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Covid-19 Diligence Briefing

Our briefing for Friday, October 29, 2021:

  • In the United States, the state of Florida is suing the Biden administration over its coronavirus vaccine mandate for federal workers. A 28-page lawsuit filed on Thursday in Tampa alleges that the president overstepped his authority and that the new rules violate procurement law. Florida Governor Ron DeSantis made the announcement at a news conference after maintaining for weeks that he would seek legal action against the federal government for their sweeping new vaccine mandate.  The Florida governor has staunchly opposed other coronavirus measures such as mask mandates and proof of vaccination for businesses. The Biden administration announced the vaccine mandate for all federal workers back in September. 
  • In Canada, the pandemic has created a rise in food bank usage across the country, a new report shows. The report titled HungerCount2021 from Food Banks Canada is a cross sectional consensus survey of almost 4750 food banks and community organizations. The report says that in March 2021 alone, there were over 1.3 million visits to food banks, which is an increase of approximately 20% compared to 2019. The report explains that food banks in large city centres saw a sharp increase in their usage, caused by pandemic-driven unemployment. The report makes recommendations for policy changes including increases in government supports for vulnerable demographics.
  • In the United Kingdom, London Mayor Sadiq Khan is calling on the government to make face masks mandatory on public transportation, as the U.K.’s case numbers average around 40,000 per day. The mayor also urged citizens to get their flu shots as well as their coronavirus boosters, warning that protection from both is needed. “The worst thing we can do is to lower our guard, be complacent and underestimate the risk these viruses pose to all of us,” the mayor said in a statement. His comments came right after Professor Neil Ferguson, member of the Scientific Group for Emergencies (Sage), said that there is no apparent growth in case numbers in the U.K. Ferguson implied that the government’s “Plan B” measures may not be needed if cases and hospitalizations continue to trend downward.
  • In South Korea some curbs will be eased and vaccine passports implemented as the country takes its first step towards living with the virus. Private gatherings of up to 10 people will now be allowed regardless of vaccination status, although restaurants and cafes must cap the number of unvaccinated people at four per group.  Indoor venues like bars, nightclubs and gyms will require proof of vaccination for entry, while concerts can be attended by up to 100 people regardless of vaccination status. So far South Korea has vaccinated about 72% of the population, while about 80% have had their first dose. 
  • New Zealand announced a plan on Thursday to gradually ease their border restrictions for the first time since March 2020. Covid-19 Response Minister Chris Hipkins said travellers arriving from small Pacific nations will be allowed to skip quarantine, beginning on November 8. Fully vaccinated overseas travellers will still have to quarantine in a state-run facility, but for seven days rather than the full 14, as of mid-November. Hipkins said home quarantines will be allowed by the first quarter of 2022. Further steps to reopen the borders will be taken once 90% of New Zealanders are fully vaccinated; so far about 72% have had both shots.
  • In Australia, the state of Victoria’s contentious pandemic bill has passed in the lower house after days of debate. The bill, which was tabled on Tuesday, would give Victoria Premier Daniel Andrews the power to declare a pandemic for three months at a time. The new laws would also give the state’s health minister, Martin Foley, the power to approve public health orders, rather than having to go through the country’s chief medical officer. Andrews’ government says the legislation helps to ensure accountability and transparency, but Victoria’s Opposition Leader Matthew Guy has said it’s an attack on democracy.

Covid-19 – Due Diligence And Asset Management

Buyout Boss Says Remote Work Is a Bad Fit for Private Equity

Brief: You can’t do private equity by Zoom.That’s the view of Michael Psaros, co-founder of $13.5 billion private equity firm KPS Capital Partners. Forget flexible days, don’t even think about remote work and please don’t mention video calls. KPS, which invests in manufacturing companies, has required all its New York staff to be in the office five days a week since early September, provided they’re vaccinated. It’s the only approach that makes sense in the buyout world, according to Psaros, a former Bear Stearns banker who noted that most employees had already returned by June. “I’m sure flexible work is good for certain industries, but not in private equity,” Psaros, 54, said in an interview. “Private equity is an apprenticeship and relationship business, and you cannot apprentice by Zoom. You cannot learn by Zoom.”

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Air Canada orders staff back to office, fully COVID-19 vaccinated

Brief: Air Canada said employees working remotely must gradually return to the office starting Nov. 15 and be fully vaccinated, as COVID-19 cases ebb across Canada. The country’s biggest airline described its plan on Friday as “a balanced approach” that allows employees to keep working some “set days” remotely. In a statement, Chief Executive Officer Michael Rousseau cited Canada’s high vaccination rate as part of the company’s rationale for bringing workers back. “For individuals, companies or any organization to achieve their full potential requires personal connections and interactions,” Rousseau said. “This makes the return of Canadians to the workplace a necessary step in the recovery of our society and economy from the pandemic’s isolating effects.”

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SEC Wants Senator Burr’s Brother-in-Law to Testify in Covid Trading Probe

Brief: The Securities and Exchange Commission is seeking to force U.S. Senator Richard Burr’s brother-in-law to testify about their stock sales just before the beginning of the coronavirus pandemic, according to court records. Gerald Fauth has “waged a relentless battle” to avoid complying with a subpoena issued to him in May of 2020, the SEC said in court filings. “The Commission is investigating possible insider trading by Fauth’s brother-in-law, Senator Richard M. Burr, and respondent’s own sales of stock in the minutes after speaking with Senator Burr on the day the senator sold the vast majority of his own portfolio.” Fauth, a holdover Donald Trump appointee to the National Mediation Board, which governs labor relations in the rail and airline industries, has said he’s too ill to answer questions from investigators.

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Citi Requires Vaccines for All U.S. Workers, Citing Biden Order

Brief: Citigroup Inc. will require all U.S. employees be vaccinated against Covid-19 as a condition of their employment, citing new orders from President Joe Biden. The Wall Street giant asked staffers to submit proof of vaccination by Dec. 8, and said those who comply will receive $200 as a “thank you,” according to a memo to staff Thursday seen by Bloomberg News. Citigroup set Jan. 14 as the final cut-off for workers to upload vaccine cards, to give unvaccinated staff more time to get shots. “Our medical teams have consulted with top experts at some of the most prestigious medical institutions in the country, and are confident about the safety and efficacy of the vaccines available to us,” Sara Wechter, who leads human resources at New York-based Citigroup, said in the memo.

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Merck Rises on Outlook for Billions in Covid Antiviral Sales

Brief: Merck & Co.’s closely watched Covid-19 antiviral molnupiravir could bring in as much as $7 billion in global sales through 2022, according to the drugmaker. The figure includes up to $1 billion in revenue this year if the experimental drug is authorized in December, Chief Financial Officer Caroline Litchfield said early Thursday on a conference call. She projected at least $5 billion in sales by the end of next year, provided it’s cleared. Merck rose as much as 5.4% to $85.96 as of 11:12 a.m. in New York, its highest intraday price since January 2020. Molnupiravir has become one of the most highly anticipated coronavirus medications, as the pill is relatively cheap to make and easy to transport. Merck has taken steps to make sure that it will be distributed widely, including in low-income countries.and Event Driven funds brought in USD2.28 billion, 0.8 per cent of assets.

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

Our briefing for Thursday, October 28, 2021:

  • The United States economy slowed sharply to a 2% annual growth rate in the third quarter, the weakest quarterly expansion since the recovery from the pandemic recession began last year. The last quarter growth fell below expectations and would have been weaker if not for an increase in restocking by businesses, according to the Associated Press. Consumer spending, which fuels about 70% of overall economic activity, slowed to annual growth rate of just 1.6% after surging at a 12% clip the previous quarter. The news has Republicans zeroing in on higher inflation rates this year to support their charges that President Joe Biden’s economic policies aren’t working.
  • In Canada, Prime Minister Justin Trudeau left Thursday for Europe ahead of a G20 meeting in Rome and subsequent 26th “conference of the parties” (COP26) climate summit in Glasgow. While climate change will be top of mind for Trudeau and other top world leaders, the race to vaccinate people in low-and-middle income countries will also dominate the conversation. The G20 countries alone represent 80% of the global economy. 
  • The United Kingdom’s travel “red list” will have zero countries on it as of Monday November 1st. Grant Shapps, the government’s Secretary of State for Transport, confirmed on Thursday that the seven remaining countries on the “red list” would be removed. The seven remaining countries were Columbia, the Dominican Republic, Ecuador, Haiti, Panama, Peru and Venezuela. Arrivals from those countries are currently required to confine themselves to ten days of hotel quarantine at a cost of £2,285 per person. This marks a drastic improvement for people who want to be on move in the UK. As of early October, there were 54 countries on the “red list”. The list will reportedly be maintained as a “lever” for government minsters in the future should they feel the need to protect the country from another dangerous COVID-19 variant. 
  • Israeli public health experts are warning the country must do more to break down vaccine resistance and implement tougher safeguards as foreign tourists start returning next month or risk a fifth wave. Although Israel is a relatively small country in terms of population on the world stage, they have often been ahead of the curve in handling the coronavirus, from sweeping restrictions to well-run vaccine programs and the first widespread booster program. Epidemiologist Hagai Levine, chairman of the Israeli Association of Public Health Physicians, has urged officials to set up a permanent epidemiological unit at the main airport that will serve as an early warning system for new variants as well as future epidemics.
  • Singapore health officials are looking into an “unusual surge” in infections after the city-state reported 5,324 new COVID-19 cases on Wednesday, the most since the beginning of the pandemic. In a statement Wednesday night, the Ministry of Health (MOH) noted “the infection rates are unusually high today, mostly due to many COVID-positive cases detected by the testing laboratories within a few hours in the afternoon.” Singapore extended some of its social curbs last week to contain the spread of COVID-19 for around a month to ease the strain on the healthcare system. According to a Reuters report, about 84% of Singapore’s population has been vaccinated against the virus.
  • Ahead of the G20 meetings in Rome, the World Health Organization (WHO) and other aid groups are again calling on the richest countries in the world for help. On Thursday, the WHO appealed to the world’s 20 largest economies to fund a $23.4 billion USD plan to bring COVID-19 vaccines, tests and drugs to poorer countries over the next 12 months. About 82 countries are likely to miss the WHO global target of 40% vaccination coverage by year-end. Nearly a million booster jabs are being given each day to richer countries; three times the number of vaccines being administered in low-income countries, according to WHO chief scientist Soumya Swaminathan.

Covid-19 – Due Diligence And Asset Management

Biden Goes All-In to End Deadlock with $1.75 Trillion Blueprint

Brief: President Joe Biden unveiled a framework for a $1.75 trillion tax and spending package his administration believes can pass Congress and urged House Democrats to quickly clear a separate public works bill for his signature, despite misgivings by progressives. Biden visited Capitol Hill on Thursday to sell the package of tax increases and climate and social-welfare spending to House Democrats. The legislation would expand federal support for child care, health care and climate programs, funded by a minimum tax on corporations, a tax on stock buybacks and new taxes on incomes above $10 million annually. Total new revenue from the measure is estimated at $2 trillion over a decade, according to a White House fact sheet. The president asked the lawmakers to break a deadlock on a separate, Senate-passed $550 billion infrastructure bill and vote to send it to his desk, according to Representatives Mike Quigley of Illinois and Richard Neal of Massachusetts. House Speaker Nancy Pelosi immediately began pressing lawmakers to vote on Thursday.

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Some 5% of Unvaccinated Adults Quit Their Jobs over Covid Vaccine Mandates, survey shows

Brief: Five percent of unvaccinated adults say they have left a job due to a vaccine mandate, according to a survey released Thursday by the Kaiser Family Foundation. This early read on whether workers will actually quit their jobs over mandates comes as more employers are requiring shots. One-quarter of workers surveyed by KFF in October said their employer has required them to get vaccinated, up from 9% in June and 19% last month. President Joe Biden announced in September a mandate for businesses with 100 or more employees to ensure workers are vaccinated against Covid or tested weekly for the virus. The mandate, which is currently still under review, is estimated to cover roughly two-thirds of the private sector workforce once it’s implemented. The Kaiser survey only asked whether people have quit over a vaccine requirement, not a vaccine requirement with a testing option. More than a third of unvaccinated workers said they would quit rather than comply with a vaccine or testing mandate, the Kaiser survey shows, a share that jumps to 72% if no testing option is offered.

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Australia Advises Caution Overseas when Border Opens Monday

Brief: Australia advised its nationals traveling overseas on Thursday to “exercise a high degree of caution” as it prepares to open its borders for the first time in 19 months. The Department of Foreign Affairs and Trade reinstated its travel advice for 177 countries and territories ahead of fully vaccinated Australians becoming free to travel from Monday. No destination has been given a risk assessment lower than the second-tier warning: “Exercise a high degree of caution.” The vast majority of Australian permanent residents and citizens have been stranded in the island nation since March last year by some of the most draconian pandemic restrictions of any democracy. They had to request exemptions from the ban and demonstrate exceptional circumstances. Most requests were rejected or approved too late for Australians to reach death beds or funerals. Travel to and from Australia for tourism has never been allowed. A few categories of citizen, including public servants on government business, were exempt from the international travel ban. International travel will be initially restricted to Sydney’s airport because New South Wales has the highest vaccination rate of any state. More than 86% of the population of Australia’s most populous state aged 16 and older are fully vaccinated, and over 93% of the target population had received at least a single vaccine shot.

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AEW Forecasts 5.1 Per Cent Average Prime Total Return from European Residential Sector over Five Years

Brief: AEW, the global real estate investment manager, has released its latest research on the European residential sector, publishing its internal forecasts on rental growth, yields and total returns across 24 different European residential markets for the first time. Key findings of the report include: On a risk-adjusted basis, residential stands out as the most attractive property sector. Also known as the private-rented sector or multifamily, residential is the most resilient of all property types. Residential income streams are underpinned by a primary human need and come from a diversified individual tenant base, while supply constraints limit void periods. Residential investments therefore offer bond-like, stable and predictable cash flows. For these reasons, residential total returns have historically been less volatile than for the other property types, while at the same time generating prime total returns close to 8 per cent pa; Continued lack of supply and strong demand from new household formations is driving prime rental growth in most European markets. Despite an increasing number of rental regulations to ensure affordability for tenants, prime residential rental growth is projected at 2.6 per cent pa over the next five years on average in Europe…

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Hedge Fund Allocations Soar

Brief: The hedge fund industry continued to attract new assets in August with USD30.5 billion in inflows. August’s inflows represented 0.69 per cent of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions. August marked the sixth consecutive month of hedge fund industry inflows, totalling USD143.8 billion since March. A USD37.8 billion monthly trading profit brought total industry assets to nearly USD4.52 trillion as August ended. “As economies continued to rebound and equity markets surged throughout the summer, investors saw growth and speculative opportunities in hedge fund investments,” says Ben Crawford, Head of Research at BarclayHedge. “Hedge Funds may also be having a moment for less optimistic reasons: They have a history of performing well during inflationary periods. While central bankers contend that the recent spike in the cost of living will be transitory, forecasters in the U.S. and elsewhere are revising their inflation expectations upward for multiple periods to come.” Most hedge fund sub-sectors reported inflows in August. Fixed Income funds set the pace bringing in USD10.4 billion, 1.1 per cent of assets while Multi-Strategy funds added USD7.5 billion, 1.6 per cent of assets, Balanced (Stocks & Bonds) funds saw USD5.1 billion in inflows, 0.8 per cent of assets, Sector Specific funds added USD2.96 billion, 0.8 per cent of assets, and Event Driven funds brought in USD2.28 billion, 0.8 per cent of assets.

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

Our briefing for Wednesday, October 27, 2021:

  • In the United States, Pfizer’s request to start vaccinating American children from 5-to-12 years of age cleared a significant hurdle on Tuesday. A panel of the U.S. Food and Drug Administration (FDA) voted by majority to back the drugmaker’s request. The next steps will likely involve the FDA formally authorizing the vaccine, followed by the Centers for Disease Control and Prevention (CDC) also weighing in with its own recommendations before inoculations can be rolled out. Seventeen members of the committee voted in favour of authorizing the shots while one abstained.
  • In Canada, Conservative Leader Erin O’Toole met with his caucus on Wednesday to discuss what to do about its position around mandatory vaccinations, and what it means to members who may not be fully vaccinated. The issue is at the top of list for Conservatives as an all-party committee decided last week that all members of Canadian parliament need to be double vaccinated against COVID-19 or have a medical exemption to take their seat in the House of Commons. O’Toole refuses to disclose how many of his 118 members are fully vaccinated, but he also opposes any return to a hybrid Parliament, putting him in a tough position.
  • The United Kingdom’s Rishi Sunak delivered his third budget since becoming Chancellor, announcing a £150 billion boost for government departments as the economy showed a better-than-expected recovery from the COVID-19 pandemic. The Chancellor also announced £2 billion to help families with the cost of living through changes to the Universal Credit and pledged to deliver lower taxes for working people by the end of Parliament in 2024. Sunak insisted the budget and three-year spending review for government departments set out a vision for post-pandemic Britain and would give families “the tools to build a better life for themselves”.
  • In Brazil, the Senate committee voted 7-4 in favour of recommendations that President Jair Bolsonaro face a series of criminal indictments for actions and omissions related to the world’s 2nd largest death toll due to COVID-19. President Bolsonaro has denied any wrongdoing and as mentioned in Tuesday’s COVID-19 Diligence Briefing, it is unlikely prosecutor general, Augusto Aras, a Bolsonaro appointee, will file any charges against him. For what it’s worth, Aras’s office said the report would be carefully reviewed as soon as it was received.
  • With Japan’s long ruling Liberal Democratic Party and its junior coalition partner expected to keep their parliamentary majority ahead of this Sunday’s general election, Prime Minister Fumio Kishida is already thinking long-term. The Japanese leader wants to draw up key economic proposals shortly after the election with the number one aim helping those who have suffered an economic hit from the coronavirus. Kishida, who only took office last month, has been busy trying to win Japanese voters over with his pledges on building a “new capitalism” in which economic growth will be spread more widely.
  • Australian government officials announced on Wednesday they plan to lift a ban on citizens travelling overseas. As of November 1st, Home Affairs Minister Karen Andrews said fully vaccinated Australians will no longer have to seek an exemption to leave the country. The move marks an end to more than 18 months of Australia having its international borders closed. Andrews said Australian citizens are currently being prioritized but plans are in the works to ease more travel restrictions to include non-citizens as vaccination rates increase. Quarantine arrangements for returning vaccinated residents will depend on where they arrive in Australia.

