State telecom agency CAT Telecom has teamed up with IBM to develop the CAT Covid Tracker service for alternative state quarantine (ASQ) hotels to keep track of their guests’ health condition.
This system aims to help reduce risks and build confidence once Thailand reopens its doors to foreign tourists.
Dr Wongkot Vijacksungsithi, CAT’s senior executive vice president for digital business, said the application allows ASQ hotels to keep track of guests’ health digitally instead of getting staff to check on the guest in person.
Under the system, guests will be given a username and password and will be required to record their daily health information, such as temperature and symptoms.
The system will then automatically create files that can be submitted to the Department of Disease Control. The app also allows guests to talk directly to doctors or nurses from partnering hospitals.
The app also tracks the health of hotel staff, providing notifications if any cases are found so other personnel can protect themselves and treatment can be provided in a timely manner.
The CAT Covid Tracker, which took just one month to develop, leverages the capabilities of CAT’s cloud services, together with experiences in open-source management and support services from IBM.
Anywheel ties up with Dtac to launch bike-sharing service in Chiang Mai
Oct 08. 2020
By The Nation
Anywheel, Singapore’s largest short-distance public transport provider, has chosen dtac Business’s internet of things (IoT) solutions to power its eco-friendly bike-sharing service in Chiang Mai.
Dtac Business is a unit of Total Access Communication (dtac), which was created to provide connectivity services and business solutions to corporate clients.
The Anywheel service supports the public transportation dimension of Chiang Mai’s aspiration of becoming a smart city in line with the Thailand 4.0 goals.
Cycling also supports efficient social distancing in the Covid-19 era.
Anywheel, which was founded by CEO Htay Aung, has been offering bike-sharing services for more than three years in Singapore, Malaysia, and most recently in Thailand.
Dtac Business has supported Anywheel from prototype development and testing, to the shipment of the first 1,000 IoT SIMs for installation onsite. Dtac Business IoT SIMs enable accurate vehicle fleet management with real-time positioning of all bicycles.
Rui Jie Seet, general manager of Anywheel Singapore said: “Anywheel kicked off its Thailand operation in Chiang Mai’s city centre and now has about 150 docking stations already installed and more than 6,000 users per day. The company also installed another 150 docking stations at Chiang Mai University and plans to expand its services to other university campuses and industrial complexes. I really hope that in the post-Covid era, locals and tourists will want to enjoy cycling and the scenery of Chiang Mai during the cool months. We know every year from January to March the air quality worsens, but I hope we can help improve the situation here.”
The Anywheel service is simple: download and open the Anywheel app, locate the nearest bicycle parking from its built-in map, scan QR code on the bike to unlock it. The base fare is Bt10, while a monthly pass starts at Bt200.
Anywheel also plans to develop their app to further suit urban needs with electric scooter services which would better serve longer journeys. Currently, electric scooters are only available in Singapore and Malaysia.
Thai Smile Airways, a subsidiary of Thai Airways International, plan to fly on four new routes in the last quarter of this year, chief executive officer Charita Leelayudth said.
The routes are: Suvarnabhumi-Nan, Suvarnabhumi-Nakon Panom, Nakhon Si Thammarat-Chiang Mai and Nakhon Si Thammarat-Udon Thani.
Charita said that the airline had witnessed an increase in passenger numbers after the resumption of operation on domestic routes since June 1.
She said that the airline saw new potential customer segments, including retirees.
By The Washington Post · David J. Lynch · NATIONAL, BUSINESS, POLITICS
ECON-ANALYSIS
Katie Button has put her bar stools into storage, laid off about half of her 130 employees and learned how to run a half-empty restaurant. But she remains at the mercy of Washington, D.C.
With the recession having blown a $3 million hole in her business, Button, 37, was counting on the federal government to provide one more round of financial aid to get Curate, her Asheville, N.C., restaurant, through the winter.
The coronavirus pandemic already has permanently shuttered 24 eateries in her scenic town of about 93,000 people. Button is trying desperately to avoid becoming the 25th.
“They can’t just walk away and go home to campaign,” she said. “It’s getting worse and worse…We need help.”
