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Covid-19 Diligence Briefing

Our briefing for Tuesday, August 31, 2021:

  • The United States is urging its citizens to avoid travel to Canada because of high risks of Covid-19. The Centers for Disease Control and Prevention (CDC) issued the advisory on Monday, putting Canada at a Level 3 which indicates high levels of the virus in the country. Earlier this month, the U.S. made the decision to keep its land border closed to non-essential Canadian travellers until at least Sept. 21, due to concerns about the delta variant. About 61% of eligible adults in America are fully vaccinated, compared with 75% of Canadians over age 12. 
  • In Canada, the city of Edmonton is reinstating its mask rules, after the city council voted in favour of extending and fortifying a bylaw. Residents will now have to wear masks in all indoor spaces, including on public transit, in taxis and ridesharing vehicles. The bylaw comes into effect on Friday. Meanwhile in Saskatchewan, Premier Scott Moe has dismissed the call for provincial vaccine passports, calling them a “heavy-handed approach.” Speaking at a news conference on Monday, Moe said his government will work with those businesses and workplaces that require proof of vaccination. “It won’t be the government that comes out and forces such a policy,” he said.
  • In the United Kingdom, Britain has reported its lowest number of new Covid-19 cases in almost three weeks. According to government data, there were 26,476 new Covid-19 cases reported on Monday, the lowest number since August 10. According to a recent study by Public Health England (PHE) and Cambridge University, those infected with the delta variant are twice as likely to be hospitalized as those with the alpha variant. The study looked at healthcare data from 43,338 positive coronavirus cases in England and confirmed they were either the delta or alpha variant through genome sequencing.
  • Italy has eliminated the need to quarantine for fully vaccinated travellers from the U.K.  Under the previous rules, travellers were required to show a negative Covid-19 test, self-isolate for five days on arrival and then take another test to be released from quarantine. The new rules will require travellers to have received a second dose of vaccine at least 14 days prior to arriving, or to have a negative Covid-19 test 48 hours before arriving in order to skip the self-isolation.  Italy’s existing restrictions for travellers from other countries will remain in place. 
  • Japan will consider mixing doses of different vaccines in an effort to speed up its vaccination campaign. On Sunday the minister in charge of vaccinations said he asked the health ministry to look into the use of the AstraZeneca vaccine paired with a second shot of Pfizer of Moderna. This could speed up the vaccination campaign by shortening the intervals between the first and second shots when using the AstraZeneca vaccine (AstraZeneca has a longer waiting period between doses). Japan’s vaccination rollout has been sluggish, with only about 43% of the population fully vaccinated.
  • Australia’s capital city of Canberra has extended a lockdown for another two weeks as the city struggles to contain the delta variant. Canberra reported 13 new cases in 24 hours. Meanwhile in neighbouring Victoria state, 76 new cases were reported, up slightly from 73 reported the previous day. State Premier Daniel Andrews is expected to make an announcement about the current lockdown on Wednesday, although he did say that too many people are unvaccinated for restrictions to significantly ease. Australia has used a series of strict lockdowns and quarantines to try to contain the spread of the delta variant, but has struggled with a slow vaccine rollout.

Covid-19 – Due Diligence And Asset Management

U.S. Consumer Confidence Falls to Six-Month Low on Delta Variant

Brief: U.S. consumer confidence dropped in August to a six-month low, suggesting concerns over the delta variant and elevated prices are weighing on Americans’ views of the economy now and in the coming months. The Conference Board’s index fell to 113.8 from a revised 125.1 reading in July, according to the group’s report Tuesday. Economists in a Bloomberg survey had called for a decline to 123. The figures suggest the spread of the delta variant has dented consumers’ views of the economy and threatens to undermine spending on services. The latest spike in Covid-19 infections has already curbed restaurant reservations, airline travel and hotel occupancy. At the same time, Americans are paying more at the grocery store and at the gas pump, which may be further weighing on sentiment.

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What data can teach us about the post-Covid travel industry recovery

Brief: Covid-19 has accelerated many behavioural changes for consumers. But one tradition – vacations – is highly unlikely to change. If anything, we believe the suppressed travel of the last 18 months is likely to give way to a travel boom when people feel safe to get back on trains and planes and to stay in hotels. However, the recovery of travel around the world is unlikely to be uniform. But with the help of big data, we can observe how vacation appetites are playing out in real time this summer and develop actionable investment insights. Travel has recovered in fits and starts so far. In the US, a major milestone was reached over the July 4 holiday as passengers screened at US airports exceeded pre-pandemic levels for the same week in 2019. Hotel bookings confirm the US recovery as higher prices at US hotels have helped offset volumes that remain slightly below 2019 levels.

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European Stocks Steady Amid Optimism Over Pandemic and Policy

Brief: European stocks edged higher on Tuesday, on the cusp of their longest monthly win streak since 2013 amid a brightening outlook for risk assets on the policy and pandemic fronts. The Stoxx 600 Index was up 0.1% at 8:17 a.m. London time, with gains led by miners, technology stocks and autos. The FTSE 100 Index was little changed following a U.K. holiday on Monday. While risks such as China’s regulatory crackdown and the early withdrawal of stimulus have haunted markets recently, Friday’s speech from Federal Reserve Chair Jexrome Powell reassured investors that the central bank was in no rush to raise rates. Coupled with Europe’s vaccination push to curb the spread of the coronavirus, the backdrop for equities is looking rosier heading into September. The region’s equity benchmark is set to post a gain of about 2.4% for August, during which it hit a series of record highs.

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Stocks wobbly after hitting record; dollar falls

Brief: Stocks fluctuated as traders assessed whether lofty valuations can withstand the unwinding of pandemic-era stimulus. The S&P 500 edged lower after hitting its 12th all-time high in August, while European shares retreated as a governing member of the region’s central bank said it may be time to discuss the bond-buying program. Investors also sifted through data showing a drop in U.S. consumer confidence, the biggest jump in home prices in more than 30 years and signs of a slowdown in Chinese growth. The dollar declined. American equities still headed toward their seventh straight monthly advance -- the longest winning streak since January 2018 -- amid a tonic of strong corporate profits and moderate monetary policy. The rally is stirring doubts, with warnings mounting over a slower economic recovery as the delta coronavirus variant delays reopenings in some parts of the world.

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City Centers Are Bouncing Back from the Pandemic Lows

Brief: One of the major lifestyle trends emerging from the pandemic has been movement out of cities to smaller suburban or rural locations. U.S. Postal Service change-of-address data showed that in the February – July 2020 period, New York City saw a 487% increase over 2019 in change of address forms to other locations. Chicago saw its change-of-address requests double from 2019.Remote working allowed many people the opportunity to relocate to places with less density and more distance between neighbors. In New York, the move to home offices has led some commercial office towers to begin converting to apartments. It’s one sign of a changing downtown environment in many cities. But are these trends here to stay? In the latest episode of The Economists, CME Group Chief Economist Blu Putnam and Senior Economist Erik Norland look at the health of cities 18 months into the pandemic and explore whether the movement trend was only temporary.

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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, August 30, 2021:

  • The United States will push forward with plans to administer booster shots at the eight-month mark, according to the nation’s top infectious disease expert. Dr. Anthony Fauci says his administration is focused on plans to deliver the shots in a quick and efficient way. The boosters will be first be given the week of Sept. 20 and will require approval from the Food and Drug Administration (FDA). Although some countries such as Israel are offering boosters after only five months, Fauci says the U.S. will stick with its plan for eight months, and will continue to review emerging data. 
  • In Canada, the province of Alberta accounts for one third of all active Covid-19 cases. With daily case numbers reaching over 1000 for the past three days, the province leads the country for new daily and active cases. The province reported a total of 1168 new cases on Friday, bringing the total case count to 9655 with five deaths recorded over a 24-hour period.  Meanwhile in Ontario, Premier Doug Ford will be bringing in a vaccine passport for the province, despite saying for weeks that he would not do so. The decision was made in hopes of avoiding more lockdowns and restrictions. 
  • In the United Kingdom, experts are concerned about the uptake for the second dose of vaccine, as official data shows that hundreds of thousands of people have yet to come forward. The data from Public Health England (PHE) shows that nearly 20.4 million people ages 50 and over in England have had their first dose, while just under 19.9 million have had their second – a difference of about 500,000. While conversations about booster jabs and shots for children have dominated public discourse, experts maintain that ensuring all adults receive their first two doses is most important. 
  • In Germany, thousands of people marched on the streets of Berlin in protest of new coronavirus restrictions being imposed on unvaccinated individuals.  The Associated Press reported that there were nine different demonstrations on Saturday, despite bans on several of the protests. Currently in Germany individuals need to be vaccinated, have a negative Covid-19 test, or recent recovery in order to enter indoor events and restaurants, or to visit hospitals and nursing homes. As the delta variant surges, the government is considering putting stricter rules in place for unvaccinated individuals. Currently about 60% of the German population is fully vaccinated.
  • New Zealand reported their first death linked to the use of a Covid-19 vaccine. A woman suffered from myocarditis, an extremely rare but known side effect of the Pfizer jab. Myocarditis is an inflammation of the heart muscle that can limit its ability to pump blood. The report comes as New Zealand announces 53 new cases, bringing the nation’s total to 562 for the current outbreak. "The benefits of vaccination with the Pfizer COVID-19 vaccine continue to greatly outweigh the risk of both COVID-19 infection and vaccine side-effects, including myocarditis," the health ministry said in a statement. 
  • Australia’s death toll has exceeded 1000, as the country struggles to contain the delta variant. The number climbed to 1003 after four more deaths were reported on Monday. Despite being a grim milestone for Australia, the number is low in comparison to other developed nations. New South Wales also reported over 1200 new cases, as authorities warned hospitalizations and deaths would likely continue to increase in the coming weeks. Australia plans to start easing restrictions when 70% of adults are fully vaccinated, a plan that’s based on modelling from the Doherty Institute. 

Covid-19 – Due Diligence And Asset Management

ECB’s Villeroy Hints at Looming Slowdown in Pandemic Bond-Buying

Brief: European Central Bank Governing Council member Francois Villeroy de Galhau said policy makers should take into account more favorable financing conditions in the region when they decide on the pace of emergency bond-buying next week, hinting a slowdown may be in the cards. Any changes in the program dubbed PEPP would not amount to tapering like that announced by U.S. Federal Reserve Chair Jerome Powell on Friday, according to Villeroy, who is also the governor of the Bank of France.  Yet the ECB should be coherent with the principle that has led it to purchase assets at a significantly higher pace since March to ensure conditions supported a recovery in the euro area.  “On monthly volumes, we are looking at the favorable financing conditions, and we should underline that they are more favorable than at our June meeting,” Villeroy said on BFM Business radio. “We have to decide the monthly volumes for the fourth quarter.”

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Crossmark’s Doll Says Economy Good Enough to Buoy ‘Tired’ Stocks

Brief: The stock market rally may be getting “a little tired” but it has more than enough fuel to continue, says veteran strategist Robert Doll. The Standard & Poor’s 500 Index is up more than 20% this year and has rallied more than 90% since a plunge near the beginning of the Covid-19 pandemic in March 2020. Some investors are concerned that such a high valuation may not be sustainable, with the delta variant still hindering growth in some businesses. A “still good” economy means that stocks will “generally go up,” Doll,  chief investment officer at Crossmark Global Investments Inc., said in an interview on Bloomberg TV’s Surveillance on Monday.   “A good economy means good earnings so the path of least resistance has been and likely will continue to be to the upside.”

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Wall Street awaits Zoom's next act as pandemic boom cools

Brief: When stay-at-home favorite Zoom reports quarterly results on Monday, Wall Street will look for details on how the video conferencing platform plans to attract more users as its meteoric growth brakes to its slowest rate since going public. Zoom's revenue growth has been decelerating as the economy slowly reopens, users complain of "Zoom-fatigue" and as vaccinated people return to school and offices. Wall Street analysts expect revenue to grow only 49% in the to-be-reported quarter, compared with multiple-fold growth rates in the past year. Zoom raked in millions of new users as the pandemic forced more people to work, study and communicate with friends and family remotely. The company is now looking to win bigger contracts from businesses, an area dominated by rivals like Cisco, Microsoft's Teams and Salesforce's Slack."Long term, we expect Zoom will grow into a broader enterprise communication and collaboration platform," said Rishi Jaluria, RBC Capital Markets analyst.

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Asia-Pacific stocks rise; Australia shares recover from earlier slip as Covid infections spike

Brief: Shares in Asia-Pacific mostly rose on Monday trade, with Australian stocks recovering from an earlier slip as Covid cases in the country spike. In Japan, the Nikkei 225 advanced 0.54% to close at 27,789.29 while the Topix index gained 1.11% to 1,950.14. South Korea’s Kospi ended the trading day up 0.33% at 3,144.19. Mainland Chinese stocks were mixed on the day as the Shanghai composite rose 0.17% to 3,528.15, while the Shenzhen component dipped fractionally to 14,423.37. Hong Kong’s Hang Seng index closed 0.52% higher at 25,539.54. The S&P/ASX 200 in Australia closed 0.22% higher at 7,504.50. The country’s most populous state New South Wales had reported on Monday a record one-day rise in new Covid-19 infections, according to Reuters. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.91%. Investors in the region looked ahead to the release of earnings from Chinese food delivery giant Meituan on Monday.

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Wall Street during the pandemic: The impossible is now commonplace

Brief: Despite the seemingly endless supply of brainpower and cutting-edge technology that’s put to work in financial markets, at times it feels as if nobody knows anything. That’s perhaps the hardest-to-digest lesson learned—or at least reinforced—from the past year and a half, during which the U.S. stock market doubled at the fastest pace since 1932: The accrued wisdom of Wall Street can be a swiftly depreciating asset. “If someone would have told me in March of last year, when COVID was first rearing its ugly head, that 18 months later we would have case counts that are as high—if not higher—than they were on that day, but that the market would have doubled over that 18-month period, I would have laughed at them,” says Steve Chiavarone, a portfolio manager and head of multi-asset solutions at Federated Hermes Inc.

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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, August 27, 2021:

  • In the United States, the Biden administration’s temporary ban on evictions has ended, as the Supreme Court’s majority said that they may continue, even despite the pandemic. The moratorium on evictions first ended on July 31, but the Centers for Disease Control and Prevention (CDC) reimposed it on August 3. The courts have argued that the CDC did not have the authority to reimpose the moratorium without congressional authorization. Census Bureau data shows that about 3.5 million people in the U.S. could face an eviction in the next two months.
  • In Canada, pressure is mounting in the province of Ontario for the introduction of a vaccine passport. Local health groups have said they are considering developing their own system if the province continues to resist. Ontario’s government has repeatedly said they will not introduce any sort of vaccine certificate program beyond vaccine receipts.  In B.C., the announcement of a vaccine passport has led to an increase in the number of people booking their shots. The government announced that there was about a 200% increase in the number of people registering for their vaccines since Monday.
  • In the United Kingdom, the government made a few updates to their traffic-light system that will come into effect on Monday. Seven countries were moved to the green list, including Canada, Denmark and Finland. The Azores, Switzerland, Liechtenstein and Lithuania were also added to the green list, while Thailand and Montenegro were downgraded from amber to red. Green list countries mean travellers do not have to quarantine when they return to the U.K., even despite their vaccination status. Most countries are on the amber list, meaning fully vaccinated travellers do not have to quarantine on return but they must have tests upon arrival and departure.
  • In Denmark, all Covid-19 restrictions will be dropped as of Sept. 10, as the government deems it no longer considers the virus “a socially critical disease.” The high vaccination rates in the Scandinavian country have largely contributed to the decision. “The epidemic is under control. We have record high vaccination rates,” said Health Minister Magnus Heunicke in a statement Friday. “We can drop some of the special rules we had to introduce in the fight against COVID-19.” Some 80% of the adult population in Denmark has been fully vaccinated, according to Heunicke.
  • New Zealand reported 70 new coronavirus cases, bringing the total number to 347 since the outbreak began. The country will remain in lockdown until midnight on Tuesday, with Auckland likely remaining in a “level 4” setting for another two weeks. Prime Minister Jacinda Ardern says the country will make an announcement on Monday, but that Auckland will likely remain locked down. “This is so we can get Delta under control and reopen fully and safely. We simply can’t do that if we still have a lot of Delta circulating in the community. To move safely down, we will need to be confident we have stamped it out and have cases contained and isolated,” she said.
  • In Australia, New South Wales reported 882 new cases, down slightly from the record of 1029 on Thursday. State Premier Gladys Berejiklian says she will be focusing largely on vaccination rates and hospitalizations as the situation unfolds. "They are the two things that will matter even when we start to live life more freely at 70% and then obviously at 80% ... we are starting to make that mind change in New South Wales," Berejiklian said during a media conference. Neighbouring Victoria state reported 79 new local cases, 26 of which had unknown origins.

Covid-19 – Due Diligence And Asset Management

Exit game: Central banks' shift from crisis policies gathers momentum

Brief: While the financial world waits for the Federal Reserve to start reversing its ultra-loose policy stance, recent moves by a clutch of other central banks signal the days of pandemic-era accommodation are already numbered even as COVID-19 continues to impede smooth economic recoveries around the world. South Korea's central bank on Thursday raised its benchmark interest rate by a quarter of a percentage point to blunt rising financial stability risks posed by a surge in household debt, becoming the first major monetary authority in Asia to do so since the coronavirus broadsided the global economy 18 months ago.Even before the rate hike in South Korea, though, central banks in Latin America and eastern and central Europe had begun lifting interest rates this year to beat back inflation that is building on the back of currency fluctuations, global supply chain bottlenecks and regional labor shortages.

