Giles Coghlan, chief currency analyst at HYCM, analyses the surge in gold prices and how the COVID-19 pandemic may continue to influence its fortunes.

In the future, investors and traders will regularly look to 2020 to understand just how different stocks, bonds, currencies, commodities and investment securities react in times of prolonged market volatility. What makes this year stand out from other volatile periods (the 2008 global recession immediately comes to mind) is twofold.

The first has to do with the  COVID-19 pandemic being a health crisis shrouded in uncertainty. We simply do not know when or how the virus will cease to dominate government agendas, business activities and consumer behaviours. As a result, traders and investors cannot predict with any certainty what the coming months, weeks, or even days will bring. This makes managing an investment portfolio particularly difficult, forcing investors to contend with something beyond their control.

The second has to do with the long-term implications of COVID-19 on the global economy. There are concerns that the coronavirus will trigger a reverse in globalisation; for example, new popularity for protectionist policies to safeguard the future of national industries and a contraction in global supply chains. It is too early to tell whether this is likely to be the case, but either way, we must acknowledge the enduring influence COVID-19 will have on businesses, government and investor actions for many years to come.

A critical crossroads

At the moment, we have reached what I consider to be a critical juncture. We have weathered the initial outbreak of cases, and countries are now relaxing social distancing measures as a result. In reaction to this, the financial markets have been posting positive figures. On 20 July, the Euro hit its highest level against the US dollar since March – a consequence of EU leaders negotiating a €750 billion recovery plan. In response to this plan, the Dow Jones Industrial Average rose 1.03% and the S&P 500 regained positive territory for the first time since 8 June.

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While this is welcoming news, such market movements only reveal part of a bigger story. The stock markets may be making gains, but so has the price of gold. What makes this particularly interesting is the fact that investors tend to rally to this so-called safe-haven asset in times of uncertainty. Gold prices are currently trading at over $1,800 per ounce – a major milestone that has not occurred since 2011. What’s more, the gold price has gone up by around 19% in 2020 alone, and commentators are hopeful that gold will surpass $2,000 per ounce by the end of the year – a record breaking achievement.

Such projections have left many investors scratching their heads. Have we really entered a period of market recovery or are we witnessing the calm before the storm –  a second outbreak of cases or significant economic downturn that will send shockwaves across the major indices?

The gold rush is here

Put simply, gold prices are ideally positioned to increase over the coming months. This is not due to an increase in consumer demand for the precious metal, but rather a reflection of investors using gold to hedge against market uncertainty by improving their risk-adjusted returns and also having access to a liquid asset able to hold its value in times of volatility.

It seems reasonable to assume gold will surpass its all-time high of $1,920 recorded in September 2011 in the coming months. This will be a defining movement, and could spur on the buyer demand needed to break the $2,000 per ounce barrier by the end of the year. Of course, such growth will by no means be a straight-line trajectory.

The reality is that the price of gold, like all assets, will be influenced by geopolitical events and the COVID-19 pandemic. However, signs at the moment seem to suggest that underlying market uncertainty is encouraging investors to flock to safe haven assets, with gold featuring at the top of their lists.

The reality is that the price of gold, like all assets, will be influenced by geopolitical events and the COVID-19 pandemic.

When is the right time to buy gold?

For those looking to buy gold, a useful reference tool is the Volatility Index, or VIX. By analysing future risk and investor behaviour, the VIX provides a 30-day projection of the expected volatility likely to be experienced by the major markets – a vital instrument in today’s climate.

Based on performances in the past, a drop in the VIX should be followed by a rise in gold prices. Conversely, a rise in the VIX will normally occur prior to gold prices dropping. That’s why investors looking to buy gold need to watch the performance of the VIX carefully to ensure they enter the market at the right moment.

Overall, investors should not rush to gold simply because it is rising in price. Any trade or investment decision needs to be influenced by a bigger strategy and lead to an ultimate goal. A common mistake is investors acting hastily and making rash decisions, instead of taking a step back and thinking how they can best take advantage of the market while at the same time not losing sight of their ultimate financial objectives. By understanding this simple point, investors and traders will be best positioned to make effective use of future gold price movements.

High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.

Iskander Lutsko, Chief Investment Strategist and Head of Research for ITI Capital, offers Finance Monthly his perspective on how US markets are likely to trend in the latter half of the year.

Throughout the first six months of 2020, world markets have been volatile to say the least. Global stock index values have so far been characterised by record beating losses and resurgent gains; The Dow Jones and FTSE 100, for example, dropped more than 20% in March, but have already regained much of those losses in the time since. Additionally, the Nasdaq recently hit a record high, and the S&P 500 reached a local high at the start of June below an all-time high on 19 February 2020, and a severe dip in March.

The primary reason for this market volatility is not the US and China trade-related disputes or any other geopolitical market-sensitive tensions which have become an essential part of the global volatility environment since 2018. Quite clearly, markets have been impacted most prominently by COVID-19, and none more so than in the US, which is the world’s largest economy, reserving currency account for 65% of all global transactions – and now also the epicentre of COVID-19, accounting for 26% of total recorded infections worldwide.

All eyes have been on the US in recent weeks. Controversial decisions to reopen certain aspects of society and reduce lockdown measures have seen the number of infection rates rise across the country after a slight decrease. As a result, US equity markets have mostly been driven by HF flows being reallocated into IT stocks, primarily in those that benefited from quarantine. Hence, cyclical companies are trading, on average, 30% below its pre-COVID levels, as opposed to IT companies and biotechnology companies which recorded historical highs.