Covid-19 – Due Diligence And Asset Management

Large Private Capital Firms Pioneer New Technology in the Industry

Brief: A majority (62 per cent) of private capital fund managers in the UK, Europe, North America and Asia will increase the amount of automation and new technologies used to administer their funds over the next five years.According to a new global study commissioned by Intertrust Group, of these, over two thirds (67 per cent) said they plan to invest in Big Data capabilities while just under two thirds (63 per cent) expect to invest in distributed ledgers such as blockchain.The study, The Future of Fund Technology, found that business size is key in shaping technology investment decisions. Nearly half (47 per cent) of those with AUM of USD3 billion or more stated that it is “very likely” that they will invest in more automation and tech over the next five years. A majority (90 per cent) said they were also more likely to pioneer new technologies and work to utilise new technological advances as soon as they become available. 

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Private Equity Racing to Close Deals, says new BDO Survey

Brief: Private equity fund managers are accelerating deal timelines in an effort to win bids, and more than half say uncovering risk during due diligence is a main challenge to closing deals, according to BDO’s Fall 2021 Private Capital Pulse Survey. The findings of the survey, which polled 200 US private equity fund managers, underscore the frenzied state of deal making. Forty-two per cent of fund managers say they are directing the most capital to new deals (up from 19 per cent a year ago and 26 per cent in the spring) and deal flow drivers are up across the board. Meanwhile, their pursuit of add-on acquisitions has fallen to 16 per cent from 24 per cent a year ago and 29 per cent in the spring. “To compensate for the slowdown in deal activity at the beginning of the pandemic, fund managers are racing to put committed capital to work and get deals done,” says Scott Hendon, Co-Leader of BDO’s National Private Equity practice. “Everything from private company sales to corporate divestitures is driving more deal flow. Add to that a healthy dose of external influences, such as a potential capital gains tax rate increase and a limited number of attractive targets to absorb all the dry powder on the sidelines, and you have a healthy amount of M&A deal activity—and competition—to contend with.”

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Surveillance of Investment Switching by Super Fund Executives Identifies Concerns with Trustees’ Conflicts Arrangements

Brief: An ASIC surveillance about personal investment switching by directors and senior executives of superannuation trustees has identified concerns with trustees’ management of conflicts of interest. ASIC looked at a sample of 23 trustees (including trustees of industry and retail funds), and focused on conduct during the time of increased market volatility arising from the COVID-19 pandemic. Directors and senior executives of superannuation funds are potentially privy to price-sensitive valuation information. ASIC undertook this surveillance to look into concerns about whether fund executives were using this information for personal gain by switching investment options based on their knowledge of the timing of the revaluation of unlisted assets. The surveillance revealed conduct that fell below ASIC’s expectations. ASIC Commissioner Danielle Press said, ‘We expected superannuation trustees to have robust conflict of interest policies that dealt adequately with investment switching, including by their directors and executives. What we found instead was often a clear failure to identify investment switching as a source of potential conflict, resulting in a lack of restrictive measures and oversight to adequately counter this risk.

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The Pandemic’s hit to Global Employment is Much Worse than Anticipated

Brief: The number of working hours lost due to the COVID-19 crisis will be “significantly higher” than projected just a few months ago, according to the International Labor Organization. In what it termed a “dramatic revision,” the Geneva-based group now estimates that global hours worked this year will be 4.3 per cent below their pre-pandemic level, the equivalent of 125 million full-time jobs. Africa, the Americas and Arab States were the regions that experienced the biggest declines. “A two-speed recovery between developed and developing nations threatens the global economy,” said the ILO, which had forecast a loss of 3.5 per cent in June. “This great divergence is largely driven by the major differences in the roll-out of vaccinations and fiscal stimulus packages.” The organization cited estimates showing that a full-time job was added to the global labour market for every 14 people fully vaccinated. “However, the highly uneven roll-out of vaccinations means that the positive effect was largest in high-income countries, negligible in lower-middle-income countries and almost zero in low-income countries,” it said.

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Hedge Funds Defy Major Indices with Record Outperformance Last Month

Brief: Hedge funds protected investors in September, even as traditional investments suffered in last month’s declining markets. Almost every global equity market index lost ground in September. But PivotalPath’s composite index, which represents more than 40 hedge fund strategies, was up 0.1 percent for the month. That puts September’s outperformance of 4.7 percent, relative to the S&P 500’s decline of 4.6 percent, in the top 10 percent of all months since January 1998, according to the hedge fund research and data firm. Hedge funds also held their own as the Nasdaq declined 5.3 percent and the health care and technology sectors lost approximately 6 percent. Hedge funds have been on a good run. PivotalPath’s composite index, which includes all of the hedge fund strategies the firm tracks, was up 11.3 percent in 2020, its best year since 2013. Traditional long-only strategies were hit hard by fears of inflation, rising energy prices, and supply chain hiccups. “But as worries about inflation became frenzied, energy, utilities and industrials hedge fund strategies were the second-best performer for the month, exactly as predicted,” Jon Caplis, CEO of PivotalPath, told Institutional Investor.  The energy, utilities, and industrials category was up 1.8 percent last month and was the fifth best performer of all 40 strategies covered by the firm. 

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

Our briefing for Tuesday, October 26, 2021:

  • In the United States, the negative attention Facebook and its founder, Mark Zuckerberg are receiving continues to mount. The Associated Press (AP) is reporting Tuesday that the social media giant “froze” as anti-vaccine comments swarmed users earlier in the year. In March, the AP reported some Facebook employees tried to find ways to help stop the false claims of COVID-19 vaccine dangers and ineffectiveness. One of the methods suggested was to disable comments on vaccine posts until the platform could do a better job of tackling anti-vaccine messages. The employees noted senior executives either shelved ideas like this entirely, or other changes weren’t made until a month later. “Why would you not remove comments? Because engagement is the only thing that matters,” said Imran Ahmed, the CEO of Center for Countering Digital Hate, an internet watchdog group. “It drives attention and attention equals eyeballs and eyeballs equals ad revenue.”
  • In Canada, a group that calls themselves “Feds for Freedom” are organizing efforts to avoid complying with the government’s new mandatory vaccination rules. The Federal Liberal government unveiled its vaccine policy for public servants earlier this month, giving federal employees until this Friday to disclose their vaccination status. Those who don’t, or who say they won’t be fully vaccinated, could be forced into an unpaid leave of absence. According to a report from CBC, the Feds for Freedom group say there are hundreds of federal public servants who are not anti-vaccine but don’t agree with the government policy – because in their view – it violates their rights to privacy and bodily autonomy.
  • The United Kingdom’s Evening Standard is reporting via a government leaked report, that a return to millions more people working from home would blow a multi-billion hole into the economy. The Treasury document, leaked originally to Politico London Playbook, had the cost of the government’s “Plan B” at between £11 billion to £18 billion if it were in force for five months until the end of March. Government ministers are desperate in their attempt to avoid this scenario – wanting to keep London and other large city centres open – and pleading with citizens to either become fully vaccinated or receive booster jabs to strengthen the nation’s defences.
  • In Brazil, a Senate committee was scheduled to vote Tuesday on a report recommending President Jair Bolsonaro face a series of criminal indictments for his handling of the coronavirus pandemic. The report is the culmination of a six-month investigation into the government’s handling of the pandemic that has left Latin America’s most populous country with more than 600,000 deaths related to COVID-19. Even if the committee were to approve the decision to file charges, it will likely do little to effect President Bolsonaro, outside of fueling more criticism against the leader of Brazil. The country’s prosecutor general, the person responsible on whether to file charges against Bolsonaro, was appointed by the controversial leader and is widely viewed as protecting the president.
  • Singapore is set to open its borders to Australian and Swiss residents as of November 8th as the Southeast Asian financial hub takes another step in reviving its economy. The plan is to let fully-vaccinated travelers from the two countries to enter Singapore freely after taking PCR COVID-19 tests. Australians and Swiss residents will not have to self-isolate once given the green light from a negative PCR test. Singapore had recently opened travel corridors with 10 other countries, including the United States, UK and Germany.
  • China is maintaining its zero-COVID approach as multiple media outlets have reported the country has placed a city of four million people under lockdown in attempt to crush a domestic outbreak. After reporting six cases – the city of Lanzhou – the provincial capital of the northwestern Gansu province – will have its residents required to stay at home, except in emergencies. Officials said the “entry and exit of residents” would be strictly controlled and limited to essential supplies and medical treatment. China reported 29 new domestic cases of COVID-19 on Tuesday.

Covid-19 – Due Diligence And Asset Management

Performing Under Pressure: How Hedge Funds Can Weather Q4’s Choppy Markets

Brief: Hedge funds are well-placed to outperform other assets classes in a potentially choppy market environment during the fourth quarter, with commodities, event driven and certain credit strategies faced with a rich opportunity set and strong upside potential as markets adjust to a post-Covid world. In its latest ‘Fourth-Quarter Hedge-Fund Strategy Outlook’, K2 Advisors said global equities and bond markets are now locked in a “tug-of-war” between good news and bad news, which is shaping the way investors position their portfolios. “Change creates opportunities for those nimble enough to capture the new tailwinds while hedging out the risks associated with a shifting environment,” K2, the hedge fund investing unit of Franklin Templeton, observed. Specifically, Covid cases are set against tightening central bank policies, stronger employment numbers are balanced against supply chain problems, while solid earnings growth this year face worsening year-over-year comparisons in early 2022.

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‘Painful’ Disruption Looms with Inflation Approaching 7 Per Cent in 2022, warns Aegon AM

Brief: Markets, households and students face painful disruption next year if inflation hits 7 per cent as currently implied by inflation-linked bonds, says Mark Benbow, high yield portfolio manager at Aegon Asset Management. With GDP RPI inflation swaps implying a surge in inflation in 2022, Benbow says few will escape the squeeze on prices, with RPI-linked loan holders particularly exposed to much higher borrowing costs. “You don’t need to look far to see inflation – commodity prices are rising rapidly, as are other input costs such as shipping,” he says. “And with the rising cost of living, it’s only a matter of time before employers realise that they will need to increase wages. “That may sound like a good thing, but consider that index-linked bonds are implying that RPI will hit 7 per cent in 2022. If that comes to fruition, it will disrupt markets, households and students, who are painfully charged student loan interest on an RPI +3 per cent basis, meaning they will be paying interest of 10 per cent.”

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UK Regulator sets out Rules for Long-Term Fund with Minimum 90-Day Notice Period

Brief: Britain’s financial watchdog set out rules for a new type of fund for investing over the longer term to help tackle climate change and economic recovery from COVID-19, while ruling out daily redemptions to avoid suspensions in rocky markets. The new Long-Term Asset Fund (LTAF) regime creates a category of authorised open-ended fund for investing in long-term, illiquid assets such as venture capital, private equity, private debt, real estate and infrastructure. “We want investment in long-term, illiquid assets, including productive finance, to be a viable option for investors… seeking the potential for higher long-term returns in return for less or no immediate liquidity,” the Financial Conduct Authority said in a statement. It had proposed a notice period for redemptions of between 90 and 180 days in a consultation paper last year. “So we have set a minimum notice period of 90 days and a requirement that LTAF cannot offer redemptions more frequently than monthly,” it said on Monday. Funds that invested in illiquid property and offered daily redemptions had to be suspended last year when markets suffered extreme volatility as economies entered lockdowns to fight the pandemic.

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UK Budget to Mark Shift Away from Pandemic Firefighting

Brief: Britain has experienced a series of shortages these past few months, from a lack of fuel at gas stations to not enough workers picking the fall harvest, but Treasury chief Rishi Sunak is unlikely to dwell on them when he delivers his annual budget statement on Wednesday. The Chancellor of the Exchequer, as he is formally known, will instead likely use one of the most high-profile, choreographed events in the country’s political calendar to paint a relatively rosy picture of the state of the British economy following the devastating shock of the pandemic. With government borrowing less than anticipated a few months ago — following a fairly solid recovery from Britain's deepest recession in around 300 years — Sunak has a bit of wiggle room on the taxes and spending front. However, with the next general election not due until 2024 at the latest, Sunak is not expected to turn into Father Christmas — big tax giveaways in Britain are traditionally timed for the run-up to a general election.

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Dealmakers Race Past $4.1 Trillion Record with Months to Spare

Brief: The global boom in mergers and acquisitions has just delivered dealmakers their best-ever year -- on $4.11 trillion and counting. Numerous records have already tumbled in recent months and it was just a matter of time before the previous high set in 2007 was cleared. “M&A bankers are always blamed for being perpetually optimistic but the data is quite compelling,” said Stephan Feldgoise, co-head of global M&A at Goldman Sachs Group Inc. “Whether it be large-cap M&A, sponsor M&A, SPACs, strategic repositioning coming out of Covid, the numbers have been just extraordinary.” Volumes have been rising across sectors and regions, fueled by cheap financing and super-acquisitive private equity buyers. Deals in the $1 billion to $10 billion range -- a sweet spot for buyout firms -- have underpinned the boom, in the notable absence of $50 billion-plus blockbusters. Standout transactions this year have included the leveraged buyout of Medline Industries Inc., Canadian Pacific Railway Ltd.’s hard-fought takeover of Kansas City Southern, and the long-awaited merger of German real-estate firms Deutsche Wohnen SE and Vonovia SE.

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

Our briefing for Monday, October 25, 2021:

  • In the United States, Dr. Anthony Fauci, the country’s top infectious disease expert, says vaccines for children ages five to 11 should be available by November. A Food and Drug Administration (FDA) advisory committee will meet tomorrow to discuss the submission from Pfizer requesting approval for vaccines to be delivered to the age group. The advisory committee will then hand it off to the Centers for Disease Control and Prevention (CDC) advisory group for their recommendation.  "If all goes well, and we get the regulatory approval and the recommendations from the CDC, it's entirely possible, if not very likely, that vaccines will be available for children from five to 11, within the first week or two of November," Fauci told ABC News on Sunday.
  • Canada’s provinces of B.C. and Ontario are easing some of their coronavirus curbs as vaccination rates across the country continue to rise. The nation’s top doctor, Theresa Tam says while about 90% of Canadians have had their first dose, it’s important to consider vaccines as part of a broader strategy that should also include other measures. B.C. for example, will remove capacity limits for large events like concerts and weddings, but it will maintain masking rules in addition to requesting proof of vaccination. Ontario will also remove capacity limits for most settings, while still requiring proof of vaccination. Ontario laid out a plan to remove almost all remaining Covid-19 restrictions by March, including masks and proof of vaccination requirements.
  • In the United Kingdom, Health Secretary Sajid Javid says the government is “leaning towards” mandatory vaccinations for all members of the National Health Service (NHS). A similar mandate is already in place for long-term care workers, who must be fully vaccinated by November 11. Javid said while the government is set to make a final decision soon, the vast majority of NHS workers are already vaccinated. "What we saw with the care sector is that when we announced the policy, and then we set it in law…then we saw many more people come forward and do the right thing and get vaccinated," he said. “And that's what I hope that, if we do the same thing with the NHS, we will see."
  • In Germany, coronavirus infections have crept back up to their highest levels since mid-May, reaching 100 cases per 100,000 in the past seven days. The incidence rate, which used to be the determining factor for imposing lockdowns, reached 100 on Saturday, up from 95 on Friday according to the Robert Koch Institute. Germany stopped using the incidence rate as its yardstick for lockdown measures in August, instead deciding to focus on hospitalizations. The country’s state of emergency is set to expire on November 25, when all restrictions will automatically end unless extended by parliamentary vote. Health Minister Jens Spahn says it will be possible to lift the state of emergency while still maintaining measures like mask wearing and proof of vaccination.
  • New Zealand reported 109 new coronavirus cases, its second-worst day on record since the pandemic began. This brings the total number of cases for this outbreak to 2681. So far most of the cases were reported Auckland, however there was one community case reported in the country’s South Island over the weekend. Health officials have said the risk of further spread from this case remains low. On Friday Prime Minister Jacinda Ardern said lockdown restrictions would be lifted only when 90% of the eligible population is fully vaccinated. As of today, 71% of eligible New Zealanders are fully vaccinated, including 77% in Auckland. 
  • Australia is set to start rolling out booster shots as early as November, officials said. The Therapeutic Goods Administration (TGA) met today to review the data provided by Pfizer before giving their advice on whether to approve a third jab. If approved, up to 1.6 million booster shots could be delivered by the end of this year. Moderna is also expected to make a submission to the TGA in the near future. Healthcare workers and those in long-term care homes are expected to be among those offered boosters in the initial phase. About 87% of the eligible population have received their first dose of vaccine in Australia.

Covid-19 – Due Diligence And Asset Management

Investors 'play chicken' with Bank of Canada as inflation soars

Brief: Canada's hot inflation and recovering job market are raising pressure on the Bank of Canada to hike interest rates ahead of schedule, with investors looking to a policy announcement this week for clues that the central bank is turning more hawkish. The BoC, led by Governor Tiff Macklem, is expected on Wednesday to raise its inflation forecast and to largely end stimulus from its pandemic-era bond buying program, starting a countdown of sorts to the first interest rate hike since October 2018. The central bank has pledged to keep rates at a record low 0.25% until economic slack is absorbed, which would happen in the second half of 2022 in its latest forecast, and has long maintained that the factors pushing up inflation are transitory.

