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Covid-19 Diligence Briefing

Our briefing for Monday, January 31, 2022:

  • In the United States, a new bill has garnered bipartisan support in the Senate, as it would establish a commission to investigate the country’s response to the Covid-19 pandemic. The legislation, called the Prevent Pandemics Act, could allow federal health agencies to gain new powers and would help inform the country’s response to future outbreaks.  Senator Patty Murray of Washington, who is co-sponsoring the bill with Senator Richard Burr of North Carolina, first had the idea of establishing a Covid-19 commission back in March 2020. “Because even back then it was clear: we have to learn from this pandemic to make sure we are never in this situation again,” she said on Thursday.
  • In Canada, thousands gathered in Ottawa’s city centre on Sunday, as groups of truckers and others opposed vaccine mandates and broader public health measures. The protests began as a way to voice concerns over the federal government’s vaccine mandate for cross-border truckers, but it has since expanded into a wider movement against all Covid-19 restrictions. Police say the protests have been mostly peaceful, with only one arrest being made by Sunday afternoon. There were however, several incidents that were widely regarded as disrespectful including protesters jumping on the Tomb of the Unknown Soldier and covering a Terry Fox statue with anti-vaccine materials. Police say criminal investigations related to the incidents are underway. 
  • In the United Kingdom, the government is considering making a U-turn on mandatory vaccines for healthcare workers.  Ministers will meet today to discuss whether to scrap the vaccine mandate that is currently in place. As the rules stand right now, frontline healthcare workers must be fully vaccinated by April 1, which means they must have had their first dose by Thursday.  As of today, around 77,000 have had no jab at all. The government has been under pressure by some within the healthcare service to scrap the mandate, saying it will lead to a staffing crisis. Health Secretary Sajid Javid says the policy is being kept under review, but that it is the “duty” of healthcare workers to get their shots.
  • Austria is planning on easing Covid-19 restrictions in February after its national vaccine mandate takes effect on Tuesday. The mandate, which requires all adults to be fully vaccinated or face fines of up to 3,600 euros ($5,076), is the first of its kind in Europe. Officials say the mandate is needed to boost vaccination rates and protect the country’s hospitals from becoming overwhelmed. Starting February 5, restaurants will be allowed to stay open to midnight as opposed to 10 PM, and the rules that bar unvaccinated people from stores and restaurants will be phased out. The Omicron wave is supposed to peak in Austria in the first week of February, officials say.
  • Japan’s Prime Minister Fumio Kishida is pushing a mass inoculation drive for boosters at a temporary vaccination centre operated by the military, as case numbers in Tokyo soar. The government has been giving booster shots to healthcare workers since December, but so far only 2.7% of the population has had their third shot, according to the website of the prime minister’s office.  The temporary vaccination center, run by the Self-Defense Force in downtown Tokyo, will be vaccinating about 720 people ages 18 and older per day, ramping up to 2,000 per day by next month. Another military-run centre in Osaka will begin booster shots next week.
  • Australia’s schools have reopened amid a fall in case numbers and deaths. The country reported its lowest number for daily deaths in two weeks, as local authorities braced for staff shortages in schools. "There will be challenges and there will be bumps over these first few weeks," Victoria state Deputy Premier James Merlino said during a media briefing. Children are being asked to test twice a week for Covid-19, while the government plans to roll out the distribution of millions of at-home antigen tests to families free of cost. About 40% of children ages five to 11 in Australia have had their first vaccine dose. 

Covid-19 – Due Diligence And Asset Management

Health Startup Athelas Hits $1.5 Billion Valuation After Pandemic Boom

Brief: Athelas Inc., a startup that builds remote patient monitoring technology, raised $132 million in new funding, bringing its valuation to $1.5 billion. Founded in 2016, Athelas experienced sharp growth last year, spurred in part by a shift to remote care during the Covid-19 pandemic. Athelas now has 20,000 patients, 10 times the number of patients it had in the beginning of 2021, co-founder and Chief Executive Officer Tanay Tandon said. “The pandemic really showed folks that health care in the home has to be a thing and in a lot of ways is better than the traditional care model,” Tandon said. Athelas’ primary product is the Athelas One, an internet-connected device that uses a finger-prick to return blood diagnostics and shares that information with healthcare providers. The product, which has been approved by the Federal Drug Administration, is geared toward patients who are immunocompromised or have chronic conditions that need frequent monitoring. Tandon said remote monitoring allows doctors to address health issues earlier, potentially avoiding the pricier costs of more intensive treatment or hospitalization down the road.

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Euro Area Scrapes By Second Winter of Pandemic With Mild Growth

Brief: The euro-area economy grew modestly in the fourth quarter amid another wave of surging coronavirus infections and curbs on activity. Gross domestic product rose 0.3%, slightly less than predicted, after a sharp contraction in output left Germany on the brink of recession. Meanwhile, a ramp-up in investment contributed to stronger-than-expected growth in France and Spain. Italy reported an expansion of 0.6% on Monday.  The region’s economy is tackling headwinds better than earlier in the pandemic as businesses find ways to cope with restrictions and more people get vaccinated, but it’s still lagging recoveries in the U.S. and the U.K. Supply bottlenecks have weighed on manufacturing-heavy Germany for months, and coronavirus curbs are now disrupting all parts of the economy. Euro-area output increased 5.2% in 2021. European Central Bank President Christine Lagarde said in December she expects economy to reach pre-crisis levels in the current quarter.

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Morgan Stanley Lawyer Doubles Down on Wall Street Office Return

Brief: Morgan Stanley’s top lawyer said Friday that veteran outsiders who criticized his push to end remote work are missing an opportunity to connect with the next generation of leaders. “Two years of not being together is fraying those bonds,” Eric Grossman said in a Fordham Law School talk. Almost a fourth of Morgan Stanley’s workers started during the coronavirus pandemic, and “a bunch of them have never spent time in the office—they don’t know what we’re like,” he said. Much of the negative reaction to his call to return to the office came from “fully formed lawyers,” Grossman said. “‘I don’t need to be in the office, I’m super-efficient at home, I’m serving my clients, I’m getting everything done,’” he said, paraphrasing the criticisms. “But we are stewards for the next generation.” Grossman, Morgan Stanley’s longtime chief legal officer and one of the top paid lawyers on Wall Street, in a July memo to outside law firms and legal service providers said they should end remote work and bring lawyers back to the office.

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Apollo Gives PE Staff a Work-From-Anywhere August in Nod to Flex Time

Brief: It’s time to stock up on the sunscreen at Apollo Global Management Inc. Come August, the private equity giant plans to allow staff in its buyout unit to work anywhere they would like for the month, said Matt Nord, one of the executives behind the decision. “We have seen over the last two years that we can give people more flexibility -- in how they manage, how they work -- and it doesn’t impact performance,” Nord, Apollo’s co-head of private equity, said in an interview. Private equity chiefs, like their peers across Wall Street, have taken an array of steps to provide employees flexibility as the pandemic persists. At Apollo, the August plan was also motivated by the desire to attract and retain talent in a cut-throat job market. That factor was in part what led companies including American Express Co. to offer hybrid work plans in recent months.

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Hong Kong exodus could be largest ever says report as 21-day quarantine is cut

Brief: Hong Kong's city leader Carrie Lam announced on 27 January that the 21-day quarantine period most arrivals face, one of the world's most stringent timelines, would be cut to two weeks because the increasingly dominant Omicron variant has a shorter incubation period. This move to relax the rules comes against the backdrop of international businesses sounding alarm bells of a talent drain as rival financial hubs are reopening. In a draft report obtained this week by Bloomberg News, the European Chamber of Commerce warned businesses that the city could remain internationally isolated until 2024. "We anticipate an exodus of foreigners, probably the largest that Hong Kong has ever seen, and one of the largest in absolute terms from any city in the region," the draft report said. The Financial Times reported this week that Bank of America is the latest blue-chip firm to examine relocating staff to Singapore.

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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, January 28, 2022:

  • In the United States, the Biden administration’s vaccine mandate for healthcare workers has now gone into effect and as of Thursday, those who have not had at least their first dose can be suspended without pay. The mandate, which allows for medical and religious exemptions, will cover about 10 million workers at hospitals and nursing homes who receive funding through The Centers for Medicare & Medicaid Services. The mandate will be enforced in 25 states and will be applied to the rest of the country over the coming weeks, as deadlines were staggered after several challenges to the rules were made. The Supreme Court finally backed the mandate for healthcare workers, but struck down the administration’s call for the rules to extend to all large employers. 
  • In Canada, the RCMP are investigating a website based out of British Columbia, after a Global News report found that it offered alleged fake Covid-19 vaccine and mask exemptions. The website, called “Enable Air,” says it works with unnamed “licensed physicians” to provide vaccine and mask exemptions for an undisclosed fee. The website has been linked to two B.C. physicians, one of whom is still practising. The College of Physicians and Surgeons of B.C. has recently come under pressure to properly investigate those doctors who are sharing unverified medical information on Covid-19 vaccines. The RCMP say they are in the evidence gathering stage of the investigation.   
  • In the United Kingdom, some experts say the government’s move to scrap Plan B Covid-19 restrictions came too soon, and that the prime minister should be focusing on getting vaccines to the 3 billion unvaccinated people across the world. In a two-page letter signed by over 300 scientists, health experts and academics, the prime minister is accused of failing to take enough action to augment vaccination levels worldwide. “Vaccinating the vast majority of the world’s population is the best way to prevent Sars-CoV-2 from mutating. However, as the U.K. has provided booster doses to up to 1 million people every day, more than 3 billion people across the world have yet to receive their first dose.,” the letter says. The letter is signed by 13 members of Johnson’s Sage Committee and subcommittees as well as an adviser to the Joint Committee on Vaccination and Immunisation.
  • In Germany, lawmakers had their first debate over a possible coronavirus vaccine mandate. Right now they are considering three options: requiring all adults to be vaccinated, requiring counselling for those who are unvaccinated while having those 50 and over get their shots, or no mandate at all.  Chancellor Olaf Scholz supports mandatory vaccines for everyone 18 and over, but his coalition government remains divided over the issue. As of Wednesday, about 74% of Germany’s population was fully vaccinated, which is lower than in other European countries like France, Italy and Spain. A draft law should be ready for parliamentary vote by March.
  • India’s capital city of Delhi has lifted a weekend curfew and will allow restaurants and cinemas to operate at 50% capacity. Schools and colleges will remain closed for now, and the 10 PM to 5 AM night curfew will stay in place. “In view of the decline in positive cases, it was decided to gradually ease restrictions while ensuring adherence to Covid Appropriate Behaviour,” Delhi’s lieutenant governor Anil Baijal said. The number of new coronavirus cases in Delhi fell to below 5,000 on Thursday, down from a high of 28,867 on January 13. 
  • Australia has recorded its deadliest day of the pandemic so far, with 98 deaths reported and the first cases of the BA.2 descendant of the Omicron variant identified in New South Wales (NSW). Australia now has 35 cases of BA.2 and they span across NSW, Tasmania, Queensland, West Australia and the Australian Capital Territory. While overall case numbers are plateauing, officials say deaths will remain high for some time. As we have seen during the two years of the pandemic, the number of deaths associated with those cases stay higher for a longer period,” said. Prof. Alison McMillan, the country’s chief nursing and midwifery officer.

Covid-19 – Due Diligence And Asset Management

The investment chief at the world's largest hedge fund says stocks must sink another 20% before the Fed steps in

Brief: Stocks must slide another 20% before the Federal Reserve takes action, according to an investment chief at the world's largest hedge fund. Greg Jensen, co-chief investment officer at Bridgewater Associates, told Bloomberg News that the Fed won't come to the market's rescue — in what's known as a Fed put — until the market drops another 15% to 20%. Even if that happens, he said it would depend on how quickly the bottom falls out from the market. So far this year, the stock market has largely slumped. The S&P 500 has dipped 9% to 4,349.93 as of early Thursday. Another 20% decline would bring the index down to about 3,480 points — a level last seen around the early days of the COVID-19 pandemic in 2020. Investors were initially spooked by the potential for lower liquidity after Wednesday's Fed meeting when Chairman Jerome Powell said there's plenty of room to raise rates and declined to rule out rate hikes at every meeting this year.

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Growth and the remote work revolution

Brief: For once since 2022 began, Thursday featured some good news on the economy. Last year’s fourth quarter and full year growth checked in at unexpectedly strong levels and Apple (AAPL) posted a record quarter, two recent instances where data or earnings haven’t disappointed investors. In spite of a litany of reasons like Omicron, inflation, impending rate hikes and a snarled supply chain, the world’s largest economy somehow finds new ways to defy expectations. Yet upward trends are masking a spotty recovery, with small businesses — the backbone of the U.S. economy — bearing the brunt. And at least some of the reasons have to do with remote work, a topic the Morning Brief has been exploring with increasing regularity, and for very important reasons. Two full years into the pandemic, legions of office workers are still camped out in makeshift home offices. It’s forcing employers to completely rethink the nature of the workplace, and how to attract and retain talent.

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U.S. Housing Market Gained Almost $10 Trillion During Pandemic

Brief: Strong demand and limited supply led to a historic jump in the value of the U.S. housing stock, which surged to $43.4 trillion last year. The aggregate value of homes has now doubled since a decade ago, when the market was recovering from the Great Recession, according Zillow Group Inc. Cities that have attracted people during the pandemic saw the biggest percentage gains last year, with Austin and Raleigh, North Carolina, topping the Zillow data. New York City, which many fled in the past two years, had the smallest increase among 50 metro areas, at 10.9%. “Even in the context of a year in which several housing records were topped, the scale of the housing market’s growth in 2021 is eye-popping,” Zillow senior economist Jeff Tucker said in a statement.

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Financial services firms show elevated confidence in UK

Brief: Up to 90% of global financial services firms in a survey said they planned to expand operations in the UK in 2022, according to an EY UK attractiveness report.The spike revealed the highest level of investor confidence seen in the region since the consultant began its attractiveness analysis.Financial services firm are confident about planned investment across the UK and 41% of the firms, who were surveyed in November 2021, said that the pandemic had led them to increase investment in the region.As many as 8% revealed they were planning a substantial increase in investment. This was markedly higher than in the spring of last year, when just 6% of surveyed firms said they were planning on increasing their level of activity in the UK.

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US economy grew at fastest rate since 1984

Brief: US GDP grew at 5.7% last year, its fastest rate since 1984, despite two new virus variants emerging in 2021. Growth was uneven with the economy growing at 6.9% from October to December, a steep acceleration from growth of just 2.3% in the previous quarter. The growth created 6.4m jobs in 2021, but also saw the highest inflation in 40 years. After shrinking in the first three quarters of 2021, inventories rose at a $173.5bn annual rate in the last quarter, which may alleviate the concerns of supply chains problems that have plagued 2021. Housing fell 0.7% in the last quarter, its third consecutive drop, though it remained 13.2% above pre-pandemic level. Real spending at restaurants also fell in Q4, but is still 2.4% above pre-pandemic levels. Unusually, tobacco consumption plunged in the last quarter, now standing at 5.6% below pre-pandemic level.

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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, January 27, 2022:

  • The United States has donated over 400 million doses of Covid-19 vaccines to 112 countries around the world. White House response coordinator, Jeff Zients, said that the U.S. has donated four times more vaccines than any other country. The Biden administration has set a goal of 1.2 billion doses to be sent to developing nations struggling to secure vaccines on their own. Zients continued that 70 per cent of seniors in the U.S. have received a booster shot, and just over 50 per cent of eligible adults have received a third dose. “This is significant progress, as the doctors and data have made crystal clear. Vaccinations and boosters provide the best protection,” Zients said. The number of cases over the last week has dropped to approximately 692,400, a 6 per cent decrease from the week previous. However, the number of deaths has risen 21 per cent to an average of 2200 a day. “This data demonstrates that Covid-19 disease severity appears to be lower with the Omicron variant than with prior variants,” said Dr Rochelle Walensky, director of the Centers for Disease Control.

  • Canadian Prime Minister Justin Trudeau is isolating after being exposed to Covid-19. In a tweet posted on Thursday morning, the prime minister said that although he tested negative on a rapid test, he will continue to isolate for 5 days to comply with local public health regulations. “I feel fine and will be working from home,” Trudeau said. “Stay safe, everyone -- and please get vaccinated.” The exact source of the exposure has not been released, however, Trudeau appeared with Finance Minister Chrystia Freeland, Foreign Minister Melanie Joly and Defense Minister Anita Anand at an in-person news conference on Wednesday. The government said that the exposure was in the afternoon, after the conference. It is not yet clear whether the other members of cabinet are also isolating. Joly has recently recovered from Covid-19 after testing positive on a rapid test on December 20th, 2021.

  • The United Kingdom reverted to “Plan A” Covid-19 measures on Thursday, signaling an end to restrictions that have been in place for a large part of the pandemic. The requirements for masks to be worn in public spaces and the use of vaccine passports for large scale gatherings are now a thing of the past. The government has also rescinded the call to work from home where possible, allowing much of Britain’s work force to return to their offices. Venues hosting large groups of people will still be able to require an NHS Covid Pass showing proof of vaccination, but that decision will now be voluntary. “Our vaccines, testing and antivirals ensure we have some of the strongest defences in Europe and are allowing us to cautiously return to Plan A, restoring more freedoms to this country,” said UK Health Secretary Sajid Javid. The rollback of restrictions comes with a new “Get Boosted Now” campaign from the government. “As we learn to live with COVID we need to be clear eyed that this virus is not going away so if you haven’t already – please come forward for your first, second or booster jab,” Javid said. 

  • Italy will ease Covid-19 restrictions for all travelers coming from the European Union on February 1st. Italian Minister of Health, Roberto Speranza, said on Wednesday that those entering the country will now only require a “green pass” which is effectively a vaccine passport showing proof of vaccination, previous infection, or a negative test. On December 14th, Italy had ruled that anyone entering the country will be required to test before arrival, despite wider easement of regulations across the bloc. In September, Italy created tourist-corridors which allowed Italians to travel several tourist destinations without the need to isolate upon return. Such destinations included the Maldives, Seychelles, and Mauritius among others. On February 1st, more destinations will be added to list including Cuba, Singapore, Turkey, and Thailand. On Wednesday, Italy reported 167,206 new cases of Covid-19 and 426 deaths, down from 468 the day before.

