Exclusive: What Does the Omicron Variant Mean for Investors? Nick Moakes, CIO of Wellcome Trust, Shares His Thoughts

The health research fund successfully shielded its investments from the downturn in March 2020 by preparing for the pandemic in January. 


On Friday, the World Health Organization (WHO) dubbed coronavirus variant B.1.1.529 a “variant of concern,” sending markets swinging over the Thanksgiving weekend. The variant, better known as Omicron, was first discovered in South Africa, but has made its way into at least 15 other countries, including three cases in Canada and nine in the UK. While many countries have implemented travel bans to prevent the spread of Omicron, studies have shown that they aren’t effective at keeping viruses out in the long run. 

For investors, this news is concerning. In the short term, the stock market is seeing increased volatility. On Friday, the S&P, Dow, and the Nasdaq fell 2.3%, 2.5%, and 2.2%, respectively. The indexes seem to have partially rebounded, with the S&P climbing 1.3%, Dow climbing 0.7%, and the Nasdaq climbing 1.9% by the close of Monday, but the situation remains precarious.

In the long run, however, things seem difficult to predict for institutional investors. Nick Moakes, CIO of Wellcome Trust, a London-based charitable foundation focused on health care research, says that other than maintaining higher than usual cash balances, there’s not much else he plans on changing at the moment. It’s not that Moakes wouldn’t want to shield his investments if he knew for a fact that Omicron would cause a significant economic collapse. He already made those moves back in January 2020 when scientists first warned about COVID-19’s potential to lead to a pandemic.

The issue, according to Moakes, is that it’s still much too early to tell how severe the Omicron variant will be. There are multiple different paths it could take, ranging all the way from significantly more dangerous than the original strain of the virus to significantly less dangerous. 

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

Still, as far as shielding investments goes, Moakes said he is convinced that the virus is no longer the biggest threat. “In the portfolio, we are now much more focused on the risks from inflation and from economic policies put in place to combat lockdowns than we are on COVID itself,” he wrote via email.  

Moakes said he also believes the pandemic has left a strong legacy on market volatility. “Markets are now highly sensitive to news on the science and are arguably overreacting to the individual twists and turns,” he said. And he also thinks this oversensitivity is here to stay. “This is now endemic in society and we will have to get used to dealing with it—including places that have pursued a zero COVID strategy.”

But while we have all learned the danger of underestimating this virus over the past two years, there’s still potential, if you dare to think it, for a more optimistic outcome. South African doctor Angelique Coetzee, who was among the first to suspect the possibility of a different variant, told Reuters that her patients seemed to have “very mild” symptoms when compared with the dominant Delta variant symptoms.

Experts often caution against drawing conclusions from these early and anecdotal reports, since small sample sizes and all sorts of externalities could make these observations irrelevant. The data on Omicron is still extremely new. The variant was identified from samples taken from a laboratory from Nov. 14 to Nov. 16. Nevertheless, Coetzee’s observations should remind investors of the importance of at least accounting for the possibility that Omicron could be mild, before hedging all bets on another economic collapse.

There’s also the possibility that even if the variant is more deadly than the current iterations, vaccines will continue to remain effective, as they were with Delta. However, scientists say they likely won’t know this information for at least several weeks.

For now, Moakes expects transmission rates to go up, since this is one of the ways variants become dominant.

“We should assume it will mean vaccines are less effective in preventing transmission (as was the case for Delta),” he said. “However, there is as yet no evidence that vaccines will be less effective at preventing severe disease, hospitalization, and death, which is the most important thing.”

Related Stories:

How Allocators Can Find Good Health Care Investments After the Vaccine Rollout

Sure, Delta Cut Goldman’s GDP Forecast, but It’s Not Too Bad

Ackman: Delta Variant Won’t Stop a Roaring Economy

Tags: , , , , , , , , , , , , , ,

SEC Whistleblower Program Has Record Year in Fiscal 2021

The regulator gave $564 million to 108 tipsters, while distributing $521 million to harmed investors.


Fiscal year 2021 was a record year for US Securities and Exchange Commission (SEC) whistleblowers, as the regulator doled out $564 million to 108 tipsters, raising the total amount dispensed by the program to more than $1 billion since it began in 2010.

“This year has seen a number of critically important and first-of-their-kind enforcement actions, as well as record-breaking achievements for our whistleblower program, which we expect will lead to even more successful actions in the future,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement.

For the fiscal year that ended Sept. 30, the SEC said it obtained judgments and orders for nearly $2.4 billion in disgorgement, which was a 33% drop from last year, and more than $1.4 billion in penalties, which was a 33% increase over fiscal year 2020.

The regulator filed 697 total enforcement actions, including 434 new actions, which is up 7% from the prior year; 120 actions against issuers who were delinquent in making required filings with the SEC; and 143 “follow-on” administrative proceedings that sought to bar people based on criminal convictions, civil injunctions, or other orders. The SEC credited the whistleblower program with being critical to the record-breaking year.

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

Among the new actions, 70% involved at least one individual defendant or respondent, and the actions concerned a wide range of emerging threats, including those regarding cryptocurrencies and special purpose acquisition companies (SPACs). For example, the SEC brought an action against a SPAC, its merger target, top executives, and others for alleged misconduct in their transaction.

During the fiscal year, the SEC also handed out the highest individual awards in the whistleblower program’s history, including a $114 million award to a whistleblower whose tip helped the successful enforcement of an SEC action and related actions by another agency, and a $110 million award to another whistleblower who provided the agency with “significant independent analysis that substantially advanced both the SEC’s investigation and another agency’s related investigation.”

Additionally, the SEC distributed $521 million to harmed investors during the fiscal year, down from $602 million last year, and less than half the nearly $1.2 billion distributed in fiscal year 2019. The amount was the lowest returned to harmed investors since fiscal 2016, when the SEC distributed $140 million to victims.

Related Stories:

SEC Collects Record $4.68 Billion in Disgorgement, Penalties in Fiscal 2020

Lure of Record Whistleblower Awards Leads to Frivolous Claims

SEC Accuses Company of Withholding Investor Money to Squelch Whistleblowing

Tags: , , , , , , ,

«