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Covid-19 Diligence Briefing

Our briefing for Friday April 3, 2020:

  • As worldwide cases of the coronavirus have now climbed over the 1 million mark, the United States have close to 250,000 cases and more than 6,000 deaths. New York state continues to be the hardest hit in the country with their death toll closing in on 3,000. The state had 562 deaths due to the virus on Thursday, their deadliest day yet.

  • In Canada, Prime Minister Justin Trudeau had to make a plea to the United States government to reconsider their stance via the Defense Production Act in his Friday media briefing. The US government is putting pressure on medical device maker 3M to create N95 masks for American purposes only, cutting out Canada and other Latin American countries. Trudeau noted, “There is so much trade that goes back and forth in essential services, and it could end up hurting Americans as much as it hurts anybody else. That is the point that we're making very directly and have been making for many days now to various levels of the American administration — and that message is getting through." Elsewhere in Canada, Ontario Premier Doug Ford had his province’s health experts lay out the worst-case scenario projections on Friday. Canada’s largest province could experience 3,000 to 15,000 deaths due to the coronavirus, with ramifications lasting from 18 months to two years.

  • Germany also found itself involved in the 3M/United States situation. Media reports from Germany noted 200,000 masks made by 3M and intended for Berlin police were diverted to the United States as they were being transferred between planes in Thailand.

  • In the United Kingdom, Matt Hancock, the country’s health secretary indicated he believes the daily death rate could peak on April 12th and Prime Minister Boris Johnson has urged citizens to stay indoors as they expect a warm spring weekend ahead. The country saw its death toll from the virus increase by 684 in one day and now sits at 3,600 + overall. The country’s first pop-up hospital and world’s largest critical care unit is now up and running. The NHS Nightingale has 500 beds but can increase its capacity to between 4,000-5,000. Even more impressive the facility was put together in just nine days.

  • Several states in Australia are placing checkpoints at their borders to prevent all but essential travel from neighbouring territories. Country officials are urging people to stay home over the upcoming Easter holiday as their daily increase in infections have fallen to 5% a day, compared to 25% and 30% just two weeks ago.

Covid-19 – Due Diligence And Asset Management

Money Managers Attempt to Calm Layoff Fears Amid Downturn

Brief: As firms brace for the financial impact of COVID-19, money managers and large banks with investment management staff, like Morgan Stanley, Goldman Sachs and T. Rowe Price Group, say they have no immediate plans to turn to layoffs amid the pandemic. For most firms it remains unclear how long this will be the case, however, as the coronavirus continues to wreak havoc on the economy and businesses, pushing U.S. unemployment claims to new highs. On March 26, Morgan Stanley CEO James Gorman told employees that there will not be a reduction in the workforce in 2020, according to an internal memo obtained by Pensions & Investments.

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Bridgewater’s Main Hedge Fund Loses About 20% in First Quarter

Brief: Ray Dalio’s flagship hedge fund at Bridgewater Associates ended the first quarter down about 20%, according to people with knowledge of the matter. Bridgewater extended this year’s decline after getting caught on the wrong side of the market sell-off that began in late February as a result of the rapidly spreading coronavirus. The firm’s Pure Alpha II strategy fell about 16% in March after posting smaller losses in the first two months of the year, said the people, who asked not to be identified because the information isn’t public. Dalio, who earlier this year urged investors not to miss out on an opportunity to benefit from strong markets, wrote in mid-March that the pandemic hit the firm at the “worst possible moment” because Bridgewater’s portfolios were tilted to benefit from a rise in the market.

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Billionaire Hohn’s Hedge Fund Suffers Record Monthly Loss of 19%

Brief: Billionaire activist investor Christopher Hohn’s hedge fund suffered its steepest ever monthly decline in March as the global market turmoil hit his stock bets. The Children’s Investment Fund lost about 19% during the month, the worst since it started in 2004, according to people with knowledge of the matter. The decline pushed the fund’s first-quarter loss to about 23%, the people said, asking not to be identified because the information is private. A spokesman for the London-based investment firm, which managed about $30 billion before March losses, declined to comment.

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Bank of America CEO Says Half a Million Customers Have Deferred Payments

Brief: Half a million of Bank of America Corp.’s 66 million customers have deferred loan payments because of financial fallout from the coronavirus. “The idea is to defer the payment, defer the impact,” Chief Executive Officer Brian Moynihan said in an interview Friday on CNBC. “We’re working with our customers who need help, who are losing their jobs. We have to preserve their ability to have cash flow.” The bank’s portal for small-business relief loans went live Friday morning and had 40,000 applications by the afternoon, according to a person familiar with the situation.

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Russian Fund Calls for Joint Efforts in U.S. in Tackling Coronavirus

Brief: A Russian state fund called on Thursday for promoting dialog between Moscow and Washington, which is crucial in tackling the global spread of coronavirus, as Moscow stepped up diplomatic efforts on the global stage in fighting the infection… The Russian Direct Investment Fund (RDIF) said it was the fund that took up half the cost. The fund said it has been consistently calling for dialog between Russia and the United States. Relations between the two countries have been strained in recent years by matters ranging from Syria to Ukraine to U.S. election interference, which has been denied by Russia.

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Ken Griffin’s Virus Plan Now Includes Emergency Trading Site in Florida

Brief: Citadel Securities this week opened an office in Florida to help ensure billionaire Ken Griffin’s giant trading firm can continue at full capacity during the coronavirus pandemic -- and cope with the explosion in volume the illness has spurred. The firm opened a new, temporary trading floor in Palm Beach on Monday with 24 people, according to a memo from the firm to employees seen by Bloomberg. The market maker debuted the facility two days before Florida’s governor announced astay-at-home orderfor the state of 21.5 million.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Thursday April 2, 2020:

  • In the United States, a new record of 6.6 million Americans have filed for unemployment benefits in the last week. This shattered the record that was set only a week prior of 3.28 million. According to NBC News, the 6.6 million is actually a low number and could be much higher due to many applicants being unable to file a claim as state labour departments are overwhelmed.

  • As Canada has eclipsed more than 10,000 cases of COVID-19, Prime Minister Justin Trudeau again pleaded with Canadians to stay home. Multiple media reports have noted some citizens removing barriers of banned parks, sporting areas and continue to ignore social distancing measures outside, and in other public places, such as grocery stores.

  • The United Kingdom’s health secretary has committed to a new target of 100,000 tests a day by the end of this month for either current infection, or for the antibodies which show immunity. The country currently only tests 10,000 people per day while Germany has been testing about 500,000 per week.

  • Elsewhere in Europe, the number of deaths continue to rise. Spain has set another record for their most deaths in a 24-hour time span with 950 succumbing to the virus. Their total death toll is now over 10,000.

  • In France, the country now joins Italy, Spain and the United States as the fourth country to have at least 4,000 deaths due to the coronavirus and a fifth of all private sector employees are now seeking temporary unemployment benefits.

  • China responded to a Bloomberg article stating the country was concealing their true coronavirus numbers as a “despicable attempt to put political interests above human life.”

  • During a television address on Wednesday, Philippine President Rodrigo Duterte warned its citizens not to cause any trouble during their lockdown and said anyone abusing medical workers could face the following: "My orders to the police and military ... if there is trouble and there's an occasion that they fight back and your lives are in danger, shoot them dead. Is that understood? Dead. Instead of causing trouble, I will bury you." Duterte’s chilling comments came after media reports of disturbances and several arrests in the poorer areas of Manila as people protested about insufficient government food aid.