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Saudi Seeks 50 Million Tourist Visits in 2022 in Covid Recovery

Brief: Saudi Arabia is expecting 50 million tourist visits in 2022 as it seeks to rejuvenate a nascent effort to promote domestic and international vacations stymied by the pandemic. “We have already started the recovery journey, and it will continue to 2023, 2024,” Tourism Minister Ahmed Al Khateeb told Bloomberg TV at the Saudi Green Initiative Forum. He also unveiled a new center focused on sustainable tourism as part of efforts, announced by Crown Prince Mohammed bin Salman over the weekend, to bring planet-warming emissions in the world’s biggest exporter of oil to net zero by 2060. The coronavirus crippled worldwide travel just months after Saudi officials outlined plans to attract foreign holidaymakers for the first time. The country is relying on tourism to help drive economic diversification and create jobs for its growing population.

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Asia stocks mixed after Wall St slips, China travel curbs

Brief: Asian stock markets were mixed Monday after Wall Street slipped and China tightened travel controls in some areas in response to coronavirus infections. Shanghai, Hong Kong and Sydney advanced while Tokyo declined. Wall Street’s S&P 500 index declined 0.1% on Friday, weighed down by losses for tech companies after a seven-day streak of gains. In China, Gansu province in the northwest closed tourist sites Monday after coronavirus cases were found and the capital, Beijing, banned visitors from areas with infections in the past 14 days. China has reported only a few dozen cases, but Beijing’s response of curbing travel prompted concern that they might weigh on economic activity that already is weakening. “One may expect aggressive measures to control virus spreads, which may put a cap on growth,” said Yeap Jun Rong of IG in a report.

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HSBC profits rise 74% as economy rebounds from Covid crisis

Brief: HSBC’s profits rose 74% in the third quarter as improving economic conditions allowed the bank to release hundreds of millions of pounds originally set aside for a potential jump in loan defaults during the pandemic. The London-headquartered bank said pretax profits rose to $5.4bn (£3.9bn) in the three months to 30 September, up from $3.1bn a year earlier. It easily beat City forecasts for profits of $3.8bn for the quarter. HSBC credited continued economic stability for helping increase its profits, as improving conditions allowed customers to repay their debts on time. It meant HSBC could release about $700m from the pile of cash it built up during the pandemic to help cushion the blow of a potential surge in defaults. It nearly offset the $785m loan loss charge that HSBC logged during the same period last year. Analysts had expected a further $236m charge in the third quarter. The better-than-expected results led HSBC to announce a share buyback programme, which will result in up to $2bn distributed to its investors.

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Global Banks Step Up Pressure on Hong Kong to Ease Restrictions

Brief: The finance industry is ratcheting up pressure on Hong Kong to ease its strict quarantine rules and abandon its zero-Covid policy after a survey found almost half of major international banks and asset managers are contemplating to move staff or functions out of the city. In a letter sent over the weekend to Financial Secretary Paul Chan that was seen by Bloomberg News, the Asia Securities Industry & Financial Markets Association, the top lobby group for financial firms in the city, said the hard-line approach has put Hong Kong’s status as financial center, its broader economic recovery and competitiveness at risk.  The lobbying body’s growing alarm comes as other financial centers, including Singapore, London and New York, are starting to get back to normal, easing travel rules while seeking to co-exist with the virus. Hong Kong has some of the world’s strictest quarantine policies, placing incoming travelers in quarantine for as long as three weeks, a strategy that has been largely successful in keeping local infections at close to zero.

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

Our briefing for Friday, October 22, 2021:

  • The United States has now donated 200 million vaccine doses globally, the White House announced on Thursday. Last month President Joe Biden committed to donating over 1 billion doses to countries in need across the world. Just last week he announced a one-time donation of 17 million doses of the Johnson & Johnson vaccine to the African Union, bringing their total number of donations to 50 million. "These vaccines will help save lives, protect livelihoods, and heal economies currently battered by this pandemic," the White House said in a statement. Some world leaders have still criticized the U.S. for not doing enough.
  • Canada has removed its advisory against non-essential travel for the first time since March 2020. The Government of Canada’s website was updated with a new notice, now advising all travellers to get fully vaccinated before taking a trip. “If you’re unvaccinated, you remain at increased risk of being infected with and spreading the virus that causes Covid-19 when travelling internationally. You should continue avoiding non-essential travel to all destinations,” the notice states. The notice also advises travellers to continue to follow the standard public health measures such as social distancing, hand washing and mask wearing.
  • In the United Kingdom, case numbers have hit 50,000 for the first time since mid-July. The U.K. reported 52,009 new Covid-19 cases on Thursday, and 115 new deaths. Despite the rising case numbers, Prime Minister Boris Johnson has said the government will continue with its current plan, adding that hospitalizations and deaths have remained within the parameters of what was predicted. He also said that the country is in a considerably better place than it was last year because of vaccinations, and that’s why people have confidence in the government’s plan. On Wednesday Sajid Javid, the health secretary, warned that lower vaccine uptake could lead to more restrictions. 
  • In the Philippines, Covid-19 vaccinations have slowed in recent days, and its largely due to logistical challenges. According to Vaccines Czar Carlito Galvez Jr., the country is now sitting on a stockpile of about 39 million vaccines because of issues with deployment.  Vaccine hesitancy has also become a problem alongside the logistical challenges, which Galvez said the government will address by conducting home-to-home visits. The Philippines aims to have 50% of its population fully vaccinated by the end of this year, and 70% of its population fully vaccinated by May 2022. 
  • New Zealand has set a target of 90% for full vaccination rates before it will end coronavirus lockdowns. Prime Minister Jacinda Ardern says she will require each of the nation’s 20 Health Districts to reach the 90% target. New Zealand currently has some of the strictest lockdown measures in the world, with its largest city of Auckland under restrictions for almost two months now. So far about 68% of eligible New Zealanders are fully vaccinated, while about 86% have had their first dose. New Zealand reported a total of 129 new coronavirus infections, a record for the third time this week, bringing the nation’s total number of cases for this outbreak to 2389.
  • Australia’s state of Victoria saw residents flock to the bars and restaurants after a 262-day lockdown was finally lifted in the region. Victoria is the third state, after New South Wales, and the Australian Capital Territory, to exit lockdown and start living with the virus as the population hit its target of 70% full vaccination rates. Residents in Victoria can now leave their homes for any reason, restaurants and cafes are allowed to serve up to 20 people indoors and 50 people outdoors (all must be vaccinated), and up to 10 visitors are allowed in homes. Mask rules remain in place.

Covid-19 – Due Diligence And Asset Management

HSBC has some strategies for investors to overcome the ‘wall of worry’

Brief: HSBC Asset Management has shared a raft of advice with clients looking to navigate the current “wall of worry” facing global markets. With concerns about global growth and inflation causing jitters of late, along with the prospect of premature central bank policy adjustments and the resurgence of Covid-19 in certain parts of the world, investors have plenty on their plate when deciding where to allocate money. In a message to clients earlier this week, HSBC Asset Management Global Chief Global Strategist Joe Little recommended a number of strategies, including looking at Asian fixed income, “reasonably priced inflation hedges,” and value and cyclical stocks. Consensus forecasts for U.S. 2021 GDP [gross domestic product] have been cut by 0.7 percentage points to 5.9%, according to HSBC’s aggregate, while supply chain disruption has pushed up U.S. 2021 inflation expectations by a full percentage point to 4.3%.

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Wall Street profits this year approach record level. Here's why it matters to New York

Brief: The COVID-19 pandemic has not slowed profits on Wall Street as pre-tax earnings this year have beaten last year's outsized growth, a report Thursday found. The financial sector is critical to New York's economy, and the first half of 2021 was extraordinary strong for Wall Street, Comptroller Thomas DiNapoli said in a report. For the first six months of the year, pre-tax earnings hit $31 billion, up from $27.6 billion from the same period last year, and the most since 2009.“Wall Street’s success during the pandemic has benefited New York’s economy and finances during a difficult time," DiNapoli said in a statement. "The securities industry’s strong profits have helped shore up tax revenues and securities industry workers have been among the first to return to the office.”Wall Street is vital to the state's finances, making up about 18% of all state revenue each year.

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Hedge funds edge towards USD4 trillion milestone as volatility surges

Brief: Total hedge fund industry assets have swelled to almost USD4 trillion globally, a rise of nearly USD370 billion since the start of this year, according to new capital flows data. Hedge fund managers attracted USD5.6 billion of new investor money throughout the third quarter, supplemented by marginal performance-based gains, putting total industry capital at USD3.97 trillion overall, Hedge Fund Research stats show. Global hedge fund assets have rebounded sharply over the course of the Covid-19 pandemic, according to HFR’s latest Global Hedge Fund Industry Report – with total industry capital soaring by more than USD1 trillion in the previous six quarters, after falling below USD3 trillion in Q1 2020 when the coronavirus outbreak began. With the USD5.6 billion of inflows for Q3 this year, net inflows since Q3 2020 total some USD40 billion, HFR said.

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Europe’s Top Two Economies Sound Alarm Over Absent Supplies

Brief: An aggravating global supply squeeze caused the steepest decline in French manufacturing output since stringent coronavirus lockdowns were in place last year and severely damped growth momentum in Germany, purchasing managers report. Gauges for factory orders in both countries deteriorated in October, with some goods producers mentioning that “severe delays” on inputs were responsible for contracts being canceled or postponed. Inflation pressures grew amid the bottlenecks, according to IHS Markit surveys. “While until recently, the effects of inputs shortages have been most apparent on prices, we’re now seeing them have a noticeable impact on production levels and order book,” said Joe Hayes, a senior economist at the London-based firm.

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VIX Index Closes at Lowest Level Since Beginning of Pandemic

Brief: The Cboe Volatility Index, known as Wall Street’s fear gauge, closed Thursday at its lowest level since before the pandemic hit as strong earnings pushed stocks to record highs.The VIX closed down 3.1% at 15.01, its lowest close since Feb. 19, 2020. The VIX has averaged 19.71 in 2021. The VIX is measure of market expectations of 30-day volatility and can serve as a way to gauge fear among market participants. The S&P 500 notched its seventh consecutive increase on Thursday, closing at a record; the VIX is down from 19.85 to 15.01 during the same time period.In a note published on Thursday, Susquehanna International Group equity derivative strategist Chris Murphy wrote that while the VIX has “cratered,” volatility is still high in other parts of the market.

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

Our briefing for Thursday, October 21, 2021:

  • The United States has provided its rollout plan for vaccinating children ages five to 11, pending approval from the Food and Drug Administration (FDA). The plan involves using pediatric offices, pharmacies and schools across the country as vaccination sites for those under 12. “We will be ready to get shots in arms,” Jeff Zients, White House Coronavirus Response Coordinator, said during a briefing. “Kids have different needs than adults, and our operational planning is geared to meet those specific needs, including by offering vaccinations in settings that parents and kids are familiar with and trust." Children would be given two shots about three weeks apart and they will use a lower dosage than adults.
  • In Canada, Prime Minister Justin Trudeau announced the details of a proof-of-vaccination system for international travel. The standardized vaccine passport will include a person’s name, date of birth, and their Covid-19 vaccine history, and can be used within Canada or for travelling internationally. As of today, Ontario, Quebec, Newfoundland and Labrador, Nova Scotia, Saskatchewan and all of the territories are using the standardized proof of vaccination, the government said. In other news, Alberta reached a grim milestone in that it passed more than 3000 deaths from Covid-19 on Wednesday. There were 18 new deaths reported, bringing the province’s total to 3006.
  • In the United Kingdom, the government has come under fire from the British Medical Association, for not reinstating Covid-19 restrictions as case numbers continue to rise. Dr. Chaand Nagpaul, the association’s chair, says the government has been “willfully negligent” for not implementing their coronavirus “Plan B.”  On Wednesday Health Secretary Sajid Javid urged people to come forward for their booster shots and recommended people wear masks inside and get tested often. But he also said the government would not be bringing in any Plan B measures at this time – which include mandatory masking, working from home and the introduction of vaccine passports.
  • India has administered its one billionth Covid-19 shot, an important milestone for the country as it continues to grapple with the highly infectious delta variant.  In honour of the achievement, the health minister said he would show a film and song as the Indian flag is raised at the Red Fort in New Delhi. So far India has fully vaccinated about 30% of its population, while about 75% have had their first dose. India is the second country to exceed one billion doses, as China already hit the target back in June.  
  • New Zealand has hit a record number of new cases for the second time in three days, exceeding 100 daily cases for the first time since the pandemic began. The country reported 102 new infections, 94 of which were in Auckland while eight are in the neighbouring region of Waikato. Authorities have said that they expect case numbers to rise in the coming days and that its critical to accelerate inoculations. "We are facing this outbreak with a higher rate of vaccination than perhaps others have in other countries. We are in a strong position, but we do need to build on that and see more people be vaccinated," said Deputy Prime Minister Grant Robertson at a news briefing.
  • Australia’s state of New South Wales (NSW) will send $250 to every family to thank them for homeschooling their children during the Covid-19 outbreak. The government made the announcement as NSW reported 372 new cases and one death, numbers that are relatively low for the country’s most populous state. Premier Dominic Perrottet said the vouchers will be made available through Service NSW beginning in March of next year. “It has been tough, it has been a challenge with close to three months of homeschooling, but you have been the primary educators to ensure none of our children get left behind," he said.

Covid-19 – Due Diligence And Asset Management

Business Travel Is Starting to Slowly Return

Brief: A senior executive at SAP SE, owner of one of the world’s largest travel expense management platforms, expects it to take until at least 2023 before revenues from its Concur unit return to pre-pandemic levels. After losses for Concur during the pandemic, the service is seeing an uptick for bookings and transactional revenue, Chief Financial Officer Luka Mucic said in an interview. Mucic said that transaction volume -- which includes fees for extra usage of Concur -- was on the rise. He expects Concur to return to pre-pandemic growth rates next year, although it will take until 2023 at the earliest to revert to those levels in absolute sales terms.

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Britain’s Economy Finds Out What It Means to Live With Covid

Brief: After 19 months spent attempting to ward off Covid-19 while safeguarding jobs and businesses, the U.K. is heading into winter with a growing problem: The coronavirus is spreading rapidly, just as the economy starts going in the opposite direction. U.K. cases are accelerating faster than in other western European nations, while deaths have jumped to their highest since March. Government ministers are having to deny they are planning for a new lockdown. At the same time, economic growth is slowing, inflation is running high, the Bank of England is expected to hike rates soon and households are facing a cost-of-living crisis. It’s a contrast to successive waves of infection earlier in the pandemic, when tighter Covid curbs hurt the economy and looser measures helped it rebound.

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Wall Street Profits Surge and Bonuses Will Follow, DiNapoli Says

Brief: New York City’s securities industry reaped another windfall in the first half of the year as it benefited from the pandemic-induced boom in markets -- and that’s projected to boost Wall Street bonuses. The industry’s pretax profits surged about 13% from a year earlier to $31 billion, helped by strong trading, underwriting and advisory activities, state Comptroller Thomas DiNapoli said Thursday in a report. While it was the industry’s second-most profitable first half on record, DiNapoli cautioned that profits will subside as interest rates rise and monetary stimulus fades. “Wall Street’s success during the pandemic has benefited New York’s economy and finances during a difficult time,” he said in a statement. “As we prepare for an eventual slowdown in Wall Street’s record activity, we need to ensure New York’s Main Street, and its other vital sectors, are also recovering.”

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European Bank CEOs Are as Divided on Inflation as Everybody Else

Brief: The leaders of Europe’s top banks agree they have a lot riding on the recent surge in consumer prices. But when it comes to deciding whether inflation is here to stay, they’re as divided as policy makers and business executives. On the one side, Deutsche Bank AG Chief Executive Officer Christian Sewing and his counterpart at Nordea Bank Abp are preparing for longer-lasting inflation. Sewing argues it’s time for central bankers start thinking about how to unwind years of negative interest rates that have weighed on lenders’ profitability. On the other side, Banco Santander SA Chairman Ana Botin and the chief of Swedbank AB are calling it a temporary spike from the pandemic and other factors, although they acknowledge the dangers of price pressures persisting.

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Weekly jobless claims fall to fresh pandemic-era low of 290,000

Brief: New weekly jobless claims held below 300,000 for a back-to-back week as labor market conditions trudged back toward pre-pandemic levels. The Labor Department released its jobless claims report Thursday morning. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg: Last week's initial unemployment claims fell by a greater-than-expected margin, bringing the number of new filings back to the lowest level since March 2020. The four-week moving average for new jobless claims also dropped by 15,250 to reach 319,750 as of last week, also marking the least since March of last year.

