“Every new beginning comes from some other beginning’s end.” – Seneca
Having taken the opportunity over the summer to disconnect from social media, to clear the mind and soul, it is time to rentrée.
During the traditional annual summer vacation, I like to use the initial period of decompression to reflect on the year to date and think forward to the final quarter. This year has not really provided the time nor opportunity to take a vacation, however, I have just experienced the full force of the fourteen days quarantine in the UK.
Being a ‘numbers’ guy, the symmetry of this year – 2020 – itself intrigues me. The repeating numbers and the divisibility by ten puts my mathematical conscious at ease. So often the beginning of a new decade is a start of a new chapter. Let us not forget Y2K, ushering in the new millennium and Swine Flu being declared a pandemic in 2010.
2020 has certainly been a year we will all remember. The announcement by the WHO of the corona virus pandemic will be etched in to all our minds, as will the tragedy of the lives lost and the sacrifices of those on the front line that have fought to save those infected.
The Big Shift
The various government’s policies related to Covid-19 has brought with it a cultural shift across multiple disciplines. Working from home has been broadly adopted within those sectors that can support such a practice, principally the service sector and senior management functions. By no means a new modus operandi, it has been touted as far back as the late 1980s, but by no means accepted in the mainstream. As a firm already applying this work model for many years, it has proved advantageous in managing through these times. It is also a relief to see the benefits recognized across a broader body of peers.
Online transacting has been a major beneficiary, with Amazon announcing increased volumes of over 70% since the government lock downs were implemented. This greater dependence on web-based technology is across the entire spectrum: perishables, consumables and media. In the B2B space too we will see a shift towards online solutions, from greater adoption of the cloud services to outsourced technology applications. After five years of advocating the economic benefits of such a technological shift, Quay Partners can finally highlight that the efficiency and security benefits are equally as attractive attributes in the new marketplace.
The environmental impact is also showing to be more positive. The reduced transportation needs and less energy exerted on the powering and heating offices and homes simultaneously has provided some of the cleanest air in decades. Air travel is the largest single sector contributor to pollution has been decimated. Business, so often reliant on travel, has transitioned to teleconferencing. Not only more efficient in terms of traveling but also time spent at each meeting. This will not be the end of face-to-face meetings in the longer term, but it will reduce the overall dependency of direct communication. With this development, I anticipate an increased opportunity for international collaboration, not in the context of offshoring but in the form of borderless services.
The impact of these cultural shifts also have a darker side. We are seeing the death of the high street, an inevitable event but certainly one brought to an end more abruptly than many anticipated. Likewise, the car industry suffered, with the UK seeing a 95% decline in sales in the first half of 2020. This however may be to the benefit of the electric car producers, which will likely see an increase in sales as the demand for new cars return, in part by the need for extended commutes being replaced by WFH and increased reliance on video conferencing.
Bridging both the year to date and future is the impact on the education of our children. Between the examination debacle, especially in the UK, and lost study hours, the impact on schooling will leave a deep scar for this generation of children for years to come. Those leaving education this year and next will have the double whammy of questionable qualification and a weak employment market.
The Future’s Bright(ish)
Looking forward to the rest of this year, the new new-normal will likely stoke increased activity in the alternative fund space. Delayed projects and pending resource allocation will be motivated to move forward as the decision makers return from their summer break with the realization that the opportunity remains but their approach to concluding deals needs to be adapted to the current environment. As our business supports this shake up, we expect an improved trading environment. In order to capitalize this, we are expanding our team and increasing our market presence.
The Brexit negotiations remains the most critical factor in the UK and European business landscape in this final quarter. Unfortunately, little progress has been made in the broader deal making, that is due to be concluded by the year end. The game of chicken between the UK and EU27 will undoubtedly end in significant disruption across all sectors, but without doubt the financial sector will be vulnerable. I have written extensively on this subject over the years, specifically exploring various outcomes, and so to counter this risk, Quay Partners has established multiple solutions to ensure continuity for our business and clients.
On the global stage, we will witness the US elections in November. Likely to be the most tightly fought, and controversial, presidential race since Bush/Gore in 2000. As measures around Covid-19 restrict access, postal voting is expected to be close to 40% (double 2016). As a result, the official outcome may not even be known for weeks following election night.
Lastly, we have China continuing to pursue their aggressive border expansion, both east and west, plus the deeper investment in the ‘Belt and Road’ initiative. Earlier this year we witnessed the implementation of the new security laws in Hong Kong. This action was met with complete condemnation across the US, Europe and Asia, but had no impact on the PRC policies. We are, without doubt, entering a period of increased empirical transition from the US to China.
This year has seen the acceleration of the economy’s transitioning from the tangible marketplace towards a virtual one. As the year draws to a close this openness to change, and rapid adoption, within the workplace will result in the longer-term benefits across the broader economy, and I hope society. Much effort remains to shore up the foundations of this new era, and the understanding of future best practices, but we are heading in the right direction. To ensure you remain relevant you must innovate and adapt.
To learn how Quay Partners can guide your business to success, contact us for more information.
Quay Partners Group delivers bespoke investment management solutions to independent hedge fund managers and family offices.
Thomas Underwood, the Founder, has over 20 years experience in managing and operating hedge funds.