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Coronavirus Diligence Briefing

Our briefing for Friday January 22, 2021:

Jan 22, 2021 3:48:11 PM

  • In the United States, a recent survey has revealed about 6 of 10 Americans don’t know when or where to get a coronavirus vaccine. The Kaiser Family Foundation surveyed over 1,500 Americans last week and suggested the public are going through a range of emotions varying on frustrated, confused and angry when it comes to vaccine rollouts. The report also found Black, Hispanic and lower income adults are among the least likely to say they have enough info on the vaccines with at least 6 of 10 saying they don’t know where to get vaccinated and more than two-thirds don’t know when they can get vaccinated.

  • Reuters is reporting Canada deported thousands of people even as COVID-19 raged in 2020. According to the Canada Border Services Agency (CBSA), the country removed 12,122 people in 2020, 875 more than the previous year and the most since at least 2015. This is considerably high given there was a moratorium on deportations in March through the end of November. Many of the deportation trips involve transfers at multiple airports and flights during which people are placed in enclosed spaces and in close quarters with other people for hours at a time – a recipe for COVID-19 spread. “As much as a human rights concern, it’s a common sense concern,” said Bill Frelick, director of Human Rights Watch’s Refugee Rights Program.

  • A statement made by United Kingdom Prime Minister Boris Johnson during a Friday news conference raised some eyebrows as it related to the new COVID-19 variant. “We’ve been informed that in addition to spreading more quickly… there is some evidence that the new variant… may be more associated with a higher degree of mortality,” said Prime Minister Johnson. The UK’s chief scientific adviser, Patrick Vallance elaborated on the evidence saying it was not yet strong and that the data remained uncertain. Vallance also said Friday the existing COVID-19 vaccines would work against the UK strain, but didn’t sound as confident about the variants detected in Brazil and South Africa.

  • Germany’s Economy Minister will unveil the country’s latest outlook on Wednesday, but things aren’t looking good for the European Union’s largest economy. Due to the extended coronavirus restrictions, Germany has already cut its prediction for economic growth to 3% for the first quarter of 2021 – down from 4.4% forecasted back in October. The downgrade reflects the deteriorating prospects across the EU as the bloc heads for a double-dip recession. Germany has fared better than many of its EU brethren, thanks to generous government support, but are now struggling with business disruptions and concern over vaccine shortages.

  • A recent poll is showing Brazil’s President Jair Bolsonaro’s popularity is at its lowest point since last July due to the recent handling of the coronavirus pandemic. A survey conducted by IDEIA showed President Bolsonaro’s personal backing tumbled to 26% from 37% in just one week, the largest drop of his reign. His disapproval rating rose to 45% during the same time period. Brazil has come under criticism over its slow response to the pandemic as the healthcare system in the Amazon city of Manaus faces collapse. President Bolsonaro has repeatedly downplayed the virus and even as recent as Friday said there is no scientific proof on vaccines.

  • In Japan, government officials are strongly denying a report from the British newspaper, The Times of London, citing an anonymous source that the Summer Olympics will be cancelled due to the coronavirus pandemic. A statement from the Cabinet Secretariat on behalf of Japan’s government said the following: “Some news reports circulating today are claiming that the Government of Japan has privately concluded the Olympic and Paralympic Games Tokyo 2020 will have to be cancelled. This is categorically untrue.” The local Olympics organizing committee said also in a statement that Games would go forward as planned and had the support of Japanese Prime Minister Yoshihide Suga. The Times of London report went onto add the government was seeking a way to announce the cancellation amid efforts to ensure Tokyo as a future host.

Covid-19 – Due Diligence And Asset Management

Wall Street Presses New York to Let it Help Speed Up Vaccines

Brief : Some of New York’s biggest employers are urging local leaders to let them help with the Covid-19 vaccination effort, arguing that the slow rollout is putting the state’s economic recovery at risk. Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc. and KKR & Co. were among a few dozen companies that got on a call Thursday with the state’s vaccination czar, Larry Schwartz, to offer their services, according to people on the call. The firms said they can provide distribution and logistics, and could help persuade the Biden administration to boost New York’s vaccine allocation. “Our economy will not recover, and we won’t be able to get people back into the office, until we have good penetration of the vaccines,” Goldman Chief Executive Officer David Solomon said. Wall Street leaders, who have operated from largely empty office towers, are getting increasingly concerned about continued delays that threaten a return to normal operations. New York City has had to cancel thousands of appointments and temporarily suspend 15 community vaccination sites due to vaccine shortages and distributor delays. The city continues to administer the shots, but many hospitals and vaccine sites have stopped offering new appointments for first doses. Appointments for second doses are still being made.

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Citadel Securities Reaps Record $6.7 Billion on Volatility

Brief: Citadel Securities went from strength to strength in 2020, as the pandemic spurred wild swings across finance. To cap the tumult, Ken Griffin’s firm, one of the world’s biggest market makers, just posted record revenue -- some of it from a rapidly constructed Florida trading floor. Fourth-quarter net trading revenue of $1.7 billion brought the firm’s full-year total to $6.7 billion, almost double the previous high in 2018, according to a presentation to investors. The surge came after some of its traders decamped from Chicago and New York to set up shop in a Palm Beach hotel in late March as the pandemic upended lives and markets across the globe. The figures for the closely held firm are being disclosed to investors as part of a $2.5 billion loan Citadel Securities is seeking, with proceeds going to refinance debt and bolster trading capital. A representative of Chicago-based Citadel Securities declined to comment. The company’s success comes in a year that was defined by economic pain and despair for many, but will go down as one of the most lucrative environments in Wall Street history. Traders across investment banks profited from volatility sparked by the pandemic and an explosion in stock-market speculation by people cooped up at home on apps such as Robinhood Markets. Citadel Securities’ results also highlight how buttressed it is as a pure trading firm from the health catastrophe, which forced the biggest investment banks to set aside billions to cover future soured loans.