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However, this is not a second wave; it is a mid-cycle of the first. As in the sea, waves are usually preceded by a trough, and we don’t expect the official trough of the first wave to arrive until at least the end of August. From there, we might expect a second wave of the pandemic to hit in November or December 2020. Of course, this is all speculation, and entirely dependent on weather, vaccinations and lockdown measures – however, as analysts, it’s our job to predict the most likely scenario based on the data that we have, analyse fluctuations and predict market movements accordingly.

Thus, we have crunched the numbers and come to the conclusion that the peak of the current market run will last two months, from the end of July until the end of September, coinciding with a hopefully declining number of cases. Before that, correction and consolidation are likely to dominate, implying that there will be high demand for gold and US corporate bonds, bolstered by a strong US dollar positioning against currencies in Europe and emerging markets.

As soon as investors gain confidence, either through success stories over vaccine trials or new evidence of the infection rate declining in the US and other countries, abundant cash and excess global liquidity from central banks should push the S&P 500 to record highs. However, for that to happen, countries will need to bring back temporary quarantine and policy measures to reduce further risks of the virus spreading.

According to our base scenario, we could see the S&P 500 heading to 3500 points by end of September, pulled by oversold companies from the production and service sectors of the U.S. economy.

As soon as investors gain confidence, either through success stories over vaccine trials or new evidence of the infection rate declining in the US and other countries, abundant cash and excess global liquidity from central banks should push the S&P 500 to record highs.

But risk will not fade away entirely - it’s worth also remembering that the US presidential election is imminent. Even in a ‘normal’ year this election would be considered unique, as former Vice President Joe Biden faces off against Donald Trump, whilst celebrities such as Kanye West have put their two pence in (and quickly withdrawn it), it’s fair to say that US politics has, and will continue to play a role in market volatility in 2020.

If Biden wins, the market will probably see strong sell-off, as his first policy actions will be aimed at restoring corporate taxes to levels seen before Trump's cuts, though it’s worth mentioning that this will be gradual, as it would be unwise to raise taxes at times when 18 million are still unemployed in the USA compared to pre-COVID numbers. Biden also plans to significantly reduce budget spending, which could top contribute to an unprecedented 20% of GDP this year, up from 4.7% in 2019.

Furthermore, if no vaccine will be in place it’s likely that the second wave of the pandemic could come in November or December, coinciding exactly with the presidential election. Hence, markets will be extremely shaky during this period, the extent of which can not be accurately predicted until it’s closer to the time, but certainly worth remembering for keen eyed investors and traders.

Therefore, for short term returns, there are good chances of buying cyclical stocks at the dip now, presenting lucrative opportunity for opportunistic investors. However, in these unprecedented times, almost anything can happen, and it is strongly advised that asset managers and traders looking to expand their portfolio seek professional advice aided by cutting edge technology to ensure that they are making the most informed decision available to them.

Asian and London trade saw a jump in the value of silver on Tuesday, with a net gain of more than 8%. Spot silver prices rose as high as $21 per ounce, closing the gap on the Gold/Silver Ratio and regaining the ground lost since February.

Traders use the Gold/Silver Ratio to measure the value of the two precious metals relative to each other, with fluctuations generally ending as one metal catches up with the other or the surging metal returns to its original value. Gold almost always leads the way, but Tuesday’s frenetic market activity showed silver drastically reducing the difference to below 90 – having peaked at 124 in March.

“It’s a typical low liquidity summer market where prices tend to be easier to push, especially when momentum has been established as per the trifecta of support,” Ole Hansen, head of commodity strategy at Saxo Bank A/S told Bloomberg.

Commodities have fared especially well in Q2 this year, as the COVID-19 crisis has brought about seismic shifts in global markets and driven investors to seek havens.

Silver often experiences explosions in value under the right conditions. These typically involve rebounding manufacturing demand and increasingly loose monetary policy, both of which increase silver’s relative attraction as a store of value.

Speaking with the Financial Times, analysts at Citi predicted that both of these factors would drive silver prices higher over the next 6-12 months, potentially hitting $25 an ounce by the middle of 2021.

Fresmillo, a Mexico-based silver producer listed in London, has seen its share price rise by nearly 70% this year, marking it as the best performer in the FTSE 100.

British pharmaceutical giant GSK will purchase a 10% stake in CureVac, a leading German biotech company working to create a vaccine against the COVID-19 virus, the two companies announced on Monday. GSK’s purchase will come to £130 million, or $163 million. An upfront payment of £04 million will be issued, followed by a one-time reimbursable payment of £26 million for manufacturing capacity reservation.

As part of the deal, both companies will collaborate on “the research, development, manufacturing and commercialisation of up to five mRNA-based vaccines and nonoclonal antibodies” to combat infectious diseases, according to the release. However, CureVac’s existing COVID-19 mRNA and rabies vaccines research programmes will not be included in its collaboration with GSK.

Earlier this month, CureVac was granted a €75 million loan by the European Investment Bank to fund the development and production of a COVID-19 vaccine, coming on top of a €300 million investment from the German government in June (taking a 23% stake in the company).

A Tübingen-based company, CureVac gained international attention in March after reports emerged that the Trump administration had issued a substantial offer of funding to the firm in return for its relocation to the US and exclusive rights to its eventual COVID-19 vaccine. CureVac denied that such a bid had been made.