Covid-19 – Due Diligence And Asset Management

JPMorgan CEO Jamie Dimon Back at Work After Heart Surgery

Brief: JPMorgan Chase & Co (JPM.N) Chief Executive Officer Jamie Dimon has returned to lead the largest U.S bank, after recovering from recent heart surgery, according to an internal memo to employees seen by Reuters. Dimon, who is working remotely due to the widespread lockdown caused by the coronavirus outbreak, had an emergency heart surgery on March 5 to repair a tear to his aorta. In an email to employees on Thursday, Dimon said he was “happy to be back to work this week”. “I have been recuperating well and getting stronger every day,” said Dimon, who is widely seen as the face of the U.S. banking industry.

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Starboard Moves Ahead with GCP Proxy Fight Despite Outbreak

Brief: Starboard Value is pushing ahead with its second proxy fight since the outbreak of the coronavirus, arguing its board nominees for GCP Applied Technologies Inc. would be better able to navigate the company through the crisis. The New York-based hedge fund run by Jeff Smith, which owns 9% of GCP, has nominated eight directors to take control of the chemical maker’s board. It plans to push ahead with the fight because it believes its slate of directors have the right skills to turn around the company, according to a regulatory filing Thursday. “We recognize the Covid-19 crisis has created a difficult environment for many companies,” Starboard Managing Member Peter Feld said in a letter to shareholders. “GCP is no different and needs strong leadership and oversight during these challenging times. We believe the nominees we have put forth are uniquely capable to help govern the company through and after this crisis.”

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One Hedge Fund has Surged 36% This Year by Betting Against Cruise Lines and Airlines Depleted by Coronavirus

Brief: Amid a major market rout spurred by the coronavirus pandemic, one hedge fund has had outsized returns betting against companies hit hardest. Valiant Capital Management led by Chris Hansen has gained 36% year-to-date through the end of March, before fees, The Wall Street Journal's Juliet Chung reported Thursday, citing people familiar with the firm. In the same timeframe, US stocks have tanked — the Dow Jones Industrial Average lost 23%, its worst first quarter ever. The S&P 500 lost about 20%.  The $1.4 billion fund was able to profit in the wreckage by placing strategic bets against leveraged companies that it saw being hit the hardest by the coronavirus outbreak. The hedge fund shorted stocks of cruise lines, international airlines, and travel companies, according to the report.

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Global Economic Recovery Possible “Within Six Months”

Brief: It could take up to six months for the global economy to recover from the downturn caused by the coronavirus, a leading market commentator has warned. But a recovery would only take place on two conditions: if mass testing of the virus is introduced, and governments guarantee to support demand, according to Nigel Green, chief executive of financial advisory firm deVere Group. His prediction comes the day after the United Nations released its latest trade report, according to which the world economy will go into recession this year with a predicted loss of global income of trillions of dollars.

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The Asset Managers Most at Risk of Hemorrhaging Assets

Brief: Traditional asset management firms are expected to lose around a third of their assets under management as a result of the coronavirus pandemic, according to Fitch Ratings. The ratings agency projected an average decline in assets of between 29.9 percent and 36.9 percent for large, publicly traded U.S. firms, due to a combination of declining asset prices, fee pressures, and outflows. AllianceBernstein was projected to be the worst hit of the peer group analyzed by Fitch, with an expected AUM decline of 33.8 percent in the ratings agency’s best-case scenario.

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Howard Marks Warns Economy Could Contract at Record Rate

Brief: Oaktree Capital founder Howard Marks believes the coronavirus pandemic could have a “much wider” range of negative outcomes than the 2008 financial crisis.In a newmemooutlining the potential economic repercussions associated with the virus, Marks sought to determine whether asset prices had fallen “appropriately, too much or too little” over the last few weeks. “In the last six weeks the markets have seen the best of times and the worst of times,” the Oaktree co-chairman wrote in the memo, released Tuesday evening.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Wednesday April 1, 2020:

  • United States President Donald Trump’s dire warning during a media briefing seemed to be in lockstep with his health officials stating the next 14 days are going to be tough on America as they expect their numbers to skyrocket with coronavirus cases and deaths. The warning now has estimates of the coronavirus killing between 100,000-240,000 Americans even if people continue to practice social distancing. Multiple media reports are also stating American health care workers are told not to speak to the media without authorization, or risk being fired as they deal with the deteriorating conditions in many health care facilities.

  • In Canada, the two largest provinces are trying to enhance efforts to stop the spread of the coronavirus. In the country’s largest city, Toronto Mayor John Tory issued a 12-week plan that is “locking down the city as much as any municipal government could”, including asking people to shop for groceries once a week, and for anyone older than 70 to stay home as much as possible. Meanwhile, Quebec is banning non-essential travel into the western part of the province as of noon on Wednesday, including visitors from neighbouring Ontario. The usual exceptions of health-care workers, humanitarian support and supply chain workers will continue to be enforced.

  • The United Kingdom has seen 20,000 more cases of the coronavirus in just the last week. The Evening Standard reports there are at least 29,474 cases confirmed, compared to 9,529 at the same time one week ago. The Wimbledon Tennis Championships in England, seen as the crown jewel of professional tennis’ four major championships, has been canceled for the first time since the World War II era due to the coronavirus outbreak.

  • German Chancellor Angela Merkel announced restrictions on social contact will be extended until April 19th. The measures, which were first introduced on March 23rd included a ban on gatherings of more than two people.

  • Israel had to send in police to the Arab and ultra-orthodox suburbs of Tel-Aviv as riots broke out between the two religious minorities. The media reports note the ultra-orthodox Jewish population has refused to stop weddings, funerals and public prayers.

  • As the United States have announced double the cases of coronavirus as compared to China, a Bloomberg article is citing a U.S. Intelligence classified report that China has intentionally reported inaccurate stats on cases and deaths of coronavirus in the country.

  • In Brazil, President Jair Bolsonaro continues to be one of the world leaders on an island of his own when it comes to coronavirus. Over the weekend, Bolsonaro visited a market area just outside the Brazilian capital, and in a television interview questioning coronavirus related deaths stated, “I’m sorry, some people will die, they will die, that’s life.” State governors who are responsible for more than 200 of the 210 million Brazilians continue to ignore their President refusing to follow his demands of allowing people back to work, and a federal judge has banned Bolsonaro’s social media campaign of “Brazil can’t stop.”

Covid-19 – Due Diligence And Asset Management

Loeb’s Third Point Drops 11%: Hedge Fund Update

Brief: The $3 trillion hedge fund industry is under pressure amid market turmoil prompted by the spread of the coronavirus. A wide dispersion of gains and losses is expected to emerge as firms disclose their returns for March. Below are some of the winners and losers. Dan Loeb’s Third Point posted losses in its flagship hedge fund last month, according to people with knowledge of the matter. The Third Point Offshore Fund dropped 11%, bringing its loss this year to 16% percent, said the people, who asked not to be identified because the matter is private.