  • Japan recorded over 70,000 new cases of Covid-19 on Thursday, breaking its previous record for a third day in a row. The country recorded just under 79,000 new cases on Thursday with Tokyo recording 14,086, 2000 more than the previous day. Tokyo Governor Yuriko Koike said that hospitals are at 44.4 per cent capacity and that the city will enact a state of emergency if bed capacity reaches 50 per cent, which is likely to happen in the coming days. Cases hit a record high in 33 of Japan’s 47 prefectures in the last week and several areas are being monitored closely by government officials. The country had seen relatively low numbers of cases until recently and Tokyo is quickly becoming the epicenter of the outbreak. There are currently 18 people in intensive care units, although it is not yet clear whether those patients are suffering from the Omicron or Delta variants. The number of daily cases in Tokyo have doubled in the last week, and three more deaths were recorded in the capital on Thursday. 

Covid-19 – Due Diligence And Asset Management

Fed Signals Liftoff ‘Soon,’ Sees Asset-Reduction Start Afterward

Brief: The Federal Reserve signaled it will start raising interest rates “soon” and shrink its bond holdings after liftoff has begun, moving toward ending ultra-easy pandemic support to fight the hottest inflation in a generation. “With inflation well above 2% and a strong labor market, the committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Federal Open Market Committee said in a statement Wednesday following a two-day policy meeting. In a separate statement, the Fed said it expects the process of balance-sheet reduction “will commence after the process of increasing the target range for the federal funds rate has begun.” The pivot, against a backdrop of turmoil in stocks, comes amid consumer inflation readings that have repeatedly surprised and hit 7% — the most since the 1980s — and a tight labor market that’s pushed unemployment down faster than anticipated to almost its pre-pandemic level.

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From BlackRock to Vanguard, Managers Move Before Powell Speaks

Brief: While the financial world waits for the Federal Reserve’s announcement on monetary policy Wednesday afternoon in Washington, some of the biggest bond-fund managers have already made their moves. They anticipate Fed Chairman Jerome Powell will confirm their expectations, based on his determined signaling that rates will rise for the first time since 2018, likely starting in March, to combat the fastest inflation in four decades. With the economy recovering from the pandemic’s disruptions, everyone knows the central bank at some point will withdraw a lot of the bountiful liquidity its provided through quantitative easing. In advance of Fed action, Vanguard Group Inc. is looking at floating-rate debt, BlackRock Inc. is heading toward neutral duration, and Pacific Investment Management Co. sees some attractive reopening trades in fixed income. Here’s what people handling trillions of dollars in assets under management expect to hear from Powell, and what they’re doing about it.

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JPMorgan Executives Ousted in a $200 Million Probe Land New Jobs

Brief: Wall Streeters shuddered as the news broke last year that U.S. regulators were examining whether bank employees were using personal phones to text about business with each other and clients -- a rule that just about everyone seemed to be breaking. Yet for those quietly worrying, there’s a silver lining emerging: It doesn’t appear to be a career killer. Shortly after being ousted over the scrutiny, a trio of executives from JPMorgan Chase & Co. -- the first bank hammered by authorities in the widening probe -- landed new jobs in the industry. The firm itself paid $200 million in fines for its surveillance lapses. Ben Sykes, an executive director who left last year, landed at competitor Jefferies Financial Group Inc. in September, according to records filed with brokerage regulators. Earl Dowling, a former managing director who people familiar with the matter say was also was pushed out, started this month at investment banking boutique PJT Partners Inc.

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U.S., Other ‘Populist’ Nations Mishandled Pandemic, Study Says

Brief: The U.S., Britain, Brazil and other nations with “populist” governments mishandled the Covid-19 pandemic in 2020 and caused unnecessary deaths with relatively lenient policies, according to an academic research paper. Excess mortality -- the number of deaths beyond those that could be expected without the pandemic -- was more than twice as high on average in populist-governed countries, Michael Bayerlein, a researcher at the Kiel Institute for the World Economy and one of the authors of the paper, said Thursday in a press release. The main reason for the difference was that “citizen mobility” -- measured using Google data on the number of people in places like grocery stores or parks -- was higher in populist countries at similar infection rates, the study showed. Excess mortality was 18% in populist-led countries and 8% in non-populist nations.

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3 reasons why private equity will enable the post-pandemic economy

Brief: For three-quarters of a century, small and medium-sized enterprises (SMEs) have been the growth engine of the global economy. In recent years, they have created 62% of net new jobs in the US, and even more in developing economies. There is little doubt that as we emerge from the COVID-19 pandemic, any meaningful and sustainable economic recovery will again be driven by SMEs. However, this crisis has been like nothing in recent history – the whipsawing of real US GDP from a negative 36% in the second quarter of 2020 to a positive 30% in the third quarter has no parallel in modern economic history. Given the magnitude of the disruption, it is testimony to how resilient our economic systems are. However, three trends stand out in affecting SMEs disproportionately, and therefore threatening their role as economic growth engines.

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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, January 26, 2022:

  • In the United States, a New York state judge has ruled against a mandate that required the wearing of masks in public places; however, an appellate court judge on Tuesday temporarily put it back in place, at least until the end of the week. The judge on Monday ruled that the state’s Department of Health needed the approval of the legislature to enact the mandate. Judge Thomas Rademaker of New York State Supreme Court on Long Island found that the mandate “is a law that was promulgated and enacted unlawfully by an executive branch stat agency, and therefore void and unenforceable.” Appellate Divison Justice Robert Miller granted the state’s request to keep the mandate in place while the governor’s administration prepares to appeal. 
  • In Canada, the province of Quebec is easing some pandemic restrictions as of January 31, the premier said on Tuesday. Francois Legault announced plans to ease some curbs, very slowly, with vaccine passports still required for most activities. Restaurants will be allowed to open next week at a capacity of 50%, with tables limited to four people from two bubbles. People will be able to resume private indoor gatherings, again with a maximum of four people from two bubbles. A second phase of the reopening will begin on February 7 and will involve concerts and cinemas being allowed to operate at 50% capacity. 
  • In the United Kingdom, the Metropolitan Police Service said they would begin investigating the Downing Street parties held during coronavirus lockdowns. The investigation puts further pressure on Prime Minister Boris Johnson, who is facing calls to resign after there were even more revelations of gatherings including one for his birthday. The gatherings are already being investigated by senior civil servant Sue Gray, whose report is expected this week and is a critical part of determining whether Johnson remains in power. Johnson says he welcomes the police investigation and hopes it will help “draw a line” under matters.
  • France reported over half a million new coronavirus cases on Tuesday, a new record for the country with only a week to go until some pandemic restrictions are eased. Case numbers totaled 501,635 on Tuesday, while deaths rose by 467 up to 129,489.  More than 30,000 people are in hospital right now, the highest number since November 2020. But the number of patients in intensive care is only a little more than 3,700, lower than it was last week. On Monday, France’s vaccine passport system came into effect, barring unvaccinated people from most social activities, a move that French leaders expect will help keep case numbers manageable.
  • South Korea reported more than 8,000 new coronavirus cases on Tuesday, setting a new record after the numbers exceeded 7,000 for three days in a row. Experts are predicting case numbers will reach 10,000 and possibly even 20,000 after the Lunar New Year holiday that begins this weekend. South Korea announced, in an effort to reduce the strain on hospitals and other essential services, that they will reduce quarantine times and expand testing. Officials are also hoping to treat a larger number of milder and moderate cases at home. More than 85% of South Korea’s population is fully vaccinated, and according to the Korea Disease Control and Prevention Agency, 50.1% have been administered booster shots.
  • In Australia, restrictions will remain in place in New South Wales for another month, Premier Dominic Perrottet announced on Tuesday. This means the indoor mask mandate, QR code check-ins, and a ban on singing and dancing, will be extended until February 28. ‘It comes down to priorities. I want there to be confidence in our parents, I want there to be confidence in our teachers that we can get kids back in the classroom for day one, term one,” Perrottet said. “If you’re to ask what’s more important, someone singing or dancing or someone getting their non-urgent elective surgery back, I know what the right approach is.”

Covid-19 – Due Diligence And Asset Management

Logitech says offices starting to re-equip for post-pandemic life

Brief: Logitech International is seeing offices starting to re-equip for staff returning from working at home during the COVID-19 pandemic, Chief Executive Bracken Darrell said on Tuesday as the company raised its full-year outlook. The tech company has been a big beneficiary of people exiled from their workplaces during the pandemic stocking up on its computer mice, keyboards and webcams. It is now seeing companies examining how their offices will look in future, when people use a hybrid of home and on-site locations, Darrell said after Logitech reported smaller-than-forecast declines in third-quarter sales and operating income. "I do think it is the big thaw," Darrell told Reuters. "It's as if we have had the big freeze and ...we are starting to see people making decisions on what the offices are going to be like when we get back into them.

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Trillion-dollar tech companies set to report quarterly results amid worst January slump since 2008

Brief: As the largest U.S. companies get set to report earnings, investors are torn between two ways of thinking about the technology industry. Tesla reports earnings on Wednesday and Apple on Thursday. Amazon, Meta and Alphabet all report next week. Microsoft reported earnings after the market close Tuesday. Each stock is down between 9% and 15% so far this year. Amid the slump, the bull thesis hasn’t changed much. The world’s digital transformation is in its early innings and has decades of growth ahead, whether it’s from the transition to electric vehicles, the surge in demand for connected devices or the emergence of the crypto-economy and the metaverse. Cloud computing and artificial intelligence will transform every industry in the coming years, and investments in cybersecurity are required at an unprecedented scale. Tech’s bellwethers are poised to capture huge amounts of consumer and business spending.

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BofA Brings Staff Back to Some U.S. Offices as Covid Cases Decrease

Brief: Bank of America Corp. is bringing employees back to offices in U.S. regions where new coronavirus cases have started to decline. The bank’s staff have returned or are making their way back in the coming weeks based on their region’s Covid-19 data and medical guidelines, according to people with knowledge of the plans. Previously the company had told employees to work remotely through at least the third week of January, and until they’re advised to come back. A Bank of America representative declined to comment. As coronavirus conditions improve across the country, employees across major financial firms are being asked to come back. Citigroup Inc. staffers in the New York City region and Credit Suisse Group AG’s workforce across the U.S. are being urged to return to offices in early February. In New York City, the percent of people testing positive for Covid-19 is decreasing, with a daily average of 8,269 cases in the past week.

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How a New Asset Class Is Growing Out of Subscription Revenue

Brief: Venture funds and bank loans are no longer the sole source of capital for emerging technology companies. Revenue-based financing, which allows companies to borrow against recurring revenue and return a fixed percentage of ongoing profits to investors, has become a new source of funding for entrepreneurs that don’t want to dilute current investors. Backers of the financing option are hoping it will become a new asset class. For so-called SaaS companies — technology firms that charge customers periodically for their software services — and similar businesses, the new financing option has reshaped the landscape of early-stage fundraising. Revenue-based financing “was invented a decade ago, but it really gained momentum in the last few years,” said Ed Goldstein, a partner at Pennington Alternative Income Management. The growth, he explained, is due in part to the rise of SaaS companies during the pandemic, as remote workers required reliable cloud infrastructures.

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J&J Sees 2022 Earnings and Sales Above Wall Street Expectations

Brief: Johnson & Johnson forecast 2022 earnings and sales above Wall Street’s expectations as it prepares to separate its drug and medical device unit from its consumer business. Fourth-quarter revenue narrowly missed analysts’ estimates.  The health-care giant expects annual earnings of $10.40 to $10.60 a share, according to a statement Tuesday, ahead of analysts’ average projection of $10.32 a share. Sales, including those of its Covid-19 vaccine, will be $98.9 billion to $100.4 billion, the company said. Chief Financial Officer Joseph Wolk said he hopes to see reduced Covid disruptions to the health-care system in 2022. “Each quarter is getting a little bit progressively better,” he said in an interview. Investors are preparing for a transformative year at New Brunswick, New Jersey-based J&J as new leadership has taken the helm and the conglomerate prepares to split, a move already underway at other health-care companies including GlaxoSmithKline Plc and Pfizer Inc.

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

Our briefing for Tuesday, January 25, 2022:

  • The United States health regulator recalled the emergency use authorizations for several Covid-19 antibody treatments due to their ineffectiveness against the Omicron variant. The Food and Drug Administration (FDA) said that antibody treatments from Regeneron and Eli Lilly are no longer permitted for use in any U.S. state or territory but will be kept on the pharmaceutical backburner in case they may be effective against a new variant in the future. The FDA has instead suggested the use of other antibody treatments such as those from GlaxoSmithKlein and Vir Biotechnology. It also recently approved an anti-viral pill made by Pfizer and Merck & Co, along with Gilead Sciences’ antiviral COVID-19 drug remdesivir. The FDA halted the distribution of the Regeneron and Eli Lilly drugs last month after conducting studies on the efficacy against the Omicron variant which now makes up roughly 99 per cent of cases in the United States.

  • An infectious disease expert in Canada has said that Covid-19 will remain a pandemic until vaccine equality has been reached. Dr. Abdu Sharkawy said in an interview with CTV's Your Morning that Canadians should not get ahead of themselves despite falling cases in the country. "We still have to recognize that it is a pandemic. That means that, until we satisfy the issue of vaccine inequity, which is really problematic across much of the world… it's not going to be endemic," he said. Sharkawy continued that an end to the pandemic can only come once people world-wide have access to vaccines in the same way that Canadians do, and until then, the virus will remain in a pandemic phase. "[If] we can marshal the will and sincerity to help other parts of the world, then we can look to this becoming something that is potentially seasonal, potentially not that much different from the annual flu vaccine,” he said.

  • As of February 11, the U.K. will not require double vaccinated people to test for Covid-19 once they have arrived in England. The change comes as the country is beginning to roll back its Covid restrictions including the requirement to test before boarding a flight to the U.K. which was removed earlier in the month. Prime Minister Boris Johnson said in an interview on Tuesday that the easing of restrictions is “to show that this country is open for business, open for travelers.” Transport Secretary Grant Shapps that the new regulations will lower the cost of travel and give consumers more confidence that their travel plans won’t be changed at the last minute. Airline carriers have welcomed the changes, after pushing for months for an end to testing requirements in airports, hotels and restaurants are also likely to receive a boost from the influx of travelers to the United Kingdom. “We believe testing for travel should now firmly become a thing of the past,” said Johan Lundgren, the chief executive officer of discount carrier EasyJet Plc. “We now look ahead to what we believe will be a strong summer.”

  • The World Health Organization (WHO) is saying that the European Union has reached a new phase of the pandemic as several countries continue to report record breaking case numbers. WHO regional director Dr. Hans Kluge said that the Omicron variant now makes up a third of the cases across the bloc and that Europe is beginning to enter a "a kind of pandemic endgame.” He continued that although the end may be in sight, there is a chance that nearly 60 per cent of Europe could be infected with virus by March. The 27 member states have come to an agreement on travel, allowing anyone who holds a European health certificate to travel throughout the bloc unimpeded. "Travelers in possession of a valid EU digital COVID certificate should not be subject to additional restrictions on free movement," the EU Council said on Tuesday. Although an agreement has been made to allow free travel throughout the E.U., it is not legally binding and several countries, including Italy, will still require people to provide proof of a negative test before crossing the border. 

  • Academics and business leaders in Japan are calling on the government to ease border restrictions which they say are becoming detrimental to the country. Michael Mroczek, president of the European Business Council in Japan says that “expertise is declining” because the country cannot bring in foreign workers and because new cases in the country are still rising that the restrictions “appear to some extent irrational.” Japan has seen nearly 18,500 deaths resulting from the virus, which is comparatively low despite never officially enacting Covid-Zero policies like neighboring China. An official from the Japanese foreign ministry said that the restrictions explain the “significant difference between Japan and other countries” when it comes to case numbers and death tolls. Scholars involved in Japan-U.S. exchanges have recently penned an open letter to the prime minister warning that the stringent regulation “undercuts Japan’s diplomatic objectives and status as an international leader.”

Covid-19 – Due Diligence And Asset Management

Bosses Admit to ‘Proximity Bias,’ But Want Workers Back in Offices Anyway

Brief: Among the biggest worries that executives have about remote work is a phenomenon known as “proximity bias,” meaning that the people who choose to return to offices will get ahead, while those who stay home will fall behind. And yet, despite that very legitimate fear — and how it might hurt underrepresented workers — most bosses still prefer working in offices, and want their underlings do the same, a survey released Tuesday finds. More than four out of 10 executives ranked the potential inequities between remote and in-office employees as their number one concern, according to a Future Forum survey of more than 10,000 white-collar workers. (Around 2-3% of respondents are executives.) Yet, the quarterly poll found that bosses are twice as likely to prefer working in the office at least three days a week compared to rank-and-file staff. Women and minority workers are more likely than other groups to want to stay home, adding to fears that the return to office push could further exacerbate workplace inequalities.

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IMF cuts 2022 global growth forecast as U.S., China recovery wanes

Brief: The International Monetary Fund has downgraded its global growth forecast for this year as rising Covid-19 cases, supply chain disruptions and higher inflation hamper economic recovery. In its delayed World Economic Outlook report, published Tuesday, the IMF said it expects global gross domestic product to weaken from 5.9% in 2021 to 4.4% in 2022 — with this year’s figure being half a percentage point lower than previously estimated. “The global economy enters 2022 in a weaker position than previously expected,” the report noted, highlighting “downside surprises” such as the emergence of the omicron Covid variant, and subsequent market volatility, since its October forecast. The revised outlook is led by growth markdowns in the world’s two largest economies; the U.S. and China. The U.S. is expected to grow 4.0% in 2022, 1.2 percentage points lower than previously forecast as the Federal Reserve moves to withdraw its monetary stimulus, even as supply chain disruptions weigh on the economy.

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UK dividends saw dramatic rebound in 2021 but recovery is expected to slow

Brief: UK dividends showed strong performance in 2021, rising by 46.1% to £94.1 billion on a headline basis, according to the latest Dividend Monitor from Link Group. One-off special dividends boosted the headline total by a record £16.9 billion, three times more than their normal level. Underlying payouts which exclude specials rose more modestly, up 21.9% to £77.2 billon in 2021, close to 2015 levels. Across 2021, the second and third quarters saw the strongest rebound which Link Group attributed to challenge conditions. In Q4, underlying growth slowed to 13.5%, but a large special dividend from DMGT took the headline total to £14.1 billion, 26.1% higher year-on-year. Last year also saw a greater dependence on mining companies, whose booming profits led to payouts that were three times larger than the long-term average. This accounted for almost a quarter of the UK total last year. The second most significant driver of growth was the restoration of banking distributions.

