TheChek News Flow

* Aena Raised to Buy at CaixaBank BPI; PT 137.70 euros

* Altice Europe Raised to Buy at HSBC; PT 4.50 euros

* Big Yellow Group Raised to Buy at HSBC; PT 1,096 pence

* Electra Private Equity Raised to Buy at HSBC; PT 290 pence

* Embracer Group AB Raised to Buy at SEB Equities; PT 130 kronor

- Buy Defensive Stocks as Pullback Looms, Bernstein Quants Say

Nikkei -0.90% Hang Seng -5.31% CSI -2.16% Shanghai -1.87% Shenzen -2.28%

Eur$ 1.0925 CNH 7.1421 CNY 7.1215 JPY 107.44 GBP 1.2213 CHF 0.9715 RUB 71.40 WTI$ 31.45 -7.25%

S&P -0.71% NAsdaq -0.74% EuroStoxx -1.28% FTSE -1.26% Dax -1.33% SMI

Macro :

- Hedge Funds Playing Defense Ramp Up Stock Exposures to 2010 High

- Buy Defensive Stocks as Pullback Looms, Bernstein Quants Say

- Rokos, Thiara Bet Big on Corporate Bond ETFs in Volatile Markets

- Money-Market Funds Snap 12 Weeks of Inflows, Jefferies Says

- Bond Fund Inflows Accelerate With Stocks Out of Favor, Citi Says

Keep an eye on :

- AIR FP : Etihad Plans to Cut 1200 Jobs, May Retire Its A380 Jets: Reuters

- AF FP : KLM Faces Trouble Securing Loan Amid Repayment Burden: Telegraaf

- AJB LN : AJ Bell Holder to Offer Shares

- MT NA : U.S. Steel, ArcelorMittal Hiked Steel Price Again, Cowen Says

- AZN LN : AstraZeneca Gets U.S. Funding; Kadmon Jumps: N.A. Health Wrap

- CS FP : Le tribunal de commerce de Paris donnera un nouvel éclairage sur les pertes d’exploitation, vendredi. Et la direction à suivre par les assureurs. - https://bit.ly/3cYm74c

- BDRILL NO : Borr Drilling Offering Prices 46.2m Shares at $0.65/Share

- CSGN SW : Credit Suisse Targets Luckin Ex-Billionaire’s Family Assets

- EXPN LN : Experian to Buy Maj. Stake in Bertelsmann’s Arvato Risk Mgt Unit

- HHC US : *HHC GAINS AS ACKMAN TWEETS AT ELON MUSK FOR NEW TSLA LOCATION

- KOA NO : Kongsberg Automotive Offering Prices 7b Shares at NOK0.1/Share

- LLOY LN : Lloyds Shareholders Lodge Protest Vote Over Executive Pay

- OTB LN : On the Beach to Place About 19.9% Share Capital; Adds GBP25m RCF

- PHIA NA : Turkish Consortium Plans to Buy Philips’ Appliance Unit: Sabah

- RBS LN : RBS Chief Says Most Staff Won’t Return to Office for Months

- RNO FP : Former Green Beret Arrested in Ghosn Escape to Fight Extradition

- RNO FP : France Still Discussing Aid Measures With Renault: Figaro

- ROG SW : U.K. Buys 10 Million Antibody Tests from Roche and Abbott

- ROG SW : Roche Buys Stratos Genomics; No Terms

- RDSA LN : Shell Plans Voluntary Job Losses to Mitigate Impact of Oil Slump

- SRAIL SW : Stadler Rail Supends Targets, Chairman to Replace CEO Ad-Interim

- FTI FP : TechnicFMC May Issue up to GBP 600M Notes Under CCFF Program

- UQA AV : Uniqa 1Q Pretax Loss EU13.9 Mln Vs. Profit EU42.3 Mln Y/y

Miami Design District Reopens, Planned Stores Stay on Track

As the area's stores reopen, Off-White, Alexander McQueen, Stone Island and Ovation restaurant are on track to bow in July.

MIAMI — Coming out of quarantine from his home in the Colorado Rockies, Miami Design District developer Craig Robins is back to oversee the reopening of the luxury retail neighborhood today. In a stroke of luck, his vision for flagships connected by broad avenues, leafy lanes and wide-open courtyards full of public art seems tailored to social distancing protocol.