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

Our briefing for Wednesday, October 20, 2021:

  • In the United States, the Food and Drug Administration (FDA) is set to make a call on mix and match vaccine doses. The announcement is expected to come as part of the authorization of booster doses for some Moderna recipients and Johnson & Johnson recipients. The authorization will mean people can get a different vaccine booster than the one they were initially administered. As the Washington Post reports, it is likely that the FDA will also say that people should stick to their same vaccines where possible.  Last week the FDA looked at data from the National Institutes of Health as well as evidence from the European Union and the U.K., though officials have said the research on mixing vaccines is limited.
  • In Canada, the province of Ontario is set to start vaccinating those ages five to 11, once the vaccines are approved for children in Canada. The province’s health minister made the announcement on Tuesday, explaining that the ministry is currently reviewing plans submitted by the province’s public health units. "By the time the vaccine is approved for youth by Health Canada, we will be ready to go," Health Minister Christine Elliott said at a news conference. "I know that parents are concerned about this, but they need not be." Pfizer has officially asked Health Canada for approval of its vaccine for children ages five to 11.
  • In the United Kingdom, experts are closely monitoring a new mutation of the delta variant that was detected in July. Official data from the U.K.’s Health Security Agency shows that the new variant accounts for about 6% of all coronavirus cases. The new variant, known as AY.4.2, or delta plus as some are calling it, contains some mutations that could help it enter cells. Experts say it is not yet a variant of concern, and it is unlikely to evade vaccine protection. Currently there is no evidence to indicate the new variant is more transmissible than delta, but this is an area where scientists are still studying. 
  • In Brazil, a new report from the senate has recommended that President Jair Bolsonaro should face criminal charges over his handling of the Covid-19 pandemic. The 1200-page report, which was reviewed by the Associated Press on Tuesday, recommends the president should be indicted on 11 charges, including charlatanism, inciting crime up to homicide and genocide of the Indigenous community. The document still has to be reviewed and voted on by the senate committee and could still be altered or vetoed. The prosecutor general would then have to decide whether to investigate and bring about any charges. Bolsonaro denies the allegations and says the report is a political weapon designed to sabotage him.
  • India will remove the retaliatory measures it placed on the U.K. for travellers wishing to enter the country. Those travelling to India from the U.K. will now only need to home quarantine for seven days and take Covid-19 tests. Tensions rose between the two countries after the U.K. failed to recognize Covishield, the made-in-India version of the AstraZeneca vaccine, as a valid vaccine for entry into the country. The U.K. has since designated Covishield as an approved jab, but it took them a few more weeks to add India to its list of countries exempt from quarantine.
  • Australia’s state of Victoria will not open for unvaccinated people until well into 2022, the state premier said. Premier Daniel Andrews made the announcement on Tuesday as the state recorded 1749 new Covid-19 cases and 11 new deaths. Andrews said the state would take a different approach than New South Wales, which is set to ease restrictions for the unvaccinated on December 1. “That doesn’t make any sense to me in any event and we won’t be doing that here,” he said. Andrews also said the state will require proof of vaccination even once the restrictions have eased.

Covid-19 – Due Diligence And Asset Management

Pimco Warns Uncertainty Set to Crimp Returns on Bonds and Stocks

Brief: If you think financial markets have been strange the past 18 months, just wait. What lies ahead is an unfamiliar macroeconomic environment that’s undergoing dramatic changes, says Pacific Investment Management Co. The firm released a report Wednesday warning that over the next five years the global economy will see “a more uncertain and uneven growth and inflation environment with plenty of pitfalls for policymakers.” Higher macroeconomic and market volatility will likely mean lower returns across fixed-income and equity markets, according to the manager, which oversees around $2.2 trillion in assets. But while overall capital market returns will likely be lower, increased volatility should spell opportunity for active fund managers, wrote Pimco. Markets are already bracing for the prospect that major central banks will soon begin withdrawing the emergency support provided during the Covid pandemic, with the Federal Reserve widely expected to start dialing back asset-buying next month, while inflation risks remain a major source of disquiet.

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Climate change needs to be tackled like COVID-19, says Blackrock boss

Brief: The chief executive of the world’s largest asset manager has called on governments globally to treat climate change with the same urgency as COVID-19 by supporting private capital investment in new technologies, but warned capitalism alone could not solve this crisis. BlackRock chief executive Larry Fink, who oversees around $10 trillion globally, said the pandemic had shown technologies can be developed quickly once the world recognises there is an “existential crisis”.However, Mr Fink said capitalism had fallen short in its pandemic response with large swathes of the emerging world struggling with very low vaccination rates, which could allow the virus to mutate. “We did not have the resolve to invest in the manufacturing, so we could get the whole world vaccinated, so we don’t have to worry about the next variant and the next variant and the next variant,” Mr Fink said during an online sustainability forum hosted by Credit Suisse.

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Real estate investment managers experience mixed recovery from Covid-19

Brief: The 2021 Global Management Survey, published by NAREIM, INREV and Ferguson Partners, paints a varied picture of real estate investment managers’ recovery from Covid-19. In terms of 2020 financial performance, 38 per cent of respondents recorded a 10 per cent increase in EBITDA, while 32 per cent reported a 10 per cent drop. The median firm in the survey recorded net AUM growth of 6 per cent. While still positive, this reflects the first year of slowing growth since 2016. The survey reports 29 per cent of respondents recording a year-on-year fall in AUM – up from 21 per cent in 2019.Unsurprisingly, employee numbers were impacted during the pandemic. In 2020, headcount either fell or stayed the same for 42 per cent of respondents, versus 26 per cent in 2019; and the number of investment managers who decreased headcount grew from 17 per cent to 27 per cent over the same period. 

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The Great Retail Reset

Brief: In 2018, Blackstone became the U.K.’s largest small-business landlord. That year, Blackstone partnered with the U.K.’s largest privately owned property company, Telereal Trillium, to buy an entire portfolio of commercial real estate off British government-owned Network Rail. It seemed like a good investment: Network Rail, swimming in £46.5 billion ($63.9 billion) in debts, had delayed £162 million in investment in the portfolio. Tenants — thousands of them, renting sometimes damp, sometimes noisy railway arches for businesses including bakeries, hair salons, and car garages — were long overdue for structural inspections to make sure the trains could still run safely overhead. And because Network Rail still owned the tracks, the British taxpayer would foot the bill to inspect and maintain the structures, while Blackstone could focus on filling empty arches and revaluing tenanted ones.

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United Airlines Posts Smaller Loss After Variant Wrecks Profit Plan

Brief: United Airlines Holdings Inc. posted a narrower loss than analysts had expected as a dip in demand from a summer surge in the coronavirus delta variant proved fleeting. The carrier lost $1.02 per share, or $300 million, in the third quarter on an adjusted pretax basis, better than the $1.61 loss analysts had estimated, according to figures compiled by Bloomberg. United shares rose 1.4% in trading after the market close. The stock has gained 6.9% this year through the end of trading Tuesday. Pandemic-driven losses persisted for a seventh quarter at United, which as recently as July had predicted a profit for the latter half of 2021 based on strong demand from leisure travelers and a gradual return of corporate road warriors. But that was before a summer wave of Covid-19 infections and hospitalizations caused an industrywide sales slowdown. United had warned investors Sept. 9 that its planned profit would turn into red ink due to this change in business conditions.

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

Our briefing for Tuesday, October 19, 2021:

  • In the United States, political divides over vaccinations are deepening, in a phenomenon experts say is uniquely American. President Joe Biden has been pushing hard for vaccinations, particularly with a widespread vaccine mandate for federal employees and businesses with more than 100 workers. But some Republican lawmakers have pushed back, fighting against what they say is government overreach. Texas Governor Greg Abbott issued an executive order earlier this week banning vaccine mandates for private companies. Republican Governor of Florida Ron DeSantis says he will sue the Biden administration for its federal vaccine mandates. While recent polls found that Americans are generally in favor of Biden’s vaccine mandates, Republicans specifically were not.
  • In Canada, the province of Saskatchewan has asked other provinces for help in addressing their current Covid-19 crisis. As intensive care units become overwhelmed, largely by unvaccinated patients, Saskatchewan is seeking healthcare workers from other provinces. They are looking for nurses, respiratory therapists and perfusionists (people who operate heart-lung machines). Saskatchewan also recently announced they will be sending some of their Covid-19 patients out of province as they deal with record numbers of intensive care patients. At least six Covid-19 patients will be transferred to Ontario, with more possibly being transferred to Manitoba in the coming days.
  • In the United Kingdom, the government is under pressure to reimpose social restrictions as case numbers soar back to the 50,000 range. The U.K. reported 49,156 new coronavirus cases on Monday, up from 45,140 on Sunday and the highest number since mid-July. Hospitalizations and deaths have been steadily rising since the summer, when the government lifted almost all coronavirus restrictions in England. Last month Prime Minister Boris Johnson said the country might move to a “Plan B” if infections rose to a point that the healthcare system was under pressure. Johnson’s spokesman Max Blaine says right now the government has no plans to enact Plan B and that the autumn rise infections was to be expected. “We always knew the next few months would be challenging,” Blaine said.
  • Italy’s president has condemned the violence that broke out amid protests over the country’s coronavirus health pass. President Sergio Mattarella spoke out during a speech at the University of Pisa, as police in riot gear clashed with protesters in the northern city of Trieste. Mattarella said it was surprising that the protests are happening now, "not during the dark moments when we feared the collapse of the country, but now, today when we see an encouraging economic, social and cultural recovery." Protesters are opposing the country’s Green Pass, which is now required for all workers in the public and private sectors. The government says the Green Pass is necessary to keep workers safe and to protect the economy.
  • New Zealand has reported its highest daily number of cases since the beginning of the pandemic, at 94 new infections. Most of the new cases were found in Auckland but seven of them were found outside of the nation’s biggest city. Authorities have raised concerns about people breaking the rules and pointed out that many of the new infections were among younger people. "The rules matter for everyone and the ask of testing if you are symptomatic applies to everyone," Prime Minister Jacinda Ardern said at a news conference. “We need everyone who can be, to be vaccinated...we all have a part to play," she said.
  • Australia’s case numbers remain steady as lockdowns in the nations’ biggest cities draw to a close. While Sydney and Canberra exited their lockdowns last week, Melbourne is still on track to ease stay-at-home orders this week as the state reaches their 70% double inoculation rate. Queensland outlined a plan for reopening its state borders once vaccination rates reach 80%, expected around Christmas time. Victoria state reported 1749 new coronavirus cases, down from 1903 on Monday, while New South Wales reported 273 new cases, a slight rise from the day before but still well below its pandemic highs in early September.

Covid-19 – Due Diligence And Asset Management

Dubai’s Tourism Sector Won’t Rebound Until Late 2022, S&P Says

Brief: Dubai’s key tourism sector is unlikely to rebound for at least a year, according to S&P Global Ratings.While the city will witness a modest recovery this year helped by one of the world’s highest vaccination rates, “weak international tourism is likely to drag on the economy until late 2022 at the earliest,” Ratings Credit Analyst Trevor Cullinan said on Tuesday.Last year, S&P estimated Dubai’s gross domestic product would contract about 11%, given the impact of coronavirus on sectors including travel and tourism that contribute more than a third of the city’s economy. Dubai also has a “sizable” overall public debt burden projected at around 141% of GDP, according to S&P.

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Fund Managers Sour on Global Growth Expectations, BofA Says

Brief: Fund managers may be quickly souring on global growth and earnings expectations, but their positioning remains pro-risk as they slash bond holdings to a record low and buy U.S. equities. This is a key takeaway from the latest Bank of America Corp. monthly fund manager survey, conducted in the week through Oct. 14. While the outlook for global growth turned negative for the first time since April 2020 and the overall survey was the least bullish in a year, the allocation to bonds fell to the lowest level ever as inflation woes drove expectations for higher rates, according to BofA strategists. Investors boosted their exposure to U.S. equities to a 16% overweight, the most since November 2020, while the overall positioning in stocks remained “very high,” but steady at a net 50%.

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World faces fiscal problems worse than those from COVID: OECD

Brief: The COVID-19 pandemic may have bloated public debt to levels already pushing some governments to consider consolidation, but that’s nothing compared to the fiscal difficulties brewing in the coming decades, the OECD said. According to its long-term scenario, a deceleration in large emerging economies, demographic change and slowing productivity gains will drag trend economic growth among the OECD’s 38 members and the Group-of-20 nations to 1.5 per cent in 2060 from around 3 per cent currently. At the same time, states will face rising costs, particular from pensions and health care.To maintain public services and benefits while stabilizing debt in that environment, governments would have to raise revenues by nearly 8 per cent of gross domestic product, the OECD said.

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Patience Key for U.K. Bulls as Pre-Pandemic High Remains Elusive

Brief: Hang in there -- that’s been the simple motto of equity market mavens who are bullish on the FTSE 100 Index. The U.K. benchmark is one of only a handful of major indexes that have yet to fully recover pandemic losses, being down more than 3% in that time. Among the main concerns of investors is a supply crunch that’s more acute for Britain than many other advanced economies due to the country’s high dependence on trade and because Brexit exacerbated a trucker shortage. “Brexit disruptions are having a huge sentiment effect on U.K. assets,” said Edmund Shing, chief investment officer at BNP Paribas Wealth. The energy crisis is another cause for concern, he said. After years of relative underperformance, dating back before the 2016 referendum on leaving the European Union, U.K. stocks are cheap. The FTSE 100 trades at a near-record 40% valuation discount to the S&P 500, and at 20% discount to the euro-area benchmark Euro Stoxx 50.

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'Worries me a lot': CIBC's Tal warns on uneven labour recovery risks

Brief: One prominent Bay Street economist is warning that Canada's uneven labour recovery post-pandemic could have long-lasting economic effects if not addressed. “We still see this asymmetrical widening in the income gap. So, not only are we seeing the wealth gap widening, but also the income gap is widening,” Benjamin Tal, deputy chief economist at CIBC World Markets Inc., said Monday. “That worries me a lot.” His comments come on the same day BDO Debt Solutions released new data showing the deepening financial divide among Canadians. The latest BDO Affordability Index showed 43 per cent of respondents acquired additional debt because of the pandemic, up from four per cent from 2020. Around 28 per cent of people polled reported their financial situation improved during the pandemic as they saved money and paid down debt.

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

Our briefing for Monday, October 18, 2021:

  • In the United States, case numbers are improving slightly but Dr. Anthony Fauci, the country’s top infectious disease expert, says the future really depends on vaccination rates. Currently about 57% of the U.S. population are fully vaccinated. The good news, Fauci said, is that there may not necessarily be another wave of infections. "It's going to be within our capability to prevent that from happening," said Fauci. "The degree to which we continue to come down in that slope will depend on how well we do about getting more people vaccinated."   
  • In Canada, the government is considering whether to extend pandemic support programs for businesses and individuals as five programs are set to expire on October 23.  The Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy can be extended by the federal cabinet until November 30. The Canada Recovery Benefit, Canada Recovery Sickness Benefit, and the Canada Recovery Caregiver Benefit, can all be extended to November 20 by an order of cabinet. All programs would require new legislation to be introduced if they were to be extended beyond those dates. Deputy Prime Minister Chrystia Freeland says she’s consulting with businesses, economists and labour groups but did not give any further information.
  • In the United Kingdom, England will open walk-in clinics for children ages 12-15 to get their Covid-19 vaccinations. Currently in England the vaccination rate among the age group rests at just 14.2%, compared to 44.3% in Scotland, the Guardian reports. This is believed to be because Scotland allows 12-15-year-olds to attend walk-in clinics, rather than just having their vaccinations at school. Older children ages 16-18 can already attend walk-in clinics and have a 56.5% vaccination rate. Children ages 12-15 in England are testing positive for coronavirus at a higher percentage than any other age group. 
  • Japan’s recent Covid-19 success has left the rest of the world confused, as vaccination rates soar and case numbers plummet. Japan did things differently in the sense that it has never had an official lockdown, only a series of states of emergency with relatively simple curbs put in place. But now case numbers in Tokyo have fallen below 100 daily, and the government has slowly begun to reintroduce social and economic activity. Many credit the country’s vaccination campaigns with the recent success, as almost 70% of Japan’s population is fully vaccinated.
  • The Philippines will begin to administer Covid-19 vaccines to children ages 12-17, in an effort to reopen schools safely. According to a report by the United Nations Children’s agency UNICEF, the Philippines are one of 17 countries in the world where schools have been closed throughout the entirety of the pandemic. The news comes as the country reports 6943 new infections and 86 new deaths, bringing the total cumulative case number to over 2.7 million. So far the Philippines has vaccinated about 24 million of its 110 million population.
  • Australia’s city of Melbourne will reopen after withstanding the longest lockdown in the world. Premier Daniel Andrews made the announcement on Sunday, with the state projected to reach the 70% vaccination milestone later this week. The state has been under six lockdowns totalling 262 days, or almost nine months since March 2020. “Today is a day when Victorians can be proud of what they have achieved,” said Andrews. “As of 11:59pm on Thursday, there will be no lockdown, no restrictions on leaving home and no curfew,” he said. Victoria state reported 1838 new coronavirus cases on Sunday, and seven new deaths.

Covid-19 – Due Diligence And Asset Management

London Office Workers Still Spending Some of Their Week at Home

Brief: Offices are starting to fill up again, but it’s still not where Londoners are spending their entire work week. More than 80% of London-based office employees who participated in a JPMorgan Chase & Co. survey said working full time either from home or from the office were their least preferred options after the ending of pandemic restrictions, analysts led by Neil Green wrote in a note. The analysts polled about 650 workers between Sept. 30 and Oct. 12, with about two-thirds of respondents saying they were back in the office on a regular basis. Only 37% said they had been going in five days.“This data strongly supports the trend for flexible offices,” the analysts wrote. “Employee demands are evolving.”

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Industry argues stagflation fears based on misnomer

Brief: The “nightmare scenario” of stagflation rearing its head is less likely than many investors think, according to investment professionals, who say the current backdrop is not comparable to the last prolonged period of stagflation during the 1970s and early 1980s.However, they warn that expectations for stagflation could lead to a "significant reversal" across nominal bond and equity markets. Stagflation, when economic growth slows and unemployment increases while inflation ticks higher, creates a tough environment for investors, given consumer spending slows, companies' earnings fall and unemployment continues rising. It is a difficult cycle to break, as evidenced between 1973 and 1982, when the oil embargo of 1973 hit prices and first challenged the seemingly stable inverse correlation between inflation and unemployment.

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Boris Johnson Hosts Business Leaders’ Dinner Amid U.K. Investment Push

Brief: Prime Minister Boris Johnson will host a dinner Monday with 20 of the world’s most powerful executives ahead of a summit designed to boost investment into the U.K. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and Bill Gates will be among the guests, according to the Daily Telegraph. Stephen Schwarzman, co-founder of private equity firm Blackstone Inc., Barclays Plc CEO Jes Staley  andBanco Santander SA Chairman Ana Botin and will also be there, the newspaper reported. Chancellor of the Exchequer Rishi Sunak will host a separate dinner for other leading business figures on the same evening in the capital’s financial district alongside William Russell, the Lord Mayor of London. More than 200 top business people have been invited to Tuesday’s summit, which is aimed at boosting business investment in Britain.