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Biz activity dips to pre-pandemic levels amid third Covid wave

Brief: The ongoing third wave of the coronavirus pandemic has dragged business activity almost back to the pre-pandemic levels, a weekly report tracking the changes said on Monday. The Nomura India Business Resumption Index (NIBRI) -- which compares the activity in a particular week with that of the pre-pandemic levels -- fell further to 100.5 for the week ended January 23 from 102.2 in the previous week, the Japanese brokerage said. The index fell because of a fall in the mobility levels as seen in the Google workplace and retail and recreation mobility, which fell by 10.7 percentage points (pp) and 4.4 pp, respectively, while the Apple driving index inched 1.7 pp higher after a massive 84 pp fall over the past two weeks. The labour participation rate inched up to 39.8 per cent.

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COVID-19 Analysis for Global Property Insurance Market 2022-2031 | Allianz, Axa, Nippon Life Insurance, American Intl. Group

Brief: Market Research Intellect has released a new publication on the Property Insurance market, which has the title "Analysis and forecast of the Property Insurance market 2022."The publication provides an in-depth assessment of the global automotive chassis dynamometers market based on competition, market dynamics, market segmentation and other vital aspects. The market research report is a compilation of comprehensive intelligence studies that explore almost every aspect of the global Property Insurance market. Market participants can use the report to learn more about the competitive landscape and the level of competition in Property Insurance market. The report presents itself as a powerful tool that players can use to prepare to secure the lion's share of the global Property Insurance 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 Monday, January 24, 2022:

  • In the United States, early signs show the Omicron wave may be peaking, as case numbers finally begin to fall. There was a 7% decrease in the number of cases reported for the week ending Friday over the previous week, and deaths were only up slightly. Parts of the northeast in particular, such as New York, Rhode Island and Connecticut, are seeing steep declines after reaching their peaks and the rest of the states are expected to follow, with most likely to peak by the end of January. According to data from the Centers for Disease Control and Prevention, the Omicron variant now accounts for nearly 100% of all new Covid-19 cases in the nation.
  • In Canada, the two most populous provinces are seeing a decline in hospitalizations, as one of them expands its vaccine passport program. Ontario reported a drop of 229 patients being hospitalized on Sunday, while Quebec reported 12 fewer patients were hospitalized. But the two provinces still had more than 7,000 hospitalizations between them as of Sunday.  Quebec just ended a three-week ban on Sunday shopping that was imposed to try to help curb hospitalizations, and also expanded its vaccine passport program to include more retail settings. It now applies to big-box and grocery stores with areas of 1,500 square meters or more.
  • In the United Kingdom, the worst of the Covid-19 pandemic is over, according to one of the country’s top scientists. Professor Neil Ferguson, epidemiologist at Imperial College London and major contributor to shaping Britain’s lockdown strategy, says he’s optimistic that the U.K. will be prepared for possible challenges along the way, including new variants. “The very high level of immunity in the U.K. population – acquired via both vaccination and infection – means that the risk of a new variant causing unmanageable levels of healthcare demand is much reduced,” he said. “An additional positive is that if any new variant arises from Omicron – not a certainty – there is a fair chance it will retain the reduced severity of that strain.”
  • Ireland dropped almost all Covid-19 restrictions on Saturday, after coming through the latest surge in cases. Prime Minister Michael Martin said booster uptake in the country, which is one of the highest in the continent, has helped keep the number of seriously ill people lower than in previous waves. “We have weathered the Omicron storm,” Martin said in Friday’s televised address. “I have stood here and spoken to you on some very dark days. But today is a good day.” Bars and restaurants will no longer need to close at 8 PM or ask for proof of vaccination, and venues will return to full capacity limits. Some measures, like mask wearing on public transport and in indoor spaces, will remain in place until the end of February.
  • Germany’s Chancellor Olaf Scholz and the 16 state governors are meeting to discuss the coronavirus pandemic and the country’s future direction through the Omicron wave. The leaders are expected to limit the use of PCR tests to the elderly, healthcare workers and those deemed high-risk as the rising case numbers put a strain on capacity. On Sunday, Scholz told German local media that it would be “naive” to think that the pandemic will be over any time soon. The leaders are not expected to discuss the universal vaccine mandate, which Scholz supports and says is necessary to get vaccination rates up.  
  • New Zealand on Sunday ordered nationwide restrictions after nine cases of the Omicron variant were detected in a single family. The country will move into its “red stage,” of pandemic response, meaning masks must be worn and there are limits on gatherings. Prime Minister Jacinda Ardern stressed that the red setting is not a lockdown and made a point of saying businesses can remain open and people can still travel freely. "Our plan for managing Omicron cases in the early stage remains the same as delta, where we will rapidly test, contact trace and isolate cases and contacts in order to slow the spread," Ardern told reporters on Sunday.

Covid-19 – Due Diligence And Asset Management

UK dividends rebound 46% in 2021 but remain below pre-covid level

Brief: UK dividends rebounded significantly on their 2020 lows, with the headline figure jumping 46.1% to £94.1bn, but payouts remain below their pre-covid levels, according to Link Group's latest UK Dividend Monitor. This figure was boosted by a record amount of one-off special dividends as companies paid out £16.9bn in this format, triple the normal level. The mining sector provided more than a third of the total special dividends, contributing £6bn from just six companies. As a result, Rio Tinto knocked Royal Dutch Shell of its typical top spot as the company paying the highest dividends, while BHP, Anglo American and Glencore all feature in the top ten. On a headline basis, mining dividends increased 160% year-on-year, one of five sectors to more than double payouts in 2021.

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Living With Covid Proving Tough for a Gridlocked World Economy

Brief: The surging omicron variant is complicating the recovery for a world economy that continues to be wracked by supply chain chaos, worker absenteeism and faltering assembly lines. Supermarkets are struggling to stock shelves amid chronic staff shortages. Airlines are grounding flights. Manufacturers are facing disruption and shipping lines remain backed up. At the same time, surging energy prices are adding to inflation, pressuring central banks to raise interest rates even as the recovery slows. Optimists argue that the economic hit from omicron will be limited as vaccinations and boosters allow the disease to shift from an acute phase to an endemic one. U.S. Treasury Secretary Janet Yellen said she doesn’t expect the variant to derail the U.S. recovery.

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Why the huge stock market correction may be actually good news about the pandemic

Brief: Just like everyone else this January, the stock market has the Omicron blues. Several "at-home" stocks, including Peloton and Netflix got crushed this week, amid reports of slipping demand and lower-than-anticipated performance. Meanwhile, the Nasdaq closed dow on Wednesday and fell deeper into correction territory on Friday when it dropped 2.7%—marking its worst week since 2020. It shows that the stock market is reassessing how to value the companies that cater to people putting up with COVID quarantines and reduced socializing amid high caseloads. Netflix tumbled more than 24% on Friday after the streaming service acknowledged it only added 8.3 million net new subscribers last quarter, missing expectations.

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Boom times are back on Wall Street as some Goldman partners mint $15 million pay packages

Brief: Bonus season has arrived on Wall Street, and the bankers who produced record revenue last year for firms including Goldman Sachs are reaping the rewards. Goldman and JPMorgan Chase informed investment bankers and traders of their pay packages this week, part of an annual ritual that can leave workers elated — or deflated — as they learn how much their 2021 efforts were valued. The compensation pool for Goldman’s investment bankers jumped 40% to 50%, according to people with knowledge of the situation. At rival JPMorgan, the bonus pool for that category rose 30% to 40%, other people with knowledge said, confirming a Bloomberg report. “I know bankers who are exceptionally happy, they generally did the best this year as opposed to traders,” said David McCormack, head of finance recruitment firm DMC Partners.

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BNP Paribas, Citigroup Set Feb 7 Return-To-Office Date for U.S. Staff

Brief: Citigroup has told staff in the New York Tri-State area to start returning to the office from Feb. 7, while BNP Paribas is targeting the same date for U.S. staff after recently postponing its return-to-office plans by nearly a month due to the Omicron variant. Wall Street firms were among the first to encourage staff to return to offices, but a winter wave of COVID-19 infections driven by Omicron has forced many to rethink their plans and review their vaccination policies in recent weeks. "With what happened with Omicron, we wanted to go back into a more conservative mode. So we only have people in the office if there's a business critical need for them to be in," said Kevin Abraszek, head of HR change and transformation at BNP Paribas in New York.

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

Our briefing for Friday, January 21, 2022:

  • In the United States, the state of California may become the first to allow children ages 12 and up to be vaccinated without their parents’ consent. Senator Scott Wiener, a Democrat from San Francisco, proposed the change on Thursday, which would make California the state with the youngest age for such decisions.  In Alabama the age is 14, in Oregon it’s 15 and 16 in Rhode Island and South Carolina. “This is about empowering teenagers to make decisions on their own health and their own safety,” Wiener said. “Almost a million California teenagers are unvaccinated, and for a lot of those teens it’s because their parents either refuse to get them vaccinated or they have not yet gotten around to it.” 
  • In Canada, the premier of Alberta is calling on Prime Minister Justin Trudeau to extend an exemption to a Covid-19 vaccine mandate for truckers, citing supply chain issues and inflation. The mandate means truck drivers entering from the U.S. must be fully vaccinated if they want to avoid a Covid-19 test and two-week quarantine when crossing into Canada. It has been in place since January. 15, while the U.S. confirmed their plans to put a similar mandate in place this Saturday. Industry representatives say the mandate has cost them about 10% of their international drivers. Justin Trudeau defended the mandate on Wednesday, saying it’s in alignment with the U.S.
  • In the United Kingdom, only two coronavirus briefings at the height of the pandemic were led by a female politician, a new report on gender representation has found. The 2022 Sex and Power Index was compiled by the Fawcett Society, a non-profit that advocates for women’s rights. According to the index, 43% of the 56 daily press conferences on coronavirus featured all men with no female politicians or experts present. Only 92 of the 274 members of Covid-19 advisory boards are women, the index shows. “The pandemic has laid bare deep-rooted inequalities across the UK,” said Jemima Olchawski, CEO of the Fawcett Society.
  • France set out a plan to ease coronavirus restrictions in February, although vaccine passports and indoor mask wearing will remain in place. Prime Minister Jean Castex made the announcement on Thursday, saying that there are “encouraging signs” that the current wave of Omicron is slowing. The vaccine passport system will come into effect on Monday, meaning people will no longer be able to show a negative test to enter bars, restaurants, theatres or to travel on trains. Beginning on February 2, masks will no longer be required outdoors and working from home will no longer be mandatory.  By February 16, people will be allowed to eat and drink in stadiums, and nightclubs will be allowed to reopen.
  • Austria’s parliament voted on Thursday to introduce the European Union’s strictest vaccine mandate, the first of its kind. The new legislation passed with 137 votes in favour and 33 against, with all parties except the far right supporting the measure. The new law goes into effect on February 1, however officials will only begin conducting checks from March 15. Beginning then, those without a Covid-19 vaccine or exemption will be facing fines of 600 euros ($680). Pregnant women and those who can’t be vaccinated for medical reasons will be exempt from the mandate. Currently about 72% of Austrians are fully vaccinated, which is in line with the European Union average.
  • New Zealand says it will not be using lockdowns in the future even as Omicron hits, which Prime Minister Jacinda Ardern says is inevitable. New Zealand has so far avoided having any large outbreaks of the Omicron variant, it’s one of the few countries in the world to do so. "This stage of the pandemic is different to what we have dealt with before. Omicron is more transmissible," Ardern said. "That is going to make it harder to keep it out, but it will also make it more challenging to control once it arrives.” Ardern said within 24 to 48 hours of Omicron being detected in the community, the nation would move into its “red” stage which means children would have to wear masks in school and crowds would be limited to 100 people.  

Covid-19 – Due Diligence And Asset Management

Biotech and healthcare investors hope for rebound following weak 2021

Brief: 2021 was a difficult year for biotech equities, with the Nasdaq Biotechnology Index giving a full year performance of -0.6% and a total return of 0%, underperforming the S&P 500 benchmark by more than 25 percentage points. It was one of the worst years for the index. As of 20 January, the Nasdaq Health Care Index was down 23.9% compared to 12 months prior. The industry experienced a lot of volatility throughout last year. Funds such as the L&G Healthcare Breakthrough UCITS ETF finished the year down 8.32%, while BB Biotech reported a net loss of CHF 405m (£327.3m). But biotech investors and analysts are looking to the new year with optimism. Investment in the sector, after all, is about long-term potential - and performance.Despite a boom in investment, catalysed by the pandemic, Covid-19 slowed growth for biotech and healthcare companies that are not Covid-focused, according to Howie Li, head of ETFs at Legal & General Investment Management.

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Canadians continue to flock to foreign investments during pandemic

Brief: “No place like home” has become “anywhere but here” for Canadian investment portfolios. According to Statistics Canada, Canadians pumped $17.5 billion into foreign securities last November compared to $5.4 billion in October - drastically accelerating a trend that has seen investment dollars flow out of the country since the onset of the pandemic. The bulk of those Canadian dollars - $7.4 billion - went toward purchases of U.S. shares with a focus on big technology companies, and funds that track broad market indices such as the benchmark S&P 500. Canadian investors also purchased $4 billion in non-U.S. foreign shares in November. The massive flow of foreign investments were made by Canadian businesses, governments and big institutional investors, but also include individual retail investors either directly or through pensions, mutual funds or exchange-traded funds (ETFs). I

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Netflix, Peloton bring the pandemic-stock era to shuddering halt

Brief: The COVID-19 pandemic isn’t over yet, but the boom it helped create for stay-at-home stocks is vanishing. Netflix Inc. and Peloton Interactive Inc., two of the highest-profile stars of the lockdown era, both plunged Thursday -- the latest sign that investors have moved on from the so-called pandemic trade. Netflix expects to add a paltry 2.5 million users in the current quarter, well short of estimates. Peloton, meanwhile, is slashing costs to cope with slowing demand for its stationary bikes. Netflix shares were down about 20 per cent in premarket on Friday, holding the drop seen in late trade on Thursday. If the loss sticks, it would be the stock’s biggest drop in almost a decade. Peloton shares were up five per cent in premarket after sinking 24 per cent on Thursday.

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Trust discounts widen in 2021 as post-Covid euphoria is hit by new variants

Brief: In 2021, equity investment trusts saw their discounts widen by a weighted average of 4.8%, according to figures from the Association of Investment Companies (AIC) and Morningstar for Investment Week. However, when it comes to the individual winners and losers trusts swung drastically in both directions. Ten years ago, in 2011, the equity investment trust universe saw their discounts widen by a weighted average of 11.1%. Since then the widening has gradually been declining, reaching just 3% for 2020. However, 2021 saw the reversal of that trend, with the average widening ending up higher than that of 2019. "If we cast our minds back to this time last year there was a fair bit of euphoria around the ‘reopening' trade as Covid vaccines began to be rolled out," explained Sarah Godfrey, director of investment trusts at Edison Group. 

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Global hedge fund capital passes USD4tn mark

Brief: Total hedge fund industry capital has passed the USD4 trillion milestone to begin 2022, with managers navigating a volatile Q4 21 driven by another wave of coronavirus variant, as well as rising interest rates and increased expectations for additional increases in 2022. Total hedge fund capital rose increased to an estimated USD4.01 trillion to begin 2022, representing an increase of over USD400 billion from the start of 2021, as reported by HFR in the latest release of the HFR Global Hedge Fund Industry Report. As reported previously, total hedge fund industry capital has soared by over USD1 trillion in the trailing seven quarters since falling below USD3 trillion in Q1 20 as the global pandemic began. The HFRI Fund Weighted Composite Index (FWC) posted a gain of +0.5 per cent for 4Q21, bringing the FY 2021 performance to +10.3 per cent.

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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, January 20, 2022:

  • United States President Joe Biden said the country is on track to meet the challenges arising from the pandemic despite rising inflation and staunch opposition to his Build Back Better platform from Republicans. In an interview on Wednesday the president said that he didn’t “overpromise” during his election campaign last year and added that his work is not done. "Should we have done more testing earlier? Yes," the president conceded, but remained confident that the country "probably outperformed what anybody thought would happen.” Roughly four-fifths of the country has received at least one shot of a Covid-19 vaccine, and while the virus is still causing severe disruptions to everyday life, Biden claims he is still optimistic. "Some people may call what's happening now 'the new normal,'" he said. "I call it a job not yet finished. It will get better." Nearly 2000 people are dying from Covid-19 related illnesses a day in the United States, and Biden admitted that "after almost two years of physical, emotional and psychological impact of this pandemic, for many of us, it's been too much to bear."

  • The first shipment of an oral antiviral pill is being sent across the country according to Canadian Prime Minister Justin Trudeau. Canada has purchased 1 million courses of the antiviral drug Paxlovid, however, Trudeau said that the drug is not a substitute for a Covid vaccine. In an interview, the prime minister said, "it's important to remember that this will be a powerful tool to continue to keep people from people getting extremely sick, but it needs to be used right.” The pill is intended to reduce the risk of hospitalization or death from Covid-19. Canadians are hoping that the country will reach its peak in new infections this month with Canada’s two most populated provinces, Quebec and Ontario, both recording lower hospitalization rates and the number of patients in intensive care units is slowly declining. Despite most businesses in Ontario being closed, Premier Doug Ford has said that the province can expect a “positive” announcement on restrictions later in the week.

  • U.K. Prime Minister Boris Johnson said on Wednesday that scientists believe the Covid-19 cases have peaked in the country and will begin lifting restrictions next week. Masks will no longer be required in public places and vaccine passports for large events will be scrapped as cases throughout the country have begun to stabilize. While hospitals in the north of England are still seeing rising cases, much of the rest of the country has seen cases dropping. The government is no longer suggesting that Britons work from home and students in secondary schools will no longer be required to wear masks. “We will trust the judgment of the British people and no longer criminalize anyone who chooses not to wear [a mask],” Johnson said. The government recorded 108,069 new cases on Wednesday, which is less than half of what it was recording during the holiday season. Despite the ease in restrictions, anyone who has received a positive Covid test will still need to isolate for five days, but Johnson has said that too will be lifted in the coming weeks.

  • Western Australia has decided to delay its February 5 reopening as Covid cases in the east of the country are still reaching their peak. The state – one of the last holdouts of a Covid-Zero policy – in December announced that they would eliminate all travel restrictions in February of this year. Premier Mark McGowan said in an interview late Thursday that opening the border could create problems and that he would prefer to wait until the state has a better understanding of the impact Omicron may have. “Allowing a wave of Omicron cases to fly straight into Perth from February 5, with no testing, no quarantine and no public health measures would cause a flood of disease across our state,” McGowan said. While the other Australian states have gradually reopened, Western Australia has kept its strict border restrictions, and its residents have been able to live without mask mandates. The Western Australian government has said that keeping the border closed will allow more time for residents to receive a booster shot before potentially exposing themselves to virus when the border reopens.