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Standard Chartered Commits $1bn to Covid-19 Fight

Brief: Standard Chartered has made $1 billion (€0.9 billion) of finance available for companies able to provide ventilators, face masks and other goods and services to help fight the Covid-19 pandemic. Companies in scope include healthcare providers, along with manufacturers and distributors in the pharmaceutical industry. Companies in non-related sectors that can switch their production to support the fight against the virus and Standard Chartered said it is also trying to identify companies who are considering changing to, or adding anti-virus products to their production line, but have not yet said they will.

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U.K. Property Fund Freeze Hits $25 Billion as Virus Rocks Values

Brief: The lockdown of U.K. property funds has now put about 20 billion pounds ($25 billion) out of investors’ reach as the coronavirus pandemic batters the economy and makes valuation of assets nearly impossible. BlackRock Inc., Schroders Plc and Legal & General Group Plc are among the latest firms to freeze some funds, telling their institutional clients that withdrawals are halted indefinitely because of the outbreak, according to company statements. The suspensions of these funds for professional investors, which have about 9 billion pounds of assets under management, follow previous decisions by a range of firms to lock up about 11 billions pounds of mom-and-pop clients’ cash.

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Private Equity Lobbyists were Involved in the Push for $500 Billion Coronavirus Bailout Fund

Brief: Lobbyists representing the private equity industry pushed the Trump administration and members of Congress to provide hundreds of billions of dollars in relief for businesses hammered by the spread of coronavirus. The American Investment Council, which lobbies on behalf of the private equity industry, spoke to congressional leaders from both sides of the aisle and Treasury Department officials, according to people with direct knowledge of the matter. These people declined to be named because the conversations were deemed private.

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CFTC Provides Further Relief to Market Participants in Response to COVID-19

Brief: The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) today announced that it has issued additional targeted, temporary no-action relief to foreign affiliates of certain futures commission merchants (FCMs) in response to the COVID-19 (coronavirus) pandemic. The relief expires on September 30, 2020. “The CFTC will continue to provide targeted, temporary relief to market participants where appropriate,” said DSIO Director Joshua Sterling. “This action bolsters our efforts to facilitate orderly trading and liquidity in our derivatives markets during this volatile period. We encourage market participants to engage with the CFTC early and often as market developments continue to unfold.”

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This Crisis Will Unleash an Activist War

Brief: Although some have opined that shareholder activism appears unseemly during a global pandemic, a new survey shows that investors think this mindset won’t last for long. A recent survey by Boston Consulting Group found that 59 percent of the investors it polled think activists are coming for companies amid the devastation caused by the spread of Covid-19 — and that management should do more than sit and wait. These investors also think companies should "take proactive steps to mitigate activism risk by strengthening their businesses’ near- and medium-term fundamentals,” according to the survey, entitled “Investor Pulse on the COVID-19 Crisis.”

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Tuesday March 31, 2020:

  • In the United States, The White House will formally reissue coronavirus guidelines on Tuesday, which includes social distancing efforts extended until April 30th. A CNN report states not all of President Donald Trump’s advisers supported the decision with some only wanting a 15-day extension. The report notes Trump told aides it would work more in the government’s favour to possibly ease the guidelines earlier than to extend them again.

  • Canada is closing in on 8,000 confirmed and presumptive cases of COVID-19 as of Tuesday and 92 deaths. The provinces of Quebec (4,100 +) and Ontario (close to 2,000) account for almost three-quarters of the country’s confirmed/presumptive cases.

  • Italy was the first European country to issue a nationwide lockdown and they continue to slowly show signs of improvement. It was noted last week, the country’s daily diagnosis rate was holding below 10% for consecutive days. On Tuesday, that number was 4%, the slowest percentage daily growth rate since the outbreak began. However, the country still holds the designation of most citizens lost to the virus as their death toll sits at close to 12,450.

  • In the midst of a two-week lockdown, Spain reported its deadliest day yet due to the coronavirus with 849 passing away in the last 24 hours. The country expanded their lockdown this week with a ban on all work deemed to be non-essential as Spain has close to 8,200 deaths, 2nd only to Italy.

  • As the number of cases continue to rise in the United Kingdom, Michael Gove, the Cabinet Officer minister admitted on Tuesday the country must go “further, faster” to increase the ability to carry out coronavirus tests. The government aims to carry out 25,000 tests per day but admit their ability has been thwarted due to a global shortage of the chemicals needed to do the tests. The UK government has drawn criticism as Germany has been able to test 70,000 people daily. Meanwhile, the UK continues to prepare several enormous (Florence) Nightingale field hospitals in conference centers, with building efforts supported by the military.

  • Australia is showing cautious optimism in their battle against COVID-19, seeing their rate of growth of infections slowing from 25-30% last week to 9% over the past three days. However, government officials noted citizens shouldn’t become complacent and stressed the need to continue with social distancing.

Covid-19 – Due Diligence And Asset Management

Goldman Gives Staff 10 Days Paid Family Leave due to Coronavirus

Brief: Wall Street bank Goldman Sachs (GS.N) is offering employees 10 days of paid family leave to care for children or elderly parents who are at home during the coronavirus pandemic, according to a memo sent to staff on Tuesday that was seen by Reuters. Several banks have been extending extra paid time-off to employees, as the flu-like virus has shut down schools and forced many to stay at home.

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Billionaire Investor Steve Cohen: ‘After an Earthquake there are Tremors’

Brief: Billionaire trader Steven A. Cohen is cautioning the staff of his investment firm, Point72 Asset Management, to remain cautious amid markets that have recovered slightly from coronavirus-driven lows. “Markets don’t come back in a straight line; after an earthquake there are tremors,” Cohen wrote to staff on Friday in an internal memo seen by Reuters. “We need to continue to be disciplined. We are seeing plenty of opportunities to generate returns, but I don’t want us taking undue risks.”

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EU Watchdog Considers Leverage Curbs on Hedge Funds to Bolster Financial Stability

Brief: The European Union markets watchdog is considering leverage curbs on hedge funds and private equity funds to shore up financial stability as the coronavirus outbreak roils global markets.The proposal from the European Securities and Markets Authority (ESMA) could give more powers to countries like Spain, Italy and France - that have over the past week slapped bans on short-selling - a favoured trading strategy of hedge funds in particular.

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Prophet Capital to Dissolve Hedge Fund Amid ‘Extreme Volatility’

Brief: Prophet Capital Asset Management LP, an investor in loans and structured credit securities hit by recent market turmoil, plans to temporarily block withdrawals from one of its hedge funds and ultimately dissolve it, according to a letter sent to investors on Monday seen by Reuters. “As you are no doubt aware, financial markets are experiencing extreme volatility and impaired liquidity as a result of the Coronavirus crisis,” Prophet executive David Rosenblum wrote.

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$4.7 TR Asset Owner Group to Firms: Five Ways YOU Can Help Ease Covid-19 Blow

Brief: As Covid-19 continues to create disruption across Europe, 195 institutional asset managers are appealing to companies to stay the course when it comes to maintaining staff and prudent cost management. The group, which includes such heavyweights like BMO, Aviva Investors and Nordea, has collective assets under management of $4.7tn. In an open letter, the group said the long-term viability of firms they invest in is closely linked to the welfare of their employees, suppliers, customers and the communities in which they operate.