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Powell: Delta variant stifles tapering despite strong progress towards maximum employment

Brief: The Federal Reserve continues on its path towards tapering its quantitative easing programme, but rising uncertainty resulting from the Delta variant has stifled economic confidence. Speaking at the Jackson Hole symposium, Fed chair Jerome Powell said the strong monetary policy employed over the past 18 months had led to a "vigorous but uneven recovery", one which stands as "historically anomalous". He referenced the July meeting of the Fed, in which he and his fellow bankers suggested the tapering of its QE programme "could be appropriate", however despite continued progress towards maximum employment, the uncertainty of the Delta variant had left "much ground to cover". Powell highlighted lessons learned from the period of the 1950-80s in which stabilisation policy enacted too soon in response to transitory inflation had created a negative effect as evidence for the current policy.

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U.S. Consumer Sentiment Remains Depressed in Late August

Brief: U.S. consumer sentiment remained weak in late August amid ongoing concerns over inflation and the coronavirus pandemic. The University of Michigan’s final sentiment index fell to a near-decade low of 70.3 during the month from 81.2 in July, data released Friday showed. The figure was in line with the preliminary reading and just below the median estimate of 70.8 in a Bloomberg survey of economists. “Consumers’ extreme reactions were due to the surging Delta variant, higher inflation, slower wage growth, and smaller declines in unemployment,” Richard Curtin, director of the survey, said in a statement. “The extraordinary falloff in sentiment also reflects an emotional response, from dashed hopes that the pandemic would soon end and lives could return to normal without the re-imposition of strict Covid regulations,” he said.

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Bankers in the Basement as U.K. Lender Rolls Out Hybrid Offices

Brief: Some two dozen Metro Bank Plc office staff got an early taste of what hybrid working will look like this week as they trialled their firm’s new approach to office life. Hovering outside the lender’s Moorgate branch in the City of London until it opened at 8:30 a.m., colleagues on the bank’s financial crime team greeted each other in person on Thursday after a year and a half of remote work. Walking into the branch, they turned left and passed through a glass gate before descending into a newly opened basement office below the store.The new space is part of a sweeping overhaul of the bank’s estate as the firm adopts a hybrid work model. It has vacated its standalone office building and redeveloped 78 of its branches to create office space above -- and in some cases below -- its branches. The bank, which employs about 3,000 office workers, has 1,100 desks under the new hybrid system. From Sept. 13, teams will have access to offices via a bookings system that allows staff to book a desk in their neighborhood up to six weeks in advance.

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Emerging Asia and Russia lead emerging markets through global reopening

Brief: Emerging Markets (EM) hedge funds, led by funds investing in India, Russia, China, and the Middle East, extended strong gains through mid-year 2021 as EM hedge fund capital eclipsed another record, with performance again topping gains in EM regional equity markets and complemented by volatile cryptocurrencies. The HFRI Emerging Markets (Total) Index has returned +8.1 per cent YTD 2021 through July, led by the HFRI Emerging Markets: India Index, which surged +33.3 per cent, while the HFRI Emerging Markets: Russia/Eastern Europe Index vaulted +16.3 per cent YTD, as reported today with the releases of the HFR Asian Hedge Fund Industry Report and the HFR Emerging Markets Hedge Fund Industry Report from HFR. The investable HFRI 500 Fund Weighted Composite Index, which includes funds across all regions in both Emerging and Developed markets, has gained +8.8 per cent YTD 2021 through July.

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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, August 26, 2021:

  • In the United States, hospitalizations have reached more than 100,000, a level not seen since January. On Wednesday there were 100,317 people hospitalized with the coronavirus, and that number has been steadily increasing since July. Hospitalizations have increased by 10% in the past week alone and have nearly tripled in the past month. Florida has the highest number of hospitalizations at more than 17,000, followed by Texas which has more than 14,000. Despite the rise in hospitalizations, the number of deaths has stayed relatively low, with the daily average at about 1100 on Wednesday.
  • In Canada, Air Canada announced a strict vaccine policy for all of its employees, requiring them to be fully vaccinated by Oct. 30. The policy will also apply to prospective employees. “Under the mandatory vaccination policy, testing will not be offered as an alternative. While Air Canada will fulfil its duties to accommodate employees who for valid reasons, such as medical conditions, cannot be vaccinated, failure to be fully vaccinated by October 30, 2021 will have consequences up to and including unpaid leave or termination, except for those who qualify for accommodation,” the company said in a press release. 
  • In the United Kingdom, researchers in Britain have found that vaccine effectiveness begins to fade after six months. According to the analysis from the U.K.’s ZOE Covid app study, the effectiveness of the Pfizer-BioNTech vaccine falls from 88% to 74% after five to six months. The same study showed that the effectiveness of the Oxford-AstraZeneca vaccine falls from 77% to 67% after four to five months. The study is based on data provided by over a million app users and was collected after May 26, when the delta variant became the dominant strain.
  • In Brazil, Covid-19 booster shots will be administered to those 70 and older or those who are immunocompromised.  The boosters will be administered beginning in mid-September, the health ministry said. Only vaccines from Pfizer, Johnson & Johnson and AstraZeneca will be used for the boosters, while Sinovac’s Coronavac vaccine will not be used. Those with suppressed immune systems will get their third shot 28 days after their second dose, while those 70 and older get theirs around the six-month mark. So far about 59% of people in Brazil have received at least one dose of vaccine, while 26.5% are fully vaccinated.
  • Japan has suspended the use of 1.63 million doses of the Moderna vaccine after contamination particles were found in several vials. Contamination was reported from multiple vaccinations sites according to the health ministry, although they did not elaborate on what type of contamination.  Takeda Pharmaceutical Company, who is responsible for sales and distribution of the Moderna shot in Japan, said that they informed Moderna and requested an emergency investigation. Takeda also said that they did not receive any reports of adverse health effects as a result of distributing the affected doses. 
  • In Australia, New South Wales (NSW) reported 1029 new Covid-19 cases, topping 1000 for the first time since the pandemic began and exceeding the previous day’s record of 919. As the country continues to struggle with the delta variant, some hospitals are setting up emergency tents outdoors to help address the increase in patients. NSW State Premier Gladys Berejiklian says the system can deal with the pressure it’s under once more people are vaccinated. She says NSW can reach the 70% vaccination level by mid-October. Currently about 32% of people ages 16 and older in Australia are fully vaccinated.

Covid-19 – Due Diligence And Asset Management

The hybrid work revolution is already transforming economies

Brief: Even in the 19th century, workers were beginning to resent the grind of office life. “You don’t know how wearisome it is to breathe the air of four pent walls without relief, day after day,” British essayist Charles Lamb wrote in a letter to poet William Wordsworth back in 1822, railing against his toil in the East India’s Company’s office in Leadenhall Street, London.For the last 17 months, however, Lamb’s modern successors have mostly worked from home, liberated from what he termed “official confinement.” Today’s white-collar staff are living through a radical transformation of professional life, one economists say is already beginning to jump-start economic productivity and accelerate innovation. The pandemic has weakened the gravitational pull of city centers, with new forces now reshaping knowledge-based economies.

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Asset managers look to cloud and AI to drive Covid-19 recovery, says new Temenos survey

Brief: Investment in technology and data infrastructure sit at the top of asset managers’ priorities as they position themselves to deliver business growth in the recovery from the Covid-19 pandemic. Fifty six per cent say their investment will focus on these areas over the next 12 months and for almost half (47 per cent) on ensuring ESG compliance across their product range. That's according to a new report by Funds Europe – The Future of Investment Operations – for Temenos (SIX: TEMN), the banking software company.The survey of global investment professionals across the asset management sector also reveals Covid-19 has pushed firms to review their IT strategies and transition to the public/hybrid cloud.

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Euro-Area Consumers Shrug Off Pandemic But Firms Struggle

Brief: Lending to euro-area consumers resumed its pre-pandemic trend, supporting a recovery that’s increasingly driven by private spending. By contrast, credit growth to companies slowed further in July after spiraling last year when lockdowns paralyzed the economy and eroded income, ECB data showed Thursday. With lending an early indicator for investment, this trend could become a reason for concern if it persists into 2022, according to ING’s Carsten Brzeski.

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Oaktree Seeks Hidden Gems in a World of Low Returns, Marks Says

Brief: Howard Marks, co-founder of distressed debt firm Oaktree Capital Management LLC, says he’s looking to find “hidden gems” in a world where too many buyers are driving returns down. “Ever since the Fed and the Treasury and the world’s central banks rescued the global economy,” and the Fed injected trillions of dollars into markets, investors have became “forced buyers,” Marks said in a video interview Wednesday afternoon. That turned bargain hunting into a “very challenging” activity, he said. Oaktree is one of the largest specialists in distressed debt, with about $37 billion committed to credit and private equity from troubled companies. The Los Angeles-based fund has thrived in times of economic stress, when bonds of companies in danger of defaulting fall to deep discounts.

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A WeWork SPAC Was Looking Promising. Then Delta Happened

Brief: After a planned initial public offering blew up spectacularly in 2019, WeWork Inc. was counting on the post-Covid era of flexible working to staunch big cash outflows and gain a fresh start. Its attempt to go public (again) is premised on people now preferring its shared workspaces over traditional corporate offices.But with virus cases surging in key markets like the U.S. and U.K., its recovery isn’t going as well as hoped. Last week it warned that full year revenues would be lower, and losses larger, than previously forecast. U.K.-listed rival IWG PLC issued a similar warning in June. There are signs that WeWork and IWG have overcome the worst — revenues have picked up again since the spring — but both are still losing money. The next weeks are therefore crucial: Even as virus worries re-emerge, they need to boost occupancy so their revenues better cover costs.

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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, August 25, 2021:

  • In the United States, Dr. Anthony Fauci, the country’s top infectious disease expert, says the fourth wave of Covid-19 could be under control by Spring 2022. With the FDA giving its approval for the Pfizer shot, Fauci says more people in the U.S. should be getting vaccinated. "I would like to appeal to the people in the country who are not vaccinated to realize that we have the capability, among ourselves, to essentially cut down the time frame to getting to the end of this pandemic," said Fauci during a press conference. Fauci said he also expects the Moderna and Johnson & Johnson vaccines to get FDA approval in the coming weeks.  
  • In Canada, the province of Quebec is preparing to launch its vaccine passport on September 1. The smartphone applications that will run the system were available for download as of Wednesday. Residents of Quebec were sent a response code by the Health Department as proof of vaccination. Beginning September 1, residents ages 13 and up will be required to show proof of vaccination to access non-essential services such as restaurants, gyms, bars and cinemas. In order to read the QR codes, businesses will be required to download a special application. Residents can also show a paper version of the code or present an image of the code on their phones. 
  • In the United Kingdom, Scotland will hold a public inquiry into the way the pandemic was handled by authorities by the end of the year. First Minister Nicola Sturgeon made the announcement at her Covid-19 briefing, confirming the plans to establish a judge-led inquiry. The inquiry will look at decisions that were made throughout the pandemic and examine aspects like deaths in care homes. Sturgeon also warned at the briefing that new Covid-19 curbs could be introduced in Scotland if case numbers continue to rise.  U.K Prime Minister Boris Johnson’s government has also committed to holding an independent public inquiry, but it is not set to begin until next year.
  • In France,  the Haute Autorite de Sante (HAS) health watchdog has recommended Covid-19 booster shots for those over 65 or those with existing medical conditions. The booster shots would be available to those who have already had two doses of vaccine and would consist of an mRNA vaccine such as Pfizer or Moderna.  Last month the health ministry announced booster shots would become available to the country’s most vulnerable. The World Health Organization (WHO) has called for a moratorium on booster shots until at least the end of September, to address global inequities in vaccine distribution.
  • Germany will stop using incidence levels as its key measurement system for determining whether Covid-19 restrictions should be imposed. Chancellor Angela Merkel said on Monday that vaccinations in the country are rising and as such, the incidence rate will be dropped as a measure for determining whether lockdowns are necessary. "We decided today that we no longer need comprehensive protective measures when the number of cases or incidence is 50, because a large proportion of the people are vaccinated," Merkel said. Merkel says instead of the incidence rate, the government will monitor hospitalizations as an indicator as to whether the healthcare system is overly strained.
  • In Australia, despite being locked down, major cities of Sydney and Melbourne are still grappling with the delta variant. New South Wales (NSW) reported a record number of 919 new Covid-19 cases on Wednesday. Officials say parts of the healthcare system are now under pressure. Neighbouring Victoria state reported 45 new cases, down from 50 a day earlier. Officials in Melbourne sought to speed up the vaccine rollout by offering shots to anyone 16 and older.  About 31% of people ages 16 and older in Australia have been fully vaccinated, while about 54% have received at least one dose.

Covid-19 – Due Diligence And Asset Management

Geopolitical tensions and new Covid-19 variants top investor concerns

Brief: Fears of a new wave of increasingly contagious strains of Covid-19 have knocked investor confidence, with few prepared to make any changes to their portfolio. A poll by interactive investor of 1,617 visitors to its website between 17 and 23 August 2021 found 57% had concerns over the impact further outbreaks of Covid-19 would have on their portfolio. New variants of the virus topped the list of concerns for almost a quarter of the respondents, while almost a third said they were concerned about both new variants and a new wave of the virus. A fifth of those that took part in the poll said they would be increasing their exposure to the stock market, confident that markets will need to get used to Covid-related shocks. However, 65% confirmed they would not be making any changes to their investments.

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Most return-to-office plans will be flexible, new study says

Brief: As workplaces across the country unveil return-to-office plans, a new survey has found that most employers are shifting away from requiring work to be done in the office full-time. According to an ADP Canada survey conducted by Maru Public Opinion, more than half of Canadian workers will no longer be required to work in the office five days a week. One-third (33 per cent) of employees surveyed say they are expected to return to the office between two and three days a week, while slightly more than one-fifth (21 per cent) say they will have a flexible schedule with no set days in the office. The survey found that 40 per cent of employees will still be expected to come into the workplace five days a week, although Ann Buckingham, executive HR manager at ADP Canada, says this figure largely reflects industries where employees have to be in-person, such as manufacturing.

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BOJ Sees Delta Variant Delaying Recovery More Than Expected    

Brief: Japan’s economic recovery will be delayed more than previously expected as the delta variant pushes up infections to record levels, according to a Bank of Japan board member. “The current spread of infections is more than expected at the time of the July policy meeting,” Toyoaki Nakamura, one of nine members on the board, told reporters in Tokyo. “Downward pressure on the economy is going to continue for the time being.” Prime Minister Yoshihide Suga looks set to expand Japan’s state of emergency to almost 80% of the economy later Wednesday as he tries to contain the latest wave of cases that has put extra strain on the medical system. Nakamura said an expected spending uptick built on pent-up demand had failed to emerge in the summer break as surging infections kept consumers cautious.

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Goldman Requires Vaccines, Masks at Work to Fight Delta Variant

Brief: Two months after Goldman Sachs Group Inc. led Wall Street’s return to the office, it’s copying pages from the pandemic playbooks of its more cautious rivals, requiring employees to don masks and prove they’ve been vaccinated against Covid-19 to enter the U.S. workplaces. The more stringent safety measures, announced to staff on Tuesday, signals escalating caution at Goldman, which greeted the return of employees in June with live music and food trucks. Masks will be required starting Wednesday regardless of vaccination status, a company spokeswoman said. People who aren’t fully vaccinated by Sept. 7 will be expected to work from home, she said. Goldman’s decision means all six U.S. banking giants have now instituted some sort of broad mandate that employees get shots or don masks inside buildings -- or in some cases do both.

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Three ways investors are playing the resurgent reopening trade, according to two market analysts

Brief: Exchange-traded fund investors might be able to take advantage of the rebound in reopening trades. Stocks traded higher Tuesday after the Food and Drug Administration granted Pfizer and BioNTech’s Covid-19 vaccine full approval. Travel, energy and retail stocks were some of the biggest gainers. This means the market is now at an “inflection point,” J.P. Morgan Asset Management’s Bryon Lake told CNBC’s “ETF Edge” on Monday. “We do think that there’s an opportunity for investors to continue to participate in the reopening trade through the end of the year,” the firm’s head of Americas ETF client said. Three key areas are of particular interest to investors as they reposition for the second half of 2021, Lake said: income, short-duration investments and value.