Button’s plight illustrates the economic consequences of Washington’s failure, after months of intermittent negotiation, to deliver a fresh economic stimulus package. Negotiations between President Donald Trump’s team at the White House and congressional Democrats have been on and off for months, though they appeared to be on again as of Thursday evening.
The president and his congressional adversaries picked a bad time for gridlock. Job growth is slowing, businesses are closing, and cooler weather is driving people inside where the virus flourishes. In September, for the first time since the pandemic began, the Homebase gauge of small business activity declined, signaling weakness ahead.
Failure now to agree on new help for struggling workers, companies and public agencies risks greater misery for millions of Americans, lower future living standards and a longer, slower road back to prosperity, economists said.
“It is completely avoidable, if they would just provide some stimulus. It is so obvious what needs to be happening,” said Nan Whaley, mayor of Dayton, Ohio, who confronts a $10 million budget gap that will likely force cuts to police and fire services.
When the coronavirus shutdowns began in March, the White House and Congress quickly agreed to spend nearly $3 trillion to help the economy through the worst of the pandemic. But much of that aid lapsed months ago, leaving households and businesses exposed.
The expiration this summer of enhanced unemployment payments triggered a decline in August’s disposable income reading. On again, off again negotiations between the administration and lawmakers failed to reach agreement on new measures to contain the virus and repair the economic damage.
In recent days, companies that endured the pandemic’s first half-year without permanentjob losses — such as Walt Disney, Houghton Mifflin and Allstate — announced layoffs. United Airlines, American Airlines and other air carriers hurt by the collapse of travel have also begun tens of thousands of cuts.
Earlier this week, the owner of Regal Cinemas announced it would close all of its 663 movie theaters in the U.S. and United Kingdom, imperiling 45,000 jobs. And state and local governments, which already have trimmed 1.2 million workers over the past year, face budget shortfalls that will require additional pink slips.
Furloughs once billed as temporary have hardened into permanent job loss for an increasing number of workers. And almost 11 million Americans who had jobs in February remain unemployed, even as the labor market is slowing.
A total of 661,000 people were hired in September, down sharply from June’s 4.8 million.
At last month’s hiring pace, it will take until early 2022 to regain February’s number of jobs.
In Bowling Green, Ky., Amy Perry, 51, a former loan company customer service representative, filed for unemployment on June 1. But more than four months later, state backlogs mean she’s still waiting for her first check.
“I have not gotten a penny of unemployment. I get a robo-call every two or three days, saying I’m in the queue,” she said. “I’m at a loss. I don’t know what to do.”
She and her husband, Jonathan, 49, have secured six months of forbearance on their mortgage payments. And they expect to cover their other bills with his salary as a driver for UPS.
“We’re like everyone else,” she said. “We have a mortgage. We have bills to pay. It’s been hard.”
Perry has autoimmune disorder, and her employment prospects amid a contagion are slim. She and her husband plan to sell their home in the spring and downsize to a smaller place. Even if Washington eventually provides additional help, she worries about the long run.
“How long can they continue the stimulus packages?” she said. “Our country is so much in the hole. I worry about what we’re leaving our children.”
The unique nature of this recession also worries some economists. The U.S. failure to contain the coronavirus has interrupted the education of millions of American schoolchildren and caused a sizable labor force exodus of women who lack adequate childcare.
“This could be permanently damaging,” said Lisa Cook, an economics professor at Michigan State University, who worked in the Obama White House. “The whole economy is going to be worse off because these kids are worse off. We are losing our future labor force. We’re settling for lower living standards in the future.”
To be sure, after suffering the sharpest plunge in recorded history during the second quarter, when output contracted at an annual rate of 31 percent, the economy has bounced back stronger than many economists anticipated in the dark days of March.
Tom Porcelli, chief U.S. economist for RBC Capital Markets, cites a steady decline in the total of continuing claims for unemployment benefits as a sign of genuine progress. From a peak of 22.8 million in early May, the number of those receiving jobless benefits has been cut in half, according to the Bureau of Labor Statistics.
Yet at year end, the U.S. economy is still expected to be smaller than it was a year ago. And nearly 98,000 businesses have permanently closed their doors, according to Yelp, the online review site.
“The economy needs a bridge and the bridge is fiscal stimulus,” he said. “There is absolutely a need.”