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Groups Raise Alarm over Fed, BlackRock Debt-Buying Deal

Brief: A collection of 30 investor and sustainability focused groups have raised concerns in a letter to the Federal Reserve over potential conflicts of interest and lack of transparency and oversight in the recent agreement between the central bank andBlackRock. On March 24, the Fed announcedBlackRockas investment manager and adviser for three new programs aimed at supporting the U.S. economy amid the COVID-19 pandemic. Two of the three appointments relate to the Fed's new measures to ensure credit continues to be available to large employers: The primary market corporate credit facility, providing new bond and loan issuance; and the secondary market corporate credit facility, providing liquidity for outstanding corporate bonds.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Monday March 30, 2020:

  • Over the weekend as health officials in the United States made appearances on national television outlining scenarios where the country could see as many as 200,000 deaths due to the coronavirus, it was made clear President Donald Trump’s Easter re-opening of America was not going to happen.

  • Therefore, during a Sunday media briefing, President Trump extended America’s social distancing measures until April 30th. The United States have over 150,000 confirmed cases with New York state remaining the hardest hit with over 66,000 cases and 1,200 deaths.

  • In Canada, Prime Minster Justin Trudeau as promised gave a little more information on the increased 75% wage subsidies he announced last Friday.

  • During his media briefing on Monday, Trudeau outlined businesses and non-profit organizations that have seen at least a 30 per cent drop in revenue due to the coronavirus will qualify for the government’s wage subsidy program. The government will cover up to 75% of salary on the first $58,700. More details of the program will continue to be rolled out during the week.

  • A top health official in the United Kingdom noted the country could be under coronavirus emergency measures for as long as another six months even as some signs show the outbreak slowing.

  • Curbs on normal life may need to continue through the summer and into the autumn in order to avoid progress being "wasted”, said England’s Deputy Chief Medical Officer Jenny Harries.

  • In Germany, researchers want to send out hundreds of thousands of coronavirus-antibody tests over the coming weeks. The reason being is people who test positive for antibodies could be given an “immunity certificate” that would allow them to leave their coronavirus lockdown earlier than expected.

  • Germany has one of the lowest COVID-19 death rates in the world, which some experts believe is due in part to the extensive testing rolled out by Chancellor Angela Merkel and her government.

  • Meanwhile in France, the country saw it deadliest 24-hour period due to the coronavirus with over 400 dying in one day, bringing their death total to over 3,000. The country’s director of health believes the epidemic will peak later this week in the country as they enter the third week of its nationwide lockdown.

  • In Japan, the country learned the Tokyo Summer Olympics scheduled for this summer will instead take place from July 23rd, 2021 until August 8th, 2021. According to the Financial Times, Japan was set to see a $294 billion jolt to its economy from the Olympics, but now that has all been put on hold due to the coronavirus.

  • Australia’s government has rolled out a plan close to $80 billion in order to subsidize the wages of an estimated 6 million people that have been affected by the coronavirus. Prime Minister Scott Morrison stated six months of funding was necessary to ensure businesses were able to retain staff and could hit the ground running once the crisis has passed.

Covid-19 – Due Diligence And Asset Management

SEC Chair: We Shouldn’t Ban Short Selling – It’s Needed for Properly Functioning Market

Brief: SEC Chairman Jay Clayton said Monday that the practice of short selling — effectively betting that a stock will drop — is needed to “facilitate ordinary market trading.” “We shouldn’t be banning short selling,” Clayton told CNBC’s  However, he said the Securities and Exchange Commission did replace the old uptick rule with a new measure to help mitigate the volatility that short selling can bring to an already agitated market like the one that investors have been dealing with for weeks now because of the coronavirus crisis.

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JPMorgan Seeks up to $10 Billion for Alternative Investments

Brief: JPMorgan Chase & Co.’s alternative-investments division is seeking to raise as much as $10 billion in an effort to bolster its spending power as the Covid-19 pandemic roils global markets. “The magnitude of these dislocations is so significant,” Anton Pil, the global head of alternatives for JPMorgan’s asset-management arm, said in an interview Monday. “And to get some of these markets functioning, you need a lot of capital.” JPMorgan plans to raise $5 billion to $10 billion “in the next couple of months” from clients including pension funds, sovereign-wealth funds, family offices and private banks, Pil said.

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Jefferies Group CFO Dies of Coronavirus Complications

Brief: The chief financial officer of Jefferies Group LLC, Peregrine "Peg" Broadbent, has died from coronavirus complications, the company said in astatementSunday.Broadbent, who was 56-years-old, had served as CFO of the financial services company since 2007. The company has appointed Teri Gendron, CFO of Jefferies Financial Group, as the interim CFO and chief accounting officer ofJefferies Group(JEF)."For over a dozen years, Peg has been our CFO and partner, and helped us build Jefferies from less than half its current size, and navigate through hard times and good times," the company said. "He has also been a much-loved and respected leader to the incredible global team that provides the support, foundation and glue across our firm."

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Hedge Fund Millennium Rebounds in March, Erases Losses

Brief: Losses at Izzy Englander’s $40 billion hedge fund were erased this past week as markets rebounded following unprecedented aid from the U.S. government. Millennium Management finished last week down 67 basis point for the month, compared with a decline of 5.1% a week earlier, according to a person familiar with the matter. That fund is now up 17 basis points for the year. Millennium Management and most other firms struggled in the first three weeks of March as the effects of the spreading coronavirus virtually halted the global economy and seized up markets from stocks to bonds to commodities. Then came unprecedented moves by the Federal Reserve and the promise of a $2 trillion stimulus bill that was signed by President Donald Trump on Friday.

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Coronavirus Worries and Strife: Investors Fear Markets not out of Woods Despite Big Rally

Brief: After a brutal meltdown, some investors have been wading back into U.S. stocks. But others are wary of another leg down as the coronavirus spreads and its economic impact is difficult to predict. High-profile investors from BlackRock Inc (BLK.N) to billionaire William Ackman have turned more bullish on equities in recent days, as unprecedented stimulus from the Federal Reserve, a $2.2 trillion stimulus bill signed Friday, and a call by President Donald Trump to get the United States back to work in weeks rather than months sparked the biggest weekly rally in the Dow Jones Industrial Average since 1938.

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Allianz Global Investors Liquidates Two Hedge Funds Amid Market Turmoil

Brief: Allianz Global Investors said on Friday that it had decided to liquidate a pair of hedge funds after suffering losses during the market turmoil of the coronavirus outbreak.The two funds are part of the money manager’s 27 Structured Alpha funds, the company said. The funds are private and Allianz Global Investors doesn’t disclose their performance or size. The investor said it decided it was in the best interest of investors to liquidate after “significant realized losses”.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Friday March 27, 2020:

  • The United States now have the most coronavirus cases of any country in the world, surpassing Italy and China. America has at least 90,700 cases, over 1,300 deaths and hot spots emerging in large cities including Chicago, Detroit and New Orleans.

  • Meanwhile, the House of Representatives on Friday passed the $2 trillion coronavirus response stimulus package. Next on the agenda will be President Donald Trump’s signature before it becomes law.

  • During a news briefing on Friday, Canadian Prime Minister Justin Trudeau announced more help for small and medium-sized businesses who are dealing with the fallout from the coronavirus.

  • The Prime Minister increased the wage subsidy from 10 per cent to 75 per cent, which brings Canada more in line with other countries throughout the world and guaranteed interest free loans for the first year. The wage subsidies will be backdated to March 15th, 2020. Trudeau said more details on the program would be released on Monday.

