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Covid-19 Diligence Briefing

Our briefing for Thursday, March 31, 2022:

  • The United States Senate is expected to vote early next week on a deal that is likely to secure $10 billion worth of Covid-19 relief funding. Democrats and Republicans are nearing a deal on a pandemic funding package that may now exclude money for the global vaccine effort that President Joe Biden has been trying to push through for most of his presidency. Republican Senate leader Mitch McConnell said the bill has been “skinnied down” from $15 billion to $10 billion as of Wednesday night. Senate Majority Leader Chuck Schumer expects the bill to be passed. “The gap has been narrowed greatly, and we’re intent on working with Republicans to cross the finish line because this is vital for our country if, God forbid, a new variant rises in the future, and that’s all too likely,” Schumer said. The agreement is a far cry from the $22 billion originally proposed by Biden earlier this month, and smaller still than the $15.6 billion that was scrapped from 2022 budget bill that would have seen money taken from a rescue package destined for state-level governments. The $5 billion intended for the global vaccine effort is likely to be dropped due to disagreements over where the money will come from. House Appropriations Chair Rosa DeLauro said the need for vaccines outside of the U.S. is still of great concern. “No amount of domestic preparedness can continue with an onslaught of new variants,” she said. Senator Roy Blunt, a Republican from Missouri has said that Congress is likely to propose another bill that will focus on Covid-19 aid outside the U.S. within two months.
  • In Canada, the economy continued on its streak of monthly gains in February, leading to expectations that the central bank will begin a tightening cycle to curb soaring inflation. According to preliminary data from Statistics Canada, the gross domestic product rose 0.8 per cent last month for the ninth straight month in a row, with economy rising 0.2 per cent in January alone. From the start of 2022, the country was able to keep an upward trajectory despite lockdowns brough on by the Covid-19 pandemic and was able to keep a steady pace heading into February when most of the country’s restrictions were lifted. Canada is now projected to grow at an annualized rate of 0.4 percent in the first quarter, nearly doubling January predictions from the central bank. “Heading into the year, some slowdown in activity was expected due to the pandemic restrictions, but, unlike in past waves, that wasn’t the case,” said Benjamin Reitzes, head of Canadian rates and macro strategy at BMO Capital Markets. Led by Governor Tiff Macklem, the central bank began a tightening cycle with a 25-basis-point hike earlier this month and now economists at Bank of America and Citigroup are expecting a 50-basis-point hike at each of Macklem’s next three decisions.
  • The number of patients in London hospitals testing positive for Covid-19 has reached a two-month high. As of Wednesday, 2,330 people were in hospital with the virus in the U.K. capital, which is the most since February 3. There are currently just over 100 patients requiring ventilators, down considerably from the peak in mid-January. Most cases of the virus are unknown when patients enter the hospital, with only 563 entering solely for Covid-related illnesses. A survey by the Office for National Statistics last week found that 3.4 million people in England had the virus in the week ending March 19, about 1 in every 16 people. Starting in April, people in the U.K. will no longer be provided with free PCR or lateral flow tests and will have to pay for testing out of pocket. However, based off of the most recent NHS data, deaths resulting from the virus still lag behind the number of people infected considerably.
  • More than 16 million people will be confined to their houses in the second phase of Shanghai’s Covid-19 lockdown. Residents are being asked to even avoid those in their own household as the virus circulates throughout the city. Residents in the western part of the city, which contains about two thirds of Shanghai’s population will begin a three-day lockdown starting at 3 a.m. on Friday just two hours before the eastern part of the city will be coming off their own lockdown which began on Monday. Most parts of the eastern section of the city will regain public transport on Monday, with particularly hard-hit areas remaining suspended. Shanghai’s communist party chief Li Qiang said late Wednesday that the city will attempt to curb the spread of the virus by using “whole-region static management,” a phrase that has previously indicated the most stringent level of lockdowns in other parts of the country. In the northeastern province of Jilin, static management meant that residents were completely barred from leaving their homes, many of whom have complained they were unable to receive basic necessities like groceries and were without health care as several medical facilities were closed.
  • India is witnessing a drop in Covid-19 cases as some states begin to do away with coronavirus restrictions. As the virus surges in other parts of Asia, on Thursday, the western state of Maharashtra announced it will lift all Covid-19 related restrictions on April 2 ahead of the Marathi New Year, a spring festival for Marathi and Konkani Hindus. Maharashtra was one the hardest hit areas of the country during the first and second waves of Covid-19, and although it will lift all restrictions, the government continues to advise the wearing of masks in public areas. The state is seeing roughly 100 new cases a day, and as of Monday, there was 963 cases across all 35 districts. In Delhi, the nation’s capital, authorities have decided to stop handing out fines for those not wearing masks in public, and only 113 new cases were reported. The city has gone multiple days this month without a death related to the virus and the country as a whole has seen cases drop dramatically over the last two months.

Covid-19 – Due Diligence And Asset Management

Anthony Scaramucci says he’s ‘not quite convinced’ on the recession signal the bond market flashed

Brief: A key signal of recession flashed in the bond market this week, but SkyBridge Capital’s Anthony Scaramucci told CNBC that he would be cautious on predicting there would be a downturn. On Monday, the U.S. 5-year and 30-year Treasury yields inverted for the first time since 2006. On Tuesday, the yield spread between the 2-year and the 10-year rate came close to inverting but stayed positive. Historically, the yield curve has inverted prior to recessions, indicating investors’ concern about the health of the economy. “So historically it would signal that we’re heading into a recession 12 to 18 months from now, but I will be cautious on that data,” Scaramucci said on CNBC’s “Capital Connection” on Wednesday. When the bond market is healthy, yields are higher for bonds with a longer time to maturity, and lower for short-term yields. Investors expect a bigger reward for lending their money for a longer time. But when the opposite occurs — meaning an inverted yield curve — short-term bonds pay a higher yield than long-term ones. That represents a distortion in the market and suggests bond investors are worried about the economy’s long-term prospects.

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Thiel-backed venture firm Mithril seeks to nominate candidates for Adagio's board

Brief: Mithril Capital Management, co-founded by Peter Thiel, intends to nominate candidates to the board of COVID-19 drug developer Adagio Therapeutics, according to a regulatory filing from the venture capital firm. Mithril Capital Management’s unit, Mithril II LP, owns a 10.1% stake in Adagio as of March 28 and has reached an agreement with some other shareholders to vote all of their respective shares in favor of the election of the nominees at the 2022 annual meeting. The battle for the board comes as the company announced on Wednesday plans to apply for U.S. emergency use authorization for its COVID-19 antibody, adintrevimab. Adagio’s shares jumped 54% to $5.94 before the bell. The company did not respond to a request for comment on Mithril’s filing.

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U.K. Economy Grew More Than Expected as Omicron Raged

Brief: The U.K. economy grew stronger than expected at the end of last year, displaying resilience as the omicron variant of the coronavirus spread. Gross domestic product expanded 1.3% in the fourth quarter, the Office for National Statistics said Thursday. That’s more than the 1% figure previously reported. Service industries expanded more quickly than the ONS had previously estimated, and exports also enjoyed a bigger jump. The figures also showed the collapse in the economy at the height of the pandemic was not quite as bad as previously thought. In 2020, GDP shrank 9.3% rather than the 9.4% previously estimated. The rebound in 2021 was correspondingly shallower, with growth of 7.4%, down from the earlier estimate of 7.5%. That’s still the largest increase in GDP in a single year since World War II.

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China’s Covid Lockdowns Strain Economy and Global Supply Chains

Brief: China’s Covid lockdowns are putting the economy under strain and threatening to disrupt global supply chains, prompting Beijing to call for more contingency plans to deal with the risks. Purchasing managers’ indexes for March showed lockdowns in the technology and trade center Shenzhen and automotive city Changchun cut factory activity in the month. Services have also been hit hard as restaurants and retail shops close because of renewed restrictions and tightened social distancing measures. Supply chain scares are intensifying as Shanghai -- home to the world’s largest container port -- battles mounting infections. Covid controls in the city are impacting operations and reducing efficiency at the port, while shipping giant AP Moller-Maersk has already shut some facilities in the city. “Beijing’s determination in maintaining its Zero Covid strategy for fighting the infectious omicron variant will very likely deal a severe blow to China’s economy and will also have a global impact,” economists at Nomura Holdings Inc. led by Lu Ting wrote in a note.

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Air Canada to ramp up capacity this year, but won't yet reach pre-pandemic levels

Brief: Air Canada plans to more than double its capacity this year compared with 2021, but says that is still below its pre-pandemic level. In its outlook for this year the airline says its capacity, measured by available seat miles, for 2022 will be up about 150 per cent compared with last year. However, Air Canada says its capacity will still only be about 75 per cent of where it was in 2019 as it continues to account for passenger demand, public health guidelines and travel restrictions. The airline says it expects its adjusted cost per available seat mile for 2022 to increase about 13 to 15 per cent when compared with 2019. Looking further into the future, Air Canada says it expects its capacity for 2024 to be about 95 per cent of its 2019 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 Wednesday, March 30, 2022:

  • In the United States, the Biden administration’s budget proposal shows a commitment to pandemic preparedness, although some say it doesn’t go far enough. The budget proposal includes an $82 million for the health and human services department over five years, “to prevent, detect and respond to emerging biological catastrophes.” Xavier Becerra, the health and human services secretary, says the administration needs to do more.  “That is a drop in the bucket compared to what it’s cost so far to deal with Covid,” he told reporters on Monday. Becerra added that these funds are different from the billions that the administration asked Congress for to address immediate needs. “What we need to continue to finish the job on Covid, we need immediately,” he said. “What we’re asking for in this budget for long term preparedness is very separate.”
  • Air Canada has seen a jump in its shares, by almost 4% on Tuesday, as the carrier expects to more than double its capacity from last year. The company says it expects to recover 75% of the total seats offered in 2019, which is a 150% jump over 2021. “With the pandemic receding and travel returning, Air Canada has put in place a strategy to return to profitability and increase long-term shareholder value,” Chief Executive Officer Michael Rousseau said. Looking even further into the future, Air Canada says it expects its capacity for 2024 to be at about 95% of its 2019 level. 
  • In the United Kingdom, free Covid-19 testing for the general public ends on Friday, as the government sets out its new “Living with Covid” plan. The government released the details of the new rules on their website, explaining that free asymptomatic testing will only be provided to those in high-risk settings like hospitals or long-term care homes.  Free symptomatic testing will be available to those in the community who are at risk of becoming seriously ill if they contract Covid. In the announcement the government also explained that 55% of people in hospital who have tested positive are not there were Covid as their primary diagnosis.
  • Brazil’s health regulator Anvisa has recommended an easing of travel restrictions as case numbers and deaths continue to fall. The new rules would see the elimination of quarantine for all travellers, even those who are unvaccinated, although they will still be required to provide a negative test when entering the country. Effective immediately, travellers’ health declarations used to track Covid-19 will no longer be needed, while testing for vaccinated travellers will be suspended as of May 1. Anvisa’s recommendations must still be approved by the Health, Justice and Public Security, and Transport ministries
  • South Korea’s health authorities have announced that the Omicron wave has peaked, with case numbers falling for the first time in more than two months. Case numbers are down to nearly half of what they were a week ago, and deaths are also on the decline. According to the Korea Disease Control and Prevention Agency (KDCA) Commissioner Jeong Eun-kyeong, it is likely that case counts will continue to trend downward, although the process will be slow because of the relaxing of restrictions and return to in-person learning.  The KDCA reported 187,213 new cases on Monday, the first time cases have fallen below 200,000 in 25 days. 
  • In South Australia, vaccine mandates have just ended for those in the school and public transportation sectors. That means unvaccinated teachers, school staff, taxi and ride share drivers and public transport workers were able to return to work as of midnight. Unvaccinated teachers and school staff are still required to wear a mask inside at all times, and to use a rapid test every day. Police Commissioner Grant Stevens made the announcement on Tuesday, explaining that the mandate has served its purpose despite being revoked only four months after its implementation. "The mandate under the Emergency Management Act was put in place so we could implement quick and effective changes that saw staff in critical sectors vaccinated as quickly as possible and getting those vaccination levels up to a high standard," he said. “That has been achieved."

Covid-19 – Due Diligence And Asset Management

Traders sleep by their desks as China’s financial hub locks down

Brief: China’s banks and investment firms are calling on essential staff to live at the office this week to avoid any trading disruption during Shanghai’s massive Covid lockdown. A person familiar with the matter told CNN Business that traders and fund managers were being offered between 500 and 2,000 yuan ($78 to $314) per night to camp out at work, with some companies placing folding beds under workers’ desks. Other firms have also provided staff with sleeping bags, food and toiletries to get by. Much of Pudong “is doing it,” the source added, referring to Shanghai’s financial district, which is home to more than 1,000 financial institutions, and China’s leading stock exchange — which is continuing to operate as normal.Zhong Ou Asset Management, a Chinese firm that says it has $98 billion in assets under management, said that several of its investment directors and fund managers had begun staying overnight earlier this month to ensure operations continued as the pandemic “began to escalate” in Shanghai.

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Anthony Scaramucci says he’s ‘not quite convinced’ on the recession signal the bond market flashed

Brief: A key signal of recession flashed in the bond market this week, but SkyBridge Capital’s Anthony Scaramucci told CNBC that he would be cautious on predicting there would be a downturn. On Monday, the U.S. 5-year and 30-year Treasury yields inverted for the first time since 2006. On Tuesday, the yield spread between the 2-year and the 10-year rate came close to inverting but stayed positive. Historically, the yield curve has inverted prior to recessions, indicating investors’ concern about the health of the economy. “So historically it would signal that we’re heading into a recession 12 to 18 months from now, but I will be cautious on that data,” Scaramucci said on CNBC’s “Capital Connection” on Wednesday. When the bond market is healthy, yields are higher for bonds with a longer time to maturity, and lower for short-term yields.

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Goldman Plans Full Return to Office in Hong Kong on April 19

Brief: Goldman Sachs Group Inc. plans a full return to its offices in Hong Kong starting in the middle of next month as the Asian financial hub begins to ease Covid measures amid declining virus cases. The New York-based bank on Wednesday started with a split-team arrangement and outlined a plan for a full return starting on April 19, according to a memo sent to staff that was seen by Bloomberg News. A spokesman for Goldman Sachs declined to comment. The lender will “welcome” all staff to return “in anticipated alignment with the government’s relaxation of social distancing measures and resumption of in-person school classes,” according to the memo. It added that if circumstances change, it will amend its approach accordingly. Hong Kong last week moved to scrap some travel curbs and laid out a road map for easing internal pandemic restrictions, acknowledging the damage its absolutist approach to Covid-19 has had on the city’s status as a financial hub. The moves were spurred by frustration in the banking community and wider population, which has endured more than two years of strict border controls.

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Manulife to Open All Canada Offices for Staffers From April 25 -Memo

Brief: Canadian insurer Manulife Financial Corp said on Tuesday that employees can return to its offices across Canada from April 25 regardless of vaccination status, amid a fall in COVID-19 infections. The country's biggest life insurer has asked staffers to return under a hybrid model with certain days of the week designated for remote work, according to an internal memo seen by Reuters. Guidelines on mask mandates and physical distancing will be set in line with local regulations, the memo said. Several financial firms across Canada and the United States that had postponed their back-to-office plans late last year are now looking to reopen offices and bring back employees with fresh coronavirus guidelines.Earlier this month, Manulife had opened select office locations as a part of its return-to-office plans in Canada after COVID-19 cases in the country declined.

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BlackRock President Says ‘Entitled Generation’ Now Learning About Shortages

Brief: BlackRock Inc. President Rob Kapito warned that inflation is having dramatic effects on the economy, with an entire generation now learning what it means to suffer from shortages. “For the first time, this generation is going to go into a store and not be able to get what they want,” Kapito said at conference held in Austin by the Texas Independent Producers and Royalty Owners Association. “And we have a very entitled generation that has never had to sacrifice.” The economy is reckoning with what he dubbed “scarcity inflation,” or the fallout from a shortage of workers, agricultural supplies and housing, and of oil in some regions. “I would put on your seat belts because this is something that we haven’t seen,” Kapito said.

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

Our briefing for Tuesday, March 29, 2022:

  • According to new data from the Centers for Disease Control and Prevention (CDC), the Omicron subvariant BA.2 is now the dominant strain of Covid-19 in the United States. Last week, the BA.2 variant made up for an estimated 54.9 per cent of new infections across the country. Hardest hit by the new variant is the Northeast, where over 70 per cent of new infections are being caused by BA.2, in the South and Mountain West, only a third of infections are being attributed to the highly contagious strain. Experts are still suggesting that a new surge is unlikely as overall case numbers have continued to remain below the record-breaking peak in January. The seven-day moving average for U.S. Covid-19 cases was 27,895 as of Saturday, up 4 per cent from the previous week. Most people in the U.S. are now living in places considered to have low Covid transmission according to CDC data that has moved away from case numbers and focuses more on hospitalizations. In the week ending March 19, BA.2 made up only 39 per cent of total Covid-19 cases.

  • In Canada, public health experts in Quebec are suggesting that the province is already in the middle of its 6th wave of the pandemic. According to Dr. Don Vinh of the McGill University Health Centre, the latest wave is a result of the BA.2 Omicron subvariant, and that it is so-far unclear on what the surge in Quebec could mean for the rest of the country. Vinh pointed to the rise in cases across nursing and long-term care homes, along with a 60 per cent increase in health care workers who are absent due to Covid. “I think these are signals that cannot be ignored and interpreted any other way than to say we are we are already started in that wave,” he said in an interview. On Sunday, interim public health director Luc Boileau said that despite the fact that BA.2 now makes up two-thirds of new cases in the province, he is reluctant to confirm a 6th wave. Hospitalizations and test-positivity rates have gone up in recent weeks in Quebec and across the country as most jurisdictions have lifted Covid-19 preventative measures.

  • The first round of fines has been handed out to those who attended parties held at the residence of U.K. Prime Minister Boris Johnson during Covid-19 lockdowns. British police have issued 20 fines in relation to the illegal parties but so far Johnson has not been on the list of recipients. The Metropolitan Police force said Tuesday that it does not plan on releasing the names of people who received fines, however, Johnson’s office said they would notify the public if the prime minister was given a fine. Johnson has already admitted to attending several events at 10 Downing Street between 2020 and 2021, including a “bring your own booze” party which he believed was supposed to be a “work event.” Opposition parties in the country are calling for Johnson’s resignation should he be given a fine for his involvement in the gatherings. The police force has said officers are still working through a “significant amount of investigative material” and that more fines could be issued. Questionnaires were sent out to over 100 individuals, including Johnson, and multiple interviews were conducted allowing police to gather evidence surrounding the parties.

  • On Tuesday, Germany’s Health Minister Karl Lauterbach urged his European Union counterparts to endorse a fourth Covid-19 vaccine or second booster for use in people over age 60. With over 300,000 new cases being reported daily in Germany, Lauterbach is citing data from an Israeli study that shows an 80 per cent decrease in the number of deaths caused by the virus in those who have had a fourth shot. “The situation in Europe, as far as the pandemic is concerned, is worse than people feel,” Lauterbach said. “We have very high case numbers — we have unfortunately also very high death rates.” Lauterbach made a proposal to the European Commission for common advice to be issued to all countries in the bloc, which was backed by a majority of ministers. Earlier this month, the European Medicines Agency (EMA) said there was not yet enough data to support a fourth dose, but said it hopes that more data will be available later in the spring. On Sunday, Israeli researchers said that in a study, people aged 60 to 100 had a 78 per cent lower mortality rate when a fourth dose of the Pfizer-BioNTech vaccine was administered versus those who received only one booster.

  • In Singapore, mask-wearing is now optional in public spaces and the group limit for restaurants and public gatherings has been raised to 10. The new rules came into place on Tuesday despite rising case number overs the last 9 days. The country reported just under 8,200 new cases and 4 new deaths bringing the total number of fatalities during the pandemic to 1,258. There are now 728 people in hospital, 83 require oxygen supplementation and 25 are in intensive care. Most of the Covid cases in the country are considered to be Protocol 2 cases, which means those infected are either doing well or are experiencing mild symptoms. Of the new reported cases, most are local in origin, meaning they have been contracted within the country, while 128 were “import cases” or contracted while abroad. Although cases have risen over the last several days, the week-on-week infection ratio is down slightly at 0.69, down from 0.73 last Monday. According to government data, a number under 1 means that the number of Covid-19 cases on a whole is falling. As of Monday, over 95 per cent of Singapore’s adult population has completed their full vaccination regimen as part of the national vaccination program.

Covid-19 – Due Diligence And Asset Management

Investor Redemptions from China Funds Hit Pandemic High

Brief: Global investors’ confidence in China is at the lowest since the start of 2021. The bearish mood can be clearly seen in the data about redemptions from Chinese stock and bond funds. In the third week of March, global investors pulled out more than $3 billion from Chinese equities, the highest since the first week of 2021, according to the latest report from Emerging Portfolio Fund Research, which is owned by Informa and tracks fund flows and allocations. China bond funds saw a weekly outflow of more than $1 billion for the first time, EPFR data showed. The sizable capital outflow is in sharp contrast to the bullish consensus assessment of Chinese securities not long ago. From September to the first week of March, over $50 billion was pumped into EPFR-tracked China equity funds and $11 billion into Greater China fund groups, the report said.

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Technology is a weapon in the fundraising war

Brief: 2022 will be the year the level of in-person and online meetings rebalance to create a new fundraising ‘normal’ for years to come. The private market fundraising process underwent a historic transformation through the various stages of Covid-19, but many of the adjustments made during 2020 and 2021 are now being reviewed by GPs and LPs as travel restrictions and lockdowns ease in the UK, Europe and the US. In 2020 fund managers relied mainly on existing relationships to raise and close funds virtually. Last year saw a shift back to engaging with new clients. “In 2021, the situation largely didn’t change, but we had to meet new managers and find new ideas,” says Kevin O’Donnell, global head of investment relations, Adams Street Partners. “And by doing so online, we raised double what we had in 2020, and it was a record year for the firm.” Over the past two years, LPs have been under pressure to allocate to existing GPs that have performed very well. There has been skepticism around investing in new managers virtually.

