Market Commentary: Asset managers respond to pandemic

BlackRock

Over the past several weeks BlackRock has been implementing various business continuity plans to ensure they protect the health and safety of its employees, while also continuing to be able to serve its clients.

As the coronavirus outbreak continues to spread globally, the firm is taking additional steps that will further increase social distancing in its offices.

From 16 March, BlackRock adopted a split operations model for a four-week period across all its offices in the Americas, Europe, the Middle East and Africa.

Employees have been split into two teams that will not be in offices simultaneously, i.e., each team alternating with one working remotely and another in offices.

A limited number of roles on each team have been designated as “essential in office.” These roles on each team will be physically segregated from one another when their respective teams are in offices.

There will also be a lower density of people in offices and by the increased cleaning efforts.

BlackRock also said its business continuity plans are working as planned – last week, almost half of the firm globally worked from home.

Additionally, the firm committed up to $50m (€46m) in philanthropic support for immediate needs of communities where it operates as well as larger solutions to fill gaps as the situation evolves.

Nuveen

On investments, the firm’s global investment committee said the speed and magnitude of the market selloff has been seen by some as an overreaction. “However, it’s important to remember that stocks and other risk assets were fully or overvalued before the panic selling started, which contributed to the rapid selloffs.”

Given the degree of unknowns, it’s hard to tell how much downside risk is still embedded in the markets, the firm said.” Our best sense at this point is that we may be past the worst of the panic selling across asset classes, but volatility is likely to be elevated in both directions.”

Since this crisis is event driven and not a result of structural or financial problems, the manager said, the critical sign to watch will be when there is a plateau in new COVID-19 cases.

“Once that happens, we will be better able to assess the related supply and demand shocks as well as provide more clarity on the corporate earnings outlook. Additionally, markets are looking for additional policy responses.”

Robeco

Victor Verberk, deputy head of investments, said: “The point is that this whole sell-off is not about the virus alone. It’s much more about these major imbalances that have caused, for example, the US to be in a net investment position or minus one times GDP.”

That means, the manager added, the US owes one times the value of its GDP to foreigners, on a net basis. “And now the panic is here and GDP will shrink.”

Robeco’s fixed income teams are now slowly moving towards buying assets. “It might not feel comfortable at all, because we are in the middle of the crisis, but it’s always darkest before dawn.”

It added: “We were very cautious going into this crisis and, now that everybody is panicking, it’s a great, great moment to start buying. It’s still early days, but my advice is to become bullish now.”

AXA Investment Managers

Chris Iggo, CIO core investments, said: “As we all isolate and get used to home video conferences and virtual lunches, there is much to reflect on.”

There will be permanent changes in markets and some financial products will disappear, he said, adding that some ways of managing money may not survive.

“Like it or not, central banks will have more influence on markets than ever before through the impact of their huge asset purchases and credit facilities. Their actions have hopefully prevented more disorder and greater economic damage.”

He said that “time will tell how quickly this feeds into asset prices, but it will.”

He predicted that de-risking will come to an end, adding that “the good thing is there will be new opportunities for investors. Keep calm and look for value”.

BNY Mellon

The asset manager is actively implementing business continuity measures globally, including remote working and use of alternate sites, to protect its employees while remaining operational and responsive to client needs. “We are closely monitoring the situation and the safety and wellbeing of our employees and clients remain our top priority.”

Franklin Templeton

Colin Morton, vice president, portfolio manager, said: “UK investors were hoping for a much better 2020 after Brexit trials and tribulations, so obviously the past month has been disappointing.”

As the coronavirus has spread across the globe, he said “we are in the middle of the perfect storm.”

Prior to the coronavirus outbreak, average corporate earnings had been rising well above inflation and the UK had very low levels of unemployment.

“My first reaction to news of the coronavirus outbreak in January/February was to look back at the playbook for similar events, such as Severe Acute Respiratory Syndrome (SARS) in 2003,” he said.

“The feeling was that this is something that will probably be relatively short-lived; it will probably last two or three months, and the markets would quickly recover.”

He said there is clearly a return of volatility in the market, which has not been seen in many years.

“Naturally, it’s hard to envisage what may lie ahead over the next six months, as it’s a fast-moving situation. As bottom-up investors, we’re alive to potential opportunities, yet are also cognisant of the challenges that UK stocks may face in the coming months.”