“It’s what we are — a very spacious, open-air neighborhood designed for outdoor experiences,” he said, anticipating cooped-up people will flock to the neighborhood over indoor or high-density options. “If you’re outside and social distancing, there’s a low risk of infection. It’s the safest possible experience [if leaving one’s home].”

Since the novel coronavirus presents so many unknowns, Robins is walking the delicate line between opening for business and ensuring the best possible safety measures. He consulted the University of Miami’s Health System to minimize risk and maximize the guest experience. Along with setting a good example at his corporate office — where only half the staff has returned, while the rest continue to work from home, temperatures are taken daily, and the layout has been reconfigured for social distancing — he hopes a bit of levity and style will persuade people to follow the rules. Branded signage says “Thank You for Being a Friend, Please Practice Social Distancing” and floor-placed markers with “Please Maintain Your Distance” demonstrate what 6 feet looks like. Fifty hand-sanitizer stations were installed, rigorous disinfection occurs regularly, and a touchless, online parking system replaces valet service for the time being. Masks for All, a collaboration between model Karolina Kurkova and Ashley Liemer, the founder of Tailor House alterations shop here, created three variations of branded, custom masks for ambassadors to distribute for free from new checkpoint desks.

Though business in Miami typically dips during hurricane season, Robins is optimistic based on China’s luxury store sales since reopening and the Miami Design District’s strong growth last year, as well as in early 2020 before the pandemic hit.

“Sales grew by 40 percent in 2019, and they were robust in January and February. One brand’s store here was number-one in men’s wear and number-two in women’s in the U.S.,” he said.

Nonetheless, given the unprecedented economic upheaval, he expects some of the neighborhood’s retailers won’t make it and has worked with tenants, particularly more threatened, sole proprietors, to mitigate closures. Deferred rent, which lasts three months, can be paid over the remainder of the five- or 10-year lease agreements.

“Tenants understand that expenses don’t stop and that I can’t go into foreclosure on loans. We’re negotiating to reach a common ground, and banks have been very fair, so we’re in a good position,” said Robins.

Beyond just getting through this period, he was caught off-guard by brands’ steadfast enthusiasm in continuing with stores already in the works and in requesting space during the pandemic. Construction wasn’t halted in Miami; aside from a slight delay, buildouts for Off-White, Alexander McQueen, Stone Island and Ovation restaurant are on track to bow in July. Flagships for Chanel and Maison Margiela will follow. A handful of European and U.S. brands have started a dialogue to sign leases.

“I thought we’d be at a complete standstill, but people believe in the neighborhood,” said Robins, who’s hunkering down to see how it all pans out now that his traditional travel pattern of spending June in Europe for business and art fairs is canceled. “No one has asked me to fly to Paris yet.”

How Pierre Andurand became oil’s comeback kid

The French hedge fund manager was losing confidence and clients before a bet on an oil shock came good

Pierre Andurand was starting to doubt himself.

In January, the French hedge fund manager had hoped a bet on diesel would be another blockbuster, the kind of trade that first made his name last decade, when he quickly climbed the ranks at Goldman Sachs and then at oil trader Vitol before launching his own fund at the age of 30.

Instead, the trade went sour, capping a miserable 24 months, where Mr Andurand lost money in consecutive years. The once-$1.6bn Andurand Capital Fund was shrinking as even long-term investors grew nervous, leaving him at one of the lowest points in a 20-year career. 

“It’s so easy to lose confidence and I have lost confidence many times, to be honest,” Mr Andurand said. “I was wondering if we’d ever get the opportunity to make money again. But the key in this industry is to be resilient.” 

What followed was a remarkable bounceback. The two funds managed by Mr Andurand, with $800m divided into two pools that take on different levels of risk, have soared by 148 per cent and 68 per cent year-to-date, after he spotted early in the year that the coronavirus outbreak in China had the potential to upend oil markets.

A series of large-scale futures and options bets Mr Andurand made against the oil price in early February have landed deep in the money, cementing his reputation as a trader who performs best when markets are at their most volatile, successfully profiting from almost every large oil price swing of the last 17 years.