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SEC seeks to broaden definition of dealer to ease liquidity worries

Brief: The Securities and Exchange Commission on Monday proposed two rules that would force more trading firms to register as dealers and open their books to far greater regulatory oversight. The move, applauded by SEC Chair Gary Gensler, would require many firms that execute algorithm-based, high-frequency trades to come under the regulator’s scrutiny as it looks to ensure liquidity across U.S. financial markets. “I was pleased to support this proposal because I believe it reflects Congress’s statutory intent that firms engaging in important liquidity-providing roles in the securities markets, including in the U.S. Treasury market, be registered with the Commission,” Gensler said in a statement. The SEC’s new rules would require firms or persons to register as a dealer if they regularly make comparable purchases and sales of the same securities in the same day or turn profits primarily through bid-ask spreads. Those who have at least $25 billion of trading volume in U.S. debt in at least four of the prior six months would also be compelled to register. People or firms that manage less than $50 million would not be subject to the new rules.

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China's biggest COVID-19 lockdown in 2 years prompts new supply chain concerns

Brief: China's most extensive COVID-related lockdown in two years is underway in Shanghai, as the city of 26 million people undergoes a series of phased shutdowns to test a growing outbreak of the coronavirus. China's financial capital and largest city has implemented a two-phase partial lockdown for the next 10 days, starting with the Pudong financial district and nearby areas from Monday to Friday. This will allow mass testing to get underway after 3,500 new cases of COVID-19 were reported Sunday. In the second phase of the lockdown, the vast downtown area west of the Huangpu River that divides the city will start its own five-day lockdown. Residents will be required to stay home and deliveries will be left at checkpoints to ensure there is no contact with the outside world. Offices and all businesses not considered essential will be closed and public transport suspended. Bridges and tunnels in and out of the area are being strictly monitored.

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Pandemic fallout: Canadian workers losing 41 working days per year to absences and presenteeism

Brief: Manulife's 2021 Wellness Report highlights how the pandemic is affecting employee health, and underscores that two years into the pandemic, Canadian workers continue to struggle to take care of their health and wellbeing. "Employee mental health patterns could be K-shaped as we move through the next phase of the pandemic," said Dr. Georgia Pomaki, Director, Mental Health Best Practices, Manulife. "One arm of the K represents employees who are excited about reopening and returning to the office—the other represents a group of employees who are facing mental health challenges and significant fatigue: for this group, a return to office may feel overwhelming. Organizations need to consider both groups to design effective and supportive return to office programs." The Report highlights that 16% of working hours (41 days) were lost in 2021 due to absences and presenteeism, and close to half (48%) of employees are experiencing at least one work-related mental health risk factor. These findings suggest employers should consider placing significantly more focus on culture and wellness programs in 2022 and beyond, particularly as large employee populations return to Canadian offices in the near future.

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

Our briefing for Monday, March 28, 2022:

  • In the United States, the Biden administration plans to move forward with the decision to offer second booster shots to adults aged 50 and older. The Food and Drug Administration (FDA) could authorize a second shot as early as next week, officials said, with the Centers for Disease Control and Prevention (CDC) following shortly after with its own recommendation. Unlike the first round of regulatory decisions surrounding booster shots, there will be no advisory committee meetings of either the FDA or the CDC ahead of the decision on second boosters. Officials have said that in the fall, Americans of all ages should get a second shot.
  • In Canada, Quebec’s Medicago vaccine has been denied authorization for emergency use by the World Health Organization (WHO), because of ties to a tobacco company. Philip Morris Investments, subsidiary of tobacco giant Philip Morris International, currently holds a 21% stake in the company which keeps the vaccine from being part of the Covid-19 Vaccines Global Access (COVAX) program. "It is our understanding that this decision is linked to Medicago's minority shareholder and not the demonstrated safety and efficacy profile of our COVID-19 vaccine," said Medicago president and CEO Takashi Nagao in a statement Friday. The WHO has said it is currently exploring policy options for other valid health products linked to the tobacco industry and will provide more information soon.
  • In the United Kingdom, new Covid-19 cases have rose by a million in one week, according to data from the Office of National Statistics (ONS). Driven by the highly infectious BA.2 Omicron subvariant, cases are now hovering at around 4.3 million, up from 3.3 million the week before. Rates are rising in England and Wales, and have reached an all-time high in Scotland, Northern Ireland is the only region where case numbers have decreased.  ONS data shows approximately one in 16 people in England are now infected, with hospitalizations also on the rise. There were approximately 17,440 patients in the hospital with the virus on March 24, with just over 300 in intensive care.
  • Israel’s prime minister has tested positive for Covid-19 and will be working from home over the next few days, his office confirmed. Naftali Bennett says he is still feeling fine and will continue with his schedule as planned, after holding a series of in person meetings that included U.S. Secretary of State Antony Blinken. A state department spokesperson has since confirmed that Blinken will be following Centers for Disease Control and Prevention recommendations, such as masking and undergoing appropriate testing. Nearly half of Israel, including Bennett, have received three vaccinations. 
  • China has announced its largest city-wide lockdown since the pandemic began two years ago. The city of Shanghai has been divided in half for a two-part lockdown which will take place over the course of nine days, as the city carries out mass testing. The eastern part of the city will be locked down from Monday until April 1, while the western part will be locked down from April 1-5. Public transportation will be suspended and companies must stop their operations or work remotely, authorities said. Chinese authorities have avoided lockdowns in Shanghai so far to prevent economic disruption, however, after the city recorded its highest daily number of cases on Saturday since the pandemic’s early days, they appeared to have changed course.
  • In Western Australia, Level 2 Covid-19 restrictions will begin to ease from Thursday, amid high vaccination rates and lower than anticipated hospital admissions. Almost three quarters of people aged 16 and older in Western Australia have had three vaccinations.  The changes to restrictions will include the abolition of mandatory check-ins, except for venues where proof of vaccination is required. Masks will still need to be worn indoors, and private home gatherings will be limited to 30 people. “Our numbers in hospital remain relatively stable and obviously our number of new cases actually has declined from where it was last week,” Premier Mark McGowan told reporters on Monday.  

Covid-19 – Due Diligence And Asset Management

Hedge funds performed well in February despite market turmoil, says PivotalPath

Brief: The PivotalPath Composite Index, a broad measure of overall hedge fund performance, was up 0.3 per cent in February, outperforming most major indices, according to data released by hedge fund research and intelligence specialist PivotalPath. The firm's Dispersion Indicator meanwhile, decreased during the month to 3.8 per cent. The firm writes in its Pivotal Point of Viuerw for March 2022, that strategies able to capitalise on the 'flattening yield curve rally in the energy complex and other factor trends', include Global Macro, Managed Futures, and Equity Quant. Multi-strategy, Managed Futures, Global Macro and Credit were also positive for the month, while commodities, especially oil, reached fresh highs not seen in a decade which, in turn, benefited Global Macro and Managed Futures funds.

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U.K. Would Be in Recession Were It Not for Post-Covid Bounce

Brief: A downgrade on that scale “in any ordinary year” would have left the economy in recession, David Miles, head of macroeconomic forecasting at the OBR, told U.K. lawmakers. That would be the third recession in 14 years. Rocketing energy prices are expected to drive the consumer prices index of inflation to a 40-year high of 8.7% later this year and trigger the worst household living standards crisis in over half a century. The economy is still rebounding from the pandemic, having only just recovered the output lost in 2020. That tailwind prevents a downturn. Normally, “if you’d seen the forecast of growth fall by around 2.5%, we would be in recession,” Miles said. Miles said the squeeze “hits consumption and that’s the biggest part of the downgrade in growth … it’s a hit to the standard of living of this country, it is a terms of trade shock. We are spending more on stuff we import and less on stuff we produce in the U.K.”

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Investors Exit Istanbul’s Huge New Airport as Virus Halts Growth

Brief: Smaller investors in Istanbul Airport, set to be the world’s highest-capacity hub when completed, have agreed to exit the project after the coronavirus pandemic slowed travel and delayed expected profits. Limak Yatirim Holding AS and Mapa Insaat AS are each selling their 20% stakes in the operating company IGA Havalimani Isletmeleri AS, according to people with direct knowledge of the matter. The two remaining partners Kalyon Insaat AS and Cengiz Insaat AS will raise their holdings to 55% and 45%, respectively, after the transaction, the people said, asking not to be identified because the talks are confidential.  Limak, Kalyon and Cengiz declined to comment. Mapa Insaat, owned by Istanbul-based MNG Group, didn’t immediately respond to requests for comment. When signed, the deal will mark the second exit by the original builders that won the rights to build and operate the airport in a joint venture with equal stakes in 2013. Kolin was the first to sell its stake in 2019.

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Poor and Rich in U.K. Hit Hardest in Pandemic’s First Year

Brief: Household incomes in the U.K. continued to grow on average in the first full year of the coronavirus pandemic but the poor fared worse than others, official figures show. Adjusted for inflation, the median after-tax income rose by 2% in the year through March 2021 to 31,385 pounds ($41,270), the Office for National Statistics said Monday. It followed a 4.1% gain the previous year. However, the pandemic had a disproportionate impact, with the poorest fifth of the population experiencing a 2% fall in income. Many found themselves furloughed on reduced wages when businesses were shuttered to fight the spread of Covid-19, and an increase in welfare benefits only partially made up for the hit, the ONS said.The richest fifth also lost income, although not to the same extent, and the gap with the lowest-income households remained at almost 50,000 pounds.

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China Economy Faces Worst Slowdown Since Pandemic, Nomura Says

Brief: China’s economy faces its worst downward pressure since the spring of 2020 when it was hit by the first wave of Covid-19, according to Nomura Holdings Inc. The slowdown in China’s growth worsened in the first quarter and markets should be concerned about a further slide in the second, Nomura Holdings Inc. economists including Lu Ting wrote in a note Saturday. Economic activities “may notably deteriorate across the board” in March, weighed down by increasing mobility restrictions across the country and a continued property sector slump, they said. With the outbreaks suppressing a wide range of sectors, including in-person services, construction and some manufacturing activity, “it’s getting harder for Beijing to achieve its ‘around 5.5%’ GDP growth target for 2022,” the economists said.

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

Our briefing for Friday, March 25, 2022:

  • In the United States, Moderna announced on Wednesday its plan to apply to the Food and Drug Administration for emergency use of its coronavirus vaccine for children aged six months to five years. An outside panel of experts will advise the agency on whether or not the shot should be authorized.  The shot has proven safe for the age group, but its efficacy was weakened in the face of the Omicron variant. With Omicron, vaccine effectiveness fell to about 40%, following the pattern also seen in adults, though the data has not yet been published or peer reviewed. Currently there are no coronavirus vaccines authorized for this age group in the United States. 
  • In Canada, the Conservative Party is urging the federal government to remove all remaining Covid-19 restrictions, pushing for a return to normal after two years of the pandemic. They tabled a motion in the House of Commons on Thursday, legislation that would see the end of measures like vaccine mandates for federal workers. The motion is expected to fail, with opposition parties saying they’re still in favour of the keeping those measures in place. The government has said they will keep certain curbs for now, like blocking travel for unvaccinated foreign nationals and requiring proof of vaccination on planes and trains. 
  • In the United Kingdom, the latest Covid wave has brought hospitals under pressure, with the numbers expected to rise until at least the beginning of April. Professor Chris Whitty, England’s chief medical officer, warned on Wednesday that the Covid-19 pandemic “is not over,” and that the latest wave is being driven by the Omicron BA.2 subvariant. Speaking at the annual conference of the Local Government Association and the Association of Directors of Public Health, Whitty explained that new variants could emerge any time, and that the Covid-19 crisis is likely to be a “significant problem” for the rest of our lives.  
  • Japan’s government has reached an agreement with Shionogi and Co. for supplies of its oral Covid-19 treatment, the firm announced on Friday. It added in a statement that the government is considering buying a million doses of the drug should it get regulatory approval. Shionogi sought approval of the drug last month, hoping to become the third antiviral pill approved in Japan, after Pfizer’s and Merck’s. Japan’s government announced on Thursday its plans to spend 439.7 billion yen ($3.61 billion) on Covid-19 treatment drugs. The country will also start administering fourth shots of coronavirus vaccines, although it isn’t clear yet who will be eligible.
  • Singapore announced on Thursday that it will ease some coronavirus restrictions, in a move towards living with the virus. Prime Minister Lee Hsien Loong said in a televised speech that “our fight against Covid-19 has reached a major turning point.” Lee said quarantine requirements for all vaccinated travellers will be lifted next month, as well as mask mandates and limits on social gatherings. They will also remove a 10:30 PM curfew on alcohol and dining, while continuing to monitor the situation. "After this major step, we will wait a while to let the situation stabilise," he said. "If all goes well, we will ease up further."
  • In Australia, pre-departure Covid-19 testing for international arrivals will soon be scrapped. Health Minister Greg Hunt made the announcement on Thursday, explaining that the new rules will come into effect from April 17. "Given that the vaccination requirements remain and the masking requirements, the medical advice is that [the test] would no longer be required,” Hunt said.  "Particularly as there are some challenges in some jurisdictions in having access to those tests or proving those tests." Travellers will still have to be fully vaccinated and wear masks during flights. Pre-departure tests were introduced in Australia at the beginning of last year to help curb the spread of Covid-19.

Covid-19 – Due Diligence And Asset Management

Costs of going unvaccinated in America are mounting for workers and companies

Brief: Nearly a year after COVID vaccines became freely available in the U.S., one fourth of American adults remain unvaccinated, and a picture of the economic cost of vaccine hesitancy is emerging. It points to financial risk for individuals, companies and publicly funded programs. Vaccine hesitancy likely already accounts for tens of billions of dollars in preventable U.S. hospitalization costs and up to hundreds of thousands of preventable deaths, say public health experts. For individuals forgoing vaccination, the risks can include layoffs and ineligibility to collect unemployment, higher insurance premiums, growing out-of-pocket medical costs or loss of academic scholarships. For employers, vaccine hesitancy can contribute to short-staffed workplaces. For taxpayers, it could mean a financial drain on programs such as Medicare, which provides healthcare for seniors.

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Moderna Sees 1-in-5 Odds of Dangerous Future Covid Variant

Brief: Chances are roughly one in five that new Covid-19 variants will arise that are more dangerous than the current versions, Moderna Inc.’s chief executive officer said. The more likely scenario is that vulnerable people, such as the elderly and immunocompromised, will need annual boosters for protection against strains that are similar in virulence to omicron, Moderna CEO Stephane Bancel said Thursday in an interview with Bloomberg TV. The CEO spoke on the day of a company event detailing its research and progress with messenger RNA vaccines. Moderna is working to reassure investors about its longer-term growth prospects as the new cases decline following the winter spread of highly transmissible omicron. However, omicron’s BA.2 subvariant continues to circulate, leading to concerns about a resurgence and the emergence of new strains of the virus with greater power to infect and sicken.   

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BlackRock’s Larry Fink, who oversees $10 trillion, says Russia-Ukraine war is ending globalization

Brief: Larry Fink, CEO and chairman of the world’s biggest asset manager, BlackRock, said Russia’s invasion of Ukraine has upended the world order that had been in place since the end of the Cold War. “The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades,” Fink said in his 2022 letter to shareholders. “It has left many communities and people feeling isolated and looking inward. I believe this has exacerbated the polarization and extremist behavior we are seeing across society today.” Fink’s letter came a month into Russia’s invasion of Ukraine with Moscow’s forces bombarding cities across the country and killing civilians unable to escape. The U.S. and its allies have imposed unprecedented sanctions on Russia and provided military assistance to Ukraine.

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How Singapore Stacks Up Against Financial Centers on Covid Rules

Brief: Singapore announced Thursday significant easing in its Covid-19 curbs, with a plan to lift most restrictions for fully vaccinated visitors and a requirement to wear masks outdoors as part of its shift toward living with the virus. The loosened domestic social measures come into effect on March 29, while easier travel rules apply from April 1. Here’s how the city-state’s regulations will compare with some global financial centers.

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Private markets bounced back from pandemic-driven turbulence to reach new heights in 2021, according to a new report by McKinsey

Brief: Private Markets Rally to New Heights, a comprehensive analysis of the dynamics and performance of the private investing industry, encompassing private equity, real estate, debt, and infrastructure and natural resources, shows that fundraising was up by nearly 20 per cent year over year to reach a record of almost USD1.2 trillion. In addition, dealmakers were busier than ever, deploying more than USD3.5 trillion across asset classes, while assets under management (AUM) grew to an all-time high of USD9.8 trillion as of July 2021, up from USD7.4 trillion the year before. Private equity continued to drive global growth in private markets. Fundraising rebounded across regions, and global totals fell just short of the pre-pandemic peak established in 2019.

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

Our briefing for Thursday, March 24, 2022:

  • The chief executives of several major airlines in the United States are urging President Joe Biden to end the federal mask mandate on airplanes and pre-departure Covid-19 test requirements. The chief executives of American Airlines, United Airlines and Delta Airlines said in a letter that the current restrictions are “no longer aligned with the realities of the current epidemiological environment.” Earlier this month the Biden administration extended the mask mandate in airports, train stations, and ride-share programs until April 18, the mandates were originally slated to end on March 18. Delta Airlines CEO Ed Bastian in a separate statement said, “considering the improved public health metrics in the US and medical advancements to prevent the worst outcomes of COVID-19, the federal mask mandate and pre-departure testing no longer fits with the current environment.” The White House did not comment on the letter but said that it had tasked the Centers for Disease Control and Prevention (CDC) with developing a “a revised policy framework for when, and under what circumstances, masks should be required in the public transportation corridor.” Last week the U.S. Senate voted 57 to 40 to overturn the public health order requiring masks on airplanes and public transportation, which Biden threatened to veto if it passes.

  • In Canada, wastewater data is suggesting a rise in Covid-19 cases in several provinces. According to analysis by Global News, Ontario, Saskatchewan, and British Columbia are seeing resurgences of the virus as pandemic restrictions are being lifted. Dr. Steve Hrudey, chair of the research advisory group of the Canadian Water Network COVID 19 Wastewater Coalition said, “the reality is that as all of the restrictions come off in terms of masking and the other measures which have been in place for some period of time, we can expect that more cases are going to be out there.” Experts say that wastewater testing provides a more accurate representation of the prevalence of Covid-19 at a time when testing measures fluctuate throughout different municipalities. “Wastewater testing provides a true picture of COVID-19 community health, especially in the current situation when resources for clinical testing may be limited in some areas,” said Anna Maddison, a Public Health Agency of Canada (PHAC) spokesperson. Dr. Peter Juni, a professor of medicine and epidemiology at the University of Toronto said that wastewater analysis has shown a “relatively steep increase” in coronavirus prevalence across all regions in Ontario.

  • The number of people in hospital due to Covid-19 has risen for the 19th day in a row in the United Kingdom. On Thursday, the U.K. reported that 16,975 people were in hospital due to complications caused by Covid-19, an increase of 216 from Wednesday. The number of patients in intensive care units requiring ventilators was at 302, that number has remained relatively constant throughout the last few weeks. People aged 75 or higher are being particularly affected, as hospitalizations for that age group have jumped to their highest levels in over a year. Nearly 75 in every 100,000 people over age 75 in the country have Covid-19, that number is up from 59 the week previous, and in the over 85 age category 178 per 100,000 have contracted the virus. All regions in the country are seeing an increase in cases and experts are suggesting that numbers will continue to rise.  Dr Susan Hopkins, Health Security Agency chief medical adviser said the figures are “a reminder to us all that the pandemic is not over.” She added, “hospital admissions and cases of Covid-19 have continued to rise, and we can expect to see further increases before we start to see a decline.”

  • The European Medicines Agency (EMA) is recommending the use of AstraZeneca Plc’s antibody drug for adults and children over 12 who have not yet contracted Covid-19. Over the last several weeks, Europe has seen a spike in cases and a stagnation of vaccination rates in adults. The EMA is suggesting that the AstraZeneca drug can also be used by people whose immune systems may be too weak to respond to vaccines. While vaccines require an intact immune system to fight off the virus, AstraZeneca’s EVUsheld contains antibodies designed to linger in the body for months and will contain the virus in case of infection. In an independent lab study, EVUsheld was proven to be effective against both BA.1 and BA.2 strains of the Omicron variant. The studies show that EVUsheld was able to cut the risk of symptoms resulting from infection by 77 per cent with protection lasting roughly six months. The EMA’s decision to recommend the drug is expected to soon be followed by the European Commission.

  • China has recorded over 2,000 new cases of Covid-19 for the third straight day and the government is now putting the blame solely on the transmissibility of the BA.2 strain of the Omicron variant. “Omicron BA.2 caused this outbreak, and spreads faster and more easily than previous viruses,” the export-heavy province of Fujian said in an online statement Tuesday, it continued by saying the BA.2 variant is “stealthier” than the previous Omicron variant, but it is causing mainly mild or asymptomatic cases. Scientists across the world have described BA.2 as a “stealth” variant because it contains mutations that make it less distinguishable than the previous Delta variant when using a PCR test. China is currently relying on local governments to impose restrictions based on the severity of the outbreaks in their jurisdiction and negative Covid tests are being required to travel throughout different regions of the country.

Covid-19 – Due Diligence And Asset Management

Hong Kong Holds Third Spot in World’s Financial Centers Ranking

Brief: Hong Kong, in the midst of an exodus of residents as it grapples with its largest ever outbreak of Covid-19, held its third place ranking among the world’s financial centers, trailing New York and London, according to a survey. In the main areas of competitiveness, Hong Kong ranked in the top four for business environment, human capital, infrastructure and general reputation, but out of the top 10 in financial sector development. Its overall hold on the third spot came as financial centers in Asia “generally recovered losses” experienced in the previous study, suggesting restored confidence in the region’s economic strength, according to the Global Financial Centres Index published by Z/Yen and the China Development Institute. Shanghai and Shenzhen moved up to fourth and 10th place, respectively. Hong Kong’s strict pursuit of Covid zero, coupled with a brain drain over the past years amid a political crackdown on media and civil society groups, has prompted warnings over the city’s status as a financial hub.