  • The Merck & Co. anti-viral pill will be manufactured by over 30 generic drug-makers in Asia, Africa, and the Middle East thanks to an emergency UN-backed deal. The agreement will give poorer nations access to Merck’s anti-viral pill molnupiravir, to be used as a weapon to fight against the spread of Covid-19. The sharing of such a new patent is rare in the pharmaceutical sector, which normally goes to great lengths to protect such intellectual property. The deal negotiated between the UN-backed Medicines Patent Pool(MPP) and Merck will allow for a low-cost version of the pill to be manufactured as the pandemic continues. The U.S. based company will not receive any royalties from the distribution of the drug. The drug will be sent to 105 developing nations and will cost US$20 for a full course of 40 pills to be taken over 5 days. That price is compared to $700 per course that the United States agreed to for 1.7 million courses. An MPP spokesperson suggested that deliveries from manufacturers in some nations could start as early February.

Covid-19 – Due Diligence And Asset Management

Goldman Sachs, Citi Asking London Staff to Return to Office

Brief: Goldman Sachs Group Inc. and Citigroup Inc. are among the firms asking London staff to return to their desks, as finance firms start to push workers to return after the U.K. dropped its work-from-home guidance. Goldman employees are being asked to return in line with the government’s announcement on Wednesday, according to a person familiar with the matter. Citigroup has emailed its London staff telling them to come into the office at least three days a week. We are now free to gather in our offices, without restriction, where we are better able to generate the energy and collaborative spirit on which Citi thrives,” EMEA Chief Executive Officer David Livingstone and U.K. head James Bardrick said in an email to staff sent late Wednesday and seen by Bloomberg. Fidelity International CEO Anne Richards and Standard Chartered Plc Chairman Jose Vinals both said on Bloomberg Television Thursday that their firms are encouraging U.K. staff to return to its offices.

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Wall Street traders are placing fresh bets on a post-Covid world

Brief: Evidence is piling up that traders are betting the coronavirus’s grip on the global economy is loosening for good — even as the spreading omicron variant ignites fresh supply-chain chaos and worries over the effectiveness of existing vaccines. A Wells Fargo basket of stocks that win in the great economic reopening has stormed back toward pre-pandemic levels versus a gauge of rate-sensitive tech companies. A rally in commodities has added to evidence that the investment and consumption cycle is rebounding. Meanwhile German bund yields have just turned positive as central banks around the world pare pandemic stimulus. “There’s growing optimism that we are nearing the end and we are seeing that reflected across the markets,” said Craig Erlam, senior market analyst at Oanda Corp. “Each market you look at there is a common theme of the recovery and the belief that it’s here to stay.”

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Remote Working Surges as Criteria for More Jobseekers in U.K.

Brief: More jobseekers in Britain are looking to work remotely, a survey showed, indicating that the shift away from office work may outlast the pandemic. Indeed, a job search website, said 10% of its advertisements now offer remote work as an option and about 2.4% of all searches by potential candidates, up 10-fold from 2019. Britain had one of the biggest increases in remote working during the pandemic and in the share of vacancies offering it as an option, Indeed said, citing its own research and work by the OECD. Those posts were disproportionately concentrated in higher-paying, non-client facing roles. “We are settling into seemingly permanent ways of working,” Pawel Adrjan, head of EMEA research at Indeed. “Firms face intense competition when trying to hire staff. So offering remote working makes sense. It can be a powerful way to grab the attention of the sizable number of candidates.”

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Carlyle Prepares to Raise Its Biggest-Ever European Buyout Fund

Brief: Carlyle Group Inc. is preparing to raise its biggest-ever European buyout fund, taking advantage of a rush of capital into private equity firms, people with knowledge of the matter said.The U.S. investment firm could aim to raise around 7.5 billion euros ($8.5 billion) for its Carlyle Europe Partners VI fund, one of the people said. It plans to start fundraising efforts later this year, the people said, asking not to be identified because the information is private.

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Secretive hedge fund Renaissance Technologies' reportedly sees $15 billion in outflows despite double digit performance

Brief: Renaissance Technologies double-digit returns in 2021 weren't enough to prevent the nearly $15 billion in outflows it experienced over the past 14 months, according to a Bloomberg report. The quant-focused hedge fund, founded by Jim Simons and Howard Morgan in 1982, has turned into a more than $100 billion behemoth over the years thanks to the consistently jaw-dropping performance of its Medallion fund, which is only open to current and former employees of the company. The allure of Renaissance's Medallion fund has helped drive investors to the three hedge fund strategies it makes available to the public. But the diverging returns between the private and public funds has led to consistent outflows over the past 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, January 19, 2022:

  • In the United States, the federal government has a new website that allows people to order up to four free at-home coronavirus tests and it just went live. According to government officials, the tests are expected to ship within seven to 12 days of an order being placed and are limited to four per household. U.S. President Joe Biden said he would make half a billion coronavirus tests available to Americans by mail last month. So far the Biden administration has committed to 1 billion rapid tests, the initial 500 million to be distributed by mail, and an additional 500 million for meeting future demand.
  • In Canada, the province of Alberta is making fourth vaccine doses available to those who are immunocompromised, which will affect around 80,000 Albertans over the age of 18. Recipients must have had their third dose at least five months prior. The fourth dose for immunocompromised individuals is “equivalent to a third dose for others,” said Dr. Deena Hinshaw, the province’s chief medical officer. Meanwhile in Quebec, a record number of hospitalizations has been reported at 3,417, with 289 people in intensive care units. Pfizer’s antiviral drug Paxlovid is expected to arrive in the province soon, but officials say the treatment won’t affect the number of hospitalizations immediately.
  • In the United Kingdom, free lateral flow tests are expected to be scrapped by the end of June, according to a report by Reuters. The tests have been available to order online or to pick up from local pharmacies for free since April. According to the U.K. Health Security Agency, more than 8 million lateral flow tests were conducted between December 30 and January 5, the highest weekly number on record. The cost of the lateral flow tests is about 30 pounds, or $40.75 for a pack of seven. Officials are now working on an online ordering system that will instead direct people to paid providers of lateral flow tests. 
  • Japan has extended coronavirus curbs in Tokyo and other regions covering half the population as they try to find a way to address Omicron. The new measures, which allow governors to shorten the operating hours of bars and restaurants and to limit the sale of alcohol, will go into effect on Friday and last until February 13. "We are battling against an unknown virus, and I hope that we can overcome this situation with sufficient preparation and without excessive fear," Prime Minister Fumio Kishida said. Japan has fully vaccinated about 80% of the population but only about 1% have had the booster. 
  • Brazil’s vaccine rollout for children ages five to 11 started on Monday, despite continuing opposition from President Jair Bolsonaro. The president has been widely criticized for his downplaying of the severity of Covid-19 at home and internationally. The latest instalment in the saga is his strong position on child vaccination.  Just days before the vaccine rollout, Bolsonaro falsely claimed in an interview with local media that no children have died of Covid-19, saying later in the same interview that "some children must have died, but they must have some comorbidity." About 70% of Brazilians are fully vaccinated.
  • In Australia, a record number of deaths were reported on Tuesday, as the state of Victoria declared an emergency for hospitals in its capital. A total of 74 deaths were reported among the states of New South Wales, Victoria and Queensland, surpassing the previous record of 59 deaths set on September 4, 2020.  "We've reached a point in our healthcare system where it's juggling extreme workforce shortages ... alongside a vast number of patients with COVID-19 who require hospitalization, alongside that an extraordinary workforce that are absolutely exhausted," Acting Health Minister James Merlino said.

Covid-19 – Due Diligence And Asset Management

Schwab CEO Sees Brokerage of the Future Looking More Like Uber

Brief: Financial firms need to take more cues from Silicon Valley, according to Charles Schwab Corp. Chief Executive Officer Walt Bettinger. Consumers want their banks and brokerages to offer technology with the same level of personalization they get from ride-hailing and food-delivery apps, Bettinger said in a wide-ranging interview after Schwab reported fourth-quarter results this week. “The expectations for clients of the experience they have at their financial-services company is formed by the experiences they have at Uber, DoorDash or Amazon,” Bettinger said. Schwab, a 50-year-old firm with more than $8 trillion of client assets, upended the brokerage industry by eliminating commissions and announcing the $26 billion acquisition of rival TD Ameritrade just months before the pandemic turbocharged trading by individual investors.

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Global Investment Flows Are Rebounding to Pre-Pandemic Levels, UN Says

Brief: Global foreign-direct investment flows surpassed their pre-pandemic levels in 2021, jumping 77% to an estimated $1.65 trillion, according to the United Nations Conference on Trade and Development. The U.S. and other developed economies saw the largest increase in foreign investment flows, which tripled to $777 billion in 2021 from the previous year, according to a report published Wednesday. Inward investment in the U.S. grew 114% to $323 billion, due to a surge in cross-border mergers and acquisitions. Foreign-direct investment in developing economies grew by 30% to nearly $870 billion, led by a 20% jump in East and Southeast Asia and a recovery to near pre-pandemic levels in Latin America and the Caribbean.

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Gates and Wellcome Take Aim at Covid Variants and Future Threats

Brief: Philanthropist Bill Gates and Jeremy Farrar, director of the U.K.’s Wellcome foundation, called for caution in predicting the path of the coronavirus as their organizations committed a combined $300 million to help prepare for emerging variants and future pandemic threats. “Talk of the pandemic coming to an end or waking up one Tuesday morning and it’s finished, that is premature,” Farrar said. “We’ve got to prepare for other scenarios which may not be quite as rosy.” While the U.K. and some other countries have probably turned the corner in the fight against omicron thanks to vaccines, much of the world remains unprotected, and new variants continue to pose a risk, Farrar told reporters Tuesday on a call. Rising levels of immunity could reduce the impact of omicron and future variants, but forecasting the course of the pandemic remains perilous, Gates said.

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BlackRock CEO on ‘new world of work’: Companies not adapting ‘do so at their own peril

Brief: As the coronavirus pandemic stretches into 2022, BlackRock CEO Larry Fink is predicting that some of the workplace changes spurred by the crisis – including flexible schedules and a renewed focus on employee mental health – will be permanent. “No relationship has been changed more by the pandemic than the one between employers and employees,” Fink writes in his annual letter to CEOs, published on Tuesday. He points to the historic quit rates and the wage growth we’re seeing in the United States as positive signs of “workers seizing new opportunities” as well as “their confidence in a growing economy.” Workers aren’t just looking for new opportunities now either – they’re demanding more from their employers in benefits and work-life balance, especially flexible work arrangements and work that aligns with their values.

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WestJet, Air Canada cancel flights as Omicron takes toll on sector

Brief:Canada's two biggest airlines have cut thousands more flights as COVID-19 continues to surge, miring the sector in uncertainty nearly two years after the pandemic began. WestJet Airlines Inc. said Tuesday it will cancel 20 per cent of its February flights, less than three weeks after announcing flight reductions of 15 per cent for January. The move marks a response to "government barriers" amid the Omicron variant, which has also affected staffing levels, the Calgary-based airline said. "We continue to advocate for the elimination of cumbersome travel rules that are unnecessarily impacting Canadians and prolonging the recovery of the travel and tourism sector,” chief executive Harry Taylor said in a release.

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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, January 18, 2022:

  • In the United States, hospital systems are being overwhelmed by new cases of the Omicron variant and experts are suggesting that there are no signs of a natural immunity being built among the American population. Dr. Anthony Fauci, Chief Medical Advisor to the President said in an interview for the World Economic Forum that he would not yet declare Covid-19 to be endemic nor would he consider Omicron to be the last variant the world must contend with. When asked if the virus could this year become a part of a normal life, like the flu, Fauci said “I would hope that that’s the case, but that would only be the case if we don’t get another variant that eludes the immune response.” American deaths now exceed 1,900 per day and although cases are beginning to slow in the Northeastern U.S., the rest of the country may not have yet reached its peak. Fauci said that the evolution of the pandemic is still unclear and would not speculate about its end. “The answer is: We do not know,” he said.

  • Major Canadian airlines are calling for an end to mandatory Covid testing at airports. In a letter addressed to the federal government and the government of Ontario, Air Canada, WestJet, and Toronto's Pearson International Airport petitioned to halt testing for vaccinated travelers on arrival. "As the government has ramped up testing at airports for international arrivals, we have seen frontline workers struggle to get PCR tests, and lab processing capacity decrease significantly," the letter said. The letter claims that the tests have been unfairly distributed to airports when some of the most vulnerable communities struggle to acquire them. As cases continue to rise, the molecular testing kits have been restricted to those at high risk of hospitalization or people in settings where the virus can spread rapidly. Travelers entering the country are required to show proof of a negative test before boarding and all passengers arriving from countries other than the United States are required to isolate until they are able to show proof of a second negative test upon landing.

  • A new study from the United Kingdom suggests that front-line health care workers have suffered PTSD at the same rate as soldiers who have fought in combat missions. Health care workers in intensive care units throughout the U.K. have experienced levels of post-traumatic stress from the pandemic comparable to those who have fought in Afghanistan, according to a survey released last month. Researchers say that the level stress experienced by ICU workers could affect the quality of patient care. The study found that nurses who have recently begun their careers have been the most negatively affected. The study concludes that there is a strong link between poor mental health of the practitioners and increased functional impairment while administering care. "These effects are likely to have an impact on patient care outcomes and the longer-term resilience of the healthcare workforce," the researchers said.

  • On Monday, Greece made vaccination mandatory for people over age 60 as hospitals in the country are seeing a dramatic spike in new admissions. People in the age group will face a 50 euro fine in January for failing to get vaccinated, followed by a 100 euro fine for every month after that. Currently, two-thirds of the Greek population is fully vaccinated, and the average throughout the European Union is roughly 70 per cent. Health Minister Thanos Plevris said that the money collected from the fines will be used to fund hospitals in the country. “The age factor is important because of its impact on the public health service,” Plevris said in a television interview on Sunday. Health care workers have been mandated to get vaccinated since last year, and vaccine passports in the country will now be considered null and void after 7 months if the individual has not received a booster shot. Since the vaccine mandate for older people was announced in December, more 500,000 of the targeted population have been fully vaccinated.

  • According to an Israeli study released Monday, a fourth dose of the Pfizer-BioNTech vaccine is not enough to thwart infection from the Omicron variant. 154 medical personnel at the Sheba Medical Center in Tel Aviv received a fourth dose of the vaccine for the trial, and antibody levels were raised, however, that was not enough to completely prevent infection. Those infected in the trial were not immune to virus but those who contracted it saw little-to-no symptoms after receiving the shot. Last week, European regulators said that a fourth dose of the vaccine could actually have the opposite effect, weakening the body’s immune systems and causing more serious symptoms. In December, Israel began administering fourth shots to people over 60 and since then have inoculated over half a million people. Gili Regev-Yochay, the trial’s lead researcher, said that the decision to give elderly people an extra dose was the right decision despite outside concerns, however, the results did not prove to be worth a large-scale rollout of a fourth dose.

Covid-19 – Due Diligence And Asset Management

Pandemic caused major shifts in investment portfolios, report finds

Brief: The 2022 bfinance Insurer Investment Survey has revealed major shifts in asset allocation, investment risk exposures and ESG practices during the pandemic, driven by long-term pressures and the effects of Covid-19. The survey found most insurers are set to further cut their fixed income allocations in the next 18 months. A further 61% of insurers are planning to enter unfamiliar asset classes, including Emerging Market Debt, Private Equity, and Infrastructure Equity and 74% are expected to increase portfolio liquidity. Insurers are also planning to increase their risk exposure with 73% saying there was the possibility to add more risk to their portfolios. The survey highlighted greater efforts towards ESG, including a 120% rise in the proportion of insurers integrating ESG factors since before the pandemic. It also found more insurers were taking part in exclusions/negative screening, carbon reporting and impact investment. bfinance stated the proportion of net-zero investment commitments is set to rise from 24% to 64%.

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Return to pre-pandemic investment levels in Irish real estate

Brief: While 2022 may not surpass or even match the extraordinary €5.5 billion invested in Irish real estate in 2021, the ongoing emergence of society from the Covid-19 pandemic should mean another strong year for the commercial property market, according to CBRE. Outside of the continued appetite of investors for traditional office, residential, retail and industrial sectors, the growth in demand for alternative investments such as data centres, life sciences and senior housing is expected to see the momentum built up in the last 12 months continue. Speaking at the virtual launch of the 33rd edition of the commercial real estate agency’s annual Outlook report, CBRE Ireland managing director Myles Clarkesaid: “The landscape for commercial real estate is dramatically different from the last decade, yet long-term financial trends and the growth trajectory of the Irish economy remains intact. This presents immense opportunity. Indeed, the central theme of this year’s report is Identifying Opportunity”.

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Pandemic Fuels Demand by Ultra-Wealthy for Investment Migration, Alternative Citizenship

Brief: Never again”—that’s the feeling among high-net-worth individuals after 18 months in which global travel has been limited by the Covid-19 pandemic, said Jean Francois Harvey, global managing partner of Harvey Law Group, an international law firm based in Montreal that helps clients immigrate to new countries. As international borders begin to reopen and the globe confronts a new, more contagious coronavirus variant, those who can are making plans to ensure they’ll never be so limited in their movement again. High-net-worth individuals are seeking real estate investments in historically safe real estate markets across Europe, the United Kingdom and the U.S., adding even more demand for prime properties in markets that are already seeing frenzied price growth. “During COVID, the only way to get into another country was to be a resident or a citizen,” Mr. Harvey said. “Suddenly, people realize that to have only one residence or one passport is not the best.”

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Exchange-traded funds: Covid-19 spurs work-from-home ETFs

Brief: In the wake of the Covid-19 emergency, US ETF managers are launching funds that tap into the working-from-home phenomenon. The question is, will these ETFs outlive the pandemic? Peter Taberner reports. In June last year, New York-based Direxion launched the first ETF linked to the working-from-home (WFH) theme. It is designed to provide investors with exposure to companies at the forefront of the transition towards flexible work patterns. Three months later, BlackRock unveiled its own Virtual Work and Life ETF, where the investment objective is to track the investment results of companies that design products and services centred on employees working from home. Similarly, asset manager Emles, another New York-based company, designed its own @Home ETF, also identifying companies that will benefit from the new culture of increased home-based working.