  • In the United Kingdom, Prime Minister Boris Johnson has been diagnosed with the coronavirus after experiencing mild symptoms which included a fever and cough. Downing Street said Johnson would self-isolate for the next seven days, and officials insisted Johnson would continue to lead the country. If Johnson somehow couldn’t lead, Dominic Raab, the UK’s foreign secretary and first secretary of state would step in.

  • The UK’s health secretary Matt Hancock also tested positive for the coronavirus as the country’s cases continue to double every three to four days.

  • The World Health Organization announced Friday that patients in Spain and Norway will be the first to be enrolled in a coronavirus drug trial. The trial will test the effectiveness of four different drug combinations in treating Covid-19.

  • Italy has suffered its deadliest 24-hour period due to the coronavirus after deaths almost reached 1,000 in one day.

  • In France, the country has extended its nationwide lockdown until April 15th and could be extended further if the situation requires it. The peak of the coronavirus wave is expected to hit the Paris region within days after the country recorded its highest daily death total on Thursday.

  • Australian Prime Minister Scott Morrison announced on Friday enforcement of self-isolation for citizens returning from overseas, quarantining arrivals in hotels around the country. Morrison stated the Australian Defence Force would be deployed to help enforce the self-isolation rules as the country has surpassed 3,000 cases after less than 100 at the start of March.

Covid-19 – Due Diligence And Asset Management

Goldman Sachs. Morgan Stanley to Take Control of Mainland Joint Ventures as China Opens up Financial Sector

Brief: Goldman Sachs and Morgan Stanley received regulatory approval on Friday to take control of their Chinese securities joint ventures, becoming the latest foreign banks to take advantage as China opens up its financial services sector. In separate announcements on Friday night, the American banks said the China Securities Regulatory Commission had approved their bids to own majority stakes in their securities joint ventures, Goldman Sachs Gao Hua Securities Company and Morgan Stanley Huaxin Securities.

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Billionaire Investor Bill Ackman Explains Himself

Brief: It’s the most eventful 0.2% gain of Bill Ackman’s career. The billionaire investor entered 2020 long a handful of brand name companies like Berkshire Hathaway, Hilton Worldwide and Chipotle. But his $6.5 billion in assets firm, Pershing Square, weathered what was the quickest 30% market drop in a century after Ackman decisively hedged his portfolio from the coronavirus pandemic. In late February after weeks of fretting about the effects of the pandemic, Ackman paid $27 million in premiums to buy credit default swap insurance on investment grade and high yield bond indices, judging that their tight spreads were the most mis-priced way of playing the looming financial chaos. He was right. Financial markets went haywire in March and the hedges ultimately yielded a $2.6 billion payout for Pershing Square.

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Hedge Fund Manager to Lead Norway Sovereign Fund After $124 Billion Loss

Brief: Norway’s sovereign wealth fund, the world’s largest, named a London-based hedge fund manager as its new chief executive on Thursday and said it had lost $124 billion (104 billion pounds) this year as stock markets tanked due to the coronavirus pandemic. Norwegian-born Nicolai Tangen, until now chief executive of AKO Capital, which he established in 2005, will take the helm in September, succeeding Yngve Slyngstad who announced his resignation last year.

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Morgan Stanley CEO James Gorman Tells 60,431 Employees: ‘Your Jobs are Secure' This Year

Brief: Morgan Stanley CEO James Gorman told his employees that despite the upheaval caused by the coronavirus pandemic, their jobs will be secure through this year. “I am sure some, if not many, of you are worried about your jobs,” Gorman said Thursday in a staff memo.  “While long term we can’t be sure how this will play out, we want to commit to you that there will not be a reduction in force at Morgan Stanley in 2020,” Gorman said. “Aside from a performance issue or a breach of the Code of Conduct, your jobs are secure.”

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This Hedge Fund Manager is Up 27% in a Market Down 30%

Brief: Roy Niederhoffer loves a good crisis. The 54-year-old hedge fund manager’s firm, R.G. Niederhoffer Capital, which manages about $350 million in assets currently, often does best when the stock market is at its worst. His Manhattan-based firm was one of the industry’s top performers during the past decade’s global financial crisis, and it is once again leading many of its peers in the market turmoil caused by the coronavirus pandemic. So far, his company’s flagship diversified fund, which invests in stocks, bonds, commodities, and currencies, is up 27% for the year, after fees, at a time when the overall U.S. stock market is down 30%. Its second fund, which trades only currencies and bonds, is up almost 18% after fees.

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Man Group Seeks Reward as Defaults set to Spike on Virus

Brief: A dramatic increase in defaults during the next year due to the coronavirus will create a big opportunity for distressed debt investors, according to the world’s biggest publicly listed hedge fund firm. Money managers at Man Group Plc are intrigued by what they say could be the largest global distressed credit cycle in a generation. It all happened in just a month as the public health crisis rippled through economies all over the world, prompting a sell-off in sovereign and corporate bonds. That means even some stronger countries and companies could get caught up in the process, according to Patrick Kenney and Santiago Pardo, money managers at the firm’s GLG unit.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Thursday March 26, 2020:

  • In the United States, unemployment rates soared close to 3.3 million. This number shatters the highest number of initial jobless claims recorded since the Department of Labor started tracking such data in 1967. The previous high was 695,000 claims filed in the week, ending October 2nd, 1982.

  • The Senate on Wednesday passed the $2 trillion stimulus package in an unanimous 96-0 vote, a remarkable sign considering how politically divided the country has been in recent years. The House of Representatives will now vote on the bill on Friday. Treasury Secretary Steve Mnuchin says Americans should start receiving deposits within three weeks of the bill becoming law.

  • In Canada, Prime Minster Justin Trudeau has implemented the Quarantine Act, which forces travellers coming home from abroad to self-isolate for two weeks. The measure which makes some exceptions for health-care workers and truckers, allows for fines and even jail time for people who ignore the order.

  • Global News in Canada is reporting White House officials are actively discussing putting soldiers near the Canadian border because of security concerns, relating to Covid-19. "Canada is strongly opposed to this U.S. proposal and we've made that opposition very, very clear to our American counterparts," said Deputy Prime Minister Chrystia Freeland on Thursday.

  • As the United Kingdom closes in on 10,000 coronavirus cases, Home Secretary Priti Patel noted the new lockdown enforcement allows police officers to order people to go home, leave or disperse an area and ensure parents are taking steps to stop their children from breaking the law. Those who refuse to listen, could find themselves facing a fine.

  • Italy continues to take small steps towards their recovery from the coronavirus as the country noted their daily growth rate in diagnosed cases has been under 10 per cent for the fourth consecutive day. However, their death toll stands at just over 8,100 from the virus, the most of any country in the world.

  • In China as the country slowly tries to return to normal, their foreign ministry is set to temporarily suspend entry to the country for almost all visas and residence permits. Starting on March 28th, entrance of foreign nationals will be barred with the small exception of diplomatic visas. Individuals who are coming to China for urgent humanitarian reasons, or for essential trade or science must apply for an exemption.