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CureVac plans a stock market listing in September or October, and is likely to receive a high valuation due to its investments from GSK and others.

“We are delighted to partner with GSK,” said Dr Franz-Werner Haas, CureVac’s acting CEO. “With this collaboration, we are gaining a world-class partner whose expertise and global footprint will allow us to further develop and translate the value of our platform into potential products for the world.”

Roger Connor, President of GSK Vaccines, also commended the deal. “GSK’s self-amplifying mRNA (SAM) vaccine technology has shown us the potential of mRNA technology to advance the science of vaccine development, and CureVac’s experience complements our own expertise. Through the application of mRNA technology, including SAM, we hope to be able to develop and scale up advanced vaccines and therapies to treat and prevent infectious diseases quicker than ever before,” he said.

You can invest in the stock market directly, meaning when you decide when, how much, and in what way you invest.

For that, you need to have experience in trading on the stock market, the necessary information on market developments, a short-term and long-term strategy, the necessary accounts and trading tools, and most importantly - investment assets.

You can also invest in the stock market through investment funds, which is much more comfortable.

Investing in the Stock Market or Not

This has become a rhetorical question these days. Investing in the stock market is the best way to fertilise your capital and finally make your capital work for you. However, it’s necessary to know how to invest directly in the stock market, and to approach it extremely carefully and only after generous preparations.

If you don’t have the necessary knowledge to be able to invest in the stock market on your own, the best option available to you is through investment funds. Anyone who engages in trading on the stock market and doesn’t have the necessary knowledge is doomed to failure, and even worse - will lose all their invested money.

About 80% of trading on the stock market is done by insufficiently professional traders. That’s why there’s always a great opportunity to make money on the stock market.

Direct Investment in the Stock Market

Direct investment in the stock market means that investors independently hire brokers to whom they give instructions for buying or selling items with which they want to trade on the stock market. They are offered many opportunities: from trading the best shares in the UK, raw materials, derivatives (financial), currencies, cryptocurrencies…

In this sea of offers, investors need to decide what they want to trade with because each of these products requires a different tactic, parameters, trading rules, etc.

In addition to this, it’s necessary to decide the dynamics of trading. This refers to the dynamics with which they want to monitor changes in the stock market. From changes at the level of seconds to changes at the level of days, weeks, or months. The faster the dynamics, the greater the knowledge and self-control required.

Direct Investment Costs

Investing in the stock market isn’t cheap. In addition to the funds you’re willing to invest, it’s necessary to take into account the investment costs, which aren’t small at all. They are different in relation to the amount of planned investment, trading dynamics, conditions under which you start investing…

The most common costs to count on are the cost of opening a trading account, the cost of a broker, the cost of the stock market, the cost of buying, the cost of selling, the cost of taxes, and the cost of withdrawing funds. All of these costs can take away the profits you make through trading, and it’s extremely difficult to make a net profit.

And note: direct investment isn’t recommended for so-called “small“ investors.

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Investing in the Stock Market Through Investment Funds

Investing in the stock market through investment funds is truly the most comfortable way to invest. The investment fund, as a collective investment institution, is designed to help “small“ investors to participate in world markets under the same conditions as “large“ investors. Funds of investment fund members are collected and invested under previously agreed conditions (investment fund prospectus).

The costs are calculated as if invested by one investor and are divided among the members of the investment fund. This reduces investment costs and most of the funds are invested.

Advantages of Investing Through Investment Funds

Investing in stock markets through investment funds has many advantages over direct investing. Let’s list some of them:

• Reducing investment costs
• Provided professional investment management by portfolio managers
• Monitoring market movements by consulting firms
• The possibility of investing in several types of products
• Portfolio diversification by industries, currencies, and geographical diversification
• The ability to choose the risks you want to accept
• Constant control of your investment
• Maximum liquidity of funds
• Cost-benefit transparency

Reducing Investment Risk

The risk of investing in the stock market is always present. We can’t avoid it but we can define and diminish it.

• Defining risk means determining exactly how much risk you’re willing to accept, and therefore how much profit you expect from your investment.
• Risk reduction is achieved by diversifying investments, while the risk is higher if you’ve invested in a smaller number of products.

If you want low risk, you’ll invest in a money market fund, which invests only in bills, bonds, bank deposits, and the like. If you’re willing to accept a higher risk, you’ll look for a balanced fund, which invests part of the money in bonds and part in shares.

For investors who accept even greater risk, the chosen fund is an equity fund. For investors who want a high level of risk, the right choice are hedge funds, Forex, and cryptocurrencies.

International rolling lockdowns has left an undeniable mark on the economic future, leaving many of us uncertain and concerned about our wealth. The world is changing rapidly, and these changes influence investor preference; meaning that suitable investments in 2019 may no longer be solid sound choices. Even though predictors can sometimes be misleading, the following predicted trends are most likely to survive the impacts of the economic downturn and reward savvy-investors with high profits.

Digital Currencies

Digital currencies such as Bitcoin, Ethereum, and several others are leading the way towards an innovative future. There has never been a better time to invest in blockchain-based currencies as profit margins have not shown negative influence as a result of the Covid19 outbreak. If you are looking to invest in Bitcoin, you will be able to transact between traditional currencies and digital currencies according to your strategy, which means you can move from Bitcoin to Euro or vice versa.

The value of Bitcoin is fuelled by popularity. Because investors did not pull out at the first signs of economic uncertainty, many now consider the revolutionary digital currency a safe haven investment in line with likes of commodities such as gold.