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Top 500 managers see assets hit record USD119.5tn

Brief: Assets under management (AuM) at the world’s 500 largest asset managers have reached a new record of USD119.5 trillion, according to new research from the Thinking Ahead Institute. As of the end of 2020, this represents an increase of 14.5 per cent on the previous year when total AUM was previously USD104.4 trillion.The research, conducted in conjunction with Pensions & Investments, a leading US investment newspaper, confirms growing concentration among the top 20 managers whose market share increased during the period to 44 per cent of total assets. Of the top 500 managers, 221 names which featured on the list a decade ago in 2011 are now absent in 2021, demonstrating a quickening pace of competition, consolidation and rebranding.

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Wall Street banks set to profit again when Fed withdraws pandemic stimulus

Brief: Wall Street banks have been among the biggest beneficiaries of the pandemic-era trading boom, fueled by the Federal Reserve's massive injection of cash into financial markets. With the central bank nearing the time when it will start winding down its asset purchases, banks are set to profit again as increased volatility encourages clients to buy and sell more stocks and bonds, analysts, investors and executives say. The Fed has been buying up government-backed bonds since March 2020, adding $4 trillion to its balance sheet, as part of an emergency response to the COVID-19 pandemic. The strategy was designed to stabilize financial markets and ensure companies and other borrowers had sufficient access to capital. It succeeded but also resulted in unprecedented levels of liquidity, helping equity and bond traders enjoy their most profitable period since the 2007-09 financial crisis.

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

Our briefing for Friday, October 15, 2021:

  • In the United States, a Food and Drug Administration (FDA) advisory panel has recommended a third dose of the Moderna vaccine for elderly and immunocompromised people and those whose jobs expose them to Covid-19. The panel met on Thursday and voted unanimously 19-0 to approve the mRNA booster. If the FDA gives final approval, the Centers for Disease Control and Prevention will determine exactly who gets the booster shots. The FDA often follows the advice of the advisory panel but it is not required to do so. An advisory committee will meet to weigh in on Merck’s Covid-19 pill on November 30.

  • In Canada, the province of Saskatchewan took over the operations of five nursing homes after officially ending their relationship with operator Extendicare. The government made the announcement on Thursday after the homes were reviewed. An ombudsman report from August found that Extendicare was ill-prepared to deal with a deadly Covid-19 outbreak that happened in 2020, killing 39 residents of its Parkside home in Regina. Scott Livingstone, CEO of the Saskatchewan Health Authority, apologized for not being able do more to prevent the situation. The health authority will take over the operations of the five Extendicare long-term care homes, home to more than 540 residents.  
  • In the United Kingdom, about 43,000 people may have been wrongfully given negative coronavirus tests, health officials said. The U.K. Health Security Agency announced suspension of operations at a private lab in central England, after an investigation found reports of people who tested positive on rapid tests were testing negative on PCR tests. “Around 400,000 samples have been processed through the lab, the vast majority of which will have been negative results, but an estimated 43,000 people may have been given incorrect negative PCR test results," the health agency said. Officials say the problem is an isolated incident that can be attributed to the one laboratory.

  • Italy is gearing up for more civil unrest as its strict vaccine mandate comes into effect. Beginning today, all workers in the public and private sectors are required to present a coronavirus health pass in order to enter their workplaces. The health pass requires a person to be fully vaccinated, have proof of a negative test taken within 48 hours or recent recovery from Covid-19. Failure to comply could result in fines or suspension without pay. Although 80% of Italy’s population over 12 are fully vaccinated, an estimated 2.5 million workers have yet to get their shots. More protests along with staff shortages are expected in the coming days.
  • India will reopen to fully vaccinated international travellers, the first time it has allowed foreign tourists for 19 months. Commercial flights will be able to enter the country beginning on November 15, officials announced. The country has not granted any tourist visas since March 2020, when the government closed borders to address the coronavirus pandemic. Travellers must be fully vaccinated and test negative within 72 hours of their flight. Daily case numbers in India have fallen below 20,000, down from their peaks of 400,000 in May, as more people get vaccinated. About 70% of the eligible population in India have had at least one dose of vaccine.

  • Australia’s city of Sydney will allow fully vaccinated international tourists to enter without quarantine, authorities announced. Premier Dominic Perrottet said the new rules will come into effect on November 1. "We want people back, we are leading the nation out of the pandemic ... we are opening Sydney and New South Wales to the world," Perrottet told reporters in Sydney. The announcement comes as New South Wales approaches the 80% full vaccination milestone, well ahead of the rest of the country. Australia initially closed its borders in March 2020 in response to the pandemic.

Covid-19 – Due Diligence And Asset Management

Return-to-office plans are colliding with a shortage of key supplies

Brief: Your return to the office might come with no desk, toilet paper or refrigerator to stash your lunch. The supply-chain disruptions and chip shortages that have retailers fearing empty shelves for Christmas are complicating employers’ plans for a smooth reopening of offices, according to a report this week from consultancy Korn Ferry. Office managers are saying that orders for breakroom refrigerators they need in January may not be fulfilled until next summer, said Elise Freedman, a senior client partner at Korn Ferry who is advising companies on their return-to-work strategies. New desks are also months behind schedule, she said, though that’s a smaller issue as offices are slow to fill to capacity. With workers already reluctant to go back to the five-day office routine — a third of professionals responding to a Korn Ferry survey in August said they’re never returning full-time — each hiccup makes it harder for the employer to make reliable plans.

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CFA Level I Pass Rate Climbs to 26% Following Pandemic-Era Lows

Brief: The pass rate for the first level of the chartered financial analyst exam rose from the record low set in July. In August, 26% of candidates passed the Level I test, up from 22% for those who sat for the exam the previous month and 25% in May, according to the CFA Institute’s website. The 10-year average pass rate is now 41%. “We see a similar phenomenon in the lower-than-average pass rate from the August Level I administration as we did earlier this year,” Peg Jobst, managing director for credentialing at the institute, said in a statement Thursday. “As Covid-19 continues to challenge a large number of candidates on their journey through the CFA program, we continue to see the impact reflected in the lower pass rates.” The latest results follow historically low pass rates across all levels of the CFA exam. The institute said its pass rates would improve in the future, approaching pre-Covid levels as long as pandemic pressures subside.

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U.S. Economy Is Losing Its Bounce as Recovery Turns Into a Grind

Brief: Just a few months ago, the U.S. economy looked like it was roaring back from the pandemic slump. Now the recovery is starting to look more like a grind. The spread of the delta variant has held back millions of Americans from spending on services like restaurants and hotel rooms. Supply chains are still creaking and Hurricane Ida, which caused havoc in petrochemicals hub Louisiana as well as roughly $20 billion of flooding damage in the Northeast, may have made them worse. And high inflation is stretching household budgets. The Atlanta Federal Reserve’s real-time estimate of economic activity now predicts growth of just 1.3% in the quarter that ended in September. Two months ago it was forecasting 6%. Economists surveyed by Bloomberg are more upbeat. Still, the consensus growth forecast for the third quarter has dropped sharply since August. None of this means the U.S. rebound is heading into reverse, says Nathan Sheets, newly appointed chief economist for Citigroup Inc. “I think recession’s too strong,” he says. “But it’s certainly softer.” Here are five indicators that illustrate and explain the gathering gloom.

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Energy Crisis Fuels U.K.’s FTSE 100 Index Rally to Pandemic High

Brief: The U.K.’s benchmark equity index is clawing back pandemic losses, driven by a rally in mining, energy and banking stocks. The FTSE 100 Index rose as much as 0.5% to 7,242.73 on Friday, taking it to the highest level since February 2020, when market jitters about the pandemic started to surface. “Having underperformed for so much of the last 18 months, the FTSE 100 is now reaping the benefits of its heavy weighting of basic resources, energy and financials,” said Michael Hewson, chief market analyst at CMC Markets. A surge in metals and energy prices as well as rising yields are lifting miners, oil companies and banks higher, he said. Royal Dutch Shell Plc and BP Plc have both soared more than 15% over the past month, with HSBC Holdings Plc and Standard Chartered Plc also among the top performers. Meanwhile, reopening beneficiaries Rolls-Royce Holdings Plc and British Airways owner IAG SA have benefited from easing travel restrictions.

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Wall Street Bosses See Windfall Lasting, Fueling Pay and Hiring

Brief: The dealmaking and trading windfall that the pandemic unleashed on Wall Street firms just keeps piling up as the economy recovers -- and U.S. banking leaders are pointing to signs that it’s far from over. A fresh round of earnings reports by five of the nation’s largest lenders included revenue hauls from investment banking at Morgan Stanley and Bank of America Corp. that were at or near record levels, and dramatic surges in equities trading across the industry, such as a surprising 40% jump at Citigroup Inc. Closely watched Goldman Sachs Group Inc. reports its third-quarter results Friday. The latest phase of the 18-month frenzy was driven by companies eager to do deals as they adjust their businesses, and by traders betting on the pace of an economic recovery amid supply-chain woes and inflation worries. The outlook, according to several financial industry leaders, is more of that, along with mounting pressure on the Federal Reserve to reduce its emergency pandemic support for the economy.

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

Our briefing for Thursday, October 14, 2021:

  • In the United States, case numbers and deaths are falling and vaccination rates are rising, largely thanks to sweeping vaccine mandates put in place across the country.  White House officials announced on Wednesday that vaccination rates increased by 20%, and that 77% of eligible Americans have had at least one dose of vaccine. The vaccine mandates put in place by local and state governments, healthcare systems, social institutions and private businesses have all contributed to the increase in vaccination rates, said White House Covid-19 Response Coordinator Jeff Zients.  The Biden administration has pushed hard to bump up vaccine rates, announcing policies last month that require healthcare workers and federal employees to be fully vaccinated.
  • In Canada, the province of Quebec has extended the deadline for healthcare workers to get their shots, from October 15 to November 15. The move came as a surprise, as Health Minister Christian Dubé had been insisting on having the vaccine mandate in place by this Friday. He said his decision to extend the deadline was difficult but necessary to avoid losing staff. "I have the responsibility to protect the health-care network of Quebecers," Dubé said during a news conference. "The risk right now is too high, and it would be irresponsible to roll the dice with the health of Quebecers."

  • The United Kingdom is in for a difficult winter, even if Covid-19 cases remain low, said Professor Chris Witty, the government’s chief medical advisor. “The winter as a whole, I regret to say, is going to be exceptionally difficult for the (National Health Service) and general practice is going to be absolutely at the forefront of this, unfortunately…” Witty said at the Royal College of General Practitioners’ annual conference. “Zero Covid over this winter is a completely impossible dream...what we hope is we can keep it roughly to low levels.” The U.K. reported 42,776 coronavirus cases on Wednesday, up from 38,520 the day before and the highest number since mid-July.
  • In Japan, Prime Minister Fumio Kishida has dissolved parliament, setting up the country for a pandemic-era election. Kishida’s Liberal Democratic party is focusing largely on coronavirus measures, including a plan to provide oral antiviral medication this year. The campaign will officially start on October 19, with the vote taking place on October 31. Meanwhile, case numbers in Japan have begun to fall, on Monday the country reported 369 new infections while Tokyo reported 49, the lowest number since June 2020. The vaccine rollout in Japan has sped up, with almost 70% of the population fully vaccinated to date.
  • South Korea has assembled a panel that will debate a strategy on how to best live with Covid-19. As the country moves through the latest wave of infections, the health ministry said it will focus more on hospitalizations and deaths rather than daily case numbers. The government plans to relax coronavirus restrictions for fully vaccinated citizens and have milder Covid-19 patients recover at home as part of the strategy. Earlier they announced a phased plan to return the country to normal, which will start in November when 70% of the population is expected to be vaccinated. 
  • Australia’s state of Victoria is set to exit lockdown, despite hitting a record number of new cases. Victoria state reported 2297 new cases and 11 new deaths, surpassing the previous record of 1965 set on October 9. Despite the rising case numbers, Premier Daniel Andrews said the state is set to reopen next week once they reach the 70% vaccination milestone. “Save and except for this point – case numbers, particularly among unvaccinated people, will translate into a number of hospital patients,” he said. Concerns were raised about the high case numbers possibly affecting the state’s reopening, but case numbers are still within modelled predictions.

Covid-19 – Due Diligence And Asset Management

UK social impact investment market swells to a record GBP6.4bn in year of the pandemic

Brief: Social impact investing in the UK has increased by almost eight-fold over nine years from GBP833 million in 2011 to GBP6.4 billion in 2020, according to new figures released by Big Society Capital, a UK social impact investor. The data, from Big Society Capital’s Annual Market Sizing Report, shows there has been consistent growth year-on-year with a particular acceleration between 2019 - 2020, the year of the pandemic, which saw a 26 per cent increase in the value of social impact investments in the UK (26 per cent 2019-2020 vs 21 per cent increase 2018-2019). Social property funds continue to account for the largest portion (45 per cent) of the social impact investment market and has seen eight-fold growth since 2016. Social lending accounts for 43 per cent of the market, seeing three-fold growth since 2011.

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Pandemic and climate change are biggest deal blockers in next 12 months, say UK dealmakers

Brief: UK dealmakers are equally convinced that the biggest threats to completing deals in the next 12 months will be issues stemming from the pandemic and climate change. That's according to a survey of 400 UK and US-based dealmakers by Datasite, a leading SaaS technology provider for mergers and acquisitions (M&A) professionals. The research shows that 41 per cent of UK dealmakers expect the biggest M&A dealbreaker in the next 12 months to be Covid-19, just ahead of climate change at 40 per cent. By contrast, 48 per cent of US dealmakers expect climate change to be the biggest dealbreaker in the next 12 months, followed by Covid-19 at 32 per cent. “Britain’s economy has certainly come a long way following the darkest days of the pandemic, but we still have some labour and supply chain issues to resolve,” says Merlin Piscitelli, Chief Revenue Officer for Datasite in Europe, the Middle East and Africa.

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The trends shaping post-pandemic property investments

Brief: Now that more than 18 months have passed since Covid-19 started sweeping the world, we have a good understanding of how the pandemic has affected real estate investments. In some ways, it has changed the game. In other ways, it has simply underlined a number of trends that were already shaping the sector. These ‘megatrends' will likely cross decades and decades, and have big implications for real estate - boosting some sectors and disrupting others. Below is a snapshot of the trends that have shaped 2020 to now, and how we see them developing in the coming decade. While we are not predicting the end of the office tower, we do expect a fall in their popularity with tenants. Global lockdowns have proven the viability of remote working and, even as the world normalises, many companies are adopting a hybrid working model going forward.

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Covid-19 puts spotlight on range of ESG issues, RBC Global Asset Management Survey finds

Brief: The adoption of environmental, social and governance (ESG) integration remains strong amongst global institutional investors, while a significant group has also placed greater emphasis on ESG considerations as a result of the Covid-19 pandemic, according to the 2021 RBC Global Asset Management (RBC GAM) Responsible Investment Survey. The 2021 survey highlighted that while ESG adoption remains near peak levels amongst institutional investors globally, there is a sizable group of institutional investors (29 per cent) who have placed greater emphasis on ESG considerations as a result of the Covid-19 pandemic. These investors are also the most vigorous supporters of ESG as an enabler of investment performance, as nearly all of this group (97 per cent) believe ESG integrated portfolios are likely to perform as well or better than non-ESG integrated portfolios, a significant difference compared to the overall global respondents who said the same (83 per cent).

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Ray Dalio says the workplace is never going back to the same way it was pre-Covid

Brief: Billionaire investor Ray Dalio believes the workplace will never return to pre-pandemic conditions as flexibility and technology became the major driving forces in the new world. “The future of the workplace is going to be characterized by probably two things — customization and technology. We’ve been given a gift to be able to rethink what we are doing,” Dalio said Wednesday at CNBC’s @Work Summit. “I don’t think we are going to go back to the old world.” “It’s going to be an erratically different kind of work — what is employment? How will technology be replacing people? How will that be dealt with? How will the wealth gap be dealt with...there are going to be many, many changes over the next five years,” Dalio added.

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

Our briefing for Wednesday, October 13, 2021:

  • The United States will open the U.S.-Canada land border to fully vaccinated visitors in November. The border has been closed for non-essential travel since the beginning of the pandemic in March 2020. The requirements will be similar to those for international air travellers, but officials did not give many details on the new rules. It is unclear whether the AstraZeneca vaccine, which has not been approved for use in the U.S., will be accepted, or whether those who mixed vaccine doses will be eligible. Unvaccinated visitors will still be banned from entering the U.S. at the land borders.  
  • In Canada, the province of B.C. has expanded a mask mandate that now requires children ages five and older to wear masks indoors. The initial mandate applied to children ages 12 and older, but it was expanded to keep the rules consistent, said Dr. Bonnie Henry, the province’s top doctor. "I continue to be amazed by the adaptability and resilience of children across this province," she said during a news conference. Henry added that she hopes vaccines for children ages five to 11 will be available by as early as November. Pfizer has already made a request for approval from Health Canada. 
  • In the United Kingdom, job vacancies hit a record high of 1.2 million in September, as employers scrambled to hire through staff shortages caused by Brexit and the pandemic. Unemployment rates fell to 4.5%, between June and August, down from 4.6% in the previous quarter. Officials are still concerned that unemployment rates could rise again following the end of a government support program that came out of the pandemic. The support program at its peak helped 11 million people but that number fell to 1 million as more people went back to their jobs and the program was phased out. 
  • In France, a study published on Monday found that vaccines cut the risk of death or serious illness from Covid-19 by 90%. The study was conducted by a science group set up by France’s health system, Epi-Phare, as well l’Assurance Maladie and the country’s medicines agency. As the Guardian reports, the study was the largest of its type and compared 11.3 million vaccinated people over 50 with the same number of unvaccinated people from the same age group. The study found that vaccines reduced the risk of serious illness and death by 84% in those over 75, and 92% in the 50-74 age group.
  • India has recommended emergency use of its Bharat Biotech Covid-19 shot for children ages two to 18. Bharat Biotech’s Covaxin vaccine was trialled in children back in June, with the trial data being submitted to the Drugs and Comptroller General of India at the start of this month.  If approved by regulators, the made-in-India vaccine will be the first available to children ages two to 12. The World Health Organization has not yet granted emergency use authorization of the two-dose shot, though Covaxin has submitted the documentation and is currently undergoing the review process. 
  • Australia’s state of Victoria kicked off their regional vaccine passport trials over the weekend, with around 70,000 people downloading the Service Victoria app. The trials are leading up to October 26, when the state expects to have 70% of the eligible population fully vaccinated. At the same time, Pfizer and Moderna vaccines are now available to all eligible age groups, as the state expanded the eligibility criteria. “As we push to 70 and 80% double doses and beyond, it’s time to throw open the doors of all of our clinics, more than 60 of them across the state, to the mRNA vaccines … for all comers,” said Victoria’s health minister, Martin Foley.