Without immediate pump-priming, the economy may come dangerously close to “stall speed” in the last three months of the year, according to Oxford Economics. Economist Michael Feroli of JPMorgan Chase is more upbeat, projecting annualized growth of 2.5 percent in the fourth quarter.
The president’s abandonment of talks with Pelosi sent the Dow Jones industrial average sharply lower on Tuesday into a nearly 600-point plunge on Tuesday. Investors Wednesday took solace from late-night Trump tweets backing separate measures for a new round of $1,200 individual checks or an airline industry bailout, which already have been rejected by Democrats who favor a comprehensive approach.
The importance of fiscal support was evident this summer, when Walmart credited government stimulus checks for delivering a more than 9 percent gain in same-store sales compared to the same period in 2019.
But in July, the final month of the company’s second quarter, that increase dipped to 4 percent, as customers retrenched in anticipation of the expiration of enhanced unemployment benefits, executives told investors.
The earlier benefits were critical to supporting consumer spending at a time of high unemployment. By halting support, at least for now, the administration and Congress are defying increasingly loud pleas for help from the Federal Reserve.
Earlier this week, Federal Reserve Chairman Jerome Powell told an audience of economists that the Fed had “deployed the full range of tools at our disposal,” but needed those who control government spending to act.
“There is still a long way to go,” he said. “…Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.”
To some economists, a premature end to government support risks repeating mistakes made after the 2008 housing bubble collapse. Layoffs then by cash-strapped state and local agencies delayed the return to pre-recession unemployment rates by four years, according to the Economic Policy Institute.
The current recession is gouging similar holes in public accounts, forcing officials to ax teachers, recreation aides and first responders. Such belt-tightening only hurts the local economy, depressing tax revenue and requiring further layoffs, officials said.
In Dayton, Whaley said she already has laid off “dozens” of workers at the city’s airport and closed two of the three municipal golf courses. Further cuts are likely in police and fire services.
“These are real tough decisions we’re going to have to make. There’s no fat left here,” she said.
In Asheville, with the state limiting indoor dining, Curate’s revenue is stalled at just 40 percent of last year’s figure. But Button’s loss is not her problem alone. Her customary payments to area workers and farmers have dropped by $2.5 million.
Button, who owns two successful eateries, got a government-backed small business loan that she says helped her navigate the pandemic’s first months. But she’s watched in frustration as lawmakers and administration officials spent months debating additional economic aid even as public health officials warn Americans to be cautious about venturing into restaurants.
The Independent Restaurant Coalition, an industry group, hoped for a $120 billion bailout in any final stimulus measure.
“You can’t say we’re not different from other industries,” she said. “Ninety to ninety-fie percent of every dollar that we take in is going right back out the door into our communities. The risk of doing nothing is far greater than the risk of giving restaurants what they need.
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David J. Lynch is a staff writer on the financial desk who joined The Washington Post in November 2017 after working for the Financial Times, Bloomberg News and USA Today.
By Syndication Washington Post, Bloomberg · Claire Ballentine, Vildana Hajric · BUSINESS, US-GLOBAL-MARKETS U.S. stocks rose to almost five-week highs as traders speculated that lawmakers will eventually provide more stimulus and corporate deal activity increased. Treasury bond yields dropped and the dollar weakened.
The S&P 500 finished up 0.8% after conflicting comments from President Donald Trump and House Speaker Nancy Pelosi, D-Calif., whipsawed equity markets earlier in the day. Energy, utilities and financials were the biggest gainers in the benchmark index, with crude oil rallying as Hurricane Delta approached the already battered Louisiana coast.
“It’s likely that there will continue to be near-term volatility due to the back-and-forth over a deal,” UBS Global Wealth Management strategists led by Mark Haefele wrote in a note. “A stimulus deal will be struck eventually, central banks will continue to stay supportive, and medical developments still have scope to surprise, in our view.”
Eaton Vance leaped after the investment firm agreed to be taken over by Morgan Stanley. IBM surged after saying it will spin off its infrastructure unit. Regeneron Pharmaceuticals rose after Trump said its antibody cocktail was the “key” to his quick recovery. The president said he would authorize its emergency use.
Bulls are now back in control of a market that’s increasingly betting that a Joe Biden presidential victory and gains by Democrats in Congress will be good for equities. The scenario seems to be somewhat quelling volatility even as risks from a split in government to a resurgence of coronavirus cases threaten the economic rebound.