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Private equity's pandemic-era health care push

Brief: Private equity firms invested nearly $70 billion in the life sciences and medical device industries last year — a sign that the pandemic's disruptions didn't cool interest in the sectors, according to a new report by the American Investment Council. Why it matters: The influx of capital could help bring more lifesaving drugs and medical technologies to market. But private equity's growing presence in health care isn't always viewed positively, particularly when it's associated with price increases or reduced access to care. By the numbers: Private equity deals in the life sciences sector were worth nearly $26 billion in 2021, the highest amount in a decade. Medical devices and supplies deals were worth nearly $44 billion last year, which was also the highest value over the last decade — by far. Private equity has invested more than $280 billion into the sectors over the last decade, according to the report. What they're saying: "What COVID brought was probably a bigger focus on health care gaps and needs in the country, and I think you saw more money going into this sector as a result of a new focus on exposing some of the challenges we have in the health care system," American Investment Council CEO Drew Maloney said in an interview.

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Record-Setting Venture Capital Market Shows Signs Of A Slowdown

Brief: When pandemic-induced lockdowns started to spread in March 2020, partners at some venture capital firms became concerned about an overdue correction. Instead, the opposite happened, and the pandemic pushed the market into one of the strongest bull periods on record. Now, amid a geopolitical crisis and a downward-trending stock market, some in the industry say the overheated venture capital climate is finally beginning to cool down. Investors tell Forbes that late-stage deal activity — which set records for both deal count and investment volume in 2021 — has slowed considerably over the past few weeks. They say that crossover investors who helped drive the breakneck pace in 2021 may have overindulged at the late stages. The broader venture ecosystem is realizing the swollen price tags they were willing to buy into to get into the hottest deals of 2021 were inflated, these investors say.

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Nearly 50% of foreign firms in Hong Kong plan to relocate staff

Brief: Nearly half of the European companies in Hong Kong plan to fully or partially relocate operations and staff out of the city, a new survey suggests, in the latest sign that the world's toughest Covid-19 travel and quarantine restrictions are eroding the appeal of Asia's main finance hub. Around 25 per cent of responding companies said they planned to fully relocate out of Hong Kong in the next year, according to a new survey from the European Chamber of Commerce in Hong Kong, while another 24 per cent said they are planning to partially move out of the city. Roughly 34 per cent of firms said they were uncertain about their plans, while just 17 per cent said they had no desire to relocate over the next 12 months. The negative results, which come amid a surprisingly chaotic coronavirus outbreak, are the latest measure of declining business confidence in a once-freewheeling city that has been increasingly isolated from the world over more than 2 years.

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Will the world economy avoid an inflationary bust?

Brief: Today’s high inflation is being compared to the 1970s. However, robust consumer spending, fuelled by pandemic savings, makes for a different set of circumstances. Memories of the 1970s were evoked as the price of Brent crude oil temporarily climbed above $139 a barrel in the wake of Russia’s invasion of Ukraine. That was a period when very high oil prices and elevated rates of consumer inflation plunged some of the world’s major economies into recession. Using the definition of recessions from the National Bureau of Economic Research (NBER), there have been seven such downturns in the US since the 1970s. The first four were all preceded by a pick-up in inflation and interest rates (see chart, below). The decision by the US Federal Reserve (Fed) to raise interest rates amid signs of inflationary pressures broadening out in the US – as they did in the 1970s – has further put parallels with the past back into focus. Could this “economic cycle” play out like those from the 1970s, 80s and 90s, when economic conditions were seemingly more akin than to those seen over the past two decades? The economic cycle, which is sometimes referred as the business cycle, is the period in which an economy moves from a state of expansion to one of contraction, before expanding again.

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

Our briefing for Wednesday, March 23, 2022:

  • In the United States, government data now shows that one in three Covid-19 cases are caused by the BA.2 subvariant, though overall infections are still on the decline. In New York, New Jersey and Massachusetts, BA.2 now makes up more than half of all cases, according to the Centers for Disease Control and Prevention (CDC). As of March 19, the seven-day average of Covid-19 cases was 27,747, down 18% from a week earlier. As per the CDC’s new guidelines that prioritize hospitalizations over case counts, most of the country is at a low transmission rate. Experts note that the U.S. tends to lag behind the U.K. for about three weeks, so an uptick in BA.2 cases would start to show in about a week or so.
  • In Canada, as restrictions continue to lift across the provinces, many unvaccinated residents are frustrated that they still can’t board planes or trains. Canada’s vaccine mandate came into effect in November 2021, preventing unvaccinated people from boarding commercial planes or trains to either domestic or international destinations. Some other countries have dropped all Covid-19 restrictions and welcomed back unvaccinated travellers, including England, Ireland, Iceland and Norway. But Canada’s Chief Public Health Officer Dr. Theresa Tam says the plan to drop travel restrictions in Canada could be delayed by the emergence of new variants. "The potential for the Omicron resurgence, particularly the subtype BA.2 can still occur. So I think this is just waiting to see what happens with that situation," Tam said.
  • In the United Kingdom, the government of Wales is considering extending mask and isolation rules beyond their planned expiry date of March 28. Hospitalizations and rising case numbers have caused ministers to consider the extension, although it is unclear exactly which rules would be extended, as ministers suggested that they would be picking and choosing from the legislation. Currently, masks are required in Wales on public transportation, indoor shops and in hospitals. Scotland had initially planned to scrap mask mandates on March 21, but will now keep them in place until at least April 4. 
  • A study out of Italy has suggested that proper ventilation systems in schools can reduce Covid-19 transmission by more than 80%. The study, published on Tuesday, compared coronavirus contagion in 10,441 classrooms in Italy’s central Marche region. The 316 classrooms with mechanical ventilation systems had significantly lower rates of Covid-19, with the reduction in cases being more pronounced based on the strength of the system. Most of Italy’s schools do not have proper ventilation systems, with teachers instead being encouraged to keep windows open. The experiment was carried out between September 2021 and January of this year and overseen by the Hume foundation think tank.
  • As South Korea’s case numbers reach 10 million in total, funeral homes and crematoriums are coming under increasing pressure. On Monday the health ministry instructed 60 crematoriums across the country to burn for longer hours, raising the capacity from 1,000 cremations per day to about 1,400. But Health Ministry Official Son Young-rae says long waits and a backlog of bodies are reported in the greater Seoul area.  Crematoriums will be asked to take reservations from outside of their regions – something that doesn’t typically happen – to deal with the backlog. "There have been regional differences in Covid-19 deaths because of various factors, such as the size of the elderly population in each community, and there's also a difference in the capacity of cremations each region can handle," Son said. 
  • In Australia, isolation rules for Covid-19 aren’t likely to change anytime soon, despite Prime Minister Scott Morrison calling them “redundant” in recent weeks. Health Officials in New South Wales and Victoria are hesitant to make any changes after receiving new modelling on caseload trajectories. As the highly transmissible Omicron BA.2 subvariant begins to take hold across the country and vaccine immunity wanes, health officials are becoming increasingly nervous at the thought of abandoning the seven-day isolation rule for household contacts. The discussion on isolation rules comes as the Australian Technical Advisory Group on Immunisation is expected to sign off on a fourth coronavirus vaccine dose for some Australians.

Covid-19 – Due Diligence And Asset Management

Investors shun money market safe haven despite February uncertainty

Brief: Amid ongoing uncertainty in Europe – from war in Ukraine to Covid – investors turned away from European mutual funds en masse in February, but ETFs managed to attract inflows, the latest data from Refinitiv shows. Bucking tradition, money market funds led the redemptions. European mutual funds lost net €67.6bn during the second month of the year, while ETFs took in €9.2bn. Overall flows for mutual funds and ETFs were negative at €58.4bn.Detlef Glow, head of EMEA research at Refinitiv Lipper, said: "It was not surprising that February 2022 was in general a negative month for the European fund industry given the geopolitical situation in Europe, the still ongoing Covid-19 pandemic, and the sluggish market environment." What did come as a surprise, however, was the fact that investors sold out of money market funds, which are usually seen as a safe haven in times of uncertainty.

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Global mid-market M&A remains buoyant in Q1 2022 as entrepreneurs exit on a market high

Brief: Global mid-market M&A activity has continued robustly in the first quarter of 2022, says audit, tax and consulting network RSM, as it announces it worked on 614 completed deals in Europe last year. However, the war in Ukraine – which in addition to its dire humanitarian impact is causing inflation in the cost of raw materials and commodities – could impact deal activity and broader economic confidence in the months ahead. RSM’s advisers supported unprecedented levels of global deal activity in 2021. Among the 614 transactions completed by RSM Firms in Europe last year, the technology, media, and telecom (TMT) sector was the driving force, with 152 deals, followed by 90 completed in the engineering and manufacturing sector.

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UBS to Offer 100% Remote Work Option for Eligible US-based Employees

Brief: Today, UBS announced the launch of its Virtual Worker Framework, a new industry-leading approach to flexible working that will provide US employees in eligible roles with the opportunity to work 100% remotely. UBS will begin a phased implementation of the framework over the coming months to select current and prospective employees across the country. The Virtual Worker Framework represents a natural extension and evolution of UBS’s current hybrid work model. In a global survey, 86 percent of UBS employees stated that they value greater flexibility, including the ability to maintain a remote or hybrid work arrangement. With continued technology enhancements and positive adoption of virtual work, the firm is finding new ways to engage with clients and build trusted relationships. “Hybrid working has positively reshaped the future of our workplace,” said Tom Naratil, President of UBS Americas.

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What’s at Stake When the Majority of Institutional Investors Say That They’re Rethinking Their Portfolios?

Brief: Institutions aren’t just worried about the effect of inflation, the pandemic, and what they fear are outdated asset allocation rules. They’re potentially moving a vast amount of money that will create opportunities and challenges for asset managers — and move markets. Those are some of the findings from Nuveen as part of its 2022 global institutional investor study, which is expected to be published on Wednesday. Sixty-four percent of investors told the asset manager that the current market environment is pushing them to entirely rethink their portfolio construction strategies.In the survey of 800 institutions, each of which had a minimum of $500 million in assets, Nuveen found that the overhaul is being prompted by multiple head-shaking developments —  including inflation rates that haven’t been seen in 40 years, the pandemic, and climate change — that are affecting the value of assets not just in the future, but today.

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Partners Group's Strong Corona Rebound

Brief: After reporting strong results for 2021, the investment firm is raising its dividend in line with its assets under management growth. Zug-based Partners Groups posted a profit increase of 82 percent amounting to 1.46 billion Swiss francs ($1.60 billion) in 2021, it said in a statement Tuesday, after signaling the upward trend in January. The private equity company's assets under management (AuM) swelled to 17 percent totaling $127 billion, while performance fees increased by 46 percent of total revenues driven by «record exit activity and strong portfolio performance post COVID-19,» it said. The company will propose a dividend increase of 20 percent to 33 francs per share, in line with its AuM growth. Partners Group reconfirmed its guidance of gross client demand in the range of $22-26 billion in 2022. Its investment exposure to Russia and Ukraine was below 0.2 percent of AuM, it said.

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

Our briefing for Tuesday, March 22, 2022:

  • United States drug maker Pfizer Inc. announced on Tuesday that it will sell four million courses of its Covid-19 pill Paxlovid to Unicef for use in 95 low-income countries. The deal will make up nearly 3 per cent of the 150 million courses that Pfizer expects to produce in the coming year. The 95 countries to receive the shipments make up 53 per cent of the world’s population.  Pfizer Chief Executive Albert Bourla said that the deal was part of the company’s strategy to make sure the pill was available to everyone "regardless of where they live or their circumstances." While the transaction price was not disclosed, Pfizer has said the low to middle-income nations will receive the pill at a not-for-profit price, while higher income nations will pay more. In clinical trials, the Paxlovid pill has shown it is up to 90 percent effective in preventing hospitalizations caused by Covid-19, which is significantly better than the Merck & Co. antiviral pill molnupiravir. Paxlovid is a two-dose treatment that pairs nirmatrelvir with ritonavir and is to be taken over a five-day period after symptoms of Covid-19 are present.

  • The Canadian government is still hesitant to release any information on when the country will see an end to all Covid-19 restrictions. Health Minister Yves Duclos fielded a number of questions from Conservative and NDP members of the House of Commons on Monday, who wanted to know what conditions needed to be met for Canada to end restrictions once and for all. Duclos said the decision will rely on several factors, including vaccination rates, hospital capacity and the epidemiological effects of long-Covid. “To be responsible means that you need to follow the evidence, the science and the precautionary principle and adjust or analyze policies as things evolve,” he said. Opposition parties have long called on the government to disclose their decision-making process for federal Covid guidelines and how public health requirements are set. “I find that quite shocking, that there’s not an answer to be given, that it’s much too complex for the health committee and for Canadians to understand,” Conservative MP Stephen Ellis said to the minister at committee.

  • In the United Kingdom, the number of people in hospital has reached record highs in several areas as the BA.2 subvariant sweeps across the nation. In Scotland, 2,128 people are in hospital up from its previous peak of 2,053 last January. In the south east and south west of England cases are breaking records set in the height of the second wave in February 2021. In the whole of the U.K., nearly 15,000 people are in hospital which makes a week over week increase of 22 per cent. The spike in cases has in part been caused by the relaxation of all covid restrictions that came in to place on February 24. Last week, First Minster of Scotland Nicola Sturgeon announced that the law requiring masks to be worn on public transport and other close-proximity settings would not be scrapped as initially planned due to the current spike in cases. It is now thought that one in every fourteen people in Scotland has Covid-19 which is up from one in every eighteen the week previous.  

  • France is reporting a 36 per cent rise in new Covid-19 cases after most restrictions were lifted in the country on March 14. The 7-day average is closing in on 89,000 compared to just 60,000 the week previous. French President Emmanuel Macron – who is up for re-election in three weeks’ time – decided to lift the restrictions citing a mass-decline in case numbers. The people of France are no longer required to wear masks in public settings, except for on public transport, in hospitals and in other medical facilities. The government has also lifted vaccine passport requirements for bars and movie theaters. Hospitalizations in the country continue to drop, but at a slower pace than the previous weeks at just 1.7 per cent, the slowest decline since February. The Alsace region, which was also hit hard at the beginning of the pandemic is seeing the largest increase in cases with over 1000 per every 100,000 inhabitants. 

  • China has locked down the industrial city of Shenyang late Monday night as nearly 5,000 new cases of the virus were recorded across the country on Monday. The city of 9 million inhabitants was put into an emergency lockdown overnight after fearing that cases from the neighboring province of Jilin have spread to Shenyang and the province Liaoning. Shenyang recorded 47 new cases on Tuesday causing major manufacturers, like BMW, to close their housing complexes and barred residents from leaving without a 48-hour negative test result. The country recorded two deaths resulting from complications caused by the virus on Saturday marking the first deaths in over a year. President Xi Jinping has said there is a need for the country to “minimize the impact” of Covid-19 on the economy but has remained steadfast in his Covid Zero policy. Several larger cities, like Shanghai have avoided a full-scale lockdown but have instead isolated individual buildings, and for the first time is looking to American drug maker Pfizer’s antiviral drug Paxlovid to combat severe infection in country. China received 10,000 courses of the drug on Sunday.

Covid-19 – Due Diligence And Asset Management

How the pandemic shaped Gen Z's approach to saving and investing for retirement

Brief: Jason Dorsey, Gen Z Researcher and Author, joins Yahoo Finance Live to discuss how Gen Z and millennials are approaching retirement savings and finances emerging from the shocks of the pandemic. Video Transcript. DAVE BRIGGS: Is there a generational gap when it comes to saving for the future? Well, study after study has, indeed, shown that, but it might not be exactly what you think. Let's talk about it with Jason Dorsey. He is a Gen Z researcher and the author of "Z Economy." Jason, good to have you on, my friend. So tell me- JASON DORSEY: Thank you for having me. DAVE BRIGGS: --how are Gen Zers preparing for the future? Are they, indeed, putting away money for retirement? JASON DORSEY: They are, and it's pretty shocking. When we talk about Gen Z, the oldest members are about 25 years old. And what our research shows in multiple studies is that Gen Z is actually saving money. They're trying to hold on to the money that they were going to spend. They'll even have a birthday party. Keep the money, and then ask their parents for money to go spend, which is pretty funny. The Gen Z, right now, 70% of them say that they need to be saving money today in order to be able to retire one day.

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Are MSMEs ready for private equity, venture capital? What experts say

Brief: India's MSME sectors were highly affected by the wrath of Covid-19. According to CII, MSME sectors employ about 12 crore people and about half of the Indian exports. According to experts the root problem from the domestic MSME sector is failure to attract the private capital into their business, leading to constant starvation for funds. “MSME owners and entrepreneurs should thrive to rope in professional money. Without any predetermined rate of interest, private investments are the most expensive form of capital for a business. One should use this capital in areas where the return on investments is higher than the cost of capital. Investing this capital judiciously in the needed business areas can fetch much higher returns than the actual cost. Lenders are not active participants of your business, whereas PE funds or VCs participate in the growth actively and give a professional structure to the business.

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Traders Sleep in Offices to Keep Working Amid Shanghai Lockdowns

Brief: As China’s major financial centers confront their worst Covid outbreaks to date, many fund managers are rolling out sleeping bags on trading floors across Shanghai and Shenzhen. Traders are volunteering to take turns camping out in their offices to avoid restrictions sweeping through the cities at a time when Chinese capital markets are experiencing the biggest bout of volatility since mid-2020. With Shanghai becoming one of the nation’s epicenters for new coronavirus infections, employers are preparing for the possibility of sudden lockdowns that could forcibly quarantine traders at homes or work for days or even weeks. That means making sure workers have enough provisions on hand in case they get stuck in the office. At AXA SPDB Investment Managers Co., for example, staff is being supplied with airbeds, instant noodles and emergency kits.

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Former White House Adviser Targets Viral Threats in New CEO Role

Brief: Former White House biodefense adviser Rajeev Venkayya is taking the reins at a new venture-backed company that aims to fill a gap in treatments to combat Covid-19 and future pandemic threats. Venkayya, who stepped down as head of Takeda Pharmaceutical Co.’s vaccines unit last month, is now the chief executive officer at Aerium Therapeutics, a biotech company backed by Omega Funds. The company launched Tuesday with an initial focus on developing new monoclonal antibodies against Covid. The drugmaker is advancing with two such antibodies that have shown promise against the delta variant as well as omicron and its offshoots in animal tests, according to Aerium. The data will be submitted to a medical journal, meaning it hasn’t yet been peer-reviewed. Aerium sees an opportunity to expand in the field and a need for new tools to help patients, especially vulnerable people who haven’t been able to benefit from vaccines, after omicron overpowered some antibody treatments and raised questions about the efficacy of others. “The virus evolved very quickly around vaccines and therapeutics,” Venkayya said in an interview. “We increasingly will be trying to get away from the variant-chasing game and into the space of broadly protective therapeutics.”

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Inflation protection: Is gold still the best hedge?

Brief: Gold’s comeback amid Russia’s war in Ukraine and monetary policy uncertainty, the role of gold exchange-traded commodities (ETC) in a multi-asset portfolio and combining precious metals with ESG were the topics discussed at ETF Stream’s recent webinar in partnership with HANetf. The webinar, titled Inflation protection: Is gold still the best hedge?, started by looking at the dramatic return of gold ETCs to favour after a subdued COVID-19 recovery period in 2021. Anthony Bamber, head of business development at The Royal Mint, which co-created the Royal Mint Physical Gold Securities ETC (RMAU), said: “Towards the end of February, we saw gold jump around 6% which was the largest monthly gain since May 2021. “As everything in Russia and Ukraine began to escalate further in March, it got up to its record highs again. It was these escalations plus other underlying issues such as inflation and the energy crisis that caused this.

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

Our briefing for Monday, March 21, 2022:

  • In the United States, the country’s top infectious disease expert says a new surge of cases is likely thanks to the BA.2 virus subvariant. Dr. Anthony Fauci told ABC’s This Week on Sunday that the latest surge will not be a dangerous one, and also added that he thinks the country is “clearly going in the right direction” on the coronavirus pandemic. According to Fauci, the BA.2 variant is about 50-60% more transmissible than Omicron. “So the bottom line is we likely will see an uptick in cases as we’ve seen in the European countries, particularly the UK, where … they have BA.2,” Fauci said. “Hopefully, we won’t see a surge. I don’t think we will. The easiest way to prevent that is to continue to get people vaccinated. 
  • In Canada, the popular organization known as Vaccine Hunters will shut down its operations after one year of helping Canadians hunt for vaccines across the country. Vaccine Hunters launched in March 2021 and quickly grew in popularity on several social media channels. The organization became so widely known that it partnered with the City of Toronto and got shoutouts from Prime Minister Justin Trudeau and Dr. Theresa Tam. “While Canada’s fight against COVID-19 isn’t over, we are happy that millions of Canadians are fully vaccinated with vaccines now being readily available for anyone who is looking,” the group said in a news release. To date, 85% of Canadians are fully vaccinated, 89% of eligible Canadians have received at least one dose and 47% have received their boosters.
  • In the United Kingdom, the National Health Service (NHS) has started offering second booster shots to those who are at higher risk from Covid-19. Approximately 5 million people will be eligible; those who are 75 and over, those living in long-term care homes and those who are immunocompromised. These groups will be contacted by NHS and advised to book an appointment online or by phone. The rollout comes after the Joint Committee on Vaccination and Immunisation advised the government last month that the three at-risk groups be offered a second booster to deal with waning immunity. Covid-19 cases and hospitalizations in the U.K. are on the rise, which experts say is linked to the lifting of restrictions.
  • Germany’s parliament voted on Friday in favour of abolishing all remaining coronavirus restrictions, despite rising case numbers and hospitalizations. The new legislation would see the end of mask mandates except in places like long-term care homes and public transportation. Initially the new rules were supposed to take effect from Sunday, but a transitional period will take place until April 2 after some opposition from Germany’s 16 state leaders. Health Minister Karl Lauterbach defended the decision. "We can't continue to put the entire country under a shield in order to protect a small group of people who are unwilling to get vaccinated," he said. "The balance is being shifted."
  • Hong Kong will ease some coronavirus restrictions next month, in an apparent shift from the country’s zero-Covid policy to living with the virus. Chief Executive Carrie Lam announced that a ban on flights from nine countries will be lifted, quarantine will be reduced and schools reopened, after much backlash from businesses and citizens. A ban on flights from Australia, Britain, Canada, France, India, Nepal, Pakistan, the Philippines and the United States will be lifted from April 1, as Lam says the ban is “no longer timely or appropriate.” Restrictions on gathering limits, masking and business operations will begin to lift in three phases from April 20. Schools will resume face-to-face learning on April 19, and the country’s mandatory mass testing scheme has been suspended for now.
  • In Australia, the federal government has announced a new $75.5 million support package for those in the travel industry dealing with Covid-19. The new program, which will consist of grants between $7,500 and $90,000, intends to offer targeted assistance to travel agents and tour arrangement providers. The funds are to be directed to helping travellers rebook trips with Covid-related credits. Dan Tehan, the country’s tourism minister, said the package would help the industry rebound from the pandemic downturns. “Australia’s tourism industry is bouncing back, with international and state borders now open and a date set for the resumption of cruising,” he said.

