowns this year if a second wave of COVID hits us. Now is the time to take a good long look at your continuity plan, including:

  • Provide a safe environment for your employees and engage with each of them personally.
  • Invest time in adjusting financial projections and prepare for the inevitable shortfalls. Protect your payroll.
  • As a leader, accept the new normal and embrace each day with enthusiasm and resilience.

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I don’t want my business to inch and squirm back into the sunlight as coronavirus restrictions begin to lighten. I want to flex beautiful new wings and soar out of my cocoon, and I want the same for you! What steps can you take today to emerge from the pandemic stronger than before?

Column by Mary Oliva