“At this point the market is likely projecting a Biden victory,” said Bill Fitzpatrick, managing director at Logan Capital Management. “It’s a scenario worth considering that we don’t get results for a month or so after the election, that’s a real possibility.”
Meanwhile, Pelosi said there won’t be a standalone bill on airlines without a guarantee the other stimulus items are going to be addressed. Trump had earlier touted progress in talks even though there was no sign the two sides are any closer on a deal.
Elsewhere in markets, airlines led European shares higher, helped by as optimism over a covid-19 treatment. U.K. jet engine-maker Rolls-Royce Holdings posted its best five-day performance on record, after shoring up its finances.
Oil futures rose 3.1% after Gulf of Mexico producers shut in 1.7 million barrels a day of crude production ahead of the storm that’s expected to slam into the Louisiana coast on Friday. Gold increased for a second day.
– – –
These are some of the main moves in markets:
Stocks
– The S&P 500 index increased 0.8%, to 3,446.85 as of 4:01 p.m. New York time, the highest in almost five weeks.
– The Dow Jones industrial average rose 0.4%, to 28,425.71, the highest in five weeks.
– The Nasdaq composite index climbed 0.4%, to 11,420.98, the highest in almost five weeks.
– The Nasdaq 100 index rose 0.4%, to 11,550.94.
– The Stoxx Europe 600 index jumped 0.8%, to 368.31, the highest in almost three weeks.
Currencies
– The Bloomberg Dollar Spot Index decreased 0.2%, to 1,170.35.
– The euro was little changed at $1.176.
– The Japanese yen was little changed at 106 per dollar, the weakest in almost four weeks.
Bonds
– The yield on 10-year Treasuries fell two basis points, to 0.76%.
– The yield on 30-year Treasuries decreased two basis points, to 1.56%.
– Germany’s 10-year yield fell three basis points, to -0.52%, the largest drop in more than two weeks.
– Britain’s 10-year yield declined one basis point, to 0.289%, the biggest fall in more than a week.
Commodities
– West Texas Intermediate crude climbed 3.2%, to $41.26 a barrel, the highest in almost three weeks.
– Gold strengthened 0.3%, to $1,894.64 an ounce.
– Copper gained 0.2%, to $3.04 a pound, the highest in more than two weeks.
Stimulus packages may result in lower contraction in year’s last quarter
EconOct 09. 2020Thanavat Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC)
By The Nation
The government’s many stimulus packages should reduce the previously estimated economic contraction in the fourth quarter, said Thanavat Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC).
The Centre for Economic Situation Administration on Tuesday approved a new stimulus measure granting income tax deduction of up to Bt30,000 per person to help boost their spending on goods and services.
The measure, which is awaiting Cabinet approval, will run from October 23 until December 31 and apply to the 2020 tax year. Around 4 million people are expected to be eligible for this scheme.
The government recently launched two other stimulus measures worth more than Bt60 billion to boost domestic consumption and people’s purchasing power.
Thanavat said all stimulus packages are estimated to inject Bt110 billion into the economy, which should boost growth in the fourth quarter to 2 to 3 per cent, bringing the previously estimated contraction down to between minus 4 and minus 5 per cent from minus 6 to minus 7 per cent.
Meanwhile, the consumer confidence index in September dropped to 50.2 from 51 in August, marking the first fall over the past five months, according to UTCC survey. The survey was conducted on 2,244 respondents.
This drop was due to people’s concern over political stability and the resignation of economic guru Predee Daochai from the finance ministry’s post.
New Finance Minister Arkhom Termpittayapaisith is set to take office on Monday.
The respondents were also worried about slow economic recovery and possible job losses in the future due to the Covid-19 outbreak, which has crippled the tourism sector.
Thanavat added that if the economy fails to recover in the fourth quarter, it may result in the loss of 500,000 jobs in the tourism sector.
Thailand needs to set up a corporate bond guarantee fund in order to rescue tourism-related industries that have been hit hard by the Covid-19 pandemic, Tada Phutthitada, president of the Thai Bond Market Association (Thai BMA), said on Thursday.