Covid-19 – Due Diligence And Asset Management

KKR Says Investors Will Need to Take More Risk to See Returns

Brief: KKR & Co. warned that investing will require more risk given the market turmoil driven by Russia’s invasion of Ukraine. There may be opportunities in beaten-down growth stocks, liquid credit and inflation-hedging proxies including real estate and infrastructure, KKR’s Henry McVey and Racim Allouani said in a March 9 report to clients. Tightened financial conditions are also creating the prospect of partnering with companies facing temporary business disruptions or that have weak capital structures, they said. Low rates and government stimulus have boosted markets in recent years, with investors enjoying outsized returns even with relative safe portfolios. The war has created turmoil across asset classes from stocks and bonds to commodities and “tremendous volatility,” they noted.“The current crisis makes forecasting risk parameters such as risk of loss, volatilities, and correlations only more challenging,” said McVey, KKR’s head of global macro, balance sheet and risk, and Allouani, a managing director.

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The stock market is depressed, and apparently that's great

Brief: Markets have rallied nicely off the early March lows that were triggered by the start of Russia's war on Ukraine, but they are still dealing with a bout of depression. The percentage of individual investors who consider themselves bullish has averaged just 23.9% over the past 10 weeks, according to the American Association of Individual Investors (AAII). Truist co-chief investment officer Keith Lerner points out this is the lowest average level of bullishness since the June 2016 Brexit referendum and one of the least optimistic readings since the survey's inception in 1987.  So what has this level of depression historically meant for the stock market in the months ahead? You guessed it, a rally! Historically, these low levels on the survey have been followed by consistent and positive returns on a six- to 12-month basis for the S&P 500, Lerner notes. Only in the land of investing does bad equal good (maybe it does in other places, who knows).

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Companies Shelve $25 Billion of Fund-Raising Deals as War Rages

Brief: Firms across the globe are ditching fund-raising deals at a quickening pace, as volatility destabilizes credit markets following Russia’s invasion of Ukraine. Electric car giant Tesla Inc. is the latest big name firm to scrap financing plans, as it postponed a $1 billion offering of bonds backed by leases on its vehicles last week. Almost 80 companies, nearly half from the U.S., have put at least $25 billion of deals on hold since the start of the war nearly a month ago.  “There has been a severe jolt to investor confidence since the invasion of Ukraine as sanctions have been slapped on Russia and commodity prices roared upwards,” said Susannah Streeter, senior investment and markets analyst with Hargreaves Lansdown Plc. The caution has reached all corners of the globe. India’s Mumbai International Airport Ltd. recently delayed a dollar bond deal, SS&C Technologies Holdings Inc. halted a $1.7 billion buyout loan on Wednesday and Brazil’s Trocafone SA scrapped an initial public offering.

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Pandemic hiring boom: Federal government added nearly 20,000 workers in a single year

Brief: The Trudeau administration spent so much money during the first year of the pandemic that it was easy to lose track of the profound growth taking place in the size of the federal government’s workforce.Employment across the country jumped more than six per cent year over year to 319,600 for all departments and agencies, according to data compiled by Treasury Board. That’s an increase of nearly 20,000 between the first three months of 2020 and the same period last year. Last year’s increase was more than double the average annual employment gains posted by federal government workers between 2015 and 2020, covering years the Liberals have been in power. The financial impact was significant: The federal government’s total payroll reached nearly $60 billion in fiscal 2021, up $4.4 billion from the previous year, according to the public accounts.

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Investor behavior in Europe is mirroring the market’s worst crises, new research shows

Brief: European fund flow patterns so far this year are emulating historical crisis periods for markets, including the 2008 global financial cash, according to new research from data firm Refinitiv. A sluggish market environment, lingering concerns around the Covid-19 pandemic and the emerging geopolitical tensions in Europe meant the continent’s fund industry saw net outflows in February that took overall flows so far this year to -57.2 billion euros (-$63.2 billion), according to the research. Mutual funds — pools from investors allocated by fund managers into stocks, bonds, money market instruments and other securities — faced 67.6 billion euros of outflows in February alone. Meanwhile exchange-traded funds (ETFs) — baskets of securities that trade on regular stock exchanges — enjoyed inflows of 9.2 billion euros.

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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, March 18, 2022:

  • In the United States, the Biden administration’s COVID-19 team will be undergoing a change as COVID-19 coordinator Jeff Zients and his deputy Natalie Quillian are leaving the administration next month. The White House announced on Thursday Dr. Ashish Jha, the dean of the Brown University School of Public Health will serve as their replacement. The Associated Press notes the changeover comes as the Biden administration has come under criticism for confusing public messages around the virus as many restrictions and mandates are easing. Therefore, it is not surprising the White House’s statement highlighted Dr. Jha’s communication skills and familiarity to Americans as he has been a fixture on cable news outlets during the pandemic.
  • Canada’s population grew by nearly half a million in 2021, closer to the record population growth the country was experiencing pre-pandemic. According to Statistics Canada, the number of people living in the country rose 1.2% or 457,888, to 38.5 million in 2021. The number is up from 2020 when the COVID-19 pandemic first took hold, when the population only increased by 160,273 people. Most of the population gain came from international migration as the Canadian federal government eased most travel restrictions for those coming to the country for work, school, or family reunification – with the numbers increasing to four times as many as compared to 2020. 
  • In the United Kingdom, a cross-section of parliamentary MPs have said the Coronavirus Act was passed in an “unsatisfactory” manner. The Guardian reported ministers failed to allow parliament enough of an opportunity to scrutinize the 329-page Coronavirus Act of 2020 as sweeping laws were passed to tackle the COVID-19 pandemic. “It is unsatisfactory that since the Coronavirus Act was passed, in just three sitting days in March 2020, parliament has been unable to substantively debate its provisions as was promised during its passage,” said the committee chair, William Wragg. The committee points to the two-year “sunset clause” to the bill and if it was right approach attaching “stronger and broader powers” than they might otherwise not have been willing to accept.
  • In South Korea, government officials are trying to calm public fears that the coronavirus pandemic response is faltering. On Thursday it was reported there were 429 deaths due to COVID-19 in the last 24 hours, nearly 140 more than the previous record set on Tuesday. The 621,266 coronavirus cases registered on Thursday also shattered the previous high of 400,624 set on Wednesday. The outbreak has been significantly larger than what had been forecast by government officials, who maintain the Omicron variant is nearing its peak. However, even though South Korea set a record for COVID-19 deaths, it has a much lower death rate, in relation to population size, than the United States or many European nations, which officials attribute high vaccination rates as more than 68% of the South Korean population have received booster shots.
  • Japan’s government have formally decided to lift all remaining coronavirus emergency curbs as scheduled, starting next week. Tokyo is one of 18 other areas expected to see restrictions end on Monday March 21st. When the Omicron variant was making its way through Japan earlier in the year, 36 prefectures were subject to some kind of coronavirus related restriction. When the measures are lifted it will be the first time since January 8th, Japan has been free of such measures, but Prime Minister Fumio Kishida said there will still be a transition period where Japanese citizens should continue to take maximum caution against spread of infection. 
  • The World Health Organization (WHO) have stated the evaluation of Russia’s Sputnik V coronavirus vaccine has been postponed due to the country’s ongoing war in Ukraine. A WHO vaccine expert had stated the United Nations’ health agency was originally scheduled to visit Russia on March 7th to assess the facilities where Sputnik V is produced, but due to the war that inspection had been postponed for a later date. The WHO has been evaluating Russia’s Sputnik V vaccine since last year and its authorization would allow the Russian-made vaccine to be purchased as part of the UN-backed COVAX effort to distribute vaccines worldwide and would lend creditability to the jab that some other countries have been slow to take up.

Covid-19 – Due Diligence And Asset Management

Ukraine War Hits World Economy Like an Earthquake, IMF Head says

Brief: The war in Ukraine is like a powerful earthquake that will have ripple effects throughout the global economy, especially in poor countries, according to the head of the International Monetary Fund. The conflict will lead to lower growth and faster inflation worldwide, Managing Director Kristalina Georgieva said Friday on an IMF panel about the lender’s strategy to support fragile and conflict-affected nations. Countries, businesses and households will face more serious debt problems after a jump in borrowing during the first year of the pandemic, she said. Ukraine and Russia together account for more than a quarter of the global trade in wheat, and a fifth of corn sales. The longer Russian forces remain in Ukraine, the longer tractors and combines to harvest the nation’s crops stay idle, threatening food security far beyond the region, Georgieva said. “We would have some very significant problems that would be particularly difficult for fragile states,” Georgieva said. The world tends to focus on “front-page issues, and not on this second- and third-order-of-impact consequences,” she said.

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Fed Governor Waller says half-point rate hikes could be needed as ‘inflation is raging’

Brief: Federal Reserve Governor Christopher Waller told CNBC on Friday that the central bank may need to enact one or more 50-basis-point interest rate hikes this year to tame inflation. Though he voted this week for just a 25-basis-point move due to uncertainty from the Russian invasion of Ukraine, Waller said he thinks the Fed may need to be more aggressive soon. “I really favor front-loading our rate hikes, that we need to do more withdrawal of accommodation now if we want to have an impact on inflation later this year and next year,” he told CNBC’s Steve Liesman during a live “Squawk Box” interview. “So in that sense, the way to front-load it is to pull some rate hikes forward, which would imply 50 basis points at one or multiple meetings in the near future.” In addition to the rate hikes, Waller said he thinks the Fed needs to start reducing its bond holdings soon. The central bank balance sheet has ballooned to just over $9 trillion, and officials are preparing the process to start rolling off some of their holdings. Waller said that process should start “in the next meeting or two.” “We’re in a different place than we were before,” he said. “We have a much bigger balance sheet, the economy’s in a much different position. Inflation is raging. So, we’re in a position where we could actually draw down a large amount of liquidity out of the system without really doing much damage.”

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American private equity firm Sycamore has designs on fashion chain Ted Baker

Brief: An American private equity firm is weighing a potential takeover bid for Ted Baker, the British fashion chain. Sky News has learnt that Sycamore Partners is working with advisers to examine a potential offer for the London-listed company. Sycamore specialises in investments in the retail sector, having previously owned brands such as the upmarket footwear label Kurt Geiger. This week, it was linked with a $9bn takeover bid for Kohl's, the US department store chain. It was also reported to be among the suitors circling Boots, Britain's biggest chain of high street chemists, although City insiders have expressed scepticism about Sycamore's eventual involvement in the auction.

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50% of companies want workers back in office 5 days a week-why experts say this strategy could fail

Brief: After two years of working from home – and seeing return-to-office plans derailed by new Covid-19 variants – a growing number of companies are eager to get employees back to the office. About 50% of leaders say their company already requires or is planning to require employees to return to in-person work full-time in the next year, according to new research fromMicrosoft, which surveyed 31,102 workers around the world between January and February. This number stands in sharp contrast, however, to what employees really want:flexibility. In the same report, 52% of workers said that they are thinking of switching to a full-time remote or hybrid job in 2022.  “A lot of business leaders have told me that they don’t believe in hybrid work, that it has no place in their culture,” Elise Freedman, a workforce transformation practice leader at Korn Ferry who is helping companies coordinate their return-to-office plans, tellsCNBC Make It

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Hedge Fund Manager Pierre Andurand Sees a Path to $200 Oil By End of the Year

Brief: Commodities trader Pierre Andurand sees a path for crude oil to get to $200 by the end of the year as historically tight markets struggle to ramp up production and replace lost supply from Russia. He estimates some 4 million barrels per day have been taken out of circulation as a result of Russia’s invasion of Ukraine and subsequent restrictions on doing business with the Putin government. While releasing oil from strategic petroleum reserves could help boost supply in the short-term, it’s likely that the energy industry won’t be able to increase capacity to fully offset the lost barrels. Russian oil will likely be out of the market even if Putin agrees some sort of imminent ceasefire with Ukraine, the founder of Andurand Capital Management LLP said on the latest episode of the Odd Lots podcast. Meanwhile, shale producers and some OPEC members will also struggle to boost production after years of underinvestment.

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

Our briefing for Thursday, March 17, 2022:

  • The Omicron subvariant BA.2 now makes up nearly a quarter of all Covid-19 cases in the United States according to estimates made by the Centers for Disease Control and Prevention (CDC). While overall case numbers are down, rising case numbers in Europe and the U.K. may be foreshadowing for a spike in cases in the U.S. The subvariant, or sister variant BA.2, has shown to be more transmissible than the previous Omicron strain, BA.1, and with Covid-19 regulations being eased across the country, the new variant has some experts worried about potential outbreaks. For the week ending March 12, the BA.2 subvariant made up 23.1 per cent of new cases in the U.S., up from 13.7 per cent the week previous. In certain parts of the country, like New York and New Jersey, BA.2 makes up nearly 40 per cent of the new cases, according to CDC data. In the U.K., BA.2 now makes up the majority of new Covid cases and although it is more transmissible, the subvariant does not appear to be more deadly than its predecessor. “Although the proportion of infections with BA.2 is increasing in the U.S., Covid-19 cases are now declining, so it is likely that absolute numbers of BA.2 infections are not increasing as quickly as they might seem from just looking at the proportion that are BA.2,” said Deborah Dowell, MD, the CDC's chief medical officer for the agency's Covid-19 response.

  • As of April 1, Canada will no longer require travelers to show proof of a negative Covid-19 test before entering the country. Travelers may still be selected for random PCR testing at airports and will still be required to use the ArriveCan app to show their proof of vaccination status. Currently, fully vaccinated travelers must take an antigen test administered by a health professional before crossing the border. The news comes after weeks of calls from travel and tourism groups along with mayors of certain border towns to ease the requirements. Last month, Canada lifted its advisory against non-essential foreign travel, however, the requirement to be fully vaccinated to board any air, rail or marine transport will stay in effect. Prime Minister Justin Trudeau said on Wednesday that the federal government is continually assessing border restrictions and when to ease them. “All Canadians are pretty damn tired of two years of this pandemic, and eager to get back to normal as much as possible.” Trudeau said.

  • Nearly 440,000 new cases of Covid-19 were recorded in the last 7 days in the United Kingdom as travel regulations are coming to an end in the country. Several major airports, including London’s Heathrow, have dropped mask requirements in terminals, office buildings and rail stations as of Wednesday. “We’re pleased that we’re now able to move away from a mandatory requirement as society learns to live with Covid longer term,” Heathrow Chief Operating Officer Emma Gilthorpe said. “While we still recommend wearing them, we can be confident the investments we’ve made in Covid-secure measures…will continue to keep people safe while travelling.” British Airways and Virgin Airways have said they will soon follow suit and remove the mandatory mask “gradually” starting Wednesday. “For destinations where the wearing of a face covering is not mandated, our customers are able to make a personal choice,” said Jason Mahoney, British Airways' Chief Operating Officer. “And we kindly request everyone respects each other’s preferences.”

  • Germany’s Covid-19 cases have hit a new record just days before most pandemic related restrictions are set to end this weekend. The country has recorded new daily highs for six days in a row as Chancellor Olaf Scholz is meeting with regional leaders to discuss pandemic strategy on Thursday. Several state premiers are openly against the scheduled reopening, despite their dissention, the lower house of parliament is expected to approve the legislation on Friday. “This is not a step-by-step process. It’s simply a leap into the unknown,” Bavaria Premier Markus Soeder said Thursday. “The health minister warns every day about new and dangerous waves and at the same time pursues the biggest easing we have ever had,” he added. “That doesn’t fit together.” Although Covid-19 restrictions in the country are set to expire on Sunday, some states including the city-state of Berlin have said they will not begin easing restrictions until the end of the month. Health Minister Karl Lauterbach has warned that the country is removing mandates too soon and said that the outbreak could “cause many deaths.” In the last 24 hours there has been more than 300,000 new confirmed cases of the virus in the country.

  • New Covid-19 cases in China are trending lower today after recording record breaking numbers on Wednesday. The country saw just over 3,100 cases on Thursday, down from roughly 5,000 the day before. The northeastern province of Jilin barred its 24 million residents from leaving without notifying police in an effort to contain the largest outbreak the country has seen outside of Hong Kong. The government ordered blanket testing to be held in the province with Communist Party secretary Jing Junhai pleading with health departments to ensure “not a single person is missed.” Jilin has consistently registered over 1,000 cases a day this week, and Jing has described the regional outbreak as being at “a critical stage of the last-ditch battle.” The province has set up eight temporary hospitals with more than 10,000 beds in total and is preparing another 27,000 beds across five more emergency shelters according to state-run television on Wednesday. Volkswagen Group China, which has halted work at its production facility in Jilin’s capital city of Changchun since Monday, said it expects to resume work at the plant on Thursday. Authorities have said that current outbreak has spread to 28 regions across the country and are describing the situation as “severe and complicated.”

Covid-19 – Due Diligence And Asset Management

As Banks Get Fed Up, Lam Reviews Hong Kong’s Covid Policies

Brief: Rising frustration from the public and financial institutions is pushing a review of pandemic control measures in Hong Kong, where a suite of stark containment measures have been in place since January to fight the city’s worst-ever Covid outbreak. Chief Executive Carrie Lam pointed to the strain on residents and damage to the reputation of the once vibrant Asian financial hub for the revision, asking for a few more days before she unveils what could be sweeping changes to the city’s approach next week. “I have a very strong feeling that people’s tolerance is fading,” Lam told reporters at a briefing on Thursday. “I have a very good feeling that some of our financial institutions are losing patience about this isolated status of Hong Kong,” she said. “Nobody attaches as much importance as myself to Hong Kong’s international status.” Lam signaled a possible reduction in the amount of time new arrivals from abroad must spend in hotel quarantine and said virtually every area of her government’s approach is being scrutinized.

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Hedge Funds May Be Falling Out of Favor — Again

Brief: Allocators’ interest in hedge funds may be waning. At least that’s what they told Preqin before Russia invaded Ukraine, a bloody war that has upended the country and global markets. According to research and data firm Preqin, only about 10 percent of allocators said they were “more aggressively” investing in hedge funds and accumulating assets as a result of their outlook for equity markets. In November 2020, double the proportion of investors, about 20 percent, were doing the same, up from less than 10 percent the year before. Returns may be partly to blame. The performance of the average hedge fund has declined from its peak of 18.9 percent in 2020, to 13.7 percent in 2021, according to Preqin’s latest investor outlook report. Only 49 percent of investors classified the performance of their hedge funds as acceptable last year; 28 percent said returns fell short of their expectations, according to the research firm. PivotalPath’s hedge fund composite index returned 7.9 percent in 2021.

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U.S. CFTC chair says ongoing Ukraine tragedy has led to 'extreme volatility,' but markets responding well

Brief: The head of a U.S. markets regulator said on Wednesday that while U.S. markets are responding well to the ongoing tragedy in the Ukraine, the situation has resulted in ‘extreme volatility’ and record global markets trading volume. Inflation surges to 5.7%, adding pressure on Bank of Canada to accelerate rate hikes. Rostin Benham, chair of the Commodity Futures Trading Commission (CFTC), told an audience at the International Futures Industry Conference that he has tasked the agency’s surveillance unit to remain ‘surgically focused’ on analyzing trading for manipulative, inappropriate or disruptive conduct. “At my direction, CFTC staff are using every tool the agency has to ensure that commodity markets continue to fairly and transparently serve the intended price discovery and risk management function,” said Benham, adding that “markets are reacting and operating as well as anticipated given the challenging situation.”

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Jefferies Sees Wall Street Talent War Riding Out Rocky Markets

Brief: Jefferies Financial Group Inc. expects Wall Street’s fierce battle for talent to continue even as the red-hot streak in global dealmaking begins to cool. “There is still tremendous demand for good talent in investment banking,” Dominic Lester, European head of investment banking at Jefferies, said in an interview. “This year’s market slowdown hasn’t had a material impact on that.” Deal values are down 10% in 2022, having fallen below year-ago levels in the week that Russia began its war in Ukraine, data compiled by Bloomberg show. Even before the invasion, the prospect of rising interest rates was threatening to derail a $5 trillion-plus run-in mergers and acquisitions that fueled more than a year of bumper fees and bonuses at the world’s biggest banks. That saw Wall Street lenders elevate pay for junior and senior dealmakers to new highs as they sought to poach stars from rivals and keep their best talent from leaving to join free-spending private equity firms. At Jefferies, which has been recruiting from the likes of Credit Suisse Group AG, Barclays Plc and Deutsche Bank AG, pay for some of the best performers has surpassed $25 million, Bloomberg reported last month. Lester said the fight to hire and retain the best bankers came down to more than money. “Of course, it’s important but you have to provide a good, dynamic culture, challenges, development and an interesting work environment to retain your team,” he said.

