shutterstock_1629512083

Covid-19 Diligence Briefing

Our briefing for Thursday, September 30, 2021:

  • In the United States, a new poll has found that a lower number of people are opposed to Covid-19 vaccines, compared with last month. The poll was conducted between September 13-19 by Gallup, involved 4034 adults and had a margin of error of plus or minus two percentage points. There were 75% of respondents who said they are either fully or partially vaccinated, 5% said they plan to be. The 80% is an increase from the 77% reported back in August, and the highest number this year according to Gallup. The results come amid a national push for higher vaccine rates, as officials urge citizens to roll up their sleeves and get the shot. To date about 55% of Americans are fully vaccinated.
  • In Canada, the province of Alberta is dealing with soaring case numbers and record numbers of deaths and hospitalizations. Pressure is growing for Premier Jason Kenney to take bold action to address the situation, as case numbers reach more than 20,000 and hospitalizations reach more than 1000. Doctors and health experts, as well as the Canadian Medical Association, are calling for lockdowns in the province - short, controlled lockdowns often known as “firebreakers.”  Kenney has previously told the media that he will not implement a lockdown, saying it would be a punishment for the vaccinated. 
  • In the United Kingdom, Scotland has delayed the enforcement of its vaccine passport system after receiving backlash from nightclubs. First Minister Nicola Sturgeon says she understands that venues need more time to adapt to the regulations. They will still come into effect on Friday October 1, but businesses will have a grace period until October 18 where they will not face punishment for non-compliance. The rules of the vaccine passport system require anyone age 18 or older to show proof of vaccination or exemption before they’re allowed in a nightclub, an indoor event with more than 500 people or an outdoor event with more than 4000 people.
  • A hospital chain in Brazil has been accused of giving unproven Covid-19 treatments to patients without their knowledge and covering up their deaths. The lawyer for a group of whistleblowing doctors, Bruna Morato, said at least nine patients died while they were receiving the experimental treatments. The treatments used drugs such as ivermectin and hydroxychloroquine, which are not proven to be effective for treating Covid-19. Morato says the hospitals were helping the Bolsonaro government who had been promoting the unproven drugs. The hospital chain, Prevent Senior, denied all the allegations, saying that they have never hidden or under-reported deaths. 
  • Singapore faced its second straight day of cases topping more than 2200 as the country deals with some of its worst numbers since the pandemic began. They reported a record number of eight deaths on Wednesday, bringing the total number of deaths since the beginning of the pandemic to 93. Of those deaths that were reported, six were among unvaccinated people, all of them were seniors ages 72-90, the health ministry said. The figures, though high for Singapore, are still extremely low compared to other countries. About 82% of the population over 12 in Singapore have been fully vaccinated. 
  • In Australia, the state of Victoria reported 1438 new infections, up from 938 the previous day, a more than 50% increase.  According to Jeroen Weimar, the state’s Covid-19 response commander, the rise in cases was the result of social gatherings that took place for the Australian Football League championship match. About 500 new cases were a result of such gatherings, Weimar said. “We’ve had the most activity on our roads over a three-day weekend of any lockdown weekend since the end of July,” he said. About 55% of the new cases reported were among men, many of them younger.

Covid-19 – Due Diligence And Asset Management

G-7 ministers set to meet on reopening international travel

Brief: Transport and health ministers of the G-7 countries are due to meet virtually on Thursday to discuss ways to restart international travel, according to people familiar with the matter. The meeting is being organized by the U.K., which holds the presidency of the Group of Seven nations this year, said the people, who asked not to be identified ahead of any official statement. It’s aimed at moving closer to a consensus on how to ease border restrictions. While some countries, notably members of the European Union, have used so-called vaccine passports to successfully resume cross-border travel, others including the U.S. have held back on implementing app-based technology over concerns ranging from politics to privacy or fairness between people who have and haven’t received the shots. Another sticking point has been whether to recognize vaccines in countries where they haven’t been approved.

READ MORE...


U.K. Economy Emerged From Lockdown More Strongly Than Estimated

Brief: The U.K. economy emerged from the winter lockdown more strongly than previously estimated, but the recovery is already running into trouble. Gross domestic product rose 5.5% in the second quarter instead of the 4.8% previously estimated, Office for National Statistics figures published Thursday show. The increase, which reflected the reopening of stores and the hospitality sector, left the economy 3.3% smaller than it was before the pandemic struck. Government spending, exports and business investment were all stronger than previously estimated by the ONS.  Hopes that the shortfall might be made up this year are fading, with consumers and businesses facing the twin headwinds of accelerating inflation and supply chain problems. Bank of England Governor Andrew Bailey on Wednesday said that output is unlikely to recover its pre-pandemic level until early next year, later than officials predicted in August.

READ MORE...


A $1.8 Billion Hedge Fund Soared 120% During the Covid-19 Pandemic

Brief: David Rogers is having a dream run at Castle Hook Partners, the $1.8 billion hedge fund backed by investors including billionaire Stan Druckenmiller. The fund is up about 120% since April 2020, according to people with knowledge of the matter, after taking a hit in the early part of last year in the pandemic’s initial selloff. It lost 10% in the first three months of 2020, said the people, asking not to be identified because the information is private. The turnaround is in sharp contrast to the fund’s modest returns since starting five years ago with about $900 million. The money included a substantial anchor investment from Druckenmiller who trained Rogers at his former hedge fund Duquesne Capital Management and once described him as an “extremely talented” money manager. Gains in 2020 were evenly split between wagers on equities, rates and foreign exchange, according to one of the people. The firm turned bullish on inflation and commodities late last year, themes that continued to drive performance in 2021, the person said.

Read more...


Pandemic recovery fuels deal craze as third-quarter M&A breaks all records

Brief: Global mergers and acquisitions hit new record highs in the third quarter as companies and investors shaped their post-COVID future through transformative deals while their advisers struggled to cope with transaction volumes never seen before. A frantic summer of merger activity produced deals worth $1.52 trillion in the three months to Sept. 27, up 38% from the same quarter last year and more than any other quarter on record, according to Refinitiv data. Third-quarter volumes drove global M&A activity in the first nine months of 2021 to an unprecedented record of $4.33 trillion, overtaking an all-time annual peak of $4.1 trillion hit before the financial crisis in 2007 and forcing investment banks to hike pay for overworked and disgruntled junior staff.

READ MORE...


Impact Investing: Embracing Change and Optimizing Long-Term Value

Brief: Expectations for the behavior of institutional investors are changing. As societies around the world deal with the challenges of climate change, a global pandemic, social upheaval and other adversities, institutional investors are being asked to take a much more expansive view of risk than many traditional investment models currently account for. Increasingly, this includes optimizing their investments and overall portfolio for environmental, social and governance (ESG) impact. According to Nuveen’s annual survey of institutional investors, almost 70% of investors indicated that they plan to seek out more ESG-oriented alternative investments in the near term. Additionally, over 70% agree that ESG is about fully integrating environmental, social and governance factors into investment decision-making. With this holistic view, investors can pursue the stability, diversification, financial performance and positive real-world benefits that underpin long-term value growth.

READ MORE...


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

Our briefing for Wednesday, September 29, 2021:

  • In the United States, Pfizer and its partner BioNTech submitted initial trial data for their Covid-19 vaccine in children ages five to 11. Data from the trial showed the vaccine generated a positive immune response for the age group, similar to that of the 16-25-year-old group. The drug makers said they also plan to submit the data to the European Medicines Agency and to other regulators. While Pfizer’s vaccine has been authorized for use by 12-15-year-olds in the U.S., Moderna’s vaccine has not been yet been authorized for use by teens.
  • In Canada, Prime Minister Justin Trudeau has laid out his post-election priorities, and all of them are focused on the Covid-19 pandemic. His first objective will be to bring in a vaccine mandate for federal public servants and for travellers on planes, trains and ships. His government is also working on a vaccine passport system for international travel that is intended to make things easier for Canadians when crossing borders. Trudeau also plans to send money to the provinces to help them implement their own proof-of-vaccine programs, and hopes to bring in legislation to criminalize anti-vaccine demonstrations outside of hospitals.
  • In the United Kingdom, Prime Minister Boris Johnson has promised to put bereaved families at the centre of a Covid-19 pandemic inquiry. Johnson, who met with the Covid-19 Bereaved Families for Justice group on Tuesday, also said he will appoint a chair to the public inquiry by Christmas. “And obviously, there’s very little I could say to mitigate their own suffering," Johnson said. “But what I did say was that we were determined to make sure that the experience of the bereaved was something we took account of.” The group said they were pleased by the meeting with the prime minister but still “disappointed by the lack of urgency” that he displayed.
  • France’s government announced that they will fully fund psychological treatments, beginning next year. Therapy sessions in the country will be made free for anyone who has a doctor’s prescription. French President Emmanuel Macron says there’s been a spike in suicide attempts, particularly among teenagers, and that about 20% of people in France suffer from depression. Keeping children out of school also significantly impacted mental health, as did the mask mandate for school children, which is set to be lifted next week. “The consequences of the pandemic are just as tangible in mental health,” Macron said.
  • New Zealand’s Covid-19 case numbers soared to 45, the highest they’ve been in nearly a month and more than five times the previous day’s number. The city of Auckland remains under a level three lockdown, having eased some restrictions last week. Officials are urging citizens to continue to follow the rules and to go get tested. “We’ve still got to hold our nerve here,” Covid-19 Response Minister Chris Hipkins said. “We’re still aiming to run this into the ground.” About 64% of New Zealanders have had their first dose of vaccine. 
  • In Australia, the federal government announced that it will end financial aid to state governments for Covid-19. In a statement, the government said once they reach the 80% double-dose vaccination milestone, they will end payments to workers who lost hours due to lockdowns after two weeks.  It will largely be up to the individual states to fund the cost of lockdowns, should they need to have them once the benchmark is reached. New South Wales reported 863 new coronavirus cases and 15 deaths. Neighbouring Victoria state reported a record number of 950 new cases , and seven deaths.

Covid-19 – Due Diligence And Asset Management

Central banks parse inflation risk as turn from pandemic policy begins

Brief: Central banks that launched massive emergency support to fight the pandemic last year are now planning a global turn in the other direction, with gaps already emerging in their perceived risk of inflation, the need to respond to it, and the pace of the likely return to normal monetary policy. They are confronted with common supply shocks and common risks around a pandemic that continues to shape commerce. "Globally we are still in for a long process," of reopening and adapting to the post-pandemic economy, St. Louis Federal Reserve President James Bullard said this week in a Reuters interview. But the reopening, and particularly the associated inflation, is being felt differently across the developed world, testing officials' understanding of the post-pandemic economy and their ability to hit a shared 2% inflation target without derailing global growth.

READ MORE...


United to fire workers who refuse COVID vaccine

Brief: United Airlines (UAL) is set to terminate employees who refuse to get the coronavirus vaccine, under a policy it first established in August. The Chicago-based company has a total of 593 staff members who have not yet been jabbed, and have not applied for an exemption on religious or medical grounds. They now face being fired by the airline for failing to comply with its vaccination rules, however, they will be given a final chance to fall into line, United said. United required its 67,000 US staff members to provide proof of vaccination by 27 September. Employees were given an added incentive of receiving an extra day’s pay if they got their full vaccination dose before 20 September.

READ MORE...


In Covid Era, ESG Investors Found to Have Health ‘Blind Spot’

Brief: Investors are generally ignoring the significant risks posed by poor human health, a glaring omission in the era of Covid-19. Much like climate change, health poses a systemic risk that investors “cannot diversify away from,” according to a new report from ShareAction, a U.K. nonprofit focused on responsible investing. Through interviews with 30 asset managers, the group found that most aren’t investing in a way that protects human health. The Covid-19 pandemic has made clear the link between health and economic performance. It has also shown that investors who profess to consider environmental, social and governance issues when allocating their capital have many blind spots. In pure financial terms, there’s a lot at stake. The U.K. loses around 300 billion pounds ($406 billion) in economic output each year due to the poor health of its citizens.

Read more...


Climate Change Replaces Pandemic as Insurers’ Biggest Worry

Brief: Climate change has returned to the top of the list of insurers’ biggest concerns as the vaccine roll-out and gradual lifting of health restrictions see pandemic fears ease in many countries. Global warming was ranked as the biggest risk to society over the next five to 10 years in a report released Tuesday by French insurance giant AXA SA. While that also topped the ranking in 2018 and 2019, it was outstripped by diseases and pandemics last year as the virus spread across the globe. “Climate change is back at the top of the agenda,” AXA Chief Executive Officer Thomas Buberl said in a statement. “This is good news, since last year we feared that the explosion of health risks may overshadow the climate emergency.” Insurers are being increasingly challenged by global warming as extreme weather events wrought by climate change are expected to keep rising.

READ MORE...


How the pandemic has changed the financial advice business

Brief: Working remotely in a business built around relationships means adapting in more ways than one. For most financial advisory firms, the pandemic accelerated advancements already underway in virtual communications and paperless transactions. The best businesses maintained their personal connections with clients and safeguarded customer data at the same time. “We are now fully in the cloud,” said Matthew Young, president and CEO of Richard C. Young & Co. in Naples, Florida. For the most part, the transition to operating entirely online has been beneficial for clients and their advisors, particularly with electronic paperwork. “It speeds up the process,” Young said. “We can track it easier and it gets to the client instantaneously.”

READ MORE...


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

Our briefing for Tuesday, September 28, 2021:

  • In the United States, the daily pace of Covid-19 vaccinations has slowed, according to data available from the Centers for Disease Control and Prevention (CDC). The seven-day average rate of people getting their shot at the beginning of September was 836,359, while as of September 23, it was 683,329, a drop of about 18%. The numbers are far below their peaks in April, when the country saw millions of shots administered per day. On Monday President Joe Biden received his coronavirus booster shot on camera, continuing his effort to push all Americans to get their vaccines. So far about 55% of the U.S. population is fully vaccinated.
  • In Canada, the province of Saskatchewan reported 289 people in the hospital with Covid-19 on Monday, breaking a record set the previous day. Federal Health Minister Patty Hajdu told the Canadian Press that the federal government is ready to assist the province with whatever it may need, including staff. Unlike the province of Alberta, Saskatchewan has not yet made a formal request for assistance, but Premier Scott Moe says the province won’t rule out the idea if cases fail to peak. The federal government is currently assisting Alberta with airlifting of Covid-19 patients and staffing, after the province made a formal request for help.
  • In the United Kingdom, the government has eased coronavirus rules for hospitals in an effort to deal with patient waiting lists. Health Secretary Sajid Javid accepted three key recommendations for elective care on Monday, all are effective immediately. The recommendations include cutting down on social distancing, eliminating the need for patients to isolate before operations, and downgrading cleaning standards to average levels. The changes are expected to help enable medical staff to see more patients. The numbers of patients requiring elective care has grown, with 5.6 million people waiting for treatment according to the National Health Service.
  • France will soon stop providing free coronavirus tests for non-medical reasons, Prime Minister Jean Castex confirmed on Sunday. Currently Covid-19 tests are free for everyone in France, regardless of vaccination status or the reasons for taking the test. Beginning on October 15, only tests for genuine medical reasons will continue to be reimbursed. Unvaccinated individuals will have to pay for all tests unless they have a doctor’s prescription. Vaccinated people will only have to pay for tests when they’re taken for non-medical reasons, such as for travel. Tests for children will continue to be free.
  • India will resume direct passenger flights to Canada as a months-long ban gets lifted. Transport Canada said in a post on Twitter that flights from India can land in Canada with additional health measures put in place. "Travellers must have proof of a negative COVID-19 molecular test from the approved Genestrings Laboratory at the Delhi airport taken within 18 hours of the scheduled departure of their direct flight to Canada," the department said. They added that airlines will be checking to confirm whether vaccinated travellers have uploaded their information to the ArriveCAN mobile app or website. 
  • In Australia, unvaccinated residents in Sydney will have a tough time even after stay-at-home orders lift in December. New South Wales Premier Gladys Berejiklian says unvaccinated residents could be denied entry to shops, restaurants and other venues even after December 1 because many businesses won’t accept them. Pubs, cafes, gyms and hairdressers are set to reopen to fully vaccinated people by October 11, with more restrictions expected to be eased at the end of the month. New South Wales reported 863 new coronavirus infections, up from 787 a day earlier.

Covid-19 – Due Diligence And Asset Management

Market makers take centre-stage in European liquidity provision during Covid-19 pandemic

Brief: The ability of independent market making firms to provide essential liquidity to Europe’s pension funds and other asset managers during the Covid-19 financial crisis has accelerated their recognition as a vital part of the European capital markets eco-system. A new research report surveying European buyside participants reveals for the first time how market makers stepped up to help the asset managers when some of the traditional providers of risk capital partially withdrew from certain market segments in Europe in the early stages of the pandemic. As asset managers – particularly small and mid-size funds -- were seeking additional sources of liquidity the independent market makers were able to step up. This was made easier as the increasing electronification of the markets enabled asset managers and market makers to engage whilst working from home.