The fund may be set up by the government with a fund size of Bt50 billion, which would enable it to guarantee corporate bonds up to Bt125 billion, or 2.5 times, he said.
Tourism-related industries, such as hotels, could raise funds by issuing bonds with three-year maturity and the guarantee fund will compensate investors when issuers default on payment.
Three years maturity would be enough as tourism is likely to recover from the coronavirus outbreak, he said.
The bond guarantee fund will be similar to Malaysia’s Danajamin, a financial guarantee for bonds and Sukuk issuance. Malaysia has been successful in implementing the bond guarantee fund, supporting businesses to raise funds via issue of bonds and create investor confidence, said Ariya Tiranaprakij, senior executive vice president of Thai BMA.
The Thai government may make use of the Bt400-billion Covid-19 recovery fund, which has been little utilised, she said. Or money could be drawn from the central bank’s Corporate Bond Stabilisation Fund, which has not been utilised much since its launch in April, she said.
Thailand currently has the Thai Credit Guarantee Corporation, but it provides only bank loan guarantee.
In the first nine months this year, companies issued bonds worth Bt540 billion. They are expected to raise funds via bonds for the rest of the year, said Tada, and forecast total corporate bonds worth Bt800 billion for this year.
Outstanding bonds in the first nine months rose 5.09 per cent to Bt14.2 trillion from the end of last year. The issuance of government bonds contributed to the rise of outstanding bonds, but outstanding corporate bonds dropped.
Banks decreased their short-term debenture issuance, while energy firms increased their long-term bond issuance.
Between January and September, foreign investors sold government bonds worth of Bt71.3 billion, comprising Bt64.1 billion short-term bonds and Bt7.3 billion long-term.
Thai bond holdings of foreign investors dropped from Bt916.8 billion to Bt848.8 billion, representing 6 per cent of total outstanding bonds.
Foreign investors are waiting to see the outcome of the US presidential election. They want to see how US election will affect the Thai economy. Thai government bonds remain attractive due to the lower inflation rate relative to those of neighbouring countries, but market uncertainty remains, Tada added.
An expert at Asia Plus Securities expected the Stock Exchange of Thailand (SET) to hit 1,500 points next year due to high liquidity and the return of foreign funds, but pointed out five negative factors that would pressure the index in the remainder of this year.
Asia Plus Securities’ executive vice president of research, Therdsak Thaveeteeratham, expected listed companies’ profit next year to average Bt72.51 per share from Bt56.65 per share this year, as the quarterly profit is expected to bottom out since the second quarter of this year.
He expected the SET to hit 1,450 points next year and 1,526 points if the Bank of Thailand’s Monetary Policy Committee cut the interest rate one more time this year.
“The positive sentiment that would help boost the SET is high liquidity of Bt15.5 trillion, higher than the index market capitalisation of Bt13 trillion. According to previous statistics, the cash is likely to flow into the index when the deposits are higher than the index market capitalisation, especially when the interest rate is likely to stay at a low level for 1-2 years because the return on deposit was not high,” he said.
“In addition, foreign funds are likely to return to the market after they continued selling until their shareholding in the Thai stock market fell to 25.8 per cent currently.
Meanwhile, large investors have opened 510,000 accounts this year from the previous 300,000 accounts which helped boost the price of small-cap shares.”
However, he said the SET would be pressured by five negative sentiments:
▪︎ Second wave of Covid-19: This fear has caused several countries to impose lockdown measures and caused global stock markets to face correction in September.
▪︎ Domestic political situation: Investors should follow this factor closely because the past political rallies had caused the SET to fall by 6.2 per cent, while the rally organised by the Free People’s movement caused the index to fall by 7.4 per cent.
▪︎ US presidential election: Going by trends in the previous three elections, the SET will fall one month before and after the election, but the index is likely to rise one year after the election. Therefore, investors should buy shares one week before the election when the market faces correction. If Joe Biden wins the election, cash is likely to flow into the US due to his policy to raise tariffs on US companies.
▪︎ SCG Packaging (SCGP) listing on SET: Eighteen mutual funds decided to sell large-cap shares to buy SCGP shares worth Bt23 billion. Meanwhile, SCGP would be listed in the SET50 or SET100 automatically, as its market capitalisation was around Bt140 billion to Bt150 billion, so Thanachart Capital (TCAP) and The Erawan Group (ERW) would be delisted from SET50 and SET100, respectively.