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The Fall and Rise of Proptech Investment

Brief: The pandemic slammed proptech investment, which fell abruptly in 2020, but also changed the proptech landscape, mainly by boosting the popularity of safety tech related to the health issues. Tech innovations, impact investing and corporate social responsibility pair seamlessly with the need to increase energy efficiency, promote carbon neutrality and raise climate resilience. “Proptech is changing building and monitoring systems by creating technologies that increase efficiencies and track anomalies and waste. Beyond just ensuring buildings are run, heated and cooled more efficiently and effectively, proptech is also greening construction, while literally capturing carbon in the creation of concrete,” Dave Harris Kolada, managing partner at Greensoil PropTech Ventures, told Commercial Property Executive. “When it comes to making offices safer and complying with the litany of new laws or raising revenue from increased efficiencies, we see profits and public service as intricately intertwined, not mutually exclusive,” he added. Harris Kolada discussed the state of the proptech industry following what has been (we hope) the worst of the health crisis’ impact.

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

Our briefing for Wednesday, March 16, 2022:

  • In the United States, the White House is desperately trying to persuade Congress that the country needs more money for Covid-19 relief. The first cuts to pandemic aid will be felt as early as next week, the Biden administration outlined in a letter to congressional leaders sent on Tuesday. Beginning next week, uninsured Americans will be unable to submit claims for tests and Covid-19 treatments. In two weeks, claims to cover vaccinations will also end.  Earlier this month, the administration requested $22.5 billion, later revising the request to $15 billion before it was dropped entirely from the latest funding bill.
  • In Canada, Ontario’s top doctors will keep their masks on even after the province lifts mask mandates next week. Premier Doug Ford has said he will continue to wear a mask in the legislature for a few days following the end of the mandate, though he says anyone who wants to continue to wear a mask for longer is welcome to. Vaccination rates for school-aged children jumped following the decision to end mandatory masking in schools. According to the Ministry of Health, there was a 23% increase in the number of Covid vaccine appointments over the previous week for children aged five to 11 after the announcement.
  • The United Kingdom will end all remaining Covid-19 travel rules, effective Friday at 4 AM. This includes passenger locator forms and the requirement for unvaccinated people to get tested for Covid-19 before and after their arrivals. Transport Secretary Grant Shapps made the announcement on Monday, explaining that it will mean “greater freedom for travellers ahead of the Easter holidays.” The decision was welcomed by the travel industry, where some airlines have said they’re considering dropping mask requirements as well. Last month, Prime Minister Boris Johnson significantly reduced all remaining Covid-19 restrictions, including the requirement to isolate after a positive test. 
  • Italy will soon make the move to end its “Super Green Pass” requirement and other coronavirus measures. The government is set to make the announcement on Thursday following a meeting of cabinet ministers, local media are reporting. The government announced the end to Italy’s state of emergency will be on March 31 and confirmed the end to the Super Green Pass would come gradually from April onwards. The same decree is expected to outline the plans for ending mask requirements. The gradual change is expected to result in most venues and businesses requiring just a Basic Green Pass (which can be obtained with a negative test) instead of a Super Green Pass (which requires proof of vaccination or recovery).
  • India has reached an agreement with the U.S., the European Union and South Africa on an intellectual property waiver for Covid-19 vaccines, Reuters is reporting. The proposed agreement still needs formal approval from all parties before it can become official. The document authorizes use of “patented subject matter required for the production and supply of COVID-19 vaccines without the consent of the right holder to the extent necessary to address the COVID-19 pandemic". The document also says Intellectual Property rights would be waived for ingredients and processes needed for Covid-19 vaccine manufacture.
  • In New Zealand, borders will reopen sooner than originally planned, Prime Minister Jacinda Ardern announced. Australian travellers will now be allowed to enter from April 12, and travellers from other visa-waiver countries will be welcomed back from May 1. Tourists must be fully vaccinated and test negative on departure and arrival. "I know from visiting tourism operators, and talking to their staff, how tough these past two years have been," Ardern said. "And not only because of the massive loss of tourism revenue, but because we lost something we derived so much of our identity from."

Covid-19 – Due Diligence And Asset Management

Credit Agricole Trader Says Pandemic WFH Cost Him His Job

Brief: An ex-Credit Agricole trader, fired for not flagging major volatility in the gold market, accused the bank of failing to set up proper working from home arrangements early in the coronavirus pandemic. Samuel Yang, who joined the bank’s precious metal desk in 2011, sued the lender in London under whistle blowing and race discrimination rules. He said he was “scapegoated” by Credit Agricole after it didn’t give clear guidance on how to manage risk while working remotely and accused it of “side-stepping” regulatory scrutiny, according to documents prepared for a London employment tribunal. The case is one of the first U.K. working from home in the pandemic employment tribunal to make it into the public domain.

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China Criticizes Foreign Media’s Use of Locals in Covid Coverage

Brief: China blasted foreign media organizations’ use of Chinese staff to report on issues such as Covid-19 and Xinjiang, in an apparent escalation of Beijing’s efforts to restrict critical coverage of the world’s second-largest economy. The official Xinhua News Agency criticized “Western media” for recruiting Chinese nationals “as pawns to propagate their China-bashing rhetoric” in a commentary Tuesday, without naming the media outlets or providing specific examples. The piece cited their involvement in coverage on the origins of the first known Covid-19 outbreak in Wuhan and criticism of Beijing’s rigid “Covid Zero” policies. “Manipulating these journalists to misrepresent China and stir up ideological bias against the country has once again revealed that so-called ‘press freedom’ touted by the Western media is just a handy tool to advance a narrow political agenda,” the commentary said.

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Pandemic Erased Over 9 Million Jobs in Southeast Asia, ADB Says

Brief: The coronavirus pandemic obliterated 9.3 million jobs in Southeast Asia as lockdowns hit the region’s traditional engines of growth such as hospitality and tourism, according to the Asian Development Bank. This pushed 4.7 million people to extreme poverty last year, measured as living on less that $1.90 a day, the ADB said in a report Wednesday. Inequality also widened as movement restrictions hit hardest the retail and informal sectors, where women, young people and unskilled workers are typically employed. “The pandemic’s impact on poverty and unemployment will likely persist as inactive workers become de-skilled and poor people’s access to opportunities further deteriorates,” the ADB said. “When this happens, the deterioration in inequality could transfer across generations.” Green shoots are emerging though, with close to 60% of Southeast Asia’s population vaccinated and public mobility rebounding.

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HSBC to close 69 more bank branches as Covid speeds shift online

Brief: HSBC is to shut a further 69 branches, on top of the 82 it axed last year, claiming the pandemic has accelerated the shift to digital banking. It is the latest in a line of banks to announce it is reducing its network in response to changing customer habits. Consumer organisation Which? said the number of closures during the last few years was “alarming” and that millions of people were not yet ready or able to go fully digital. Early last year HSBC had 593 branches, but the latest round of closures – scheduled to take place between mid-July and early October – will take that down to 441, of which 96 are described as “full service” outlets offering a comprehensive range of services.The 69 branches that are closing are spread across the UK, from Inverness in the Scottish Highlands to Falmouth in Cornwall.

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This Private Equity Sector Had a Stellar 2021 — But Don’t Expect Record Activity This Year

Brief: U.S. middle-market private equity firms experienced a year of strong dealmaking and exit activity in 2021. The road ahead may not be quite as smooth, however. Last year, middle-market PE firms closed 4,121 deals, accounting for a combined total of $602.6 billion — an all-time high for the sector, according to PitchBook’s PE middle-market annual report, released on Monday. The previous record for dealmaking activity in PE middle markets came in 2019, when total deal count reached 2,775 for a combined total value of $400.4 billion. PitchBook defines a middle-market deal as one in which a U.S.-based company is acquired through a buyout transaction valued between $25 million and $1 billion, with a fund size of $100 million to $5 billion. It doesn’t include growth equity deals.

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

Our briefing for Tuesday, March 15, 2022:

  • The two major vaccine manufacturers in the United States disagree on whether a fourth dose of Covid-19 vaccine is necessary. The executives at Pfizer and Moderna were both recently interviewed about the need for a fourth dose, Albert Bourla, Chief Executive Officer at Pfizer Inc. said that the efficacy of three doses will wane soon and that a fourth dose is needed “right now.” In contrast, Moderna Inc. President Stephen Hoge has said that another booster shot should only be needed for older people or the immunocompromised. According to preliminary data, a fourth dose of the Pfizer vaccine was not enough to prevent infection from the Omicron variant but was able to prevent serious illness and death. Bourla has remained optimistic that the company will be able to create a vaccine that would target Omicron and will soon submit data to U.S. regulators that advocates the implementation of a fourth dose. According to a Business Insider report, Moderna is confident that a bivalent booster will be available this year and that shot will be effective against both Omicron and the original virus strain.

  • As of April 27, when Covid-19 restrictions are set to expire in the province of Ontario, mask, vaccine, and physical distancing mandates will effectively end in Canada. However, as of yet, there has been no indication that Covid restrictions will end at the federal level. Almost all the restrictions put in place by Ottawa will still be in place even as all provinces have decided to end their restrictions. Anyone boarding a flight in Canada, domestic or otherwise, is still required to show proof of vaccination in order to travel. Masks are still required onboard flights and in airports. Any travelers crossing into Canada are still required to have taken a supervised antigen test and may be selected for a random test at the border. Unvaccinated travelers are still required to isolate for 14 days upon arrival, and government officials have not yet released any information on when these restrictions may change. Furthermore, all government employees are required to be fully vaccinated, even when working from home.  Tourism Minister Randy Boissonnault said in late February that “a complete lifting of restrictions at this time isn’t good for Canadians or for Canadian businesses.” The reluctancy from the government to release information has even troubled some experts. Isaac Bogoch, an infectious disease specialist at Toronto General Hospital believes that some transparency from the government is needed, “it would just be nice for them to discuss what they’re looking for,” he said. “Even if it’s ‘we’re not sure, we’re watching this week by week,’ that’s fine.”

  • New cases of Covid-19 are again on the rise two weeks after the United Kingdom officially ended its pandemic restrictions. Covid-19 cases were up 48 per cent in the last week compared to the week previous and hospitalizations were up 17 per cent. While still less than a third of what it was experiencing during the peak of the Omicron outbreak, the U.K. is averaging roughly 55,000 new cases a day. This number has public health officials worried as hospitalizations are no longer lagging behind cases by days and are instead climbing in unison. The U.K. is offering several answers for the spike in new cases, including the BA.2 variant being more contagious that previous Omicron variant, the relaxation of regulations has more people socializing in close proximity without masks, and the waning efficacy of vaccinations. Last week, the U.K. Health Security Agency said BA.2 had an 80 per cent higher relative growth rate compared to the original Omicron strain, although, it does not appear to lead to more hospitalizations. As of now, it is not clear why the number of hospitalizations in the U.K. is rising, as BA.2 does not seem to be causing severe disease in the highly vaccinated British population.

  • Researchers at the University of Hong Kong estimate that nearly half of the city’s population has already caught Covid-19. The researchers determined that about 3.6 million of the 7.4 million Hong Kong residents have been infected with the virus as of Monday. That number is up from the 1.8 million that had been infected as of March 7 based on modeling software and rigorous analysis. The research indicates that the Omicron wave the city is experiencing peaked on March 4, but the number of cases is expected to reach 4.5 million before it drops. The research suggests that more than 5,100 people will die from the virus by May 1, up from an earlier estimate which had death numbers around 5,010. So far, 59 per cent of deaths resulting from complications associated with the virus have been in long-term care facilities. In both 2020 and 2021, more people left Hong Kong than came in and over the last month alone nearly 94,000 have moved out of the city.

  • The Dutch government will drop its last remaining Covid-19 restrictions next week, despite a rise in new confirmed cases. As of March 23, face masks will no longer be required on public transport as the government says the country must learn to live with the virus. Along with the mask mandates, the use of vaccine passports for entry into nightclubs and large-scale events will be terminated, one of the last remaining pandemic restrictions still in place. Only on airplanes and in airport screenings will the government still require mask wearing. “It is possible and responsible to further relax,” Health Minister Ernst Kuipers said as cases in the country had been steadily declining for weeks. That number again began to rise after the annual carnival weekend held earlier this month, where people gathered at large street parties across the nation. More than 21,000 people have died in the Netherlands since the start of the pandemic, and 85 per cent of people over the age of 12 have been fully vaccinated against the virus, however, only 62 per cent have received a recent booster shot.

Covid-19 – Due Diligence And Asset Management

New global risks arise amid gradual post-pandemic recovery

Brief: Even as the events in Ukraine has dominated headlines and stokes fresh uncertainty, Canada and the world are facing economic challenges that go far beyond the conflicts in the region. According to a new commentary from RBC Economics, the Russian invasion will undoubtedly aggravate already-existing pressures. “Even before the escalation in geopolitical risk, production capacity limits—including acute labour shortages and rising input costs—were emerging as more significant concerns for businesses than any shortfall in orders,” said RBC economists Craig Wright and Dawn Desjardins, along with analyst Nathan Janzen. The invasion of Ukraine has jolted financial markets, pushed commodity prices higher, and posed a threat to already strained global supply lines. While improving labor markets, growing earnings, and savings acquired during the pandemic are expected to support household purchasing power, they cited strong demand and businesses’ ability to ramp up production as factors for broadening inflation. That has created a strong motivation for central banks to stay on their paths toward rate hikes.

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Fund Managers Now See Equity Bear Market in 2008-Like Gloom

Brief: Most investors now expect global equities to slump into a bear market this year as the growth outlook has tumbled to the lowest level since the 2008 financial crisis amid fears over the impact from the war in Ukraine. This is the takeaway of the latest Bank of America Corp. monthly global fund manager survey conducted in the week through March 10. While cash levels surged to the highest since April 2020, the early days of the Covid-19 pandemic, allocation to commodities jumped to a record and exposure to equities fell to the lowest in nearly two years. “Economic growth and profit expectations are recessionary,” BofA strategists led by Michael Hartnett wrote in a note to clients. Persistently high inflation readings, concerns that central banks will tighten policy more aggressively than previously anticipated, and Russia’s invasion of Ukraine have triggered a rout in global stock markets this year, with major indexes now deep into correction territory. This flurry of headwinds, which now also includes a flare-up in coronavirus infections from China to Germany, is raising fears that a downturn in equities will continue.

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World economy braces for supply hit as China battles COVID again

Brief: The global economy -- already struggling with war in Ukraine and the stagflation risks it’s fanning -- is bracing for greater disruption as China scrambles to contain its worst outbreak of COVID-19 since the pandemic began. Since Wuhan two years ago, China has had relative success in minimizing disruption by bringing virus cases quickly under control. Now, the geographic spread of infections and higher transmissibility of the omicron variant is challenging the country’s hawkish pandemic strategy of aggressive testing and locking down whole cities or provinces. If China fails to contain omicron’s spread, further movement restrictions would derail the economy’s promising start to the year, weakening a key pillar of global growth. As manufacturer to the world, any disruptions to exports resulting in shortages could also drive up inflation internationally, just as central banks begin hiking interest rates, like the Federal Reserve is expected to do on Wednesday.

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Operational Risk Management Solution Market Forecast to 2028 - COVID-19 Impact and Global Analysis By Deployment and Enterprise Size

Brief: After the COVID-19 pandemic, corporate players have introduced changes in their operations by enabling flexible work schedules, allowing remote working, and enhancing the employee experience. The hybrid work models are defined as a more flexible, digital, and rewarding future for their employees. According to an article published by GENESIS INTEGRATION, 55% of the US workers want a work pattern that allows the mix of working from home and office. The article data also reveals that more than 2 in 5 working adults (42%) are willing to give up some percentage of their salary for higher flexibility at work. Further, 74% of newer generation would prefer either working from home or splitting work time between home and work, as per the article published by GENESIS INTEGRATION. The rising adoption of a potentially permanent hybrid workforce has led to an increase in operational risk management solutions due to the rise in cybersecurity attacks with remote working. Further, businesses also need to address the increasing risk of internal fraud. According to the article by Risk Management Intelligence in October 2021, employee fraud cases in Asia Pacific region have increased over the past year in the COVID-19 pandemic.

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Private equity reaches record heights in 2021: Bain & Company report

Brief: Private equity set a new standard for itself in 2021 as buyout deal value reached an all-time high of $1.1 trillion, doubling 2020’s total of $577 billion, said global consultancy Bain & Company in a new report. The number of deals greater than $1 billion roughly doubled in 2021, with the average deal size reaching $1.1 billion, increasing 57% to pierce through the $1 billion mark for the first time, according to the company’s 13th annual Global Private Equity Report. One reason for the sharp increase in deal value last year is the sheer volume of capital in the market. After 10 years of steady growth, dry powder set yet another record in 2021, rising to $3.4 trillion globally, with approximately $1 trillion of that sitting in buyout funds. The opportunity to put large amounts of capital to work produced a sudden and sharp increase in public-to-private (P2P) deals, especially in North America and the Asia-Pacific region. These take-private transactions soaked up $469 billion in capital globally, a 57% one-year increase, and were largely responsible for 2021’s record-setting value total.

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

Our briefing for Monday, March 14, 2022:

  • In the United States, a hybrid variant known as “Deltacron” has been detected according to a new study. The study, which has yet to be peer reviewed, was co-founded by Yale University and The British Medical Journal and observed nearly 30,000 positive Covid-19 samples from U.S. individuals between November and February. Two unique cases of the Delta-Omicron hybrid were detected, though the study’s authors noted that they were rare, and that there’s no evidence of these mutations spreading faster than Omicron does. World Health Organization Covid-19 Technical Lead Dr. Maria Van Kerkhove explained during a media briefing that such mutations are to be expected, given the high amounts of circulation of both Omicron and Delta “This is what viruses do. They change over time,” she said. 
  • In Canada, two years of the pandemic have passed, and many say they are still struggling with their mental health. According to a new survey conducted by the Angus Reid Institute in partnership with CBC, 54% of Canadian respondents said their mental health has gotten worse over the past two years, with women ranking worse overall than men. Many are still worried about the future, with 64% responding that they are concerned about the emergence of new variants, and 57% responding that they feel Covid-19 will be circulating the population for years to come. New research from the World Health Organization coincides with the findings, that the pandemic increased worldwide levels of stress, anxiety and depression by 25%.
  • In the United Kingdom, calls to offer people fourth jabs for Covid-19 are growing amidst a rise in case numbers and hospitalizations. Last month Health Secretary Sajid Javid said that immunocompromised people, those in long-term care homes and those aged 75 and over, would be offered a fourth shot beginning in April. Now scientists say because of waning immunity, ministers should consider offering fourth shots to a broader proportion of older people to try and provide better protection. Javid said Britons should brace for a rise in case numbers as restrictions have eased and more people are socializing. 
  • France has lifted its vaccine passport rules and mask mandates, allowing unvaccinated people back into restaurants, bars and other venues. Masks are no longer required in schools or offices, but they are still needed on public transit and in hospitals. Unvaccinated people will still need to provide a negative test or proof of recent recovery to access long-term care homes. The government first announced the decision last month, citing a fall in hospitalizations and declining case numbers. On Saturday the prime minister announced that fourth doses of coronavirus vaccine will be offered to people aged 80 and older who have had their booster at least three months ago. 
  • China has tightened some Covid-19 curbs as it experiences its biggest outbreak in two years.  Authorities reported thousands of new coronavirus cases across dozens of mainland cities, from Shenzhen to Qingdao, the highest numbers since the big central outbreak in Wuhan in early 2020. The country has placed the major cities of Shenzhen and Changchun under lockdown and suspended public transportation as well as indoor dining. Shenzhen will conduct three rounds of mass PCR testing for all residents during the lockdown. Schools have closed in Shanghai, with authorities advising citizens not to leave the city unless absolutely necessary. 
  • In Australia, officials are moving the country into a new phase of “living with Covid-19” as though it were a flu, Prime Minister Scott Morrison said on Saturday.  Morrison told reporters that the plan is to move into “Phase D” of the national pandemic response plan. "Our airports are open again, international arrivals can come, there are waivers now on quarantine for people returning, so we are pretty much in Phase D," he said. Morrison explained that the government especially wants to do away with isolation requirements for close contacts of Covid-19 cases and will seek advice from an expert panel on it. The isolation rule is “starving businesses of staff,” Morrison said.

Covid-19 – Due Diligence And Asset Management

U.K.’s Over 50s Were Most Likely to Quit Workforce in Pandemic

Brief: Britain’s over 50s were most likely to leave the workforce in the pandemic, suggesting most of the more than half million employees who fell out of the jobs market won’t come back. A surge in economic inactivity where people are out of work and not looking for a job is part of what’s tightened the U.K. jobs market, pushing up wages and fanning inflation. The government and Bank of England are looking for ways to loosen that pressure and halt the rise in prices across the economy that’s coming from higher wages. Findings published by the Office for National Statistics on Monday showed about 493,000 of the people that joined the rolls of the inactive since the start of 2020 were over 50, making 94.4% of the total, the ONS in a series of reports based on the labor force survey.Early in the pandemic, it was young people who fell out of the jobs market, with 229,000 becoming inactive from the fourth quarter of 2019 to the first quarter of 2021. Since then, their inactivity rate has fallen back to pre-pandemic levels while the rate for the over 50s has grown.

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War, pandemic, and inflation deal Fed a complex trifecta

Brief: In what now seem the simpler days of December, when there was only a pandemic to worry about, Federal Reserve officials rallied around the view they could tame inflation with modest interest rate hikes while the economy and labor market thrived. A war in Europe has now been layered on top of the health crisis, and when U.S. central bank policymakers meet this week they will have to decide just how much damage has been done to that rosy outlook, and whether their hopes for an economic "soft landing" have been diminished or dashed altogether. The Fed is almost certain to raise its benchmark overnight interest rate by a quarter of a percentage point at the end of its two-day policy meeting on Wednesday. More important will be projections showing just how far policymakers think rates will need to rise this year and in 2023 and 2024 to tame inflation that has blasted past their expectations.