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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, August 24, 2021:

  • In the United States, the Food and Drug Administration (FDA) has officially approved the Pfizer-BioNTeech Covid-19 vaccine. It is the first time a Covid-19 vaccine has received approval beyond emergency status since the pandemic began. The decision applies to vaccines for people ages 16 and older, while vaccines for children ages 12-15 remain under emergency authorization. “While millions of people have already safely received COVID-19 vaccines, we recognize that for some, the FDA approval of a vaccine may now instill additional confidence to get vaccinated,” said FDA Acting Commissioner Janet Woodcock. 
  • In Canada, many major sporting and cultural events will require attendees to be vaccinated or show proof of a negative Covid-19 test. The Blue Jays recently announced that proof of vaccination or a negative test will be required at their baseball games beginning on Sept. 13. The Toronto International Film Festival made a similar announcement, saying it will require proof of vaccination or a negative test for all staff, audience members and visitors. The Calgary Flames are also on board, requesting that all fans and employees be fully vaccinated by Sept. 15 in order to attend events at the Saddledome or McMahon Stadium. 
  • In the United Kingdom, deaths from Covid-19 are now averaging at 100 per day. According to figures released from Public Health England, the seven-day average for deaths within 28 days of a positive test now rests at 100. After a significant fall in mid-July, case numbers have begun to rise again with 31,914 reported on Monday. Scientists are warning that cooler temperatures brought by the fall and winter, combined with students returning to schools, could further drive up case numbers and deaths. Some scientists have suggested that this could mean the return of social distancing rules and face masks. 
  • In Japan, the government made an appeal to hospitals in Tokyo to accept more Covid-19 patients. Currently Tokyo hospitalizes fewer than one in 10 patients for coronavirus. "The Delta variant's strong infectiousness just isn't comparable to previous ones," said Health Minister Norihisa Tamura. "We would like to have further support from the medical community to secure hospital beds for coronavirus patients." Japan reported more than 25,000 daily infections in the past week, with only about 40% of the population fully vaccinated.  The situation has generated public frustration with Prime Minister Yoshihide Suga and his government’s response to the pandemic.
  • New Zealand has extended its nationwide lockdown until midnight on August 27, though Auckland will have restrictions in place until at least August 31. As case numbers jump, the health ministry said in a statement that it would not be unusual to see a rise in daily case numbers at this stage of the outbreak. New Zealand saw the highest increase in cases since April 2020, with 41 new cases recorded, taking the total number of infections in the country to 148. Authorities have said that despite the rising cases, the numbers are not rising exponentially and the majority of cases are still contained in Auckland.
  • In Australia, New South Wales (NSW) saw a total of 753 new cases, down slightly from the previous day, as their lockdown continues. NSW Premier Gladys Berejiklian said that officials are in talks about potentially giving more freedoms to vaccinated people. Currently about 30% of Australia’s eligible population is fully vaccinated, while 53% have had at least one shot. The Doherty Institute, the government’s pandemic modelling advisor, said the country can move forward with its reopening plans once 70-80% vaccination levels are reached. “It doesn’t matter whether it’s 30 cases or 800 cases, the conclusions are the same, and that’s what the Doherty Institute said … we can do this safely and we do need to do it,” said Prime Minister Scott Morrison on Nine News.

Covid-19 – Due Diligence And Asset Management

Scotiabank, BMO Earnings Get a Boost From Canada’s Reopening

Brief: Earnings at Bank of Nova Scotia and Bank of Montreal got some help from Canada’s economic reopening. The banks reported fiscal third-quarter results on Tuesday that topped analysts’ estimates on gains in domestic personal and business loans as well as continued strength in the Canadian housing market. That helped make up for slower rebounds in the lenders’ U.S. and international businesses. Canada’s vaccination campaign trailed the U.S.’s by a few months, pushing the revival of activities like restaurant dining and nonessential shopping across much of the country into June. The strong domestic results for Bank of Montreal and Scotiabank likely reflect that “initial jolt” of activity from the early phases of the reopening, said Paul Gulberg, an analyst at Bloomberg Intelligence.“Canada looks fairly decent,” he said in an interview. “You have modest growth in loans, and it looks like it’s in both consumer and business lending, not just the mortgage business.”

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Citi Sued for Profiting From Fund’s Demise as Covid Struck

Brief: Citigroup Inc. is facing a lawsuit for pulling support from a European credit fund as the Covid-19 pandemic roiled the markets, then giving its own traders a potential profit at the fund’s expense. The New York-based bank was sued by Ver Capital Partners in London for forcing the fund to default on a 224 million-euro ($263 million) loan in March 2020 and selling linked assets to its trading desk. This liquidation process created a conflict of interest at the bank, while ignoring the chance of better offers from other possible buyers and leaving the fund further out of pocket, Ver said in a legal filing. Citigroup undervalued the assets it sold to the traders, acting “with the intention of generating a profit for itself” at the expense of “the best price reasonably obtainable,” Ver’s lawyers said in the filing made available last week.

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Employers ready to embrace remote and hybrid working in post-pandemic years

Brief: Hybrid working looks likely to be the working model of the future, with just three-in-10 employees expecting their workforce back onsite full time in two years’ time, a survey by Willis Towers Watson has found.The majority (85%) of businesses have anticipated that most employees who would like to return to the workplace will have done so by the end of 2021, the insurance company found, however working practices are unlikely to return to their pre-pandemic state. Employers have estimated around a quarter (23%) of the workforce will work remotely on a full-time basis in two years' time, while just more than two-in-five (41%) will embrace hybrid working. Lucie McGrath, director of health and benefits GB at Willis Towers Watson, said hybrid working was here to stay, adding: "We've all weathered a huge amount of change over the last two years. Employers should think carefully about how to support their employees' mental health as we adjust to the new working world."

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Morgan Stanley’s Slimmon Says Buy Reopening Before Too Late

Brief: When clients call Andrew Slimmon for advice on how to position their portfolios given the rapid spread of the delta variant, he tells them in no uncertain terms: Prepare for an economic recovery, and soon. Slimmon, who oversees about $7.5 billion at Morgan Stanley Investment Management, says it’s not unusual to see economic hiccups this time of year. Going forward, “people will turn a little bit more optimistic,” which bodes well for equities that have sold off due to Covid-related worries. Rates could bottom in the coming months and recover in the fourth quarter as well, he added.“The opportunity set is in those stocks that got hit the most, namely the cyclical stocks, the energy stocks, the reopening stocks -- those are the ones that are down the most,” he said in an interview.

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Cramer says people were ‘desperate’ to buy stocks after FDA’s Pfizer vaccine approval

Brief: The rally on Wall Street after Pfizer’s Covid vaccine received full approval from the Food and Drug Administration showed “people are desperate to get into stocks,” CNBC’s Jim Cramer said Monday. “You rarely see a market that’s this straightforward, but anything with any cyclicality roared today on the Pfizer story,” the “Mad Money” host said. The S&P 500 advanced 0.8% to close at 4,479.53, while the Dow Jones Industrial Average added 215.63 points, or 0.6%, to finish at 35,335.71. The tech-heavy Nasdaq outperformed, rising 1.5% to close at 14,942.65. “What’s the market telling us here? ... It’s saying that people are desperate to get in, desperate to buy stocks even if they have to pay up. Now there’s a word for these gains, and that word is obvious,” Cramer 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 Covid-19 may impact your business.

Our briefing for Monday, August 23, 2021:

  • In the United States, a ban on non-essential travel for Canada and Mexico has been extended for another month. The ban, which was first put in place in March 2020, will be extended until at least Sept. 21. The Department of Homeland Security said they’re working closely with medical experts to determine how normal travel can resume.  The U.S. still bans most non-U.S. citizens who within the last 14 days have been in the United Kingdom, China, India, South Africa and Brazil as well as 26 countries in Europe. Earlier this month Justin Trudeau’s government allowed fully vaccinated American tourists to enter Canada for non-essential reasons. 
  • In Canada, several industry groups in the province of B.C. are calling for vaccine passports. The groups sent a letter to B.C. Premier John Horgan on Thursday, asking for a proof of vaccination program to be mandated by government and health officials. The groups ask for the program to be mandated so that “the onus of enforcing the program does not fall on businesses.” The letter was signed by 10 industry groups including the B.C. Hotel Association, the Tourism Industry Association of B.C., and the Retail Council of Canada. Quebec has already announced a vaccine passport program that will begin on Sept. 1.
  • In the United Kingdom, the government has removed 57 private Covid-19 test providers from their website because they no longer provide the right kind of tests. Further, more than 80 test providers will be issued two-strike warnings over misleading prices. The tests are mandatory for international travellers entering the U.K., but one of the biggest complaints from travellers has been that the costs of the tests don’t actually match the costs listed on the website. "It is absolutely unacceptable for any private testing company to be taking advantage of holidaymakers and today's action clamps down on this cowboy behaviour,” said Health Secretary Sajid Javid.
  • In France, the government’s health pass has come into effect, despite the number of protests that have taken place across the country. For a sixth consecutive week, thousands of people marched in cities across France, with four different demonstrations taking place in Paris. Protesters marched with flags and banners that had the word “Liberty” on them as they chanted “Macron, we don’t want your pass!” Protesters believe the health pass restricts their freedom, as it is now required for entry to restaurants and cafes, sports and cultural venues and for long-distance travel. Recent polls have shown that the majority of people in France still support the health pass.
  • South Korea will receive another 7.01 million doses of Moderna by the first week of September. The health ministry said that about 1 million of those doses will arrive by Monday after the government made a request for delivery to speed up. The statement comes shortly after Moderna informed South Korea that they’d only be able to deliver less than half of the 8.5 million doses that were expected in August. "In response to our request to speed up and expand the vaccine supply, Moderna informed us that it will supply 7.01 million doses by the first week of September," the ministry said in the statement.
  • In Australia, New South Wales saw a total of 830 new cases on Sunday as their lockdown continued. Police reported that breaches of public health orders have resulted in 940 fines in the past 24 hours. Prime Minister Scott Morrison defended the lockdown strategy on Sunday, saying it will remain in place until at least 70% of the population is vaccinated. "Lockdowns are not a sustainable way to deal with the virus and that's why we have to get to the 70% and 80% marks, so we can start living with the virus," Morrison said during a television interview.

Covid-19 – Due Diligence And Asset Management

Dividend payouts to hit $1.4 trillion in 2021, nearing pre-pandemic levels, research shows

Brief: Dividends paid to investors are projected to hit $1.39 trillion in 2021, reflecting a recovery that’s stronger than expected, according to a new report from British asset manager Janus Henderson. The 2021 forecast for dividends is just 3% below the pre-pandemic peak, the firm found. Dividend payments in the second quarter jumped 26% from the same period last year to $471.7 billion, just 6.8% below the levels seen in the second quarter of 2019. Janus Henderson projected that dividend payouts will return to pre-pandemic highs within the next 12 months. The research, published Monday, said 84% of companies around the world either increased or maintained their dividends compared to the same quarter in 2020. Much of the growth was attributed to companies restarting frozen payouts and issuing higher special dividends on the back of strong earnings. Underlying dividend growth in the second quarter, stripping out the effects of special dividends and exchange rates, was 11.2%.

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Goldman, BofA See Lost Decade Over for Emerging Markets

Brief: Expectations for a recovery in commodity prices and earnings growth are igniting bullish bets on emerging-market equities after more than a decade of underperformance that left them approaching a 20-year low against developed-nation stocks. Goldman Sachs Group Inc., Bank of America Corp. and Lazard Asset Management expect a boost for developing equities as investors capitalize on cheap valuations once vaccine rollouts pick up, helping the global economy to recover from the pandemic. South Africa, Russia and Brazil are among markets set to benefit, even as China’s regulatory crackdown continues to weigh on Asian equities. In the decade following the global financial crisis, MSCI Inc.’s emerging-market stock index gained just 8%, while the benchmark for developed nations more than doubled. That’s partly due to the slowdown of Chinese economic growth from above 10% in 2010 to around 6% by the end of the decade, resulting in a decline for commodity prices and weak earnings growth.

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UK growth slows to six-month low as post-lockdown shortages bite

Brief: Britain's post-lockdown economic rebound slowed sharply in August as companies struggled with unprecedented shortages of staff and materials, though strong inflation pressures cooled a bit, a survey showed on Monday. The IHS Markit/CIPS flash composite PMI dropped for the third month in a row, sinking to 55.3 from 59.2 in July, its lowest since February and a sharper fall than a median forecast of 58.4 in a Reuters poll of economists. The pace of growth was still slightly above the pre-pandemic average but IHS Markit said there were clear signs of the recovery losing momentum after a buoyant second quarter. "Despite COVID-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages," Chris Williamson, chief business economist at IHS Markit, said.

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Big Canadian banks set to release earnings as economy shifts to reopening

Brief: Investors in Canada's major banks will be looking for signs of loan growth, impacts of the Delta variant and hints of what the Big Six may do with their cash reserves when they report this week. The banks are widely expected to further unwind the record-breaking amounts of money they set aside last year — at least $16.5 billion across the Big Six — to cover widespread loan defaults that never materialized. Shareholders, however, have already largely factored in the earnings boost from the reserve winddown, as was already seen in U.S. bank earnings last month, said James Shanahan, senior equity research analyst for North American financials at Edward Jones. “In some cases there were earnings beats of 10, 20, 30 per cent, and the stocks were down. So the market clearly isn’t going to reward the Canadian banks if they deliver huge earnings beats and it’s just simply related to reserve releases.”

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Energy hedge fund Westbeck’s momentum halted, as rising Covid cases send oil equities into retreat

Brief: Energy-focused hedge fund manager Westbeck Capital Management’s flagship strategy has suffered its first monthly loss in eight months, after surging coronavirus rates in China, Europe and North America dented oil markets – but the fund remains up more than 70 per cent since the start of the year. The Westbeck Energy Opportunity Fund – a long/short directional hedge fund strategy which trades a mix of oil equities, futures and options – fell 5.3 per cent in July. By comparison, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which tracks oil services companies, lost 14.4 per cent in July, while and Brent (total return) gained 2.1 per cent. The USD230 million manager – which is led by co-founders Jean-Louis Le Mee, CIO, and Will Smith, CEO and deputy CIO – has profited from a resolutely bullish stance on oil for much of this year.

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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, August 20, 2021:

  • In the United States, health officials are recommending that all Americans get booster shots. The World Health Organization (WHO) objected, citing concerns about developing countries not having enough supplies. Last week health officials recommended booster shots for those with suppressed immune systems, but the plan to extend boosters to all Americans could begin as early as Sept. 20. U.S. President Joe Biden defended the decision, saying that the extra doses are the best way to protect people from any new variants. "We have a responsibility to give the maximum amount of protection," Biden said at the White House.
  • In Canada, an increasing number of employers are choosing to make vaccines mandatory. On Thursday evening, the Royal Bank of Canada said it will require employees to be fully vaccinated by Oct. 31, while the City of Toronto recently announced that it will require all of its employees to be fully vaccinated by Oct. 30. “The City of Toronto has a duty as an employer to do everything that it can to ensure that our work environment is safe for all of our employees,” Toronto Mayor John Tory said at a news conference Thursday. The Toronto Transit Commission (TTC) immediately followed, saying vaccines will be mandatory for all TTC employees and contractors as of Sept. 13.
  • In the United Kingdom, a month has passed since England removed almost all of their Covid-19 restrictions, a move that was widely criticized by health experts and scientists. On July 19, they allowed venues like nightclubs to open at full capacity and removed almost all mask requirements. As of Monday they also removed the requirement for fully vaccinated people to quarantine when coming into contact with a Covid-19 case. Some experts are still criticizing the move to reopen, pointing at figures like the death toll which some say is still unnecessarily high.
  • In Japan, Tokyo reported 5386 new cases on Wednesday, down slightly from its record of 5773 last Friday. As the Paralympics approach, officials continue to disagree over whether the Olympics had a significant impact on rising case numbers. Tokyo is currently under a state of emergency and will remain until the Paralympics are over. The current rules in place require restaurants and bars to close early and stop serving alcohol, but Japanese media reports that about 40% of them in some parts of Tokyo are ignoring the rules. About half of the population of Japan has received at least one dose of vaccine, while only about one third are fully vaccinated. 
  • New Zealand has extended their nationwide lockdown until next Tuesday as coronavirus cases spread from Auckland to Wellington. Total case numbers have now gone up to 31, with 19 of the cases linked to the first one, a 58-year-old man in Auckland. Prime Minister Jacinda Ardern acknowledged the challenges of lockdowns and urged citizens to stay vigilant. “I know we all want to block out the memory of 2020,” she said. “We have been here before. We know the elimination strategy works – cases rise, and then they fall. It’s tried and true. We just need to stick it out. Everyone, I mean everyone, needs to play their part.”
  • In Australia, New South Wales reported 642 new cases, down slightly from 681 on Thursday. The government extended a lockdown in Sydney until the end of September and also imposed a curfew on Sydney’s worst-hit city suburbs. The curfew will run from 9:00 PM until 5:00 AM and is meant to stop the movement of young people, according to New South Wales Premier Gladys Berejiklian. "I apologise to the vast majority of people in those communities who are doing the right thing but for our health and safety moving forward we need to make these difficult decisions," Berejiklian said.

Covid-19 – Due Diligence And Asset Management

Stocks rise as investors eye lingering virus, Fed policy concerns

Brief: Stocks reversed overnight declines to trade higher Friday, as investors considered the latest batch of earnings and economic data and continued to contemplate the path forward for monetary policy. The S&P 500 rose, though the index was on track to post a weekly decline for the first time in three weeks. Both the Nasdaq and Dow also moved to the upside. Traders this week have watched a number of market concerns unfold, with infections related to the Delta variant continuing to climb and the Federal Reserve suggesting in its latest meeting minutes that officials believed the economy might recover enough by the end of the year to warrant a shift in their massive asset purchase program. New weekly jobless claims fell more than expected to a fresh pandemic-era low, signaling a notable step forward in the labor market's recovery.

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Three More Canadian Banks Mandate Vaccines for Most Staff

Brief: Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Bank of Montreal joined other major financial firms in requiring staff to be fully vaccinated against Covid-19 before returning to the office. All employees of the Toronto-based TD will be asked to register their vaccination status by Sept. 30, according to a memo sent to staff Friday. As of Nov. 1, full vaccination will be required of TD employees working in all company locations globally, a spokesman said. “We believe that the majority of TD colleagues have already been vaccinated. This is great news,” Kenn Lalonde, chief human resources officer, said in the memo. “However, Covid-19 remains with us and the delta variant, which is far more contagious, is spreading in our communities, primarily to those who are unvaccinated.”