READ MORE...


U.S. pandemic fraud crackdown yields first case against bank employees

Brief: U.S. prosecutors have brought what is believed to be the first case against bank employees who allegedly exploited multi-billion dollar programs aimed at helping small businesses survive the COVID-19 pandemic. In a case unsealed in Brooklyn federal court on Friday, prosecutors say Anuli Okeke, a former branch manager at Popular Bank in New York, conspired with other bank employees and tax preparers to apply fraudulently for more than $3 million in pandemic relief loans overseen by the U.S. Small Business Administration. Alex Moncion, a spokesperson for Popular Bank, which was not named in the complaint, said on Monday that the bank had alerted law enforcement and bank regulators to the conduct and terminated the employees involved.

READ MORE...


Boeing Predicts Travel Back at 2019 Levels in Two or Three Years

Brief: Boeing Co. forecasts that commercial aviation should be back to 2019 levels in two to three years, buoyed by a strong domestic recovery in China and parts of Europe, the U.S. planemaker’s China head said. Various countries’ vaccination rates and differing quarantine requirements will pose some hurdles but “we’re anticipating in the next two to three years that the aviation market will fully recover to 2019 levels,” Boeing China President Sherry Carbary said on the sidelines of Airshow China 2021 in the southern city of Zhuhai on Tuesday. Carbary also said that Boeing was working very closely with the Civil Aviation Administration of China as it waits for its 737 Max model to be cleared by Chinese regulators. China -- the first to ground the Max following the jet’s second fatal crash in Ethiopia in March 2019 -- still hasn’t lifted its ban, though a test flight was conducted in the country in August. Other markets in Asia including India and Singapore have cleared the model to fly in recent months.

Read more...


Investors’ Preference for Later Stage Tech Deals During the Pandemic is Expected to Continue

Brief: During the pandemic, investors hedged their risks by putting money into more mature technology start-ups, but the trend is expected to endure well beyond Covid-19. The growing interest in later stage funding rounds that started last year as a hedging tool amid Covid-19 also comes as tech companies stay private longer and as so-called moonshot companies blow through capital. Companies developing self-driving cars, for example, require huge amounts of money for multiple years of research and development, according to a technology report from Bain & Company, the global management consulting firm. The number of late-stage deals grew 165 percent from the first quarter of 2020 to the first quarter of 2021, according to Bain & Co.

READ MORE...


Senators call for governments to craft a grand post-pandemic plan to grow economy

Brief: A group of senators is calling on the federal government to strike a grand economic plan with provinces, territories, businesses and civil society to drive growth coming out of the pandemic. The report includes calls to rethink how to deliver skills-training programs, to streamline the regulatory system to encourage entrepreneurs and for companies to invest in themselves. The document also says the federal government must come up with a more credible plan to manage the nation's burgeoning debt through new rules to guide budgetary decisions. Senators say the Trudeau Liberals must consider finding more new sources of revenue and suggest the government increase the value of federal sales tax. The report made public today is the culmination of work that started last November and included interviews with some 70 domestic and international experts about how Canada could avoid another era of low economic growth.

READ MORE...


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

Our briefing for Monday, September 27, 2021:

  • In the United States, the director of the Centers for Disease Control and Prevention (CDC) admits there is some confusion around who should get a booster shot. Last week the CDC backed the decision to authorize boosters for people 65 and older, adults who have underlying medical conditions and adults in high-risk jobs. CDC Director Rochelle Walensky overrode a recommendation from an advisory panel that the shots should be available only to a smaller group of people. The advisory panel wanted to exclude those people working in high-risk jobs, citing concerns about the recommendation being too broad. "This was a scientific close call. In that situation, it was my call to make," Walensky told reporters at a White House briefing. For now, boosters are only being made available to those who originally received the Pfizer vaccine.
  • In Canada, an inaccurate study on Covid-19 vaccines has spread rapidly on the web and social media before finally being retracted. The study, which has not been peer reviewed, was released last week by researchers at the Ottawa Heart Institute.  The study reported extremely high rates of heart inflammation linked to Covid-19 vaccines, but the researchers made a critical mathematical error and as such, the findings are false. The study has spread around the world on social media and has appeared on numerous anti-vaccination websites as so-called evidence of the damage caused by Covid-19 vaccines. 
  • In the United Kingdom, the government has largely gone their own way when it comes to Covid-19 restrictions. Despite objections from some experts, Prime Minister Boris Johnson removed nearly all restrictions for England back in July, ending social distancing, mask requirements and limits on gatherings. England does not require proof of vaccination for access to restaurants or even crowded venues like nightclubs. Also, while countries like Italy and the U.S. have made vaccines mandatory for millions of workers, Johnson’s government only requires them for nursing home staff. The government has argued that their strategy is working, and that they can change course anytime if necessary.
  • Japan plans to lift a state of emergency by the end of the month, broadcaster NHK reports. Prime Minister Yoshihide Suga told the media that he will seek the advice of a government panel on Tuesday before making any final decisions. The current emergency restrictions have been in place now for nearly six months, with curbs requiring restaurants to close early and not serve any alcohol.  Tokyo will consider keeping some curbs in place, for example, they may limit the opening hours for restaurants and only have alcohol served at pre-approved locations.
  • New Zealand will begin a pilot program to allow a small number of vaccinated overseas travellers to self-isolate at home. Currently, New Zealanders have to isolate for two weeks in government-approved hotels when they return home from abroad. Prime Minister Jacinda Ardern said the pilot will start next month and will involve 150 business travellers who are fully vaccinated. “The only reason that we are running this self-isolation pilot now is in preparation for a highly vaccinated population,” Ardern said at a news conference. “The intention is that in the first quarter of 2022 when more New Zealanders are vaccinated, it will be safer to run self-isolation at home.”
  • In Australia, New South Wales (NSW) Premier Gladys Berejiklian says she expects the state to reach the 80% double-vaccinated milestone by the end of October. At this point, the state can enter its next phase of reopening, which will include increased access to venues like restaurants and cafes, the option to travel freely and different limits on visitors. This builds on the first phase of the reopening which will happen at the 70% double vaccination milestone, around October 11, Berejiklian said. A third phase of the reopening will happen on December 1 and will see more freedoms for unvaccinated people, as well as eased restrictions on some venue capacities.

Covid-19 – Due Diligence And Asset Management

Biden Gets Covid Booster and Says He Wants More Vaccine Mandates

Brief: President Joe Biden received a booster shot Monday of the Pfizer Inc.-BioNTech SE Covid-19 vaccine in front of cameras at the White House and said he’ll press for more vaccination mandates to improve the U.S. inoculation rate. Biden, 78, meets guidelines issued last week by the Food and Drug Administration and the Centers for Disease Control and Prevention that those over age 65 get a third vaccination. “If you’re fully vaccinated, you’re highly protected now from severe illness even if you get Covid-19. You’re safe and we’re going to do everything we can to keep it that way with the boosters,” he said before getting his shot. “The most important thing we can do is to get more Americans vaccinated.”

READ MORE...


Great Reopening Trade Is Back as Hedge Funds Add Stock Longs

Brief: With a helping hand from the Federal Reserve, the great reopening trade is staging a return on Wall Street as money managers bet the U.S. consumer won’t be cowed by the delta-virus variant. Equities tied to the economic cycle including value and financials are rebounding, while investors just sank $5.5 billion into the largest ETF tracking the Russell 2000 Index of small-cap companies -- the most in five years. Last week’s hawkish U.S. central bank meeting is powering rate-sensitive trades as inflation-adjusted yields hit the highest since June.JPMorgan Chase & Co. data shows hedge funds are re-building exposure to stocks hitched to the expansion, with plenty of ammo to extend longs anew. Meanwhile, an index of economic-data surprises is rebounding from recent lows, suggesting supply-side woes have yet to derail the recovery in investment and consumption as much as feared.

READ MORE...


New Survey Finds Post-Pandemic Travel Will Pose Challenges Old and New

Brief: Wise today released the Wise International Travel Survey, assessing U.S. international travelers’ attitude and willingness to travel abroad. This comes on the heels of the White House announcing that the U.S. will reopen in November to air travelers from 33 countries who are fully vaccinated against COVID-19. According to the three market study of consumers, 82% of U.S. travelers say that as things get back to normal, international travel is one of the things that they’re looking forward to most. While 72% expressed that they are currently planning an international trip. "While the Delta Variant still presents challenges for international travel, consumers are keen to go abroad again," said Lindsey Grossman, director of product, North America for Wise.

Read more...


Beaten-Down Airline Stocks Celebrate Easing of Travel Rules

Brief: The easing of U.S. and U.K. travel restrictions is breathing new life into European airline stocks. British Airways owner IAG SA has been the star of the show in the last two weeks, soaring 21% after the White House said America would open up to vaccinated foreigners and the U.K. relaxed coronavirus testing requirements for fully jabbed arrivals. Air France-KLM and Deutsche Lufthansa AG have also rallied strongly, as have budget carriers such as Ryanair Holdings Plc. But investors are divided on whether the gains can last and the industry has been a laggard for a long time. European airlines remain about 25% below pre-pandemic levels, underperforming sectors like industrials and retail, which are up as much as 30% from where they were back then.

READ MORE...


Australia’s Morrison Tells States Their Borders Can’t Stay Shut

Brief: Australian Prime Minister Scott Morrison said state premiers must not keep borders closed once agreed Covid-19 vaccination targets are reached. “We can’t stay in second gear,” he said on a Sunday morning television program. “We’ve got to get to top gear in living with the virus.” State governments where Covid-19 cases are low, such as Queensland and Western Australia, have been reluctant to open their borders. Morrison says that will need to change when fully-vaccinated rates reach 80%, which he expects to happen before the end of the year. “I can’t see any reason why Australians should be kept from each other,” the leader said. “And so that puts a heavy, heavy responsibility on those who would seek to prevent that from happening.”

READ MORE...


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

Our briefing for Friday, September 24, 2021:

  • In the United States, the state of Alaska is experiencing its worst wave of the coronavirus pandemic yet, as hospitals come under extreme pressure. The state is averaging 125 new cases per day for every 100,000 people, more than any other state in the country, according to the New York Times.  On Wednesday the state announced that they were implementing crisis care standards for their entire hospital system, which gives hospitals legal grounds for making difficult triage decisions. Under half of the population of Alaska is fully vaccinated, compared with about 55% of the national population. 
  • In Canada, hospitals in the province of Alberta are seeing record numbers of patients admitted for critical care. The average number of intensive care unit admissions over the past five days has been 23 per day, according to Alberta Health Service officials. Across the province there are 226 people in total in intensive care with Covid-19. Meanwhile in Saskatchewan, pediatric intensive care beds are being used to treat adults because of a lack of capacity. The Jim Pattison Children’s Hospital in Saskatoon is currently treating two adults, one of whom has Covid-19. As of Tuesday, 262 people in Saskatchewan are in the hospital with Covid-19, while 54 of them are in intensive care.
  • In the United Kingdom, male life expectancy has dropped for the first time in 40 years because of the coronavirus pandemic. The Office for National Statistics (ONS) reports that a boy born between 2018 and 2020 is expected to live until he is 79, down from 79.2 for the 2015-17 period. The numbers for females are largely unchanged, with a girl born between 2018 and 2020 expected to live until age 82.9, the same as for the 2015-17 period. The ONS said that the coronavirus pandemic led to a greater number of deaths in 2020, so as a result, life expectancy for females saw no improvements, while for males it fell back to 2012-14 levels. 
  • South Korea has set another record for daily coronavirus cases, at 2434, after the country’s biggest holiday drew to a close. The government is currently working on a plan for how the nation can better live with Covid-19, which includes 80% of adults being fully vaccinated by late October. President Moon Jae-in told reporters on Friday that he feels the country is in a good place for vaccinations. "There is no problem at all with the amount of vaccines secured for this year," Moon said. "The vaccine shipment got off to a slower start than other countries, which delayed the vaccination programme, but I believe by next month, we will catch up and be a leading country by inoculation rate."
  • Japan’s Prime Minister Yoshihide Suga announced that the nation would be doubling its commitment of vaccine donations to the world. "Today, I am pleased to announce that, with additional contributions, Japan will provide up to approximately 60 million doses of vaccine in total," Suga said in a pre-recorded video message to the United Nations General Assembly. Of the 30 million previously committed doses, the country has already donated about 23 million of them to countries like Taiwan, Vietnam and Indonesia. Nearly 2100 new coronavirus cases were reported across the country, with 235 of them being in Tokyo.  
  • In Australia, the state of Victoria reported its highest number of daily cases on Thursday at 766. The state will roll out the Moderna vaccine starting next week as they strive to hit 80% first-dose vaccination rates. So far in the state some 76.2% of adults have received their first dose while about 46.2% are fully vaccinated. The state will receive 32,000 Moderna doses to be administered through state vaccination sites. The state’s health minister, Martin Foley, says record numbers of Victorians have come forward to get vaccinated over the past week. He says the state will reach 80% first doses within a week, at which point a small number of restrictions can be eased.

Covid-19 – Due Diligence And Asset Management

Powell Hears Covid-19 Ruptures Still Dog Economy as Fed Listens

Brief: Federal Reserve Chair Jerome Powell listened to a litany of ways in which the U.S. economy remains distorted by Covid-19 as he and his colleagues calibrate withdrawing emergency pandemic support. “I’ve never seen these kind of supply-chain issues, never seen an economy that combines drastic labor shortages with lots of unemployed people and a lot of slack in the labor market,” Powell told a virtual Fed Listens panel Friday. He didn’t address the economic outlook or monetary policy during the hour-plus event, but got plenty of food for thought: The U.S. central bank gets “tons and tons of data,” he said, but “it doesn’t really live for us until we hear your stories.”

READ MORE...


Office vacancies in Canada hit highest level since 1994

Brief: Canadian office vacancies have reached their highest point in more than a quarter century, surpassing the levels of both the dotcom bubble and the global financial crisis. The distress in the commercial real estate market comes as the COVID-19 pandemic continues to keep workers home and as employers reconsider how much space they’ll need long term. The national vacancy rate reached 15.7 per cent in the third quarter, the highest since 1994, according to a report released Friday by commercial real estate brokerage CBRE Group. Across the country, office buildings that began construction before the pandemic are being completed and hitting the market even as many tenants are walking away from the space they have now, the report says.

READ MORE...


Property in a post-pandemic world

Brief: With government bond yields in the US and UK yielding 1.3% and 0.6% respectively, lower than where they started in 2020, and corporate bond spreads narrowing to levels below those seen pre-Covid, the search for sustainable yield in global asset markets has once again become very challenging. Against this backdrop, the hunt for yield is pushing investors further up the risk curve, while pricing suggests investors accept the benign view that current levels of inflation will not persist. The question now is whether there remain any areas to invest where yields remain attractive, economic recovery is not fully reflected in valuations, and which provide some protection in the event inflation proves less transitory than expected. One sector that fulfils these three criteria is property.

Read more...


European VC shakes off effects of Covid-19

Brief: Invest Europe, in partnership with the European Investment Fund (EIF), has published ‘The VC Factor - Pandemic Edition’, a new report illustrating European venture capital’s continued strong support for innovative and fast-growing start-ups in the immediate aftermath of the Covid-19 pandemic in 2020. The study is the second edition of the ground-breaking collaboration between Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, and the EIF - Europe’s largest investor in venture capital funds. It draws on data from 2,611 firms investing into VC and 32,114 start-ups between 2007 and 2020.

READ MORE...


DC schemes largely unaffected by Covid-19 market volatility

Brief: The 2021 edition of The DC Future Book, published by the Pensions Policy Institute in association with Columbia Threadneedle Investments, finds that positive trends in the UK Defined Contribution (DC) pension market have continued despite the backdrop of volatile investment markets due to Covid-19. However, the unprecedented nature of the market volatility should encourage DC schemes to assess the resilience of their default funds allowing them to derive and implement suitable measures to improve member outcomes. As an established annual compendium of statistics, The DC Future Book provides insight into the current state of DC workplace pensions and their likely direction of travel.

READ MORE...