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Infrastructure roundtable: How Covid could benefit infra

Brief: Government spending at a time of economic crisis, as well as the heightened sense of ‘green’ investing, are both drivers for non-listed infrastructure investing. Another is the return of inflation. What are Europe’s infrastructure needs, to what extent is there government support for infrastructure development, and how would infrastructure investment make our societies better? Tania Tsoneva, CBRE Investment Management – We have relatively high-quality infrastructure in the UK as well as in Europe. However, infrastructure investment has diminished over time, probably due to sovereign balance sheets being under pressure. We went through the financial crisis, then the sovereign debt crisis, so we saw a declining trend and there is going to be a need for catch-up. The drivers of infrastructure investments going forward are going to be decarbonisation and digitalisation. Europe is the role model when it comes to the energy transition and the greening of the power generation fleet.

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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, January 17, 2022:

  • In the United States, the surgeon general says the Omicron wave of Covid-19 has not peaked yet, and that the next few weeks will be very difficult. Dr. Vivek Murthy said in an interview on CNN’s “State of the Union” that the virus is spreading quickly throughout the country at different times. “The challenge is that the entire country is not moving at the same pace,” he said. Murthy noted the drop in cases in places like New York and New Jersey, but warned that the decline is not indicative of the national outlook. The U.S. is still seeing about 800,000 new cases per day, and hospitalizations have reached about 150,000. 
  • In Canada, new federal modelling suggests hospitalizations could reach record numbers in the coming weeks, and the Public Health Agency of Canada says it expects the high number to put a strain on healthcare systems. On average, over the last seven days, there were 6,779 patients in the hospital with Covid-19, with 883 of them in intensive care. Case numbers are hovering around 37,500 per day, but the new modelling shows the country is on track to see between 100,000 and 250,000 daily infections before cases decline. “The true number of daily cases, driven by extremely high transmissibility of the Omicron variant, could still vastly exceed anything we have experienced to date during this pandemic,” Chief Public Health Officer Dr. Theresa Tam said on Friday. “We are hopeful that cases will soon peak.”
  • In the United Kingdom, Prime Minister Boris Johnson is drawing up plans to scrap “Plan B” Covid-19 measures as case numbers continue to fall. According to a report the by Telegraph, vaccine passports and work from home orders are expected to be lifted from January 26, though the report said some face masks measures may remain. Guidance will remain in place but will not result in fines or legal action if ignored, the report said. The Scientific Advisory Group for Emergencies warned on Friday that the scrapping of Plan B measures before the peak of infection is passed could result in an increase in hospitalizations.
  • Austria on Sunday tweaked its plans for bringing in a vaccine mandate, saying it will now apply to residents ages 18 and older, rather than 14 and older as originally planned. Chancellor Karl Nehammer explained that the change in age limit was due to concerns that were raised about teenagers being punished. Nehammer told reporters on Sunday that people who are unwilling to get their shots face fines of up to 3,600 euros ($4,108), beginning in mid-March with a transition phase planned for February. Except where medical exemptions are granted, the mandate will apply to all adults living in the country. The fines can be reversed by taking a vaccine within two weeks of being identified.
  • France’s parliament gave final approval on Sunday to a new law that will exclude unvaccinated people from entering places like restaurants, cafés and cinemas. In the lower house of parliament, lawmakers voted 215 in favour and 58 against, despite opposition parties finding some provisions of the new law were too tough. Currently, unvaccinated people can enter most venues by providing a negative Covid-19 test, but the new law will take effect in the coming days. Anti-vaccine protesters demonstrated against the new law in Paris and other cities across the country, but their numbers were down significantly from the week before. 
  • In Australia, Health Minister Greg Hunt says the Omicron wave may be peaking, pointing to signs out of New South Wales (NSW) and the Australian Capital Territory (ACT). “I won’t call it as having reached it yet, but in particular what we’ve seen, is that all of these jurisdictions have so far significantly undershot the hospitalisation, ICU and ventilation predictions that were made at the outset,” Hunt said. NSW reported 34,660 new Covid-19 cases on Sunday and 20 deaths, while the ACT reported 1,316 new cases and two deaths.

Covid-19 – Due Diligence And Asset Management

Credit Suisse chair resigns after Covid breaches

Brief: Antonio Horta-Osório, chairman of Credit Suisse, the global banking giant, has resigned with immediate effect after breaking Covid rules.cAn internal investigation found that Horta-Osório had broken Covid quarantine rules twice. In one incident he reportedly attended the Wimbledon tennis finals when restrictions would have required him to quarantine. This weekend Horta-Osório held discussions with the bank's board about his decision to quit, the Financial Times has reported. Horta-Osório has only been in the role for eight months and was previously chief executive of Lloyds Banking Group. He joined Credit Suisse after a series of scandals at the bank, including those involving Greensill Capital and revelations the company had spied on its senior employees."I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally," Horta-Osório said in a statement on Sunday night (16 January).

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Pandemic prompts major shift in asset allocation, investment risk exposures and ESG practices

Brief: A new study from independent investment consultancy bfinance has revealed a major shift in insurers’ investment portfolios, driven by a combination of long-term pressures and the effects of the Covid-19 pandemic. The 2022 bfinance Insurer Investment Survey highlights substantial changes in asset class exposures, risk profiles, resourcing/headcount and ESG approaches, drawing on data from nearly 90 insurers in 20 countries, whose combined investment portfolios exceed USD5 trillion. Insurance firms have found it increasingly challenging to deliver appropriate investment outcomes to support the needs of their businesses – a task which, before the era of rock-bottom interest rates, could often be achieved through relatively low-risk core holdings. This pressure has driven widespread innovation, which is now reinforced by the ongoing macroeconomic fallout of the pandemic.

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FCA fines UK finance firms GBP568m in 2021, in response to surge in pandemic-charged financial crime

Brief: FCA actions in 2021 resulted in financial organisations in the UK being fined GBP568 million in the course of the year.  This total is made up by fines against major banks and action against individuals for insider dealing, non-financial misconduct and carrying out regulated activities without authorisation. This data was contained in a new press release published to the FCA’s website, and analysed by a Parliament Street think tank. Experts concluded that the high quantity of financial penalties is in response to the new forms of financial crime buoyed by the Covid-19 pandemic.

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Group: Tax rich to fund vaccines for poor hit by pandemic

Brief: Anti-poverty organization Oxfam called Monday for governments to impose a one-time 99% tax on the world's billionaires and use the money to fund expanded production of vaccines for the poor — part of an effort to combat global inequality widened by the coronavirus pandemic. The ranks of the super-rich have swelled during the pandemic thanks to ample financial stimulus that pumped up stocks, the group said. Meanwhile, poor countries have suffered more than their share from COVID-19 because of unequal access to vaccines, which have mostly gone to rich nations, Oxfam said in a report aimed at informing discussions at the World Economic Forum’s online gathering of political and business leaders this week. "The pandemic has been a billionaire bonanza," Oxfam International Executive Director Gabriela Bucher said in an interview.

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China’s zero-Covid policy could deal another blow to global supply chains, Moody’s says

Brief: Supply chain disruptions are being prolonged driven largely by China’s strict zero-Covid policy, according to an economist from Moody’s Analytics. The bottlenecks have lasted for about a year now but are expected to “materially ease in the early months of this year,” said Katrina Ell, a senior economist for Asia-Pacific at Moody’s Analytics. “So we would start to see material downward pressure on things like producer prices, input prices that kind of thing. But given China’s zero-Covid policy and how they tend to shut down important ports and factories — that really increases disruption,” she told CNBC’s “Squawk Box Asia” on Friday, adding it amplifies ongoing supply chain pressures. Beijing has imposed a strict zero-Covid policy since the pandemic began in early 2020. It entails strict quarantines and travel restrictions — whether within a city or with other countries — to control outbreaks.

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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, January 14, 2022:

  • In the United States, President Joe Biden announced on Thursday the deployment of military medics to six hard-hit states, as the nation battles an Omicron surge. The federal government will also send double the number of at-home rapid tests to be distributed for free, and plans to make high quality N95 masks available to all in the near future. According to the Centers for Disease Control and Prevention, the U.S. is seeing a weekly average of more than 750,000 cases per day, an increase of 47% from the previous week. The military support will help at-capacity emergency rooms and overwhelmed hospital staff in Michigan, New York, New Jersey, Ohio, New Mexico, and Rhode Island.
  • Health Canada is poised to make a decision regarding the authorization of Pfizer’s antiviral Covid-19 treatment in the next seven to 10 days. In the U.S., where the drug was approved just before Christmas, supply issues have made it hard for anyone to get access, which raises even more questions as to when the drug might be available to Canadians. Pfizer applied to the United States Food and Drug administration on November 22 and to Health Canada on December 1, but health officials have said the Canadian submission was incomplete, with more data coming in at the end of December and earlier this week. As a result, the decision will take at least another week to 10 days for Canada.
  • In the United Kingdom, Professor Jonathan Van-Tam is leaving his role as England’s deputy chief medical officer to take up a new role at the University of Nottingham. Professor Van-Tam, who worked on the Covid-19 pandemic and Vaccine Taskforce, became widely known for his use of football analogies to explain complex scientific concepts during coronavirus briefings.  In a statement, he described his time as deputy chief medical officer as “the greatest privilege” but “the most challenging of my professional career,’” adding “we all wish Covid had never happened.” Professor Van-Tam was recently knighted, along with Chief Medical Officer Professor Chris Witty. 
  • Germany’s vaccine committee has recommended that children between the ages of 12 and 17 should receive their booster shots. The move makes Germany one of the first countries in the world to do so, following the United States, Israel and Hungary. The committee said the booster should be from Pfizer/BioNTech and given at least three months after the child has had their second shot. "The current situation, with a sharp increase in the number of cases due to the Omicron variant and the feared consequences for the health system in Germany, makes it necessary to extend the vaccination campaign," said the vaccine committee in a statement. The European Medicines Agency has still not given their regulatory approval, so Germany will be responsible for any liabilities linked to the booster for the age group.
  • In Japan, case numbers have topped 18,000, about 5000 more than the previous day’s number, while the nation’s capital reported 3124 new coronavirus cases, the most since September 1. According to projections announced at a municipal government meeting, the daily tally for Tokyo is expected to exceed 10,000 by the end of January. On Sunday Japan tightened restrictions in three regions that host U.S. military bases after concerns were raised that outbreaks at the bases have spilled over into local communities. Tokyo’s governor has said she will request similar measures if the region’s hospitals come under pressure.

  • In Australia, it looks like hospitalizations will plateau next week in the nation’s most populous state of New South Wales. The state’s health deputy secretary Susan Pearce said pressure will likely remain on hospitals for the next few weeks, even though hospitalization numbers are tracking better than the best-case scenario from an official modelling a week ago. "That is pleasing, but that plateauing is obviously still at a relatively high level of Covid patients in our hospitals and in our (intensive care)," Pearce told a media briefing. Of Australia’s nearly 1.4 million Covid-19 cases, about 1.2 million of them have been reported in the last four weeks.

Covid-19 – Due Diligence And Asset Management

Why a wide-scale return to the office is a myth

Brief: For two years, employees have been waiting for ‘the day’ when everyone goes back to the office. But it’s probably never coming. Workers were meant to have returned to the office by now. Our expectation, back in early 2020, was that once the pandemic had ended, we’d all collectively resume our pre-Covid patterns of office-based working. Yet that’s not how things have turned out. Two years on, employees around the world continue to face ongoing uncertainty as to when – and if – they’ll be expected back at the workplace in person. The emergence of different Covid-19 variants has exacerbated matters; Omicron has triggered record cases globally, forcing employees who were slowly adapting to a partial, hybrid return to the office to reverse course and work remotely again.  Today, the idea that we’ll all return to the office together again seems highly unrealistic.

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Alternative assets to reach USD23.21tn in 2026, says Preqin report

Brief: Alternative assets fund managers, who are currently holding more than USD13 trillion in assets under management (AUM) — continuing the year-on-year growth since 2010 — are expected to hold USD23.21 trillion by the end of 2026, according to Preqin’s 2022 Global Alternatives Reports. Private equity & venture capital (PEVC) is by far the largest asset class, with AUM estimated to be in excess of USD11 trillion as of December 2026, accounting for almost half (49 per cent) of alternative assets AUM. Private debt is expected to be the fastest-growing alternative asset class over the next five years – with a compound annual growth rate (CAGR) of 17.4 per cent, taking AUM to an estimated USD2.69 trillion by the end of 2026 – as institutional investors continue to look for reliable income streams. Environmental, social, and governance (ESG) factors have become increasingly important among alternative assets, in particular for infrastructure and natural resources.

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UK economy finally bigger than before pandemic in November

Brief: Britain's economy grew strongly in November to finally surpass its size just before the country went into its first COVID-19 lockdown, official data showed on Friday. The world's fifth-biggest economy expanded by a much faster than expected 0.9% in November - before the latest wave of COVID-19 infections and restrictions for many firms - leaving it 0.7% bigger than it was in February 2020, the ONS said.Economists polled by Reuters had forecast monthly gross domestic product growth of 0.4% for November."It's amazing to see the size of the economy back to pre-pandemic levels in November – a testament to the grit and determination of the British people," finance minister Rishi Sunak said. Other economies have already recovered their pre-COVID size, chief among them the United States.

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Why Omicron is a bigger market risk in 2022 than people think

Brief: U.S. markets have largely shaken off Omicron fears, witnessed by the pop in cruise line stocks Thursday despite a general market sell-off. But surging COVID-19 infections in China, beyond the early pandemic peak, are leading one strategist to warn of an underpriced risk to inflation that could weigh on stocks. At a recent Yahoo Finance Plus webinar, Bianco Research President Jim Bianco argued that China's zero tolerance COVID policy could lead to a nationwide shutdown — causing economic reverberations around the world. "What I'm most worried about here is as this Omicron variant mushrooms, and we get millions of cases a day, it's not necessarily a health risk. But what it is is that anybody who tests positive can't go to work for 10 days, and we've got huge absenteeism. And that's really coming home in China in a big way, because China has a zero COVID policy. They lock everybody down, and lock you in your house for weeks on end until COVID goes away," said Bianco.

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Regulation ‘huge structural risk’ for investors

Brief: Regulation is one of the most underrated and important risks for investors to consider this year. This is the view of M&G chief investment officer, equities Fabiana Fedeli who was speaking at a roundtable hosted by the fund manager this morning (13 January 2022). While Covid-19, inflation, and policy errors are concerns, Fedeli warned that risks around regulation should not be neglected. She said: “Covid, inflation and policy errors are clear risks, but regulation is a huge structural risk. “Governments are looking more and more into companies. They’re looking at the consumer from a different perspective. “In the US, there might be regulation at some point in the IT sector. It comes from a complete shift in the way the regulator thinks about how the consumer benefits.

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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, January 13, 2022:

  • In the United States, the Supreme Court blocked President Joe Biden’s vaccine or testing requirement aimed at large businesses but did allow a vaccine mandate for certain health care workers to go into effect nationwide. The decision was announced on Thursday and the ruling blocking the mandate for large businesses was based on the argument that Congress has not given the Occupational Safety and Health Administration the power to enact such a mandate. The rule would have impacted some 80 million individuals and required employers with 100 or more employees to ensure that their employees are fully vaccinated or undergo testing and wear a facial covering at work.
  • In Canada, Prime Minister Justin Trudeau said he would need to take a wait-and-see approach if Quebec’s plan to issue some sort of tax on the unvaccinated would be an idea that would work. Speaking to reporters on Wednesday, Trudeau said the federal government has tried to encourage the unvaccinated to receive the inoculation with travel restrictions and vaccine mandates – but a health care tax is a novel concept that needs further study. It is almost guaranteed the proposal would be challenged in the courts under Canada’s Charter of Rights and Freedoms. According to Lorian Hardcastle, a law professor at the University of Calgary, citizens would challenge that the proposal would be a violation of the charter rights to life, liberty and security of the person and the Quebec government would be left to justify the infringement.
  • United Kingdom Health Secretary Sajid Javid announced on Thursday people who test positive for COVID-19 will now have to self-isolate for five days, rather than the full seven. The move will bring the situation in England on par with the United States where the isolation period has already been cut to five days. The media also stated the move could ease some pressure on Prime Minister Boris Johnson, who has faced mounting criticism and even calls to resign from members of his own party over his role in what has now been dubbed “Partygate” – a May 2020 party he attended at 10 Downing Street during coronavirus lockdowns for the rest of the country. 
  • In France, schools have shut across the country as teacher unions say 75% of its members have agreed to strike in protest against the government’s handling of the coronavirus. The government’s numbers given to the public were noticeably lower on Thursday regarding the teacher walkouts – claiming 40% of primary and 24% of secondary teachers walked off the job. French ministers have made keeping schools open a priority during the pandemic, even during a recent surge in COVID-19 cases, fueled by the omicron variant. Teachers are fed up – countering COVID-19 rules in school are confusing and constantly changing. France reported a record 368,149 new coronavirus cases earlier in the week.
  • In the United Arab Emirates (UAE), the emirate of Ajman is saying two strikes and you’re out to government employees with it comes to contracting COVID-19. The Associated Press is reporting via local media outlets, federal employees in Ajman will not receive paid sick leave for quarantine if they come into close contact with infected people outside the workplace or home for a second time. The UAE are claiming near perfection when it comes to vaccination rates - 99% of eligible residents have received the jab, marking a death toll of under 2,200 for the virus. However, as is the case with most places in the world, UAE has had trouble with the omicron variant seeing its cases spike to more than 2,600 a day last week, as compared to around 50 a day in early December 2021.
  • In China, with the Winter Olympics less than a month away, the country is doubling down on its COVID-zero strategy to make sure it goes as smooth as possible. The Associated Press is reporting more than 20 million people across the country are in some form of a lockdown, with many prevented from leaving their homes. For instance, Tianjin, a city only an hour from Beijing is on high alert. Although it has refrained from a total lockdown, Tianjin city officials have sealed off several residential communities and universities, canceled almost all flights, suspended high-speed rail services and closed off highways. The city conducted mass testing for a second time for its 14 million residents and has asked them to stay at home until they receive a negative result. The Beijing Winter Olympics are set to begin February 4th with support staff already arriving in the country.

Covid-19 – Due Diligence And Asset Management

Goldman Sachs Postpones its Return to Office Again to Wait out the Covid Surge

Brief: Goldman Sachs Group Inc. delayed its return to office for staff in the U.S. by another two weeks as it looks to wait out the Covid-19 surge nationwide. Goldman’s employees were told they could delay returning to Feb. 1, according to a person familiar with the matter. The bank’s management, aggressive champions of having its offices filled, had to check their desire after an about turn last month amid a deluge of Omicron cases sweeping across New York and beyond. Anyone entering the bank’s offices must get a booster by Feb. 1 if they’re eligible for the injections by that date, Goldman had previously told its workforce. A spokesperson for the bank declined to comment.