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U.K. Budget Deficit Narrows to Almost Half of Pandemic Level

Brief: U.K. government borrowing in the first four months of the fiscal year was running at little more than half the level a year earlier as the economy returned to normality after months of restrictions.The budget deficit stood at 78 billion pounds ($106 billion) between April and July, the Office for National Statistics said Friday. That compares with 139.7 billion pounds in the same period of 2020, when the economy was under siege from the coronavirus pandemic. July alone saw the deficit narrow to just 10.4 billion pounds as self-employed workers made payments ahead of a tax deadline. The shortfall was smaller than economists forecast. Tax revenue surged by almost 16% from a year earlier, and spending fell 3.5%.

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'Gains will be harder to come by' for US economy hit by Delta variant

Brief: On Thursday morning, we noted that challenges were emerging for the health of the economic expansion, mostly due to the still-raging COVID-19 pandemic. Those signs continued into the end of this week. After highlighting that at least two Wall Street firms had either cut or cautioned on their economic growth forecasts, the team at Goldman Sachs followed this week with a reduction in its third quarter gross domestic product (GDP) outlook. Goldman's economics team led by Jan Hatzius said in a note to clients third quarter growth should come in at an annualized rate of 5.5%, well below the 9% the firm was previously forecasting. The team at Oxford Economics also published its latest weekly recovery tracker, which showed a decline for the week ending Aug. 6. Nearly all of the index's components cooling off.

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Investors expect post-pandemic recovery despite new Covid variants fears

Brief: Research from Barclays Smart Investor revealed that 63% of investors believe that pandemic-hit industries such as hospitality and travel will bounce back, even though two thirds named new coronavirus variants as their biggest concern for financial markets. The survey of 2,000 UK investors also revealed that 59% of respondents are worried about rising inflation, while half the respondents said they are concerned about a market bubble bursting by the end of the year. A tech bubble is of a particular concern, with 42% of respondents naming this as a worry. Despite these fears, however, 59% of investors revealed they are feeling optimistic about financial markets for the rest of the year, while 60% are confident the successful vaccine rollout will help markets.

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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, August 19, 2021:

  • In the United States, the Biden administration announced that vaccines will now be mandatory for employees of nursing homes. The mandatory vaccines are a condition of the facilities receiving the Medicare and Medicaid federal healthcare programs. "I'm using the power of the federal government as a payer of healthcare costs to insure we reduce those risks to our most vulnerable seniors. These steps are all about keeping people safe and out of harm's way," Biden said at the White House. Studies show that vaccinating all nursing home staff could result in at least 30% fewer Covid-19 cases, according to Biden.  
  • In Canada, new data from the Canadian Institute for Health Information (CIHI) shows that there have been nearly 95,000 Covid-19 cases reported among healthcare workers since the beginning of the pandemic. The data, which was released on Thursday, shows that cases among healthcare workers have increased 43% since January. Healthcare workers were among the first to receive their vaccines in Canada, but there is currently no data available to show how many healthcare workers have been vaccinated to date. Quebec’s numbers were the highest of all the provinces, with 45,320 cases and 13 deaths reported among healthcare workers.
  • In the United Kingdom, coronavirus cases are up 7.6% in Britain over the last week, the latest data available Wednesday showed. The numbers are the highest they’ve been since July 23, although hospitalizations and deaths in Britain remain relatively low compared to previous waves. Despite the success of vaccination campaigns, a new U.K. study shows that the vaccines may be less effective against the delta variant. The study was run by the University of Oxford and the Office for National Statistics and analyzed more than 3 million PCR tests from a random sample of people.
  • In Italy, daily coronavirus cases have risen to 7162 from 5273 the day before. Deaths have also gone up from 54 to 69 in a 24-hour period. Italy has reported 128,579 Covid-19-related deaths since its outbreak began last February, the second highest number in Europe after Britain and the eighth highest in the world. Italy’s vaccination campaign continues, with 68.1% of the population having had at least one dose, while 57.7% are fully vaccinated as of August 18.
  • In New Zealand, coronavirus case numbers are jumping as the country begins to deal with the highly transmissible delta variant. Eleven new cases were reported on Thursday, taking the total to 21 and leaving citizens to question the government’s slow vaccine rollout. Authorities have linked the origins of the latest outbreak to someone who returned from Sydney on August 7. "This is a significant development. It means now we can be fairly certain how and when the virus entered the country," Prime Minister Jacinda Ardern told a news conference. "And the period in which cases were in the community was relatively short." 
  • In Australia, New South Wales reported its highest daily case count at 681, surpassing the previous day’s high of 633. Authorities are rushing to vaccinate people, as emergency supplies were provided to Sydney’s worst-affected suburbs.  State Premier Gladys Berejiklian says the vaccinations can provide some hope to Australia’s biggest city which has been locked down since late June. “The next few weeks will be hard, but no doubt that once we get those high vaccination rates life will feel much better, it will look much rosier,” Berejiklian told reporters.

Covid-19 – Due Diligence And Asset Management

The “new normal”: How virtual conferencing has optimised investor due diligence during Covid-19

Brief: The “fluidity” of virtual conferencing has proved a “silver lining” during the pandemic, optimising allocator time during the investor due diligence process, according to new research by alternatives-focused software-as-a-service and data management company Vidrio Financial. In a new market commentary, Mazen Jabban, founder and CEO of Vidrio Financial, examined the sweeping changes and far-reaching impact of virtual manager meetings on hedge fund manager-investor relationships over the course of the Covid-19 pandemic. New Vidrio Financial research shows 100 per cent of those surveyed expect a transition to a hybrid mix of virtual and in-person meetings – the so-called “new normal” – when it comes to the due diligence and asset allocation process, with one manager not expecting return to in-person due diligence meetings until 2022.

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Financial institutions are prime targets for cybercriminals and future attacks are 'inevitable'

Brief: According to IBM, 23 per cent of all cyber-attacks are directed at financial institutions, while the total cost of a single data breach is the second largest among all industries, costing financial organisations USD5.72 million on average. Another study indicated that 53 per cent of data breaches are financially motivated, so the industry is constantly on the cybercrime radar. In other sectors, malicious users get a foothold through social engineering, credential stuffing, and application vulnerabilities. However, the Finance sector is different as these users primarily compromise internal corporate networks. The pandemic has accelerated the digital shift, with enterprises focusing on securing cloud environments.

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Stocks and commodities drop on Fed, growth worries

Brief: Stocks dropped, while Treasuries and the dollar rose as concern about the withdrawal of Federal Reserve stimulus mixed with growing angst around the coronavirus and global supply chains. The S&P 500 was down for a third day, and a gauge of equity volatility headed for its biggest weekly increase since January. Commodities sold off, with iron ore plunging and oil on track for its longest losing streak since the early days of the pandemic. The rout in Chinese companies listed in the U.S. deepened after the industry was hit with a fresh round of proposed regulations, with Alibaba Group Holding Ltd. and Baidu Inc. tumbling. Investors are bracing for the withdrawal of unprecedented liquidity as the developed world looks to mass vaccinations to keep the recovery on track. swings.

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Finance Firms Are Giving Coders More Flexibility Than Bankers

Brief: As Goldman Sachs Group Inc.’s top brass sounded the alarm of a return to pre-pandemic office life, one group of workers was reassured they’d get to keep some of their treasured flexibility. The Wall Street firm’s coders can continue to work from home two days a week, according to people briefed on the firm’s plans. They’re not alone. Across financial services, the software engineers who have been at the heart of talent wars are winning more freedom than the bankers they work with. Wells Fargo & Co. told employees last month that work from home will be capped at two days a week for many roles, but said it would make an exception for most of its technology team. Citigroup Inc. chalks up some of its recent wins around tech recruiting to the firm’s greater flexibility around remote work. Other lenders, including Barclays Plc, have also made clear that some roles would get more flexibility and the bank would leave the details of its hybrid approaches to the managers. The British bank is giving up its second office in London’s Canary Wharf financial district.

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Delta-related economic downgrades are on the rise

Brief: The pandemic remains a part of the economic story. In June 2020, Federal Reserve Chair Jay Powell said at a press conference, "The extent of the downturn and the pace of recovery remain extraordinarily uncertain and will depend in large part on our success in containing the virus. We all want to get back to normal, but a full recovery is unlikely to occur until people are confident that it is safe to reengage in a broad range of activities."In the year-plus that has followed, the economy has enjoyed a very strong recovery. But the current spread of the Delta variant throughout the U.S. now has economist cautioning that the pandemic is again throttling the speed at which the economy is bouncing back.

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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, August 18, 2021:

  • In the United States, the mask mandate for airlines, planes, trains and buses will likely be extended until Jan. 18. A Transportation Security Administration (TSA) spokesperson told Reuters that the mask requirements are necessary to protect people from the spread of Covid-19 on public transportation. The current TSA mask order remains in place until Sept. 13. It requires travellers to wear face masks on all planes, trains, ships, subways, buses, taxis and rideshares as well as in transportation hubs like airports and subway stations. The extension reflects the dangers of the delta variant and its transmissibility particularly on public transportation.
  • In Canada, the province of Ontario announced the decision to make vaccine policies mandatory for healthcare and public education workers. Dr. Kieran Moore, Ontario's chief medical officer of health, made the announcement at a news conference on Tuesday afternoon. Moore says case numbers are expected to rise in coming months as the weather gets colder and more people move indoors. He issued a directive that does not actually make the vaccines mandatory but requires hospitals and other healthcare facilities to have strict vaccination and testing policies in place by Sept.7.
  • In the United Kingdom, the health regulator has approved the Moderna vaccine for use in children ages 12-17. The Medicines and Healthcare products Regulatory Agency (MHRA) made the announcement, saying the vaccines are safe and effective for that age group. Sajid Javid, the health secretary, said earlier that jabs would be offered to 16 and 17-year-olds in England by August 23 so that they would have time to build immunity before returning to school in September.  Children are still able to become infected and spread the virus though most develop mild or no symptoms.
  • In Germany, vaccines are recommended for children ages 12-17 according to the country’s independent standing commission on vaccination. In a statement on Monday, the commission said they recommend children be immunized, giving reassurance to parents awaiting judgement ahead of the school year. Earlier, the same commission had recommended that only medically high-risk children should get the shot. In their latest recommendation the commission referred to new data from the United States, where children ages 12-15 have been getting vaccinated since mid-May.
  • In France, according to health ministry data, 111 people died from Covid-19 in 24 hours, the first time since June 1st the number has been over 100.  The new numbers take the cumulative death toll since the beginning of the pandemic to 112,844. Meanwhile, a small region in mainland France has managed to have success with speeding up its vaccination campaign, by opening walk-in pop up centres. The region of Seine-Saint-Denis, north of Paris, has a multi-cultural, working class population where many immigrants don’t speak French. This was originally why they struggled to get the word out about vaccines, but the pop up centres have provided easier access.
  • New Zealand said their first Covid-19 case in six months is linked to Australia. Prime Minister Jacinda Ardern said on Wednesday that genome testing shows a link to New South Wales (NSW), the Australian state that’s home to Sydney where outbreaks have been the most serious. NSW reported its biggest daily jump in cases at 633, surpassing the previous record of 478 set on Monday. "We haven't seen the worst of it and the way that we stop this is by everybody staying at home," NSW Premier Gladys Berejiklian told reporters in Sydney.

Covid-19 – Due Diligence And Asset Management

Business Recovery From Pandemic Drives Focus On New Consumer Behaviors In Data Findings From CX Leader ONR

Brief: ONR, a leader in transforming the customer experience (CX) for Fortune 500 companies today has shared new data highlighting how consumers, and thus businesses have pivoted successfully acting on key learnings measured during the pandemic that will impact commercial relationships in a post-COVID-19 world. Looking forward, loyalty has taken on a major significance, with customers clearly seeking trusted brands that make them feel like "they are taken care of, and a part of the family." For companies, greater emphasis on more bespoke customer facing solutions will allow brands to acquire deeper understanding and the quicker ability to address new needs in the customer's experience and customer journeys.Coming out of the extended lockdowns caused by COVID-19 and now the Delta Variant, brands in all business segments have seen continued heightened consumer uncertainty, and sustained awareness and attention on health and wellness in not only the products purchased, but also the service experience for retailing and purchase.

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Jim Cramer says investors need to stay nimble as Wall Street reevaluates Covid impact

Brief: CNBC’s Jim Cramer said Tuesday that investors need to be on their toes as Wall Street trudges through a period of frequently re-evaluating the Covid recovery. Reaction to Home Depot’s earnings report before the market open Tuesday demonstrates the need to be nimble, the “Mad Money” host said. “Don’t get too complacent in your negativity.” Shares of the home improvement retailer closed down more than 4% even after the company beat analyst expectations on revenue and earnings. However, same-store sales slightly missed forecasts, and the company also said it recorded fewer customer visits to stores during the second quarter. “In the end, Home Depot will be fine. ... The real issue is that the consumers sure picked an awful time to go back to travel and recreation,” Cramer said.

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Stocks suffer worst drop in a month; dollar climbs

Brief: Stocks posted their biggest decline in a month amid concern that the global economic recovery will lose momentum with further shutdowns to contain a coronavirus resurgence. Traders watched closely Federal Reserve Chair Jerome Powell’s remarks during a town hall with educators and students, where he noted the central bank’s “powerful tools” have limitations. Powell also said that COVID-19 will likely stay “for a while,” and we’re not going back to a pre-pandemic economy. Policy makers will gather next week for the Jackson Hole symposium, the Fed’s most-prominent annual conference. “We’re essentially in a bit of a holding period ahead of Jackson Hole,” wrote Craig Erlam, senior market analyst at Oanda Europe. “While there is a fair amount of data releases this week, some of which may carry a little more weight than others, it’s all about the Fed in these markets at the minute, and that’s unlikely to change unless the delta situation gets dramatically worse.”

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Fixed Income ETFs Were Top Choice for Institutions During Liquidity Crunch

Brief: During the heightened volatility sparked by the outbreak of the Covid-19 pandemic, investors found liquidity, price discovery, usage, and transaction costs to be pressure points across sectors in the bond markets – including high yield, investment-grade corporate, emerging markets, and, for a short time, U.S. Treasuries. With stress permeating global markets and investment decision-making processes, institutional investors sought relief through the use of fixed income ETFs. According to a global survey of 766 institutional investors, 54%1 increased their use of fixed income ETFs to source, price, and transact in bond markets during heightened pandemic-related volatility. Based on what they experienced and learned during the pandemic an additional 34% say they are likely to increase their use of fixed income ETFs in the future.

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Fund managers cut European growth expectations on Covid concerns

Brief: Less than half of fund managers expect the European economy to improve over the next 12 months, down sharply from 80% in the previous month, as concerns about the spread of coronavirus dampen optimism, the latest Bank of America (BofA) European fund manager survey shows. The 17 August survey of 232 participants representing $702bn AUM showed 44% of participants expect the EU macro cycle to improve further, the least optimistic outlook for the bloc's prospects since June 2020 and marking a substantial decline from the March 2021 peak of 94%. BofA attributed the decline to coronavirus-related concerns, with 19% of investors citing the Delta variant as the biggest tail risk facing markets, up from 9% in May, closely behind inflation concerns (20%) and worries about a taper tantrum (22%).

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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, August 17, 2021:

  • In the United States, five states have broken records for the average number of daily new Covid-19 cases, according to data from CNBC and Johns Hopkins University. Louisiana, Florida and Mississippi are suffering the worst outbreaks per capita, while Oregon and Hawaii also reached new highs in their seven-day average of new cases. The number of children who are hospitalized for Covid-19 has also hit a record high in the U.S. at just over 1900. Children currently make up 2.4% of all Covid-19 hospitalizations; they’re susceptible to the highly transmissible delta variant and they are not eligible for the Covid-19 vaccine. 
  • In Canada, pandemic-related issues are at the forefront of the upcoming federal election. Prime Minister Justin Trudeau announced the snap election on Sunday, with the vote taking place on Sept. 20. Leaders of the Conservative Party of Canada and the New Democratic Party have both criticized the decision to hold an election during the pandemic, saying it’s too dangerous. Trudeau is said to be seeking approval for his government’s handling of the pandemic. Mandatory vaccinations for public servants and vaccine passports will both be important topics for candidates.
  • In the United Kingdom, the government’s Scientific Advisory Group for Emergencies (Sage) has warned that a potential new Covid-19 variant that evades vaccine protection could arrive. If the virus were to evolve to a level that results in vaccine failure, it could potentially intensify the crisis significantly, Sage said. Professor Graham Medley, a member of Sage, told the Guardian on Sunday that this is, “clearly something that the planners and scientists should take very seriously as it would put us back a long way.” Case numbers have been around 30,000 per day.
  • Germany has added the U.S. to its list of high-risk countries and unvaccinated travellers who arrive there from the U.S. will face tightened restrictions. Those travellers entering Germany from the U.S. will need to provide an important reason for doing so, or otherwise be fully vaccinated.  Unvaccinated travellers will be required to self-isolate for up to 10 days on arrival. Germany added other countries to the high-risk list including Israel, Turkey and Vietnam. India, Spain and the U.K. were already on the list.
  • In Japan, case numbers reached 4377 after a record-high of 5773 on Friday. The government expanded its state of emergency to include seven more prefectures as the country grapples with the delta variant. "The Delta variant raging across the world is causing unprecedented cases in our country," Prime Minister Yoshihide Suga said. "Serious cases are increasing rapidly and severely burdening the medical system, particularly in the capital region." The state of emergency now covers 60% of Japan’s population. Further less strict emergency measures will be applied to another 10 prefectures. 
  • New Zealand will enter a nationwide lockdown for at least three days after discovering a single case of the coronavirus in the community. Prime Minister Jacinda Ardern said it was important to eliminate the virus as early as possible. "We have seen what happens elsewhere if we fail to get on top of it," she said. "We only get one chance." Ardern announced that Auckland and Coromandel, where the infected man had been, will enter a seven-day lockdown while the rest of the country will lockdown for three days. Despite New Zealand’s successful efforts to eliminate the virus, Ardern had been warning that the delta variant could be greater cause for concern.