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

Our briefing for Thursday, September 23, 2021:

  • In the United States, the Food and Drug Administration (FDA) authorized booster doses of the Pfizer vaccine for people 65 and older, those at risk of health complications and those whose jobs expose them to Covid-19. The authorization came on Wednesday and could see boosters be made available as early as this week. It will allow boosters for groups like healthcare workers, teachers, daycare staff and other essential workers. Last week an advisory panel to the FDA voted against the proposition that boosters will be needed by the broader population. The advisory panel said there is currently not enough evidence to support booster shots for all.
  • In Canada, deliveries of Covid-19 vaccines have been put on pause because supply in the country exceeds demand. Canada currently has a stockpile of 18.7 million doses, more than enough to vaccinate the remaining eligible population. About 80% of Canada’s eligible population is fully vaccinated, so at most 11 million doses would be needed to finish vaccinating everyone over 12. All provinces have stopped requesting new doses and the country has told suppliers to stop shipments. Canada will work with suppliers and other countries to determine how its excess doses of Pfizer and Moderna can be donated.
  • In the United Kingdom, England’s Chief Medical Officer Chris Whitty has warned it is inevitable that almost all unvaccinated children will get Covid-19 at some point. Speaking to MPs on Wednesday, Whitty explained that transmission rates are highest among those ages 12-15.  “It won't necessarily be in the next two or three months but they will get it sooner or later because this is incredibly infectious and because immunity wanes, we're not going to see a situation where it just sort of stops at a certain point," Whitty said. Last week the government accepted a recommendation to offer jabs to 12-15-year-olds. Whitty says the vaccines will reduce the risk of infection by 50% or maybe more.
  • Germany will stop paying compensation to unvaccinated workers who are forced to quarantine, Health Minister Jens Spahn announced on Wednesday.  The new rules come into effect on October 11 and will cover people who test positive for the virus as well as people returning home from trips to countries deemed “high risk.” Critics have said the new rules are too similar to a vaccine mandate, arguing that many people can’t afford to stay home without pay. “We should see this differently," Spahn told the media. "It's about fairness. Those who protect themselves and others via a vaccination can rightly ask why we should have to pay somebody who ended up in quarantine after a holiday in a risk area."
  • New Zealand’s Prime Minister Jacinda Ardern says she hopes to avoid lockdowns in the future, and sees vaccinations as “the golden ticket” out of the pandemic. The country reported 15 new locally transmitted cases of Covid-19, down from 23 on Wednesday. New Zealand has taken a different approach to the virus than most countries, aiming to completely eliminate the outbreak in Auckland through a series of measures including lockdowns, at least until vaccination rates pick up.  So far about 62% of New Zealanders have had at least one dose of vaccine, while about 40% are fully vaccinated.
  • In Australia, the government of New South Wales (NSW) announced a trial vaccine passport system for certain regions. The trial will take place for two weeks from October 6 and will allow people to use the Service NSW app to show their vaccination status, which is the same app people can currently use to check into venues. NSW Minister for Customer Service Victor Dominello said the trial will be a closed pilot for between 100-500 people. The regional areas where the trial will run haven’t been selected yet, but the government decided against running it in Sydney.

Covid-19 – Due Diligence And Asset Management

Investment management AUM grows to £9.4trn despite tumultuous 2020

Brief: Assets under management held by Investment Association (IA) members grew to £9.4 trillion in the UK by the end of 2020, an increase of 11% compared to the previous year, according to the Investment Management Survey. The annual assessment of the state of the industry found that total funds under management for UK investors also saw an 11% increase year on year, reaching £1.4 trillion in 2020. The recovery and resilience of the industry's recovery through the Covid-19 pandemic has been attributed to quick adaptation to home working, a focus on delivering for customers, and crucial interventions from the central banks. Chris Cummings, chief executive of the Investment Association said: "The investment management industry demonstrated its long termism through the pandemic by supporting the companies it invests in. The swift action of the central banks supported the global economy and the industry rallied to the cause injecting over £22bn into businesses to help them ride out the storm."

READ MORE...


Nuveen’s Nick Says Dovish Fed Provides Solid Support for Stocks

Brief: Nuveen’s Brian Nick is among the several strategists who think economic growth has already peaked as the effect of trillions of dollars in fiscal stimulus wears off. Yet he remains optimistic about the stock market. “We still have an overall positive view of where the economy is going to be going over the next five or six quarters,” Nick, the chief investment strategist at the wholly owned TIAA subsidiary, said in an interview on Bloomberg TV’s Surveillance Thursday. “That includes a deceleration in year-on-year earnings growth and deceleration in GDP growth, but there is still much more positive than negative out there. “Federal Reserve Chair Jerome Powell said on Wednesday that the U.S. central bank could begin scaling back asset purchases in November and complete the process by mid-2022, after officials revealed a growing inclination to raise interest rates next year.

READ MORE...


UAE Says It’s Unwinding Pandemic Stimulus as Economy Recovers

Brief: The United Arab Emirates has begun winding down an economic support program launched in response to the coronavirus pandemic as the economy shows signs of gradual recovery, the central bank said in a statement. The reduced reserve requirements for banks won’t change for now and neither will the lower loan-to-value ratio required for first-time home buyers seeking mortgage loans, the bank said. The loan deferral component of the Targeted Economic Support Scheme will expire by the end of 2021 with financial institutions able to carry on tapping a collateralized 50-billion-dirham ($13.6 billion) liquidity facility until the middle of 2022, in line with earlier guidance.

Read more...


US jobless claims tick up from near a pandemic low

Brief: The number of Americans applying for unemployment aid rose last week for a second straight week to 351,000, a sign that the delta variant of the coronavirus may be disrupting the job market's recovery, at least temporarily. Thursday's report from the Labor Department showed that jobless claims rose by 16,000 from the previous week. As the job market has strengthened, unemployment aid applications, which generally track layoffs, have tumbled since topping 900,000 early this year, reflecting the economy's reopening after the pandemic recession. The four-week moving average of claims, which smooths out week-to-week swings, registered its sixth straight drop — to a pandemic low of 336,000. Jobless claims still remain somewhat elevated: Before the virus tore through the economy in March 2020, they generally numbered about 220,000 a week.

READ MORE...


Investor confidence in PM's recovery plan falters

Brief: A new survey of investors has found that the majority lack faith in the government’s ability to tackle record levels of public debt and rebuild the economy post-pandemic. Forex platform HYCM surveyed 1,479 UK investors — all of whom have more than £20,000 ($27,292) invested. Some 60% of that number do not think Boris Johnson and the government have handled the pandemic competently. Some 59% also lack faith in the government’s ability to tackle record levels of public debt. Meanwhile, just under half (48%) believe Rishi Sunak is the right person to be chancellor. However, Sunak does appear to have the backing of wealthier investors, as this figure increases to 70% among those with portfolios worth in excess of £1m.

READ MORE...


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

Our briefing for Wednesday, September 22, 2021:

  • In the United States, President Joe Biden is expected to announce that the country is doubling its purchase of Pfizer’s Covid-19 shots from half a billion to one billion, for the sake of sharing with the world. The purchase reflects the country’s commitment to the goal of vaccinating 70% of the global population within the next year. Biden will make the announcement at a virtual vaccination summit that he is leading as part of the United Nations General Assembly. Biden’s plan is to use the summit to push other developed nations to ramp up their vaccine sharing plans. The U.S. global response has been criticized as being too modest, however the U.S. has donated around 160 million shots, more than the rest of the world combined.  
  • In Canada, Ontario Premier Doug Ford is calling for unity as the province’s vaccine passport system comes into effect.  The premier says the issue is one that has caused emotions to run high during the federal election, as he knows many are concerned about the policy impeding on their civil liberties. Ford’s government reversed course and brought in a vaccine passport system for the province after saying for months that they would not do so, due to a surge in cases caused by delta.  Although the system has come into effect, the government’s app for scanning QR codes won’t be available for another month. 
  • In the United Kingdom, travel guidance has been amended to include the Indian-made version of AstraZeneca as an approved vaccine.  India’s Covishield, which was developed in the U.K. and manufactured in India, was initially not recognized as an approved vaccine by the U.K. under their new travel rules. The rules that come into effect next month would require Indians visiting Britain to quarantine for 10 days even if they are fully vaccinated by Covishield. Britons who have been vaccinated with the same Indian-made doses do not have to quarantine. The policy sparked outrage in India, with authorities calling it “racist” and “highly discriminatory.” Although the travel guidance has since been amended to include Covishield, It is unclear whether Indians travelling to the U.K. will still have to quarantine.
  • Brazil’s health minister has tested positive for Covid-19 after attending the United Nations General Assembly in New York. According to a statement provided by the Brazilian president’s office, Health Minister Marcelo Queiroga is “doing well,” and the other members of the Brazilian delegation have tested negative. Queiroga said last week that he’s been vaccinated with the Chinese-made CoronaVac vaccine, although he did not say when he received it. He told CNN that he will be quarantining in New York for 14 days and won’t be leaving with the rest of his delegation.
  • South Korea will receive one million doses of the Pfizer coronavirus vaccine as part of a swap deal with the U.K. South Korea will return the same number of doses to the U.K. by the end of the year, according to the U.K.’s Department of Health and Social Care. The extra doses will help South Korea reach their target of having 70% of the population fully vaccinated by the end of October. South Korea is aiming to step up its vaccination campaign amid the country’s worst wave of infections.
  • Australia is planning to open its borders by Christmas at the latest, according to the country’s minister for tourism, trade and investments. "I do empathize with the Australians who have been denied the opportunity to travel overseas this year," said Minister Dan Tehan."It's another reason why everyone should get vaccinated and we have to stick to the national plan that will see our international border open up -- at this rate by Christmas at the latest." Australia’s plan is to reopen its borders once the country reaches an 80% full vaccination rate. So far about 38% of Australians have been fully vaccinated.

Covid-19 – Due Diligence And Asset Management

U.K. Job Creation During Pandemic Concentrated in High-Pay Roles

Brief: U.K. job creation was concentrated in high-skilled, high-pay roles during much of the pandemic, while job destruction occurred mostly among low-paid, low-skilled roles. That’s according to a report published Wednesday by the Institute for Public Policy Research. Noting that the decline in employment has been unevenly spread across sectors, the research group warned that most people who lost their jobs during the crisis are likely to lack the skills and training required to be hired in a the newly created role. The government should “boost it like Biden,” with a stimulus that would mean “employers compete for workers, rather than workers competing for jobs,” IPPR Executive Director Carys Roberts said.

READ MORE...


Pandemic Boosts U.S. Demand for Cloud Solutions as Companies Seek Greater Agility

Brief: U.S. demand for cloud-based solutions has continued to grow during the COVID-19 pandemic, as companies recognize they can better prepare for major disruptions by subscribing to software and infrastructure as services, according to a new report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm. The 2021 ISG Provider Lens™ Enterprise Application-as-a-Service Platforms report for the U.S. finds the pandemic led to more cloud adoption as companies raced to implement remote work and improve their customers’ digital experience. Cloud applications was the only segment of IT spending that did not decline due to the pandemic, and it continues to grow, ISG says.

READ MORE...


Moody's chief economist: US debt default would cost economy $15trn

Brief: The United States could wipe out 6 million jobs and about $15trn in household wealth if Congress fails to raise the debt ceiling, according to new analysis. Mark Zandi, chief economist at Moody's Analytics, warned of a "catastrophic" fallout that Congress has weeks to avoid if it cannot come to an agreement on whether to raise how much the US government can borrow. While the report notes that shutting down the government would not immediately cause a recession, estimates of the previous 2018-2019 government shutdown put the cost to the US economy at $11bn. The true danger to the economy comes when the Treasury exhausts its funds and defaults on its debt, which the report states would happen around 20 October. If the limit is not lifted by mid-October, the economist predicts gross domestic product falling by nearly 4%, with the unemployment rate rising from 5% to 9%.

Read more...


Paris Airports Need More Than U.S. Reopening to Recover Traffic

Brief: The reopening of transatlantic flights to the U.S. is “great news” for Paris, but it won’t bring air traffic back to where it was before the pandemic, according to the operator of the city’s airports. Paris serves as a hub to connect various continents, and “as long as Asia is closed, notably China,” all incoming traffic to Paris that normally goes to China from Africa, Latin America or North America is being slowed down, Aeroports de Paris Chief Executive Officer Augustin de Romanet said during a media event at Paris Charles de Gaulle airport on Wednesday. “As long as this stickiness exists, we fear we may not return to 2019 levels of traffic,” he said. Romanet said he still expects pre-pandemic traffic to return between 2025 and 2027. For this year, he predicts between 30% and 40% of 2019 levels. ADP will most likely deploy more staff for the expected increase in passengers once flights to the U.S. resume to minimize waiting times, he said.

READ MORE...


Asia below pre-pandemic levels as variants slow rebound

Brief: Developing economies in Asia will likely grow at a slower pace than earlier expected due to prolonged COVID-19 outbreaks and uneven progress in vaccinations, the Asian Development Bank said in a report Wednesday. The regional lender lowered its outlook for economic growth to reflect renewed coronavirus outbreaks as variants spread, prompting fresh pandemic precautions. The Manila, Philippines-based ADB expects 7.1% growth in 2021, falling to 5.4% in 2022. The forecast in April was for 7.3% growth this year and 5.3% in 2022. Most regional economies will remain below their pre-pandemic levels into 2022, and some of the losses from the crisis will be permanent, ADB economists said.

READ MORE...


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

Our briefing for Tuesday, September 21, 2021:

  • In the United States, President Joe Biden will ease travel restrictions beginning in November for foreign nationals who are fully vaccinated. White House Covid-19 Coordinator Jeff Zients announced the new policy on Monday, explaining that all foreign travellers flying into the U.S. will have to demonstrate proof of vaccination before boarding, as well as show a negative Covid-19 test taken within three days of the flight. Unvaccinated Americans travelling outside of the country will now be required to take a test upon departure as well as after they return. Fully vaccinated travellers will not be required to quarantine, Zients said.
  • In Canada, Pfizer says it plans to provide Health Canada with the data to demonstrate that their vaccine is effective for children. On Monday they pointed to research that shows their product generated an immune response in five-to-11-year-olds in their clinical trials. “These trial results provide a strong foundation for seeking authorization of our vaccine for children five to 11 years old, and we plan to submit them to the FDA (Food and Drug Administration) and other regulators with urgency," Pfizer Chief Executive Albert Bourla said in a news release. Health Canada says there are several studies being conducted by vaccine manufacturers around children, and that it anticipates they will provide data in the coming months.
  • In the United Kingdom, 36,100 new coronavirus cases were reported in the last 24-hour period, and 49 more deaths. Hospitalizations are currently at 7847, the first time in weeks that they’ve fallen below 8000. Prime Minister Boris Johnson says he hopes to avoid lockdowns during the colder months but hasn’t ruled out any possibilities. Last week he laid out the government’s plans for managing the pandemic throughout the autumn and winter, which include jabs for 12-15-year-olds and a booster program. The National Health Service announced that about 1.5 million people will be contacted this week as they’re now eligible for booster shots. 
  • Germany will likely make a Covid-19 vaccine available for children under 12 beginning early in the new year. Health Minister Jens Spahn says he also expects a recommendation from the Standing Committee on Vaccination to follow. “I am assuming that the approval for a vaccine for children under 12 years of age will come in the first quarter of 2022," Spahn told Funke media group. "Then we could protect the younger ones even better." The European Medicines Agency has said that they cannot speculate around a possible timeline for approval.
  • New Zealand announced greater fines for those who breach coronavirus restrictions, as they try to contain their current outbreak in Auckland. "Our success has been really based on the fact that people by and large have been compliant," Prime Minister Jacinda Ardern told media. “However, there has been the odd person that has broken the rules and put others at risk.” Fines for people who intentionally fail to comply with Covid-19 measures will increase from NZ$4000 to NZ$12,000 and could also come with six months imprisonment.  The changes will take effect in November if the Covid-19 Public Health Response Amendment Bill passes.
  • In Australia, violence broke out in the city of Melbourne as more than 1000 demonstrators took to the streets to oppose vaccine mandates and Covid-19 restrictions. Authorities said they arrested more than 40 people and at least three officers were injured.  Police used pepper balls, smoke bombs and rubber bullets as crowd control measures. The protests came after the state government announced the forced shutdown of the construction industry for two weeks, citing concerns about poor compliance with public health orders. Victoria state reported 603 new coronavirus cases and one death in the past 24 hours.

Covid-19 – Due Diligence And Asset Management

Middle-Market PE Firms Successfully Weather the Pandemic Storm

Brief: Middle-market private equity sponsors have made a remarkably smooth transition during the pandemic, according to research by New York Life Investments Alternatives, an investment advisor, and Coalition Greenwich, a consulting and research firm. Their success is reflected in a stellar performance in deal volume this year, according to data from PitchBook. Middle-market PE sponsors have closed 1,721 deals in the first half of the year for a combined $264.6 billion, putting 2021 on track to break the prior annual record of $416.3 billion in 2019. “Companies that have shown resiliency through 2020 and into 2021 are tracking very, very high values,” said Chris Taylor, head of NYLIA.  “And I don’t see that changing anytime soon.”