Covid-19 – Due Diligence And Asset Management

Jamie Dimon says worst of pandemic may soon be over

Brief: JPMorgan Chase CEO Jamie Dimon is not known for mincing words or hiding his emotions. So the fact that the leader of America's largest bank sounds very upbeat about the health of the US economy is noteworthy. Dimon said he is not worried about the possibility of inflation heating up in the next few months during a call with reporters about JPMorgan Chase's third quarter earnings Wednesday. He bluntly said "that's life" and added that the fact that we're even talking about inflation is a good thing because it's a sign that the worst of the Covid-19 pandemic, despite Delta variant fears, may soon be over. "We should all thank our lucky stars," Dimon told reporters about his expectation that the US may soon be turning a corner with regards to Covid-19 cases. Dimon even dismissed worries about all the headlines regarding supply chain disruptions due to the pandemic.

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Pandemic makes workplace meetings more inclusive, study shows

Brief: The pandemic has made workplace meetings more inclusive and efficient, according to a survey of more than 600 business leaders across Singapore, Australia and Japan. In Singapore, more than half of C-Suite executives who responded said they tried to open up conversations to a wider group of staff, the analysis from Tableau Software Inc. and YouGov showed. The loss of face-to-face interactions was a concern for two-thirds of executives in Australia, and leaders in Japan aged 44 and under said they had seen an improvement in workplace conversations, according to the study. Decision-making got faster during the pandemic, said JY Pook, senior vice president for Asia Pacific and Japan at Tableau, a data visualization software firm. “

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Finance jobs remain attractive to graduates, but firms must do more to showcase ‘purpose’, says new CFA Institute survey

Brief: CFA Institute, the global association of investment professionals, has released results from a survey it conducted on the career outlook of more than 15,000 current university students and recent graduates aged 18-25 from 15 markets. The results find that globally, 58 per cent of respondents still feel confident about their future career prospects in the wake of the Covid-19 pandemic. The findings also indicate that traditionally stable fields, such as finance, remain attractive for graduates navigating these uncertain times. In fact, respondents across all 15 markets ranked finance as one of the top five most valuable majors for finding a career. Overall, graduates felt that medicine/science was most stable and attractive, followed by healthcare and then education. 

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Hedge funds eye “potent” anti-viral Covid-19 drug molnupiravir

Brief: US multinational pharmaceutical manufacturer Merck’s new drug – which is designed to help reduce Covid-19 symptoms for people with Covid-risk factors including age, obesity, and diabetes – offers “great potential” to fully re-open the global economy, Man Group noted in market commentary on Tuesday. The London-listed global hedge fund giant’s ‘Views From The Floor’ note observed how the Goldman Sachs US Global Health Risk equities basket, which lagged the S&P 500 for much of 2021, has risen on the back of encouraging trials of molnupirarvir. The Health Risk equities basket – which includes airlines, tour operators and hospitality names including such as Royal Caribbean, Expedia, Delta Airlines, and Nordstrom – relies on the post-pandemic economic reopening, which has stalled in recent months after powering 2020’s stock market rebound. “

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Private equity market "softens" after strong pandemic

Brief: Certain key private equity numbers turned to point downwards in the third quarter of the year, including fundraising which fell by 21% year-on-year.Private equity, which was described as “performing well since the pandemic”, also saw ‘exit’ values fall by over 2% and Prequin - the data firm which published the Q3 figures - said “some signs of market softness may be appearing”.Aggregate private equity capital raised was $83 billion, down 21% year-on-year. Preqin said private equity exit activity had “cooled down slightly” and that exit values were down 2.4% year-on-year. However, North America remained the dominant source of “buyout deal flow”, having registered $107.2 billion in aggregate during Q3, compared to only $61.5 billion in the same period last year.

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

Our briefing for Tuesday, October 12, 2021:

  • In the United States, the AstraZeneca vaccine will now be recognized for international travel, the Canadian Press reports. The Centers for Disease Control and Prevention (CDC) said on Monday that they will accept any vaccine approved by the World Health Organization or the Food and Drug Administration. It is still unclear whether this includes people who had mixed vaccine doses, which is about 3.9 million people in Canada. The Canadian government has been working with the U.S. to recognize different vaccine regimens, including mixing doses. The CDC says it will provide more information as the requirements are finalized. 
  • In Canada,  the country is preparing for staff shortages across the healthcare sector as vaccine mandates begin to take effect. Officials are especially concerned about the impacts of layoffs on already overburdened healthcare systems. As CBC News reports, 36% of staff were placed on unpaid leave at a long-term care home in Toronto after they refused to be vaccinated.  Healthcare workers in Quebec have until October 15 to get their shots before they face suspension without pay, while B.C. recently extended the deadline for long-term care workers to have their first dose.
  • In the United Kingdom, a new report from lawmakers has found that the British government failed to act quickly enough to stop the spread of Covid-19. “Decisions on lockdowns and social distancing during the early weeks of the pandemic – and the advice that led to them – rank as one of the most important public health failures the United Kingdom has ever experienced,” the report said. The 150-page report resulted from a cross-party inquiry that began in October 2020. It includes the testimony of more than 50 witnesses across government policy, health and science sectors. The report did highlight some positives, including the government’s quick and effective vaccine rollout.
  • In Italy, violent protests broke out in Rome over the weekend as people opposed some of the toughest vaccine mandates in the world. Italy’s “green pass” was first introduced back in June for international travel, and since then its scope has expanded. Beginning on October 15, the green pass will be required for all workers in both public and private sectors. Protesters say the requirements infringe on their rights and freedoms. Police arrested 12 people including Roberto Fiore, the leader of right-wing extremist group Forza Nuova. On the same day as the protests, Italy reached a milestone of having 80% of citizens over 12 fully vaccinated.
  • New Zealand will require healthcare workers and teachers to be fully vaccinated, Prime Minister Jacinda Ardern announced on Monday. Ardern also extended lockdown restrictions in Auckland for another week as 35 new cases were reported, bringing the total for this outbreak to 1622. Healthcare workers must be fully vaccinated by December, while those working in the education sector must be fully vaccinated by January. “New Zealand is at one of the trickiest and most challenging moments in the COVID-19 pandemic so far," Ardern told reporters in Wellington. She explained that moving forward, New Zealand would be looking to live with the virus by boosting vaccination rates.
  • Australia’s Prime Minister Scott Morrison encouraged citizens to “enjoy the moment,” as some Covid-19 curbs were lifted in Sydney on Monday. "Today is a day so many have been looking forward to - a day when things we take for granted, we will celebrate," he said. Gyms, pubs and hairdressers opened their doors to fully vaccinated customers after being locked down for 106 days. New South Wales reported 496 new Covid-19 cases, continuing the downward trend, while vaccination rates rose above 70%. NSW plans to hit the 80% vaccination rate by late-October at which time it will ease more restrictions.

Covid-19 – Due Diligence And Asset Management

IMF foresees a slight drop in global growth from pandemic

Brief: The International Monetary Fund is slightly downgrading its outlook for the global recovery from the pandemic recession, reflecting the persistence of supply chain disruptions in industrialized countries and deadly disparities in vaccination rates between rich and poor nations. In its latest World Economic Outlook being released Tuesday, the IMF foresees global growth this year of 5.9%, compared with its projection in July of 6%. “The global recovery continues but the momentum is hobbled by the pandemic,” IMF Chief Economist Gita Gopinath told reporters at a briefing. For the United Sates, the world's largest economy, the IMF predicts growth of 6% for 2021, below its July forecast of 7%. The downward revision reflects a slowdown in economic activity resulting from a rise in COVID-19 cases and delayed production caused by supply shortages and a resulting acceleration of inflation.

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Traders Working at Home Should Expect a Knock at the Door

Brief: Traders and investment banking staff who plan to work from home regularly should expect the U.K.’s markets watchdog to come knocking. The Financial Conduct Authority on Tuesday warned regulated firms that it has powers to visit any address where work is performed and that includes private residences. The FCA could visit a home for ongoing supervision, not just as part of an investigation, the watchdog said. The updates come as staff across the financial services sector move to a hybrid working model. The FCA said firms will now need to prove that remote working arrangements don’t increase the risk of financial crime or hurt competition.

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Hong Kong Risks Global Status as Singapore Opens Up to World

Brief: The divide between Asia’s two main financial hubs in handling the pandemic is growing ever wider, with one opening up to global travel and the other maintaining one of the world’s harshest quarantine policies. In Singapore, officials are taking steps to reconnect with the global economy even as the government faces pressure to favor locals over foreigners for well-paying jobs. Speaking in a televised address over the weekend, Prime Minister Lee Hsien Loong said that Singapore can’t stay “locked down and closed off indefinitely” and residents should prepare to see “many Covid-19 cases for some time to come.” Hong Kong Chief Executive Carrie Lam has taken the opposite approach, stressing in a Bloomberg Television interview Monday that even a single death would be a “major concern” as she follows China’s Covid Zero approach that tolerates no local infections.

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Why ESG Investing Thrives in Chaotic Times

Brief: Another COVID-19 variant; melting ice caps cause cities to sink below the water level; wars breaking out over diminishing supplies of potable water. Cyberattacks bankrupting global corporations and crippling governments. Corrupt autocrats plundering their countries for wealth and power. They aren’t just dystopian fantasies. Some are already occurring around the world. They’ll likely only increase in the coming year and decade. Each could exert a monumental impact on our lives—and on markets. Yet the impact won’t be uniformly negative. For investors, alpha is possible amid the chaos. The trick is adopting a mindset to take advantage of the possibilities that disruption brings.

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Pharmacy M&A deals jump 26 per cent as sector thrives during pandemic

Brief: The number of UK pharmacy M&A transactions has jumped 26 per cent to 408 in the last year, up from 325 the year before, says UHY Hacker Young, the national accountancy group. Pharmacies were one of few sectors to benefit from a surge in customer demand during the pandemic. As one of the few designated “essential retailers”, they were also allowed to remain open throughout lockdown. Sales of PPE, along with Covid testing has opened up a whole new business lines for pharmacies. This has not only increased their appetite amongst pharmacies to acquire smaller operators  but also made pharmacies a more attractive target for buyers from outside of the sector. UHY Hacker Young says both regional and national pharmacy groups are making acquisitions, including first time buyers that have not previously made acquisitions. Private equity buyers have also been showing increased interest in the sector.

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

Our briefing for Friday October 8th, 2021:

  • In the United States, CNBC’s Global CFO Council for the fourth quarter of 2021 view a COVID-19 outbreak as the biggest external risk factor that their businesses face. The American media outlet’s CFO Council features a group representing public and private companies from various major sectors including Facebook, IBM, BNP Paribas and Johnson & Johnson, just to name a few. A COVID-19 outbreak marks the second straight quarter for the biggest external risk factor. The first two quarters saw cyberattacks and inflation as CFO’s biggest concerns. The majority of the firms are also in favour of President Joe Biden’s vaccine mandate where he recently ordered all federal workers and contractors to be vaccinated. Eighty percent of CFO’s surveyed say they “totally support” the Biden administration’s mandate, while 15% said they totally oppose it.

  • The Canadian job market received some good news on Friday. According to Statistics Canada, the country added 157,100 jobs last month, returning the job market to pre-pandemic levels. According to Bloomberg, Canada lost roughly 3 million jobs to the pandemic and the news is a welcoming sign to the nation’s economy – showing that employers are willing and able to hire workers as virus restrictions ease and vaccination rates continue to climb. The employment numbers will also bolster the predictions by Bank of Canada officials that the economy will post a strong rebound in 2021 after contracting earlier in the year.

  • In the United Kingdom, British Airways was reporting a nearly 400% increase in website searches for popular sun destinations as the country slashed its travel red list to just seven countries and PCR tests will no longer be required on travellers return to England, as long as they are fully vaccinated. As of 4 AM Monday, places such as Mexico, South Africa, Seychelles, and Thailand are some of the 47 places being take off the red list. The only countries that remain will be Panama, Columbia, Venezuela, Peru, Ecuador, Haiti, and the Dominican Republic – those that choose to travel there still must stay in hotel quarantine for 11 nights upon their return at a cost of £2,285 per adult.

  • Germany has vaccinated 3.5 million more citizens than previously stated. The announcement was made on Thursday by the country’s health minister after Germany’s disease control center, the Robert Koch Institute, stated almost 80% of Germans are fully vaccinated with 84% receiving at least one shot. So how did Germany lose track of almost 3.5 million people? “The discrepancy between the numbers that had been reported so far and those that the Robert Koch Institute now found out about in surveys is due to the fact that some vaccinations may not have been reported,” Health Minister Jens Spahn told reporters in Berlin. Spahn also pointed out that vaccinations of employees at large companies, mobile vaccination teams in nursing centres and surveys not including those under the age of 18, as reasons for vaccinations not being fully reported.

  • In Japan, the country’s new prime minister gave his first policy speech on Friday and promised to strengthen the country’s response to the coronavirus pandemic in case of another resurgence. Prime Minister Fumio Kishida pledged to be more attentive to public concerns and needs and prepare virus measures based on “a worst-case scenario.” Those measures included improving crisis management before the weather turns cold, approving drugs for treatment of COVID-19 by the end of December and digitization of vaccine certificates as Japan gradually expands social and economic activities.

  • With Sydney, Australia prepared to relax restrictions after more than 100 days in lockdown next week, doctors are sounding the alarm. Stay-at-home orders are expected to be lifted on Monday in New South Wales after hitting its 70% target of full vaccination, but Australian doctors warned a too-rapid easing of COVID-19 curbs could put pressure on health systems and risk lives. While government officials already previously planned to ease travel restrictions upon hitting the 70%, they also decided to bump up permitted limits for home gatherings, weddings, and funerals – drawing the ire of the Australian Medical Association.

Covid-19 – Due Diligence And Asset Management

Asset Management Industry Emerges Unscathed from the Pandemic

Brief: The global asset management industry reached an all-time high of $114.7 trillion in assets under management in 2020, according to a McKinsey report released yesterday. That made 2020 the second-best year since the financial crisis in terms of AUM growth, according to the report. It was not just driven by performance: Net new flows of assets grew at 2.7 percent in 2020, just slightly down from 2019. “In North America, 2020 was a story of the updraft in the U.S. markets in particular, in large part because U.S. media, technology, and healthcare companies were overrepresented in the circle of winners of the global pandemic economy,” McKinsey said in the report. Yet even as assets surged, asset manager revenues and operating profits have grown at a slower pace. In North America, AUM grew at 13 percent last year, while revenues and operating profits grew at 7 percent and 9 percent, respectively. McKinsey pointed out that despite the market shocks and the prolonged suspension of in-person interactions caused by Covid-19, the asset management industry has picked up some tailwinds as the U.S. economy quickly recovered to the pre-pandemic level. 

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Challenges and Opportunities: How Hedge Funds are Grappling with ESG, Remote Working and the ‘Portfolio Conundrum’

Brief: With traditional equity and credit returns set for a squeeze, and ESG, Covid-19 and remote working upending the hedge fund industry from both an investment and operations perspective, managers face both considerable challenges and sizable opportunities up ahead, speakers at EisnerAmper’s 6th annual Alternative Investment Summit said this week. Opening this year’s event, the ‘Future of Hedge Funds’ panel explored an assortment of industry themes and trends – including the increased importance of ESG considerations, the far-reaching operational changes stemming from the Covid-19 pandemic, and the range of emerging investment opportunities coming down the pipeline. Simon Fludgate, head of operational due diligence of Aksia, described a “cataclysmic shift” in how much investors care about ESG, but observed how different people want different things from ESG policies, acknowledging a contrast between sentiments in US and Europe.

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Global Financial Assets Reach Magic €200trn for the First Time

Brief: Allianz has unveiled the twelfth edition of its ‘Global Wealth Report', which puts the asset and debt situation of households in almost 60 countries under the microscope to reveal a sizeable growth in financial assets over the last year. 2020 was the year of extreme contrasts. Covid-19 destroyed millions of lives and livelihoods and the world economy plunged into its deepest recession since World War II. At the same time, monetary and fiscal policy mobilized unimagined sums to support the economy, markets and people. Incomes were stabilised and stock markets recovered quickly. With this tailwind, households' wealth weathered the Covid-19 crisis: Global gross financial assets increased by 9.7% in 2020, reaching the magic EUR 200 trillion mark for the first time. Savings were the main driver: As lockdowns drastically reduced consumption opportunities, the global phenomenon of "forced savings" was born. Fresh savings jumped by 78% to EUR 5.2 trillion in 2020, an absolute record. Inflows into bank deposits - the default option of forced savings, simply leaving unspent income in the bank account - almost tripled (+187%).