Micro Investing

Micro investing is fast becoming a popular trend in the world of investors as the solution allows anyone to invest, even with smaller amounts. As we witness the launch of several innovative micro-investing apps and platforms, this trend serves as an opportunity for all to build an impressive portfolio regardless of existing wealth. You will be able to spread your investments over several opportunities and gradually add funds as your budget allows.

In days gone by, only those with large lump sums of money could invest in lucrative opportunities, where we are now gifted with the opportunity to invest with as little as $10. The solution also allows investors time to navigate the markets without concern of losing everything.

Invest In Real Estate

It’s not exactly news that investing in property can be exceptionally lucrative, although, most of us assume you need quite a fortune to invest in real estate and so, we shun the idea. However, for those who would like to invest in real estate without having to worry about the nagging details such as caring for properties and tending to maintenance issues, real estate investment trusts are the perfect solution.

A real estate investment trust is quite similar to mutual funds while being strictly aimed at properties. With the prices of houses continually rising, this type of investment may genuinely be the perfect solution for those who would like to profit from properties without actually having to buy them.

Tailor Your Strategy

Before you start investing, pulling out of existing investments, or diversifying your portfolio, it is crucial to crafting a tailored investment strategy. Now more than ever, it is vital to monitor your investments daily, especially if you are opting for stocks. Feeding investments should only be made on value declines to boost profits.

Leonardo Brummas Carvalho, CEO of Wealth Management at ITI Capital, explains why the social responsibility of finance is coming to the fore.

The COVID-19 crisis has not just posed a huge threat to human life on a global scale, it has caused mass devastation for thousands of businesses and all but crippled the economy. As a society, the extent of disruption caused by this pandemic has not been seen since the world was shook by war in the 1940s, and the financial impact has completely overshadowed the recession in 2008.

However, the comparisons to 2008 stop there. Over a decade ago, banks and financial services organisations were embracing high risk decisions as a matter of routine, where all the risk eventually fell in the hands of the consumers and working people, millions of whom were left unemployed and facing financial turmoil. The banks, on the other hand, walked away comparatively unharmed, having been bailed out by taxpayers.

As a result, the already questionable reputation of bankers, financial services and investment specialists plummeted further. Even today, business owners, consumers and mortgage owners do not feel that traditional financial service providers have their best interests at heart.

But, due to COVID-19, many consumers have no choice but to turn to banking services: taking out important investments to keep businesses afloat, to manage personal finances and to meet credit debt payments.

Thus, financial institutions have not just the opportunity, but the responsibility to win back the trust of the general public with deep pockets and generous investment – helping to boost the economy and support independent businesses and struggling individuals at a time when they need it most.

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Whilst it must be acknowledged that central and consumer banks in the UK have already introduced unprecedented emergency measures, such as mortgage and credit holidays, and cut interest rates on loans to 0%, they still could do more to fulfil the social responsibility they are now liable for and redeem themselves in the eyes of the public for actions in the early and mid-2000s.

Banks in general play a fundamental role in society, as they act as an intermediary in regulating credit and loans to the public – throughout history, banks have operated by awarding loans almost exclusively to large corporations and high net worth individuals who can guarantee repayment.

Today, the opposite can also be true and many institutions have the option to help communities, vulnerable individuals and propose social impact investments.

Now, in these challenging times, SMEs and workers are more vulnerable than ever, and would be deemed high-risk assets by numbers on a computer screen. Thus, bankers and financial experts must prioritise vulnerable communities, and not just look at the interests of their holders and senior managers, but also customers, employees and more broadly, the entire society.

The good news is that, over the last decade, digital platforms, fintech and cloud and software capabilities have evolved to the point where traditional financial service providers can overhaul operations, and cater to not just the high-paying clients, but to millions of consumers at the same time.

Unfortunately, many big banks are still running slow legacy IT systems, and therefore new technology and app services remain a priority for consumer banks.

Banks in general play a fundamental role in society, as they act as an intermediary in regulating credit and loans to the public.

On the other hand, fintech companies and financial start-ups have spent years dedicating themselves to transparency and high-quality services. At ITI Capital, we have identified the disparity that exists in advisory and investment services provided to high-net worth individuals, compared to the general public. Thus, we have dedicated ourselves to democratising the financial market, ensuring normal, hard-working people on all sorts of different wage brackets, are catered to with professional financial services.

This has all been facilitated by cutting edge technology such as artificial intelligence, which allows us to provide a huge amount of consumers with top-tier, fully regulated financial services which would otherwise only be reserved for high-paying clients.

If the entire financial sector had this mindset in the UK, consumers would be trusting again and businesses and individuals could be comfortable optimistic towards the near future.

So will the attitude from the major banks change from now until the end of COVID-19, whenever that may be?

Of course, government legislation and schemes have, in the short-term, enforced significant social change. The furlough scheme in the UK, for example, has provided millions of workers with financial support at a time when they would have otherwise been laid off by their employers. In the short-term we should hope that shortfalls in government schemes to combat COVID-19 are covered by the financial institutions, providing preferential interest loans to companies who can’t front the cash to pay salaries.

However, as previously mentioned, fintech start-ups and market disruptors are on the rise, and it appears as though the financial sector is naturally transitioning to processes facilitated by automation and artificial intelligence. Thus, within the next decade, we could expect to see fintechs, such as Monzo and Starling, become the new normal for consumer banking. Alternatively, we might see traditional banks embrace the new wave of technology, and self-democratise the financial sector by offering affordable and remote online services.