Covid-19 – Due Diligence And Asset Management

Companies pull out all the stops to fill jobs in a market 'like we have never seen'

Brief: No skills? No degree? You're hired. The hiring logjam showed some signs of easing in July. But companies in the trenches trying to match labor demand and supply still see a market that continues to be imbalanced — and tilted heavily towards those looking for work. "No matter what source you use right now, fundamentally there [are] 40% more jobs open today than there [were] before the pandemic began," ZipRecruiter CEO Ian Siegel told Yahoo Finance Live on Monday. "And that was already a white hot job market." As of the end of June, a record 10.1 million jobs were available in the U.S. But as ZipRecruiter (ZIP) said in its second quarter letter to shareholders, the labor market today is one of "disequilibrium."

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Stocks drop from record amid virus, economic angst

Brief: Stocks dropped from a record as traders assessed the latest round of economic data amid growing concern that more shutdowns will be necessary to contain a fast-spreading pandemic. Most major groups in the S&P 500 fell, with consumer-discretionary, industrial and commodity shares leading losses. The dollar climbed. Home Depot Inc. sank after the retailer posted weaker-than-expected results in the second quarter. Chinese stocks listed in the U.S. faced another wave of selling as authorities in Beijing ramped up their crackdown on some of the nation’s largest companies. Alibaba Group Holding Ltd., Baidu Inc. and JD.com Inc. slumped at least 2.5 per cent.  U.S. homebuilder sentiment sank to a 13-month low in August amid high costs as well as continuing supply shortages.

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U.K. Wage Growth Hits a Record as Vacancies Pass 1 Million

Brief: U.K. wage growth hit a record as companies posted more than 1 million new job vacancies for the first time in an unprecedented scramble for staff following the loosening of lockdown rules. Average earnings in the three months through June surged a record 8.8% from a year earlier, the Office for National Statistics said Tuesday. While the figure partly reflects distortions created by the pandemic, underlying wage pressures are also gathering pace. The pickup underscores the scale of the recovery from the deepest economic slump in 300 years. Although the Bank of England expects strains in the labor market to prove temporary, policy makers warned this month that meeting the 2% inflation target will require a modest withdrawal of monetary stimulus.

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The future of leases after Covid-19 - evolve or perish?

Brief: Leases have historically been slow to evolve. Traditional fixed rent leases are inherently predictable and inflexible, with a focus on security of occupation for tenants and income for landlords. This comes as no surprise given that, after staffing costs, the largest overhead for most businesses is real estate. However, in recent years there have been nudges towards greater flexibility and innovation, and the Covid-19 pandemic has thrown the suitability of traditional leases into question. The uncertainty created by the pandemic means there is considerable appeal for many in finding more flexible workspace solutions, provided through shorter term rolling contracts with smaller initial investments. This allows tenants the opportunity to move, expand and contract according to business needs while maintaining a degree of control over costs.

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S&P 500 doubles from its pandemic bottom, marking the fastest bull market rally since WWII

Brief: Here’s a market milestone to encapsulate how stunning the recovery rally has been: The S&P 500 just doubled its level from its pandemic closing low. The broad equity benchmark has rallied 100% on a closing basis from its Covid trough of 2,237.40 on March 23, 2020. It took the market 354 trading days to get there, marking the fastest bull market doubling off a bottom since World War II, according to a CNBC analysis of data from S&P Dow Jones Indices. The S&P 500 closed at a record 4,479.71 Monday, up 0.3% on the day and 100.2% higher than its low Covid close.During the financial crisis, the S&P 500 hit its bottom at 676.53 on March 9, 2009, and the benchmark did not double that number on a closing basis until April 27, 2011. On average, it takes bull markets more than 1,000 trading days to reach that milestone, the analysis showed.

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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, August 16, 2021:

  • In the United States, the director of the National Institutes of Health says coronavirus cases could soon reach 200,000 per day. The U.S. is currently seeing an average of about 129,000 cases per day, a number that has increased daily since July 5.  Dr. Francis Collins told Fox News on Sunday that he’d be surprised if the U.S. doesn’t cross the 200,000 threshold in the coming weeks. “That was January, February, that shouldn’t be August. But here we are with the Delta variant, which is so contagious, and this heartbreaking situation where 90 million people are still unvaccinated, who are sitting ducks for this virus, and that’s the mess we’re in,” he said. 
  • Canada will buy another 40 million doses of Moderna over the next two years, says Prime Minister Justin Trudeau. “We’ve reached an agreement with Moderna for additional supply of its Covid-19 vaccine for 2022 and 2023, with an option to extend into 2024,” the prime minister tweeted Saturday. The deal also grants Canada the option to purchase an additional 65 million doses. The news comes as the country enters its fourth wave of coronavirus infections, with the unvaccinated primarily driving the surge in cases. Approximately 71.3% of people age 12 and over in Canada have been fully vaccinated.
  • In the United Kingdom, the “pingdemic” is believed to now be over as isolation rules have officially changed. Under the new rules, fully vaccinated people do not have to self-isolate when they come into contact with a positive case. Instead of being advised to quarantine for 10 days, it is recommended that they take a PCR test and wear a mask while they wait for the results. Those who test positive or show symptoms will still be legally required to self-isolate for 10 days. In Britain the pingdemic forced thousands of people into self-isolation because of close contact with positive cases, causing staff shortages across the country. 
  • In France,  a week after the health pass came into effect, protests continue to unfold across the nation.  The health pass shows whether a person has been vaccinated, had a recent negative test or a recent Covid-19 recovery. The protesters are opposed to the government’s decision to make the health pass mandatory for restaurants, theatres and most other indoor public buildings, and they accuse the government of infringing on their personal rights.  About 1600 police were deployed to three different marches in Paris. There were 250,000 people expected at about 200 demonstrations.
  • In Japan, the government is set to extend a state of emergency through to Sept. 12, rather than the end of the month when it is currently due to expire. Prime Minister Yoshihide Suga said the government will seek the support of experts to determine how to best implement emergency measures. With the latest extension, the state of emergency will cover the Tokyo Paralympics which begin on August 24 and run through to September 5. The emergency measures focus on bars and restaurants closing at 8:00 p.m. and not serving alcohol. Only around 36% of people in Japan have been fully vaccinated.
  • In Australia, New South Wales state Premier Gladys Berejiklian told a news conference that fines for people breaking lockdown rules will increase from $1000 to $5000. "We have to accept that this is the worst situation New South Wales has been in since day one. And it's also regrettably, because of that, the worst situation Australia's been in," Berejiklian said. People entering rural areas without an official permit will also face a new $3000 fine. The news comes as New South Wales reported a record-high of 466 new cases in a 24-hour period on Saturday.

Covid-19 – Due Diligence And Asset Management

Wall Street Really Did Fumble Those Pandemic Earnings Estimates

Brief: There’s a whole class of Wall Street pundits whose lone job, it often seems, is to bash stock investors for assigning irrational valuations to companies. Rarely has the chatter from this crowd been as loud as it was in the Spring of 2020, when the pandemic was raging and the economy was collapsing and stocks were suddenly rebounding and nothing seemed to make any sense. It turns out in the end that they were right. Valuations were wildly off. But in exactly the opposite way that they had proclaimed they’d be. Corporate profits have roared higher in such a spectacular fashion that those valuations -- when analyzed against the actual earnings reported a year later -- were almost 20% cheaper than analysts thought when investors began piling into the S&P 500 in April 2020.

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Wall Street lower amid pandemic, Afghanistan worries

Brief: Stocks fell in early trading Monday, amid worries about rising coronavirus infections in the U.S. and around the globe, as well as geopolitical concerns out of Asia. The S&P 500 index fell 0.5% as of 10:05 a.m. Eastern. The Dow Jones Industrial Average lost 0.7% and the Nasdaq composite fell 0.8%. The Russell 2000 index of small company stocks was down 1.2%. Shares of Tesla fell more than 3% after the U.S. government announced a formal investigation into the company's automated driving features, following a series of collisions with parked vehicles. Data out of China showed the global coronavirus pandemic continues to hurt economies around the world. Chinese industrial production and retail sales both rose last month, but at a far weaker pace than what economists had expected.

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U.S banks walk tightrope of encouraging, but not mandating vaccines

Brief: Big Wall Street banks have started enforcing stricter mask and vaccine requirements for staff, sometimes communicating them behind the scenes, in an effort to combat coronavirus infections in their offices while avoiding a fierce national debate about individual rights, sources at the banks and consultants who work with them told Reuters. Specifics differ, but many big banks have tightened up policies or pushed back return-to-office dates from just a month ago. Now, Citigroup Inc and Morgan Stanley have the toughest rules at their New York headquarters, where staff entering must be vaccinated. PMorgan Chase & Co and Goldman Sachs Group Inc have not mandated vaccines the same way, but both require unvaccinated workers to wear masks and get tested at least weekly. Bank of America Corp will only allow vaccinated staff to return to its offices in early September, while encouraging other employees to get inoculated.

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Schroders' Tina Fong: Has Covid actually mattered to markets?

Brief: The Covid-19 pandemic has clearly mattered to our daily lives and the well-being of the global economy. But the impact on financial markets has been less straightforward. The response from financial markets to Covid-19 has been mixed. Equities appear to have looked through the economic consequences of the virus. Last year, the Covid-19 crisis triggered one of the deepest recessions in history which saw global growth contract by 3.6% year-on-year. After the initial selloff in stock markets, global equities - as measured by the MSCI AC World index - went on to deliver a 15% return in 2020. Over the past decade, with the rise of the technology sector, global growth stocks have outperformed their value peers. But the difference in returns between growth and value was stark in 2020, with the MSCI AC World Growth index beating the value equivalent by a historical record of 33%.

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How the Long Tech Rally Evolved

Brief: Since putting in a pandemic low on March 23, 2020, Nasdaq 100 futures have posted a stunning 125% rally in the subsequent 17 months, making an all-time high on July 26, 2021. This gain far outpaces the 100% rally of the broader S&P 500. The Nasdaq’s out performance has been generally attributed to several factors. The primary reason given for the initial gain was a belief that the pandemic and post pandemic economy would rely heavily on technology as work from home and remote communication became paramount. There was also the issue of interest rates. Technology companies tend to have a strong inverse correlation to interest rates because of commonly used discounted cash flow models. In short, the lower interest rates are today the more attractive the growth and technology sector becomes because of optimistic projections of future earnings.

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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, August 13, 2021:

  • In the United States, the Food and Drug Administration (FDA) has authorized Covid-19 vaccine boosters for those who are immunocompromised. Third doses of Pfizer and Moderna vaccines could now be offered to those who have been organ transplant recipients or who have equally serious medical conditions. U.S. Health officials have said those with suppressed immune systems may not be adequately protected from Covid-19 with their existing vaccines. The World Health Organization recently called for a moratorium on boosters until at least the end of September, as many developing countries are still struggling to access their first doses. 
  • In Canada, the country has officially entered a fourth wave of coronavirus infections, according to Chief Public Health Officer Dr. Theresa Tam. “We have been closely monitoring increases in COVID-19 activity across the country. The latest national surveillance data indicate that a fourth wave is underway in Canada and that cases are plotting along a strong resurgence trajectory,” she told reporters on Thursday. In Canada there are currently more than 13,000 active cases, more than double the number from two weeks ago. Tam says the majority of cases that are being reported daily are among people ages 20-39.
  • The United Kingdom’s competition watchdog has made a statement outlining the details of its plan to investigate Covid-19 testing companies. The Competition and Markets Authority (CMA) also stated that it would be working closely with the Department of Health and Social Care (DHSC) to see what action can be taken. “This is a particularly pressing issue just now for families hoping to enjoy a well-earned holiday after such a difficult year, and for those reuniting with friends and relatives overseas,” said George Lusty, the CMA’s senior director of consumer protection. “That is why we are also providing ongoing support to DHSC, including on steps that could be considered in the interim, before the rest of our work on the PCR testing market is concluded.” 
  • South Korea has signed a new deal with Pfizer for 30 million more doses of the Covid-19 vaccine for 2022. Right now the country has received 17.88 million doses of the 66 million under its existing contract. Korea Disease Control and Prevention Agency (KDCA) Director Jeong Eun-kyeong said the new doses are expected to arrive in the first quarter of 2022. South Korea’s vaccine rollout has slowed, with only about 17.4% of the population fully vaccinated. On Monday, Moderna told Seoul that less than half of the 8.5 million expected doses would be delivered this month.
  • In Japan, Tokyo saw a record-breaking 5,773 daily new cases, surpassing the previous record of 5,042 set last week. Despite the Olympics being over, cases numbers in Japan continue to rise and have topped 10,000 for more than a week now. Prime Minister Yoshihide Suga continues to rule out any connection between the Olympics and the rise in cases. The Paralympics, which are scheduled to begin on August 24, will ban spectators from almost all events.   Tokyo remains under a month-long state of emergency, although many are choosing to ignore government requests to stay at home.
  • In Australia, the capital city of Canberra entered a snap one-week lockdown on Thursday evening, after reporting its first locally acquired case of Covid-19 in more than a year. Canberra has largely been without any Covid-19 cases since the beginning of the pandemic, but officials say the lockdown was still necessary. Meanwhile in New South Wales, case numbers reached 390 with most cases being in Sydney. As case numbers rise, the less likely it becomes that Sydney will end its nine-week lockdown on August 28 as planned. Authorities have said that lockdowns will be needed until at least 70% of adults are fully vaccinated.

Covid-19 – Due Diligence And Asset Management

Fast-spreading COVID-19 Delta variant is starting to hit corporate America

Brief: The stock market continues to ignore worsening headlines on the COVID-19 Delta variant front and climb to fresh records. But given a shift in tone lately from corporate America, perhaps investors should be on high alert. Companies that had been bullish on the economic recovery from the depths of the pandemic are becoming increasingly cautious as the variant spreads. Here are three household names that have recently warned of a financial impact from the COVID-19 Delta variant. Investors may be ignoring the commentary below, but it could prove to be an earnings headwind in the current quarter — one that isn't priced into stock prices.

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Pandemic Deals Surge Boosts U.K. Law Firm Revenue to Fresh Highs

Brief: A surge in merger activity propelled profits at the U.K.’s largest law firms despite a collapse in the global economy triggered by the coronavirus pandemic. A year that started with virus-related uncertainty gave way to record deal activity that helped four elite London firms, known as the Magic Circle, report bumper financial results. Transactional lawyers around the world advised on over $4 trillion worth of deals in the year ending April 31, according to data compiled by Bloomberg. Freshfields Bruckhaus Deringer led the way posting a 5% revenue boost to 1.6 billion pounds ($2.2 billion) for the financial year -- much of the growth was attributed to their work on eye-catching deals. Those included AstraZeneca Plc’s $39 billion acquisition of Alexion Pharmaceuticals Inc. and the sale of Cazoo for $7 billion, one of the largest ever SPAC deals.

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U.S. consumer sentiment plummets in early August to decade low

Brief: U.S. consumer sentiment dropped sharply in early August to its lowest level in a decade as Americans gave faltering outlooks on everything from personal finances to inflation and employment, a survey showed on Friday. The University of Michigan said its preliminary consumer sentiment index fell to 70.2 in the first half of this month from a final reading of 81.2 in July. That was the lowest level since 2011, and there have been only two larger declines in the index over the past 50 years. Economists polled by Reuters had forecast the index would remain unchanged at 81.2. U.S. stock market indexes slipped immediately after the report was released, while the price of gold, a safe-haven investment, gained ground. U.S. Treasury bond yields hit session lows. Economic growth is still expected to grow this year at its fastest pace in four decades after falling into a brief recession in 2020 caused by the coronavirus pandemic.

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Philippines Covid Surge Spurs Worst Stocks Rout Since June 2020

Brief: Philippine stocks tumbled the most in more than a year on fears coronavirus infections will rise further and spur the government to extend a two-week lockdown affecting the capital and other areas. The Philippine Stock Exchange Index plunged 3.6% to 6,320.19 at 1 p.m. in Manila, its lowest close in more than a year. Investors dumped key blue chips -- including SM Investments Corp. and unit SM Prime Holdings Inc. -- after the gauge had held a moderate decline for much of the day. “I was expecting a downward movement, but not this drastic,” said Manny Cruz, strategist at Papa Securities. “The fear is infections will further escalate, raising prospects the lockdown will run longer.”

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Short-sellers have been the ‘secret ingredient’ to the market’s Covid rally, says Jim Cramer

Brief: CNBC’s Jim Cramer said Thursday short-sellers have helped propel Wall Street’s robust rally from its pandemic-driven sell-off, calling the cohort of bearish investors the “secret ingredient” to the stock market’s success since late March 2020. “Just like ordinary investors will throw in the towel and sell when their favorite stocks get obliterated, short-sellers throw in the towel when their favorite targets go up too much,” the “Mad Money” host said, shortly after the Dow Jones Industrial Average and S&P 500 yet again closed at record highs. “The invisible cover of their defeat is evident every day in this market and it’s something we don’t talk about enough—how the heck do you think we’ve managed to go six straight months without a 5% decline? Capitulating short-sellers are like a fifth column supporting the bulls, even if they’re not doing it by choice,” he 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 Covid-19 may impact your business.