He predicted in February, when oil was still close to $55 a barrel, that prices would turn negative. The US crude benchmark, West Texas Intermediate, sank briefly to -$40 a barrel in April in one of the wildest days in the market’s history, as the demand-crushing pandemic left traders paying rivals to haul their barrels away. Now 43 years old, some in the industry have dubbed him the “Comeback Kid”.

“Even my team thought I was crazy when I told them oil prices could go negative,” Mr Andurand says. “But everything I had studied on this virus convinced me that the world was in trouble.”

The attributes of a hotshot trader

In his career Mr Andurand has often been portrayed as the quintessential hotshot young trader. It is not hard to see why: a former junior swimming champion, a sideline in kick-boxing promotion, a Bugati supercar, a Knightsbridge townhouse, a marriage to a Russian model and a wedding featuring a performance from Elton John.

All of it added up to an image of someone living the jock-bro dream, attracting sneering comments from those who saw him as a lucky punter who would one day get caught out. Real oil traders move cargoes of oil, the argument goes, not just paper contracts.

This flash caricature, if it ever had much truth to it, seems increasingly hard to sustain as Mr Andurand approaches middle age. Three years ago he decamped from London to Malta. He has divorced, remarried last year, and thrown himself into studying, undertaking three masters degrees, including one at Oxford university in theoretical physics.

He has always been teetotal, having grown up in an alcohol-free household raised by two civil servant parents. He still trains most days, but there is an air of vulnerability when he concedes a common foible in ageing athletes.

“I realise sometimes I need to be kind to myself,” Mr Andurand said. “But when there's too much going on for me, my weakness is I eat too much and I put on weight.”

It is not exactly the mantra of the archetypal work-hard-party-harder oil trader. His frameless glasses and thoughtful demeanour instead give the impression of an academic poker player, who will only go big on his hand once he has analysed the odds. 

“If you look at my track record, it’s a few big trades,” he said. “I’m not a hyperactive deal junkie. I can go weeks without making a trade.”

These big trades include a monster bet against jet fuel ahead of the second Gulf war, which first made his name in the tight-knit oil trading community. From 2003 he made huge returns at Vitol betting China’s rise would send oil prices soaring, at times earning multiples of what some of the trading house’s traditional dealers were making shuffling physical cargoes.

When he started his first fund, BlueGold, Mr Andurand correctly called oil’s ascent towards a record $147 a barrel in 2008, its subsequent crash in the financial crisis, and its eventual recovery into the $100 oil era. BlueGold closed after a losing year in 2011, but was still up roughly 240 per cent from inception. Many BlueGold investors stuck with him when Andurand Capital Management launched in 2013, being rewarded when he correctly called the end of $100 oil the following year. One million dollars invested in BlueGold in 2008 and carried through to the present day fund would now be worth $10m-$14m, after fees — most of that from calling a few big moves right.

“I've always been more of a big picture guy,” Mr Andurand said.

He left Vitol to become a hedge fund manager as he saw little difference between managing $2bn for someone else or $200m for his own clients.

“Maybe I’m a psychopath,” he said, laughing, “but the amount of money did not faze me, even at a young age.”

If there is a philosophy to his trading style, it is rooted in the applied mathematics he studied as an undergraduate and the probabilities embedded in the options market. He and former colleagues say the fund’s aim is to have a “large right tail”: they may lose small amounts on bets they get wrong but win big when they hit the target.

But in 2018 and 2019 the wheels started to come off. First, Mr Andurand lost 20 per cent betting on higher prices when US President Donald Trump soft-pedalled sanctions on Iran’s oil exports. In 2019, oil prices were relatively stable and the fund slipped to a small loss, followed by the wrong-way diesel bet in January.

But while Mr Andurand’s confidence wobbled, his attention was already shifting to China, where the coronavirus outbreak had brought a lockdown in Wuhan.

“Honestly, I was obsessed. I was spending 10 hours a day reading everything I could find on coronavirus, doing my own modelling and trying to forecast what governments would have to do,” he said.

“The consensus view was it was only going to be a China problem. But I was looking at it saying ‘it’s going to spread to the rest of the world, there are going to be more lockdowns. And when it does oil demand will crash.’”

The fund loaded up on put options, which rise in value as prices fall. It took short positions in both Brent and WTI crude futures too, including spread trades betting oil contracts for immediate delivery would weaken fastest.

“And then we waited,” he said.