READ MORE...


Ratings Companies Reacted Slowly to Covid Crisis, Research Shows

Brief: Ratings companies reacted slowly to the Covid-19 crisis, raising questions about the reliability of creditworthiness scores and their impact on financial stability, according to the first study into the effect of the pandemic on sovereign ratings. The paper, to be published by the International Review of Financial Analysis, shows the largest three rating agencies (S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings) only reviewed sovereign scores when they were scheduled for regulatory purposes rather than as a fast response to the global spread of coronavirus. Regulations permit the companies to conduct reviews ahead of schedule when circumstances require. The lack of fast movement on ratings “is very worrying because sovereign debt accounts for a large amount in investment portfolios and is clearly not being assessed in a timely manner,” said Patrycja Klusak, a lecturer in banking and finance at the University of East Anglia, one of the authors of the paper.

READ MORE...


Virgin Atlantic, British Airways Bookings Jump on U.S. Reopening

Brief: Virgin Atlantic Airways Ltd.’s U.S. bookings surged more than 600% overnight Monday from a week earlier after the Biden administration moved to allow most fully vaccinated foreigners to fly there again. New York saw the biggest surge in demand, the U.K. airline said Tuesday, while leisure destinations also performed well. Sales to Orlando, Miami and Las Vegas soared. British Airways said its vacation division saw an almost 700% increase in searches week-on-week to destinations including Los Angeles and Boston. The shares of European airlines and other travel-related companies gained for a second day following the U.S. decision. British Airways’ parent IAG SA led the way with a 7% advance after an 11% gain Monday. Deutsche Lufthansa AG rose as much as 5% and Air France-KLM as much as 3.8%.

Read more...


Germany Trims Planned Debt Sales as Pandemic Impact Recedes

Brief: Germany cut planned debt sales in the fourth quarter by 4 billion euros ($4.7 billion), suggesting the surge in borrowing triggered by the coronavirus pandemic is receding. The federal government will raise 1 billion euros less in 15-year bonds, and trim sales of short-term discount paper by 3 billion euros compared with a plan published at the end of last year, the Federal Finance Agency said Tuesday. That means that total debt issuance for 2021 will work out at 500 million euros more than projected, it added. The pandemic brought years of German frugality to an abrupt end, with tens of billions distributed to offset the impact of the disease on the economy and borrowing climbing to a record in 2020.

READ MORE...


Fifth of UK investors' "knocked off course" by Covid

Brief: Over a million UK investors feel Covid-19 threw their finances off track, according to research by Capital Group.The investors said they were either not on track with their financial plans, or completely thrown off course.The research indicated that one in five investors was knocked off course by the pandemic and that it could take them at least five years to restore their long-term financial plans back to health. In total, 1,003 retail investors aged over 45 years with £50,000 or more in investments were surveyed. The survey was designed to give results that were nationally representative. Findings included that more than a third (37%) of those without a financial adviser lacked confidence in the performance of their investments over the next 12 months, compared to only a fifth of those with an adviser (21%).

READ MORE...


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

Our briefing for Monday, September 20, 2021:

  • In the United States, the average daily death toll for Covid-19 over the past seven days reached 2000 over the weekend, the highest it’s been since March according to the New York Times. More than 30% of those deaths were in Texas and Florida – Texas has vaccinated about 50% of its population while Florida has vaccinated about 56%. A Food and Drug Administration (FDA) expert advisory panel recommended on Friday that boosters be provided to those 65 and older as well as those with underlying health conditions.  Health experts have said they expect the FDA to expand that recommendation to the broader population in the coming days.
  • In Canada, as the federal election arrives, leaders are divided over their stances on vaccine passports and other Covid-19 related measures.  Prime Minister Justin Trudeau’s Liberal Party favours both vaccine passports and mandatory vaccination policies. New Democratic Party Leader Jagmeet Singh is also in favour of a national vaccine passport system, but Conservative Party Leader Erin O’Toole rejects the idea. His party still supports vaccinations but also favours alternatives like rapid testing.  Experts have weighed in and said vaccine passports are probably inevitable, pointing to the examples of Alberta and Saskatchewan, where two conservative premiers brought in vaccine passport measures after saying for weeks that they would not do so.
  • In the United Kingdom, a former prime minister has said 100 million Covid-19 vaccines are due to expire and be thrown away. Gordon Brown, referencing a new report by the research group Airfinity, said the world is facing a “vaccine waste disaster” and blasted world leaders for not developing plans to redistribute doses. The research by Airfinity predicts that 12 billion vaccines will be available around the world by December. Brown says it’s critical to determine how and where the vaccines will be distributed, pointing out that there is currently no plan to outline who will provide vaccines to poor countries. Brown sent the Airfinity research to political leaders including the U.S. president and the U.K. prime minister.
  • Italy has seen an uptick in vaccine appointments after the government announced that their health pass would be required for all workers. Italy’s pandemic commissioner Francesco Figliuolo said in a statement that there was an increase between 20% and 40% in bookings for the first dose, compared to last week. Last Thursday Italy became the first big European country to announce that their Green Pass would be required for all workers, public and private. “The Green Pass is an instrument of freedom that will help us make workplaces safer," Health Minister Roberto Speranza told a news conference. "The second reason is to reinforce our vaccine campaign."
  • New Zealand will ease some lockdown restrictions for its biggest city, as the government announces 22 new Covid-19 cases in the community. Prime Minister Jacinda Ardern says she is confident that there is no undetected transmission of the Delta variant, but tough curbs will still remain in place for Auckland after the alert drops from level 4 to level 3.  Schools and offices will stay closed, while residents will have to keep to their “bubbles.” Auckland will stay at a level 3 alert for at least two weeks, while the rest of the country remains under level 2. 
  • In Australia, New South Wales (NSW) reported 935 new Covid-19 cases, down from 1083 on Sunday and the lowest number since August 27th. "We're feeling more positive than we have in a couple of weeks... but I don't want any of us to sit back and think the worst is behind us," said State Premier Gladys Berejiklian. Some restrictions in NSW were relaxed for Sydney’s worst-affected suburbs; vaccinated people can now gather outside in groups of up to five, and time limits for outdoor exercise were lifted. Neighbouring Victoria state reported 567 new infections, its biggest daily rise this year.

Covid-19 – Due Diligence And Asset Management

U.S. to Open Air Travel to Most Vaccinated Foreigners

Brief: The U.S. will soon allow entry to most foreign air travelers as long as they’re fully vaccinated against Covid-19 -- while adding a testing requirement for unvaccinated Americans and barring entry for foreigners who haven’t gotten shots. The measures announced Monday by the White House are the most sweeping change to U.S. travel policies in months, and widen the gap in rules between vaccinated people -- who will see restrictions relaxed -- and the unvaccinated. The new rules will replace existing bans on foreigners’ travel to the U.S. from certain regions, including Europe. While the move will open the U.S. to millions of vaccinated people and was celebrated by the airline industry, the White House cast the measure as a crackdown, pointing to stricter testing rules and a new contact tracing regime. The new policy will take effect in “early November,” according to the White House, though the precise date isn’t yet clear.

READ MORE...


Covid crisis bruises Vietnamese trusts despite strong fundamentals

Brief: While the UK is making plans to protect itself from another Covid crisis it is easy to forget that some nations are in the middle of fighting the deadly virus. Vietnam is one such country. Up until the end of April it was a world leader in virus containment. However, since then a deadly fourth wave has caused significant disruption and markets have noticed. All three investment trusts that cover Vietnam are trading on double-digit discounts, despite achieving hefty returns across one and five years, according to figures from Association of Investment Companies (AIC) and FE fundinfo. Vietnam Enterprise Investments (VEIL) has returned 62.7% in one year and is trading on a 14.1% discount, VietNam Holding (VNH) has returned 88.7% and is trading on a 17.9% discount and VinaCapital Vietnam Opportunity (VOF) has returned 40.9% and is trading on a 20.6% discount.

READ MORE...


Corporate leverage returns to pre-pandemic levels

Brief: U.S. and European companies have marked another milestone in their road to recovery from COVID-19, seeing their debt levels relative to profits tumbling to the lowest since before the pandemic erupted in 2020. Net leverage, an important gauge of a company's financial health, refers to net debt as a proportion of EBITDA - earnings before accounting for interest, taxes, depreciation and amortization. At U.S. companies rated investment-grade, it fell in the second quarter to the lowest since 2018, according to BNP Paribas, while European leverage is the lowest since 2019.The trend is a good sign for corporate debt markets, where the lowest-rated segments are outperforming this year, signalling normalising credit quality.

Read more...


The City of London Finally Gets Back to the Office

Brief: On the lower floors of HSBC Holdings Plc’s Canary Wharf headquarters, the desks are filling up. Traders, salespeople and close support staff not currently in the office have been told they are expected to be at their workstations on the second to fourth floors of the tower five days a week, according to people familiar with the matter. The only exceptions will be for domestic emergencies and unavoidable family commitments.It's a sign that, after several false starts, the City of London's return to the office is at last gathering pace. At times over the past two weeks, trains have been at their busiest since the pandemic broke out, while the streets have been thronged with workers again.

READ MORE...


UAE central bank sees COVID-19 increasing money-laundering risks

Brief: The United Arab Emirates central bank sees increased risks of illicit financial flows emerging from the COVID-19 pandemic, including money-laundering and terrorism financing, it said in a report published on Sunday. The use of unlicensed money service providers for money laundering has increased during the coronavirus crisis last year, the report said, as well as the use of e-commerce to launder money. "Widespread lockdowns have resulted in a significant surge in e-commerce. Due to limited ability to move funds and goods during the pandemic, illicit actors are turning to e-commerce as a money laundering tool", it said. The number of so-called "money mules" - people who receive illicit funds into their bank accounts to hold or withdraw and wire elsewhere, taking a commission for their services - increased, the bank said, with accounts in the majority of cases belonging to low income individuals from Africa and Asia.

READ MORE...


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

Our briefing for Friday, September 17, 2021:

  • In the United States, one in 500 people have now died of Covid-19 since the country’s first reported infection. Data from Johns Hopkins University shows 663,913 people in the United States have died of Covid-19 as of Tuesday, a grim figure that represents how badly the country is still struggling to contain the virus. The majority of hospitalizations and deaths have been among the unvaccinated and are largely concentrated in the south, where vaccination rates are lower. With only 54% of the population fully vaccinated, government officials and experts are pushing for widespread vaccine mandates. 
  • In Canada, three Covid-19 vaccines have been officially approved by Health Canada, and with the full approval comes name changes. The Pfizer vaccine will now be known as “Comirnaty,” a combination of Covid-19, mRNA, community and immunity. The Moderna vaccine will now be known as “Spikevax” and the AstraZeneca vaccine will dubbed “Vaxzevria.” Health Canada announced the name changes on Twitter on Thursday, also adding that the vaccines themselves have not changed, only the names. The U.S. and the E.U. are already using the new names for promotional purposes. 
  • In the United Kingdom, the government is expected to make changes to their international travel rules. While they recently relaxed the rules for the fully vaccinated, expensive testing for travellers arriving into Britain remains in place. According to reports, the government is expected to scrap the testing requirements, and to revise their traffic light system into simpler high and low risk categories. Many countries are expected to be removed from the high-risk red list.  Currently there are 62 countries on Britain’s red list, a category that requires travellers to quarantine for 11 nights in a hotel at their own expense. Quarantine requirements are expected to remain in place for red list countries.
  • In Brazil, the federal government wants to stop vaccinations for adolescents, after noting adverse effects and one death that’s currently under investigation. Health Minister Marcelo Queiroga said at a news conference that there have been 1545 adverse events registered, in addition to the one death.  He criticized state and city governments for issuing the shots to teens without underlying health conditions and maintained that healthy adolescents who have received one shot should not get a second. The country’s health regulator Anvisa said in a statement that it has no evidence to support the need for changes to its approval of vaccines for teens.
  • South Korea has reported over 2000 new coronavirus cases, almost hitting a one-day record set last month. More than 1500 of the 2008 cases were in the greater Seoul area. As the nation approaches its biggest holiday of the year, concerns that the spread of the virus will worsen are growing, as millions usually travel across the country for the Chuseok holidays. Chuseok, the Korean version of Thanksgiving, begins over the weekend and lasts into next Wednesday. “We plead once again that people who aren’t fully vaccinated not to visit their aging parents who are in their 60s or older,” said Deputy Health Minister Lee Ki-il during a briefing.
  • In Australia, Prime Minister Scott Morrison announced the trial of a home quarantine system for international travellers arriving in Sydney. The seven-day trial will take place later this month and will involve about 175 people, including both residents and non-residents, as well as some Qantas air crew.  "This is the next step in our plan to safely reopen, and to stay safely open," Morrison said. The announcement comes as Australia inches closer towards their reopening plan, aiming for 70-80% full vaccination rates for the adult population. So far only about 45% of adults in Australia are fully vaccinated.

Covid-19 – Due Diligence And Asset Management

World’s wealthiest families gained US$312B over past year

Brief: Abundant liquidity, soaring stock markets and accommodating tax policies have been favorable for growing dynastic wealth. The world’s 25 richest families are worth US$1.7 trillion, a 22 per cent increase from a year ago. The Waltons of Arkansas, who own nearly half of retailer Walmart Inc., top the list for the fourth year running with a net worth of US$238.2 billion. Their fortune grew by US$23 billion in the past 12 months, despite the family selling US$6 billion worth of stock since February. New names on the ranking include the Dassaults of France, a third-generation technology and aviation empire, and the New York-based Lauders of cosmetics-maker Estee Lauder. One notable dropoff is the Lees, the family owners of South Korea’s Samsung. They fell from the list after paying an US$11 billion inheritance tax following last year’s death of patriarch Lee Kun-hee.

READ MORE...


Private Equity Is Smashing Records with Multi-Billion M&A Deals

Brief: The private equity industry is on a spending spree like never before. Buyout barons Blackstone Group Inc., Apollo Global Management Inc., KKR & Co. and others account for a record 30% of global transactions this year, with deal flow and fundraising close to all-time highs. Investors are flush with cash and looking to put the money to work. In the U.S., a private equity consortium recently announced one of the biggest leveraged buyouts of all time. And in the U.K., PE funds have been at their busiest since the financial crisis, targeting household names including grocery chain Wm Morrison Supermarkets Plc. By mid-2021, the sector had amassed a record $3.3 trillion of unspent capital, including $1 trillion held by buyout funds, giving it significant fire power for fresh acquisitions.

READ MORE...


Global Economy May be Headed for Shorter, Sharper Cycles, SocGen Says

Brief: Frictions in the world economy, Covid-19 and a shift in thinking about monetary and fiscal policy augur a new era of greater volatility, according to economists at Societe Generale. The French bank expects more bottlenecks and spikes in demand for certain skills because of a synchronized acceleration of the transitions to a digital and low carbon economy, accompanied by changes in lifestyles after the pandemic. At the same time, major central banks are modifying strategies to tolerate inflation overshooting, and governments are embracing fiscal stimulus while worrying less about high debt. “All these movements are happening together, at the same time, on a global level -- for us, that in itself is a source of friction,” Societe Generale Chief Economist Michala Marcussen said.

Read more...


ISS Tells Five9 Investors to Reject Zoom’s $14.7 Billion Offer

Brief: Investors should reject Zoom Video Communications Inc.’s planned purchase of Five9 Inc., according to influential advisory firm Institutional Shareholder Services Inc. Zoom’s offer to acquire Five9, valued at $14.7 billion when it was announced, exposes the software maker’s shareholders to “a more volatile stock whose growth prospects have become less compelling as society inches towards a post-pandemic environment,” ISS said in a note published Friday. The all-stock deal, announced in July, took advantage of Zoom’s soaring stock price during the pandemic. Zoom would use the deal to expand into an adjacent market that could bolster revenue as lockdowns end. 

READ MORE...


How Did Investors End Up on the Other Side of This Trade?

Brief: The stock market selloff in early 2020 took with it a number of high-profile volatility-trading funds that were designed to do the opposite: provide a source of uncorrelated returns. Now Markov Processes International has produced new research indicating that at least one fund was behaving as though it was selling risky hedges, or insurance in simple terms, against a stock selloff to other market participants. That’s the opposite of many of the funds’ objectives, according to investors familiar with the funds. It’s unlikely that investors intended to be in the business of providing tail-risk hedges. But that may be exactly what they did, according to the findings of MPI, which used its proprietary, returns-based style analysis to delve into what drove the behavior of volatility funds, including Infinity Q, Malachite, Parplus Partners, and others, that blew up last year.

READ MORE...