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Hong Kong’s Hang Seng index drops about 5% as investors monitor China’s Covid wave

Brief: Shares in Asia-Pacific were mixed on Monday as investors monitored a Covid wave in China. Meanwhile, oil prices continued to be volatile amid the Russia-Ukraine war. Hong Kong’s Hang Seng index dropped 4.97% on the day to 19,531.66, leading losses among the region’s major markets as Chinese tech stocks took a beating: Tencent fell 9.79%, Alibaba slipped 10.9% and Meituan plunged 16.84%. The Hang Seng Tech index tumbled 11.03% to 3,778.60. Mainland Chinese stocks closed lower, with the Shanghai composite down 2.6% to 3,223.53 while the Shenzhen component shed 3.083% to 12,063.63. China is currently undergoing a wave of Covid infections — its worst outbreak since the country clamped down on the pandemic in 2020, and major cities including Shenzhen are rushing to limit business activity. Across Shenzhen’s border, the special administrative region of Hong Kong has also been battling a resurgence in Covid cases in recent weeks.

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COVID-19 pandemic 2 years later: 3 things that have changed for investing

Brief: Change has been among the only constant for investors during the past two years of the COVID-19 pandemic.Today marks the second anniversary of the World Health Organization declaring COVID-19 pandemic. The lockdown of businesses and economies around the world soon followed. Economic growth ground to a halt. The U.S. economy subsequently entered a recession in February 2020 that lasted until April of that year, according to the National Bureau of Economic Research. Stock markets globally took it on the chin, hard. The Dow Jones Industrial Average tanked nearly 35% from mid-February to March 16 as COVID-19 infections and deaths spread. Even an often teflon stock such as Apple wasn't spared — it plunged 30% from mid-February to mid-March of 2020.In total, there have been 452 million cases of COVID-19 worldwide and more than 6 million deaths, according to WHO. 

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Economy adds 337,000 jobs in February, unemployment rate falls to pre-pandemic level

Brief: Canada's labour market showed signs last month of finally shaking off the shock COVID-19 delivered two years ago, with the share of workers with a job and the unemployment rate besting levels seen just prior to the pandemic. A gain of 337,000 jobs in February more than offset the loss of 200,000 jobs in January and dropped the unemployment rate to 5.5 per cent, falling below the 5.7 per cent level where it was at in February 2020. Statistics Canada said Friday the unemployment rate would have been 7.4 per cent last month had it included in calculations people who wanted a job but did not look for one. The majority of the decline in the ranks of Canada's unemployed came from people called back to work in February after a temporary layoff one month earlier as provinces tightened restrictions to slow the spread of the Omicron variant.

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

Our briefing for Thursday, March 10, 2022:

  • The United States House of Representatives passed a $1.5 trillion federal spending bill on Wednesday, the bill includes wide-ranging support for Ukraine, while funding for Covid-19 aid in the country was cut. Disputes over the Covid-19 aid package threatened the other legislation put forth in the bill, as Democrats and Republicans were unable to come to an agreement. The proposed $15.6 billion pandemic aid package – which has originally started at $30 billion – was shut down by Republicans who were unwilling to spend any more federal money on virus prevention. Officials suggested that there was little money remaining in federal coffers for testing, therapeutics, vaccines, and efforts to stop new variants and were in need of another injection of funds to continue the fight against Covid-19. Instead of a new funding package, some money would be taken from the aid package originally intended to be distributed to individual state governments. The legislation did, however, provide funds to rebuild the country’s pandemic response infrastructure, including $845 million for the Strategic National Stockpile and 745 million for the Biomedical Advanced Research and Development Authority.

  • Tourism and business groups in Canada are once again calling on the federal government to end pre-departure coronavirus testing for fully vaccinated international travelers at airports, saying that that at this stage in the pandemic, the process is no longer necessary. The groups said in a press conference on Thursday that the for the tourism sector to fully recover from the pandemic, the testing requirements must come to an end. “Businesses are becoming more confident that we are past the need to rely on restrictive measures like lockdowns to manage the virus,” said Lindsay Broadhead, the senior vice-president of communications and public affairs at the Toronto Region Board of Trade. The regulations are set to be updated on April 1, and the groups which include the Global Business Travel Association, American Express Global Business Travel, and Destination Toronto are demanding the regulations be removed on that date. “Travel and tourism are massive economic drivers in our province and many businesses in Toronto and across the country depend on international travelers, particularly business travelers,” Broadhead said.

  • The government of the United Kingdom published its draft terms of reference for the Covid-19 public inquiry on Thursday. In a statement, the government said that the two main points of the inquiry will be examining the response to the pandemic and its impact on the countries of the U.K. and will provide a factual narrative on what happened throughout. It includes details on a set of lessons to be learned so that the U.K. can prepare for the next pandemic. Baroness Heather Hallet will be leading the inquiry and is expected to receive help from lower administrations to address some of the shortcomings the U.K. faced when dealing with pandemic and is intended to offer some consolation for those who have lost loved ones. “It comes far too late.” Becky Kummer, spokesperson for Covid-19 Bereaved Families for Justice said upon hearing the news. “The inquiry is a one-off and historic opportunity for the terrible suffering and loss of the past two years to be learned from, to ensure these tragedies are not repeated in the future.” Prime Minster Boris Johnson said he “will conform to what is required for the inquiry,” when asked if he would give oral evidence under oath as other departments are required to.

  • Hong Kong Chief Executive Carry Lam says the city will not open its borders to international travel until it is able to contain its current outbreak of Covid-19. Lam said the city will not be able to open its borders to nine countries, including the United States and Australia, due the threat it would pose on the Hong Kong’s already-strained health care system. The ban is not expected to be lifted until the city’s entire population has been tested and the community transmission has slowed. “It’s not the time to immediately lift the ban,” Lam said. Once the reopening occurs, “a lot of people will rush to come back.” The announcement has given little hope to residents who have been stuck outside the country since January and will likely be forced to remain where they are for several months. “Inevitably among some of those people there will be infected cases. There may even be critically ill cases arising from the returns, and that would add a lot of pressure to our public hospital system,” Lam said. More than half-a-million cases have been recorded in the city since January, and its current Covid Zero policy aimed at completely eradicating the virus is still being enforced despite the advice of experts who say the ban is unlikely to stop the spread.

  • Singapore is expected to allow more travel into the country in the coming months according to Transport Minister S. Iswaran. The current target is restoring passenger volumes to at least 50% of pre-Covid levels sometime this year. Singapore currently has vaccinated travel lanes open to 32 countries and regions and Iswaran says they “are really a mechanism to manage the volumes.” In next phase of recovery, the city-state is expected to remove quarantine restrictions for vaccinated travelers and soon after that the “volume control will be relaxed.” The current daily quota for passengers arriving in the nation is 15,000, and that number was halved in December when the government reduced ticket sales as the Omicron variant swept across the globe. The government of Singapore is closely monitoring the situation in Hong Kong and “it’s absolutely important that all the hubs in our region open up and reconnect, but of course each of us has to do this very mindful of the domestic public health situation,” Iswaran said. Several other nations in the region such as Malaysia, the Philippines and Thailand have begun removing quarantine restrictions for vaccinated travelers entering the respective countries.

Covid-19 – Due Diligence And Asset Management

Covid, geopolitical risks no excuse for money managers

Brief: With the effects of the pandemic receding and a flood of information sources about world events aiding investment managers in thier risk assessment, there shouldn’t be any reason to take copious amounts of risk off the table according to a panel of researchers at the Professional Planner Researcher Forum in Sydney Monday morning. While acknowledging the complications caused by recent geopolitical events including the war in Ukraine, Scott Haslem, chief investment officer at leading wholesale advice group Crestone, said there are enough information channels for managers to incorporate the risks into their investment process. “Geopolitical risk is pretty hard, it’s often a difficult area,” Haslem said. “But I certainly would say that it’s no longer an acceptable answer to say ‘it’s too hard, it’s too binomial, I can’t factor that in’.” “There’s enough research going on around how [Russian President Vladimir] Putin and [Chinese Communist Party leader] Xi Jinping get on and what the implications of the Iranian oil deal is for China, and how that impacts their interaction with North Korea,” Haslem continued.

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Superstars, rising stars, and the rest: Pandemic trends and shifts in the geography of tech

Brief: Technology industries hold out the potential for decentralized economic vitality. However, for decades, tech has remained highly concentrated in a short list of coastal “superstar” cities—places such as San Francisco, Seattle, and New York. More recently, though, the rise of remote work during the COVID-19 pandemic has spawned new hopes for the spread of tech jobs into the U.S. heartland. Given that possibility, this report probes the latest trends in the geography of tech over the past decade and through the pandemic. Specifically, the analysis examines detailed employment data as well as location-specific job postings to assess local and national hiring trends. Data on firm starts is also examined. Growth in key tech industries has been rapid and resilient in the last decade, including through the pandemic. Software publishing and other information services have led the way. The tech sector has until recently been concentrating, not decentralizing. Prior to the pandemic, tech was adding jobs across much of America, but it wasn’t really “spreading out” in terms of more cities increasing their shares of the sector’s jobs. Instead, coastal “superstars” like the Bay Area and Seattle predominated.

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Private Equity performance at decade high, says eFront

Brief: eFront, a financial software and solutions provider dedicated to private markets, and a part of BlackRock, has released its latest Quarterly Private Equity Performance Overview, covering the period to the end of Q2 2021. The report shows that the second quarter of 2021 was a particularly good one for the global LBO market, delivering a quarterly return of almost 12 per cent. This growth was mostly driven by the European and North American regions. The strongest progression was recorded for the youngest vintage years of 2017-2019. Growth in the VC market, meanwhile, slowed modestly, but this sub-strategy is still delivering a double-digit return for investors. On industry sectors, it was the private equity deals in the Industrials and Financials sectors that accelerated performance most intensively. After the initial shock brought on by the Covid-19 pandemic, the private equity market has bounced back to multi-year highs. Q2 2021 saw a quarterly return of 11.16 per cent for buyout funds globally, while venture capital stood at 11.87 per cent).

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Financial Firms Brace for More Cyber Threats After Trying 2021

Brief: After an unrelenting year of fighting off cyber threats, the financial services sector should expect more of the same or even worse, as nation-state hacking campaigns are expected to mirror geopolitical tensions and ransomware gangs retool to dodge increased scrutiny, according to an industry group report. The Financial Services Information Sharing and Analysis Center, known as FS-ISAC, said in its annual report on cyber threats that global tensions could fuel further attacks by state-backed hackers and patriotic hacktivists. In addition, after a series of devastating breaches on the software supply chain, the group warned that its members need to be wary of potential nation-state meddling in products and services being used. “We expect current trends to continue and possibly worsen over the next year,” according the report, which was released on Thursday. Saying that cybersecurity is “no longer just a back-office cost,” the group warned that cyber threats pose critical business risks, including operational disruption, lawsuits and credit downgrades. FS-ISAC, which shares cyber intelligence among financial institutions around the world, published the report at a time when Russia’s invasion of Ukraine has kept organizations in the U.S. and elsewhere on alert for possible retaliatory attacks. So far, those fears appear largely unrealized, and cyberattacks have played a smaller role in the conflict than many predicted.

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Commodities and real estate favoured to help asset managers navigate inflationary pressures

Brief: Rising inflation globally is forcing asset managers to reallocate their capital into commodities and real estate, according to new research from Clearwater Analytics (CWAN). A poll of over 100 firms representing more than USD5 trillion in AUM shows that the majority of asset managers favour commodities (58 per cent) and real estate (55 per cent) as their preferred asset classes to combat rising inflation. Interestingly, 42 per cent also see listed equities as part of their asset mix. The research follows the US inflation report last month which showed prices rising at their fastest pace in four decades. While in the UK, prices have also risen sharply in recent months, with the rate of inflation predicted to reach around 7 per cent by spring 2022, according to the Bank of England (BofE).

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

Our briefing for Wednesday, March 9, 2022:

  • In the United States, a global foundation known as the Coalition for Epidemic Preparedness Innovations (CEPI) has announced a $3.5 billion dollar initiative to “Face down the next Disease X with a new vaccine in just 100 days.” The announcement comes in alignment with President Joe Biden’s State of the Union Address, when he committed to investing in an effort to produce new vaccines within 100 days of the arrival of a new variant. The Biden administration will contribute $150 million over the next three years to support CEPI, though experts have said it needs to do more.
  • In Canada, on this day in 2020 the country reported its first death caused by Covid-19. Exactly two years later, the province of Ontario announced it will end its mask mandate by March 21. The province’s top doctor made the announcement, explaining that masks in restaurants and shops as well as elementary and secondary schools, will no longer be needed after March break. The province will make the change because of positive trends like lower rates of hospitalizations and ICU admissions as well as strong booster uptake. Premier Doug Ford has said that he wants the mask mandate gone as soon as possible, and although he wants to be cautious, he also wants to move forward.
  • In the United Kingdom, a new study shows that Covid-19 and particularly the development of long Covid, is linked to economic hardship. The study, which has not been peer reviewed yet, analyzed data from 16,910 Britons over 16 who answered monthly questions about their health and household income between May 2020 and October 2021. The study found that testing positive for Covid-19 was associated with a 39% increase in the odds of people reporting insufficient income to meet their basic needs. The findings were strongest where catching Covid led to hospitalization or the development of long-term symptoms, further supporting the idea that Covid was the cause of people’s financial hardships.
  • Austria has suspended a law to make Covid-19 vaccines mandatory for all adults, only a month after the legislation came into effect. Austria was one of the first countries in the world to make coronavirus jabs compulsory, and enforcement was due to begin on March 15. But Constitutional Affairs Minister Karoline Edtstadler said the law would be suspended, “Because there are many convincing arguments at the moment that this infringement of fundamental rights is not justified." Edtstadler and the country’s health minister said the mandate could be reintroduced later if necessary, with a review taking place in the next three months.
  • South Korea’s pandemic-era presidential election is drawing to a close, with over 76% of the country’s eligible voters casting their ballots. Last month health experts and lawmakers revised the election laws to allow all those infected with Covid-19 to vote. While the general public could vote early on Friday and Saturday, virus patients and those in quarantine were only allowed at the polls for a short window between 5 and 6 PM on Saturday. The results of having so many people show up in such a short timeframe were very long lines, sometimes outside in the cold. The country’s National Election Commission has since released an apology for poor planning.
  • In New Zealand, struggling with staff shortages in hospitals, officials told workers that they can help out in understaffed Covid-19 wards, even if they are mildly sick themselves. The move demonstrates the extent to which New Zealand has shifted its approach, from an elimination strategy to living with the virus. With only 65 deaths reported, New Zealand has been more successful than other countries at containing their outbreak, but hospitalizations on Tuesday reached a record level of 750, with the system now under strain. Officials have said sick hospital workers will only be allowed to work with patients who already have the virus, and that there were no other options.

Covid-19 – Due Diligence And Asset Management

Majority of workers who quit a job in 2021 cite low pay, no opportunities for advancement, feeling disrespected

Brief: The COVID-19 pandemic set off nearly unprecedented churn in the U.S. labor market. Widespread job losses in the early months of the pandemic gave way to tight labor markets in 2021, driven in part by what’s come to be known as the Great Resignation. The nation’s “quit rate” reached a 20-year high last November. A new Pew Research Center survey finds that low pay, a lack of opportunities for advancement and feeling disrespected at work are the top reasons why Americans quit their jobs last year. The survey also finds that those who quit and are now employed elsewhere are more likely than not to say their current job has better pay, more opportunities for advancement and more work-life balance and flexibility.Majorities of workers who quit a job in 2021 say low pay (63%), no opportunities for advancement (63%) and feeling disrespected at work (57%) were reasons why they quit, according to the Feb. 7-13 survey. At least a third say each of these were major reasons why they left. 

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Manulife allows staff to return to offices as COVID cases ease

Brief: Canadian insurer Manulife Financial Corporation said on Wednesday fully vaccinated employees can return to its offices in select locations on a voluntary basis from March 14 as COVID-19 cases in the country ease. “With a decline in average daily COVID-19 cases and hospitalization rates, we are making our Halifax, Montreal, Toronto and Waterloo offices available,” the company said in an emailed statement to Reuters. The country’s biggest insurer had delayed its return-to-office plans for staffers in North America in December due to the fast-spreading Omicron variant driving a surge in cases. Several financial firms across Canada and the United States that had postponed their back-to-office plans late last year as governments reimposed curbs to contain the virus surge, are now looking to reopen offices and issue new guidelines for employees.

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Bolt-on transactions more than double pre-pandemic levels, says Rickitt Mitchell

Brief: The number and value of acquisitions made by private equity-backed businesses across the UK in 2021 significantly exceeded levels seen in 2019 and 2020, according to Rickitt Mitchell’s Buy and Build Barometer. The latest analysis from the corporate finance firm, conducted in partnership with Experian Market iQ, reveals 578 deals were completed across the UK in 2021, up more than 56 per cent on 2020 (370) and more than double that of 2019 (276). The South East (58) saw the highest number of acquisitions out of any region, followed jointly by East of England and London (47). Elsewhere, Yorkshire (37) was the highest performing Northern region, ahead of North West (24) and North East (14). The UK’s devolved regions were amongst the least active, with Wales (16) ahead of both Scotland (14) and Northern Ireland (5).

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San Francisco Bay Area Firms Pull More Workers Back to Office

Brief: Of around 200 employers surveyed in the San Francisco Bay Area, 71% have either brought non-essential workers back to the office or plan to do so by mid-March, according to a poll released Tuesday by the Bay Area Council, a business advocacy group. Most of the companies surveyed monthly since last year said they expect their workers to come into the office three days or fewer a week, with those days most likely being Tuesday through Thursday, the group said. This “new normal” mode of operations will be in place by June for about 67% of respondents, while 82% see it occurring by August or September. This bodes well for San Francisco, which is struggling with the nation’s weakest office occupancies, stubbornly low transit ridership and one of the country’s slowest job recoveries as remote work leaves downtown streets empty.

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Memories of post-COVID melt-up haunt anyone selling stocks now

Brief: Institutional investors are offloading equities to retail buyers in a traumatized market. While similarities between now and the bottom of the coronavirus crash may end there, memories of how that episode played out are proving hard to shake. Despite breakneck volatility and harrowing images of war, retail traders just plowed money into the equity market for a ninth straight week, according to Bank of America Corp. client data. That’s a stark contrast to the firm’s hedge fund clients, which last week sold US$4 billion of stocks, the most on record. Same thing on Morgan Stanley’s trading desk, where professional speculators have been cutting equity exposure, alongside relentless buying from amateurs. Who exactly constitutes the smart money on post-pandemic Wall Street is a point of debate after mom and pop day traders dove into stocks as they were bottoming two years ago.

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

Our briefing for Tuesday, March 8, 2022:

  • As Covid-19 restrictions are being eased in much of the United States, according to a report filed by over a dozen scientists on Monday, deaths from respiratory illnesses are still 10 times higher than they were before the pandemic. In past years, nearly 1,200 people died weekly from respiratory viruses like the flu. According to the Centers for Disease Control and Prevention (CDC), 9,000 people in the United States died from respiratory illnesses in the last week, and as many as 12,000 people in weeks prior. “Make no mistake, the United States is far from a normal situation,” the authors wrote. They continued that Covid-19 is still causing an “intolerable” level of death in the country. White House chief medical advisor Dr. Anthony Fauci has said that the U.S. will only be able to return to normal when deaths from respiratory illnesses return to levels previously caused by the flu. Further exacerbating the spread of disease, according to CDC data, roughly 90 per cent of Americans now live in areas where mask mandates have been relaxed.

  • In Canada’s smallest province, 1 in every 40 people has a confirmed active case of Covid-19. According to the province’s website, there is currently 4,241 cases of Covid-19 in Prince Edward Island. With a population of just under 166,000, the number of cases is the highest per capita of any Canadian province thus far in the pandemic. “They're certainly eye-popping,” said infection control epidemiologist Colin Furness, a professor at the University of Toronto. “When you look at it as a rate or as a proportion of the population, that's really high — that's remarkably high.” P.E.I is averaging 472 new cases per day over the last 7 days, with the largest outbreaks happening in long-term care homes and childcare centers. The province was largely able to keep the virus at bay throughout most of the pandemic but after some restrictions were lifted in February the province has seen a large uptick in cases. "People need to really understand when they walk out their front door that COVID is probably nearby — P.E.I. is not that big a place, and those are some very, very high numbers," Furness said.
     
  • According to a study conducted in the United Kingdom, even mild cases of Covid-19 can be associated with “a significant, deleterious” change in the brain. The study draws on data in the U.K. Biobank from 401 people aged 51 to 81 who contracted a coronavirus between the start of the pandemic and April 2021. Researchers analyzed brain scans from the study participants before and after contracting the virus and was compared with 384 people who had not had Covid-19, as well as people who had either influenza or pneumonia. The scientists used “trail-making” tests to measure the impact the virus had on people’s ability to complete cognitive tasks, those who tested positive for COVID-19 took “significantly greater time” to complete the tasks. Through a series of MRI tests, the researchers noticed an overall decline in brain size in those who had tested positive, the scans showed signs of tissue damage in areas of the brain that are related to smell and memory. Former FDA Commissioner Dr. Scott Gottlieb said “this is concerning. And I think what it suggests is that the balance of the information that we're accruing does indicate that COVID is a disease that could create persistent symptoms.” The results of the study may give some explanation for persisting symptoms stemming from previous infection often dubbed long Covid.

  • Business in Australia picked up in February as the Omicron wave subsided and supply chain disruptions were corrected. A National Australia Bank Ltd. survey showed Tuesday that business confidence was up 13 points from 4 in January, with gains recorded across all industries. Business conditions consisting of hiring, sales, and profits, were up 9 points from a revised 2 in January, although the poll was largely conducted before the Russian invasion of Ukraine. Despite the increased infections seen during December and January as the Omicron wave swept the country, the unemployment rate stayed relatively constant at 4.2 per cent.  “The employment index has improved considerably as the labor market strengthens, after the virus caused many to be unable to work due to illness or isolation requirements at the peak of the recent wave,” NAB Chief Economist Alan Oster said. The positive outlook has market makers expecting an interest rate hike to come as early as June. Furthermore, retail prices in the country rose 2 per cent in February, suggesting businesses are now passing the increased cost of goods to consumers.