▪︎ SET’s old short sales and ceiling/floor regulations: Various risks will cause more impact on the SET due to its old short sales and ceiling/floor regulations.
Therdsak added that the government’s “Shop Dee Mee Kuen” (Shop and Payback) measure to stimulate domestic consumption would help boost shares in the retail group, advising investors to buy Central Retail Corporation (CRC), SPVI and Jay Mart (JMART) shares as their prices were currently cheap.
Jobless claims declined last week while remaining elevated
EconOct 09. 2020Waiters assist diners at a restaurant in New York on Sept. 26, 2020. MUST CREDIT: Bloomberg photo by David Dee Delgado.
By Syndication Washington Post, Bloomberg · Olivia Rockeman · BUSINESS, US-GLOBAL-MARKETS, CAREER-WORKPLACE The number of Americans seeking unemployment benefits fell for a second week while remaining elevated, as the labor market makes scant progress amid risks of further weakness without additional federal stimulus.
Initial jobless claims in regular state programs decreased by 9,000 to 840,000 in the week ended Oct. 3, with the prior week’s figure revised higher by 12,000, Labor Department figures showed Thursday. Continuing claims, the total number of Americans on state benefit rolls, fell to 11 million in the week ended Sept. 26, a bigger-than-expected drop.
Even so, seven months into the pandemic, initial claims are still about four times the pre-virus level, and higher than the peak of the 2007-09 recession. For the latest week, economists expected initial claims of 820,000 and for continuing claims of 11.4 million, according to median estimates in a Bloomberg survey.
The report came with the same major caveat as last week: The figures from California, the most populous state, used numbers identical to the previous week because the state temporarily halted acceptance of new applications for two weeks to improve its systems and address a backlog of filings.
“The stubbornly high level of claims may already be starting to reflect the large corporate job cuts announced last week. The report continued to exclude California’s numbers as the state put applications on hold for two weeks, announced on Sept. 19, to revamp its system,” Bloomberg economist Eliza Winger said.
The slight drop in new claims underscores the gradual improvement that the labor market has seen since the initial lockdowns of the pandemic eased. Even so, recent layoff announcements from companies including Walt Disney Co. and Allstate Corp. as well as multiple airlines could start showing up in the numbers in the coming weeks.
At the same time, President Donald Trump’s mixed messages on additional federal stimulus have fueled more uncertainty across the world’s largest economy as Federal Reserve Chair Jerome Powell warns it will face longer-lasting scars and a weak recovery without sufficient aid.
“Even as filings are declining, levels remain extraordinarily high,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note. “Employment growth has already slowed and without fiscal support that protected jobs, risks are skewed to the downside for payrolls going forward.”
U.S. stocks opened higher after the jobless claims report, while 10-year Treasury yields and the dollar both fell.
The confusion comes as unemployment persists for many Americans. While continuing claims fell by 1 million, that could reflect recipients exhausting regular benefits and moving to state programs that provide extended benefits. Also, the number of Americans transitioning onto Pandemic Emergency Unemployment Compensation — a federal program for people who have exhausted state benefits — increased by 153,700 to 1.96 million in the week ended Sept. 19.
The biggest increases in new unemployment claims on an unadjusted basis were in Florida, Illinois, Virginia and Massachusetts, which may reflect cuts at major airline hubs. New Jersey, Pennsylvania, Louisiana and Michigan saw declines.
The total number of Americans claiming Pandemic Unemployment Assistance — a federal program for self-employed and gig workers — decreased by 433,500 to 11.4 million in the week ended Sept. 19, while initial filings dropped by 44,270 last week to about 464,400.
Wall Street is helping private equity recycle its aging assets
EconOct 08. 2020Pedestrians walk past the New York Stock Exchange on a nearly empty Wall Street in New York on March 30, 2020. MUST CREDIT: Bloomberg photo by Gabby Jones.
By Syndication Washington Post, Bloomberg · Benjamin Robertson · BUSINESS, US-GLOBAL-MARKETS Private equity firms are prolonging the shelf lives of their aging assets with deals that are proving increasingly popular with managers, but not with all investors.
