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Covid-19 Diligence Briefing

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”.

Read more...


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.

Our briefing for Friday March 20, 2020:

  • In the United States, New York State joined the State of California in ordering all non-essential workers to stay home. These measures affect nearly 59 million people in America, or close to one in five Americans. California’s order exempts 16 critical sectors including emergency services, transportation and communications. New York state is working through their list of essential services.

  • America also confirmed they will be closing their borders with Mexico and Canada, limiting non-essential travel. This will take effect on March 21st.

  • Canadian Prime Minister Justin Trudeau announced on Friday that the country will turn back asylum seekers as part of the border shutdown with the United States. As of Friday afternoon, Canada is closing in on 1,000 presumptive cases of the coronavirus with Ontario and British Columbia, accounting for more than half.

  • In Europe, Italy’s president of Lombardy, the country’s hardest hit region, has requested that the military be deployed on the streets of Milan to enforce the continued lockdown.

  • United Kingdom Prime Minister Boris Johnson and the government has ordered all cafes, bars and restaurants to close “as soon as they reasonably can”. Johnson stated nightclubs, theatres, cinemas, gyms and leisure centres should also close and not re-open for the foreseeable future.

  • The UK government also announced it will pay the wages of any employee facing redundancy in an unprecedented intervention to protect jobs amid sweeping economic uncertainty.

  • In Saudi Arabia the country will be halting domestic air travel, trains, buses and taxis as of Saturday after reporting 70 new coronavirus cases on Friday.

Coronavirus – Due Diligence And Asset Management

Blackrock to Freeze Global Hiring for a Few Weeks

Brief: Blackrock, the world’s largest asset manager, will freeze global hiring for “a few weeks,” a source familiar with the situation said on condition of anonymity. As the new coronavirus has swept across the globe, killing thousands of people, companies have cut their investment plans, withdrawn financial outlooks and laid off employees in response to the economic impact. With $7.4 trillion of assets under management as of December 2019, making it the world’s biggest investment manager, Blackrock’s hiring freeze underlines how painful the impact of the global market selloff and the coronavirus will be for the real economy. A spokesman was not immediately available for comment.

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Colony Capital Provides Update Regarding Impact of COVID-19

Brief: Colony Capital, Inc. (NYSE: CLNY) (“Colony Capital” or the “Company”) today announced a number of updates in connection with the impact of COVID-19 on its assets and business operations… “Since our earnings call on February 28, 2020, the coronavirus has been declared a pandemic and has fundamentally altered the global economy,” said Thomas. J. Barrack, Jr., Executive Chairman and Chief Executive Officer.

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PE Firms Act to Save Portfolio Companies from Coronavirus Troubles

Brief: Private equity firms are taking steps to help their portfolio companies survive the coronavirus onslaught of forced closures, scattered workforces and upended markets. From providing millions of dollars in emergency aid to more mundane things like phone calls designed to boost managers’ morale, professionals in buyout shops around the US are trying to ensure the new coronavirus doesn’t bring down their investments.

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Hedge Fund Manager: Market ‘Purging’ Could Lead to a Plunge of ‘at Least 74%’

Brief: Back in February, Kevin Smith, chief investment officer at Crescat Capital, urged investors to resist the temptation to buy the dip as he pushed his “macro trade of the century. “We certainly did not predict the coronavirus,” he wrote at the time. “But it may prove to be the catalyst to tip this market [into] a brutal bear market….We are looking for a 56% drop from the top in February. That just gets us to a reversion to the mean for historical market valuation,” he told MarketWatch. “Honestly, we think a more reasonable target for this global recession that is only beginning is at least a 74% decline from February’s highs to mark the bottom. There were just too many excesses in this one. The purging... has only just begun.”