Regardless, if traditional banks are looking to excel in the new normal, or if fintech start-ups are looking to flourish, they should each prioritise one thing: serving vulnerable communities and society as a whole during the remainder of the COVID-19 crisis and beyond.

 Adding biotech stocks to portfolios has not been top of the list for most financial advisers over the last five years as expensive drugs were being used as political footballs and scaring away investors.

Yet, that was not always the case.

In the six years since the financial crisis of 2009 to mid-2015, the iShares Biotech ETF gained 586%, outstripping not only the S&P 500’s 215% gain but also the Technology Select Sector SPDR ETF’s (XLK) 268% rise, as well.

So, biotech stocks do have a good track record in uncertain times.

*DISCLAIMER: The content is for informational purposes only and should not be construed as financial advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Graham Norton-Standen, HIG, Finance Monthly or any third-party service provider to buy or sell any securities or other financial instruments.

For most countries and organisations, COVID-19 appears to still be a level of confusion, uncertainty and loss of direction. Yet I believe this is a fundamental shift which does follow lots of the models related to businesses in need of change and not following where the market is going. For the first time in a long time, it is now all of the world, and all governments and administrations that need to change – and it is the world, the communities and businesses focused on a continuous transitional future that are in charge, and gaining momentum in being ready for where the future appears to be going. Therefore, a lot of the tech, energy and health companies are certainly in the wrong place and the wrong time.

However, some key organisations appear to be in the right place and the right time, so let’s take a look at what those companies might look like.

Those who have that chance appear to be scrambling, but perhaps it’s not them scrambling – perhaps it’s the world around them. Biotechs are the future, and with our overall thoughts and understanding of privacy and what it really does and ‘does not mean’, this will help lead these companies to the future for us.

Privacy is a privilege which we demand all the time, and once we have it, we then give it away in order to gain some other privilege. We will see this happening more in the future as we become happy to give up ‘privilege’ and ‘privacy’ for immunity and freedom to travel.

As companies start coming up with plausible solutions related to medicines, vaccines, and control over what COVID and the future mean to us, let us start by looking at a few targets that may become the next big and future players.

To do this, here is a selection of just a few who may show themselves as the biotechs of the future, or the only stable bodies around a very uncertain world.

1. Neurocrine Biosciences

This is THE company to watch. Neurocrine Biosciences is a publicly-traded biopharmaceutical company headquartered in San Diego, California. It develops treatments for neurological and endocrine-related diseases and disorders.

With a recent press release of positive phase-2 data of Crinecerfont and an expected report soon, they also have posed positively throughout the coronavirus pandemic.  Shares recently spiked in value with the announcement of phase-2 data and investors are trending on a bullish stance.

2. Alexion Pharmaceuticals

Alexion’s mission is to serve people living with rare diseases and the company is also involved in immune system research related to autoimmune diseases. Both have been brought their mission into sharp focus during COVID-19.

Boston-based Alexion suffered a price correction during Q4 2019 mainly due to a patent battle with Amgen over the Alexion drug Soliris. The dark side of the battle led to investors taking a bearish stance and a sell-off caused a large drop in share price. However, positive news recently emerged from both camps of an agreement and this has seen a strong buy. This will certainly be a stock to keep an eye on.

3. Fortress Biotech, Inc

Fortress Biotech, which is more colloquially referred to as Fortress Bio, is a biopharmaceutical company that acquires, develops, and commercialises innovative pharmaceutical and biotechnology products. The NYC-based company reported record revenue for Q1 2020, with impressive results across their whole product range along with recently being ranked number 10 in Deloitte’s 2019 Technology Fast 500TM. This is a very good stock to add to a diversified portfolio.

4. SCYNexis

SCYNexis, which delivers innovative anti-infective therapies for difficult-to-treat and often life-threatening infections as well as treatments for several serious fungal infections is on a very strong buy currently with a number of positive reports and good financial results. With such a strong buy, it could be a little late to see a large return on the stocks, but the Jersey-based company is certainly a good performer to place into a structured portfolio.

5. Seattle Genetics

Seattle Genetics is a biotechnology company focused on developing and commercialising innovative, empowered monoclonal antibody-based therapies for the treatment of cancer. They are one of my personal wonder companies and recently announced positive results from exploratory analyses of HER2CLIMB for TUKYSATM with patients with HER2-Positive breast cancer. They are performing well and this is a great stock moving at a pace which would well be worth being a bull with.

About the author:

Graham Norton-Standen is the Chairman of HIG. He has served as Chairman, CEO, board member, senior adviser and in other senior capacities for a number of the world’s top companies and fund managers and has influenced and accelerated many start-ups.

He has led or participated as a senior adviser in closing mergers, financing and other complex transactions with an aggregate value exceeding $10 billion, including acquisitions of businesses, hotels, etc., and the privatisation of public utilities.

While businesses are now considering – and potentially implementing – their “exit strategy” in a post-lockdown, post-furlough world, it’s important to note that positive prospects are arising from the current crisis that has had an impact on people and businesses around the globe. Businesses across every industry have had to adapt significantly and – whilst difficult decisions are likely to be taken in the near future – there are also many lessons to be learned and a chance for companies to gain competitive advantage.