Firms under pressure to offload assets from their expiring funds are opting to repackage them into new vehicles as the pandemic curbs the usual exit routes via sales or IPOs. This once obscure corner of the private equity industry has grabbed Wall Street’s attention, with the likes of Goldman Sachs joining investors and Citigroup advising on deals.
Buyout firms are becoming more inventive as business models that usually cap a fund’s lifespan at a decade prove too rigid for covid-stricken markets. As well as offering an alternative exit route for investors wanting to cash in their holdings, so-called general partner-led secondary deals allow firms to keep top-performing assets and juice even more returns from them — often meaning even higher fees.
“The market used to be the Wild West,” said Harold Hope, head of Goldman’s secondaries investment unit in New York. “Even two years ago we saw some managers go to their investors with GP-led deals and get shot down. Deals are more stable now. There are better standards.”
In July, Goldman led investors in a $1 billion deal that enabled private equity firm Riverstone Holdings to shift renewable energy firm Enviva Holdings into a new separate fund. When Permira decided to repackage four companies from its maturing flagship fund in May, Coller Capital led investors in an $829 million deal. In both cases, some investors cashed out entirely.
But with the manager as both buyer and seller, the deals come with a health warning. Investor body Institutional Limited Partners Association has cautioned about conflicts of interest and urged that investors are on board, while the Securities and Exchange Commission has waved similar red flags. Another concern is that managers can undervalue assets when moving them, and so trigger higher performance fees upon their next revaluation.
“Managers might try to take advantage of covid-depressed prices and set themselves up with nice lower valuations,” said Simon Saitowitz, a specialist in secondaries deals and partner at law firm Fried, Frank, Harris, Shriver & Jacobson. In the past few months, he’s fielded more requests for GP-led restructurings than for the whole of last year.
When London-based Permira carried out its May transaction, the firm sought to allay investor concerns by keeping the same terms for those that opted to stay in, said a person familiar with the deal. Around a third of the original investors took the opportunity to exit, said the person. A spokesman for the firm declined to comment.
The advisory side has typically been dominated by boutiques like Evercore Inc. and Campbell Lutyens, but no longer. Citigroup has worked on the transactions since 2017 and now has a 17-person team, according to Anthony Diamandakis, global co-head of asset managers.
BC Partners recently decided to postpone a listing of academic publisher Springer Nature, which could have been Germany’s biggest IPO in more than a year, Bloomberg News reported this month. It also considered a potential GP-led deal for the investment, people with knowledge of the matter said. A spokesperson for BC Partners declined to comment.
Rarely used until about a decade ago, the value of GP-led deals surged to a record $26 billion last year. Since the pandemic upended markets, managers who wouldn’t normally talk to secondaries experts are interested, said Gabriel Boghossian, partner in the private equity team at Stephenson Harwood. He even interrupted a holiday to work on three such deals.
The growth in demand points to booming interest in the broader secondaries market, where some $80 billion of fund assets were traded in 2019, according to Evercore. Some of the biggest private equity players in the space include Ardian, which raised an industry record $19 billion fund in June, and Coller Capital, which has this year been raising money for its latest flagship secondaries fund.
While the virus spurred GP-led exits to account for a record 41% of the secondaries market in the first half of this year, their volumes plummeted in line with industry activity. The number of all types of completed sales by private equity firms fell to the lowest in five years in the period, according to data compiled by Bloomberg.
U.S. private equity firm GCM Grosvenor last month said it expects GP-led deals to return to record volumes in the next couple of years as pent-up demand and less transactions in underlying portfolios send firms into the secondary market.
But as a portion of the wider market, this year could prove the strategy’s most popular yet. The deals are on track to make up 50% of all secondaries transactions by year-end, compared with 33% in 2019, said Nigel Dawn, global head of private equity advisory at Evercore, which advises on the transactions.
“Managers are saying ‘we need more time’,” said Dawn.
David J. Lynch 
Thanavat Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC) 
Waiters assist diners at a restaurant in New York on Sept. 26, 2020. MUST CREDIT: Bloomberg photo by David Dee Delgado. 
Pedestrians walk past the New York Stock Exchange on a nearly empty Wall Street in New York on March 30, 2020. MUST CREDIT: Bloomberg photo by Gabby Jones. 