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Ray Dalio: Damage from Coronavirus: Will be ‘Much Greater’ Than Reported

Brief: Billionaire hedge fund manager Ray Dalio believes that policymakers and other leaders could be downplaying the impact of the coronavirus outbreak, a pandemic that he expects to result in “many trillions of dollars” in lost profits and “enormous” spending on relief efforts. “I believe that the health, economic, and market impact of the coronavirus will be much greater than most people are now conveying,” the Bridgewater Associates founder said in a LinkedIn post Wednesday evening. According to Dalio, the realities of the ongoing pandemic are “so bad that conveying them accurately could provoke panic.” To prevent that panic, he argued that “some leaders and knowledgeable researchers who are in the position to know are inclined to withhold the facts.”

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Griffin’s Citadel Sending Aid to Chicago to Help in Pandemic

Brief: Partners at the hedge fund and securities firms founded by Ken Griffin are donating$2.5 millionfor public schools and food insecurity relief efforts in Chicago as the effects of the coronavirus pandemic take hold. In early February, Citadel and Citadel Securitiesdonated$7.5 millionto help contain the virus in China. The money helped send medical supplies to a hospital in Wuhan, support humanitarian aid there and fund the development of a vaccine. The firm’s latest effort is in partnership with Chicago Public Schools and the Greater Chicago Food Depository. As of 3 p.m. Central Standard Time, there had been 422 confirmed cases of COVID-19 in Illinois and four deaths.

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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.

Our briefing for Thursday March 19, 2020:

  •  In the United States, there are now more than 10,500 cases of the coronavirus, a 40% increase in the last 24 hours. However, the White House coronavirus task force coordinator, Dr. Deborah Birx notes this is a signature that everyone is doing their job. “Those with mild symptoms are staying home, self-isolating. Those with serious symptoms are coming forward to get testing,” Birx said.
  • CNN and Politico are reporting the State Department is preparing to raise its travel advisory to worldwide Level 4, which is “Do Not Travel”, the country’s highest designation. Last Wednesday, the US raised their travel advisory to Level 3.

  • In Canada, Prime Minster Justin Trudeau held a news briefing and stated the new travel ban for Canada/US citizens is likely to come into effect Friday night/Saturday morning. The Prime Minister noted more assurances for Canadians struggling with what the pandemic has done to their lives, but warned that “extraordinary” measures such as closures, and social distancing could be in place for weeks or months.

  • In Europe, the grim reality continues to settle in with Italy now confirming more deaths due to the virus than China. Italy’s death toll has reached over 3,400, while China sits at over 3,200, according to the World Health Organization.

  • The United Kingdom government has published the Coronavirus Act, emergency legislation to help battle the epidemic if the situation calls for it. The powers include the ability to shut down airports and ports, and police and immigration officials having the ability to detain those suspected of having the coronavirus. Those individuals can be sent to be tested and put into self-isolation.

  • Calling the coronavirus “hysteria” and “fantasy” previously, Brazil’s President Jair Bolsonaro and his government have closed its land border with neighbouring South American countries. On Wednesday night, hundreds of thousands of Brazilians banged pots and pans from their windows and shouted "Bolsonaro out" in protest against the perceived inaction of their leader.

  • Finally, in China the country has reported no new locally transmitted coronavirus cases. A first, since the pandemic began. At a news conference on Thursday, China announced 34 new cases in the last 24 hours, all imported from overseas.

Coronavirus – Due Diligence And Asset Management

Hedge Fund Manager Apologizes for Wiping Saliva on Hong Kong Metro Rail

Brief: A hedge fund manager in Hong Kong has publicly apologized after a parody video of him licking his finger and wiping it on a hand rail in a metro car went viral, sparking anger in the city which is grappling to contain an outbreak of the new coronavirus… “I made light of the COVID-19 situation in a parody video that was only intended for a handful of friends,” Joel Werner, chief investment officer at Solitude Capital Management said in a public Facebook post. “But I now realize that I shouldn’t have done that. A global pandemic is no laughing matter.”

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Englander’s Millennium to Shut Some ‘Trading Pods’ as Coronavirus Bites

Brief: Millennium Management has closed many of its "pods" run by teams of traders, as violent market swings caused by jitters over the economic fallout of the coronavirus led to losses, the Financial Times reportedhere citing two sources.Millennium, one of the industry’s biggest hedge funds, has closed “trading pods” in double-digit numbers, the report said, adding that job cuts at the firm that runs between 150 and 200 pods are expected.