During the last major economic crisis, the 2008 financial crash, many firms and their investors remained on the sidelines for too long, meaning chances were missed when all seemed bleak[i]. While, like the recession that followed the crash 12 years ago, COVID-19 has presented unparalleled challenges for most businesses, it has also presented good prospects for securing investment through M&A activity, particularly for the sectors that have seen a surge in use throughout the pandemic like technology and FMCG. This time around, the challenges faced during the crisis must be viewed as hurdles to jump, rather than walls preventing businesses from capitalising on opportunities.

One thing we have seen that has emerged in most of the competitive M&A deals in the last two to three years is that they have been backed by warranty and indemnity insurance. Generally, warranty and indemnity insurance has been for sound businesses, whereas now there is a move towards products that will back distressed businesses – and even insolvent businesses – whereby the insurer will directly give the warranty cover. This is a development which will really help to push a lot of the deals through in the current climate because no business is going to want to put their cash on the line and stand behind warranties when, actually, they’re selling for a lower value or bound to sell in the near future.

COVID-19 and M&A

When we first went into lockdown M&A activity stalled; however, rather than stopping altogether, deals were simply postponed. We are now seeing much more optimism and an appetite to get the economy moving again. Although many struggling businesses have taken advantage of loans and the furlough scheme to streamline costs and continue operations, the real task for businesses – especially those considering M&A – is working capital management. Capital management will help companies get into a position to move forward and survive once things start to return to ‘normal’ and they start repaying the debts they have accrued.

Although M&A activity is down more than 33%[i] this year, to the lowest level since 2014, private equity firms are focusing on the strongest sectors to invest in on the other side of the pandemic.

Why there’s an opportunity

Although M&A activity is down more than 33%[ii] this year, to the lowest level since 2014, private equity firms are focusing on the strongest sectors to invest in on the other side of the pandemic. COVID-19 has presented investment opportunities for many businesses, particularly in the food and tech sectors, and for some businesses, now is the perfect time to accelerate the M&A conversation.

Whilst a lot of active deals were postponed during lockdown, we have also seen several deals secured – and even exchanged and completed – within the food, technology and manufacturing sectors, as the FMCG industry faced unprecedented demand (namely supermarkets and online retailers) and was forced to adapt and streamline its operations. Research carried out by accounting firm PwC recently highlighted the chance for “attractively priced M&A opportunities”[iii] to arise in the food and retail sectors in the next 12 to 18 months, as many challenger brands will simply not be able to continue trading without investment.

The pandemic has also resulted in a change in attitude for many business owners and entrepreneurs as they consider what the ‘new normal’ looks like for them. Having experienced real downtime with their families during the lockdown period, their priorities may have shifted and they may be willing to accept a slightly lower value in order to be able to exit their business earlier and continue to enjoy the other things they have since come to value more. M&A and private equity are both commercially savvy ways for businesses to secure investment in the wake of COVID-19 and those willing to accept a lower offer have high chances of investment from buyers looking to bag a bargain as the crisis abates.

The greatest challenge will undoubtedly be uncertainty over future business performance in light of COVID-19. With valuations becoming more challenging and subjective than ever we may well see a resurgence of deals being structured to bridge valuation expectations, with greater focus on deferring returns through earn-outs, vendor loans notes and equity rollovers by sellers.

How businesses can secure investment in the wake of COVID-19

During the current climate, private equity firms have been seeking out opportunities to invest in businesses when so many others have had their apprehensions. With the ability to take positions in struggling companies – guide portfolio company management and help steadily grow businesses over many years[iv] – private equity firms can add real value, particularly in challenging economic times.

In terms of future investment in business, this is likely to be technology-led to streamline portfolio companies either to a) reduce headcount through automation or b) to get teams and individuals to work smarter. A lot of private equity firms have put their fundraising on hold however, many of them still have money to spend so their focus will be picking the right businesses and the best way to streamline them, presenting a great opportunity for struggling businesses who have already put cost-cutting measures in place.

Having been forced to adapt and streamline their business functions as a result of the COVID-19 crisis, businesses will now have an acute understanding of how they can run most efficiently and cost-effectively. This means that these businesses are in a good position to secure investment from a private equity firm if they can demonstrate their business has scope for commercial growth under a streamlined business model.

Businesses looking to sell to a private equity house as a form of investment – having managed to streamline their business and still deliver on their commercial bottom line whilst demonstrating potential for growth – can benefit from additional support from private equity houses that they may not have had before, for instance; how to implement technology that enables the business to run more efficiently and with fewer overheads. The businesses in this position will not only benefit from all of the expertise of a private equity house when it comes to streamlining the business even further, but the private equity house will have knowledge of how to grow in a financially unstable climate and understand what their commercial targets should be.

Whilst there will undoubtedly be some businesses that create M&A activity because they just can’t survive post-pandemic, further down the line, businesses should have a better idea of what’s required to deliver their core business; what can be removed to save costs, and where technology can streamline their approach. On this basis we can expect positive activity from private equity houses and M&A – firms are currently waiting to see how the current situation unfolds and what businesses will look like once restrictions are properly lifted.

[i] https://www2.deloitte.com/us/en/insights/economy/covid-19/private-equity-m-and-a-deal-activity-post-covid-tax-implications.html

[ii] https://www.lexology.com/library/detail.aspx?g=c3a8a59f-dbf3-4476-8476-7c52e011b356

[iii] https://www.thegrocer.co.uk/mergers-and-acquisitions/coronavirus-will-lead-to-increase-in-opportunistic-manda-predicts-pwc-report/604711.article

[iv] https://www2.deloitte.com/us/en/insights/economy/covid-19/private-equity-m-and-a-deal-activity-post-covid-tax-implications.html87

This AI ‘arms race’ is being driven by two tech superpowers: the United States and China. The US is barrelling ahead, with Washington recently signalling its intentions to promote AI as a national priority. Last year, President Donald Trump launched a national AI strategy – the American AI Initiative – which orders funds, programmes and data to be directed towards the research and commercialisation of the technology. 