  • Malaysia will fully reopen its borders on April 1st, according to Prime Minister Ismail Sabri Yaakob. Citing the virus’ slow progression into the endemic phase, Yaakob said that Malaysians will now be free to travel to any country that has similar border measures and that those traveling Malaysia will only be required to show valid travel documents. Foreigners entering the country are also no longer required to subscribe to the MyTravelPass contact tracing system. Those who can show proof of vaccination will not need to isolation upon entry, but unvaccinated people may still be subject to quarantine periods, depending on several factors including a positive test. “Taking into account the Omicron variant, which is still in our country and other countries, there are some mandatory steps for both Malaysians and travelers,” Yaakob said. All travelers entering the country will be required to take a polymerase chain reaction (PCR) test two days prior to their flight and will be subject to a rapid antigen test upon arrival. Although the country is now allowing all air travel, its land borders are still operating with vaccinated-only travel lanes.

Covid-19 – Due Diligence And Asset Management

Asia's mass affluent women become more active in investment since the onset of COVID

Brief: Since the outbreak of the pandemic, mass affluent women in Asia have increased their investment activities to build or expand their investment portfolio, and have been quite successful so far, HSBC finds. HSBC analysed the investment behaviour of mass affluent women in Asia, including Hong Kong, mainland China and Singapore, between 2019 and 2021. Here are the highlights of changes identified in their investment behaviour since the outbreak of COVID: A 14% increase in the number of mass affluent female investors compared to pre-COVID period. Female investors in the study have on average shown a double-digit increase in their trading activities, mainly driven by an increase in stock trading. Over 50% of female investors have increased their investment in different asset classes or added different market exposure within the same asset class compared to pre-COVID to further diversify their portfolios.

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Morgan Stanley Workers Are Staying Despite Office Push, CEO Says

Brief: The Great Resignation is turning into a great myth for one Wall Street bank. Morgan Stanley chief James Gorman says the firm has seen relatively few departures in the wake of the pandemic, and certainly nothing like the trend that’s seen U.S. workers quitting their jobs in record numbers. In contrast, he says the bank received about 500,000 job applications last year. Together with a tightening economy that will make job-hopping even harder, that’s further emboldened him to champion a return to regular office life. “At the end of the day, people have to work somewhere,” Gorman said at the Australian Financial Review Business Summit in Sydney on Tuesday. “If the economy turns south a little bit, I think you’ll see much less job mobility than in the last 12 months.” Gorman said that anyone going to a restaurant should also be showing up to the office, reiterating comments that he made last year. They mirror those of his counterparts at Goldman Sachs Group Inc. and JPMorgan Chase & Co., who’ve made banking one of the most aggressive among white-collar industries in driving a return to the office.

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Capital One Releases Two-Year COVID Retrospective on Americans' Financial Health

Brief: Timed to the two-year anniversary of the COVID-19 pandemic, the Capital One Insights Center has released new research that shows the gap between lower and higher earners continues to widen against new affordability pressures. As part of the Center's ongoing Marketplace Index survey, this latest release dives into the disproportionate impact of the pandemic across income groups against the backdrop of rising inflation. The Marketplace Index is one of the longest-running surveys on the social and economic effects of COVID-19 to date by a private sector enterprise, having run surveys of 2,000-10,000 Americans every four to eight weeks since April 2020. Ahead of the forthcoming Federal Reserve's interest rate decision (3/15), the study addresses consumer sentiment on topics impacting Americans' financial health today. "Americans believe their financial health has declined to levels not seen since early in the pandemic," says Melissa Bearden, Head of Consumer Intelligence at Capital One.

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Women Can’t Go Back to the Pre-Pandemic Status Quo

Brief: Two years on, the consequences of the Covid-19 pandemic on workers’ health and well-being are staggering. In addition to lost income and unemployment, the stresses of working or looking for work during the worst public health crisis in generations have taken a punishing toll. Remote work, while literally a life-saver and certainly a job-saver for those to whom it’s been available, has come with costs. Younger workers have struggled to establish critical workplace relationships. The ability to work at any time has turned into working all the time. Parents and caregivers have been stretched past the breaking point. Remote workers who live alone have endured grueling isolation during lockdowns. Meanwhile, workers whose jobs can’t be done remotely have faced the direct threat of the coronavirus, as well as angry and anxious customers and clients, whose outbursts further exacerbate the stress of working through a pandemic.

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Women hold just 12.9 per cent of senior positions in alternatives, says Preqin

Brief: Preqin's new Women in Alternatives 2022 report shows that although the alternatives industry has not seen a major drop in the proportion of female employees during the Covid-19 pandemic, there is more work to be done to rectify the marked gender imbalance, especially in senior positions. Gender balance has improved, albeit slowly, across the alternative assets industry as a whole. According to Deloitte, one woman in the C-suite leads to three promotions of women into senior management roles; simply put, the lack of women in leadership positions can negatively affect the prosperity of women in the industry as a whole. Preqin data shows that an eighth (12.9 per cent) of senior positions in the alternatives industry are held by women. As of January 2022, 20.9 per cent of the alternative assets workforce is female – and when looking at investors alone this rises to 24.2 per cent (up from 20.3 per cent and 24.0 per cent respectively a year earlier). 

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

Our briefing for Monday, March 7, 2022:

  • In the United States, the White House has warned that the country will run out of money for Covid-19 testing supplies and treatments, if Congress doesn’t approve more funding soon. Officials say the funds are urgently needed because “from the Covid side, the bank account is empty.” The effects of this could be felt by later this month. “This is an urgent request and this is what is at stake in our fight against Covid,” White House Press Secretary Jen Psaki said on Friday.   Officials say the money is needed to buy antibody treatments, medications for the immunocompromised, and to fund community testing sites. 
  • In Canada, the provinces are cautiously lifting Covid-19 restrictions as the Omicron wave subsides.  Officials are encouraging “individual risk assessments” as the restrictions lift, and wearing masks where necessary. "Regularly checking in on the local epidemiology where you are or where you are going is important for keeping up on recommendations," said Dr. Theresa Tam, Canada’s chief public health officer. Tam says another major wave of infections is unlikely for Canada, except in areas that have large numbers of unvaccinated people. "Regaining in-person social and economic activities while the pandemic is still ongoing and the virus is not going away means we must use all that we have learned to do this safely and make it last,” Tam said.
  • In the United Kingdom, a new study has shown that an arthritis drug, baricitinib, reduces the risk of death in hospitalized Covid-19 patients. The study involved over 8,000 patients, who were administered baricitinib in addition to usual care, or at random. According to the study, the drug reduced the risk of death by 13%, regardless of whatever other treatments the patient had. The drug, which is normally used to treat rheumatoid arthritis, works by blocking enzymes that contribute to the immune system process and lead to inflammation, which is often seen as lung damage in Covid-19 patients.
  • Japan announced that it surpassed 1 million booster shots per day, meeting the government’s target in mid-February. According to Vaccines Minister Noriko Horiuchi, the number of daily shots reached a million on February 18 and February 26. Earlier in the month, when Prime Minister Fumio Kishida pledged to augment the country’s booster drive to 1 million shots per day by the end of February, only about 6% of the population had received their third shots. As of Thursday, that number had increased to about 23% according to the government. Right now the government’s priority is inoculating older citizens as they have accounted for the majority of severe cases and deaths.
  • In Hong Kong, officials are urging residents not to panic as they plan to move forward with a mass Covid-19 testing scheme, with details to be announced in the coming days. While local media have reported that the testing will be done over a period of nine days, few details of the plans have been released. The country reported 25,150 new infections and 280 new deaths, with 161 of the deaths having occurred in the past 24 hours. Authorities are struggling to contain an outbreak that has overwhelmed hospitals and isolation centers and left many sectors struggling without staff.
  • New Zealand is experiencing a skyrocketing of cases, largely due to the spread of the highly infectious Omicron variant. The South Pacific country went from less than 1,000 cases per day to more than 30,000 in the span of two weeks, with the virus spreading at one of the fastest rates in the world. Thanks to strict lockdowns imposed at the beginning of the pandemic, New Zealand has been mostly successful at dealing with the virus, with a death toll of only 63, one of the lowest in the world.  Prime Minister Jacinda Ardern is warning New Zealanders that they’ll start to see more of the virus circulating and more people becoming infected as the country moves into its reopening phase. She urged residents to get their third shots.

Covid-19 – Due Diligence And Asset Management

Working From Home Is a Breeze — for Men

Brief: It’s great to be able to work from home, but even better if you’re a man. That’s according to a New Zealand study, which found that while both sexes mostly liked working from home during the pandemic, women still did the lion’s share of the housework and childcare. “Our study makes it clear that although flexible working has many benefits, it also highlights the difference between what men and women are expected to do around the home,” said Vittoria Shortt, chief executive at ASB Bank, which commissioned the survey. “With women still taking on responsibility for the bulk of domestic chores, the risk is that they are being disadvantaged both at work and in the home.” New Zealand was already adopting more flexible working arrangements before the pandemic, including discussions about shorter working weeks, but the strict nationwide lockdown in 2020 accelerated the trend toward working from home.

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Global Covid Deaths Top 6 Million as Omicron Wave Leaves Scars

Brief: More than 6 million people worldwide have died from Covid-19 two years after the novel pathogen started spreading globally, despite the distribution of vaccines that slashed fatality rates across the globe. The latest 1 million recorded deaths came more slowly than the previous intervals. It took about 125 days to go from 5 million deaths to 6 million, compared to 117 days to hit the 5-million mark and less than 90 days each to reach the 3- and 4-million ones. The pace has returned to what was seen during the first year of the pandemic, when the virus was still taking hold. Covid continues to kill thousands of people every day. Billions more remain unvaccinated, either because they lack access to the shots or are unwilling to receive them, leaving them exposed to the infection and the world vulnerable to new variants.

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Managers Expect U.K. Firms to Cut Flexible Work After Pandemic

Brief: More than half of U.K. managers expect to dial back their pandemic-era embrace of remote work and flexible arrangements once Covid-19 recedes, dampening hopes among employees that many of the changes will endure. A survey of U.K. managers and human resources leaders, carried out for workplace management firm GoodShape by Ipsos, showed that more than two-thirds of respondents describe many initiatives currently in place -- from working practices to mental-health provision -- as “much needed.” This is in sharp contrast to what they think will happen. Some 34% managers and HR professionals believe that remote working initiatives will be rolled back after the pandemic, the survey of more than 750 people showed, even though 66% support current policies. Respondents also expect initiatives addressing poor mental health among employees to be rolled back, even though that was the leading cause of work absenteeism in the U.K. in 2021.

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As COVID, mask mandates fall, businesses 'really think hard' on whether to comply

Brief: As COVID-19 cases began to fall after the winter Omicron variant surge, governors across the country are beginning to ditch mask and vaccine mandates — presenting a conundrum for business owners who aren't entirely certain if they want to follow suit. Places like Florida and Texas have long abandoned indoor masking requirements, but major coastal cities are finally rolling back COVID-related restrictions. Monday will mark the official end of New York City's vaccine passport system, with the Big Apple already having loosened mask mandates. In California, Los Angeles County will no longer require masks for both vaccinated and unvaccinated people in most indoor places – a key milestone for the Golden State. The change aligns L.A. County with California state rules, which on Tuesday stopped mandating indoor masking for unvaccinated people.

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UK jobs market hits two-year high as economy recovers from pandemic

Brief: The UK jobs market hit a two-year high in February as the British economy emerged from the coronavirus pandemic and final restrictions were lifted. According to the latest edition of accountancy and tax consultancy network BDO’s business trends report, the employment index rose for a fourth consecutive month to 110.75, representing a monthly gain of 0.77 points. This was the first time the labour market had returned to pre-pandemic levels, the accountancy firm said, since February 2020 when it came in at 112.86. The index now sits above the 95 level which indicates growth. The easing of restrictions provided a large boost to business optimism in February. As businesses fully re-opened and resumed normal operations, they have also been looking to hire more staff to cope with increased demand.

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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, March 4, 2022:

  • In the United States, officials announced on Thursday their intentions to share technology with low and middle-income countries that might be used to prevent Covid-19. While under pressure from activists and WHO officials to do more to share the pharmaceutical industry with other countries, Biden’s new policy will aim to help poorer nations manufacture inexpensive vaccines that are developed in the United States. Officials did not specify exactly what the technology would be. The announcement was made by President Biden’s health secretary, Xavier Becerra, and his top medical adviser for the coronavirus, Dr. Anthony Fauci after they met with health ministers from around the world.
  • In Canada, the government of Ontario announced that they may drop the province’s mask mandate by the end of March. The province’s chief medical officer of health made the announcement on Thursday, though he would not commit to a firm date. “We can only mandate masking for so long,” Dr. Kieran Moore said in his first update since the province scrapped vaccine passports. “As long as the risk is decreasing, we’ll make a decision together as a province to remove them.” Moore also told reporters that he anticipates the BA.2 variant to take over as the dominant strain by mid-March. 
  • In the United Kingdom, the National Health Service (NHS) has scrapped free flu shots for people over 50 and school-aged children. The letter published on the NHS website confirms that the flu program for the next year will only be offered to patient groups who align with “pre-pandemic recommendations.” This includes people 65 and over, people deemed high-risk, and very young children. The decision is expected to affect around 10 million people aged 50 and over, and around 4 million school-aged children. The guidance was given in line with advice from the Joint Committee on Vaccination and Immunisation and the Department of Health and Social Care. 
  • France will lift its vaccine passport requirements and remove its mask mandate by March 14, Prime Minister Jean Castex announced. From March 14, masks will only be needed on public transit and the vaccine passport will only be needed to access long-term care centers. The announcement comes one month before the country’s presidential election, where French President Emmanuel Macron says he will run again for a second term. Macron says he’s seeking a mandate to lead the country out of the world’s crises, like the Covid-19 pandemic. If he succeeds, he will be the first French leader for two decades to win a second term.
  • South Korea’s Prime Minister Kim Boo-kyum has tested positive for coronavirus, officials said on Thursday. The news comes as the country’s infections continue to rise, with some restrictions easing despite case numbers reaching unprecedented levels. Kim has begun receiving treatment at home and will pass the country’s anti-virus meetings off to other officials for now. The Korea Disease Control and Prevention Agency reported 186 deaths in a 24-hour period, shattering the previous day’s record of 128 deaths. On the same day, officials announced that the curfew for restaurants, movie theatres, bars, and other indoor venues, would be extended from 10 PM to 11 PM, citing pandemic fatigue as the reason for the decision. 
  • Western Australia has finally ended its border closure, one of the world’s longest. The state, which covers one-third of the nation’s land area, closed its borders in March 2020 to stop the spread of Covid-19. The border was closed for 697 days, becoming the last Australian state to reopen. Travellers will need to be fully vaccinated and have a travel pass if they want to enter, they’re also required to take a rapid test within 12 hours of arrival and report any positive results to authorities. Unvaccinated returning Australians will still be required to go through hotel quarantine.

Covid-19 – Due Diligence And Asset Management

JPMorgan Hands Out Cash to Hong Kong Staff to Boost Morale

Brief: JPMorgan Chase & Co., the first Wall Street bank to offer a quarantine subsidy in Hong Kong, is now handing out HK$1,800 ($230) to each of its employees as the city grapples with its largest outbreak of infections during the pandemic. The cash payment will allow staff to treat themselves and their families to a meal once the current restrictions are lifted, a Hong Kong-based spokeswoman said. She wouldn’t provide the bank’s total headcount in the city. The city has closed schools, bars and evening dining, and is planning a mass testing drive coupled with a lockdown to gain control of an outbreak that has overwhelmed its health-care system even as most of the world returns to normal. Banks are now facing a potential exodus of expatriate staff who are fed up with the city’s draconian measures, which also include a two-week quarantine for incoming travelers and a potential isolation in government run facilities.     

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Climate Groups Press Banks, Asset Managers to Sever Russian Ties

Brief: A coalition of more than 75 climate change-focused nonprofits want the biggest names in banking and fund management to “stop propping up Putin’s illegal war on Ukraine” by severing all financial ties with Russian energy companies. The organizations, which include Sierra Club and Rainforest Action Network, have requested 100 financial institutions — a group it’s calling the “Putin 100” — put an end to the financing, investing and insuring of companies in Russia's coal, oil and gas industries, and to divest from existing holdings. The letter was sent to firms including JPMorgan Chase & Co., BlackRock Inc and Citigroup Inc.Financial firms are scrambling to respond to Vladimir Putin’s invasion of Ukraine, the worst military conflict on the European continent since World War II, as sanctions pile up and a growing number of companies walk away or distance themselves from Russia.

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£1bn Janus Henderson property fund may face wind up

Brief: The £1bn Janus Henderson UK Property fund may be facing closure as Nuveen has reportedly hired CBRE to independently value the assets in the fund. The fund, which launched in June 1999, is currently co-managed by Marcus Langlands Pearse and Ainslie McLennan. The fund was suspended in March 2020 as the pandemic hit the UK, before lifting ten months later as the economy returned to normal. Since the suspension was lifted, £1bn has been withdrawn from the fund. The fund is a Property Authorised Investment Fund (PAIF) and considers location, tenant strength, lease length and structure, building quality and sustainability considerations when investing. Oli Creasey, property research analyst at Quilter Cheviot, said that if the fund was wound up, "it would come as something of a surprise, as the fund has made it through the difficult period in 2020 when it was forced to close by new FCA rules and has since produced good returns."

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February worst month for European equities since July 2020

Brief: February was the worst month for equity funds since July 2020, as capital flowed out of products in response to Russia’s invasion of Ukraine, according to the latest Calastone survey.  Investors abandoned the region, while there was a slight increase in sellers, and inflows fell to £42m over the month, 96% lower than the average monthly inflow over the last year, representing a 79% month-on-month drop compared to January. According to Calastone, funds had inflows of £646m up until 23 February, though as Russia invaded, investors withdrew £604m during the last three days of trading. Head of global markets at Calastone, Edward Glyn, said: "Investors have a lot to worry them at present. Stock markets have certainly fallen since the Russian army invaded Ukraine, but the falls have not indicated a rout."

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What’s next for Pfizer, Moderna beyond their projected $51 billion in combined Covid vaccine sales this year

Brief: Pfizer and Moderna expect $51 billion in combined vaccine sales in the coming year, even as the omicron wave dramatically subsides in many parts of the world and both companies believe the pandemic is shifting into an endemic phase where the virus will be less disruptive to society. Pfizer expects $32 billion in Covid vaccine sales for 2022, while Moderna is forecasting at least $19 billion in sales, the companies said in their fourth-quarter earnings statements released last month. Those are minimum sales, reflecting contracts that have already been signed by nations across the world anticipating their need for the year. But they could be far higher, depending on the trajectory of the virus. Pfizer just raised its 2022 Covid vaccine sales guidance by $1 billion from its previous forecast given to investors in the third quarter while Moderna upped its guidance by $2 billion. The companies’ 2022 expectations come after booking bumper revenues during the the first full year of the Covid vaccine rollout.

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

Our briefing for Thursday, March 3, 2022:

  • The United States Centers for Disease Control and Prevention (CDC) as of this week, no longer recommends universal case investigation and contact tracing. Nearly two years after the CDC first recommended the use of 100,000 contact tracers track the origins of infections, the agency no longer considers the process necessary. Instead, the CDC is encouraging health departments to focus their contact tracing efforts on high-risk settings such as long-term care facilities, jails and prisons, and shelters. Contact tracing in almost half of U.S. states has already ended as new cases nationally continue to drop. “This is a big change,” Crystal Watson, a senior scholar at the Johns Hopkins Center for Health Security said. “It does reflect what’s already happening in states and localities, particularly with Omicron. There was no way contact tracing could keep up with that. Many of the cases are not being reported, so there’s no way of knowing the incidence.” The original aim of the contact tracing was to make sure that those who came in close contact with an infected person isolated until they were tested. But due to long delays in processing tracing information and large parts of the population having full or partial immunity, the contact tracing has less of an effect on reducing new infections. 

  • Earlier this week, Canada eased travel restrictions for people entering the country. For over a year, the federal government required anyone crossing the border into Canada to show proof of a negative molecular test taken within 72 hours of their intended entrance. With the new regulations, a rapid antigen test can now be taken instead of the molecular test such as a PCR. These rapid tests typically cost under $100, and results are available within minutes. The new rapid test must be taken within a day of the departing flight or land crossing. However, common rapid tests that are available locally are not sufficient for re-entry, to be allowed across the border, the tests must be given by an authorized source outside the country. “It can't be the take-home tests that we've seen here in our communities,” said Denis Vinette, vice-president of the Canadian Border Services Agency’s (CBSA) Travelers Branch. “It has to be done through a lab that will give you then the [written] confirmation that you are either negative or positive.” Still, many travelers and border towns are arguing that pre-arrival testing needs to end. “You still have to go through the hassle of clicking the box, making the appointment, finding a pharmacy that is available,” Windsor Mayor Drew Dilkens said at a news conference. The Canadian government has said that the requirement will end only when current conditions have improved.

  • A study conducted in the United Kingdom has found that two doses of the Pfizer BioNTech or Moderna Covid-19 vaccines provide little resistance against symptomatic illness from the virus after six months. However, a booster shot, or third dose was able to greatly improve protection. The study suggests that the Pfizer vaccine dropped to 8 per cent effectiveness down from 65 per cent in a six-month period after the primary vaccine series and the Moderna vaccine dropped to 15 per cent, down from 75 per cent. The boosters were able to bring the effectiveness back up to primary levels, but also begins to wane after a two-month period. The study, funded by the U.K. Health Security Agency, found that while the vaccines offered relatively weak protection against minor illness from Omicron variant, it was still extremely effective at preventing severe illness or death. The authors of the study highlighted the importance of a third dose and said that a booster provides a “rapid and substantial” increase in protection.