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Up 3,000%: The Tail Risk Funds that Mastered Coronavirus Market Mayhem

Brief: Boaz Weinstein was waiting for this. The New York hedge fund manager, seasoned by past financial crises and spooked by seemingly endless quarters of ever-higher markets, had for years set up for financial calamity, even if it meant sometimes poor returns. When panic over the coronavirus spread to global financial markets in late February, Weinstein swung into action.

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Activist Investors Throw in Towel as Market Turmoil Rages

Brief: Activist shareholders are giving up on some of their campaigns amid historic market volatility. Elliott Management Corp. dropped its opposition Wednesday to Altran Technologies SA’s $4 billion takeover by Capgemini SE, citing “current market conditions.” The investment firm led by Paul Singer said it will sell its stake in Altran to Capgemini, after arguing for months that the deal undervalued the French technology consulting firm. Robert Tchenguiz, who had been challenging FirstGroup Plc’s management for at least four months, announced Wednesday that he no longer holds a material interest in the transport operator.

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Aberdeen Standard Suspends Property Funds

Brief: Aberdeen Standard Investments (ASI) is the latest to gate property funds as total assets in funds suspended reaches £8bn. The fund manager said dealing was suspended in the £1.7bn Standard Life Investments UK Real Estate fund and £1.1bn Aberdeen UK Property fund. The news follows the suspension of the £2bn Janus Henderson UK Property and the Kames Property Income and Aviva UK property funds as Covid-19 takes its toll. ASI said it would lift the suspension ‘as soon as confidence has returns to the market’.

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Aussie Billionaire Investor Warns of ‘Devastating Economic Collapse’

Brief: The chairman of $100 billion investment house Magellan Financial Group, Hamish Douglass, has warned of a near total shutdown of the world economy over the next two to six months, calling on governments to increase stimulus packages while taking emergency measures to avoid a depression. In a note to clients, Mr. Douglass said the impact of the deadly coronavirus was a "fast-moving and fluid" situation, as theAustralian dollar plummeted to US55¢and the ASX continued to slide, having lost more than $665 billion in value over the past four weeks.

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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.

Our briefing for Wednesday March 18, 2020:

  • In a joint agreement between the United States and Canada, the two countries have confirmed the border between the two countries will soon be closed to all non-essential travel for its citizens. Both sides agreed to preserve the supply chains which ensure that food, fuel, and life-saving medicines will continue to reach people on either side of the border.

  • Also in the United States, President Donald Trump invoked the Defense Production Act to help expand production of hospital masks and other medical supplies to help battle shortages as the US deals with the pandemic.

  • Two hospital ships that help with overseas emergencies are preparing to deploy with one that will dock off the coast of New York City, which Governor Andrew Cuomo noted could soon run out of hospital beds.

  • In Canada, Prime Minster Justin Trudeau announced a $82B stimulus package and concessions to support the economy during the coronavirus pandemic. The package includes money to help Canadian citizens, businesses given a temporary wage subsidy for up to three months to allow workers to stay on the payroll, and taxpayers having until August 2020 to pay their taxes.

  • In the United Kingdom, the pound dropped five percent against the dollar to levels not seen since the 1980’s. Prime Minister Boris Johnson, along with his education secretary, noted all schools will close from Friday until further notice. Exemptions will be made to children of key workers and the most vulnerable. The PM is also ruling nothing out when it comes to stricter measures for London and for travel.

  • United Arab Emirates’ attorney general made clear anyone arriving in the country that does not quarantine themselves for 14 days could face legal action. Emiratis and expatriates caught leaving their home and risking contact with others would be prosecuted. Starting Thursday, the UAE will close entries to tourists arriving. Diplomats are exempt.

  • Australia’s Prime Minster Scott Morrison declared a “human biosecurity emergency”, which gives the government the power to close off cities or regions, impose curfews and order people to quarantine, if deemed necessary.