Covid-19 – Due Diligence And Asset Management

Tudor Jones says DC coronavirus aid is biggest fiscal-monetary ‘bazooka’ ever, More Like ‘Nuclear Bomb’

Brief: Hedge fund manager Paul Tudor Jones said Thursday investors should commend Washington’s policy response to the economic shock from the coronavirus pandemic. “Investors can take heart that we’ve counteracted this existential shock with the greatest fiscal, monetary bazooka. It’s not even a bazooka. It’s more like a nuclear bomb,” Jones said on CNBC’s “Squawk Box.” Jones said the actions from the Federal Reserve and Congress have brought “safety” to the economic system, even as COVID-19 spreads across the U.S. and disrupts daily life. “We did in two weeks what it took the Fed eight months to do in 2009,” the billionaire investor said. “Remember, we didn’t even get quantitative easing until well after the great financial crisis had started, well into the recession.” 

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Two U.S. Banks Halt Layoffs Amid Coronavirus Uncertainty

Brief: Morgan Stanley (MS.N) and Citigroup Inc (C.N) have hit pause on layoffs as the coronavirus pandemic has led to a record level of unemployment claims and unprecedented economic uncertainty, according to sources. Morgan Stanley on Thursday pledged to not cut any jobs this year, according to a memo seen by Reuters, as the Wall Street bank sought to reassure worried employees during the coronavirus pandemic. Contents of the memo were confirmed by a Morgan Stanley spokesman. Citigroup Chief Executive Michael Corbat has also ordered a suspension of any planned layoffs, a source told Reuters. Further details were not immediately available.

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Hedge Fund Legends Quietly Contacting Investors, Citing Historic Buying Opportunities

Brief: “Please note,” the hedge fund firm’s website warns, “the Baupost partnerships are generally closed to new capital and do not actively solicit or market to prospective investors. But right now,Seth Klarman’s firmis making an exception, along with a number of other superstar managers who are typically impossible to invest with. The massive drop in asset prices catalyzed by the novel coronavirus pandemic has some elite hedge funds quietly shopping for extra capital to invest, sources say.  In addition to Baupost, which managed $29 billion at the end of last year, The Children’s Investment Fund (TCI) has selectively reopened to additional money. 

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Talpins’s Element is Betting on Sharp Market Reversal After Rout

Brief: Jeff Talpins’s Element Capital Management is predicting that global markets are near a turning point and has begun betting on a sharp market reversal. The $15 billion hedge fund firm told clients it has started deploying cash and is taking positions on the prospect that equities will gain. Element is also shorting the long end of the interest rate market. In a note sent to clients Monday, the day before the S&P 500 bounced back with gains of more than 9%, the firm said the stimulus packages announced across continents to soften the economic blow from the coronavirus means the worst is over.

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Joint Statement by the FCA, FRC and PRA

Brief: The coronavirus (Covid-19) pandemic is an unprecedented situation but it is important to recognise that, while the reduction in activity associated with coronavirus could be sharp and large, it is likely to rebound sharply when social distancing measures are lifted. In addition, in the intervening period, while activity is disrupted, substantial and substantive government and central bank measures have been put in place in the UK and internationally to support businesses and households. These measures, which have been evolving rapidly and could evolve further, are expected to remain in place throughout the period of disruption. Successful and sustainable businesses underpin our economy and society by providing employment and creating prosperity. Equity and debt capital markets play a vital role providing finance to these businesses and will aid the recovery. Governments and regulators around the world remain focused on keeping capital markets open and orderly. 

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SEC Extends Conditional Exemptions from Reporting and Proxy Delivery Requirements for Public Companies, Funds and Investment Advisers Affected by Coronavirus Disease 2019 (COVID-19)

Brief: Today, the Securities and Exchange Commission announced that it is extending the filing periods covered by its previously enacted conditional reporting relief for certain public company filing obligations under the federal securities laws, and that it is also extending regulatory relief previously provided to funds and investment advisers whose operations may be affected by COVID-19.  In addition, the SEC’s Division of Corporation Finance issued today its current views regarding disclosure considerations and other securities law matters related to COVID-19.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Wednesday March 25, 2020:

  • In the United States, congress finally struck a deal for a $2 trillion package that hopefully brings a spark to an economy struggling with the coronavirus pandemic. The full details have yet to be released, but some elements are coming out including $250 billion in direct payments to individuals and families, and $500 billion in loans to distressed companies. The stimulus bill now must go through the Senate before it becomes official.

  • Canada has also passed a similar measure through government, opening up $82 billion in aid to the public. The House of Commons passed the bill early Wednesday morning after Members of Parliament from the Conservative and NDP parties expressed concern about the Liberal government inserting language that would have allowed the government unlimited tax-and-spend powers until the end of 2021. As it’s written right now, the Liberals only have that power until June 2020.

  • The aid package from the government includes a new Emergency Care Benefit of up to $900 bi-weekly, for up to 15 weeks, to provide income support to workers, including the self-employed, who have to stay home and don't qualify for paid sick leave or employment insurance (EI). There is also a new Emergency Support Benefit to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment.

  • In the United Kingdom, the country has its most high-profile case of a person infected with the coronavirus as Prince Charles, the heir to the throne has tested positive. His last public engagement was on March 12th and he is now self-isolating at home in Scotland.

  • Elsewhere in Europe, Spain has now seen more deaths than China, recording over 3,400 deaths. Officials say the peak of the outbreak has not yet been seen in the country.

  • One of those who succumbed to the coronavirus in Spain was Jose Maria Loizaga Viguri, who died at the age of 84. Loizaga is widely recognized for being one of the first private equity investors in Spain after founding Mercapital in 1985.

  • Dubai has directed the private sector to implement working from home for 80% of its workforce starting Thursday and lasting until April 9th. Supermarkets, groceries and pharmacies are exempt as the United Arab Emirates have 333 reported cases of the virus.

  • Australia is expanding its testing to include people if they have a fever or an acute respiratory infection. The country previously limited testing to only people who were displaying symptoms and had recently returned from overseas. The country now has over 2,500 cases of Covid-19.

  • In Brazil, the coronavirus has sparked a political feud as a majority of the country’s state governors are charting a response that runs contradictory to what it is being said by its President, Jair Bolsonaro. On Tuesday, Bolsonaro described the coronavirus as “a little cold” that would not harm most people and urged governors to get citizens back to work and children back to school.

Covid-19 – Due Diligence And Asset Management

Private Equity Eyes Industries Crippled by Coronavirus: ‘They Have Been Waiting for This’

Brief: The coronavirus pandemic is shutting down entire sectors of the economy and putting millions of Americans out of work, but one corner of Wall Street may find opportunity amid the carnage: private equity. The group, which includes investment giants Blackstone, Carlyle and KKR, has a record $1.5 trillion in cash ready to deploy and has been actively seeking deals across the struggling travel, entertainment and energy industries, according to a half-dozen investment bankers who declined to be identified to speak candidly about potential clients. “They have been waiting for this type of market dislocation,” the head of mergers at a major Wall Street firm told CNBC. “I don’t think they wanted something quite this bad, but they did want a pullback in valuation.”

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Brevan Howard Hedge Fund on Track for Record Month with 17% Gain

Brief: Brevan Howard Asset Management’s flagship macro hedge fund is surging amid the ongoing market turmoil, on course for its best monthly gain since starting in 2003. The Brevan Howard Master Fund returned 17% in the three weeks through March 20, boosting its gain for this year to 21.6%, according to a letter to investors seen by Bloomberg. The firm’s best month so far was a 9.9% gain in January 2008. A spokesman for the Jersey-based investment firm declined to comment. The returns mark a turnaround for the hedge fund that’s seen assets plunge to $3.3 billion from its 2013 peak of almost $28 billion as clients exited following underwhelming returns.