His main office in Knightsbridge, directly opposite Harrods, was largely closed more than a month before the UK lockdown started, with Mr Andurand fearing that the brewing pandemic posed a risk to his team.

In March, as lockdowns spread across Europe and North America, oil demand started to dive. Crude went into freefall, with an ill-timed price war between Saudi Arabia and Russia exacerbating the situation. Investors asked if he should take profits.

“I had to tell them this is just the preview,” Mr Andurand said.

There were some hairy moments. The fund went ahead with its party at London’s International Petroleum Week in late February. Mr Andurand also attended a Vitol event with 200 traders earlier that month, perhaps against his better judgment.

“I thought for sure I’m going to catch it,” Mr Andurand says ruefully. “But you could see there how bullish everyone still was.”

One of his team did fall ill. Cameron Van Der Burgh, a South African Olympic swimming champion, revealed on Twitter in March that he had been flattened by the virus. 

Donald Trump also sparked a violent rebound in US crude prices in early April, after talking up a deal between Saudi Arabia and Russia to cut oil production.

“Trump has cost us a lot of money,” Mr Andurand said. But the eventual Trump-backed deal that emerged failed to end the rout.

The crash climaxed on April 20. US crude started the day near $18 a barrel, but plunged as traders realised there was little available space in the tank farms at the contract’s delivery point.

By the afternoon, prices were in single digits. In the final hour of trading, the last bulls capitulated. Prices turned negative as desperate traders were forced to pay rivals to take barrels away. Within minutes prices crashed to -$40, sowing fear throughout the oil industry.

Negative prices should have been Mr Andurand’s crowning moment. But the man who had called it two months earlier sat out the denouement. He had taken profits that day shortly before prices slipped below zero. 

“I regret it a little,” he said. “‘Damn, I’m not participating in it’ I thought as we watched it go under. But the easy money had been made already.”

It is uncomfortable to make money from a pandemic that kills hundreds of thousands of people, Mr Andurand acknowledged, even though oil traders are used to betting on wars and crises.

He has faced criticism from some within the industry for publicising his views on Twitter, but insists he has no need to “talk his book” as a trader with a longer-term view. He says his concern about the virus is very real.

“The lockdowns might be easing now, but I don’t particularly want to go out or see people,” Mr Andurand said. “We still know little of the long-term effects. The fund is not short any more, but I still get upset when I see people comparing it to the flu.” The fund opened a small long position in mid-May as oil prices recovered.

His anger towards those who tried to dismiss the danger is palpable.

“One person that we found really disgusting was Elon Musk,” says Mr Andurand, adding that he had once viewed the Tesla chief executive as “a bit of a superhero” before he downplayed the impact of the virus.

It is not quite clear what Mr Andurand does next. When he was 19, he abandoned his dream of being an Olympic swimming champion. But he had so many ideas for his future that he settled first on making money to fund what came next.

Mr Andurand says his interests today are climate change and the risk of future pandemics. He supports increasing taxes on the wealthiest to help rebuild the economy. Starting a fund that invests in renewable energy is under consideration. He is looking at algorithmic programmes to support his own oil trading in quieter markets. He is exploring backing pandemic research.

The confidence would appear to be back.

When he remarried last year, he held a large celebration in St Tropez. Asked whether Elton John was booked to perform again, he grinned.

“No, not this time. We had Gloria Gaynor instead,” he said. “She sang ‘I Will Survive’ of course. I guess we didn’t realise how apt the song would become during the pandemic.

“It’s a song about resilience,” Mr Andurand said. “I’ve always admired that.”

The average UK active fund has outperformed over the long term

No one can say Neil Woodford hasn’t touched a lot of lives. Just ask anyone who invested with him. Or his one-time protégé Mark Barnett. 

Mr Barnett spent 24 years at fund manager Invesco. He became Mr Woodford’s right-hand man, even taking over the firm’s High Income and Income funds when Mr Woodford moved on to set up his now famous wealth-destroying machine Woodford Investment Management in 2014. 

It hasn’t gone well. Money flowed out. Returns have been awful. Trustnet has Mr Barnett as the second worst performing equity income fund manager in the UK over one year and the worst over five. By mutual agreement with Invesco, Mr Barnett is now unemployed. 

