For those interested in the up-to-date developments in our global portfolios, we wanted to share the following. As of Monday, March 30, we observed the following: COVID-19 data (daily growth rates in deaths and cases) shows clear improvement in Europe and Australia.

Note: we view deaths data as being the most accurate, with growth rates reflecting the growth rate of the true number of cases lagging 3-5 weeks. We view confirmed cases growth as being a more timely indicator, but its accuracy is ultimately a function of the extent of testing.

Context: when Korean case growth fell below 10 per cent per day on March 4 it took only one week to fall to low-single-digit percentage daily growth rates and remain there subsequently (so far).

In the days prior to March 30 (and compared to the growth rates we were observing two weeks earlier):

• Europe: death growth slowing; and cases growth slowing materially.
• Australia: cases growth slowing materially.
• US: deaths growing strongly still (not surprising given lateness of lockdowns). Cases growth has slowed somewhat, though so too has testing growth (due to limited supplies being prioritised for the caring of patients over the testing of patients), so we exhibit a reasonable dose of scepticism around how meaningful this slowdown is.
  • We also note that some US states are still not in lock-down suggesting they are many weeks/months away from getting into the position of the Europeans.
• UK: deaths growth accelerating, likely reflecting the initial lazy attitude towards containment 3-5 weeks prior (similar to the US). No material improvement in cases.

Daily growth rate in deaths due to COVID-19

Source: WHO; MGI

Source: WHO; MGI

There has been a clear improvement in the EU and Australian virus data since we cut exposure on March 16. There is an alternative history here in which these growth rates did not improve suggesting that lockdowns were not successful and more drastic and prolonged efforts would be required to contain the virus. It was this alternative history we were protecting against with our more drastic cuts to net exposures on March 16.

On this basis, we have updated our exposures to reflect these regional differences:

• US exposure: remain net zero
• UK exposure: remain net zero
• EU exposure: increase longs and trim shorts (in Montaka strategies)
• AU exposure: increase longs and trim shorts (in Montaka strategies)
• (Note: we had already adopted this approach for our Chinese exposure in February).

Resulting approximate positioning:

• Montaka: 20-25 per cent net exposure, up from zero
• MGF: 30 per cent cash weighting, down from 40 per cent

We still remain conservatively positioned. There are still possible scenarios in which lockdowns are prolonged and the economic disruption intensifies (if we see a resurgence in cases in China and Korea, for example).

The portfolio augmentations described above reflect the improvement we are seeing in the virus data and associated improvement in probabilities of a more positive possible scenario. Such a positive possible scenario looks like the following: the virus is contained over the coming weeks and months and governments find solutions for societies to return to some form of modified normality (as we are observing in China at present, and soon to be Korea). That said, it remains difficult to see life returning back to how it was pre-covid until a usable vaccine was developed (in an estimated 12 month’s time).