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Blackstone warns coronavirus is ‘material’ risk to its funds’ performance

The global epidemic has wiped at least $1.5trn off global stock markets in the past week.

Blackstone, the world’s biggest private equity firm, has warned that coronavirus could impact the performance of its funds as the effects of the epidemic continue to disrupt the global economy.

The novel coronavirus “presents material uncertainty and risk with respect to our and our funds’ performance and financial results,” the firm noted in a regulatory filing on Friday. “The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.”

Quarantines and restrictions on travel are creating disruption in global supply chains and adversely impacting a number of industries, such as transportation, hospitality and entertainment, it noted. The rapid development and fluidity of the situation makes any prediction about the ultimate impact of the coronavirus impossible, the firm added.

The impact of the coronavirus wiped around $1.5 trillion from global equity markets last week with global markets down 10.8 percent as of Friday. Its impact has spread as far as wages and bonuses, with Singaporean state-backed investor Temasek – which has 42 percent of its portfolio in private markets – saying last week it had enforced voluntary “salary restraint measures” including a company-wide wage freeze for April. Its senior management, including managing directors, will see cuts of 5 percent to 15 percent in their annual bonuses.

On Monday, the Organisation for Economic Co-operation and Development warned that the coronavirus presented the biggest threat to the global economy since the 2008 global financial crisis, and called on governments to act immediately to limit the spread of the virus, protect people and businesses from its effects and shore up demand in the economy.

“Even in the best-case scenario of limited outbreaks in countries outside China, a sharp slowdown in world growth is expected in the first half of 2020 as supply chains and commodities are hit, tourism drops and confidence falters,” the OECD noted. It forecast that global economic growth will fall to 2.4 percent for the whole year.

Last week, Blackstone’s head of growth equity investing Jon Korngold said the firm was not dissuaded from investing in China or the Pacific Rim because of the outbreak.

“Longer term, we still remain very bullish on the region,” Korngold told Bloomberg TV.  “We’re not trying to take advantage of near-term arbitrages, we’re certainly not doing so at anyone’s expense when it comes to pandemics. This is a serious issue that affects all of us as humans.”