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U.S. Fed Hires BlackRock to Help Execute Mortgage-Backed Securities Purchases

Brief: The U.S. Federal Reserve has hired asset management giant BlackRock to help it execute the purchase of commercial mortgage-backed securities announced this week as part of the central bank’s aggressive efforts to shore up the U.S. economy.Over the past week, the central bank has released a volley of measures to boost liquidity in the financial markets and get cash into the hands of small businesses and consumers amid growing worries the coronavirus outbreak would wreak economic havoc across the country.

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FCA Rules out Short Selling Ban as Hedge Funds Stack up Bearish Bets

Brief: The UK’s Financial Conduct Authority last night (23 March) ruled out a ban on short selling, as many major hedge fund firms continue to weigh in with bearish bets to capitalise on the recent global market turmoil. The UK market watchdog said on Monday there is “no evidence” that short selling – a core component of most hedge fund strategies – had driven recent market falls, adding aggregate net short selling activity is low as a percentage of total market activity and has decreased in recent days. The notice comes as many well-known hedge fund firms including as Crispin Odey’s Odey Asset Management, Gladstone Capital Management, Man GLG, and Marshall Wace have made gains with successfully shorts in a range of names amid the recent downturn.

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Bill Ackman Puts Part of his Personal Fortune in Covid-19 Testing

Brief: Bill Ackman said he has invested a portion of his personal wealth to help manufacture antibody testing kits produced by Covaxx, a newly formed subsidiary of closely-held United Biomedical Inc., amid the outbreak of the coronavirus. Ackman has repeatedly called for a complete shutdown of the U.S. for 30-days to help combat the spread of the Covid-19 virus. He has also called for antibody testing, like the one Covaxx develops, across the country to determine who has been contracted the virus. “The key to a successful reopening beyond the maintenance of social distancing, hand washing, mask use and other related practices is a broad-based testing regime and tracing program,” Ackman said in a letter on Wednesday to investors in his hedge fund, Pershing Square Capital Management.

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Ex-Goldman Sachs CEO Calls on America to Return to Work ‘Within a Few Weeks’

Brief: If you’re already tired of the coronavirus lockdown and its subsequent trashing of the world economy, you have something in common withLloyd Blankfein, the billionaire former CEO of Goldman Sachs—especially if you’re itching to return the work and resume interacting with the public, as Blankfein would like you to do, as soon as possible. Over the weekend, presumably watching the value of his investments vanish—along with the savings andjobs of millions of “normie” Americans—Blankfein took to Twitter to suggest that, maybe, we don’t need to social distance that much after all.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Tuesday March 24, 2020:

  • In the United States, the President and health experts are seemingly at opposite ends of the spectrum with it comes to the coronavirus. President Donald Trump has repeatedly said over the past few days he wants to see the country back up and running. During a town hall for Fox News, the President stated, "I give it two weeks… I guess by Monday or Tuesday [March 30th/31st], it's about two weeks. We will assess at that time and give it more time if we need a little more time. We have to open this country up."

  • Meanwhile the World Health Organization during a call with reporters on Tuesday said the United States has the potential, due to their large acceleration in the number of cases, to become the new epicentre of the virus, replacing Europe.

  • In Canada as of early Tuesday there are close to 2,200 confirmed and presumptive cases of the coronavirus with Quebec overtaking B.C. and Ontario for most cases. Quebec noted a huge spike with over 1,000 confirmed/presumptive cases, nearly tripling their number from Sunday to Monday.

  • Premier Francois Legault says one of the factors is the province’s spring break takes place at an earlier date than the rest of the country, so Quebecers started returning home earlier. Quebec’s public health director also notes more testing and including the number of potential cases in the total number of cases as reasons too for the dramatic increase.

  • In Japan, the country has come to an agreement with the International Olympic Committee (IOC) to postpone the 2020 Summer Olympics in Tokyo until 2021. This news comes as pressure mounted against the IOC and Japan to cancel the games due to the worldwide spread of the coronavirus. Countries like Canada and Australia made the decision to pull their athletes from Tokyo 2020 just a few days ago.

  • In a live television address Tuesday evening, Indian Prime Minister Narendra Modi seemed to spark panic amongst his people, announcing an abrupt, minimum 21-day lockdown of the country’s 1.3 billion citizens. The lockdown would start at midnight local time.

  • While Modi assured people the government would work to maintain essentials like milk, food and vegetables, he was vague on how people were supposed to obtain these essentials if they weren’t permitted outside of their home.

  • In Italy, the country is showing small signs of improvement marking the second consecutive day of new cases increasing by less than 10%. However, the government on Tuesday approved new measures to punish anyone who appears to have broken restrictions on social distancing, including a fine up to €4,000, and ability to close businesses for up to 30 days.

  • In the United Kingdom, more than 8,000 people have tested positive for the coronavirus as the country experiences its first full day under lockdown after Prime Minister Boris Johnson made the announcement Monday evening. People in the UK can only leave their home to shop for essentials, for one form of exercise per day, medical need or to provide care to a vulnerable person, or travelling to and from essential work.

  • China reported some good news as Wuhan, the city at ground zero of the coronavirus epidemic, is scheduled to have its shutdown lifted on April 8th. The date would be more than two months after the city was first locked down from the outside world. Similar lockdown measures for other cities in China’s Hubei province, for which Wuhan is the capital will have their lockdown lifted as early as Wednesday.

Covid-19 – Due Diligence And Asset Management

Trump, Pence Held Call on Economy with Investors including Paul Tudor Jones, Stephen Schwarzman

Brief: President Donald Trump and Vice President Mike Pence held a call to discuss the coronavirus impact on the economy, according to sources. Investors on the call included Third Point’s Dan Loeb, Blackstone’s Stephen Schwarzman, Vista Equity’s Robert Smith, Intercontinental Exchange’s Jeffrey Sprecher and Paul Tudor Jones, hedge fund manager and co-founder of JUST Capital. The call with some of Wall Street’s top investors and hedge fund leaders was less focused on potential actions the administration could take to mitigate the impact of the novel coronavirus. Instead, it was more focused on how America’s top money managers are viewing markets and the U.S. economy, the people familiar with the matter said.

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Citadel Turns 2020 Profit After Spotting Virus Risks Early

Brief: Citadel, the Chicago-based hedge fund giant led by billionaire Ken Griffin, has so far weathered the coronavirus market storm well, turning a slight profit in its flagship Wellington hedge fund for the year through Monday, according to a person familiar with the situation.The fund, which practices a so-called multi-strategy array of bets on stocks, bonds, commodities and other securities using teams of traders, was as of Friday down 5.25% for March, the person said, who requested anonymity because the information is private. The exact year-to-date gain, which is net of fees, was not finalized.

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JPMorgan Plans Firm-Wide Hiring Freeze Amid Virus Uncertainty

Brief: JPMorgan Chase froze hiring across most of the firm as millions of people stay at home to help stem the spread of the coronavirus, according to people familiar with the matter. The bank asked managers in businesses including the corporate and investment bank, the consumer unit, and the asset- and wealth-management group to review job postings and pull listings for roles that don’t need to be filled immediately, said the people, who asked not to be identified discussing the private plans.