  • The government also raised its travel advice to an unprecedented Level 4, which means no travel to any country in the world, while banning any non-essential indoor gatherings of more than 100 people.

Coronavirus – Due Diligence And Asset Management

Seven Ways the Effects of the Coronavirus Will Impact the Hedge Fund Industry

Brief: The changing landscape caused by the Coronavirus will lead to the largest shake out in the hedge fund industry since the 2008 market crash. Below are some of the ways we believe the Coronavirus will impact the hedge fund industry.

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CFTC Issues Second Wave of Relief to Market Participants in Response to Covid-19

Brief: The Commodity Futures Trading Commission's Division of Market Oversight (DMO) has issued three no-action letters providing temporary, targeted relief to swap execution facilities (SEFs) and certain designated contract markets (DCMs) in response to the COVID-19 (coronavirus) pandemic. The spread of coronavirus has caused compliance with certain CFTC requirements to be particularly challenging or impossible because of displacement of personnel from normal business sites due to social distancing and other measures.

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Janus Henderson and Kames Suspend Property Funds as Covid-19 Takes Toll

Brief: Janus Henderson has suspended its £2bn (€2.19bn)UK Propertyfund, becoming the second such mandate to be gated over uncertainty of the valuation of its holdings as Coronavirus takes its toll. It comes after Kames Capital suspended its £501m (€548m)Property Incomefund and its feeder funds yesterday citing ‘difficult market conditions’ on the face of the pandemic. Both the Janus Henderson and Kames funds have the same independent property valuer, CBRE.

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Financial Agencies Urged to Halt All Non-COVID Rulemakings

Brief: A top Senate Democrat is calling for federal financial regulators to shelve all their rulemaking projects that aren't directly related to the COVID-19 pandemic, saying their attentions right now need to be on protecting the financial system and mitigating economic fallout from the outbreak. In a letter dated Tuesday, the Senate Banking Committee's ranking member Sherrod Brown, D-Ohio, urged the Federal Reserve Board to halt its pre-existing rulemaking work and "instead focus and prioritize actions on activities related to the economic risks posed to markets" by the novel coronavirus.

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Billionaire Activist Investor Bill Ackman Calls on Trump to ‘Shut Down’ the U.S. for the Next 30 Days

Brief: Billionaire activist investor Bill Ackman, the CEO of $11 billion Pershing Square Capital, called on President Trump to shut the U.S. down for the next month to save lives as the coronavirus (COVID-19) spreads.  “Mr. President, the only answer is to shut down the country for the next 30 days and close the borders. Tell All Americans that you are putting us on an extended Spring Break at home with family. Keep only essential services open. The government pays wages until we reopen,” Ackman Tweeted. 

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Goldman Tells Most Staff in Americas, EMEA to Work from Home

Brief: Goldman Sachs (GS.N) said it has instructed most of its staff in the Americas, Europe, the Middle East and Africa to work from home from Wednesday until further notice, according to an internal notice the bank posted on its website late on Tuesday. The announcement comes after the bank said two employees at one of its Salt Lake City, Utah, office buildings tested positive for COVID-19 on Monday. 

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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.

Our briefing for Tuesday March 17, 2020:

  • In the United States there are now over 5,000 cases of the coronavirus and close to 100 have died. Dr. Anthony Fauci, one of the country’s top infectious disease physicians, says it’s the possible the peak number of cases is still another 45 days away for the United States. 

  • Meanwhile, the government is looking at a way to send money directly to Americans to help curb the economic fallout from the pandemic. The idea, which is gaining bipartisan support, could give $1,000 checks to Americans.

  • In Canada, Ontario has issued a state of emergency. As part of the declaration, the province mandated the closure of restaurants and bars, although those that offer takeout and delivery can stay open. The order does not apply to public transit, shopping malls, grocery stores and pharmacies. As of Tuesday morning, there are 185 cases of COVID-19 in the province.

  • In Europe, the United Kingdom has announced a £330B emergency rescue package for UK businesses. The London Stock Exchange also has no plans to suspend trading as some investors question whether markets should shut down.