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

Our briefing for Thursday, September 16, 2021:

  • In the United States, a senior White House official says a new system for international travel is being developed. White House Coronavirus Response Coordinator Jeff Zients told the U.S. Travel and Tourism Advisory Board that the new plan will eventually replace existing restrictions, although he did not give any indication as to when that change will be made. "We are exploring considering vaccination requirements for foreign nationals traveling to the United States," Zients said on Wednesday. The new system will involve contact tracing of travellers to provide data to the Centers for Disease Control and Prevention. Zients says the administration is looking to lift existing travel restrictions as soon as possible.
  • In Canada, the province of Alberta is dealing with soaring case numbers as they struggle to contain the fourth wave of the virus. On Wednesday, Premier Jason Kenney declared a state of emergency and announced several new Covid-19 measures including a vaccine passport system. Alberta reported 24 new deaths on Wednesday, one per hour, and 1609 new cases. The premier warned that the situation is becoming increasingly severe and that the province could soon run out of intensive care beds. “Unless we slow transmission, particularly among unvaccinated Albertans, we simply will not be able to provide adequate care to everyone who gets sick based on current trends,” Kenney said.
  • In the United Kingdom, booster shots for people over 50 have been recommended as part of the government’s Covid-19 winter plans. The Joint Committee on Vaccination and Immunization (JCVI) made the recommendation that the boosters be given to everyone over 50 in addition to people with weakened immune systems and healthcare workers. Approximately 30 million people are eligible for the shots, which will be given no earlier than six months after a person receives their second dose. The boosters will be delivered beginning next week. Despite case numbers being in the 30,000 range, Prime Minister Boris Johnson has said his government will not introduce any further restrictions for England at this time.
  • In Italy, the Covid-19 Green Pass will be made mandatory for all workers beginning next month, a minister said. The Green Pass is a digital or paper certificate that discloses whether a person has been fully vaccinated, tested negative or recently recovered from Covid-19. Italy is the first European nation to require all workers to come under a vaccine passport system. Regional Affairs Minister Mariastella Gelmini said the cabinet plans to make the Green Pass mandatory for both public and private sector workers. People who don’t comply with the rules could face suspension without pay.
  • New Zealand reported 13 new Covid-19 cases, down slightly from 15 the previous day. This brings the total number of infections for this outbreak to 996. Prime Minister Jacinda Ardern is urging citizens to get vaccinated, not just for themselves but also for their children. “There’s a whole group of children that cannot be vaccinated right now, they’re not eligible. And yet we are increasingly seeing Covid-19 reach our children. So, if you don’t feel like doing it for yourself, do it for our kids,” Ardern said. So far about 69% of New Zealand’s eligible population have had their first dose of vaccine, while about 35% are fully vaccinated.
  • In Australia, Victoria state reported its highest jump in new coronavirus case numbers at 514, exceeding the previous record of 473 set on Monday. Melbourne remains under its sixth lockdown but is expected to reach the 70% first dose vaccination milestone by this Friday, which means some curbs around travel and outdoor exercise can be eased. New South Wales reported 1351 new cases, up from 1259 the previous day, and 12 new deaths, 10 of which were among unvaccinated individuals. Officials are urging Australians to get their vaccines, as they aim for 70% full vaccination rates before reopening.

Covid-19 – Due Diligence And Asset Management

Lack of knowledge prevents pension trustees from capitalising on post-pandemic investment opportunities

Brief: Professional trustees’ appetite for taking risk has increased since pre-pandemic, according to a new study of Professional DB Trustees, conducted by Charles Stanley Fiduciary Management. Almost half (47 per cent) of professional DB trustees revealed that their appetite for investment risk overall has increased, with around one in five (18 per cent) saying that it has increased significantly. Just 14 per cent said it had reduced. But the research also found that they feel their investment decisions are hampered by onerous regulation and a lack of knowledge.Professional Trustees want to take more risk across the board – in equities, credit markets and alternatives - as well as relaxing liability hedging. But burdensome regulation coupled with a lack of confidence in their investment knowledge mean it is unclear whether trustees have the freedom to enact their views.

READ MORE...


The Firms That Have Guided EMEA Investors Through the Pandemic

Brief: When it comes to making investment decisions in the European, Middle Eastern, and African markets, investors want the real thing. “In emerging markets, the human touch as ever is very important to have the pulse of the markets and, ultimately, make more informed decisions,” said Camille Asmar, head of equity sales for CEEMEA at HSBC. “You have to walk around the streets of Istanbul and Johannesburg or go to Riyadh and see exactly what is happening on the ground, how the population is behaving and thinking.” For much of the past 18 months, as the world grappled with Covid-19, this due diligence by investors was rendered nearly impossible due to lockdowns causing business travel to cease. But fortunately, the top equity sales and corporate access providers in the regions were there to step up.

READ MORE...


Boom for banks as M&A and pandemic boost corporate FX needs

Brief: A boom in corporate dealmaking, surging input costs and a focus on short-term cash flows in the pandemic have sent companies rushing to hedge their currency exposures this year, giving a boost to banks that sell foreign exchange products. Corporate treasurers say the pandemic, which sent revenues tanking in 2020 before this year's sharp rebound, has encouraged many to hedge currency risks more frequently. Relentless supply chain pressures, and a sharp rise in raw material and other input costs that are mostly denominated in U.S. dollars, are reasons for companies to lock in prices too. And a surge in mergers and acquisitions as the recovery takes hold is also lifting corporate demand for foreign currencies. Global dealmaking is running at a record high this year, with $3.9 trillion of deals already transacted by early September, according to Refinitiv data.

Read more...


World Economic Forum Is Set to Return to Davos Next Year

Brief: The World Economic Forum will return to the Swiss ski resort of Davos in 2022, after the pandemic forced organizers to shift to Singapore and then cancel their meeting altogether this year. The in-person event is scheduled for Jan. 17-21 and designed “to address economic, environmental, political and social fault lines exacerbated by the pandemic,” the group said on Thursday. It is working with the Swiss government and health experts to establish the appropriate safety measures. The meeting usually feature heads of states as well many of the world’s top executives, bankers and economic policy makers. “The pandemic has brought far-reaching changes,” WEF Founder Klaus Schwab said. “In a world full of uncertainty and tension, personal dialog is more important than ever.” 

READ MORE...


Toronto-Dominion Sees Broad Return to Office Delayed Until 2022

Brief: Toronto-Dominion Bank said a broad return of workers to its offices has been delayed until at least next year as Covid-19’s delta variant upends employers’ plans across North America. The lender, Canada’s largest by total assets, had said in March that employees working from home would likely continue to do so into the summer or potentially longer. Toronto-Dominion now doesn’t “currently expect a broader return to TD locations before calendar 2022,” Kenn Lalonde, the bank’s chief human resources officer, said in a memo to employees Wednesday. “We are monitoring the evolving situation and will update you when we have new information to share,” Lalonde said in the note. “In the meantime, we are making the necessary preparations for colleagues to be able to return to work on TD premises or third-party locations when conditions allow.”

READ MORE...


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

Our briefing for Wednesday, September 15, 2021:

  • In the United States, case numbers and hospitalizations are still on the rise as delta continues to tear through the country. Cases are nearing levels not seen since last winter, averaging at about 170,000 per day, with deaths at around 1800 per day. This is still well below the peaks of January, when cases were hovering around a quarter-million per day, however officials are especially concerned about vaccine hesitancy as the majority of cases and deaths are among the unvaccinated. U.S. President Joe Biden says this is a “pandemic of the unvaccinated,” and his administration continues to advocate for widespread vaccine mandates.
  • In Canada, the province of Ontario has released more details of their vaccine passport program, which is set to come into effect on Sept. 22. The vaccine passports will be required in what are deemed to be high risk indoor spaces, such as indoor restaurants, bars, nightclubs, sports and fitness facilities, concerts and other large events. Individuals and businesses that don’t comply with the rules could be fined or charged, officials say. Meanwhile, the province of Nova Scotia has delayed the move into their final reopening phase as a result of rising case numbers. The province will now enter Phase 5 in two and half weeks, after their proof of vaccination policy takes effect.
  • In the United Kingdom, Prime Minister Boris Johnson has unveiled the government’s winter plans for dealing with Covid-19. Under Plan A, ministers will encourage widespread vaccinations, offer jabs to 12-15-year-olds and begin a booster program. Plan B, which the government will enact if the National Health Service (NHS) becomes overwhelmed, will mean the return of mask mandates, vaccine passports and guidance on working from home. “What I would stress about Plan B is that contains a number of different shots in the locker. And you wouldn’t necessarily play them all at once, far from it. You’d want to do things in a graduated way,” Johnson said at a news conference on Tuesday.
  • In France, vaccines for healthcare workers are now mandatory, and people could face suspension from their jobs if they don’t comply.  According to government officials, more than 90% of healthcare workers in France are vaccinated, which means that about 300,000 still haven’t got their shots. Unvaccinated healthcare workers can face suspensions without pay, but a top court has ruled that they cannot be fired outright. Healthcare workers who have only received one shot are required to take a Covid-19 test every three days until they receive their second one. Both shots are required for all healthcare workers as of October 15.
  • In New Zealand, officials are pushing to speed up the country’s vaccination campaign, as case numbers begin to fall.  The country reported 15 new infections on Tuesday, down from 33 the previous day, with lockdowns and border closures credited with keeping the numbers lower. "The vaccine is the best tool we have in our toolbox and our ticket to greater freedom," Prime Minister Jacinda Ardern told a news conference. "The more people who are vaccinated, the fewer restrictions you have to have." So far, only about 34% of New Zealand’s population have been fully vaccinated.
  • In Australia, a nightly curfew that was imposed on Sydney’s suburbs will be lifted, authorities announced, though other curbs will remain in place. In New South Wales (NSW), 80% of adults have now had at least one dose of vaccine, while 48% are fully vaccinated.  "The stabilization and decline in some areas of concern are pleasing and we are at a critical stage... but the best advice we have is that it's too early and too risky to do anything further today," said Premier Gladys Berejiklian during a media conference. NSW reported 1259 new cases, up slightly from 1127 the previous day.

Covid-19 – Due Diligence And Asset Management

TD's U.S. head sees 'sort of a pause' in the economic recovery

Brief: Toronto-Dominion Bank’s top U.S. executive said the American economic recovery has hit some speed bumps over the past month and a half, with COVID-19’s Delta variant spreading and businesses finding it difficult to hire qualified workers. “We’ve seen sort of a pause and in some spaces or industries -- a little bit of a tapping on the brakes,” Greg Braca, Toronto-Dominion’s head of U.S. retail banking, said at a Barclays Plc conference Wednesday. “And we’re watching how this plays out.” The U.S. economy gained 235,000 jobs last month, the smallest increase in seven months. Still, the large amount of cash that consumers have stockpiled along with a low level of loan defaults are keeping the bank “bullish” for the remainder of the year, Braca said at the virtual event.

READ MORE...


Pandemic Inflation Has Flipped: Now It’s the Rich Who Pay More

Brief: Inflation rates are now higher for top-earning U.S. households than those on low incomes, reversing the trend that took hold earlier in the pandemic, according to research by Harvard economist Alberto Cavallo. Covid-19 has caused headaches for price statisticians because it’s changed the way people spend. Headline measures of U.S. inflation use a basket of goods and services that’s based on pre-pandemic shopping habits -- so it doesn’t always capture the higher prices that Americans have been paying in the past 18 months or so. Cavallo, an inflation specialist, has come up with baskets weighted according to what consumers actually spent money on since the pandemic began. He found that the inflation rates experienced by different income groups, which were broadly similar in 2019, have diverged since then. In the pandemic’s first year, prices were rising faster for low-earners. In the last few months the opposite is true.

READ MORE...


Amundi's Wosol: Covid stocks still trading at 'significantly low' valuations

Brief: The head of the largest European value fund in the world believes the European value rotation has further to go as the threat of further lockdowns and new variants keeps Covid-related stocks underpriced. Andreas Wosol, Amundi's head of value who manages around €5bn in European equity value strategies, told Investment Week both Covid-related stocks and cyclicals are trading below pre-pandemic levels, creating opportunities for investors. "People are talking about a fourth lockdown, another wave of the Delta variant coming into play this autumn or winter so these stocks are still not fully back to their pre-Covid situation, making them an area in the market where you might expect recovery potential," he said. Wosol sees a lot of opportunities in the more consumer-focused areas of the market, including the automotive industry, media, and entertainment, as well as cyclical consumer areas, such as the retail that are trading "significantly low".

Read more...


UN Says World Economy to Grow at Fastest Pace in Almost 50 Years

Brief: The global economy is expected to undergo its fastest recovery in almost five decades this year, but deepening inequities between advanced and developing countries threaten to undermine this, the United Nations warned. Following last year’s 3.5% contraction, world gross domestic product will likely surge 5.3% in 2021 due to “radical” policy interventions and a successful, if incomplete, vaccine rollout in advanced economies, the UN Conference on Trade and Development said in a report Wednesday. Expansion may slow to 3.6% next year, taking the estimated cumulative income loss since 2020 to $13 trillion, it said. Many countries in the southern hemisphere have been hit especially hard during the pandemic, and fiscal constraints, a lack of monetary autonomy and poor access to Covid-19 vaccines could escalate economic stress on developing nations, according to the report.

READ MORE...


ECB’s Lagarde Sees Part-Time Home Office Outlasting Pandemic

Brief: Office workers probably won’t return to their desks full-time as companies learned to live with flexible arrangements during the coronavirus pandemic, according to European Central Bank President Christine Lagarde. “We’re heading toward a hybrid movement, where part of the week will be spent in the office so that people can meet, can see each other, can hold regular meetings and have face-to-face contact,” she said on “The David Rubenstein Show: Peer-to-Peer Conversations” on Bloomberg Television. “But the rest of the week will likely be working from home.” While the exact design of these new arrangements still needs to be determined, “people have learned during the pandemic, and those learnings will be bottled in and used for the future way of working,” Lagarde said.

READ MORE...


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

Our briefing for Tuesday, September 14, 2021:

  • In the United States, booster shots are not needed for the general public, according to a group of international scientists who recently completed a paper on the matter. The paper, which was published Monday in medical journal The Lancet, was authored by senior vaccine leaders including some from the U.S. Food and Drug Administration and the World Health Organization. The authors say that governments are better off focusing efforts on people who aren’t vaccinated yet. “Even if some gain can ultimately be obtained from boosting, it will not outweigh the benefits of providing initial protection to the unvaccinated," the scientists wrote.
  • In Canada, as the federal election draws closer, leaders are taking a stand against demonstrations in front of hospitals and healthcare facilities. Prime Minister Justin Trudeau says if re-elected, he will crack down on the protests and make it an offence to obstruct access to any healthcare facility. The NDP’s Jagmeet Singh has also said he would make changes to the Criminal Code to create harsher sentences for those who intimidate or threaten healthcare workers. Conservative Leader Erin O’Toole also denounced such protests, saying peaceful protesting is quite different from this type of harassment
  • In the United Kingdom, jabs for 12–15-year-olds have been approved, as recommended by the U.K.’s four chief medical officers. According to the vaccines minister, Nadhim Zahawi, the government has accepted the recommendation and will start delivering doses next week. The program will operate within schools and the vaccines will require parental consent, although children can overrule parents in some situations. So far in the U.K., vaccines for children have been limited to those with underlying health conditions, but the chief medical officers say expanding the program will help reduce the spread of the virus in schools.
  • In Germany, a weeklong vaccination drive is underway, with healthcare workers taking up locations like shopping centres, sports arenas and hardware stores, to offer people vaccines without appointments. Under the motto #HierWirdGeimpft, which means “get vaccinated here,” the sites are listed on a national website and promoted with the hashtag on social media. The campaign runs all week until September 19. “It has never been easier to get a vaccination. It has never been faster," said Chancellor Angela Merkel in a video address. So far, 62.2% of the German population is fully vaccinated, while authorities are aiming for 75% 
  • In Italy, schools opened on Monday, with students in 10 of the nation’s 20 regions returning to the classroom. For the past year and a half, Italian students have been learning largely online, but authorities are determined to prevent a return to remote learning. Teachers, school staff and parents who enter school property are now required to carry the green pass, a digital or paper certificate that shows whether people have been vaccinated, tested negative or recently recovered from Covid-19. Education Minister Patrizio Bianchi said the reopening on Monday ran smoothly, with 93% of teachers presenting the green pass and others granted exemptions for health reasons. 
  • In Australia, a trial of vaccine passports will begin with some countries in the latest step to prepare for reopening. Minister for Trade and Tourism Dan Tehan made the announcement on Sunday, explaining that a QR code could be linked to real passports to prove the vaccination status of travellers. Among the countries included in the trial are Singapore, Japan, South Korea, the U.S. and the U.K., as well as Australia’s Pacific Islands.  Inbound travellers will have to be fully vaccinated by shots approved by Australia’s Therapeutic Goods Administration, which include Pfizer, Moderna, AstraZeneca and Janssen Cilag.