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Facebook Set for Longest Streak of Weekly Losses Since Pandemic

Brief: Facebook Inc. shares rose on Friday, though not by enough to prevent what is set to be the social-media company’s longest streak of weekly losses since the pandemic started. The stock climbed 0.5% today, but remains down 3.6% for the week. Should the stock end the week in negative territory, that would mark its fourth straight weekly loss, the longest such streak since a five-week decline that ended in March 2020. At current levels, Facebook shares are down more than 13% off a September peak. Over the past month, the stock is down 12%, making it the weakest performer among Wall Street’s biggest names. Recent losses reflect a rise in Treasury yields, which have broadly weighed on growth stocks, along with a number of company-specific headwinds. This week saw a lengthy global outage of the company’s sites, along with Senate testimony from a former insider turned whistle-blower, who argued that Facebook puts profits ahead of user safety. 

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Pandemic Fuels Activity in Health Care’s Billing Industry

Brief: Money is flowing heavily into the business of medical billing as hospitals and doctors — whose revenues were disrupted by the coronavirus — focus on maximizing every dollar they can collect from patients and insurers. The big picture: The rise and even existence of the billing industry is the result of a fragmented system that is designed around multiple types of insurance plans and a system that has increasingly forced patients to shoulder more of the costs of their care. The state of play: Companies involved with billing and collections, called "revenue cycle management" in industry jargon, increasingly advertise themselves to health care providers as one-stop shops for all things involving payments. Driving the news: The pandemic drastically shrank revenue among hospitals and other providers, and although that drop was relatively short-lived, it spurred even more revenue cycle activity.

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

Our briefing for Thursday, October 7, 2021:

  • In the United States, the government announced they will be purchasing an additional 180 million at-home rapid Covid-19 tests. The purchase will help quadruple the availability of rapid tests by the end of the year, the White House said. “We’ll continue to pull every lever to expand manufacturing production of tests which will have the impact of driving down the cost per test and making sure that tests are widely available and convenient,” said Jeff Zients, the White House Covid-19 coordinator. About half a billion tests per month will be made in the U.S. by December.
  • In Canada,  a group of healthcare professionals has warned that action is needed from all levels of government to address the Coviid-19 healthcare crisis. An emergency summit that brought together members of over 30 healthcare organizations including the Canadian Nurses Association and Canadian Medical Association took place on Tuesday night. Leaders from both organizations reported high levels of staff burnout and the need for government to intervene following the summit. They asserted more supports are needed for healthcare workers including mental health supports, and better ways of addressing staff shortages. They also said they wanted government to take responsibility for its role in the Covid-19 crisis.  
  • In the United Kingdom, the government is expected to announce changes to its “red list” for international travel. On Monday the government’s traffic light system was replaced by a single red list. Currently there are 54 countries on the red list, including Mexico, all of mainland South America, and southern and eastern Africa. The government is expected to cut the list down to about a dozen countries. Red list countries are those that the U.K. advises should not be visited, except in rare circumstances. Anyone returning from a red list country is still required to quarantine for 10 days in a government-approved hotel. 
  • Sweden and Denmark have paused the use of Moderna’s Covid-19 vaccine for younger people because of an increased risk of heart inflammation, which is a rare side effect. Sweden has said it will pause the shots for anyone 30 and under, while Denmark has said they won’t offer it to those under 18. Both countries’ decisions were based on an unpublished Nordic study that pointed to an increase in myocarditis and pericarditis among young adults that had been vaccinated by Moderna. There is only a very small risk of being affected.
  • South Korea has secured 20,000 courses of Merck’s oral antiviral medication for Covid-19, following countries like Australia and Singapore. Prime Minister Kim Boo-kyum said on Wednesday that South Korea is also looking to buy other antiviral drugs. "We already have secured a budget enough for treatment of around 40,000 people and have signed a pre-purchase deal for 20,000 courses," Kim said in a Covid-19 response meeting. Molnupiravir’s treatment involves patients taking four pills twice a day for five days. It is on track to become the first available oral antiviral medication for Covid-19. 
  • Australia’s New South Wales (NSW) announced some changes to their roadmap, with an increased focus on reopening. From October 11, visitors in homes will be allowed to increase to 10, double what the previous roadmap had outlined. Premier Dominic Perrottet also changed the limit on outdoor gatherings from 20 to 30, and increased the cap for weddings and funerals from 50 to 100. Perrottet said the changes to the roadmap do not mean that he disagrees with his predecessor, Gladys Berejiklian. NSW reported 587 new cases as infections continue to trend downward.

Covid-19 – Due Diligence And Asset Management

The World Bank is More Upbeat on Mideast’s Post-Covid Recovery

Brief: The World Bank has revised upward its economic growth projections for the Middle East and North Africa to 2.8% this year from an earlier estimate of 2.2%, as vaccine campaigns gather pace and pandemic restrictions ease. The Washington-based lender now calculates the total cost of the pandemic at around $200 billion in terms of gross domestic product losses, according to its latest regional economic review published on Thursday. Growth in 2021 will still lag behind pre-pandemic levels and is seen at 4.2% next year, as some countries have been slower to address the public health crisis. The Middle East and North Africa was hit hard by the coronavirus pandemic last year and, like the rest of the world, lockdown measures introduced to combat the spread of the virus left many of its economies in distress. Going forward, governments must ensure efficient vaccination campaigns to prevent public health from deteriorating once again, the report said.

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IMF urges governments to make fiscal plans to tame pandemic debt

Brief: Governments should start planning a return to more sustainable budgets with policies that win the trust of investors, after unprecedented fiscal stimulus to fight the COVID-19 pandemic, the International Monetary Fund said on Thursday. But each country must determine the appropriate timing and pace of fiscal consolidation based on its own individual circumstances, the IMF said in its Fiscal Monitor report. The fiscal plans needed to consider the stage of the pandemic, existing fiscal vulnerabilities, the risk of economic scarring, pressures from aging populations, development needs and historical difficulties in collecting revenues. "There are countries where the pandemic is still raging and therefore the priority continues to be the health emergency," IMF deputy fiscal affairs director Paulo Mauro told Reuters in an interview.

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Investor sentiment falls on government recovery plans

Brief: UK-based investors are losing faith in the Government’s ability to rebuild the economy following the pandemic, HYCM research has found. The survey of nearly 1,500 investors with investments of more than £20,000 excluding property, savings and workplace pensions, found that 60% do not believe Prime Minister Boris Johnson and the Conservative Government have handled the pandemic properly. An additional 59% said they lack faith in the government's ability to tackle the record levels of public debt that was accrued during the coronavirus pandemic, while half of UK investors said they are concerned about the potential of acute economic austerity over the coming years. "As recent policy reforms would suggest, the government is already taking significant action to repay the large level of public debt accumulated during the pandemic.

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Asset Managers Are Losing Out on Talent. Executives Think Culture Is to Blame.

Brief: The ways people work are changing, and some asset management executives are worried the industry won’t be able to keep up. Asset management executives surveyed by Accenture expressed concerns around changes in technology and permanent adoption of remote work. For instance, 68 percent of respondents answered “yes” when asked if they believed their firm’s culture is resistant to adopt new technologies. The survey, which included 100 c-suite asset management executives, is expected to be released Thursday. Respondents were largely based in the U.S. and included a range of positions, including chief information officers, chief operating officers, and chief technology officers. Firm types included asset management subsidiaries, alternative asset managers, and standalone asset managers.

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Bank of America offers $200 to vaccinated Merrill staffers going to office

Brief: Bank of America Corp will pay out $200 awards to its employees at Merrill Lynch Wealth Management who have been fully vaccinated and going to office regularly, according to a memo shared with Reuters on Wednesday. The awards will be offered to client associates, administrative support and operations staff at BofA-owned Merrill Lynch, a spokesperson for the bank said. For now, only those staffers who have confirmed they have received their vaccines were asked to return to office, the spokesperson said. “While there is no vaccine mandate across the company, we strongly recommend employees be vaccinated and to notify us of their status.” More than 80% of Merrill employees have voluntarily reported their vaccination status and have or are returning to the office, the spokesperson added.

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

Our briefing for Wednesday, October 6, 2021:

  • In the United States, Johnson & Johnson is seeking approval from the Food and Drug Administration (FDA) for emergency use authorization of a booster shot. They are looking to have boosters authorized for anyone 18 and older who previously had their single-dose vaccine. The FDA has already authorized booster doses of the Pfizer vaccine for people 65 and older, those at high risk of health complications and those whose jobs expose them to the virus. Moderna also submitted an application to the FDA last month seeking authorization of a booster shot, and a panel will meet next week to make a decision.
  • In Canada, the provinces of Alberta and B.C. are expanding their eligibility for booster shots as they battle the latest wave of infections. Now anyone in Alberta 75 and older, and First Nations, Inuit and Metis people who are 65 and older, can book a third dose of vaccine, as long as it has been six months since their last shot. “We’re doing this because older Albertans remain uniquely at risk and will benefit from more protection," said Premier Jason Kenney. Neighbouring B.C. announced it will expand the group of immunocompromised people who are currently eligible for a vaccine, meaning that about an additional 100,000 people will receive an invitation for a third dose.
  • In the United Kingdom, plans to vaccinate children ages 12-15 in England are being delayed because of high infection rates in schools. Officials had determined that the mid-term in autumn would be an ideal target to have vaccinations completed, after receiving complaints that England is falling behind other countries. But the program has yet to rollout in many areas and others have said they had challenges meeting the high demand. High infection rates are also causing further delays, as students who test positive for the virus have to wait a period of 28 days before they can receive their vaccination. According to numbers from the Department for Education, about 204,000 students in England were absent due to Covid-19 last week.
  • In the United Arab Emirates (UAE), Abu Dhabi’s crown prince has announced that life is going back to normal after the coronavirus pandemic. Sheikh Mohammed bin Zayed made the announcement on Wednesday as virus cases in the Emirates fell. “I bring you good news. The health situation in the United Arab Emirates is good,” he said. New cases in Emirates have fallen below 200 per day, the lowest they’ve been in over a year. “We thank God that we have emerged from this crisis, well, with goodness, honor, safety, health and experiences that we have paid for but that have brought us a lot of knowledge,” Sheikh Mohammed said.
  • Spain approved administering third doses of the Pfizer and Moderna vaccines for people ages 70 and over. The booster campaign will begin at the end of October and will aim to keep vulnerable people safer, the health ministry said. Until now Spain has only offered third doses to home care residents and some people who are immunocompromised. The European Medicines Agency has approved booster doses of both the Pfizer and Moderna vaccines for people who are seriously immunocompromised. About 78% of Spain’s population is fully vaccinated as of Tuesday.
  • Western Australia announced a vaccine mandate for all employees who work with natural resources. People who work in oil and gas exploration or mining will need to have their first dose of vaccine by December 1, and be fully vaccinated by January 1. The mandate will apply to around 141,000 workers in the natural resource sector and is intended to protect vulnerable indigenous communities. Western Australia has only seen a total of 1109 cases and nine deaths since the beginning of the pandemic. It has vaccinated about 54% of its population, compared with 46% nationally.

Covid-19 – Due Diligence And Asset Management

Private equity GPs to increase exposure to energy sector over next five years

Brief: An overwhelming majority (93 per cent) of private equity fund managers expect to make an investment in the energy sector over the coming five years as they seek to capitalise on the post-pandemic rebound in global demand for power and government-backed stimulus programmes. Of these, over half (51 per cent), stated they were ‘extremely likely’ to invest in energy. The findings are revealed in a new study, Recovery to Rediscovery: Capitalising on a Changed Private Equity Landscape, which was commissioned by Auxadi, a leading provider of accounting, tax and payroll services to private equity, real estate, and multinationals. It was based on interviews with senior-level private equity investors with average assets under management of EUR14.4 billion.

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Bridgewater’s Jensen Says Stagflation is ‘Real Risk’ to Assets

Brief: While inflation concerns mount for the U.S. economy, the real danger may be the combination of rising prices and a stagnating economy, said Bridgewater Associates co-Chief Investment Officer Greg Jensen.  “The problem is stagflation -- that’s the real risk, and so many portfolios are massively exposed,” Jensen said Wednesday at the Bloomberg Invest virtual conference. Policymakers have limited options to handle that, Jensen said in an interview with Stephanie Flanders of Bloomberg Economics. “The Fed faces certainly the problem of inflation being well above their target and the inability to be as easy as they’d like to be and being pulled along by that -- and certainly the increasing odds that we’re facing bubbles,” he said.

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European Firms Mull Moving Staff From Hong Kong, Chamber Says

Brief: European companies are discussing relocating staff from Hong Kong, the region’s local chamber of commerce said, as the city commits to a “Covid Zero” strategy that almost every country apart from China is abandoning. Hong Kong’s strict quarantine measures have led many businesses to consider restructuring at least part of their operations to places such as Singapore, Frederik Gollob, chairman of the European Chamber of Commerce in Hong Kong, said Wednesday on Bloomberg Television.“You can assume that in most boardrooms across Europe and Hong Kong this is a subject of discussion,” he said. “You can’t really avoid it, looking at the restrictions. “His comments come a day after Chief Executive Carrie Lam said Hong Kong’s ties with mainland China were more important than the international business and global travel connections that helped cement the city’s status as an Asian financial center.

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The Stock Market Hasn't Been This Frenetic Since Early in the Pandemic

Brief: Pick a direction, and don’t go with it. That’s the story in stocks of late, with the S&P 500 alternating between gains and losses of at least 1% for four straight sessions -- the longest stretch since June 2020. It’s the same in fixed income, with 10-year Treasury yields swinging wildly around 1.5%.    The harrowing reversals reflect a particularly stark divide between bull and bear cases in markets right now. On one side, risk appetites are being constricted by lingering uncertainty over the government debt ceiling, tightening Federal Reserve policy and disrupted supply chains. At the same time, sentiment is being buttressed by improving Covid trends, an economy that keeps chugging along and forecasts for more double-digit earnings growth from corporate America.

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RBC cuts Air Canada rating amid 'lower for longer' recovery

Brief: RBC Capital Markets downgraded its rating on Air Canada to the equivalent of hold from buy, citing a “heightened risk” that COVID-19 variants will cap the stock’s near-term performance.“The [Delta] variant has undoubtedly impacted the pace of the recovery while also adding a layer of uncertainty regarding the timing of the industry’s ‘return to normal,’” Walter Spracklin and Ryall Stroud, analysts at RBC, wrote, arguing investors should prepare for a more stubborn recovery that stays “lower for longer.” Tuesday’s downgrade represents the first time the bank’s analysts have lowered Air Canada’s stock rating since 2013. Their outperform rating remained untouched through the thick of the pandemic, as the airline slashed capacity and global travel collapsed. But new data indicates the recovery will be “choppier” and longer than previously assumed, Spracklin and Stroud wrote.

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

Our briefing for Tuesday, October 5, 2021:

  • In the United States, New York City’s Covid-19 vaccine mandate for teachers and school staff has come into effect. The vaccine mandate applies to about 150,000 people who work in the school system including teachers, principals, custodians and lunch workers.  Mayor Bill de Blasio said that about 95% of all full-time school staff have received their first dose of vaccine, and that includes 96% of teachers and 99% of principals.  Vaccination rates rose significantly after the mandate was announced on August 23, de Blasio said. Some 8000 employees have been placed on unpaid leave because of a refusal to be vaccinated. 
  • In Canada, the government is working to demonstrate the effectiveness of mixed vaccines to other countries including the United States. Chief Public Health Officer Dr. Theresa Tam says the Public Health Agency of Canada has presented data on the effectiveness of mixed doses to the U.S. and other countries. Many countries including the U.S. only recognize people with two identical doses as being fully vaccinated.  Tam says Canada is working to provide information on the effectiveness of mixing the AstraZeneca vaccine with mRNA vaccines like Pfizer and Moderna. "They have not used AstraZeneca vaccine in the U.S. and certainly not a mixed-dose schedule. As a result, they don't have domestically generated information on that front," said Tam at a news briefing.
  • In the United Kingdom, experts are warning that the worst of Covid isn’t over yet. As the weather gets colder and students return to school, and offices reopen again, the U.K. could very well see another major surge in cases. Covid-19 cases in the U.K. have been averaging around 35,000 per day, with hospitalizations and deaths kept relatively low as a result of high vaccination rates. But keeping the vaccination rates up will be crucial as the colder months unfold, says Professor Mark Woolhouse of Edinburgh University. “We need to finish the job and give the maximum number of jabs,” Woolhouse told the Guardian. “Unfortunately, our vaccination programme has stalled and rates are regularly dropping below 100,000 doses a day – that’s lower than many other countries, including many in Europe.”
  • India will pay compensation to the families of Covid-19 victims, as a top court approved the decision on Monday. Around 50,000 Indian rupees will go to every family who lost a loved one to the coronavirus (about $670).  Families of the more than 448,000 people who died are eligible for the compensation. If the compensation is provided to everyone who already lost someone, it will end up costing provincial governments around 300 million. The government has outlined a process for submitting a claim, and the Supreme Court says the compensation should be paid no more than 30 days after the claim is submitted.
  • New Zealand’s Prime Minister Jacinda Ardern says the country will no longer pursue a Covid-19 elimination strategy. As the delta variant continues to spread, New Zealand’s latest outbreak has grown to more than 1300 cases, with some of them detected outside of Auckland. As she announced a plan to ease some restrictions in Auckland, Ardern acknowledged that the country must learn to live with the virus. “For this outbreak, it’s clear that long periods of heavy restrictions has not got us to zero cases,” Ardern said. “But that is OK. Elimination was important because we didn’t have vaccines. Now we do, so we can begin to change the way we do things.”
  • Australia has ordered 300,000 courses of Merck’s antiviral drug used to treat Covid-19. Molnupiravir would be the first oral treatment for coronavirus if it is approved by regulators. It’s a capsule that gets taken twice a day for five days by patients with Covid-19 symptoms. Though still in its late clinical trials, Molnupiravir has proven to be effective at preventing hospitalizations, serious illness and deaths. Prime Minister Scott Morrison says the treatments mean the country will better be able to live with the virus. If approved by the country’s regulator, the drug could be available in Australia by as early as next year.