  • In Italy, citizens are required to self-declare on a form they have not tested positive for coronavirus or are currently in self-quarantine due to recent exposure. Those who break the rules, could face up to 12 years in prison for culpable participation in the epidemic.

  • In France, starting at midday on Tuesday, the country was locked down for the next 15 days. During the lockdown, people will be able to leave their houses only if necessary and must fill out a form that gives their reason for being outside.

  • Elsewhere in the world, India says as of Wednesday, it will ban all passengers, including Indian citizens, from entering the country on flights from the European Union, Turkey and the UK.

  • Finally, the Philippines became the first country to shut down its financial markets, suspending the stock market trade over coronavirus fears. The closure took place as of Tuesday and will remain closed until further notice.

Coronavirus – Due Diligence And Asset Management

France, Italy, Spain Ban Short Selling to Curb Market Plunge

Brief: Regulators in France, Italy and Belgium banned short selling in some stocks for Tuesday’s session, aiming to curtail the plunge in equity markets driven by the coronavirus outbreak. France’s AMF halted such trades in 92 stocks, while Italy’s Consob blocked the transactions in shares of 20 companies and Belgium’s FSMA imposed a similar restriction. Spain went further, telling market participants late Monday they couldn’t bet on share declines for a month, and French Finance Minister Bruno Le Maire said he would like to see that rule extended Europe-wide.

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Macquarie Group Sends 15,700 Home

Brief: Macquarie has told its 15,700 staff around the globe they should work from home from Wednesday. The email, sent on Tuesday morning, says the bank's offices will remain open but with minimal staff. The firm, which has around 6600 staff in Australia, did not put an end date on the new working-from-home arrangement. It is understood some staff at the bank have been told the arrangement could be in place until the middle of the year.

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SEC, NYSE Urge Open Markets as COVID-19 Spurs Telework

Brief: U.S. regulators and stock exchanges, while widely transitioning their staffs to remote work during COVID-19’s spread, advocated on Monday for financial markets to stay open despite mounting recession fears. The U.S. Securities and Exchange Commission said in an announcement that it took measures over the weekend to provide relief to market participants affected by the novel coronavirus after a week of transitioning to what the agency called a “full telework posture.” The regulator said it has remained fully operational throughout the transition.

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Crispin Odey Rakes in Millions Amid Coronavirus Sell-Off

Brief: Crispin Odey has emerged as one of a handful of winners among the coronavirus induced sell-off, raking in millions of pounds from recent bets against FTSE 250 favourites. Odey’s eponymous investment boutique has initiated bets against six companies, including emerging markets specialist Ashmore and Nick Train favourite Fevertree, which have seen their share prices plummet this year, according to disclosures on short positions from the Financial Conduct Authority.  Frankie & Benny’s owner Restaurant Group has fallen 65% since Odey shorted the stock on 5 March, while Tullow Oil shares slid by a third since Odey took out a 0.76% short position on 12 March. 

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Hedge Fund Bridgewater Places $15 Billion in Bets Against Europe and UK

Brief: Hedge fund behemoth Bridgewater has shown its hand in Europe with roughly $15 billion in bets against companies on the continent and in Great Britain, filings reviewed by Reuters show.  The world’s biggest hedge fund manager’s short positions amount to more than $5.3 billion in France and $4.7 billion in Germany, while in Spain its shorts add up to almost $1.4 billion and $821 million in three Italian companies.

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Traders ‘Flying Blind’ in Turbulent Markets as Coronavirus Splits up Teams

Brief: At a time of extraordinary swings on world markets, many traders working from out-of-town offices or in unfamiliar dealing rooms fear that communication problems and technical glitches risk adding to already spiralling volatility. Banks’ contingency plans to safeguard markets and employees through the coronavirus pandemic could over time transform the trading and investment world, with more staff working from home or in smaller centers rather than being concentrated in expensive locations like London’s Canary Wharf or Manhattan in New York. 

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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.