Our briefing for Thursday, August 12, 2021:

  • In the United States, California has officially become the first state to require teachers and school staff to be vaccinated or regularly tested for Covid-19. Governor Gavin Newsom made the announcement on Wednesday, saying that the decision is “the right thing to do.” The U.S. is still struggling with the delta variant as hospitalizations and deaths continue to rise. Recently the federal government, several states and a number of private employers have said they will require their employees to get vaccinated. Last week, New York became the first major city to require proof of vaccination for access to gyms, restaurants and other indoor businesses.  
  • In Canada, vaccine passports will arrive in the fall, Immigration Minister Marco Mendicino said. The vaccine passport will be a digital document (or paper for those who wish) that will certify the Covid-19 vaccine status of an individual for the sake of international travel. The passports are not meant for domestic use but could be if the provinces decide to do so.  "I want to take a moment to thank all Canadians who've rolled up their sleeves over these past months," Mendicino said. "As more and more are getting vaccinated they are planning for life in a post-vaccinated world, including the safe return to travel."
  • In the United Kingdom, according to health officials, more than three quarters of adults in Britain have now received both doses of vaccine. Approximately 90% of adults have had at least one dose. The news comes as Britain reported another 146 coronavirus-related deaths in a 24-hour period. “It’s so important that those who haven't been vaccinated come forward as soon as possible to book their jab - to protect themselves, protect their loved ones and allow us all to enjoy our freedoms safely," said Prime Minister Boris Johnson in a statement. 
  • In France, a total of 22 health facilities including 15 vaccination centres have been attacked, a French Interior Ministry official told Reuters. The vandals covered the buildings in Nazi symbols and graffitied words on them like “Nazi” and “genocide.” Although no arrests have been made yet in relation to the vandalism, French officials have said there will be punishment for those who committed the acts. The vandalism reflects the frustrations expressed at protests over the last four weekends in response to the government’s launching of the Covid-19 health pass.
  • In Spain, Prime Minister Pedro Sanchez announced that the medicines agency has authorized clinical trials for the Covid-19 vaccine developed by a Spanish company. "Spain's medicines and health products agency has just authorized clinical tests of the Spanish Covid vaccine on humans," Sanchez told a news conference. Hipra, a pharmaceutical lab that predominantly focuses on veterinary vaccines, has been working on two different Covid-19 vaccines. Hipra expects it will be able to deliver 400 million doses of vaccine throughout 2022 and 1.2 billion doses in 2023.
  • In Australia, the New South Wales state government announced that more military personnel may be called into help enforce lockdown rules in Sydney. "We are making sure that we do not leave any stone unturned in relation to extra (military) resources," New South Wales state Premier Gladys Berejiklian said at a media conference. Approximately 580 unarmed military personnel are already enforcing quarantine rules in Sydney which is in its seventh week of lockdown. New South Wales reported a total of 345 new cases, up slightly from 344 the day before.

Covid-19 – Due Diligence And Asset Management

Tech trends continue to evolve for the post-pandemic future

Brief: It’s been a year that many of us would probably prefer to forget, but for asset managers the pandemic has turbocharged many underlying technology trends that were already in place before anyone had ever heard of Covid-19. The migration of more and more activities onto the cloud has been underway for years, of course – propelled above all by the sheer volumes of data which asset managers now juggle daily in order to shape their investment decisions. But those firms which had already shifted many of their activities into cloud-based solutions well before the pandemic hit last March found the transition to working with a dispersed workforce much easier – and faced less disruption compared to those heavily reliant on on-premise infrastructure and in-house teams of IT staff. John Kain of AWS, the world’s biggest cloud provider, says the charge into the cloud by the industry has been led by those firms which rely on the most data intensive investment strategies – above all the quant funds – but he thinks there is still plenty of room for overall growth as smaller firms and those with different strategies contemplate the long-term future of their tech stack post-pandemic.

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Remote working brings benefits, but also security fears

Brief: For asset managers, the past 18 months have been a rollercoaster ride as the pandemic has forced them to embrace new ways of working. The implications have been profound as it has become more critical than ever for management firms to offer staff – everyone from portfolio managers to back office teams – the ability to access essential systems remotely. Many firms which were unable to do this initially have found themselves scrambling to update their technology. But the surge in home working has also fuelled mounting fears over cybersecurity. How can asset managers ensure their systems are as safe as they can be from the prying eyes of unwanted guests or from hackers seeking to disrupt or inject ransomware? “Businesses have increased the number of opportunities for cyber attacks massively, because every single device being used outside of traditional office network is of course an opportunity for cyber breach in essence we have decentralised cyber security,” says George Ralph (pictured), global managing director of RFA, an IT consultancy, which specialises in the alternative investment sector.

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Experts predict UK economy will recapture pandemic losses by end of 2021

Brief: Industry commentators are forecasting that the UK economy will "comfortably" recover to its pre-pandemic levels by the end of the year, after a strong June reading that took year-on-year Q2 growth to 4.8%. The figure, reported by the Office for National Statistics (ONS) this morning (12 August), includes a 1% rise in June and is "strongly ahead" of US and European equivalents, according to Charles Hepworth, investment director at GAM Investments. He called the figures "a stunningly strong rate of growth compared to other western economies on a like-for-like basis", but warned this "record pace" is unlikely to continue now that coronavirus restrictions have been largely factored in to growth forecasts. "Consumer expenditure drove the increase over the second quarter despite a rise in coronavirus infections and a lot of that spending will likely cool from these levels," he said.

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Four beats five as pandemic prompts shorter working week trials

Brief: From travel to technology, employers across the globe are offering four day weeks as incentives to woo workers after the coronavirus pandemic upended their working patterns. Debate over the so-called 'Scandinavian model', which holds that productivity will rise if working hours are dropped, is not new but it has gained traction during the COVID crisis not only among companies but also the public sector and politicians. In Europe, Spain's left wing government is considering its own version to help its economy, while public administrations in Denmark and Iceland have already adopted 4-day weeks. With retail and hospitality now among the sectors struggling to attract and retain staff as economies recover from the crisis, many companies are introducing shorter weeks, the president of global staffing group Adecco said."After the (coronavirus) crisis, people became more aware their working conditions weren't always the best ... Now they're thinking, we don't want to sacrifice our personal life," Adecco's Christophe Catoir told Reuters.

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Reconfigured retail: Covid-driven online sales boom nearing peak, says Toscafund’s Savvas Savouri

Brief: The boom in online retail during Covid-19 is substantially reshaping the UK’s consumer sector, but Toscafund Asset Management’s Savvas Savouri believes e-commerce sales may peak sooner rather later as restrictions finally end. In a market commentary on Wednesday, Savouri – chief economist and partner at Martin Hughes’ hedge fund behemoth Toscafund – reflected on how the coronavirus pandemic sent online sales soaring as the UK entered a protracted lockdown. However, looking ahead, he believes that multi-channel retail operators that offer both digital sales and ‘bricks-and-mortar’ stores may now have reached a point where their online offering has gone from a “disruptive competitor” to their physical presence to a “stable companion”.Observing the rise in internet shopping, he noted that as recently as 2008, less than one-twentieth of UK retail sales were online; within a decade, that number had swelled to a fifth, as a result of online sales growing at an average of 20 per cent every year. But that 20 per cent levelled off towards the end of 2019 and into 2020, nearing what Savouri referred to as ‘retail internet penetration’ (RIP) – before spiking back up towards highs of almost 80 per cent UK’s first coronavirus lockdown in March 2020.

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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, August 11, 2021:

  • In the United States, the Centers for Disease Control and Prevention (CDC) lowered the travel recommendation for Canada to Level 2. The U.S. State Department also lowered the travel advisory for Canada to “Level 2 Exercise Increased Caution.” The U.S. has not indicated as to when they might ease travel restrictions for Canadian travellers, despite Canada opening its border to fully vaccinated Americans on August 9. The CDC also recommended Americans avoid travel to France, Israel, Thailand, Iceland and several other countries because of high rates of infection.
  • In Canada, a fourth wave of infections is inevitable, experts say. Unlike previous waves, this time things are expected to be slightly different because of high vaccination rates. Approximately 60% of Canadians are now fully vaccinated. The seven day average for new daily cases is around 1,300, with the majority of new cases in B.C., Alberta, Saskatchewan, Ontario and Quebec. The vast majority of new cases are among unvaccinated individuals, federal public health data shows. Vaccination rates are lowest in some regions of rural Alberta and Manitoba. Federal data also shows that approximately six million eligible Canadians have yet to get the shot.
  • In the United Kingdom, Sajid Javid, the health secretary, said he expects a vaccine booster program to start in early September. The Joint Committee on Vaccination and Immunisation (JVCI) recommended in June that if boosters were to be offered, they should go to people over 50, those who are immunocompromised or other vulnerable people. Despite broad public support for the booster program, some scientists have questioned whether it’s actually needed, especially in light of the need for more vaccines in the developing world.
  • In Germany, free coronavirus testing for citizens will end in October, as a way to encourage more people to get vaccinated. Chancellor Angela Merkel says the government aims to have 75% of people vaccinated, but so far only slightly more than 55% have had both shots. Children and those who cannot be vaccinated for medical reasons will continue to get the tests for free. Merkel said the speed of Germany’s vaccination campaign has significantly declined and she urged those who are already vaccinated to encourage others to get the shot
  • In New Zealand, a group of health experts have advised the government to keep the borders closed until more people have been vaccinated. The Strategic Covid-19 Public Health Advisory Group released a report saying the borders should have a slow, phased reopening. According to the advisory group, a border reopening should not happen until early 2022. The group also says that a progressive system should be used to allow travellers in based on a variety of risk factors including their vaccination status. On Thursday, Prime Minister Jacinda Ardern is set to provide the government’s response to the recommendations.
  • In Australia, the city of Melbourne extended its sixth lockdown for a second week, until the end of August 19. "This is very challenging, I know, for every single Victorian who would like to be going about their business. They'd like to be open and have a degree of freedom that's simply not possible because of this delta variant," Victoria Premier Daniel Andrews said. "If we were to open, then we would see cases akin to what's happening, tragically, in Sydney right now." The Victoria state government reported 20 new infections in a 24 hour period, while meanwhile New South Wales reported 344 new cases.

Covid-19 – Due Diligence And Asset Management

Macro hedge funds primed to capitalise on market trends amid fragmented global recovery

Brief: Macro strategies have advanced 7.82 per cent so far in 2021, according to data provider BarclayHedge, after managers posted a narrow gain of 0.19 per cent in July. In comparison, the broader Barclay Hedge Fund Index – which measures average industry performance across strategy classes – has risen almost 9 per cent year-to-date, BarclayHedge said this week. Macro managers take long and short positions across a wide range of markets and indices, including equities, bonds, currencies, and commodities, with bets shaped by their outlook on broader macroeconomic trends and events. Last year, the sub-strategy generated an annual return of more than 10 per cent. Despite macro hedge funds suffering the largest volume of investor outflows towards the end of the first half – allocators withdrew some USD5.57 billion from the sector in June, according to eVestment data – the outlook for managers remains positive.

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Has Covid-19 given women the chance to make their mark in private equity?

Brief: While the damage wrought by the Covid-19 pandemic has been all-encompassing, research shows that it is women who have been disproportionately impacted. PWC's Women in Work 2021 research reports that women's job losses outpaced men's in 2020, with women forced to reduce their participation in the workforce due to the disproportionate burden of care. The findings point to a worrying reversal in progress towards gender parity in the workplace, prompting businesses across all sectors to reprioritise a recovery from Covid, which puts equality front and centre. Although discouraging, can these circumstances create a vital moment for change? And against this backdrop, what is the view from private equity, specifically? We know that the sector has historically had a reputation for being a less caring and socially inclusive place to work than many. Is this finally an opportunity for change?

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U.S. stocks retreat from highs; dollar drops after CPI

Brief: U.S. stocks were off the highs of the day and the dollar weakened after data showed consumer prices increased at a more moderate pace in July, reducing concern about the timing of an unwinding of some of the stimulus that has helped the economy recover from the COVID pandemic. The S&P 500 and Dow Jones Industrial Average indexes climbed to records after data showed CPI rose 0.5 per cent in July after climbing 0.9 per cent in June. The tech-heavy Nasdaq 100 declined as investors rotated to cyclical shares from traditional growth favorites such as Amazon.com. The reaction was muted in the Treasury market, with yields lower on two-year notes and slightly higher on 10-year securities. Investor focus on U.S. price data comes as Federal Reserve Chair Jerome Powell and other officials discuss the prospects of unwinding stimulus that has helped the recovery from the pandemic. Chicago Fed President Charles Evans said he expects substantial further progress later this year on the central bank’s tapering intentions.

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FTSE hits post-pandemic high as stocks rally around the world

Brief: The FTSE 100 closed at an 18-month high on Wednesday, as stocks rallied around the world on stimulus hopes and easing inflation fears. The FTSE 100 (^FTSE) rose 0.8% to close at 7,220, its highest finish since March 2020. The index remains around 200 points off levels it was trading at before the onset of the COVID-19 pandemic. In Europe, Germany's DAX (^GDAXI) was up 0.3% and the CAC (^FCHI) rose 0.5%. Global sentiment was helped by signs that US inflation could be topping out. Consumer price figures published 1.30pm Europe time showed US prices growing at 5.4% in July. That was flat on the prior month and broadly in line with forecasts. "With US CPI having beaten expectation for most of 2021, it’s almost a surprise to see the numbers come out in line with expectations," said Mike Owens, a global sales trader at Saxo Market.

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Dow jumps 150 points to new record after inflation report is not as bad as feared

Brief: Stocks rose on Wednesday after inflation jumped, but not by quite as much as investors feared when stripping out volatile food and energy prices. The Dow Jones Industrial Average gained about 170 points, or 0.5%, to reach a new intraday record. The S&P 500 rose 0.1% to an intraday high. The Nasdaq Composite traded 0.45% lower.The 10-year Treasury yield turned flat following the CPI report, giving up an earlier gain and trading around 1.344%. July’s Consumer Price Index released Wednesday showed prices jumped 5.4% since last year, compared to expectations of 5.3%, according to economists surveyed by Dow Jones. The government said CPI increased 0.5% in July on month-to-month basis. But investors were concentrating on the core rate of inflation. CPI, excluding energy and food prices, rose by 0.3% last month, below the 0.4% increase expected. Core prices still jumped 4.3% on a year-over-year basis.

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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, August 10, 2021:

  • In the United States, vaccines will now be mandatory for members of the U.S. military. The White House and Pentagon announced on Monday that approximately 750,000 members will be required to get the shot. “Being vaccinated will enable our service members to stay healthy, to better protect their families, and to ensure that our force is ready to operate anywhere in the world,” President Joe Biden said in a statement released by the White House. About half of the U.S. armed forces are already fully vaccinated, compared with about 60% of the U.S. population.
  • In Canada, reopening plans are unfolding across the country as vaccination rates creep up. New Brunswick, P.E.I., Manitoba, Saskatchewan and Alberta have all relaxed their masking rules. Ontario and Quebec still require masks and social distancing in indoor spaces. Quebec extended hours for bars and restaurants and increased capacities for social gatherings. Nova Scotia is in its fourth phase of reopening, which means retail stores can operate at full capacity while churches and other venues can operate at half capacity. British Columbia removed most Covid-19 restrictions on Canada Day and now allows for outdoor gatherings of up to 5,000 people 
  • In the United Kingdom, Britain will ease some travel restrictions for those delegates attending the UN Climate Conference in Scotland in November. Following the U.K.’s traffic light system, those delegates attending from “red list” countries will be required to self-isolate for only 5 days if they are vaccinated, and for 10 days if they are unvaccinated. The British government is offering vaccines to all attendees, and all vaccines will be recognized. There are about 20,000 people expected to attend from 196 different countries. The conference is the largest public event that the U.K. has hosted since the 2012 Olympics.
  • In Italy, police had to crackdown on a network of people who were selling fake Covid-19 health passes online. According to a statement by police on Monday, the sellers were offering fake versions of the pass for up to 500 euros ($588) in cryptocurrency or online shopping vouchers. Italy launched their green pass on Friday, which shows if someone has received one dose of vaccine, had a negative Covid-19 test or recovered from Covid-19 in the past six months. The green pass is required for access to indoor venues like gyms and restaurants, and in September it will be mandatory for all university students and for travel. 
  • In Japan as the Olympic games drew to a close on Sunday, experts were left to wonder whether Japan’s surge in cases had any link to the games.  Inside the Olympic “bubble,” a total of 430 new coronavirus cases were reported as of Sunday. The International Olympic Committee (IOC) and Prime Minister Yoshihide Suga have both said there is no link between the games and the surge in cases. Some analysts, however, have said that it’s too early to draw any conclusions about the outcomes.  
  • In Australia, the city of Sydney saw its worst day of this pandemic outbreak yet, even as it entered its seventh week of lockdown. New South Wales reported 356 new cases, up from 283 the day before. “We know New South Wales is going through challenging times but we also know that vaccination is a key tool in reducing the spread and preventing hospitalization,” state Premier Gladys Berejiklian told reporters on Tuesday. Australian authorities have also said they will ramp up the country’s sluggish vaccination campaign in an effort to start opening international borders next year.

Covid-19 – Due Diligence And Asset Management

German Investor Confidence Plunges Amid Virus Variant Concerns

Brief: Investor confidence in Germany’s recovery dropped to the lowest level since late last year after a rise in infection rates stoked concerns over a possible tightening of pandemic curbs. ZEW’s gauge of expectations declined to 40.4 in August from 63.3 the previous month, with the institute’s President Achim Wambach warning of “increasing risks” to the economy. A measure of current conditions improved. Although more than half of Germany’s population is fully vaccinated, coronavirus infections in Europe’s largest economy are on the rise. The government has already tightened some travel rules and is set to discuss additional steps during a summit on Tuesday.