Covid-19 – Due Diligence And Asset Management

Covid Surge Imperils Small-Business Recovery, Goldman Sachs Says

Brief: Inflation pressures and a resurgence in coronavirus cases due to the Delta variant are hampering the recovery of small businesses across the U.S., according to a Goldman Sachs Group Inc. report. Among the 1,145 respondents surveyed around the end of August, about 75% worry about the impact of rising Covid infection rates on their businesses, Goldman Sachs said Tuesday in its report. Some 86% said they’re concerned about inflation, with 81% seeing an increase in pricing pressures since the firm’s last survey in June. The number of small-business owners who think the U.S. is moving in the right direction has declined in the period.“There’s been a big sentiment shift when it comes to inflation and workforce challenges,” Joe Wall, national director of Goldman Sachs 10,000 Small Business Voices program, which conducted the survey, said in an interview. Hiring conditions have also deteriorated since June. “Those themes are becoming more and more pronounced in terms of the challenges in addition to access to capital that we consistently hear from small businesses.”

READ MORE...


Wells Fargo Pushes Back Return-to-Office Date Again to Nov. 1

Brief: Wells Fargo & Co. delayed its return-to-office plans by another two weeks to early November. The firm, which has the biggest workforce of any U.S. bank, will now begin bringing back employees who have been working remotely starting Nov. 1, according to an internal memo Tuesday from Chief Operating Officer Scott Powell. The bank had previously planned on beginning the process Oct. 18.  President Joe Biden announced a plan last week to issue rules requiring large private employers to mandate shots or testing. Wells Fargo is evaluating how that might affect its return-to-office plans, Powell wrote in the memo. “We are studying these proposed requirements to better understand how they apply to our RTO plans, and will share more information when it is available,” Powell said.

READ MORE...


Global debt is fast approaching record $300 trillion - IIF

Brief: Global debt rose to a new record high of nearly $300 trillion in the second quarter, but the debt-to-GDP ratio declined for the first time since the start of the pandemic as economic growth rebounded, the Institute of International Finance (IIF) said on Tuesday. Total debt levels, which include government, household and corporate and bank debt, rose $4.8 trillion to $296 trillion at the end of June, after a slight decline in the first quarter, to stand $36 trillion above pre-pandemic levels. "If the borrowing continues at this pace, we expect global debt to exceed $300 trillion," said Emre Tiftik, IIF's director of sustainability research.The rise in debt levels was the sharpest among emerging markets, with total debt rising $3.5 trillion in the second quarter from the preceding three months to reach almost $92 trillion.

Read more...


City of London Staff Return in Largest Numbers Since March 2020

Brief: More people are back at their desks in the City of London than at any time since the pandemic forced the government to impose a lockdown 18 month ago. In the financial district, more than half of staff were back in their offices on Thursday, according to data compiled by Google, which tracks the locations of its users. The number of people returning has gradually ticked up in recent months, but the start of the school term is now accelerating the process. Many employers are pushing staff to come into work for at least a few days a week. Their return has boosted the local economy, with bars, coffee shops and restaurants last week appearing to be the busiest they’ve been since the pandemic struck. Traffic congestion and public transportation usage has also increased markedly.

READ MORE...


Manulife Joins Banks With Vaccine Mandate for Canadian Employees

Brief: Manulife Financial Corp. will require employees in Canada to provide proof of their vaccination status by the end of October and will force unvaccinated staff to undergo regular Covid-19 testing before they work in its offices. Employees who can’t be vaccinated for medical reasons must provide a note from a licensed health care professional, Manulife Canada Chief Executive Officer Mike Doughty said in a memo Monday. Those refusing the shots for religious reasons must make a written attestation. The life insurer’s move follows similar policies announced last month by top Canadian banks to make vaccines mandatory, with limited exceptions.

READ MORE...


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

Our briefing for Monday, September 13, 2021:

  • In the United States, Dr. Anthony Fauci, U.S. top infectious disease expert, says more vaccine mandates will be needed to end the pandemic. Speaking to CNN on Sunday, Fauci said more schools and businesses may have to mandate vaccines in order to help keep the virus under control.  He said that the delta variant combined with vaccine hesitancy has created a very challenging time with the Covid-19 pandemic in the U.S. His comments come shortly after President Joe Biden’s announcement of new vaccine measures, which include a mandate for all federal workers to get vaccinated. Currently in the U.S. about 63% of the eligible population is fully vaccinated.
  • In Canada, the province of Alberta continues to lead the country in new and active Covid-19 cases. On Friday, Alberta saw 1473 new cases and 10 new deaths. Over 2400 Albertans have died of Covid-19, and one of those who died this week was a young, unvaccinated pregnant woman. Currently there are more than 16,000 active Covid-19 cases in the province. Demonstrations were held in the city of Calgary over the weekend to protest vaccine mandates and other health restrictions. The rallies were held to support nurses, firefighters, police and other public sector workers who are against vaccine mandates.
  • In the United Kingdom, vaccine passports will no longer be needed in England for access to nightclubs and other venues. Health Secretary Sajid Javid made a sharp U-turn on the matter, saying only about a week ago that it was the best thing for the industry. "This virus hasn't gotten anywhere, there's still a pandemic so of course we need to remain cautious,” Javid told the BBC on Sunday. “But we just shouldn't be doing things for the sake of it all because others are doing it. We should look at every possible intervention properly.”
  • In Japan, a 50% vaccination milestone has been reached, according to the government. Japan’s vaccine rollout began slowly and has followed behind those of other developed nations. The program began in mid-February with healthcare workers and then expanded to those age 65 and older in April. Despite facing shortages of imports, the program picked up the pace by the end of late May, eventually reaching 100 million doses per day. The government expects a large majority of the eligible population to be fully vaccinated by November, when they plan to ease some restrictions.
  • In New Zealand, Auckland will remain under strict Level four restrictions for at least another week, Prime Minister Jacinda Ardern announced.  The country reported 33 new Covid-19 cases, bringing the total for this outbreak to 955. “Level four remains our best option to beat Delta and contain the virus at this stage of the outbreak. We don’t want to risk the sacrifices everyone has made, and all the hard work you’ve put in, by moving to alert Level three too quickly,” Ardern said. The rest of the country will remain under Level two restrictions because of the risk of the virus spreading from Auckland.
  • In Australia, New South Wales (NSW) Premier Gladys Berejiklian says vaccination rates are slowing and urged the unvaccinated to come forward to get their shots. "For those of you who choose not to be vaccinated, that is your choice, but don't expect to do everything that vaccinated people do when we hit 80%," Berejiklian said at a media briefing. "Our vaccination rates keep increasing, however there has been a slight slowdown. So we encourage everybody to come forward and get vaccinated." NSW reported a total of 1257 new Covid-19 cases, while neighbouring Victoria state reported 473.

Covid-19 – Due Diligence And Asset Management

Scaramucci's SALT hedge fund confab returns in person in New York City

Brief: A marquee Wall Street conference returns this week, but much like everyone's pandemic-era plans, the event hosted by hedge fund executive and former White House communications director Anthony Scaramucci, will be a little different this year. The SALT event, one of the premier hedge fund industry conferences, kicks off Sunday at the Jacob K. Javits Convention Center in New York, rather than the Bellagio Hotel in Las Vegas where organizers hosted the event 10 times before. The annual conference in Las Vegas was famous for pool parties, private rock concerts, and exclusive dinners as managers tried to get commitments for big checks from pension funds or other institutional investors. The Delta variant — a more infectious version of the original coronavirus — will force changes at this year's event in New York where roughly 3,000 signed up after Scaramucci sent "save the dates" a few months ago.

READ MORE...


UK pay and spending shrinks in year of pandemic

Brief: UK households reduced their spending by an average of £109.10 ($150.85) per week during the coronavirus pandemic, while they also struggled with a fall in income, new research has shown. According to data from the Office for National Statistics (ONS), richer households saw a bigger cut to spending than poorer households during the year to March 2021. Restrictions on buying certain goods and services during the pandemic were part of the cause of the 19% spending drop across the country, as well as a fall in household income, and a shift to home working. At the height of the spring 2020 lockdown, more than one-fifth of usual spending was largely prevented, the ONS said. Lower spending on international holidays, which included accommodation, travel and food, accounted for half of reduced spending in the highest income households, compared with just a third for the lowest income households.

READ MORE...


U.S. equity funds face outflows on growth concerns -Lipper

Brief: U.S. equity funds faced an outflow in the week to Sept. 8, on concerns the spread of the Delta coronavirus variant could slow economic growth and uncertainty over the timeline for the Federal Reserve to pull back its accommodative policies. Data from Lipper showed U.S. equity funds faced an outflow of $1.85 billion in the week to Wednesday, compared with an inflow worth $11.18 billion in the previous week. Investors also assessed data that showed the U.S economy created the fewest jobs in seven month in August, which affected risk sentiment. U.S. equity growth funds faced net selling of $4.72 billion, their biggest outflow in seven weeks, while value funds saw outflows for a third straight week, worth a net $541 million. Among equity sector funds, real estate funds lured a net $2.29 billion, the biggest since at least mid-October 2019. However, financials, industrials and materials sectors faced outflows of $1.05 billion, $857 million and $512 million respectively.

Read more...


Wall Street Braced for ‘Far Stickier’ Inflation to Test Markets

Brief: Markets are on tenterhooks for critical U.S. inflation data that could buffet stocks and bonds if they shift expectations about Federal Reserve stimulus withdrawal and the timing of interest-rate hikes. A backdrop of slower reopening in pandemic-stricken economies due to the delta strain, and price pressures stoked by supply snarls led to declines in both global stocks and Treasuries last week. Some measures of producer prices released Friday topped expectations, with a gauge of final demand jumping 8.3% year-over-year amid persistent disruptions in supply. That’s coming against a backdrop of tenacious inflation concerns, with central banks pumping in stimulus, and inventory issues cropping up just as the labor market adjusts to a new reality of work. Here’s what some strategists and investors are saying now.

READ MORE...


Asset Managers Need a Tech Overhaul

Brief: Asset managers used to depend on in-person conversations to strike deals, but that’s no longer the case as managers and clients across the globe shift to remote work. That’s one reason 75 percent of asset managers showed a strong appetite for digital transformations, according to a recent survey from KPMG. KPMG got 1,300 global respondents to its survey, including 112 asset management CEOs. Of the U.S. participants, 63 percent were from private equity, 22 percent were brokers or financial advisors, 9 percent were from wealth managers, 3 percent were from hedge funds, and another 3 percent were multi-strategy alternative investors.

READ MORE...


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

Our briefing for Friday, September 10, 2021:

  • In the United States, President Joe Biden has announced sweeping new measures to augment vaccination rates across the country. The new rules will apply to 100 million workers, or about two thirds of the American labour force. The administration will require all federal workers to get vaccinated, as well as all employers with 100 or more workers. Around 17 million workers at healthcare facilities will also be required to get vaccinated or test weekly for the virus. In his speech given on Thursday, Biden expressed growing frustration with the approximately 80 million unvaccinated Americans, saying that his “patience is wearing thin.”
  • In Canada, a new report from the Canadian Institute for Health Information shows that the average cost of treating a Covid-19 patient in Canada is more than $23,000. This is four times as much as a patient with influenza. Covid-19 patients are typically hospitalized for around 15 days which is twice as long as the standard pneumonia patient.  According to the data, almost one in four Covid-19 patients are admitted to the ICU, and one in five die in intensive care. The average cost of a Covid-19 patient admitted to the ICU is approximately $55,000, compared with $22,000 for an ICU-admitted pneumonia patient.
  • In the United Kingdom, over 8000 people were in the hospital with Covid-19 as of Wednesday, the highest number for nearly six months. The figure represents a 6% increase over the previous week. Despite this, numbers are still well below their peaks in January, when hospitalizations were hovering around 39,000. Cases have been slowly rising again in the U.K., reaching as high as 40,000 per day. The U.K. also has some of the highest vaccination rates in the world, with over 65% of the total population having had 2 doses.
  • In Italy, green pass requirements have been expanded to include all university and school staff, including cafeteria workers and cleaners. Prime Minister Mario Draghi said in a cabinet meeting that the decision was made to deal with the Covid-19 emergency in schools and other social facilities. Employees in those sectors will now have to show proof of vaccination, a negative Covid-19 test or proof of recent Covid-19 recovery, as per the green pass requirements. The rules are expected to be extended to state workers in the coming weeks, and eventually private sector workers. 
  • In New Zealand, Auckland reported 11 new cases of Covid-19, down from 13 the previous day and the lowest number of any day this week. This takes the total number of infections for the current outbreak to 879. Auckland remains under strict level four restrictions, while the rest of the country eased them earlier this week. The government will announce on Monday whether the lockdown in Auckland will be extended. New Zealand recently purchased about a quarter of a million doses of the Pfizer vaccine from Spain, which are expected to arrive this week and boost the country’s inoculation program.
  • In Australia, New South Wales (NSW) reported its highest number of new cases since the beginning of its latest outbreak, at 1542. Nine new deaths were also reported. State Premier Gladys Berejiklian announced that there will be no more daily media briefings as of Monday, updates will be provided through an online video instead. NSW is still aiming for 70% full vaccination rates before reopening, a target that is expected for mid-October. So far about 76% of adults in the state have had at least one dose of vaccine, while 44% are fully vaccinated.

Covid-19 – Due Diligence And Asset Management

BlackRock Rethinks October Return-to-Office Plan on Delta Risk

Brief: BlackRock Inc. is re-assessing its plans for U.S. employees to return to offices in early October, saying the spread of the Covid-19 delta variant calls for a more flexible approach. The world’s largest asset manager is now telling employees that it hasn’t decided when it would like to see them at their desks at least a few days a week, according to a memo seen by Bloomberg Thursday. The New York-based firm said it would give staff 30 days’ notice before moving to that hybrid work model.“We will be measured in our approach to return to the office,” executives including Chief Operating Officer Rob Goldstein said in the memo. “At this time, we are assessing our return-to-office plans for October and beyond.”

READ MORE...


ECB slows pace of pandemic stimulus programme but insists no tapering

Brief: The European Central Bank is set to slow the monthly bond purchases under its crisis programme as the economic outlook improves. "Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council judges that favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under the pandemic emergency purchase programme (PEPP) than in the previous two quarters," the ECB said this Thursday (9 September). While it will buy fewer bonds for the rest of the year the ECB stated it could increase its stimulus again if the eurozone outlook worsens. UBP macro strategist Mohammed Kazmi said the decision is in line with expectations. "There would have been some fears over a more hawkish announcement coming into today, taking purchases back to Q1 levels, especially after Lane's speech.

READ MORE...


U.K. Economy’s Coronavirus Rebound Grinds to a Halt in July

Brief: The U.K. economy barely grew in July, suggesting the recovery from the coronavirus recession is rapidly levelling off as consumer spending weakens and supply disruptions hamper production. Gross domestic product expanded just 0.1%  -- a tenth of the pace posted in June, the Office for National Statistics said Friday. Economists surveyed by Bloomberg had expected 0.5% growth. The figures left output 2.1% below the level in February 2020, before the pandemic struck. The slowdown heralds a return to more normal growth rates after pent-up demand following the lifting of restrictions in the spring saw the economy surge by almost 5% during the second quarter.

Read more...


TSX, U.S. markets fall on concerns about virus and Fed moves

Brief: North American stock markets were weaker for at least a third-straight day over concerns about the Delta variant and the potential scaling back of monetary stimulus in Canada and the U.S.Investors remained anxious about the impact of rising COVID-19 infections on economic growth and demand for commodities such as energy. A new pandemic low in first-time U.S. benefit claims also raised anticipation that the U.S. Federal Reserve might pull back its stimulus earlier than expected. The number of Americans seeking unemployment benefits fell last week to 310,000. That's below expectations and is approaching the pre-pandemic level of about 225,000. “Because things are mending on the labour front, the U.S. Federal Reserve could move sooner than anticipated to scale back some of its COVID pandemic accommodative monetary policies,'' said Anish Chopra, managing director with Portfolio Management Corp.

READ MORE...


Airlines lower forecasts, blaming rising Covid cases for weaker travel demand

Brief: Several U.S. airlines on Thursday lowered their financial forecasts, citing weaker bookings amid a rise in Covid-19 cases in recent weeks. United Airlines said weaker revenue will mean adjusted pretax losses in the third and fourth quarters of this year. The Chicago-based carrier said in July it expected to post pretax profits for that period. It plans to further trim capacity this year because of weaker demand. United said the spike in Covid cases over the summer, however, has had less of an impact on demand than previous increases in infection rates. Air travel generally falls in late summer as schools reopen, but airline executives in recent weeks have warned that the fast-spreading delta variant has exacerbated the drop in demand.