This isn’t just about Mr Barnett and Mr Woodford, of course. Their portfolios appear to have been particularly awful. But their advertised focus hasn’t helped: both value investing and income investing have been terrible places to be over the past few years. 

Value stocks have outperformed growth stocks in only one year of the past 11 (this was 2016, in research by Oldfield Partners). As for income, dividends have been slashed around the world during the past few months and, according to Duncan Lamont of Schroders, history suggests they won’t be back in a hurry. 

Over the past 150 years, there have been only six dividend bear markets in the US (where dividend payments fall 20 per cent or more) but those six have dragged out unpleasantly — it has taken an average of 4.8 years for payouts to return to previous peaks. This makes sense. Once you’ve cut your dividend, why put it up again until you are sure your financials are up to it in the long term.

Still, for the purposes of the investors in any of the Woodford or Barnett funds, it doesn’t really matter whether their failures are about them or about the market. They were well-known managers. They promised outperformance. They — very publicly — didn’t deliver.

I should think it’s enough to drive the average saver directly into the arms of the passive investment industry — something that even St James’s Place, a wealth manager known for its affection for expensive active management, is beginning to do more of. You won’t get outperformance from an exchange traded fund (unless it is tracking its index badly!) But you won’t have to pay for the promise of it either. 

This is a perfectly reasonable response. I’m keen on index tracking investments — I have plenty of ETF investments of my own and I am pretty pleased with them, particularly the one tracking small gold mining company share prices. 

But I’m also still a believer in active fund management. That’s partly because once you stop to think about it you will realise that there is no such thing as fully passive investment. Someone has to choose what makes up a tracker or ETF (they never track an index exactly) and someone has to choose which ones to buy. There is no way to remove choice and hence an element of skill, from investing. 

That aside, while it is true that on average active fund managers slightly underperform the market as a whole, it isn’t true that all active managers are useless. Far from it. There are obvious outliers in the business. 

Results this week from Scottish Mortgage Investment Trust — which I hold — will have given even the most committed passive investors pause for thought, for example. Over the past 10 years, thanks to its managers’ pursuit of innovation and long-term growth, it has made an annualised total return of 16.5 per cent a year against the FTSE All World total return of 8.6 per cent. 

However, even workaday active managers tend to do rather better than you think. Simon Evan-Cook of Premier Miton Investors suggests looking at the Vanguard FTSE UK All Share tracker from its inception in December 2009 against the IA UK All Companies sector. The former has returned 77 per cent and the latter 84 per cent after fees. 

That’s not bad — and given that the All Companies calculation includes trackers, you could make active funds look even better if you took them out of the numbers too. The comparison holds good for the nasty part of this year (active has outperformed year to date). It also holds outside the UK. Research from BMO Global Asset Management last year showed the average active fund outperforming the average passive over 20 years, not just in the UK, but in Europe and Japan too. 

It isn’t true of the US, where most studies into this kind of thing are done, presumably because performance there is led by a few huge tech companies (now more than ever). There, winners take all — and the winners dominate every tracker. 

But back to the UK. The real point to bear in mind here is that the average active fund has outperformed over the long term. Your job, then, as a UK investor with the idea of beating the index a little, is to make sure that the returns on your holdings add up to at least the average of the UK active fund sector. That in turn could mean little more than avoiding holding the worst funds in it. 

How hard can that be, particularly now Mr Woodford and Mr Barnett have packed their bags? Harder in practice than in theory, of course. But there are a few key starting points. 

First, buy cheap. A fund with ongoing charges of 0.5 per cent is clearly going to find it easier to outperform after fees than one with ongoing charges of 0.9 per cent. Second, buy genuinely active. If a fund is a closet tracker (buying roughly the stocks in an index and hoping for the best) and charging active fees, it is pretty likely to be one of the ones dragging average performance numbers down. 

Look for the portfolio’s “active share” measure to be over 80 (where zero is holding exactly the same shares as an index and 100 is having none of them). Then choose five to six funds of these cheapish active ones with sensible sounding long term strategies — remembering that while paying whatever it takes to own growth stock looks like the only way to invest right now, over the longer term it is the price you pay that determines the return you make. 

Mark Barnett and Neil Woodford started out as value investors (obviously things went a little haywire at some point after that). Their time won’t come again. But value’s time might. Best diversify your fund choices to reflect that possibility.