Government involvement and long-term investment in AI has paid off: US companies have raised more than half (56%) of global AI investment since 2015. China, meanwhile, is catching up quickly and is now vying with the US to become the dominant force in the area. In 2017, it laid out a roadmap to become the world leader in AI by the end of the decade – and create an industry worth 1 trillion yuan (or the equivalent of $147.7 billion). As part of the three-step strategy, China has announced billions in funding for innovative startups and has launched programmes to entice researchers.

Achieving economic and political prowess is the ultimate goal. Indeed, AI is a vast toolbox of capabilities which will give nations a competitive edge in almost every field. However, the question beckons: where does Europe stand in this race, and what is at stake? Nikolas Kairinos, founder and CEO of Soffos, offers his analysis to Finance Monthly.

Europe is falling behind  

Thanks to great access to home-grown talent and an inspiring entrepreneurial spirit, Europe is still a strong contender in this race. According to McKinsey, Europe is home to approximately 25% of the world’s AI startups, largely in line with its size in the world economy. However, its early-stage investment in the technology is well behind that of its competitors, and over-regulation risks stifling further progress.

Thanks to great access to home-grown talent and an inspiring entrepreneurial spirit, Europe is still a strong contender in this race.

Early last year, for instance, the European Commission announced a pilot of ethical AI guidelines which offer a loose framework for the development and use of AI. The guidelines list seven key requirements that AI systems must meet in order to be trustworthy; amongst the chief considerations are transparency and accountability.

The intentions behind such proposals are pure, albeit counter-productive. Proposing a new set of standards to be followed risks burdening researchers with excessive red tape. After all, AI remains a vast ocean of uncharted waters, and introducing ever-changing hurdles will only impede progress in R&D. Innovative new solutions that have the capacity to change society for the better might never come to light if developers do not have the freedom to explore new technologies.

Meanwhile, a European Commission white paper recommends a risk-based approach to ensure regulatory intervention is proportionate. However, this would only serve to deter or delay investment if AI products and services fall under the loose definition of being too ‘high-risk’.

Upholding human rights through proper regulation is of paramount importance. However, Europe must be careful to find the right balance between protecting the rights of its citizens and the needs of technologists working to advance the field of AI.

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The risk of ignoring AI solutions  

What is at stake if AI development falls behind? The risk of ignoring AI solutions is immense, particularly for sectors like the financial services industry which must keep pace with evolving consumer habits.

AI has given the world of banking and finance a brand new way of meeting the demands of customers who want better, safer, and more convenient ways to manage their money. And with populations confined to their homes for long periods of time in the face of the coronavirus pandemic, the demand for smart digital solutions that allow people to access, spend, save and invest their money has peaked.

Those who fail to adapt by leveraging AI are at risk of losing their competitive advantage. The real value of AI is its automation potential; AI solutions can power more efficient and informed decision-making, taking on the data processing responsibilities that would normally be left to humans. If used wisely, smarter underwriting decisions can be made by delegating the task of assessing loan and credit applications to AI. Not only is this markedly faster than performing manual checks, but the chances of making risky decisions will also be reduced: AI software can be used to build accurate predictive models to forecast which customers have a higher likelihood of default.

Accurate forecasting is needed to ensure the continuity and success of a business. Again, those businesses that utilise the AI toolsets at their disposal stand to benefit from advanced analytics. Machine learning – a subset of AI – is adept at gathering valuable data, determining trends, anticipating changing customer needs and identifying future risks. Those who turn their back on AI risk losing out on sound risk management, leaving their profits and reputation vulnerable.

Accurate forecasting is needed to ensure the continuity and success of a business.

At the heart of any bank or financial firm, however, lies the customer. Traditional bricks and mortar banking is no longer the favoured option when money can instead be managed online. Yet, while online banking is by no means a new phenomenon, AI offers the hyper-personalised services that customers seek. Indeed, a global study conducted by Accenture recently found that customers today “expect their data to be leveraged into personalised advice and benefits, and tailored to their life stage, financial goals and personal needs.” Meanwhile, 41% of people said they are very willing to use entirely computer-generated advice for banking.

There is clearly an appetite for innovation from the consumer side, and financial institutions must step up to enhance their offering. Enhanced, real-time customer insights generated by AI will optimise recommendations and tailor services to each individual. AI-powered virtual assistants that offer personalised advice and tools which can analyse customers’ spending to help them meet their financial goals are just some of the ways that financial institutions can create a better customer experience.

These are just a few of the many incredible applications of AI within the financial services sector. Not only can it enhance a business’ core proposition, but the cost-saving potential and operational efficiency is becoming difficult to ignore.

AI technologies are transformative, and those who fail to invest in new solutions risk losing out on the multitude of benefits on offer. I encourage business leaders to think carefully about the about the outcomes that they want to drive for their institution, and how AI can help them achieve their goals. I hold out hope that Europe as a whole will ramp up AI development in the coming years, and I hope to see governments, businesses and organisations working together to continue to push forward the AI frontier and pursue innovative applications of this technology.