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Institutional Investors Reveal Strong Appetite for Real Estate in 2022

Brief: Institutional investors plan to invest at least EUR68.2 billion in global real estate this year, according to the 2022 Investment Intentions Survey by ANREV, INREV and PREA. The majority of this new capital comes from European investors (52 per cent), whilst their counterparts from North America and Asia Pacific account for 26 per cent and 21 per cent respectively. Funds of funds expect to commit a further EUR8.5 billion, taking the total to at least EUR76.7 billion. Of this total, EUR31.5 billion is expected to be invested in European real estate over the next two years. At a global level, 62 per cent of the surveyed investors said the Covid-19 pandemic would not impact their investment plans for 2022. With a gap of 120 basis points between current (8.9 per cent) and target (10.1 per cent) allocations to real estate, institutional capital looks set to continue to flow into the asset class during the coming year and 61 per cent of all surveyed investors expect their allocation to real estate to increase over the next two years.

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London Tech set to Reach New Heights in 2022 Following Record Year for VC Investment

Brief: The future looks bright for London’s tech sector, according to a new report from London & Partners and Dealroom.co, showing that 2021 was another record year for venture capital investment into London’s tech firms. 2021 marks the year London tech came of age, with a large increase in megarounds (USD100 million-plus rounds), an unprecedented number of exits and more new unicorns than any previous year. The UK capital’s tech firms raised an all-time high of USD25.5 billion in VC funding, 2.3x investment levels in 2020, against a backdrop of record global (USD675 billion) and European (USD115 billion) VC investment.  Despite the challenges posed by Brexit and coronavirus, the strong performance and rapid growth of London’s tech sector in 2021 suggests the city is competing strongly on the world stage with other leading global tech hubs like the Bay Area, New York and Shanghai. London ranked fourth globally for VC investment in 2021, behind the Bay Area (USD100.9 billion), New York (USD47.5 billion) and Greater Boston (USD29.9 billion).

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More than Half of Workers Would Consider Quitting Before Returning to Office

Brief: Workers grew more uncomfortable about heading back to the office in the first week of the year and were much more likely to consider quitting if their employer demanded they return, a sign that companies’ efforts to get people back amid rising COVID caseloads face stiff resistance. The share of remote workers who would consider leaving their job if they were asked back to the office before they felt safe rose to 55 per cent as of Jan. 6, up from 45 per cent just a week earlier, according to pollster Morning Consult. More than four in 10 workers felt unsure about returning to the office, compared with 35 per cent who said so on Dec. 30. People were also less likely to want to attend indoor sporting events, go to the movies and dine out, Morning Consult’s weekly U.S. survey found. The findings come as Robinhood Markets Inc. said it would allow most employees to work remotely on a permanent basis, while companies including Facebook parent Meta Platforms Inc. and Wells Fargo & Co. once again delay plans to bring employees back to their desks as the omicron variant sweeps through the U.S.

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Foreign Investment in Emerging Markets Outside China Comes to ‘Abrupt Standstill’

Brief: Foreign investment in emerging market stocks and bonds outside China has come to an "abrupt standstill" due to fears that many economies will not recover from the pandemic this year, according to a report by the Institute of International Finance. In its latest capital flows tracker, the organisation estimates that emerging market securities attracted around $16.8bn in December 2021, but IIF believes the outlook is worsened by the Omicron variant and expectations of a stronger dollar and higher US interest rates. Jonathan Fortun, economist at the IIF, said: "On the other hand, we see flows into China sustaining the overall picture. The last quarter of the year has seen investors pumping money, particularly into China equities. This China and non-China EM split is rooted on the growth outlook. "Markets see China rebounding more quickly than other EMs. Moreover, inflation is forcing the hand of policy makers across the EM landscape. Consequently, our tracker shows bond flows diminishing, as 15 of 20 major EM central banks have tightened monetary policy since May." Non-China emerging market debt suffered an outflow of $9.6bn, while Chinese debt attracted $10.1bn in December, the data shows.

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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, January 12, 2022:

  • In the United States, the federal government announced it will increase the number of Covid-19 tests available to schools by 10 million per month, which will include five million rapid tests and five million PCR tests. The announcement came as part of a set of new measures that aim to keep schools open. Other measures include connecting local school districts with testing providers and providing full reimbursement to schools that set up their own testing programs. According to the Biden administration, its measures so far have allowed 96% of schools to open for in-person learning this month, up from 46% in January 2021. 
  • In Canada, the province of Quebec announced it will impose a health tax on those who refuse to get their Covid-19 vaccines. Premier Francois Legault did not say how much the tax would be or when it would take effect, but he did say he wanted it to be significant enough to incentivize people to get their shots. "These people, they put a very important burden on our health-care network," Legault said at a news conference. "I think it's reasonable a majority of the population is asking that there be consequences." Only about 10% of eligible Quebecers are unvaccinated.
  • In the United Kingdom, case numbers reached 120,821 on Tuesday, and 379 deaths were recorded within a 24-hour period. This is the highest number of daily deaths since February 24 of last year, when 442 deaths were reported. This brings the total death toll since the start of the pandemic to 150,609. The U.K. crossed the 150,000 deaths threshold over the weekend, with Prime Minister Boris Johnson saying in a statement that the best way out of the pandemic is through boosters. So far about 62% of people aged 12 and above in the U.K. have had their booster shots.
  • South Korea has approved the Novavax vaccine for use, to be produced by vaccine developer SK Bioscience Co. Ltd. Novavax is now added to the ranks of South Korea’s approved vaccines, which include Pfizer, Moderna, AstraZeneca, and Johnson & Johnson.  The country is also preparing to distribute the first of Pfizer’s antiviral pills, known as Paxlovid. According to the health ministry, at least 21,000 pills will arrive in the country on Thursday, with another 100,000 expected by the end of the month. Paxlovid has been shown to reduce hospitalizations and deaths by 90% according to data from the company’s clinical trials.
  • Brazil’s health regulator Anvisa has asked President Jair Bolsonaro to retract statements he made regarding the vaccination of children last week. In a letter made public over the weekend, retired rear admiral Antonio Barra Torres asked the president to provide evidence on his statement that there were undisclosed “interests” behind the decision to authorize the vaccine for children. Torres calls on Bolsonaro to retract his statements if he cannot provide the evidence. Bolsonaro openly criticized Anvisa last Thursday, saying he had never heard of children dying from Covid-19. The president’s office has not responded to the request for comment on the letter.
  • In Australia, calls to expand the definition of “essential worker” are growing as Covid-19 continues to cause staff shortages across the country. The federal government and industry groups have held crisis talks as job vacancies surge. All sectors of the economy reported higher vacancies, with openings up 19.4% in the private sector from last August. Public sector vacancies were up 9.7%, the Guardian reports. Arts and Recreation saw an increase in job openings of about 260%, compared with February 2020. The numbers come as Omicron officially overtakes Delta as the dominant strain in Australia.

Covid-19 – Due Diligence And Asset Management

2021 private equity deal value surpasses pre-Lehman Brothers peak, says Preqin

Brief:After a surprisingly resilient 2020, private equity deal flow came roaring out of the gates in 2021, as fund managers looked to deploy record amounts of investor capital, while also taking advantage of buoyant listed equity markets to exit existing positions. Around 8,000 deals are expected to have been completed, conservatively annualising data to October 2021, with a combined value of more than USD800 billion, breaking the 2007 record of USD712 billion. That's according to the 2022 Global Private Equity Report published by Preqin, whilst also finds that private equity returns continue to outperform public markets, with the global private equity funds tracked by the company having achieved a net initial rate of return (IRR) of 18.8 per cent over the five years to March 2021. The surge in private equity investment activity has been supported by a virtuous circle driving the asset class to new heights.

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Goldman: China’s Zero-Covid Policy Presents Risks to Global Investors

Brief: The Chinese city of Xi’an has been on lockdown for almost three weeks. Apart from the 14 million residents, the city is also home to several memory chip manufacturing facilities, including those of Samsung Electronics and Micron Technology. Although China’s strict zero-Covid policy implemented at the start of the pandemic was effective early on, the approach has disrupted global supply chains, worrying investors who have bet on a globalized economy, according to the latest report from the Investment Strategy Group at Goldman Sachs. The China findings are just one part of Goldman’s outlook published Wednesday. The report includes the firm’s investment recommendations and its 2022 outlook for global economies and financial markets.

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Brevan Howard partners share GBP120m pandemic payout

Brief: Seventeen partners at hedge fund Brevan Howard have shared a bumper GBP120 million payout after profits surged following a series of successful bets during the first year of the coronavirus pandemic, according to reports in The Times and The Daily Telegraph. Founder Alan Howard took the lion's share earning over GBP55 million in the year to end March 2021, up from GBP29.9 million in the previous twelve months. In total the firm's partners received GBP43.4 million in remuneration and shared profits of GBP79 million, up from GBP18.3 million the previous year.

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Which disruptive themes might drive the post-pandemic economy?

Brief: Investors and policymakers alike will have to come to grips with a radically different macro environment over the secular horizon as the post-financial-crisis, pre-pandemic New Normal decade of subpar-but-stable growth, below-target inflation, subdued volatility, and juicy asset returns is rapidly fading in the rear-view mirror. What lies ahead is a more uncertain and uneven growth and inflation environment with plenty of pitfalls for policymakers. Amid disruption, division, and divergence, overall capital market returns will likely be lower and more volatile. But active investors capable of navigating the difficult terrain should find good alpha opportunities.

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The Renaissance Man of Venture Capital

Brief: Josh Wolfe, co-founder of venture-capital firm Lux Capital, is not a person one might expect to pen a dystopian vision for 2022. After all, the Covid-19 pandemic has put a torrent of cash in the wallets of investors and has pushed scientific breakthroughs to the forefront of their brains, leading to an incredible run at Lux, a relatively small player in the world of venture capital. In the past two years, its assets have doubled to $4 billion, with 25 of its portfolio companies creating almost $30 billion in value through mergers, acquisitions, or IPOs — including deals with 11 special-purpose acquisition companies. But the extraordinary run has clearly brought out the dark side of the quirky financier. “Failure comes from a failure to imagine failure,” he wrote in a recent ten-page letter to investors, proceeding to envision what he might be saying a year from now: “2022 has been a punch in the face.”

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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, January 11, 2022:

  • The United States reported 1.35 million new cases of Covid-19 on Monday, the highest daily total for any country in the world since the beginning of the pandemic. In the last two weeks, the 7-day average has tripled to roughly 700,000 new infections daily. Monday also saw the number of hospitalizations reach 136,604, breaking the previous record of 132,051 set in January of last year. With cases rising, cities across the country are struggling to keep up. New York City was forced to close three subway lines as many workers are out sick. In Chicago, schools have been closed for several days as teachers and administrators attempt to cope with mass infections. Chief Executive Officer for Pfizer, Albert Bourla, has said that the need for an Omicron-specific vaccine is evident and that company intends to have one available by March. “The two doses, they’re not enough for Omicron,” Bourla said. “The third dose of the current vaccine is providing quite good protection against deaths, and decent protection against hospitalizations.”
     
  • Canadian provinces are urging the federal government for more rapid antigen tests as the Omicron variants sweeps through the country at an alarming rate. In the first intergovernmental meeting since December, Prime Minister Justin Trudeau and Minister for Intergovernmental Affairs Dominic Leblanc advised the provinces that requests will be met as soon as possible. Members from the three opposition parties called for an emergency meeting of the House of Commons to be held before the end of week to press for more aid from the federal government in relation to the surging case numbers seen nationwide. Currently, the federal government has promised to allocate 140 million rapid tests to the provinces in January. “While we will do everything we can to respond,” Leblanc said. “It’s important to remember that health care ultimately is a provincial and territorial jurisdiction and we as a government have to efficiently use the federal resources we can bring to bear to fill the gaps the provinces and territories are identifying.”

  • In the U.K., Prime Minister Boris Johnson is again under fire as new emails have leaked surrounding a party held at No.10 Downing Street, the prime minister’s residence, during the first Covid-19 lockdown in 2020. The emails allegedly came from the prime minister’s Principal Private Secretary Martin Reynolds and invited nearly 100 guests to a “bring your own booze” party in the garden of 10 Downing Street. Johnson and his partner were in attendance at the party on May 20th, along with 40 of the PMs staff. At the time of the party, schools, bars, and restaurants had been closed and social gatherings were prohibited. This is not the first time questions have been raised about parties held by the Conservatives during the pandemic. Earlier this year, a video surfaced online showing members of the party joking about a party over the Christmas holidays when the country was once again on lockdown. A senior government official, Sue Gray, is currently investigating five parties that were alleged to have been held by government departments during lockdowns.
     
  • Spain is asking the rest of Europe to debate the possibility that Covid-19 could be treated as an endemic illness, similar to the common cold or flu. Prime Minister Pedro Sanchez said in a radio interview on Tuesday that because death rates have been dropping since the start of the pandemic, the virus is no longer severe enough to warrant the classification. “It’s a necessary debate; Science has given us the answer to protect ourselves,” he said. “We have to evaluate the evolution of Covid from pandemic to an endemic illness.” Spain has started to monitor the illness with a different set of parameters, and Health Minister Carolina Dariasis is discussing with her European counterparts about how to treat the still surging case numbers. According to Health Ministry data, Spain reported almost 692,000 new cases of Covid-19 in the last 7 days, and 13.4 per cent of hospital beds are being used to treat Covid patients. However, compared to last year, Covid patients made up 11.8 per cent of beds, and case numbers were roughly 115,000 per week.
     
  • China has once again put an entire city on lockdown as more cases of the Omicron variant have been detected in the province of Henan. Residents of the city of Anyang have been told to remain in their houses and the use of vehicles has been prohibited after two people tested positive on Monday. As of Tuesday, 58 people in the city have tested positive, although, there has been no confirmation on whether those cases were of the Omicron variant. The new cases have Chinese authorities worried as Henan province lies adjacent to Hebei province which is hosting several snow sports for the Winter Olympic Games. China reported 110 new cases of the virus on Tuesday, with 87 of them coming from Henan province. All businesses in Anyang were forced to close, and tickets for travel to Beijing are no longer being sold. In the provincial capital of Zhengzhou, all restaurants have been closed for in-person dining and all non-essential business have been told to close.

Covid-19 – Due Diligence And Asset Management

Fed Vice Chair Clarida to step down early following scrutiny over his trades during pandemic

Brief: Federal Reserve Vice Chairman Richard Clarida said Monday he will be leaving his post with just a few weeks left on his term and amid revelations regarding his trading of stock funds. In an announcement released Monday afternoon, Clarida said he will be stepping down from his post this Friday. His term expires on Jan. 31. The move comes following additional disclosures regarding trades Clarida made in February 2020, around the time when the Fed was getting ready to roll out what eventually would become its most aggressive policy tools ever, in an effort to combat the Covid crisis. “Rich’s contributions to our monetary policy deliberations, and his leadership of the Fed’s first-ever public review of our monetary policy framework, will leave a lasting impact in the field of central banking,” Fed Chairman Jerome H. Powell said in a statement. “I will miss his wise counsel and vital insights.” Clarida’s exit comes amid heightened scrutiny over what he had described as pre-planned portfolio rebalancing on Feb. 27, 2020. However, recent disclosures, first reported by the New York Times, showed that three days earlier, Clarida sold shares in three stock funds that he would repurchase on the 27th.

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Healthcare sector sees record VC investments in 2021

Brief: VC-backed exits and healthcare funding/investment both set new records yet again in 2021, according to Silicon Valley Bank’s (SVB) annual Healthcare Investments and Exits report. New venture funds allocated to healthcare in 2021 almost doubled 2020’s record with investment into companies exceeding USD86 billion in the US & EU (30 per cent increase from 2020) leading every sector to hit record highs. While the venture backed healthcare industry saw record IPO activity across the board the average post-IPO performance for 2021 was muted (-21 per cent average) and similarly while SPAC mergers were also up this year it was a poor year for de-SPAC performance (-44 per cent average). Healthtech experienced the greatest increase in investment of 162 per cent. Part of this growth is due to the device market, which saw a four-times increase in European investment specifically. Healthtech also saw the number of financials with USD1 billion-plus valuations explode and the creation 42 new unicorns (four-times more than 2020). Biopharma saw increased funding in platform, neurology and anti-infective while orphan/rare activity continued to slow.

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JPMorgan's Jamie Dimon warns unvaccinated New York staff could be terminated

Brief: Unvaccinated New York-based staff at JPMorgan Chase risk losing their jobs, Chief Executive Officer Jamie Dimon said on Monday in a further indication that banks are getting tougher on employees as they return to work. “If you aren’t going to get vaxxed, you won’t be able to work in that office. We’re not going to pay you not to work in the office,” Dimon said. “We want people to get vaccinated.” Last week, Citigroup Inc said staff in the United States who had not been vaccinated against COVID-19 by Jan. 14 would be placed on unpaid leave and fired at the end of the month unless granted an exemption. Asked about a possible hybrid work policy in the future by which employees split their time between home and the office, Dimon said: “We don’t have to answer this right away.” 

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More insurance brokerage M&A expected for 2022

Brief: Consolidation in the insurance brokerage space is expected to continue at a rapid pace through 2022, following a trend from the last 12 months where brokerage transactions drove the majority of announced insurance merger and acquisition (M&A) activity worldwide. PwC’s ‘Insurance Deals Insights: 2022 Outlook’ projects “continuing consolidation in the insurance brokerage space,” especially from private equity-backed firms. This has resulted in “high multiples for insurance brokerage targets [which] shows no signs of stopping” in 2022, according to PwC. Over the past few years, as the world has grappled with the COVID-19 pandemic and related economic challenges, the insurance brokerage space has proven to be very profitable, lucrative, and resilient, according to Mark Friedman, a partner in PwC’s Financial Services Deals practice where he supports private equity and corporate clients with transactions in the insurance sector.

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Ten key medtech themes for 2022

Brief: The COVID-19 pandemic has accelerated the transformation of business models in the life sciences industry, with digital initiatives coming to the forefront. The combination of rapid technological innovation and disruption of traditional models of care has expedited the integration of medtech—digital health, wearables, AI-driven offerings, diagnostics, telemedicine, and other health IT solutions—in healthcare. Here are ten global medtech themes we are tracking in the coming year: Focus on digital and data assets in life sciences/healthcare M&A. Globally, life sciences technology companies, private equity and other financial investors are focussing on the value of digital and data assets as they evaluate potential targets. We expect to see both the continued consolidation of digital health players along the lines of the Ginger-Headspace merger as well as additional acquisitions by Big Tech and Big Pharma such as Oracle’s acquisition of Cerner to bring complementary datasets, expertise and capabilities from different segments, regions, and specialties in-house to enhance product and service offerings.