READ MORE...


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

Our briefing for Thursday, September 9, 2021:

  • In the United States, children are being hospitalized for Covid-19 at alarming rates, just as schools reopen and temperatures drop. The latest available data from the U.S. Department of Health and Human Services shows that 2396 children were hospitalized with the virus as of Tuesday, a record high. According to the American Academy of Pediatrics, children now make up more than 26% of new Covid-19 cases in the U.S. Many of the children being hospitalized had no pre-existing conditions. Experts say it’s important to protect children from the delta variant, to prevent further spread and to maintain classroom learning.
  • In Canada, a new online poll suggests that support has increased in Alberta for vaccine passports, despite the province’s premier opposing them. In Alberta, 54% of people who responded to the survey support mandatory proof of vaccination for public activities. While several provinces, including British Columbia, Ontario, Quebec and now Nova Scotia, have opted to bring in vaccine passports, Alberta Premier Jason Kenney maintains that they would interfere with the province’s Health Information Act. He instead announced last Friday that he would offer $100 incentives to help encourage people to get vaccinated.
  • In the United Kingdom, the Joint Committee on Vaccination and Immunisation (JCVI) is scheduled to meet to make a decision about the Covid-19 booster program. A week ago, the JCVI approved boosters for people with weakened immune systems, but this is separate from a formal booster program.  The leader of the World Health Organization (WHO), Director-General Tedros Adhanom Ghebreyesus, is calling for another moratorium on booster shots, this time through to the end of the year. “A month ago, I called for a global moratorium on booster doses, at least until the end of September to prioritize vaccinating the most at risk people around the world who are yet to receive their first dose,” Tedros said. “There has been little change in the global situation since then.”
  • In South Korea, the government is concerned about eroding vigilance as the country deals with a surge in cases. According to Korea’s Disease Control and Prevention Agency (KDCA), Seoul reported more than 2100 new infections in the past 24 hours. Despite the rise in case numbers, officials announced on Wednesday plans to lift restrictions and reopen once enough people have been vaccinated. The health ministry said with the current vaccination levels, the target of 80% will likely be hit in late October.  As of Tuesday, about 42.6% of adults in South Korea had been fully vaccinated.
  • In Japan, authorities have extended a state of emergency in Tokyo and other regions until the end of this month. The extension is intended to help avoid hospitals becoming overwhelmed, despite the fact that cases are falling and vaccinations are rising. "Inoculation of all those who wish to be vaccinated will be completed in October or November," Prime Minister Yoshihide Suga told reporters. "And from then, we will be able to ease restrictions by using proof of vaccination or testing results." Japan’s emergency restrictions are based around restaurants closing early and not serving alcohol. 
  • In Australia, New South Wales (NSW) unveiled its reopening plan, with the lockdown expected to ease next month provided enough people are vaccinated. State Premier Gladys Berejiklian did not provide a date for the reopening but said it would happen the first Monday after the 70% vaccination target is reached. Right now, about 43% of adults in NSW are fully vaccinated while 75% have had at least one dose. NSW reported 1405 new Covid-19 cases and five new deaths, while neighbouring Victoria state reported 324 new cases, its highest figure since August 2020.

Covid-19 – Due Diligence And Asset Management

The Pandemic Has Made Europe’s Top Executives Smarter… and Humbler

Brief: As the world slowly begins to shake off the unprecedented effects of the Covid-19 pandemic, corporate executives around the globe have been forced to grapple with challenges that even the most forward-thinking business leaders couldn’t have imagined just two short years ago. For many of the top-scoring chief executives in Institutional Investor’s 2021 All-Europe Executive Team, supply-chain issues top the list. “Supply chains around the world are in significant disarray,” said Nestlé’s Ulf Mark Schneider, the top-ranked chief executive in the food sector. “The consequences are rising raw material and freight costs.” Schneider said that the secret to overcoming these issues — and coping with an uncertain geopolitical environment — lies in increased agility and flexibility. For him, that’s not about knowing all the answers, but knowing he can delegate decisions to those who do: “We rely strongly on our people in the markets to know the best way to deliver for consumers, the company and society.”

READ MORE...


Wall Street turns higher after jobless claims hit new pandemic-era low

Brief: Stocks rose on Thursday, with Wall Street hoping to stave off a 4th consecutive day off losses as investors struggle to reconcile a still hot jobs market with an economy that's had its momentum dented by soaring COVID-19 infections. On Wednesday, the Dow Jones Industrial Average and S&P 500 Index posted their 3rd consecutive day of losses, and the technology-laced Nasdaq fell for the first time since last week. The market has mostly taken disappointing news in stride, but August's jobs data falling far short of market expectations last week tempered hopes for the fourth quarter.Separately, however, Labor Department data showed that open jobs hit yet another series record, with workers quitting their jobs en masse, and nearly 11 million positions unfilled. On Thursday, new jobless claims set a new pandemic era low at 310,000, temporarily allaying fears about the economy.

READ MORE...


Goldman Sachs Ends Social Distancing, Free Food in London Office

Brief: Goldman Sachs Group Inc. is dropping social distancing rules in its London office and will return to full occupancy starting next week. With the “vast majority” of staff in the U.K. fully vaccinated, Goldman is already seeing about half of its London workers in the office each day, according to an internal memo seen by Bloomberg News. “We encourage those of you who have not yet had the opportunity to be in the office to speak to your manager about doing so,” the memo said. The bank will keep mask wearing in common areas and a mandatory testing program in place. Goldman is also ending free meals in the office from Sept. 20 “ to encourage support of the local restaurants and businesses reopening around us.” The move was first reported by Financial News.

Read more...


Deep Dive: Absolute return managers adjust to the 'pandemic paradigm'

Brief: In 1837 Hans Christian Andersen wrote a folktale entitled The Emperor's New Clothes which always seems to come to the forefront when modern day markets' behaviour deviates from academic investment reason. Since March of 2020, when markets reeled from the pending pandemic effect on global economies, world governments have used record amounts of monetary and fiscal stimulus to attempt to shore up the world economy. While market crises have largely been avoided, the sheer size of the coordinated effort has led asset prices to surge, in some cases diverging from any fundamental valuation, at least relative to historical levels/multiples. 

READ MORE...


Muni-Bond Ratings Hit as Delta Derails Tourism Industry Revival

Brief: The persistence of the pandemic is dealing a fresh financial hit to corners of the municipal-bond market. As the strength of the tourism revival is restrained by the surge in the delta variant, S&P Global Ratings this month downgraded bonds partly backed by hotel-room revenue in Anaheim, California, the home of Disneyland. Bonds issued for New York’s Jacob K. Javits Convention Center had their rating cut by Moody’s Investors Service, with the trade association business plunged back into uncertainty. And Fitch Ratings knocked down its grade of the subway system serving San Francisco, the tech industry hub where companies have been kicking back the timeline for returning to the office.“Whether you take a vacation is one of the most discretionary choices you have,” said Dora Lee, director of research at Belle Haven Investments, which oversees $15.4 billion in investments.

READ MORE...


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

Our briefing for Wednesday, September 8, 2021:

  • In the United States, President Joe Biden will make an announcement outlining a new six-point strategy for dealing with Covid-19 and the delta variant. The announcement will come on Thursday, the White House said, and will address important matters like rising case numbers and vaccine hesitancy. Over the holiday weekend, the U.S. reached 40 million cases of the virus, the highest tally in the world.  Hospitalizations have also increased and seven states–Alaska, Georgia, Hawaii, Idaho, Kentucky, Tennessee and Washington–reported record numbers this month. The U.S. is struggling to keep the delta variant under control as concerns grow around children heading back to school.
  • In Canada, British Columbia has officially launched their vaccine passport for residents to access non-essential services.  Premier John Horgan says the new system will help get the economy running and allow social events to return safely. The new rules come into effect on Sept.13 and will apply to fully and partially vaccinated people until Oct. 24. Beginning on Oct. 24, residents will have to be fully vaccinated in order to access those non-essential services. British Columbia joins provinces of Quebec, Ontario and Manitoba in launching similar programs to try and augment vaccination rates. 
  • In the United Kingdom, Prime Minister Boris Johnson laid out plans on Tuesday to raise taxes to fund health and social care, after spending billions on the coronavirus pandemic. The tax on workers and companies across England would be a 1.25% levy, which is expected to generate about $62 billion over three years, according to the government. Speaking in the House of Commons on Tuesday, Johnson said it would be “wrong for me to say that we can pay for this pandemic without taking the difficult but responsible decisions about how we finance it.” In July, government reports said the U.K’s Covid-19 spending was around the equivalent of nearly $648 billion. 
  • In France, the government’s “pass sanitaire” was introduced about a month ago on August 9. The pass makes it mandatory to provide vaccination status or show a negative test, in order to enter indoor restaurants, cinemas, shopping malls, or for travel on planes and trains. Since the pass was introduced, vaccination rates in France have gone up. Approximately 72% of the French population had received one dose of vaccine by August 30, compared to 53.6% on July 12 when the pass was announced. More than one million people booked their vaccine appointments the day after President Emmanuel Macron announced the policy.
  • In Germany, the health minister is urging more people to get vaccinated, as vaccination rates fall and case numbers rise. Health Minister Jens Spahn tweeted on Saturday that at least 5 million vaccinations are needed to make the autumn and winter safer. The minister warned of hospitals becoming overwhelmed if not enough people are vaccinated. For weeks, case numbers have been rising in the country and vaccination rates have been falling. Currently about 61% of the German population has been fully vaccinated, a rate lower than most other European countries.
  • In Australia, vaccinations are accelerating as the country deals with lockdowns in its two biggest cities. Around three quarters of people over the age of 16 in New South Wales (NSW) have now had their first dose of vaccine. NSW reported 1480 new cases, up from 1220 a day earlier, and nine further deaths. In neighbouring Victoria state, cases fell from 246 to 221. The country now aims to live with the virus instead of eliminating it, with restrictions to lift once 70% of the adult population has been fully vaccinated, a goal that’s predicted for mid-October.

Covid-19 – Due Diligence And Asset Management

U.S. Stocks Cut to Underweight at Morgan Stanley on Higher Risk

Brief: Morgan Stanley cut its recommendation on U.S. equities to underweight and its call on global stocks to equal-weight, citing “outsized risk” to growth through October. Rising cases of the delta strain of Covid-19, and tension between elevated inflation expectations and low yields and easy monetary policy are at play during a time “that has historically poor seasonality,” strategists including Andrew Sheets wrote in a note on Tuesday. The investment bank’s caution on U.S. equities comes as the S&P 500 Index has outperformed global equities this year to make new records, even as coronavirus infections have started rising again in many parts of the world, and as the U.S. Federal Reserve edges closer to setting a path toward tapering stimulus. 

READ MORE...


European Equity Research Has Changed — ‘And That’s a Good Thing’

Brief: More than a year and half since the Covid-19 pandemic plunged Europe into lockdown and ushered the equity research industry into a virtual environment, there are some changes on the near horizon. The region’s vaccine effort — sluggish at first — has now reached 70 percent of adults in Europe, according to European Union officials, and the end of the summer signals a return to the office for many employees, despite the looming Delta variant. This shift is poised to recalibrate the industry and its relationships once again — and finding the right balance for both research teams and their institutional investor clients will be key.

READ MORE...


Dow, S&P 500 drop, tech stocks notch gains as Delta variant clouds gather

Brief: Stocks fell on Tuesday, with Wall Street indices retreating from last week's record highs, with analysts closely watching the labor market as rising COVID-19 infections cloud the outlook. Last week, the S&P 500 Index set an all-time high, and the Nasdaq Composite briefly hitting an intraday record, despite August's jobs data falling far short of market expectations. While payrolls showed the economy creating a relatively slim 235,000 new positions, the data stoked speculation that the Federal Reserve's Open Market Committee (FOMC) could alter its timetable for scaling back its stimulative bond-buying, which has propped up investor confidence.On balance, we expect the September FOMC statement to confirm the July minutes that tapering can begin later this year," wrote Marc Chandler, chief market strategist at Bannockburn Global Forex, in a morning research note.

Read more...


European Stocks Slip as Investors Mull ECB Stimulus, Inflation

Brief: European equities fell Tuesday as investors assessed how soon pandemic stimulus could potentially be withdrawn and the effects of rising inflation. The Stoxx Europe 600 Index was 0.5% lower by the close in London, weighed down by chemicals, health-care and utilities shares. Luxury shares outperformed, with Switzerland’s Swatch Group AG and Gucci-owner Kering SA gaining after Hong Kong moved toward reopening the border with China. European stocks are hovering near a record high reached mid-August on the back of strong corporate earnings and economic growth potential. But the focus has now shifted to the risks of inflation and monetary policy, with investors awaiting the European Central Bank meeting on Thursday for clues on how soon it will move dial down emergency stimulus.

READ MORE...


Deutsche Bank Calls End of Honeymoon Phase With Remote Work

Brief: Deutsche Bank AG is calling the end of the honeymoon phase for employees’ relationship with remote work. A growing number of workers report feeling isolated from colleagues, Deutsche Bank said in a report to clients. Women are increasingly likely to develop musculoskeletal problems due to inadequate remote-work setups. Nearly 40% of workers in the U.S. say they feel exhausted after a full week of virtual meetings. “Despite our initial honeymoon, people are starting to realize that the freedom of work-from-home does have some downsides: dilution of company culture, coordination issues, and even the mental wellbeing of some workers,” Marion Laboure, an analyst at Deutsche Bank, said in the report.

READ MORE...


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

Our briefing for Tuesday, September 7, 2021:

  • In the United States, boosters are still set to become available by Sept. 20, but Pfizer jabs will likely be available before Moderna. According to Dr. Anthony Fauci, U.S. top infectious disease expert, Pfizer has submitted all the necessary information to the U.S. Food and Drug Administration (FDA), but Moderna is still a little bit behind in the process. Fauci says he hopes both vaccines will be available for the booster rollout in late September, but if Moderna fails to complete the process in time then the Moderna doses will be given later.
  • In Canada, new rules for international travellers have officially come into effect. As the Government of Canada’s border reopening plan enters its latest phase, fully vaccinated international travellers no longer need to quarantine for 14 days upon arrival. Travellers must show proof of full vaccination received at least 14 days prior to entry, or a negative Covid-19 test taken no more than 72 hours prior to their scheduled flight or border crossing. Travellers must also be asymptomatic and must upload all their documentation through the ArriveCAN app or website within 72 hours before their arrival.
  • In the United Kingdom, vaccine passports will be needed for entry to nightclubs and similarly crowded indoor venues, the vaccines minister has confirmed. On Sunday Nadhim Zahawi told British media that nightclub visitors will have to prove their vaccination status via the passport, by the end of this month. Zahawi says the passports are the best way to keep the economy open, and that the government is working closely with the industry to help ensure the venues can be opened safely. The vaccine passport rules will only apply in England.
  • Japan’s Prime Minister Yoshihide Suga will not run in the governing party’s leadership elections this month, creating space for a new leader to become the country’s prime minister. Suga has been widely criticized for his handling of the coronavirus pandemic and for pushing ahead with the Tokyo Olympics despite objections from health experts. Suga said his decision to step down was based on the desire to focus more on the pandemic. "As I was planning to run for the presidency, when I thought about the coronavirus measures and also campaigning, I realized a great deal of energy would be needed, that I cannot have it both ways and that I must choose one or the other," he said. 
  • In New Zealand, Covid-19 lockdown measures will be eased across the country with the exception of Auckland.  Auckland has remained the epicentre of the outbreak, and so the city will stay in a full lockdown until at least Sept. 14. Prime Minister Jacinda Ardern says her government will continue to pursue an elimination strategy. "We are within sight of elimination, but we can't drop the ball," Ardern said at a news conference. "Day by day we are making very good progress. What I don’t want to do is move too quickly and then see a resurgence."
  • In Australia, New South Wales (NSW) Premier Gladys Berejiklian says hospitals will be under the most pressure in the coming weeks. Berejiklian says the government’s modelling shows daily cases in Sydney’s worst-affected suburbs are expected to rise to as high as 2000 until the middle of the month. "If too many of us do the wrong thing, (if) there are too many super-spreading events, we could see those numbers higher," Berejiklian said during a media briefing. NSW reported a total of 1281 new cases on Monday, down from 1485 a day earlier.