Nikolas Kairinos is the chief executive officer and founder of Soffos, the world’s first AI-powered KnowledgeBot. He also founded Fountech.ai, a company which is driving innovation in the AI sector and helping consumers, businesses and governments understand how this technology is making the world a better place.

UK banking start-up Monzo (formerly Mondo) has closed a funding round of £60 million with a valuation of £1.25 billion.

As of its last valuation in June 2019, Monzo was ranked as the UK’s second most valuable start-up at £2 billion, 40% up from its current status. This latest valuation brings the firm closer to levels seen in 2018.

Most investors who participated in the funding round, including Y Combinator, Accel, Goodwater Capital, General Catalyst, Thrive Capital, Orange Ventures and Passion Capital, were existing investors in Monzo. However, the round also drew funds from at least two new investors: Swiss fund Reference Capital and Vanderbilt University.

A second, smaller part of the funding round, which could see an additional £40 million invested in the business, is set to close in the coming months.

Earlier this month, Monzo told employees that it would cut up to 120 jobs, or 8% of its workforce, owing to the impact of the COVID-19 crisis. The company has also shut its Las Vegas office and furloughed 300 UK employees.

Even before the pandemic swept Europe and the Americas, however, Monzo was losing money. During the twelve months ending in February 2020, the company lost $57.3 million in a push to grow its number of account holders.

Investment trusts date back to the 19th century, when the F&C Investment Trust was launched in 1868. There are 23 investment trusts that have been around for over a hundred years, surviving both world wars, the Spanish flu pandemic and many market crashes. Michael Born, Senior Investment Analyst at EQ Investors, offers Finance Monthly an in-depth look at what these investment trusts have to offer.

What are investment trusts?

Unlike open-ended funds, investment trusts are listed companies, and are traded on stock exchanges like the London Stock Exchange (LSE). ‘Closed-ended’ structures are so-called as the number of outstanding shares is fixed, unlike in an open-ended product which requires that investors can tender (redeem) their shares to the manager in order to get their cash back on a daily basis, so the number of shares changes from day-to-day.

Instead of trading with the fund manager, investors in investment trusts will trade with each other throughout the day. This means that the “price” of an investment trust can float independently of its net asset value (“NAV”) the fair valuation of the shares underlying value.

Buying portfolios at a discount

When investment trust prices move above the NAV (as investors clamour for shares, and demand outweighs supply) the trust is said to be on a “premium”, and when the price is below the NAV, a discount.

One of the key advantages for investment trust investors here is the potential to buy a portfolio at a discount, and then sell at a premium, which adds to investors’ returns. However, a negative swing in sentiment can exaggerate losses through down markets and if we are in an environment where most investment trusts are on a premium, this means that investors will have to pay over the odds for popular strategies.

As with most types of investing, it pays to be patient and wait for opportunities.

One of the key advantages for investment trust investors here is the potential to buy a portfolio at a discount, and then sell at a premium, which adds to investors’ returns.

Intraday trading

Whilst open-ended funds offer investors liquidity on a daily basis, as investment trusts are listed companies, investors can trade in and out at any point when the LSE is open. This allows investors to reposition their portfolios in response to real time newsflow, whilst open-ended investors have to wait for their books to clear.

Not constrained by liquidity

As the managers of an investment trust are not bound to offer investors daily liquidity, they can invest in assets which are not manageable in an open-ended strategy, like assets which are not publicly traded such as property, infrastructure and private equity. These investments, which do not have “mark-to-market” risk (when values are determined by supply and demand on the open market) add considerable diversification benefit as they will not necessarily fall on bad news.

In addition to being able to invest in less liquid assets, managers of investment trusts do not have to hold a cash buffer to manage liquidity, which is essential if you have flows in and out of the product on a daily basis, so the cash “drag” resulting from the portfolio not being fully invested is minimised. Similarly, there is no obligation for managers to sell assets at unfavourable prices to provide daily liquidity.

Gearing

One of the unique features of investment trusts is the ability to gear the shares, where trusts borrow debt and then leverage their returns. Although this certainly increases the potential for upside, losses can also be magnified by gearing, and one of the attributes of a manager is their ability to know when to deploy debt.

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Corporate governance

Legally, investment trusts are required to have a board who oversee the investment manager as well as interacting with shareholders via the annual general meeting (AGM). The board has the ability to fire and replace the manager if they determine the company is not being run in the interests of shareholders (e.g. for poor performance) in addition to making key decisions on strategic areas like share buybacks (to tighten the discount) and dividend policy. As a listed company, there is a higher burden of disclosure required for investment trusts as compared to their open-ended cousins.

A constrained universe

Like stocks, investment trusts must go through an IPO process, so the costs of bringing a product to market are considerably higher than for the open-ended space, which results in a much smaller universe. Many sectors only offer 4-5 choices with regard to strategy or manager and there are strategies which are not covered at all by the investment trust market. This also means that it is not possible to deploy large amounts of money in the investment trust space, as the premium would be driven up significantly. This is one of the main reasons that the investment trust market remains niche and is often overlooked by institutions.

Relative value opportunities

There are several managers who run both investment trust and open-ended versions of their products, which provides investors with the opportunity to choose between the two, as well as trade them if valuation opportunities open-up. However, investors should also be aware of the differences between “versions”.

Although strategies may be run pari-passu (side-by-side), the freedom of the manager from liquidity constraints can often result in the investment trusts running a longer tail and being closer to the manager’s “ideal” portfolio.