Our briefing for Monday March 16, 2020:

  • The United States now reports over 4,000 confirmed cases of the coronavirus with at least 70 fatalities to date. West Virginia remains the only state without a confirmed case. In New York State, the governor announced he was working with neighbouring New Jersey and Connecticut to institute early closure of bars and restaurants, as well as a reduction in local government workforces. In San Francisco the mayor has announced he wants residents to stay home starting at midnight, except for essential needs.

  • In Canada, Prime Minister Justin Trudeau announced the country will ban entry to all travellers who are not Canadian citizens or permanent residents, with the notable exception (for the moment) of US citizens. Canadian citizens who exhibit coronavirus symptoms will also not be allowed on flights home, irrespective of citizenship. International flights will be permitted to land only at international airports in Montreal, Toronto, Calgary and Vancouver, in order to enhance screening.

  • In Europe, the EU announced it too will close its borders to all non-essential travel for a minimum of 30 days. Family members of European nationals, essential staff, such as doctors and nurses, and people transporting goods within the EU are exempt. Italy and Spain remain the hardest hit countries in Europe, with Spain now announcing a partial lockdown. Italy has over 24,000 cases and 1,800 deaths, while Spain has close to 9,200 cases and over 300 deaths.

  • In the Middle East, the United Arab Emirates have suspended tourist visas, cultural activities and the country has taken measures to ensure social distancing, including the closure of bars, clubs and lounges.

  • In the Philippines, President Rodrigo Duterte extended quarantine measures. Inhabitants inside Metro Manila may not leave, and all workplaces are closed; only those buying food and medicine permitted to go out. This policy will stay in place until at least April 12.

  • In Australia, the government imposed a two-week self-isolation on international flyers and those who don’t comply could face fines, according to the Australian Prime Minister.

Coronavirus – Due Diligence And Asset Management

The Private Goldman Sachs Coronavirus Meeting That’s Setting the Internet on Fire

Brief: Last Thursday, Goldman Sachs moved to reassure its nervous merchant banking clients with a conference call led by its chief economist, Jan Hatzius, and its chief medical officer, Michael Rendel. Someone on the call took notes then leaked them. The conversation, which seems to downplay the coronavirus’ effects on the world economy, have since gone viral on social media and through messaging services like WhatsApp—leaving the bank to now downplay the comments made in that meeting.

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FCA to Postpone ‘Non-Critical’ Work Amid Covid-19 Crisis

Brief:  The Financial Conduct Authority is reviewing which "non-critical" regulatory work it can postpone in response to the coronavirus pandemic and subsequent market fallout. The regulator told FTAdviser it hoped this would allow firms in the financial services sector to focus on "supporting their customers during this difficult period".

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Even the World’s Biggest Hedge Fund was Caught Flat-Footed by the Coronavirus Market Sell-Off

Brief:  Bridgewater Associates, the largest hedge fund in the world founded by Ray Dalio, has navigated several market downturns with great success. The recent coronavirus-induced sell-off is not one of them, however. The Financial Times reported Bridgewater’s flagship fund — the Pure Alpha Fund II — is down about 20% for the year following the swift plummet from all-time highs into a bear market from stocks. For March, the fund was down about 13% through Thursday’s close, according to the report.

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HSBC Employee in its Dubai Office has Coronavirus

Brief: An employee in HSBC’s (HSBA.L) office in Dubai has been diagnosed with coronavirus, a spokesman for the bank confirmed on Friday in response to a Reuters inquiry. The employee works in the bank’s global banking division and colleagues who came into close contact with the infected person have been sent home.

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Vanguard Closed one Building on Malvern Campus for Cleaning After Employee Sent Home with Flu-Like Symptoms

Brief:  Vanguard briefly closed one of the main buildings on its Malvern corporate campus to disinfect and clean, after an employee was sent home with flu-like symptoms. On Wednesday, “we learned that one member in Malvern had fallen ill” and was displaying flu-like symptoms, said Dana Grosser, Vanguard spokesperson in Malvern. The Vanguard employee “was seen at a local hospital, but was not recommended for further testing by medical staff.” The employee was later sent home and asked to self-quarantine at home for 14 days, as a precaution," she added.

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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.

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