Covid-19 – Due Diligence And Asset Management

Active funds ride the post-vaccine wave while appetite for index funds slow, says Calastone

Brief: A strong month for equity funds saw inflows rise to GBP1.3 billion in August, according to the latest Fund Flow Index (FFI) from global finds network Calastone. Since the sea change in sentiment towards equity funds that accompanied the announcement of successful clinical trials of Pfizer’s, Moderna’s and AstraZeneca’s Covid-19 vaccines in November 2020, investors have added GBP17.2 billion to their equity holdings. This means more than a third of the net inflows to equity funds (35 per cent) since 2015 has taken place in the last ten months alone. Global funds saw the largest net inflows in August (GBP1.1 billion), much of this targeted at ESG offerings. Most other categories saw only modest inflows, though funds focused on UK equities, equity income and Asia-Pacific all suffered outflows.

READ MORE...


Postponing a Return to Office Gets Companies Nowhere

Brief: The planned autumn 2021 return to the office is being delayed. Until January, purportedly. That’s when Apple Inc., Amazon.com Inc., Facebook Inc., Alphabet Inc. subsidiary Google, Microsoft Corp. and some other major employers of knowledge workers now say they expect people back at their desks, 22 months after sending everybody home at the outset of the Covid-19 pandemic. Given the current high U.S. levels of Covid cases, hospitalizations and in some places deaths, it’s understandable that companies don’t want to do a big return-to-office right now. Less clear is why they all thought early fall would be such a great time for RTO in the first place, or why they think the coast will be so much clearer in January.

READ MORE...


Wall Street falls on worries over slowing economic recovery

Brief: The Dow Jones and S&P 500 fell on Tuesday, as worries over the slowing pace of economic recovery overshadowed hopes that the Federal Reserve would maintain its accommodative stance a little longer after a soft U.S. payrolls report. Amgen Inc and Merck & Co dropped about 2.5% each as the drugmakers dragged down the Dow Jones index, after Morgan Stanley cut its rating on the stocks to "equal-weight" from "overweight". Industrial heavyweight Boeing Co also slipped 1.9% after Ireland's Ryanair said it had ended talks with the planemaker over a purchase of 737 MAX 10 jets worth tens of billions of dollars due to differences over price. Ten out of eleven sub-indexes fell in early trading with economy-sensitive sectors like industrials, real estate and materials leading declines.

Read more...


UK M&A deals continue to rebound after pandemic

Brief: The total value of mergers and acquisition (M&A) activity taking place across the UK has gone up significantly in the second quarter of 2021 compared to the first, as lockdown restrictions eased, government data has revealed.According to the Office for National Statistics (ONS), the total value of inward M&A — foreign companies abroad acquiring UK companies — was £27.7bn ($38bn) in Q2, £19.4bn more than the previous quarter. The value of domestic M&A — UK companies acquiring other UK companies — was £10.6bn in Q2, an increase of £6.1bn.Two notable domestic acquisitions were National Grid's (NG.L) £8bn acquisition of British firm Western Power Distribution; and water giant Pennon Group (PNN.L) buying the company behind Bristol Water from its US, European and Japanese owners for £425m.

READ MORE...


Post-Pandemic Economic Puzzle Widens to ‘Phantom Menace’ Rate

Brief: Global central bankers trying to gauge the threat posed by surging inflation have another puzzle to solve too: whether the pandemic has shifted their policy bearings. The disruption caused by Covid-19 has been so extensive that economists including Kristin Forbes at the Massachusetts Institute of Technology are now wondering if one repercussion could be an increase in advanced economies’ neutral level of interest rate -- the setting at which growth is neither stimulated nor constricted. If that equilibrium point -- sometimes called R* -- has drifted higher, that would mean central banks’ already ultra-easy monetary policy is looser than generally thought.While that offers the prospect that officials may need to repeatedly raise interest rates in due course to brake the economy, it also holds the risk that they misjudge how stimulative their stance is. Such a policy error could open the door to an enduring bout of inflation.

READ MORE...


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

Our briefing for Thursday, September 2, 2021:

  • In the United States, hospitals are under pressure as the delta variant continues to tear through the country. Over 12,000 Americans are admitted to the hospital every day with Covid-19, a number that could rise to 22,400 by Sept.27, according to modelling by the Centers for Disease Control and Prevention (CDC). Officials say more Americans need to get vaccinated to turn the situation around, and are urging the unvaccinated to avoid travelling over the Labour Day long weekend. Dr. Anthony Fauci, the top U.S. infectious disease expert, says around 80 million eligible Americans are still unvaccinated.
  • In Canada, the province of Quebec has launched their vaccine passports, and proof of vaccination is now required for access to non-essential services, including indoor restaurants, gyms, theatres, sporting and other events. Quebecers will have to display QR codes, provided by the health department, along with identification to access those non-essential services. Beginning on Sept. 15, people in Quebec could face thousands of dollars in fines if they violate the health order. Ontario will follow with a similar vaccine passport system, which is expected to come into effect in late September.
  • A study that came out of the United Kingdom shows that vaccines cut the risk of an infection turning into long Covid. The study, which was published in the Lancet Infectious Disease Journal on Wednesday, tracked 1.2 million people in the U.K. who had been vaccinated with Pfizer, Moderna or AstraZeneca in the first half of this year.  The study found that fully vaccinated people who experience breakthrough infections are around 50% less likely to develop long Covid than unvaccinated people. The researchers say the study demonstrates the effectiveness of vaccines in preventing deaths and serious illness.
  • France has begun to offer booster shots to those who are 65 and older and those with underlying health conditions. France is the first big European Union nation to offer booster jabs and is expected to be a leader for other nations. People in France can get a booster shot on the condition that six months have passed since they were fully vaccinated with a Pfizer or Moderna jab. According to the health ministry, about 18 million people are estimated to be eligible for the booster shot.  So far the French government has not made any decisions about the expansion of the program to the whole population.
  • In Italy police outnumbered protesters at the nation’s main train stations, as the use of the Green Pass expanded. The Green Pass is a digital or paper document that shows whether someone has received at least one Covid-19 vaccine, has tested negative or recently recovered from the virus.  The Green Pass is now mandatory for travel on trains, planes and ferries (local transit is exempt). Protesters had vowed to block railway traffic on Wednesday, but in the end only a handful of protesters showed up. Approximately 70% of Italians over the age of 12 have been fully vaccinated.
  • In Australia New South Wales reported 1288 new cases, just below the pandemic high of 1290 hit on Monday. Seven new deaths were also reported. Fortunately, New South Wales also hit the 70% milestone for those who have had their first dose of vaccine. Authorities are hoping to be able to introduce some new freedoms in the coming days. “At the moment, there are 8 million citizens who don’t have a choice in how they spend their free time, who don’t have a choice about what they can do, when they can leave their homes. That is no way to live,” State Premier Gladys Berejiklian said.

Covid-19 – Due Diligence And Asset Management

Stocks rise to record highs after jobless claims hit pandemic-era low

Brief: Stocks gained Thursday as investors awaited more labor market data, which will serve as crucial information in determining the path forward for the monetary policies underpinning risk assets over the past year. Ahead of a key monthly report on job gains, a new print on weekly unemployment claims came in lower than expected, underscoring further improvements in the economic recovery. The S&P 500 advanced to an all-time high. The Nasdaq also gained to set a fresh intraday record. The indexes' latest march to record highs has been powered by technology stocks, with the Nasdaq extending a run of outperformance from August. This has in turn signaled investors' concerns over the status of the economic recovery given the Delta variant's spread, with growth and technology stocks seen as more of a defensive trade amid a coronavirus resurgence.

READ MORE...


Why the 60/40 model is here to stay

Brief: As the global economy recovers from the impact of the Covid-19 pandemic, some investors are questioning the case for a balanced portfolio of stocks and bonds, including the classic 60/40 model – particularly if bonds suffer a period of weakness due to rising inflation and interest-rate expectations. Although bond yields remain close to historic lows, they have trended higher since August 2020 as prices have fallen. At the time of writing, the 10-year US Treasury yield is up more than 40 basis points (bps) in 2021, with the 10-year gilt yielding around 39bps more than at the start of the year. The downward pressure on bond prices stems from recent economic data.

READ MORE...


Fading Pandemic Trading Boom Sends CMC Down Most in Five Years

Brief: CMC Markets Plc slumped the most since 2016 after warning of a slowdown in activity as the pandemic-fueled retail trading boom eases. “Reduced volatility in markets has resulted in lower trading activity across both the newly acquired and existing cohort of clients,” the London-based firm said in an unscheduled update, sending the stock down as much as 29%. CMC, a provider of contract-for-difference products that allow traders to speculate on price movements without owning the underlying securities, was one of a raft of companies that benefited from people stuck at home during the pandemic being enticed to markets by a spike in volatility. The so-called “meme-stock” craze in early 2021 further aided business.

Read more...


Covid Test Maker Cue Health Files for IPO After Revenue Gains

Brief: Covid test maker Cue Health Inc. filed for an initial public offering, showing a sharp turn to profitability this year. The San Diego-based company in its filing Wednesday listed the size of the offering as $100 million, a placeholder that will change when terms of the share sale are set. For the first six months of the year, Cue Health said its product revenue increased to $202 million, up from $15 million in 2020 -- all of it the second half of the year. It also erased its $47 million annual loss to log net income of $33 million in the first half of 2021, according to its filing with the U.S. Securities and Exchange Commission. Cue Health’s tests were used last year by the National Basketball Association to help limit the spread of the coronavirus among team members who played and lived in a so-called bubble in Florida.

READ MORE...


This lawmaker is pushing for a four-day workweek

Brief: Representative Mark Takano (D-Calif.) recently introduced a bill into the House which would reduce the standard work week to 32 hours. In an interview with Yahoo Finance Live, Takano explained the rationale behind the bill. “The main problem we're trying to solve with it is the work-life balance,” Takano said. “I think that is what resonates with so many people, who during this pandemic experienced neighbors, family members, loved ones, dying. And they also experienced being able to work from home.” H.R. 4728: Thirty-Two Hour Workweek Act would reduce most workers’ standard work week by setting 32 hours as the new maximum amount of hours worked before employees are allowed to earn overtime pay.

READ MORE...


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

Our briefing for Wednesday, September 1, 2021:

  • In the United States, vaccination rates are increasing, particularly the number of first shots, according to White House officials. White House Covid-19 Coordinator Jeff Zients says the vaccine mandates implemented across the country have contributed to the rising numbers. The increase in the number of first shots being administered could be an indication that vaccine skepticism is declining. “We’ve accelerated the pace of first shots. In August, we got over 14 million. That’s almost 4 million more first shots in August compared to the prior month,” Zients said in a news conference Tuesday.
  • In Canada, the western provinces are driving the fourth wave of Covid-19 in the country. Alberta is leading the country in new infections, with over 7000 cases reported in one week. The province has yet to reinstate any public health measures to try and curb the spread of the delta variant. Physicians in Saskatchewan have called for the reinstatement of Covid-19 curbs and the introduction of vaccine passports, but so far the province has chosen not to act. Meanwhile in B.C., tighter restrictions will be put in place including a mask mandate and a vaccine passport system.
  • In the United Kingdom, the government will move forward with the introduction of a vaccine passport system for nightclubs and other indoor venues in England. A spokesperson for Boris Johnson told the Guardian that the details of the announcement will be forthcoming in the next few weeks. The passport system will use the National Health Service (NHS) app to allow users to display their vaccination status. The system is expected to come into effect at the end of the month. With the implementation of the vaccine passport system, the government intends to increase vaccine uptake among younger people.
  • Germany will offer a week-long open vaccination campaign as a way to try and increase vaccination rates.  Chancellor Angela Merkel wants at least 75% of the German population to be fully vaccinated, but so far only 60% have had both their shots. The government announced on Tuesday that vaccinations will be offered without appointments at easily accessible locations such as fire stations and pharmacies, for the week of Sept.13-19.  On Monday, a special train service was offered in Berlin as another way to try and boost vaccination rates. For two hours, anyone age 18 and older could board the commuter line which circled the German capital, and get a dose of the Johnson & Johnson vaccine.
  • South Korea will offer booster shots beginning in October, joining countries like the United States, Germany, Israel and France.  South Korea has said they will offer boosters once the country reaches a 70% full vaccination rate, which they aim for by October. South Korea reported over 2000 new cases on Wednesday, as officials struggle with lagging vaccination rates. Officials have pleaded with citizens to stay vigilant ahead of the country’s biggest holidays which arrive next month. The Chuseok holidays (the Korean version of Thanksgiving) typically have people travelling around the country. 
  • Australia extended a Covid-19 lockdown in Melbourne for another three weeks as the city struggles with rising case numbers. Victoria state reported 120 new cases, up from 76 the day before. Premier Daniel Andrews says restrictions cannot ease until at least 70% of adults have had their first dose of vaccine. This is expected to happen around Sept. 23. Currently about 56% of adults have had their first dose. "We have thrown everything at this, but it is now clear to us that we are not going to drive these numbers down, they are instead going to increase," Andrews told reporters in Melbourne.

Covid-19 – Due Diligence And Asset Management

Beware of increased stock market volatility, Delta has slowed the economy: Goldman

Brief: August marked the seventh straight month of gains for the S&P 500 (^GSPC) as investors ignored softening U.S. economic data at the hands of the COVID Delta variant. But investors may be wise to stop ignoring the data, and position for a September rife with market volatility, says the team at Goldman Sachs. "General mobility statistics have weakened, full-service restaurant indicators have softened, travel intentions appear to have faded and retail traffic declines (off of 2019 levels) have re-accelerated," Goldman Sachs strategist Jason English pointed out in a new research note on Wednesday.English said his colleague at Goldman is now recommending loading up on options to profit from renewed concerns on the economic recovery. "The setback has injected a higher degree of uncertainty into the fundamental outlook for many sectors that our options analyst, John Marshall, does not believe is fully reflected in the options market.

READ MORE...


‘Forever Changed’: CEOs Are Dooming Business Travel — Maybe for Good

Brief: Business travel as we’ve known it is a thing of the past. From Pfizer Inc., Michelin and LG Electronics Inc. to HSBC Holdings Plc, Hershey Co., Invesco Ltd. and Deutsche Bank AG, businesses around the world are signaling that innovative new communications tools are making many pre-pandemic-era trips history. Take Akzo Nobel NV, Europe’s biggest paint maker, for instance. At its Amsterdam headquarters, Chief Executive Officer Thierry Vanlancker has spent the past year watching his manufacturing head, David Prinselaar, flap his arms, madly gesticulate and seemingly talk to himself while “visiting” 124 plants by directing staff with high-definition augmented-reality headgear on factory floors. A task that meant crisscrossing the globe in a plane before is now done in a fraction of the time — and with no jet lag. For Vanlancker, there’s no going back.

READ MORE...


Raymond James Delays Office Return Amid Florida Virus Surge

Brief: Raymond James Financial Inc. has pushed back its return-to-office date to the middle of October as the coronavirus surges in its home state of Florida. The St. Petersburg-based firm has told workers they don’t have to return to the office until Oct. 11, according to people familiar with the matter. The firm had initially wanted some workers to return to work next week, one person said, asking not to be identified discussing private information. A spokesman for the company declined to comment. Florida, which has become the epicenter of the coronavirus oubreak in the U.S., reported a record number of Covid-19 deaths last week. The spread of virus variants has spurred banks to enact more stringent precautions after initially leading the push to get people back to their desks.

Read more...


CEOs back to pre-pandemic levels of confidence, KPMG survey shows

Brief: The bosses of the world's biggest companies are back to their pre-pandemic levels of confidence in the global economy's prospects and most expect to make acquisitions to boost growth, a survey showed on Wednesday. While uncertainty remained due to the Delta variant of COVID-19, 60% of corporate leaders were confident about the global economy over the next three years, up from 42% in a similar survey in early 2021, accountancy firm KPMG said. Almost nine out of 10 senior executives said they were seeking out takeover deals over the next three years. "Despite the continued uncertainty around the pandemic, CEOs are increasingly confident that the global economy is coming back strong," Bill Thomas, KPMG's global chairman and chief executive, said.

READ MORE...


Zoom stock just crashed — here's the simplest reason why

Brief: The Street is unclear on how to value Zoom as its growth slows with people returning to offices and schools, despite the lingering pandemic. So the only course of action right now it seems — sell Zoom's stock (ZM) and wait for more stable waters. "We are wary of a potential demotion for Zoom from hyper-growth to growth at a reasonable price,” said Citi analyst Tyler Radke, following Zoom's underwhelming second quarter results Monday evening. Radke called the earnings report disappointing. Zoom saw slowing sequential growth rates in customers spending in excess of $100,000 a year with the company (131% in the second quarter versus 160% in the first quarter) and spending with 10 or more employees (36% growth in the second quarter versus 67% growth in the first quarter). "I think we were talking about most of us are probably socializing in person now, doing fewer things like Zoom Happy Hours, and that's where we are starting to see some of the challenges," acknowledged Zoom CFO Kelly Steckelberg on an earnings call with analysts.

READ MORE...


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