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Bill Ackman Makes $2.5 Billion ‘Recovery Bet’ Amid Coronavirus Tumble

Brief: Activist investor Bill Ackman said he has made a “recovery bet” on the economy, investing $2.5 billion in equities, including upping his positions in several of his portfolio companies and reinvesting in others like Starbucks Corp. The billionaire investor said he has taken off all the hedges that he put in place for his Pershing Square Capital Management, through shorts in the credit market. Those hedges were put in place to offset the effects of the coronavirus, he said. Ackman said his hedge fund has used the proceeds to reinvest over the past 10 to 12 days in several of his portfolio companies, including Lowe’s Cos., Hilton Worldwide Holdings Inc. and Warren Buffett’s Berkshire Hathaway Inc.

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German Tells Hedge Funds: Make No Mistake, We’ll Protect our Companies

Brief: Germany quickly wants to get aid to companies struggling with the impact of coronavirus, Economy Minister Peter Altmaier said on Monday, adding that Berlin was ready to protect firms from unwanted takeovers with a new fund during the crisis. “Make no mistake, we’re determined to protect our companies and jobs,” Altmaier said during a joint news conference with Finance Minister Olaf Scholz, adding that this message was directed at hedge funds.

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UK’s FCA says Don’t Blame Short-Sellers for Market Rout

Brief: Short-sellers cannot be blamed for the rout in stocks and markets should be kept open during the coronavirus epidemic, regulators in Europe said on Monday. Europe’s STOXX 600 index has fallen to around a seven-year low as investors price a likely recession into markets after the virus shut down swathes of the economy.A handful of European Union states have introduced temporary curbs on short-sellers in a bid to quell volatility, fanning talk of a suspension across the market as the next step.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Monday March 23, 2020:

  • In the United States, as of Monday afternoon 12 states have now issued stay-at-home orders as the country tries to limit the spread of the coronavirus. They are California, New York, Illinois, Connecticut, New Jersey, Maryland, Louisiana, Ohio, Delaware, Michigan, Massachusetts and West Virginia.

  • United States Surgeon General Dr. Jerome Adams gave a somber warning on Monday during an appearance on an American news network stating, "I want America to understand — this week, it's going to get bad.”

  • The World Health Organization (WHO) seems to echo the US Surgeon General’s statement, noting the spread of the virus is rapidly accelerating around the world.
    WHO says it took 67 days from the first reported case to reach 100,000 cases, 11 days for the second 100,000, and just four days for third 100,000 cases. There are now over 350,000 cases of coronavirus worldwide.
  • In Canada, after a weekend of media reports showing some people not really listening to the social distancing initiatives put in place by provincial and federal officials, the tone started to change on Monday. Prime Minister Justin Trudeau told Canadians to go home and stay home and warned stiffer enforcement measures could be imposed if people continue to refuse to listen.

  • Ontario and Quebec have outlined new social distancing measures. Ontario Premier Doug Ford is ordering all non-essential stores and services to close starting Tuesday at 11:59 PM, while Quebec is shutting down all in-person business activity, except those offering food and essential services until April 13th.

  • India has imposed a full curfew in the capital city of Delhi, its financial capital Mumbai and other large parts of the country as it tries to flatten the curve of the virus spread. Therefore, under more strict orders, no citizen other than government employees will be permitted outside their homes without a police-issued curfew pass. That means workers in private hospitals, grocery stores, pharmacies and other essential services must obtain these passes before returning to work.

  • In the United Kingdom, the Foreign Secretary has urged its citizens to return home from abroad as soon as possible while commercial flight options are still available. There are concerns air routes could be closed within the next 48 hours without warning. The country has also suspended rail franchise agreements for the next six months to avoid train companies collapsing due to the coronavirus.

  • Italy’s overall rate of infections fell for the third straight day, a little bit of good news to a country that badly needs it. Over the weekend, the country saw its deadliest day yet, with close to 800 people dying from the virus on Saturday. Close to 6,100 have died in Italy due to the coronavirus.

Coronavirus – Due Diligence And Asset Management

Brookfield CEO Sees Coronavirus Market Meltdown as ‘Manageable’

Brief: The head of Brookfield Asset Management Inc. said markets volatility created in the wake of the coronavirus pandemic is much more manageable than previous meltdowns. “For us, compared to the direct hit we took on 9/11, this uncertainty and volatility feels manageable,” Bruce Flatt, Brookfield Chief Executive Officer, said in a letter to shareholders Monday. “In 2008, with the banking system failing, real asset owners didn’t know if many lenders were going to exist in the future. Today, the banking system is in far better shape. It never feels very good to have this degree of chaos, but this will pass.”

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What Fund Managers Care About Amid Coronavirus Chaos

Brief: With most of the sectors on a sharp downward spiral, the main consideration for most fund managers right now is the strength of a company’s balance sheet, according to Peter Toogood. The chief investment officer at Embark Group, who has the same role at The Adviser Centre consultancy, said the current crisis was "far worse" than 2008 because the whole chain of economic activity was broken. He said: “There has been an almost complete cessation of economic activity, no one has seen this before.

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ASIC Recalibrates its Regulatory Priorities to Focus on COVID-19 Challenges

Brief: In coordination with the Council of Financial Regulators, ASIC will focus its regulatory efforts on challenges created by the COVID-19 pandemic. Until at least 30 September 2020, the other matters that ASIC will afford priority are where there is the risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters. ASIC is committed to working constructively and pragmatically with the firms we regulate, mindful they may encounter difficulties in complying with their regulatory obligations due to the impact of COVID-19.  

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Bruised Hedge Funds Ask Clients for Fresh Cash to Buy the Dip

Brief: First they lost money. Now hedge funds want clients to risk even more cash on the bets that caused the pain. LMR Partners, Citadel, Baupost Group and Capital Four Management are trying to persuade clients to inject money into their funds after taking a hit in the coronavirus-fueled market turmoil. Capula Investment Management has had talks with some investors as it considers raising fresh capital, according to people familiar with the matter.

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Goldman Injects $1 Billion into Own Money-Market Funds After Heavy Withdrawals

Brief: Goldman Sachs Group Inc (GS.N) poured more than $1 billion into two of its prime money-market portfolios this week due to heavy investor withdrawals, according to a filing with the U.S. securities regulator. The Wall Street bank purchased $722.4 million in assets from its Goldman Sachs Financial Square Money Market Fund (GPMXX.O) and $301.2 million from its Goldman Sachs Fund Square Prime Obligations Fund.

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T. Rowe Price Employee Tests Positive for Coronavirus, Sanitizing of Baltimore Headquarters Underway

Brief: An employee of T. Rowe Price Group in Baltimore has tested positive for the new coronavirus and efforts to sanitize the Baltimore headquarters are underway, a spokesman said Friday. "We are in regular communication with this associate and are supporting them during this time,” said Brian Lewbart, a spokesman for the global money management firm. The company said it notified all of its employees of the positive case. It’s requiring all those who work near or who had been in direct contact with the employee to self-quarantine for 14 days, he said.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how coronavirus may impact your business.

About Castle Hall Diligence

Castle Hall helps investors build comprehensive due diligence programs across hedge fund, private equity and long only portfolios More →

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