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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, January 10, 2022:

  • In the United States, hospitalizations are reaching record numbers as the Omicron variant continues to spread. Since it quickly overtook Delta as the dominant strain in the country in late December, hospitalizations have been increasing steadily. The number of hospitalizations in the U.S. reached around 123,000 on Friday, and it appears the number will top the record of 132,000 set last year in the coming days. An average of 17,000 people are admitted to hospital each day, and health officials say the majority of people in intensive care are unvaccinated. "I don't believe we've seen the peak yet here in the United States," Centers for Disease Control and Prevention Director Rochelle Walensky told NBC News on Friday.
  • In Canada, truckers who enter the country from the United States will now have to show proof of vaccination, as Prime Minister Justin Trudeau moves forward with a vaccine mandate despite mounting pressure from industry groups and opposition parties. The Canadian Trucking Alliance estimates that about 10% of drivers will be forced off the roads by the new policy. This will be the first measure taken since the beginning of pandemic that could potentially limit cross-border trucking, as truckers have been seen as essential and therefore have moved freely throughout the last 20 months of the pandemic. "We're going to see prices skyrocket for groceries, for everything, if we see tens of thousands of truckers unemployed," Conservative Party leader Erin O'Toole said on Thursday. Government sources say they don’t anticipate any significant disruptions for Canadians. 
  • In the United Kingdom, the Joint Committee on Vaccination and Immunization (JCVI) has decided not to recommend a fourth Covid-19 shot for people over 80 and nursing home residents.  The JCVI found that data shows a third dose provides sufficient protection against the coronavirus and instead recommended the government focus on getting third shots to as many people as possible. Data compiled by the U.K. Health Security Agency shows that people over 65 still have a 90% protection rate three months after their third dose, and that the protection rate remains the same even for vulnerable groups. The consideration for a second booster shot comes amid a rise in Covid-19 cases across the U.K., fueled in part by Omicron.  
  • Germany’s lawmakers will need considerable time to debate the highly contentious coronavirus vaccine mandate ahead of its implementation. Chancellor Olaf Scholz predicted in November "a general vaccine mandate that will take effect next year, in February or early March, and which everybody can get ready for now." On Sunday, local media reported that the implementation could come as late as June, as technical conditions such as a nationwide vaccine register, would have to be in place. The looming vaccine mandate has also sparked protests across the country, with some of them turning violent after police ordered them to disperse. Germany’s Health Minister Karl Lauterbach said the vaccine mandate won’t be in place in time to stop the current wave of infections, but will help protect against future variants that could emerge in the fall.
  • India has begun to administer booster shots to vulnerable groups and frontline workers, as coronavirus cases surge. Healthcare personnel and people above 60 years suffering from health conditions are eligible for what the government calls a “precaution dose.” These doses will be the same vaccine that was given to a person for their first and second shots; India is not mixing and matching vaccines unlike some other countries. About 67% of India’s population has been double vaccinated while about 91% have received a first dose. India reported over 179,000 new coronavirus cases, nearly an eightfold increase in a week. 
  • Australia continues to experience a strain on supply chains and hospitals, as coronavirus cases surpass one million, more than half in the past week alone. Prime Minister Scott Morrison says Australia must “push through” the current outbreak and avoid having another lockdown. More than 3500 people are in the hospital, up from 2000 a week ago. Virgin Australia will cancel 25% of its flights in January and February, due to Covid-19 reducing demand and forcing staff into isolation. Australia is now vaccinating children ages five to 11, though supply shortages are delaying the rollout.

Covid-19 – Due Diligence And Asset Management

Over half of CEOs to step-up investment and M&A in 2022, but headwinds remain

Brief: As the world enters a new phase in the global Covid-19 pandemic, the majority of CEOs are ready to accelerate plans for investment and mergers and acquisitions (M&A) in their pursuit for growth. These findings come from the inaugural EY 2022 CEO Outlook Survey, which recorded the views of more than 2,000 CEOs across the globe on their prospects, challenges and opportunities. More than half of respondents (54 per cent) will prioritise investment in existing businesses, digital transformation and sustainability, according to the survey. In addition, more than three-quarters (79 per cent) of respondents have adjusted, or are planning to adjust, their supply chain to help reduce costs and minimise risks to prepare for future disruption.  Following a record year that saw USD5 trillion worth of M&A, transactions will remain a critical tool for CEOs in 2022 complementing other areas of investment.

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Andurand, Westback Hedge Funds Soar on Back of Commodities Rally

Brief: Commodities trader Pierre Andurand capped another strong showing in 2021, with one of his hedge funds returning 87%, according to two people with knowledge of the matter. The advance by the Andurand Commodities Discretionary Enhanced Fund followed a gain of 154% in 2020. His older Andurand Commodities Fund closed 2021 up 36%. The Andurand Climate and Energy Transition Fund, formed in July, returned 28%, the people said.  A spokesman for Andurand Capital Management LLP, which has offices in London and Malta and manages about $950 million, declined to comment. Andurand, 44, has pocketed big gains from a surge in energy prices. Last year, he said the world was entering a bull market for commodities, supported by a global shift toward decarbonization. His firm has benefited from exposure to emissions and has previously been bullish on natural gas, European power prices and oil.

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European markets fall as traders watch rising COVID cases and expected rate hikes

Brief: European stock markets had a downbeat session on Monday amid a burst of new reported coronavirus cases and the impact of earlier than expected rate hikes in the US.In London, the FTSE 100 (^FTSE) fell 0.4% on the day, while the French CAC (^FCHI) tumbled 1.3% and the DAX (^GDAXI) was 1.1% lower in Germany. Oil and gas stocks managed to outperform while household goods remained under pressure as well as a slump for housebuilders. The UK government is reportedly looking for property developers to take on a greater share of the costs of repairing dangerous apartment blocks in the wake of the Grenfell tragedy of 2017. "Many flat owners have been left with onerous costs for replacing flammable cladding and the latest reports on who will foot the bill should come as no surprise to the sector in that context," AJ Bell investment director Russ Mould said.

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Moderna says it has US$18.5B in vaccine orders for 2022

Brief: Moderna Inc. said it has signed vaccine purchase agreements worth US$18.5 billion for this year, along with options for another US$3.5 billion, including booster shots. In a statement on Monday, the company also said 2021 product sales would be US$17.5 billion, slightly higher than the average analyst estimate of US$17 billion, according to data compiled by Bloomberg. Additionally, the company said that it shipped 807 million vaccine doses in 2021. Previously, it had said it would deliver between 700 milion and 800 million doses. The advance purchase agreements for 2022 are up from US$17 billion worth of commitments it had announced last year. Analysts were expecting US$19.3 billion in Moderna COVID vaccine sales for 2022, according to a Bloomberg survey of analyst estimates. In premarket trading in New York, Moderna shares were up 0.2 per cent. Moderna announced the advance orders on the first day of the JPMorgan Healthcare Conference, where it is scheduled to present Monday morning.

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Citigroup will terminate unvaccinated workers by Jan. 31, a first among Wall Street banks

Brief: Citigroup will be the first major Wall Street institution to enforce a vaccine mandate by terminating noncompliant workers by the end of this month. The bank reminded employees in a memo sent Friday about its policy, first disclosed in October, that they must be “fully vaccinated as a condition of employment.” At the time, the bank said that employees had to submit proof of vaccination by Jan. 14. Those who haven’t complied by next week will be put on unpaid leave, with their last day of employment being Jan. 31, according to the memo, which was first reported by Bloomberg. A spokeswoman for the New York-based bank declined to comment. Citigroup, the third biggest U.S. bank by assets and a major player in fixed income markets, has had the most aggressive vaccine policy among Wall Street firms. Rival banks including JPMorgan Chase and Goldman Sachs have so far stopped short of terminating unvaccinated employees.

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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, January 7, 2022:

  • In the United States, experts are recommending that adolescents aged 12 and older should get a vaccine booster as soon as they become available. If approved, boosters will be offered to teens aged 12 to 15 that have received both doses of an approved vaccine starting five months after their second shot. Studies have shown that a third dose will – at least temporarily – increase the antibodies to levels high enough to fight off infection from Covid-19, including the Omicron variant. However, the Omicron variant is still more capable than previous variants at bypassing the immunities built up from the vaccines. Currently, only the Pfizer BioNTech vaccine is being considered for use on children, and in the coming weeks, the Centers for Disease Control (CDC) will make a final decision on whether children aged 12 and older will be eligible to receive a booster. If approved by the CDC, nearly 5 million adolescents in the United States will immediately be eligible for a third dose. 

  • In the Canadian province of Ontario, people who have tested positive for Covid-19 can now leave isolation earlier than the 5 days previously recommended by health authorities provided that they have had two negative tests within 24 and 48 hours. People who have received two negative tests in the aforementioned time period will be able to resume normal activities as long as they are not showing any remaining symptoms. The province is expecting that the demand for rapid tests will reach 18 million per week as the Omicron variant continues to spread. According to officials, the federal government is expected to send 54 million tests to Ontario for the month of January, with province itself purchasing another 84 million tests. On Thursday, the province recorded roughly 13,000 new cases of Covid-19 and has 2,279 people in hospital, 319 of those are in intensive care units.

  • In the U.K. over 200 military personnel, including 40 medics were deployed to London hospitals as the Omicron variant continues to surge throughout the country. The military reinforcements were called in to deal with hospitals struggling to deliver vital care amid widespread staffing shortages caused by workers isolating due to symptoms from Covid-19. Health Secretary Sajid Javid noted Friday that hospitalizations are rising dramatically, and that the NHS is facing a “rocky few weeks ahead,” with nearly 40,000 NHS workers absent from hospitals across the country. Wales’ first minister, Mark Drakeford, has accused Prime Minister Boris Johnson of exacerbating the situation by easing travel restrictions and failing to implement stricter lockdown measures. "The one country that stands up as not taking action to protect its population is England," said the first minister. "In England, we have a government that is politically paralyzed with a prime minister is unable to secure an agreement through his cabinet to take the actions that his advisors have been telling him ought to be taken."

  • The World Health Organization (WHO) has reported that the new IHU variant, first found in France by researchers are the University Hospital Institute (IHU) in Marseille, will be categorized as a “variant under monitoring.” The new variant, also known as B.1.640, is of lowest concern compared to the other categories used by the WHO for classifying severity, which are “variant of interest,” and “variant of concern.” Currently, the Delta and Omicron variants are both classified under “variant of concern.” According to researchers in France, the IHU was found in 12 people at approximately the same time as the Omicron variant was discovered in South Africa. Dr. Maria Van Kerkhove, COVID-19 technical lead with the World Health Organization said that “Within France, less than one per cent of the samples that were sequenced … are of this particular variant.” As the Omicron variant swept rapidly across the globe, the IHU remained largely dormant. “It’s important that we track this, particularly because of the number of the mutations it has,” says Van Kerkhove, “but it isn’t circulating widely at the moment.”

  • Chinese government officials in the eastern metropolis of Zhengzhou, known to locals as IPhone City due to the presence of Apple manufacturer Foxxcon Technologies, are requiring that every resident be tested for Covid-19 due to outbreaks in similar tech hubs across the country. Along with the hundreds of thousands of workers at Foxxconn, Huawei Techonologies is also implementing mandatory testing for all their employees in nearby Dongguan. The city of Shenzhen has discouraged anyone from leaving the city after several cases were reported early Friday morning. Those who are required to leave the city must provide a negative Covid-19 test to authorities. China’s National Health Commission reported 116 domestically transmitted cases of the virus on Friday and despite the flare-ups, government officials remain committed to China’s Covid Zero policy. “Though we might expect more cases to keep coming, the risk of a substantial rebound in the outbreak has been largely contained,” said Li Qun, an official with the Chinese Center for Disease Control and Prevention.

Covid-19 – Due Diligence And Asset Management

Bitcoin price tumbles and 'no signs of a decisive reversal in sight,' hedge fund risk manager says

Brief: Crypto investors have cashed out over $135 billion from the asset class so far in 2022, according to Coinmarketcap market cap data, and bitcoin (BTC-USD) is down around 7% year-to-date and hovering around $43,000 as of Thursday at 10 AM ET. "There are no signs of a decisive reversal in sight," Mikkel Morch, executive director at digital assets hedge fund Ark36, told Yahoo Finance when asked about the largest cryptocurrency's recent price action relative to its drawdown over the past two months. Bitcoin and other cryptocurrencies began tumbling after the publication of notes from the Federal Reserve's December meeting. Following the broader stock market down, especially technology growth stocks captured on the Nasdaq-100 (NDX). Morch added that similarities between the current price movement and those witnessed in mid-May and August suggest reasons for "cautious optimism in the medium term."

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RBC asks employees to keep working remotely amid Omicron surge

Brief: Royal Bank of Canada has advised all employees in regions including Ontario and Quebec to work remotely if their jobs allow, following advice from these provincial governments, a spokesperson said in a statement late on Wednesday. Royal Bank, unlike some rivals, did not provide a firm return-to-office date, and leaders had encouraged employees to work from home in December, according to the emailed statement. In the past week, both Ontario and Quebec announced renewed restrictions amid a surge in COVID-19 cases due to the Omicron variant. Royal Bank, Canada’s biggest bank by market value, joins all its major rivals in keeping employees at home. In December, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada, as well as insurer Manulife Financial Corp, all halted plans to bring employees back to their work locations in early 2022.

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Cloud stocks are off to a brutal start to 2022 as investors sour on pandemic’s top performers

Brief: Cloud software has been one of the best bets for investors over the past half decade. But that trade has rapidly unwound of late. The slump, which started in November and deepened this week, is part market rotation, part economy reopening from the pandemic, and part concern that the Federal Reserve’s expected interest rate hikes will have an outsized impact on this particular sector. For years, cloud computing services were some of the top gainers in technology, which itself outperformed the broader market. Since Bessemer Venture Partners created the BVP Cloud Index of publicly traded companies in August 2013, the basket is up 909%, almost triple the gains in the Nasdaq and five times better than the performance of the S&P 500. Covid-19 proved to be a massive boon, as companies, schools and government agencies sped their transition to the cloud so they could access remote communications, collaboration and storage tools.

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BofA to Keep Remote Work Through at Least Second Week of January

Brief: Bank Of America Corp. is pushing back its return to office another week as it monitors the surge in Covid-19 cases. The company encouraged U.S. employees to work remotely through the week starting Jan. 10 as the bank evaluates its next move, according to an internal memo sent Thursday. The firm had earlier advised workers to stay home through at least this week. In its memo, the bank also continued to encourage staff to get fully vaccinated and receive booster shots, stopping short of implementing a full mandate. Contents of the memo were confirmed by a representative of Charlotte, North Carolina-based Bank of America.

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Shell reclaims Footsie top spot knocking Covid vaccine maker Astrazeneca off its perch

Brief: Shell has overtaken Covid vaccine maker Astrazeneca to become the biggest company on the FTSE 100. The oil giant was worth £132billion last night while the pharmaceuticals titan was valued at £131billion. It marks a return to the top spot for Shell which was for years the biggest company on the Footsie before the pandemic struck. Astrazeneca, which developed a Covid jab with Oxford University, knocked Shell off its perch in May 2020 after strict lockdowns sent oil prices plummeting and plunged the energy company into crisis. Consumer goods giant Unilever – whose brands include Domestos, Hellmann’s and Ben and Jerry’s – also spent some time as the biggest listed company in Britain. But as the oil price bounced back following the rollout of vaccines and reopening of economies, so too have Shell’s fortunes. Shell’s return to the top comes after the company ditched its dual-listed status, abandoning the Netherlands in favour of London.

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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, January 6, 2022:

  • In the United States, health officials have said that they will not change the definition of “fully vaccinated.”  The Centers for Disease Control and Prevention (CDC) said on Wednesday that a person would still be considered under the definition two weeks after receiving a first dose of Johnson & Johnson or a second dose of Moderna or Pfizer vaccines. The CDC now recommends a third dose of vaccine for individuals to stay “up-to-date” on their inoculations to ensure they have optimal protection. The CDC says the decision was made to make Covid-19 vaccines “align with standard language CDC uses about other vaccinations.” The new language could potentially have legal implications and raise new challenges to vaccination requirements.
  • In Canada, Prime Minister Justin Trudeau says Canadians are becoming increasingly frustrated with the unvaccinated. He said while most Canadians have gotten the shot, unvaccinated people are still putting others at risk. "It's not just about governments and health workers frustrated that there are Canadians who still continue to choose to not get vaccinated. It's fellow Canadians as well," Trudeau said at a news conference on Wednesday. "When people are seeing cancer treatments and elective surgeries put off because beds are filled with people who chose not to get vaccinated, they're frustrated.” According to the CBC’s vaccine tracker, 80.6% of Canadians aged five and older have been fully vaccinated.
  • In the United Kingdom, fully vaccinated travellers will no longer be required to take a Covid-19 test before arriving in England. The decision was made after heavy lobbying from the travel industry, who have been hit hard by the Omicron variant. Under the new rules, fully vaccinated people will no longer need to take a test before travelling, only on arrival. Travellers can also opt for the less costly lateral flow test rather than the PCR test and will no longer need to self-isolate unless they test positive.  Prime Minister Boris Johnson made the announcement on Wednesday, explaining that the pre-departure test discourages people from travelling. The new rules come into effect this weekend.
  • Italy has made it mandatory for everyone age 50 and older to get the Covid-19 vaccine, becoming one of the first European countries to do so. Prime Minister Mario Draghi’s government has already made the shots mandatory for healthcare workers and teachers, with refusal resulting in suspension without pay. Beginning on February 15, people aged 50 and over will not have the option to take a test when entering their workplaces. They will be required to have the “Super Green Pass,” which is only available to those who are fully vaccinated or have recovered from Covid-19. It is not clear what the penalty would be for those who don’t comply. 
  • Health authorities in Brazil approved the Covid-19 vaccine for children ages five to 11 on Wednesday. The decision from the country’s Ministry of Health came three weeks after the country’s independent medicines regulator, Anvisa, gave the green light on Pfizer’s child-size dose. "To all those parents who want to vaccinate their children, the Ministry of Health will guarantee doses of the vaccine," said Health Minister Marcelo Queiroga at a news conference. Although the vaccines will not be mandatory, state governments could require children to be vaccinated in order to attend school.  President Jair Bolsonaro, who is not vaccinated, is against the vaccination of children and has said he will not immunize his 11-year-old daughter.
  • Australia’s economy has been hit hard by Covid-19, with staff shortages causing shops and restaurants to close and calls growing for free rapid tests in workplaces. Although there is no official data to show how many people are off work because of Covid-19, some companies are reporting that they’ve lost over half their employees. Prime Minister Scott Morrison says the federal government is focusing on increasing capacity in areas like healthcare, food production and transport. “We need truck drivers to keep on trucking, that is what we need to do to keep moving things around,” Morrison said. “And right now they are delivering vaccines to GPs and pharmacists, and that system is of course under strain because of the high case numbers.”