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United Airlines CEO Calls on Companies to Mandate COVID-19 Vaccination

Brief: United Airlines may make the COVID-19 vaccine mandatory for employees, and other companies should do the same, United Chief Executive Officer Scott Kirby told workers at a meeting on Thursday, according to a transcript reviewed by Reuters. A United spokeswoman confirmed that the company was “strongly considering” making vaccines compulsory, though it isn’t a policy yet. “I think the right thing to do is for United Airlines, and for other companies, to require the vaccines and to make them mandatory,” Kirby said. “If others go along and are willing to start to mandate vaccines, you should probably expect United to be amongst the first wave of companies that do it.” CNBC had earlier reported the news of Kirby wanting to mandate the vaccine for employees. Private U.S. companies can require employees to get vaccinated against COVID-19, but are unlikely to do so because of the risks of legal and cultural backlash, experts have said. Companies are still in the early stages of navigating access and distribution of vaccines against the disease caused by the novel coronavirus, but inoculation is considered the key to safely resume operations at crowded warehouses, factory lines and on sales floors.

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U.S. Will ‘Need More’ COVID Relief Beyond Biden’s $1.9 Trillion Proposal: Former Citigroup Vice Chairman

Brief: During his first full day in office, President Joe Biden on Thursday vowed a “full-scale wartime effort” to address the coronavirus pandemic, which includes a previously announced $1.9 trillion stimulus proposal that calls for spending on vaccine distribution, a $400 unemployment insurance supplement, and $1,400 stimulus checks. The new administration’s commitment to aggressively address COVID-19 came amid news that 900,000 Americans filed new unemployment claims last week — a slight drop from the week prior but an elevated figure otherwise not seen since last August. In a new interview, Democratic New York City mayoral candidate and former Citigroup vice chairman Ray McGuire applauded the Biden administration’s stimulus proposal but emphasized that the scale of the COVID-19 crisis will require additional government support beyond the nearly $2 trillion promised. Stimulus funds must target low-income people, especially those in communities of color that have suffered acutely from the pandemic, he said. “We welcome the assistance,” McGuire tells Yahoo Finance. “We will need more.” “We will need more in order for this country to make sure that it addresses the least of these Americans,” he says. “New Yorkers are suffering from the COVID economy [and] injustices across the system.” “We’ve got the existential crisis,” he adds. “This COVID pandemic has ripped and ripped through our communities and wrought havoc on many communities, especially disproportionately on Black and brown communities.”

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A Quant Hedge Fund Has Decided to Back Some Human Stock Pickers

Brief: Bainbridge Partners, a $900 million hedge fund firm that relies on algorithms to make its money, is now giving human traders a chance. The London-based money manager is investing $60 million in Andra Asset Management, which uses fundamental analysis to bet on small- and medium-sized companies in Europe, according to a company statement. Bainbridge will also get a stake in the firm co-founded by Sarunas Mazeikis and Jacob Brahms. While the investment is small, it may be another sign of a shift in sentiment in the industry following a volatile year that showed human stock pickers proving their mettle in a global crisis. Discretionary hedge funds such as Brevan Howard, Andurand Capital and BlueCrest posted record gains last year, while some of the best-known quant firms like Renaissance Technologies, Winton and Two Sigma suffered losses. Flesh-and-Blood Hedge Fund Traders Prevailed in 2020’s Tumult Mazeikis, who previous worked at Marble Bar Asset Management, and Brahms, a former employee at Artemis Investment Management, specialize in picking European small and mid-cap equities. Their Andra Absolute Return fund has gained about 17% since its launch in December 2019, according to the statement. “Because of their lower liquidity profile and reduced analyst coverage, small and mid-caps are usually more suited to a discretionary approach,” said Antoine Haddad, chief executive officer of Bainbridge.

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Covid Crisis Drives Increase in Employee Equity Initiatives, says Capdesk

Brief: According to newly released research by equity management platform Capdesk, 77 per cent of startup founders are saying that the Covid crisis has made them more likely to offer employee equity in their company. Capdesk is headquartered in London and works with European scale-ups including Secret Escapes, Curve, GoHenry, Privitar, Nutmeg and Gousto. The study found that among employees, founders and CEOs at private equity-backed UK startups and scale-ups, a majority of employees (80 per cent) and business owners (78 per cent) believe companies should be required by law to offer equity share schemes to their workforce. “After an extremely challenging year, it is encouraging to see something positive emerge: a fundamental shift towards distributing business wealth to more of those responsible for creating it,” said Christian Gabriel (pictured), CEO and co-founder of Capdesk.   “Leaders are not only recognising the power of unlocking equity to drive their business and get through an economic crisis, but also the positive impact these actions can have on wider society,” he added. The research, which was conducted by Censuswide on behalf of Capdesk, consisted of opinion surveys completed by 200 founders, CEOs and business owners as well as 1,000 employees at private equity-backed startups and scale-ups across the UK in early December 2020. Listen to this interview with Christian Gabriel, co-founder and CEO of Capdesk and Private Equity Wire’s editor Karin Wasteson to find out more about why the pandemic has made it more likely CEOs will offer employee ownership, how it could improve business performance and in what way it might further the post-pandemic recovery.

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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.

Topics:Coronaviruscovid-19