Covid-19 – Due Diligence And Asset Management

Gen X Leaves Boomers Trailing With 50% Wealth Jump in Pandemic

Brief: Generation X, the oft-overlooked demographic group squeezed between the Baby Boomers and Millennials, has experienced a wealth boom in the U.S. since Covid-19 was declared a national emergency. During the pandemic, household wealth distribution has shifted from older generations to those who are reaching their peak earnings years, according to data from the Federal Reserve. Gen Xers, who are age 41 to 56, saw robust gains in equities and pension entitlements, while their share of the nation’s consumer debt declined, the data show. The Covid-19 crisis marks a rebound of sorts for the cohort that was worst-hit by the 2008 financial crisis. Millions of Gen Xers, who were in their 30s and early 40s at the time, lost jobs and housing wealth.

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Ken Griffin Sees Young People Making ‘Grave Mistake’ Working at Home

Brief: Employees just starting out are risking their career advancement by continuing to work remotely, hedge fund manager Ken Griffin said. “If you are early in your career, you are making a grave mistake not being back at work,” Griffin said Monday in a conversation with Bloomberg’s Erik Schatzker at the Economic Club of Chicago. “It’s incredibly difficult to have the managerial experiences and interpersonal experiences that you need to have to take your career forward in a work-remotely environment.” Griffin, who runs Citadel’s hedge fund business and Citadel Securities, also said working outside the office hinders innovation and indicated it may hurt the country’s competitiveness. Workers in China have returned “literally from almost the start” of the pandemic, he said.

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JPMorgan bans business travel for unvaccinated U.S. employees - memo

Brief: JPMorgan Chase & Co said on Monday it will restrict business travel for U.S. employees who are unvaccinated or have not disclosed their vaccination status to the bank, according to an internal memo seen by Reuters. The bank has also mandated such staffers to be tested twice a week, and said they would need to contribute a higher cut of their pay towards medical insurance, to account for testing expenses. The Wall Street bank has urged its employees to get their COVID-19 shots, but not mandated vaccines, in line with peers such as Bank of America Corp and Wells Fargo & Co. JPMorgan Chase will also require proof of vaccination from employees participating in client events in-person, effective immediately, according to the memo.

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India’s $1 Trillion Opportunity

Brief: India’s digital economy is poised to mirror China’s, and is expected to be worth a staggering $1 trillion in the next five to six years. According to a white paper by Investcorp, expected to be released Monday, India’s digital advancement has further accelerated amid the pandemic as consumers relied on technology to meet everyday needs — from purchasing groceries and other essentials to accessing education and healthcare services. In a country that has been one of the hardest-hit by the pandemic, 11 new unicorns (private tech companies with a valuation of at least $1 billion) were created in 2020 — the equivalent of the previous three years combined. In the first half of 2021, India boasted 15 new unicorns, which raised a total of $6 billion at an aggregate valuation of $28 billion. Investcorp now estimates that 100 new unicorns will be created in the country by 2025.

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Are we on the cusp of a global capex boom?

Brief: It has been an eventful time for petrol stations across the UK. Panic buying of fuel has seen demand overwhelm supply. More broadly, the huge pent-up savings from the pandemic has seen a significant demand surge for goods. While global manufacturing continues to supply goods at a record pace, supply chains have not been able to keep up - from used cars, semiconductors and furniture, to Nandos' chicken. This has been further exacerbated by global capital expenditure (capex) levels having slumped in recent years. Capex levels have not kept pace with depreciation since 2017, and the pandemic unsurprisingly caused a further depression in capital spending. The MSCI AC World Capex to depreciation ratio (ex-financials) dropped to around one in 2020, indicating companies in recent years have mostly been spending on maintenance - investing ‘for balance sheet rather than for growth'.

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

Our briefing for Monday, October 4, 2021:

  • The United States is turning a corner on Covid-19 says Dr. Anthony Fauci, U.S. top infectious disease expert. Even as the death toll surpasses 700,000 in the country, there have been signs that the latest wave of the virus is on the decline. The number of Americans hospitalized with Covid-19 fell by about 25% since September 1, and daily deaths have fallen about 10% since September 20. “We certainly are turning the corner on this particular surge,” Fauci said in a Sunday interview on ABC’s “This Week”. “The way to keep it down, to make that turnaround continue to go down, is to do what we mentioned: get vaccinated.”
  • In Canada, there are no Johnson & Johnson vaccines available for the provinces, the federal government says. Federal Health Minister Patty Hajdu said the country currently has no supply of the single-shot vaccine after Alberta made a request for 20,000 doses. British Columbia and Saskatchewan have also made requests for the Johnson & Johnson shot, but in the summer the federal government said it had no plans to purchase additional shipments of the vaccine. "Currently we don't have usable doses on hand, and so we're looking for additional doses so that we can get them very quickly to the provinces and territories," Hajdu said in a news conference.
  • The United Kingdom simplified their new travel rules, scrapping their traffic light system in favour of a singular “red list.” Fully vaccinated travellers arriving from non-red list countries do not need to take a test prior to departure, they only need a single test on the second day after arrival. Unvaccinated travellers must take a test prior to departure, on the second and eighth days after arrival, and must quarantine for 10 days at home. Travellers arriving from a red list country must still quarantine for 10 days in a government-approved hotel. The red list, which currently has 54 countries on it, is due to be updated later this week. 
  • In Japan, Fumio Kishida took office as the new prime minister, faced with leading the country out of the coronavirus pandemic. Kishida also named a new vaccines minister, Noriko Horiuchi, who is one of only three women in Kishida’s cabinet. Kishida replaces Yoshihide Suga, who resigned after only one year in office when he was widely criticized for his government’s handling of the pandemic and decision to hold the Tokyo Olympics. Kishida, who says his top priority will be the economy, will have to balance social and economic activities with the vaccine campaign and other measures to prevent a resurgence of the virus. 
  • South Korea has extended social distancing curbs as the latest wave of the virus continues to impact the country. The curbs, which will now remain in place until October 17, involve a ban on gatherings of more than two people after 6 p.m. and a ban on eating at restaurants after 10 p.m. Last week South Korea’s daily numbers topped 3000 for the first time since the beginning of the pandemic, averaging out at more than 2635 over the past week. The government is offering new incentives to people to get vaccinated, including allowing higher numbers of wedding attendees for vaccinated people.
  • Australia’s Health Minister Greg Hunt announced that coronavirus cases are starting to level off as the country reaches target vaccination rates. About 80% of Australians have had their first shots according to Hunt, and the government expects to reach 80% full vaccination rates by the middle of November. "There are important reasons for hope," Hunt told a news conference.  New South Wales reported 623 new coronavirus cases, down from 900 daily cases reported last week, and Victoria state reported 1377 new Covid-19 infections, up slightly from the 1220 reported the day before. 

Covid-19 – Due Diligence And Asset Management

Goldman Says Rishi Sunak Is Still Worried About U.K. Unemployment Jump

Brief: Chancellor of the Exchequer Rishi Sunak may be touting a recovery in the U.K.’s job market, but his latest spending pledge shows he’s still concerned about a spike in unemployment now his furlough plan has ended, according to Goldman Sachs Group Inc.In a speech to the Conservative Party Conference on Monday, Sunak heralded the performance of the U.K.’s labor market during the pandemic, and announced 500 million pounds ($680 million) of funding to help get people back to work after the expiry of the wage-support program. For Goldman economists, that extra spending, while low compared with the billions spent on furlough, is a sign the Chancellor is still harboring concerns about the outlook for the labor market even as he insists it was right to end the support in September.

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Back in black: U.S. Supreme Court returns from COVID-19 telework

Brief: U.S. Supreme Court justices are set to don their black robes and sit once more behind a mahogany bench in their grand courtroom on Monday as they resume in-person oral arguments for the first time since COVID-19 pandemic disruptions started last year. In a tentative step toward normalcy, the nine justices will be joined by lawyers, court staff and journalists in their spacious column-lined courtroom as they begin their new nine-month term. No members of the public will be present. The court building has been closed to the public since March 2020 due to the pandemic, with the justices hearing oral arguments via teleconference. In a sign of how planning during the pandemic is constantly in flux, preparations for the new term were disrupted on Friday when Justice Brett Kavanaugh tested positive.

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RBNZ Set to Raise Rates Even as Delta Outbreak Shackles Economy

Brief: New Zealand’s central bank is expected to embark on a series of interest-rate increases to tame inflation and rein in soaring house prices, even as a coronavirus outbreak that has now spread beyond Auckland poses a greater risk to economic growth. Reserve Bank policy makers will raise the official cash rate by a quarter percentage point to 0.5% Wednesday in Wellington, according to 20 of 21 economists in a Bloomberg survey. Most predict it will follow up with a succession of hikes over the coming year, taking the rate to around 1.5% by August 2022, though the persisting outbreak of the highly infectious delta strain of Covid-19 could interrupt the tightening cycle. “We expect the RBNZ to go ahead with hiking the OCR on Wednesday, while noting downside risks to the outlook,” said Sharon Zollner, chief New Zealand economist at ANZ Bank in Auckland. “There’s no question that the situation is grimmer than we were all assuming back in August. We thought we were looking at a relatively short, successful lockdown and then we would be Covid-free, and that’s not likely at all any more.”

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Property Deals Reach Record $108 Billion After Pandemic Plunge

Brief: Deals by real estate investment trusts totaled $108 billion this year through September, beating the annual record as ample capital fueled transactions in the recovering economy, according to Jones Lang LaSalle Inc.  The U.S. deal surge signals the beginning of a new cycle emerging from the pandemic-related economic halt, according to Sheheryar Hafeez, a managing director in the capital markets group at JLL. “There is renewed confidence in the runway ahead of us in 2022 and beyond,” said Hafeez, whose company released a report on REIT transactions Monday.REIT mergers and acquisitions had plunged to $17 billion last year. Even before the pandemic, deals were slowing from the recent high of $86 billion in 2018 as investors worried about the decade-plus bull market coming to an end, according to Hafeez. The all-time high was $103 billion in 2006.

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Airlines Sees Covid-Related Losses Exceeding $200 Billion

Brief: Airline losses from the coronavirus pandemic are set to surpass $200 billion as travel curbs weigh on corporate and long-haul demand well into 2022, according to the industry’s main lobby. Carriers are poised to post a collective deficit of $11.6 billion next year, the International Air Transport Association said Monday in Boston at its annual meeting. The trade body also increased its loss estimate for this year, and revised upward the shortfall for 2020. The combined $201 billion in net losses over the pandemic-blighted period eclipses close to nine years of industry earnings, based on IATA figures. While domestic and regional travel have begun to rebound, there’s been little recovery in the globe-spanning business routes so crucial to many carriers. The U.S. is poised to open its borders to trans-Atlantic visitors next month, but other long-haul markets remain in the doldrums, especially those connecting Asia with Europe and North America.

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

Our briefing for Friday, October 1, 2021:

  • In the United States, a new Covid-19 variant that emerged is not an immediate threat, nor is it likely to become the dominant strain over delta, experts say. The R.1 strain was initially a concern because it has some mutations that could avoid anti-body responses. Delta continues to be the dominant variant in the United States, eclipsing other variants including Lambda and Mu. Nearly 700,000 people across the U.S. have died of coronavirus, an overwhelming majority of them unvaccinated. Despite its large supply of vaccines, the U.S. has one of the highest death rates of any country in the world.
  • In Canada, the province of Saskatchewan reported 601 new cases on Thursday, its highest daily rise since the beginning of the pandemic. With 72 people in intensive care, the province’s hospitals are under immense pressure, but officials have declined to bring in any new restrictions. Health Minister Paul Merriman refused to call the situation a crisis during an online news conference on Wednesday. “It’s an extremely challenging situation,” he said. “We’ve never seen this before. The word ‘crisis’ can mean different things to different people. It’s certainly an extremely challenging time.”
  • In the United Kingdom, case numbers are rising again as children head back to school and offices reopen. The U.K. reported 36,480 new Covid-19 cases on Thursday, and 137 new deaths. Transportation on roads has returned almost to pre-pandemic levels, although public transportation rates remain slightly below normal. Job vacancies have also soared as employers scramble to hire upon reopening. The U.K. has largely relied on vaccines to protect people from the spread of Covid-19 as they implemented their reopening plan. About 90% of the adult population in the U.K. have had their first dose of vaccine, while 83% are fully vaccinated. 
  • India will retaliate against the U.K. and impose strict travel measures on visitors arriving from that country. Beginning on October 4, travellers arriving in India from the U.K. will have to quarantine at a designated address for 10 days, regardless of their vaccination status. U.K. travellers will also have to have a Covid-19 test taken 72 hours before departure, upon arrival and on the eighth day after arrival. The U.K. recently imposed similar rules on Indian travellers, requiring them to quarantine upon arrival regardless of their vaccination status, although India was moved off the U.K.’s “red list.” 
  • The Philippines eased some coronavirus restrictions in the capital region after case numbers fell. Gyms can now reopen to fully vaccinated patrons, and restaurants and personal care services are allowed to double their operating capacity to 20%. Case numbers are averaging around 1700 daily in the past week, compared with nearly 4300 in the previous week. The total number of cases in the country since the beginning of the pandemic is now at about 2.5 million. The country has struggled because of limited access to vaccines, with only about 20% of the population fully vaccinated according to Bloomberg’s global vaccine tracker.
  • Australia will reopen its international border from November, allowing vaccinated citizens the freedom to travel again. Prime Minister Scott Morrison said the restrictions will be removed once a state reaches the 80% full vaccination milestone. “It’s time to give Australians their lives back,” Morrison said. In other news, New South Wales (NSW) State Premier Gladys Berejiklian has resigned, as a result of an investigation taking place by a corruption watchdog. The NSW Independent Commission Against Corruption said it’s investigating a matter that involved a breach of public trust. Berejiklian says she resigned because of the length of time the investigation will take, and because the state needs stable leadership throughout the coronavirus pandemic.

Covid-19 – Due Diligence And Asset Management

Vaccine Stocks Shed $84 Billion as Merck Pill Adds to Rough Week

Brief: For the world’s leading Covid-19 vaccine makers, news that Merck & Co.’s experimental pill cuts the risk of hospitalization and death in half was the latest blow in a very bad week. Stocks including Moderna Inc. and BioNTech SE have shed about $84 billion in combined value this week in the aftermath of a stock market slump that sent the two companies to their lowest level since July. Selling accelerated on Friday, with BioNTech and Moderna each declining as much as 16% in New York as Merck delivered the news on its experimental pill that Wall Street called a “game changer.” The drug, called molnupiravir, reduced the risk of hospitalization or death by 50% in a study, raising concerns about the long-term revenues for companies providing inoculations.“

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Two reasons for IPO surge during the pandemic: investment banker

Brief: SoftBank-backed Indian hotel chain Oyo Hotels on Friday filed for a public offering, just two days after trendy eyeglass unicorn Warby Parker (WRBY) went public on the New York Stock Exchange. The flurry of activity has become commonplace during a record-breaking surge of IPOs this year that's seen buzzy offerings from the likes of Robinhood (HOOD), Coinbase (COIN), and 23andMe (ME). In a new interview, Suzanne Shank — president and CEO of investment bank Siebert Williams Shank — said the IPO boom comes down to two main factors: companies repositioning themselves during the pandemic and the persistence of low interest rates from the Federal Reserve. "I think we're seeing companies that both benefited from the pandemic, as well as those that are sort of rebooting post-pandemic," she says. "That has really been sparking this increased deal flow."

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U.K.’s Coronavirus Recession No Longer Worst in Three Centuries

Brief: It may be no comfort for millions of workers and businesses, but the U.K.’s coronavirus recession was no longer the worst in three centuries. Revisions mean that gross domestic product fell by 9.69% in 2020. That makes it the deepest slump since 1921, when the economy shrank 9.71% in the aftermath of World War I. The decline was previously estimated at 9.85%. Until then, the devastation wrought by the pandemic was thought to have exceeded all recessions since 1709, when the Great Frost led to a 13.4% contraction. The revisions announced Thursday are part of the annual Blue Book, when the Office for National Statistics updates the national accounts based on new sources and methods. While ONS figures go back to 1948, long-run estimates are produced by the Bank of England.

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Zoom and Five9 abandon $14.7 billion acquisition

Brief: Zoom’s agreement to buy cloud contact center software company Five9 was scuttled on Thursday, after Five9 shareholders rejected the deal. Zoom said in July that it was acquiring Five9 in an all-stock purchase for $14.7 billion, its first billion-dollar-plus purchase and, at the time, the second-biggest tech deal of the year. The company has now lost an opportunity to quickly broaden its capabilities after its stock rallied during the coronavirus pandemic.Five9 shares fell 2% in extended trading following the statement from the companies. Buying Five9 “presented an attractive means to bring to our customers an integrated contact center offering,” Eric Yuan, Zoom’s founder and CEO, wrote in a blog post. “That said, it was in no way foundational to the success of our platform, nor was it the only way for us to offer our customers a compelling contact center solution.”

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Covid-19 catapults social issues to the top, Schroders survey reveals

Brief: The Covid-19 pandemic has catapulted social issues to the forefront of investors minds, according to the latest global investor study published by Schroders today (September 30).The survey of more than 23,000 people across Europe, Asia and the Americas, revealed that 57% of investors are now placing greater importance on social issues versus environmental issues (55%) compared to pre-pandemic levels. The definition of “people” in the context of the research means those who will invest at least €10,000 (or the equivalent) in the next 12 months or those who have changed their investments within the last 10 years.Whilst the environmental element of ESG investing has been firmly on the radar of global investors since the Paris Agreement, meaningfully addressing social issues – from the consistency of corporate behaviour towards employees during the pandemic to working conditions and a liveable wage – has traditionally been lacking.

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