Covid-19 – Due Diligence And Asset Management

Investors dismiss Omicron risk in December, pushing full-year equity inflows to record levels for 2021

Brief: Hopes that Omicron’s impact will be less severe than past waves swept a flurry of optimism through UK investors in December. Savers added GBP1.0 billion in new cash to their equity holdings during the month, taking the 2021 net inflow to a record GBP14.2 billion, according to the latest Fund Flow Index from Calastone. In 2015, the last high point, inflows reached GBP11.6 billion. As Omicron fears subsided, investors became much more enthusiastic about the prospects for equities. In December, net inflows doubled compared to November and, at GBP1.0 billion, reached their highest level since August. The biggest change in sentiment was evident in European and North American funds, where heavy selling in October and November was replaced by modest inflows.

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UK private equity market leads the way in Europe

Brief: Europe’s private equity industry has continued to rebound following disruption caused by the pandemic, completing 741 buyouts cumulatively valued at EUR141.5 billion in 2021, according to provisional full-year data from CMBOR, the Centre for Private Equity and MBO Research. Deal volume is broadly consistent with previous years, barring the understandable dip in 2020, whilst deal value reached its highest level since 2007, signalling Europe’s upswing as markets began to stabilise. Private equity activity in the UK market in 2021 reached levels not seen since before the global financial crisis. At GBP45.8 billion, the cumulative value of the 235 buyouts of UK-based companies last year represented the biggest headline figure in the 35-year history of CMBOR, surpassed on an inflation-adjusted basis only by the GBP44.1 billion recorded in 2007.

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Pandemic sees boom in voluntary super contribution

Brief: Despite the financial hardships many have endured because of global lockdowns during the COVID-19 pandemic, AMP has noted its super members have made more voluntary contributions than usual during the period. AMP reported that analysis of its approximately one million super members show they are 27% more likely to be making voluntary contributions to their super than before the pandemic. These additional contributions are also 28% larger than pre-COVID levels. AMP members contributed an extra $296 to their super over the three months to September 2021 on average, compared to the same period in 2019. However, those who withdrew money under the government's early release of super (ERS) program early in the pandemic are still lagging. This group of individuals had voluntary contribution rates 15% behind the wider population.

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Investors: Tie Pharma CEO Pay to Fair Global COVID-19 Vaccine Access

Brief: A group of institutional investors representing $3.5 trillion in assets under management on Thursday called on pharmaceutical companies to link their executives' pay to making COVID-19 vaccines available around the globe.cWhile the majority of citizens of wealthy nations are vaccinated and many are now receiving booster shots, across the African continent vaccination rates average only around 10%. The World Health Organization has set a target of a 70% vaccination rate in every country by July 2022 in order to end the "acute phase" of the pandemic. The 65 participating asset managers, pension funds and insurance companies signed a letter reviewed by Reuters dated Jan. 4 that was sent to the boards of Pfizer Inc, Johnson & Johnson, Moderna Inc and AstraZeneca PLC asking them to adopt a WHO roadmap for achieving equitable vaccine access and tying it to management pay "in a meaningful, material, measurable and transparent way."

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HSBC, UBS Order Hong Kong Office Changes as COVID Cases Rise

Brief: Banks in Hong Kong including HSBC Holdings Plc and UBS Group AG are taking steps to reduce the number of people at the workplace after having operated at near full capacity for the past few months, as the city faces a spike in COVID-19 cases. HSBC, which is one of the biggest employers in Hong Kong with about 30,000 people, will maintain a maximum of 50% staff occupancy in its offices from Friday, according to an internal memo seen by Reuters. A spokesperson for HSBC confirmed the memo's content. Bank of America has encouraged its staff to work from home from Jan. 7-24, according to the U.S. bank's internal memo seen by Reuters. A bank spokesman confirmed the contents of the memo that was sent on Thursday. Earlier, UBS said in a memo to staff that it would split its 2,500 Hong Kong workforce into two groups, with each returning to the workplace on alternate weeks.

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

Our briefing for Wednesday, January 5, 2022:

  • In the United States, the price of at-home Covid-19 rapid test kits is going up. Already in short supply, the popular BinaxNOW kits manufactured by Abbot Laboratories and sold by Walmart and Kroger has seen a price increase in recent days. Since September, the kits were being sold at a discount under an agreement between the White House and retailers, that deal has now expired. Made up of two tests, the kits are priced at $19.88 on Walmart’s website and $23.99 on Kroger’s. Experts are suggesting that the rising prices will make the tests inaccessible to people with lower incomes and thus will discourage them from getting tested. In December, the Biden administration vowed to increase the availability of at-home tests with a plan to provide 500 million rapid tests starting in January. With the rise of the Omicron variant, retailers and pharmacies are now limiting the number of tests individuals can purchase at one time.

  • Due to the rapid spread of the Omicron variant, Canada is having an increasingly difficult time relaying accurate data on the growing number of new infections. "Omicron is moving so quickly that it has become pretty much impossible to pin down the full extent of spread in real time," said Dr. David Naylor, co-chair of the federal government's COVID-19 immunity task force. With PCR testing already overwhelmed, Naylor says that “those with positive RAT (rapid antigen tests) results often have no way to register them let alone confirm them." With cases rising dramatically experts are now relying on hospitalizations and ICU admissions as a metric for measuring the impact of Covid-19. Despite its aggressive contagion rate, a recent study from Public Health Ontario suggests that the risk of hospitalization and death was 54 per cent lower for Omicron than the Delta variant, yet the sheer number of new infections may still end up increasing overall hospitalizations.

  • The United Kingdom has administered nearly 34 million booster shots as of January 5th, and that number may have proved to be the difference maker this holiday season as mortalities caused by Covid-19 did not rise over the last two weeks. Prime Minister Boris Johnson, who came under fire from both sides of the political spectrum for his Covid-19 measures, said on Tuesday that "we have a chance to ride out this Omicron wave without shutting down our country again.” Many Conservative party members attacked Johnson for his mask mandates and vaccine passports before the holiday season, while Labour supporters suggested that the measures were still not enough. The U.K. is currently averaging around 200,000 new cases a day, but after the first Covid-19 update of 2022, it appears that Johnson’s plan was successful in keeping deaths rates consistent with what they have been experiencing throughout the pandemic.

  • French President Emmanuel Macron has doubled down on his disdain for the unvaccinated people of France saying that they threaten national cohesion. In an interview with newspaper La Parisien, Macron said that he wants to “p**s off” the unvaccinated. He went on to say that the strategy is to continue “limiting as much as possible their access to activities in social life.” Macron’s comments angered the opposition and led to the suspension of parliamentary discussions on how to deal with the virus. Prime Minister Jean Castex said that he agreed with Macron, saying “The president’s remarks are perfectly consistent with what we’ve been doing” in attempts to curb the spread of the virus. The hostility towards the unvaccinated from the President has further divided the country with Valerie Pecresse, presidential candidate for conservative party, The Republicans, saying she is “outraged by his comments” and that “insults are never a good solution,” and on Twitter, far-right leader Marine Le Pen said that Macron’s remarks showed a “serious moral fault.”

  • Authorities in Thailand are worried that new cases could number in the tens of thousands in the coming weeks if restrictions in the country are not followed. The government is now looking to ban mass gatherings and restrict the sale of alcohol in restaurants to limit the amount of people in public spaces. The country saw an increased number of new cases on Wednesday, coming in around 3900, up from 2600 during this time last year. The country will also suspend the Test & Go program which allowed vaccinated travelers to skip quarantine upon arrival. The number of Omicron cases has tripled in the last week, which has law makers scrambling to come up with a solution as testing becomes increasingly difficult. So far Thailand has recorded 22,000 deaths related to Covid-19. Sumanee Watcharasin, a spokeswoman for the country's coronavirus taskforce sad that mask-wearing and regular testing must occur, or the country will soon be overwhelmed.

Covid-19 – Due Diligence And Asset Management

Covid-19 could increase the risk of age discrimination at work, says financial CEO

Brief: Whether young or old, evidence suggests the pandemic may increase age discrimination in the workplace. Academic Steve Butler - who is also a financial services chief executive – explains why and asks for your participation in research that could shape policy. Ever since the civil rights legislation in the 1960s and 1970s, workplace “discrimination” has been on the corporate agenda - especially with regard to gender and race. However, by 2000 the corporate language had changed to managing “diversity”, meaning diversity in its widest sense, including age. Diversity has become a part of HR management practice, and to direct this societal shift specifically in relation to age, the UK Government enacted The Employment Equality Age Regulations 2006. This prohibited employers from unreasonably discriminating against employees on grounds of age. Research in the UK around the time of the legislation identified that 18% of workers had received less favourable treatment because of their age. Being considered too old for promotion reduced training opportunities for older people. It fostered negative attitudes, even led to redundancies, and thus reinforced the need for the legislation.

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Airline stocks see major boost despite surge of Omicron cases

Brief: Several airline stocks have seen a major rise in the new year, despite concerns surrounding the surge in Omicron cases. Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said that stocks reliant on international travel are powering ahead. “With yet more indications that Omicron, though highly infectious, does not cause such serious illness, a wave of relief is pushing up companies which have been hit by worries about tighter restrictions,” she said. Firms including British Airways owner, International Consolidated Airlines Group secured the top spot on the FTSE 100 with a 7% rise in early trading, a major contrast to last year’s volatile performance. Rolls Royce, jet engine maintainer, also saw an increase, with shares up 3.4%. The FTSE 250 also saw travel firms in the lead, with Wizz Air and EasyJet seeing surges in share prices, by 9% and 7% respectively. “There is clearly expectation that bookings will have got a rocket boost from hopes that this latest spike of infection will flatten relatively quickly,” said Streeter.

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Manhattan real estate breaks record in 2021, reaching $30 billion in sales

Brief: Manhattan real estate posted its best year ever in 2021, rebounding from the pandemic with $30 billion in sales, according to real estate reports. The 16,000-plus signed contracts were also a record, according to a report from Corcoran. The banner year marks a dramatic turnaround from 2020 when fears of population losses, rising crime and high taxes weighed on sales. Many observers thought at the time the days of bidding wars and falling inventory were over. But sales have now eclipsed pre-pandemic totals and are showing no signs of slowing in 2022. Fourth-quarter sales topped $6.7 billion, a mark not seen since such records were kept, according to a report from Miller Samuel and Douglas Elliman. The average price for an apartment in Manhattan is now $1.95 million. The median price — which many consider to be a more accurate indicator of the market — jumped 11% in the fourth quarter compared to the year-earlier period, close to pre-pandemic levels.

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BlackRock, AmEx extend hybrid work plans as Omicron spreads across U.S.

Brief: BlackRock Inc and American Express Co are extending their hybrid work plans as the Omicron COVID-19 variant spreads across the United States. The world's largest asset manager, BlackRock, is providing flexibility through Jan. 28 and allowing U.S. employees to work from wherever they are most comfortable, according to a source familiar with the matter. The new variant has swiftly spread across the country since its detection on Dec. 1, replacing Delta as the dominant strain and sparking a new wave of infections that pushed daily cases near the 1 million mark on Monday. BlackRock had earlier required more than half of its employees to work from office for three days a week on average starting November. AmEx has decided to delay the Jan. 24 launch of "Amex Flex" in the United States, after previously saying it would start bringing its employees in the United States, the UK and Germany back to offices from Jan. 24.

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Oil bulls return as the threat from Omicron recedes

Brief: Portfolio investors have started to rebuild bullish positions in the oil market reassessing earlier fears about the likely impact of the Omicron variant of coronavirus on major economies and passenger aviation in 2022. Hedge funds and other money managers purchased the equivalent of 54 million barrels in the six most important petroleum futures and options contracts in the week to Dec. 28. Funds have purchased a total of 70 million barrels over the two most recent weeks, after selling 327 million over the previous 10 weeks, according to records published by regulators and exchanges. Last week's buying was the fastest since August, and among the most rapid rates for more than a year, signaling a sharp turnaround from previously bearish investor sentiment.

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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, January 4, 2022:

  • The United States reported a record number of new coronavirus cases on Monday, with over 1 million new infections, according to data from Johns Hopkins University.  With many Americans relying on take-home tests and not reporting their results to government authorities, the record number is still an underestimate. The new daily numbers bring the country’s total cases since the beginning of the pandemic to 56,189,547, with the surge in cases driven by the infectiousness of the Omicron variant and the busy holiday season. According to the latest available data from the Centers for Disease Control and Prevention, the Delta variant made up 41% of cases, while Omicron accounted for 58.6% for the week ending on December 25.
  • In Canada, the province of Ontario implemented new Covid-19 measures as they deal with rising case numbers and overwhelmed hospitals. Schools will move to remote learning for at least two weeks, restaurants will temporarily close indoor dining and social gathering limits will be reduced to five people indoors and 10 outdoors. Premier Doug Ford made the announcement at a news conference on Monday, explaining that he is deeply concerned about the rising case numbers. "Our public health experts tell us we could see hundreds of thousands of cases every day," he said. “If we don't do everything possible to get this variant under control, the results could be catastrophic. It is a risk I cannot take."
  • In the United Kingdom, Prime Minister Boris Johnson suggested there will be no new coronavirus measures, despite warning that hospitals will be strained in the coming weeks due to a surge in infections. The prime minister said on Monday that the “Plan B” measures put in place are working and urged people to get their booster shots. At the same time, he ruled out the possibility of any further restrictions for England. “I think the way forward for the country as a whole is to continue with the path that we’re on. We’ll keep everything under review,” he said. “The mixture of things that we’re doing at the moment is, I think, the right one.”
  • South Korea has reported their first death related to Omicron. The Korea Disease Control and Prevention Agency said on Monday that a person in their 90s was posthumously found to have contracted the variant, they were living in a nursing home and had received a second dose of vaccine in October. Since the case was first reported, 21 others in the nursing home have tested positive, three of them with the Omicron variant. South Korea has 1318 confirmed cases of Omicron, experts predict that it will soon overtake Delta to become the dominant strain in South Korea.
  • India began rolling out vaccinations for teens aged 15 to 18 on Monday, as the country braces for another wave of coronavirus infections. State governments administered the shots in schools, hospitals and special vaccination sites, as the country confirmed over 33,000 cases in 24 hours. Many states including the capital city of New Delhi have imposed curfews and banned large public gatherings. So far India has partially vaccinated about 90% of its eligible population, while about 64% have had both doses. From next week, the government will begin offering booster doses to people more than 60 years old.

  • Australia will move forward with plans to reopen the economy despite hitting a record number of Covid-19 cases. Case numbers reached over 47,000 on Tuesday, up about a third from Monday’s number which was also a record. Hospitalizations in the state of New South Wales also rose 10% from Sunday. “We have to stop thinking about case numbers and think about serious illness, living with the virus, managing our own health and ensuring that we're monitoring those symptoms and we keep our economy going," Prime Minister Scott Morrison told Channel Seven.

Covid-19 – Due Diligence And Asset Management

Morgan Stanley Bets on NYC With Lease for BlackRock Headquarters

Brief: Morgan Stanley is betting on offices in New York City. The New York-based bank has signed a deal to take over space that houses the headquarters of BlackRock Inc., according to people familiar with the matter. The 15-year deal is for roughly 400,000 square feet (37,000 square meters) at Park Avenue Plaza, at 55 E. 52nd St., one of the people said. BlackRock is leaving the space and moving west to Hudson Yards in 2023. The office market in Manhattan has been battered by the pandemic, though there were positive signs in the final months of 2021 as leasing picked up. The deal comes as a surge in Covid-19 cases pushes Wall Street firms, including Goldman Sachs Group Inc., to adjust their return-to-work plans.

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Rokos Capital Management made over GBP900m during early pandemic turbulence

Brief: Macro hedge fund firm Rokos Capital Management made more than GBP900 million in profits during the early days of the coronavirus pandemic, according to a report in the Financial Times. The firm generated returns of 44 per cent in 2020 – its best annual performance to date – generating GBP914 million in profit in the 12 months to 31 March, 2021. According to a filing with Companies House, the income is available to be divided up among the hedge fund's partners with manager Chris Rokos, formerly a co-founder of Brevan Howard, eligible for the largest share of the gain, some GBP509 million.

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Goldman Strategists Bet on Tourism-Linked Currencies in Recovery

Brief: Goldman Sachs Group Inc. strategists expect a tourism revival in the second half of 2022, with the Thai baht, New Zealand dollar and Egyptian equities among their top bets. The firm predicts that the manufacturing-led economic recovery will shift to one driven by leisure and tourism as foreign visitors return to beaches and mountains after enduring nearly two grueling years of the coronavirus pandemic. “We think you’re going to see a transition to a recovery driven by services and travel, and leisure would be an important part of that once the latest omicron wave fades,” Kamakshya Trivedi, Goldman’s co-head of global foreign exchange, rates and emerging-market strategy research, said in an interview.

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Wall Street’s Hopes for Return to Office Dashed Again by Covid

Brief: Wall Street’s push to refill office towers across the country has been derailed again. This time it’s the highly transmissible omicron variant of the Covid-19 virus that’s forced executives to rethink their plans. A record 10 million people were diagnosed with Covid-19 in the seven days through Sunday, almost twice the pandemic’s previous weekly high, though weekly deaths continued to drop. “Realistically, we do not foresee us all having a safe opportunity to be together in our offices until at least Monday January 31,” Jefferies Financial Group Inc. Chief Executive Officer Richard Handler said in a memo on Instagram. “We are encouraging everyone to work remotely unless there is a very good reason to be in our office.”

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Jefferies staff to go remote until end Jan, financial offices empty out

Brief: U.S. investment bank Jefferies Financial Group has asked staff to work remotely until Jan. 31, according to an Instagram post on Monday from its Chief Executive Officer, in another sign that New York's banking offices looked set for an empty start to the year as the Omicron variant spreads. Banks and financial firms have been grappling with how to react to the latest variant and how to communicate to staff and retain workers amid the uncertainty. A number of other banks have asked staff to work remotely for the beginning of the year due to the latest surge in cases. "Realistically, we do not foresee us all having a safe opportunity to be together in our offices until at least Monday, January 31st," Jefferies CEO Richard Handler said in the message.

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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.