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Tech drop exposes doubts in U.S. growth optimism

Brief: Slumping technology stocks briefly slowed the grind higher in U.S. equities, exposing the lingering concerns about the ability of the economy to weather less stimulus and rising COVID outbreaks. While the S&P 500 climbed to another all-time high, the Nasdaq 100 declined as Amazon.com slumped. Micron Technology led a decline in chip stocks, which are down for a fourth session. Energy shares rallied with oil. In Europe, the Stoxx 600 Index climbed for a seventh day.“The move lower in growth, especially the tech sector, may be two-fold,” said Dave Mazza, head of product at Direxion. “First, with the recent outperformance in the space, investors may be taking profits ahead of this week’s inflation data. Secondly, investors may be pricing in tapering by the Federal Reserve sooner then expected considering recent comments from officials.”

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Global M&A activity rebounded forcefully in Q2

Brief: Global M&A activity saw a strong recovery in H1 2021, as dealmaking count and value are both set to reach or surpass the record highs of previous years, according to Pitchbook's latest Global M&A report. In total, more than 17,000 deals closed with a combined value exceeding USD2 trillion, as the bounce back from the pandemic-spurred lows in 2020 continued to pick up slack. Healthy stock market returns, optimistic executives, and cheap financing were all contributing factors to the deal bonanza, the report, which mapped M&A activity in the first half of the year, revealed. Moreover, the intense pace of IPOs and SPAC reverse mergers bodes well for global M&A activity overall.

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European markets edge higher as caution lingers over Covid-19

Brief: European stocks inched higher on Tuesday, looking to break out from a cautious approach seen globally at the start of the week. The pan-European Stoxx 600 climbed 0.25% by late morning, with travel and leisure stocks adding 1.4% to lead gains while banks fell 0.6%. The cautious optimism in Europe reflects similar sentiment in Asia-Pacific, where shares mostly rose in Tuesday trade while South Korean game developer Krafton plunged in its debut. Worries about the impact of Covid on global growth continued to weigh on investor sentiment, with countries grappling with the spread of the highly transmissible delta variant of the virus.

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Even in crisis, most cryptocurrencies offer diversification benefits

Brief: During times of global turbulence, like the kind induced by the Covid-19 pandemic, cryptocurrencies may provide much-needed diversification to investment portfolios, according to a paper from researchers at the University of Bath. The researchers came to this conclusion after aggregating popular cryptocurrencies into nine equally-weighted portfolios based on the type of algorithm used in the blockchain of each currency, a methodology that gave them room to consider 553 cryptocurrencies in total. These categories included proof-of-work coins — popular mineable coins like Bitcoin and Ethereum — and proof-of-stake coins, a more energy-efficient alternative to PoW coins.

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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, August 9, 2021:

  • In the United States, daily coronavirus cases are averaging at over 100,000 per day, the highest in six months according to data from Johns Hopkins University. Hospitalizations and deaths are also on the rise. U.S. top infectious disease expert Dr. Anthony Fauci says the virus simply will not go away until enough people are vaccinated. He warned last week that more pain and suffering will be ahead. According to data from the U.S. Centers for Disease Control and Prevention (CDC), approximately 70.6% of adults have received at least one dose of vaccine, while 60.9% are considered fully vaccinated.
  • In Canada, the border officially opened to fully vaccinated travellers from the U.S. As of midnight on Sunday, American travellers are allowed to enter Canada for non-essential purposes as long as they can prove that they’ve been fully vaccinated for at least 14 days. Visitors are only allowed if they reside in and are travelling from the U.S. and they are required to submit their travel documents and proof of vaccination through the ArriveCAN app or website beforehand. Canada will open the border to fully vaccinated travellers from the rest of world on Sept. 7.
  • In the United Kingdom, Britain’s competition watchdog will look into the costs of Covid-19 testing for travellers. U.K. Health Secretary Sajid Javid will take advice from the Competition and Markets Authority on the market for PCR tests. The PCR tests are required for travel to some international destinations and for return from amber and green list countries. Javid said the high costs of the tests are preventing some families from travelling, and he asked the watchdog to look into inconsistent pricing.  The tests can average about 75 pounds ($130 Cdn) each.
  • France will continue to move forward with their health pass, despite the number of protests that have taken place across the country.  The health pass is now required for access to cafes, restaurants and for long distance travel. The pass had already been in place for cultural and recreational venues. Thousands protested in Paris and other cities on Saturday, only days after the French Constitutional Council upheld most provisions of a new law that would expand the health pass requirements to other locations. About 237,000 people protested nationwide, according to French officials. 
  • South Koreas health minister has apologized for a Covid-19 vaccine shortage, after announcing that a planned shipment of Moderna vaccines would arrive with less than half the expected doses.  Health Minister Kwon Deok-cheol said Moderna informed South Korea that less than half of the expected 8.5 million doses would be arriving in August.  According to the Korea Disease Control and Prevention Agency (KDCA),  only about 2.4 million doses of Moderna have arrived so far, while South Korea has a contract with Moderna to buy 40 million doses.
  • In Australia, Prime Minister Scott Morrison announced that Moderna will become the third approved Covid-19 vaccine. A total of about 10 million Moderna shots are scheduled to arrive in country by the end of the year, Morrison said. Morrison is still taking criticism for the lagging vaccine rollout, with only about 22% of Australians fully vaccinated. Morrison said any Australian over 16 who wants a vaccine will be offered one by the end of the year. New South Wales reported 283 new cases of Covid-19 in the past 24 hours, up from 262 cases a day earlier.

Covid-19 – Due Diligence And Asset Management

Hedge funds fall into the red as volatility and variants halt nine-month rise

Brief: Hedge funds’ nine-month consecutive run of positive returns has been halted, with managers ending last month in the red as market volatility and renewed uncertainty over the impact of coronavirus variants. Hedge Fund Research’s main industry-wide benchmark, the HFR Fund Weighted Composite Index – which tracks the monthly returns of some 1400 single manager hedge funds across all strategy types – lost 0.60 per cent in July, its first down month since September 2020. The dent means hedge funds have now returned 9.45 per cent gain since the start of 2021. Before last month, the industry’s January-to-June advance – a rise of some 10 per cent – had been its best first-half performance since 1999, according to HFR data.

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UK DB funding levels improve since the onset of Covid-19, but sponsor health remains top concern, says LGIM

Brief: For the first quarter since the onset of the pandemic, the health of the UK’s Defined Benefit (DB) pensions schemes failed to improve, ending what had been four consecutive quarters of growth. However, it should be noted that funding levels remain far stronger than their pre-Covid levels, according to Legal & General Investment Management (LGIM). LGIM's Health Tracker, a monitor of the current health of UK DB pension schemes, found that the average1 DB scheme can expect to pay 98.2 per cent of accrued pension benefits as of 30 June 2021, the same figure recorded on 31 March 20212. The health of the UK’s Defined Benefit (DB) pension schemes had originally dropped as low as 91.4 per cent as of 31 March 2020, following the onset of the pandemic, having previously been at 96.5 per cent as of 31 December 20194. LGIM’s monitor has since shown a continuing improvement in each of the last four quarters, which has been brought to an end with the latest data.

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S&P 500, Dow dip amid oil price declines as virus concerns rise

Brief: Stocks fell Monday, losing some steam after rising to all-time highs late last week. Commodity prices tumbled as concerns over the coronavirus's spread resurged, with crude oil prices moving sharply to the downside. The S&P 500 fell as shares of oil companies including Occidental Petroleum (OXY), Apache Corporation (APA) and Diamondback Energy (FANG) dropped. The Dow also dipped, weighed down by a decline in shares of Chevron (CVX).  U.S. West Texas intermediate crude oil futures (CL=F) dropped more than 4% at session lows Monday morning to hover around $65 per barrel, extending a more than 7.5% weekly decline last week. Brent crude (BZ=F), the international standard, also dropped. Other commodities also dipped Monday morning, including with copper, silver and gold futures each moving lower by at least 1%. Treasury yields fell across the curve, and the benchmark 10-year yield retreated to below 1.28%.

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Industry tentatively bullish on US as S&P 500 approaches fastest 100% recovery in history

Brief: The S&P 500 is poised for its fastest 100% recovery in history and investors remain bullish on the US equity market but advise caution on the sustainability of such a rapid recovery. From its 20 March 2020 low point to 6 August 2021, the S&P 500 has risen 95% in under 17 months, according to data from FE fundinfo, well ahead of the pace of the current record recovery following the Global Financial Crisis, which took two years. While nothing is guaranteed, Juliet Schooling Latter, research director at Chelsea Financial Services, believes it is "highly likely" the previous record will be broken given the strength of US earnings combined with current monetary policy. "The difference between this crisis and post-GFC is that we have had faster and bigger amounts of fiscal stimulus which are helping us to recover faster," she explained. "The earnings growth is also extremely strong. People have been calling [it] another tech bubble because they have been focusing on share price charts for tech companies.

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Unemployment rate headed to a 50-year low: Goldman Sachs

Brief: Goldman Sachs sees the U.S. labor market maintaining its momentum well into 2022. Economists at the firm led by Jan Hatzius lowered their year-end 2021 unemployment rate forecast slightly to 4.1% on Monday. For 2022, Hatzius and his team projects a 3.5% unemployment rate. If achieved, the unemployment rate would be at a 50-year low as the economy powers back from the COVID-19 pandemic. Employment at those levels in 2022 would bring the economy to full employment, Hatzius says. "We expect further solid job gains in the rest of the year. One reason is that labor demand remains very strong. We also see further scope for fairly quick job gains from additional reopening, the expiration of federal unemployment benefits, and the return of in-person school," explains Hatzius.

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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, August 6, 2021:

  • In the United States, according to the White House, seven states with low vaccination rates accounted for half of all the country’s new coronavirus cases and hospitalizations in the last week. Speaking at a press briefing, President Joe Biden’s Covid-19 coordinator Jeff Zients said the delta variant is driving up cases in those communities with low vaccination rates. The seven states are Florida, Texas, Missouri, Arkansas, Louisiana, Alabama and Mississippi. Of the seven states, Florida and Texas account for about a third of all new coronavirus cases. Zients said the most important defense is getting people vaccinated, and that the government is doing all they can to get shots in arms.
  • In Canada, the province of Quebec is getting ready to roll out their vaccine passport system after a rise in Covid-19 infections. Premier François Legault says the details surrounding the vaccine passport will be announced in the coming days.  The vaccine passport is expected to be required for access to non-essential services, though the government has emphasized that essential services will still be available to everyone. Quebec as well as Manitoba,  Saskatchewan, and P.E.I. have all imposed (or plan to impose) some form of a vaccine passport, while Ontario and Alberta have said they will not. 
  • In the United Kingdom, the vaccine program will expand to include jabs for 16 and 17-year-olds, the Joint Committee on Vaccination and Immunisation (JCVI) recommended. Only weeks ago, the JCVI recommended that shots for teenagers should only involve those living with underlying health conditions or living with vulnerable people. The JCVI has since updated that advice, now saying jabs should be extended to those 16 and over. Countries including the U.S., Germany and France have all recommended children over 12 be vaccinated. Currently the only shot authorized for those under 18 in the U.K. is the Pfizer-BioNTech vaccine.
  • France and Germany have said they will go ahead and offer booster shots in September, despite an appeal from the World Health Organization to hold off until more people across the globe have been vaccinated. On Wednesday, World Health Organization head Tedros Adhanom Ghebreyesus asked for a moratorium on booster shots until at least the end of September, saying inequality is a problem. "I understand the concern of all governments to protect their people from the delta variant. But we cannot accept countries that have already used most of the global supply of vaccines using even more of it," Tedros said.
  • Italy  has launched their “green pass” to try and curb the spread of the delta variant. The pass is a digital certificate that allows Italians access to some services like restaurants and gyms. Italians can get a green pass if they’ve had at least one dose of vaccine, have a negative Covid-19 test or have recovered from Covid-19. Italy is the second European country to require proof of status, after France. On Thursday the government expanded the green pass requirement to include all teachers and university students. Teachers will not be allowed to work without the pass.
  • In Australia,  New South Wales reported a record-high of 291 cases, up from 262 the previous day. Sydney is now nearing the seventh week of a nine-week lockdown. Experts say stop-and-start lockdowns will likely be inevitable until vaccination rates pick up. With only about 20% of people fully vaccinated presently, officials are warning things will get worse.  “Just based on the trend in the last few days and where things are going, I am expecting higher case numbers in the next few days and I just want everyone to be prepared for that,” New South Wales Premier Gladys Berejiklian said.

Covid-19 – Due Diligence And Asset Management

Pandemic hit UK-listed companies raise £12bn from investors

Brief: The first half of this year saw a total of 357 companies raise new capital through follow-on issues, raising £12bn in capital, according to investment bank Goodbody, which analysed stock exchange data. The figure is down from £17.3bn raised in H2 2020 and £17bn raised in H1 2020, but remains well above pre-pandemic levels, averaging £9bn each half year over the last decade. "In the face of unprecedented disruption, UK capital markets have proven to be an invaluable source of support for listed businesses," head of Goodbody's London office Piers Coombs said. "Through the backing of investors, management teams have been able to plot a course through the pandemic and protect jobs. Now, investors are backing UK businesses to build back better as they capitalise on new opportunities for growth."

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It’s Chaos on Wall Street as Delta Variant Upends Return

Brief: The call from Morgan Stanley’s human resources office went out late Monday: Two vaccinated employees had Covid-19, and workers on the 14th floor of the firm’s Times Square headquarters should stay away until the area could be cleaned. But some staff missed the message and showed up Tuesday morning anyway. Others asked if the company would start mandating masks. For now, the answer was no. After all, you have to be vaccinated to be in the building. The episode, described by a person familiar with the matter, shows the swirl of confusion across Wall Street as banks summon employees back to their towers amid the spread of Covid’s highly transmissible delta variant. As the mutation shows its ability to jump between vaccinated people, executives are struggling on how to calibrate responses. Across an industry that was already split on returning to work, policies are diverging more than ever.

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European stocks inch higher as investors track earnings, Covid-19 and economic data

Brief: European markets were slightly higher on Friday as investors monitored a fresh round of corporate earnings and the global spread of the delta Covid-19 variant. The pan-European Stoxx 600 climbed 0.12% by mid-afternoon trade, with insurance stocks adding 1.4% to lead gains after strong earnings from Allianz, while health care stocks fell 0.8%. Shares in Asia-Pacific were also mixed in Friday’s trade as rising Covid cases continued to weigh on sentiment, while investors awaited the release of a key jobs report from the U.S. Labor Department. Stateside, U.S. stock futures were little changed in early premarket trade as investors reacted to a better-than-expected July jobs report from the U.S. Labor Department. Nonfarm payrolls increased by 943,000 for the month while the unemployment rate dropped to 5.4%.

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Goldman knows the way to a banker's heart is a free meal

Brief: Companies from Goldman Sachs Group Inc. to Havas SA are hoping the way to their employees’ hearts is through their stomachs as they try to lure staff back to the office. At Goldman Sachs, free breakfast, lunch and ice-cream are part of the pitch to convince employees from London to Hong Kong and New York to leave the comfort of their homes, where some have worked since March 2020 when the pandemic took hold. One of the most vocal proponents of bringing everyone back even allows those meals to be enjoyed on Plumtree Court’s landscaped roof garden — once reserved for clients and visiting royalty. “Food is playing a much more central part in office life and businesses are using their food offers to try and influence behavior,” said Robin Mills, U.K. and Ireland managing director at catering company Compass Group Plc. “We are now fully part of these reopening conversations and part of this new world as companies think about how to get people to come back.”

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BlackRock and Wells Fargo Delay Return to Office on Delta Concerns

Brief: BlackRock Inc. and Wells Fargo & Co. are pushing their return-to-office plans back a month to early October, as Wall Street grapples with rising Covid-19 rates across the U.S. BlackRock is allowing workers to choose whether or not to come into U.S. offices through Oct. 1, according to a memo. Wells Fargo, with almost 260,000 employees, will now begin bringing back staffers who have been working remotely starting Oct. 4 rather than Sept. 7, as previously announced, according to an internal memo Thursday from Chief Operating Officer Scott Powell. The shift from both the world’s largest money manager and the firm with the largest workforce of any U.S. bank signals the financial industry is rethinking its return-to-office plans as the highly contagious delta variant sweeps across the country. While the biggest U.S. banks have so far stopped short of requiring their employees to be vaccinated, BlackRock has only allowed fully inoculated workers to come back.