  • The World Health Organization (WHO) reported that new Covid-19 cases have dropped 16 per cent globally in the last week and deaths resulting from the virus had fallen 10 per cent. Despite the drop in cases, the WHO repeated its claims that the pandemic was not yet over, and the new variants can still arise if the virus is allowed to spread unchecked. On Thursday, French Prime Minister Jean Castex announced that the country will soon end its mandatory face mask mandate, except for on public transit, and vaccine health passes will no longer be required for entering public venues. Proof of vaccination will still be required for entry into French hospitals, health centers and retirement homes, Castex said. "The situation is improving thanks to our collective efforts, thanks to the measures we have taken," the Prime Minister told TF1, a free-to-air television channel. New cases in France dropped to just over 53,000 down from 70,000 the previous week. Hospitals in the country are seeing a drop in patients in intensive care units, with 2,329 beds currently being occupied.

  • Authorities in Hong Kong reported a new daily record of confirmed cases of Covid-19 on Thursday with 56,827 new infections. In February daily cases were numbering in the hundreds, and the rapid outbreak has the Chinese-ruled city on high alert. So far, the city has not swayed from the Covid-Zero stance it has taken since the early days of the pandemic, where authorities are trying to stamp out the existence of the virus altogether. Hong Kong's Transport Department has halted 98 bus routes as the operator combats critical manpower shortages and fewer people are leaving their homes. In a statement released on Thursday, the Transport Department said that stringent social distancing measures and a rise in infections has made it difficult to continue normal operations. Similarly, the city’s subway operator, MTC Corp has said it will be cutting 8 lines in coming days due to passenger and staff shortages. Health experts from the University of Hong Kong estimate a peak of nearly 183,000 daily infections is expected sometime in the coming week.

Covid-19 – Due Diligence And Asset Management

WisdomTree targets post-Covid recovery with four sector-focused ETPs

Brief: WisdomTree has unveiled four sector-focused thematic ETPs that will seek opportunities in the post-Covid recovery, as well as the energy transition. The ETPs consist of two leveraged and two short/inverse exposure funds to STOXX Europe 600 sector indices, including Travel & Leisure, Automobiles & Parts, and Oil & Gas. Pierre Debru, head of quantitative research and multi asset solutions, Europe, for WisdomTree, said: "Our new launches give investors an even wider suite of products to choose from to express their investment views on the post-Covid economic recovery and the inevitable energy transition megatrend." The funds listed on the London Stock Exchange, Borsa Italiana and Borse Xetra today (2 March), and have management expense ratios of between 0.80% and 0.85%. According to WisdomTree's head of Europe, the launches are designed to complement the firm's existing range of tactical products and are "specifically designed to help investors navigate dynamic financial markets and challenging economic climates".

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Corporate CFOs Take a Page from the PE Operator’s Playbook

Brief: CFOs who work alongside their procurement officers can dramatically improve their EBITDA through procurement-related optimization, mitigate risk through supplier resiliency and achieve a competitive advantage in the marketplace. Thanks to inflation, labor shortages and supply chain woes, corporate CFOs are grasping for strategies to enhance revenue and mitigate risks. And, like the virus, the financial situation stemming from the pandemic is lingering longer than many expected. To strike back, CFOs are taking a page from the private equity playbook and turning to procurement as major lever for EBITDA improvement. Instead of viewing procurement as a back-office function, CFOs are embracing many of the same complex procurement strategies PE firms have relied on for years to make quick improvements in a portfolio company’s finances. Now, leaders see what good looks like, and more companies are starting to catch on and adopt this fool-proof cost optimization method.

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Are The Good Times Over? Startup Valuations Dip As Inflation, Geopolitical Issues And Pandemic Concerns Swirl

Brief: While last year was a record-breaker in terms of venture capital doled out to startups, this year is trending to be a much different story. Geopolitical tensions, inflation, expected interest rate hikes, and a seemingly never-ending pandemic are starting to affect the private markets, venture capitalists say. While the effects on the public market are obvious—the Dow Jones Industrial Average is down about 7.5 percent and the Nasdaq Composite, a good indicator of tech prices, is down about 13.5 percent since the start of the year—getting a gauge on the private markets is more difficult. However, those in the industry say although deals are being made, valuations are coming off the highs of last year, and some companies are reevaluating their fundraising efforts. “If you are a special company, you are still getting the valuation you want,” said Mark Sherman, managing director at Telstra Ventures. “But I would say the more ‘meat and potato’ companies are probably down 20 percent in January-February in relation to November-December—some more, some less.”

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Virtual underwriting is here to stay for PE fundraising, says Capstone survey

Brief: Virtual underwriting has become a permanent fixture in private equity fundraising according to a new survey of global LPs, conducted by placement agent Capstone Partners. The survey, which seeks to explore how current underwriting trends impact LP’s ability to make commitments to private equity funds, shows that virtual underwriting has been fully adopted by LPs, with the vast majority virtually underwriting re-ups in 2021, and a comfortable majority virtually backing managers they know well or had met pre-Covid. Just 9 per cent of the 130 global investors said that they had not used virtual processes to underwrite re-ups in 2021. Moreover, the survey highlights how virtual underwriting is now also a valid option for backing new GP relationships, with just 14 per cent of global investors expressing reluctance to use it. North American and European LPs are the most comfortable, with just 3 per cent and 12 per cent respectively unwilling to use virtual processes in new relationships.

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Hedge Fund Stock Pickers Return in Force Amid Chaos-Laced Markets

Brief: The upending of markets by shifting central bank policy, war and the pandemic is convincing professional investors the time is ripe to put their often-maligned stock-picking skills to work. Hedge funds that make both bullish and bearish equity bets became big buyers of shares in individual companies in February for the first time in four months, prime broker data compiled by Goldman Sachs Group Inc. show. The amount of net purchases in single stocks reached the highest level in the past year. The strategy is far from without its risks in a market being whipped around as violently as this one by war in Europe and anxiety about inflation. As often happens when big, world-changing headlines are moving indexes minute-to-minute, correlations among individual stocks have risen substantially recently.

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

Our briefing for Wednesday, March 2, 2022:

  • In the United States, President Joe Biden has announced a new program that will allow Americans to get treated for Covid-19 right after they test positive. The “test and treat” initiative will provide patients with antiviral Covid-19 medications at pharmacies right after they have a positive test, at no cost. While the antiviral pills have been scarce until now, Biden says Pfizer will provide 1 million pills in March and more than double that next month. The United States has ordered more of the treatments than any other country in the world. Biden also committed to prepare to fight new variants, explaining that the U.S. is in a position to deploy vaccines within 100 days of a variant’s arrival.
  • In Canada, the government of Alberta is forcing all municipalities to remove their mask bylaws, as Covid-19 restrictions lift across the province. When the government ended its mask mandate on March 1 as part of a broader easing of restrictions, the City of Calgary immediately followed suit. Edmonton, however, still has its mask bylaw in place, with city council not expected to discuss the bylaw until March 8. Premier Jason Kenney made the announcement at a news conference in Red Deer on Tuesday. "Something that Albertans do not deserve right now is uncertainty and confusion," Kenney said. “That is why I am announcing today that Alberta's government will introduce in the legislature, as soon as possible, amendments to the Municipal Government Act which will remove the abilities of municipalities to impose their own separate public health restrictions.”
  • In the United Kingdom, the “no jab, no job” policy for healthcare workers has been scrapped, as the government makes a U-turn on its original position. The mandatory vaccination rules have been in force for long-term care workers since November and were due to apply to frontline National Health Service staff from April 1. The policy was met by fierce resistance by those in the industry who argued that firing workers would result in crisis-level staff shortages. Health Secretary Sajid Javid has since confirmed that staff will no longer be required by law to get vaccinated, and that the existing rules will end on March 15. 
  • Japan will extend coronavirus curbs in some prefectures as hospitalization numbers slowly rise. Five prefectures have asked the central government to extend restrictions that are set to expire on Sunday. Although case numbers are down across the country, hospitals are struggling to treat an influx of patients with more serious symptoms. The media reports that 10 prefectures, including Tokyo, will seek to extend their curbs by two to three weeks. Japan’s restrictions involve shorter business hours and limits on the sale of alcohol. February was the country’s deadliest month for Covid-19, with 4,856 fatalities recorded.  
  • In the Philippines, metro Manilla shifted to its lowest alert level on Tuesday, as coronavirus case numbers continued to fall. Under Alert Level 1, businesses including restaurants and gyms can operate at full capacity, social distancing is no longer required in Manilla and all public gatherings can fully resume. The current rules will stay in place until March 15 at which time they will be reviewed again. President Rodrigo Duterte’s government has moved to an endemic approach to the virus, despite more than 40% of the population still being unvaccinated. Vaccines for children ages five to 11 only started this month, and the country’s booster rollout has been sluggish.
  • Australia’s Prime Minister Scott Morrison tested positive for Covid-19 on Tuesday, and says he is currently experiencing flu-like symptoms. Morrison says he will continue with his official duties as prime minister while isolating at home. “I had tested myself daily since Sunday, including this morning, with all tests returning a negative result,” Morrison said. “I took a further test this evening after developing a fever late today. The test was inconclusive, so I took a PCR test tonight which returned a positive result late this evening.” The prime minister’s wife and children are isolating for seven days after testing negative. 

Covid-19 – Due Diligence And Asset Management

HSBC to Require Vaccine Pass for Hong Kong Employees

Brief: HSBC Holdings Plc will require all employees to have a valid vaccine pass to enter its premises in Hong Kong from March 28, as the Asian financial hub battles its worst outbreak since the pandemic started. “All HSBC employees, contractors and third parties will need to be vaccinated or have a valid medical exemption to enter any HSBC premises, including all branches,” the bank said in a memo on Wednesday. The new requirement won’t apply to customers entering HSBC branches. A spokesman for the lender confirmed the content of the memo. The Hong Kong Monetary Authority last month urged banks to consider imposing a vaccine mandate at the workplace and required them to inform the regulator whether they will do so. Goldman Sachs Group Inc. earlier introduced rules requiring all staff to get their shots before entering the office from Feb. 24.

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Covid Hampers Hong Kong's Growth While Singapore Races Ahead

Brief: Hong Kong’s escalating Covid-19 crisis and its desperate bid to rid the population of the virus is pushing the economy into contraction again. Economists have been downgrading their growth forecasts for Hong Kong this year alongside the government’s ever-tighter virus control measures, from travel bans to business closures. With mass testing of residents on the cards in March, more disruptions to the economy are expected. Gross domestic product is now predicted to contract 1% in the first quarter, according to a Bloomberg survey of economists. While growth is set to rebound in the second quarter, the outlook is far from clear, given speculation of a full lockdown in the city. That would be unprecedented for Hong Kong and raise the prospect of an extended slump in the economy. There’s been no official information of a shutdown yet, though residents are already emptying store shelves to prepare for the worst.

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Covid has taken severe mental health toll, says WHO

Brief: The Covid pandemic has taken a dire toll on mental health, the World Health Organization (WHO) said today, indicating that cases of anxiety and depression had swelled by over 25% globally. In a fresh scientific brief, WHO also found that the Covid-19 crisis had in many cases significantly impeded access to mental health services and raised concerns about increases in suicidal behaviour. The brief, which was based on an umbrella review of a vast number of studies, determined that the world saw a 27.6% increase in cases of major depressive disorder in 2020 alone. During the first year of the pandemic, there was also a 25.6% hike in cases of anxiety disorders worldwide, it found. “In terms of scale, this is a very large increase,” said Brandon Gray of WHO’s mental health and substance use department, who coordinated the scientific brief. The brief, he told AFP, “shows that Covid-19 has had a large impact on people’s mental health and wellbeing”.

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Comptroller Lander Launches Tracker for City Spending of $11 Billion in Federal Pandemic Aid

Brief: New York City Comptroller Brad Lander on Tuesday unveiled an online dashboard tracking how the city is spending and allocating more than $11 billion in federal stimulus funds. Lander pointed to several deficiencies in the city’s accounting of those funds, with unclear links between the source of funding and expenditures and sparse measures of the outcomes of that spending. He is hoping to work with fellow Democrat Mayor Eric Adams on addressing these issues left behind by the administration of Mayor Bill de Blasio. The city and its residents are expected to receive as much as $26 billion through the 2026 fiscal year in various forms of direct and indirect federal aid including stimulus checks, unemployment insurance, and federal grants, among others.

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Scotiabank, BMO profits gain as businesses ramp up borrowing

Brief: Bank of Nova Scotia and Bank of Montreal got an earnings boost with commercial clients ramping up their borrowing as economies emerged further from the pandemic. Scotiabank increased fiscal first-quarter government and commercial loans 8.2 per cent from a year earlier in its international division and 16 per cent in its Canadian unit. At Bank of Montreal, business loans rose 9.9 per cent in its Canadian banking unit and 9.1 per cent in its U.S. division. Both banks’ overall profit topped analysts’ estimates. Canada’s banks had weathered the COVID-19 crisis with strong mortgage growth, helped by the country’s hot housing market. That lending strength is now broadening to other categories as economies recover from the earlier phases of the pandemic and omicron-variant infections dissipate, prompting businesses and consumers to borrow more.

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

Our briefing for Tuesday, March 1, 2022:

  • According to a study from researchers in state of New York, two doses of the Pfizer-BioNTech vaccine quickly lost its effectiveness in children aged 5 to 11 during the most recent surge of Omicron variant. The U.S. researchers found that the vaccine was only 12 per cent effective at stopping infection in children in January, down from 68 per cent in mid-December. For children aged 12 to 17, the vaccines efficacy declined to 51 per cent, down from 66 per cent. “These results highlight the potential need to study alternative vaccine dosing for children and the continued importance layered protections, including mask wearing, to prevent infection and transmission,” the researchers said. In mid-December, the vaccine was 100 per cent effective in keeping severe infection leading to hospitalizations at bay but declined to 85 per cent by mid-December. Dr. Paul Offit, a pediatric infectious disease expert at Children's Hospital of Philadelphia, said that “it's not surprising that protection against mild illness would wane. We know that Omicron is somewhat immune evasive for protection against mild illness. The goal of the vaccine is to protect against severe illness - to keep children out of the hospital.”

  • The Bank of Canada is expected to raise interest rates this week as the Canadian economy showed signs of improvement in the fourth quarter this year. Statistics Canada said that the output expanded by an annualized 6.7 per cent from October to December 2021, which followed growth of 5.5 per cent in the third quarter. The numbers show that the Canadian economy has returned to near pre-pandemic levels. Economists in the country were expecting fourth quarter growth to fall flat due to Covid-19 surges across the country and lockdown measures put in place. However, preliminary data is showing a 0.2 per cent growth for the country in January. According to the data, the growth was driven by business spending, as companies race to replenish inventory and spark new investments. The central bank is suggesting that the economy has almost reached its capacity limit and is no longer seeing a need for higher-than-average levels of monetary stimulus.

  • A study conducted in the United Kingdom suggests that the Novavax Covid-19 vaccine can provide long-term protection against the virus. The protein-based vaccine, NVX-CoV2373, was shown to maintain an overall efficacy of 82.7 per cent efficacy over a 6-month period. The efficacy was just slightly lower, at 82.5 per cent at preventing symptomatic and asymptomatic infection, with the vaccines efficacy at preventing severe disease was at 100 per cent. However, this analysis was conducted between November 2020 and May 2021, before the onset of the Delta and Omicron variants. Novavax said on Monday they are currently working on an Omicron-specific vaccine and expects to begin manufacturing a commercial shot in the first quarter of 2022. Earlier this year the U.K. approved the vaccine for use in adults aged 18 and older and the company expects US$4 billion to $5 billion in overall revenue in 2022. “We are encouraged to see that our COVID-19 vaccine maintains a high level of durable efficacy and continues to exhibit a reassuring safety profile in this extended timeframe,” said Gregory Glenn, president of research and development.

  • Investors are losing confidence in Hong Kong’s ability to withstand the Covid-19 surge it is currently experiencing. Bets against the city are at an all-time high, with over 225,000 cases being recorded in the latest wave but some estimates but that number as high as 1.7 million. Hong Kong residents are quickly converting their currency to the Chinese yuan as the local dollar depreciates and housing prices have fallen to an 11-month low. While Hong Kong once endured one of the strictest Covid-19 policies in the world under the cities Covid-Zero plan, residents are panic buying supplies such as medication and painkillers due to the possibility that the government will no longer be able to further contain an outbreak. “Nobody knows where the government is going,” said Simon Powell, a Hong Kong-based equity strategist at Jefferies Group. “If you’re a Hong Kong trader or fund manager, you’ve had a shocker -- the performance has been awful. Throw into the mix that you’re probably home schooling and your family is scared of getting sent to a quarantine camp.” In the past two weeks, nearly 45,000 people have fled the city, with some foreign nationals resigning from their positions to return home. In the event of worsening outbreaks, Bank of America analysts project that 2 to 3 per cent of Hong Kong’s population could depart every month.

  • Travel restrictions across Europe are being dropped as new Covid-19 cases on the continent continue to decline. Covid-19 cases in Europe peaked in mid-January and several nations, including England and Switzerland decided to start removing Covid restrictions and instead opted to learn to live with the virus. On January 25, the Council of the European Union recommended that nations use a “person-based approach” to border restrictions rather than one that was country-based. Many nations are considering dropping the requirement to show the EU digital certificate or Covid-19 passport for travel throughout the bloc. Earlier this month, the Council recommended that nations now allow travelers from outside of Europe to enter, provided that they are able to show proof of vaccination or proof that they have recently recovered from the virus. The recommendation, however, did not suggest that they open borders to people who were unvaccinated, but were able to show proof of a negative test. Cyrille Cohen, head of the immunotherapy laboratory at Israel’s Bar-Ilan University, said that allowing people who are unvaccinated to cross the border with only a negative test can prove catastrophic for countries whose health care systems are already strained, as the unvaccinated are more at risk of severe disease. 

Covid-19 – Due Diligence And Asset Management

French and Dutch market authorities publish a joint analysis of the impact of the short selling ban at the onset of the Covid-19 crisis

Brief: Returns, volatility and market depth: the Autorité des Marchés Financiers (AMF) and the Autoriteit Financiële Markten (AFM) have examined the effects of the temporary ban applying to French securities by comparing their respective markets. In March 2020, as the pandemic triggered exceptional lockdown measures around the world, financial markets underwent an episode of high volatility and sharp price declines. To curb any amplification of the unidirectional nature of the markets and restore investor confidence, six European regulators, including France’s Autorité des Marchés Financiers, imposed a temporary ban on short selling. Other European regulators chose not to take any temporary measures. In particular, the Netherlands Authority for the Financial Markets (AFM) considered that it had not observed any market failures requiring supervisory intervention, and therefore did not consider a short selling ban as an effective measure against the effects of the pandemic on the markets.

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The Pandemic Made Offices Dispensable. The Metaverse Makes Them Irrelevant.

Brief: Early in the pandemic, an allocator told an audience on the audio app Clubhouse that he never invests with a new manager without doing an on-site visit; he said he needs to look the manager in the eyes before he commits capital. Egging him on, I asked what he would do if the manager had no physical office. He said he would never invest with such a manager. I’d like to think that this never-ending pandemic would have revealed to him and his cohorts the shallowness of such orthodoxy, but a recent survey shows that though allocators are fully prepared to transition to a hybrid of in-person and virtual meetings, only about a quarter said they had allocated to a new manager without physically meeting that person. Granted, the survey was completed in August 2021, but if 18 months of a global pandemic couldn’t change allocators’ minds, then I would not expect Omicron to be the catalyst.

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Protecting Seniors and People with Disabilities by Improving Safety and Quality of Care in the Nation’s Nursing Homes

Brief: The pandemic has highlighted the tragic impact of substandard conditions at nursing homes, which are home to many of our most at-risk community members. More than 1.4 million people live in over 15,500 Medicare- and Medicaid-certified nursing homes across the nation. In the past two years, more than 200,000 residents and staff in long-term care facilities have died from COVID-19—nearly a quarter of all COVID-19 deaths in the United States. Without decisive action now, these unacceptable conditions may get worse. Private equity firms have been buying up struggling nursing homes, and research shows that private equity-owned nursing homes tend to have significantly worse outcomes for residents. Private equity firms’ investment in nursing homes has ballooned from $5 billion in 2000 to more than $100 billion in 2018, with about 5% of all nursing homes now owned by private equity firms. Too often, the private equity model has put profits before people—a particularly dangerous model when it comes to the health and safety of vulnerable seniors and people with disabilities. Recent research has found that resident outcomes are significantly worse at private equity-owned nursing homes.

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Two trends for APAC family businesses: private equity and ESG

Brief: Historically, many family-owned businesses have not been inclined to accept funding from private equity investors, as they typically view such investors as being more interested in making a quick profit than improving the company’s long-term performance. The pandemic has upended the way global business is done. Like other corporate executives, family-owned business leaders are feeling the stress from Covid-19, but the effect for them is magnified as their personal wealth and income is deeply tied to their businesses. Such business owners may be more open to private capital than ever before, as they look to shore up their liquidity to weather the pandemic and sustain their business. This will give investors many more opportunities than in the past to take minority stakes in such businesses.

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The plan for getting innovation back on track after COVID-19

Brief: A large portrait of C.D. Howe stares down at the mere mortals who enter the minister’s office on the top floor of the building that houses Innovation, Science and Industry/Economic Development. As minister and deputy minister, we developed and implemented Canada’s Innovation and Skills Plan from 2015 to 2020 under the steady gaze of Canada’s postwar “Minister of Everything.” Much like after the Second World War, this is a crucial time for Canadians to take bold and decisive action. To get back on track after COVID-19, Canada must relaunch and refocus a comprehensive innovation plan. The focus should be on the long term, while drawing lessons from the past. As the architects of the past Innovation and Skills Plan, here are some lessons we learned to help secure growth and living standards. The four pillars of the past plan remain foundational today, with the pandemic further amplifying their relevance.

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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.