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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, August 5, 2021:

 
  • In the United States, the nation’s top infectious disease expert, Dr. Anthony Fauci, says coronavirus cases are expected to rise in the coming weeks. “I think you’re likely going to wind up somewhere between 100,000 and 200,000 cases,” he said in an interview published on Wednesday. According to the U.S. Centers for Disease Control and Prevention (CDC), hospitalizations and deaths are both up this week. The Biden administration continues to urge people to get vaccinated, saying the unvaccinated are largely responsible for the surge in cases. Approximately 70% of Americans have had at least one dose of vaccine.
  • In Canada, the Canadian Medical Association and the Canadian Nurses Association are calling for mandatory vaccines for healthcare workers. Similar to what has happened in France, Italy and Greece, the organizations believe vaccines should be mandated for those working in healthcare in order to protect patients and the broader healthcare system. They cited the delta variant as being a cause for concern as well as plateauing vaccination rates. Healthcare workers were among the first in Canada to receive Covid-19 vaccines. The premiers of Alberta and Ontario have both said they are against mandatory shots. 
  • In the United Kingdom, travel rules have changed for visitors arriving in England from France. A recent loosening of restrictions now puts France in the same category as other European countries, meaning fully vaccinated travellers arriving from the nation no longer need to isolate for 10 days. Seven nations including Germany, Austria and Norway, were moved to the green list, meaning travellers don’t have to quarantine upon return. The U.K. government also eased some travel restrictions for India, Bahrain, the United Arab Emirates and Qatar.  All changes will come into effect on Sunday August 8.
  • In France, French President Emmanuel Macron says anti-vaccine protestors have “lost their minds.”  His comments come as a third consecutive weekend of protests erupted across French cities. Demonstrators were protesting the government’s Covid-19 health pass, which will be required for access to restaurants and other indoor public spaces. In order to get the health pass, people will have to show proof of vaccination status, a negative Covid-19 test or recent recovery from Covid-19. Anti-vaccine activists maintain that the health pass is oppressive, and that vaccines have failed to prevent an outbreak of the delta variant.
  • In Japan, Tokyo is reporting another record high of new cases, as the total climbed to 5,042 on Thursday. Prime Minister Yoshihide Suga says the situation has become more urgent. "We need to tackle the situation as we now have a stronger sense of urgency," he told reporters. "The infections are expanding at the pace we have never experienced before." Tokyo remains under a state of emergency and will until the end of August. Suga and Olympics organizers have both already said there is no link between the games and the surge in cases.
  • In Australia,  Melbourne announced it will enter another lockdown, only one week after lifting restrictions. Victoria state Premier Daniel Andrews made the announcement on Thursday, blaming the nation’s slow vaccine rollout for the decision. "To be really frank, we don't have enough people that have been vaccinated and, therefore, this is the only option available to us," Andrews said. "The time will come when we have many more options. But that isn't now." As of Wednesday only about 20% of Australians are fully vaccinated. 

Covid-19 – Due Diligence And Asset Management

Investors Bet $53 Billion That U.S. Rents Will Push Even Higher

Brief: There’s more money than ever betting that apartment rents are heading to new heights. Investors spent $53 billion on multifamily real estate during in the three months ending in June, the most ever for the second quarter, according to data from Real Capital Analytics. The spree extended a busy year for apartment investors that has included purchases by Blackstone Group Inc. and Starwood Capital Group. It was also fueled by real estate money moving to housing from offices, hotels and malls, which have fared poorly in the pandemic. The influx of money has pushed prices higher and forced private equity firms to behave like the aggressive homebuyers in the frenzied housing market. Some investors are frustrated by current prices for apartment buildings. But many are raising their bids, waiving inspections and promising to close fast, with rising rents driving a flurry of deals.

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Tech’s pandemic boom is coming to an end

Brief: The Covid boom times are coming to an end for tech companies. After reporting eye-popping growth throughout 2020 as more people turned to technology to work and play during pandemic lockdowns, companies from Apple to Roku are now warning the party is just about over. In general, tech companies beat earnings expectations for the second quarter, but investors still punished shares following weaker than expected guidance for the current quarter. Google’s parent company Alphabet was the most notable exception, however. To be clear, the biggest tech companies still expect to show nice growth in the third quarter, but warned they have lapped the hyper growth they saw last year. And it all appears to be a result of people turning away from tech and getting back out into the real world as the economy opens up and more folks get vaccinated.

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Real estate sees rebounding public pension investments in Q2

Brief: Public plans tracked by eVestment reported 109 commitments to private markets real estate investments totalling USD7.5 billion in 2Q, a 9.5 per cent increase from the previous quarter, according to the just-released June 2021 Private Markets Monitor. Average commitment size also increased to USD68 million from USD64 million. These 2Q 2021 real estate commitments still represent a drop of 10.1 per cent compared to 2Q 2020, as some of the most severe months of the pandemic unfolded and the extent of the disruption in the current and future state of the real estate business was unknown. But the rebound in Q2 2021 reflects an overall strengthening of and confidence in real estate as an investment as normal work, shopping and entertainment activities resume.

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Johnson Calls for Investment Big Bang in U.K. to Drive Recovery

Brief: U.K. Prime Minister Boris Johnson issued a rallying cry for the nation’s institutional investors to plow money into British companies and create a “big bang” that powers a recovery from the pandemic. In a joint letter with Chancellor of the Exchequer Rishi Sunak, Johnson called for “hundreds of billions of pounds” to be unleashed into longer-term U.K. assets, including “pioneering firms and infrastructure.” That would help secure better retirements for pensioners and support an “innovative, greener future,” he said. The language evokes the “Big Bang” of the 1980s, when Margaret Thatcher’s liberalization of finance made London the unrivaled financial hub of Europe. It’s also Johnson’s answer to criticism that his plans to bridge income gaps between London and the rest of the nation are too vague. Relying on investors would avoid further strain on the Treasury, which borrowed at record rates during the Covid-19 pandemic.

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Emerging Markets Hardest Hit by China Crackdown, Virus Outbreaks

Brief: Increased investor concerns about China and a widening vaccination gap will keep pressure on emerging-market assets relative to their developed peers, according to some market participants. China’s sweeping clampdown of its technology sector at a time when its economy is slowing has helped push a global gauge of emerging-market shares to a 17-year relative low against their developed-market peers. The spread of coronavirus variants has also weighed, with vaccine rollouts in developing nations lagging those in the likes of North America and Europe. U.S. and European stock markets are expected to continue to outperform, as advanced economies rebound, travel resumes and vaccinations creep closer to herd immunity.

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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, August 4, 2021:

  • In the United States, the city of New York became the first major U.S. city to make vaccines mandatory for entry to restaurants, gyms and other indoor businesses. Mayor Bill de Blasio made the announcement on Tuesday, in an attempt to get more New Yorkers vaccinated. The policy will come into effect on September 13 and will require New Yorkers to show proof of at least one dose.  Tyson Foods announced earlier this week that they will require their employees to show proof of vaccination. The federal government and several states already require their employees to be vaccinated.  
  • In Canada, the province of Manitoba is removing their mask mandate and removing almost all remaining Covid-19 restrictions as they move into their next phase of reopening. “Thanks to the remarkable efforts of Manitobans, we are now in a position to reopen more, sooner, as we have achieved our highest vaccination rates yet," Premier Brian Pallister said. The province is ahead of their vaccination targets, with 80% of people having had at least one dose, and more than 71% fully vaccinated. Capacity limits will also be eliminated for most businesses and there will be no limit on indoor and outdoor gatherings at private residences. The changes take effect on Saturday.
  • In the United Kingdom, vaccines may become more available to those 16 and 17 years old, government officials have said. The Guardian reports that Michelle Donelan, the universities minister, said the Joint Committee on Vaccination and Immunisation (JCVI) is reconsidering whether vaccine access should be extended to teenagers, and will be making an announcement shortly. Currently vaccines for those over 12 are limited to those who have underlying health conditions or those living with people who are high risk. Some countries, including Canada, the U.S. and France, are already routinely vaccinating those over age 12. 
  • In South Korea, according to the Korea Disease Control and Prevention Agency (KDCA), the country has detected its first two cases of the new delta plus variant, a sub-lineage of the delta variant. So far only a few countries, including Britain, Portugal and India, have reported cases of delta plus. Experts are still studying the delta plus variant but some say it might be more transmissible. The KDCA reported 1,725 new coronavirus cases on Tuesday, up more than 500 from a day before. About 39.3% of people in South Korea have received at least one shot while approximately 14.2% have been fully vaccinated.
  • In Japan, a contentious new policy was announced by the government that requires coronavirus patients with moderate symptoms to isolate at home instead of in hospitals. The plan is intended to save hospital beds for those with the most serious symptoms. On Wednesday Tokyo reported another record high of 4,166 cases as the city grapples with the highly contagious delta variant. Health Minister Norihisa Tamura defended the policy in parliament, saying the delta variant has created conditions that are “unseen in the past.” The policy has drawn a lot of criticism from medical experts who warn that it could be putting people at risk by asking them to stay home .
  • In Australia,  a man in his 20s from New South Wales has died after becoming infected with Covid-19, authorities reported. The man was not vaccinated and had no underlying health conditions. His death is one of the youngest deaths the country has seen since the pandemic began and was one of two Covid-19-related deaths reported by New South Wales in a 24-hour period.  New South Wales also recorded 233 new cases. State Premier Gladys Berejiklian said things will likely get worse. “If you look at the number of people infectious in the community, it indicates that perhaps we haven’t reached our peak,” she said.

Covid-19 – Due Diligence And Asset Management

Three quarters of UK startups confident about the next 12 months, Angel Investment Network survey finds

Brief: Despite seeing growth significantly impacted during the pandemic, the vast majority of UK startups are now confident about the next 12 months. That's the key finding of a survey of startup opinion, conducted by Angel Investment Network (AIN), the UK’s largest online angel investment platform. In the largest study it has ever conducted, AIN surveyed the views of 645 UK startups 18 months after the pandemic first hit. Despite 59 per cent seeing growth negatively impacted, nearly three quarters are now optimistic about the next 12 months (72 per cent), with 42 per cent very optimistic – up from 23 per cent when a similar survey was conducted at the start of the pandemic. Of those who have raised in the past year, 54 per cent reported being negatively impacted with investors pulling out. Meanwhile 68 per cent reported delaying fundraising as a result of Covid.

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ECB Won’t Rush to Signal Future of Pandemic Program, Kazaks Says

Brief: Investors waiting for a heads-up from the European Central Bank on the future of pandemic bond-buying in September will probably be disappointed, according to Governing Council member Martins Kazaks. With nearly 600 billion euros ($713 billion) left to spend and the program running at least through the end of March, it would be much too early for a decision on whether to extend or phase out purchases, he said in an interview. Coronavirus infections are rising again across much of the region, threatening new restrictions that could jeopardize the recovery.

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Vanguard Offers $1,000 to Employees to Get Vaccinated by October

Brief: Vanguard Group Inc. is offering $1,000 to employees who get vaccinated by October, according to a person familiar with the matter. The asset manager is extending the payments to all workers who can prove they’ve gotten a Covid-19 vaccine, even if they were inoculated before the firm extended the offer. A Vanguard spokeswoman confirmed the company is offering an incentive. “We are offering a vaccine incentive for crew who provide Covid-19 vaccination proof,” she said in an emailed statement, adding that the company rewards employees “who have taken the time to protect themselves, each other, and our communities by being vaccinated.”

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North American markets continue to rise despite mounting COVID-19 case numbers

Brief: North American markets moved up on the first day of August trading in Canada, even as concerns mount around rising COVID-19 case counts in the U.S. Scott Guitard, senior vice-president and portfolio manager at Fiduciary Trust Canada, said it was a typically slow start to the summer month in terms of volume. However, he said markets managed to continue upward movement on Tuesday thanks to second quarter earnings that beat expectations last week, and the belief that the U.S. is prepared to weather the Delta variant of the coronavirus.

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Delta variant wreaking havoc on America’s return to office plans

Brief: The Delta variant is wreaking havoc on companies’ return-to-office plans. Uber, Apple and Google are among the latest to push their return dates back by a month – from September to October. Employment website Indeed took it one step further, announcing its employee return-to-office date is now Jan. 3, 2022. “Health risks are at a peak these days because of this pandemic, and we’re still learning about what’s going on every single day,” Paul Wolfe, Indeed’s Senior Vice President of Global Human Resources, told Yahoo Finance. “Our guiding principle through the entire pandemic has been the health and safety of our employees.” Commuting time and costs are a top concern for workers dreading a return to the office, according to a recent Indeed report published in July

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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, August 3, 2021:

  • In the United States, President Biden has achieved his Fourth of July vaccination goal one month late, as 70% of adults in the U.S. have received at least one shot. The 70% goal was initially set by Biden in May and was seen as an important step to achieving herd immunity. Despite the surge in cases and hospitalizations, the U.S. has seen an uptick in vaccinations over the past few days. The Centers for Disease Control and Prevention (CDC) reported Sunday that 816,203 shots were administered, making it the fifth consecutive day that the agency recorded over 700,000 shots in arms.
  • In Canada, the nation’s top doctor has warned that the country could be headed for a fourth wave if restrictions are lifted too soon. Dr. Theresa Tam told reporters on Friday that the delta variant could be responsible for another surge of infections, especially if vaccine rates don’t pick up quickly enough. She referred to an updated national model for the pandemic trajectory. "While some resurgence is expected as measures are eased, this updated model shows that if we maintain current levels of community-wide contacts, we would expect to see a modest increase in cases,” she said.
  • In the United Kingdom, travel restrictions were eased on Monday for fully vaccinated travellers from the U.S. and the E.U.  Arrivals from amber list countries no longer need to self-isolate for up to 10 days. Prime Minister Boris Johnson’s government was considering adding another category to its traffic light system for overseas travel, which would have alerted travellers to when a country was at risk of shifting from amber to red. But sources have recently said no new categories will be added. The travel industry responded positively to the decision, saying the rules for travel should be clear and consistent.
  • In Germany, booster shots will be offered in September, and it will be easier for 12-17-year-olds to get a vaccine, government officials have said. Health Minister Jens Spahn said that the elderly and those at-risk should be offered a booster shot, as concerns about the delta variant continue to rise.  Doctors will be able to give the booster shots to anyone who qualifies. The ministry has also said it will make the vaccines more available to 12-17-year-olds. Currently the country’s vaccine regulator only recommends vaccines for 12-17-year-olds if they live with people who are high risk. 
  • In Japan, coronavirus cases are surging as the Olympic games continue, Tokyo reported another record high of 4,058 new cases on Saturday. To date, there have been 294 positive cases among people who are connected to the Olympics, including 25 athletes. The majority of people testing positive are contractors or third-party personnel. Prime Minister Yoshihide Suga and Olympic organizers have both said there’s no link between the Olympic games and the rise in cases, although medical experts have said the games created confusion around stay-at-home orders. Just under 30% of the population of Japan is fully vaccinated.
  • In Australia, the state of Queensland extended a lockdown in Brisbane,  reporting 13 new Covid-19 cases in 24 hours. This was the state’s biggest one-day jump in cases for over a year. Brisbane’s lockdown was scheduled to end on Tuesday but will now be extended at least until Sunday. Meanwhile, in New South Wales, Sydney remains under their sixth weekof lockdown, as the state reported 207 new Covid-19 cases in 24 hours. Military personnel began door-to-door visits on Monday, to ensure that people who tested positive are self-isolating at home.

Covid-19 – Due Diligence And Asset Management

Global Banks’ $170 Billion Haul Marks Most Profitable Year Ever

Brief: Never mind banker burnout, return-to-office headaches, and new pandemic waves. A simple reality stands out for the biggest global investment banks: they’re minting money like never before. As the dust settles over earnings season, a total profit of more than $170 billion from a dozen of the biggest firms in the past four quarters shows how far the industry has come from the frazzled early stages of the pandemic. JPMorgan Chase & Co. was the standout, earning the equivalent of $131 million a day. A string of trading wins certainly helped the sector in the early days of Covid-19, and as last year’s market volatility faded, investment bankers were ready to fuel the boom in takeovers and fundraisings via special purpose acquisition vehicles.

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Clorox Plunges Most Since 2000 as Pandemic Boom Fades Away

Brief: Clorox Co. plummeted the most in more than two decades after forecasting a sales decline in 2022 as pandemic-fueled demand for its cleaning products wanes. The maker of disinfecting wipes and Glad trash bags posted fourth-quarter sales of $1.8 billion, missing the lowest analyst estimate. With consumers reallocating spending amid a reopening economy, Clorox expects organic sales to decline by 2% to 6% in the current fiscal year. The stock fell 11% at 9:55 a.m. in New York on Tuesday, the biggest drop since 2000. The shares had already declined 10% in 2021 through Monday’s close. Clorox’s guidance is a warning to investors about the bumpy road ahead for consumer-products companies that enjoyed a boom during the onset of the pandemic. The forecast reflects consumers’ new priorities, which now more closely resemble pre-pandemic trends as they spend less time at home and offices and businesses reopen.

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Looking for New Investment Talent? You Could Buy a Whole Team

Brief: Laura Pollock’s Third Street Partners launched its lift-out business 18 months ago, just before the pandemic began. “The pandemic has created an opportunity for individuals to reflect on what do they want their career to look like,” Pollock told Institutional Investor. With that comes opportunity for an executive search firm like Third Street. Its lift-out business involves facilitating an entire investment team’s next career move. Third Street acts as a “professional matchmaker,” as Pollock puts it, finding teams that would be good fits for existing asset managers — or that would do well if they spun out on their own.  

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Two days in the office will be ‘new normal’ after pandemic

Brief: Two days a week working from the office is expected to become the new normal as businesses adapt to the fallout of the coronavirus pandemic. With millions of employees already working from home, big firms are adopting a three days at home, two days in the office approach, reports the Mail Online. Several employers have already agreed the changes, while the Institute of Directors said two thirds of business leaders will allow remote working to continue. The institute’s director of policy Roger Barker said the pandemic had led to changes to the working week “greater than radical reform or regulation ever could have”. A recent YouGov survey found just one in five bosses will ask all staff to come in five days a week after the pandemic.

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Delta variant surge will crush reopening stocks, longtime market bear David Rosenberg suggests

Brief: Investors may want to start August by lightening up on the reopening trades. Longtime market bear David Rosenberg warns surging Covid-19 delta variant cases paired with the culmination of fiscal stimulus will crush stocks tied to the economic recovery. “We have to be prepared here for the economy to sputter in the next several months,” the Rosenberg Research president told CNBC’s “Trading Nation” on Friday. “You don’t have to basically abandon the stock market, but I definitely would not be in the value reflation cyclical trade.”

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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.