shutterstock_1629512083

Coronavirus Diligence Briefing

Our briefing for Thursday March 18, 2021:

Mar 18, 2021 4:08:44 PM

  • Medical experts believe the United States could be in for a fourth surge of Covid-19 infections, but this time the death toll could be considerably lower. This is thanks to the number of high-risk individuals having already received vaccinations to protect against the virus. As state-leaders begin to ease restrictions across the country, including the practice of wearing masks, all signs point to case numbers rising. New infections had been declining for a number of weeks before appearing to hit a plateau earlier this week. This type of regression has previously indicated a forthcoming surge in new cases. The plateauing numbers combined with the contagion rates of new variants of the virus – which are expected to be the dominant form by late March - lead experts to believe that a fourth wave is imminent.

  • White House press secretary Jen Psaki has confirmed that Canada has petitioned the United States for any surplus doses of Covid-19 vaccines. On Wednesday, Psaki said that both Canada and Mexico had formally requested the help of the United States in securing more vaccines. Today, the United States has said that it will distribute 4 million doses via loan agreements to Canada and Mexico. As Canada begins to roll out vaccinations, a third wave of the virus is beginning to take shape in the more densely populated areas of the country. “It’s a pipe dream to believe that anything other than additional measures are going to cause this to abate,” said Dr. Andrew Morris, an infectious-diseases specialist at Mount Sinai Hospital, “our vaccination efforts are not going to simmer this down.” Meanwhile, Quebec’s premier Francois Legault has suggested that all adults in the province should have at least one dose of a vaccine by Quebec’s Fete Nationale, a provincial holiday on observed on the 25th of June.

  • The United Kingdom has announced today that the Oxford/Astra-Zeneca vaccine is safe and effective. Despite rare side-effects like blood clotting in the brain, the U.K. believes that the risks do not outweigh the positives for vaccine. Emer Cooke, executive director of the European Medicines Agency has said “[the Oxford/Astra-Zeneca vaccine] benefits in protecting people from COVID-19, with the associated risks of death and hospitalization outweigh the possible risks.” Out of the 20 million people that have tested the vaccine, there has been comparatively low instances of side-effects being seen after inoculation. "The evidence we have is, at the moment, not sufficient to conclude with certainty whether these adverse events are indeed caused by the vaccine or not," said Dr. Sabine Straus, chair of the EMA's Pharmacovigilance and Risk Assessment Committee. 

  • A new surge of Covid-19 infections in India is causing a dire shortage in vaccines that were scheduled to be exported to the United Kingdom. The rising cases in India has nearly halted the distribution of vaccines to U.K. which will result in people under 50 in Britain having to wait a up to a month longer before they will be vaccinated. India, like many other nations is citing new variants of the virus as the catalyst for the increasing cases. The Indian government has instructed the Serum Institute of India, the world’s largest vaccine producer and the largest administrator of doses for the Covax program to keep more vaccines for use domestically. India is leading the rest of the world in terms of vaccines shared, with over 60 million doses being sold or gifted to other countries thus far in the pandemic.

  • Australia will send roughly 8000 doses of its own Astra-Zeneca vaccines to Papua New Guinea to help alleviate the neighboring country of a new wave of infections. This week, Australian Prime Minister Scott Morrison said that the country will be “making a formal request to Astra-Zeneca and the European authorities to access 1 million doses of our contracted supplies of Astra-Zeneca not for Australia, but for PNG, a developing country in desperate need of these vaccines.” Earlier this month, the European Union blocked a shipment of 250,000 doses of the Astra-Zeneca vaccine to Australia saying the need for vaccines elsewhere outweighs the need for vaccines in Australia where the virus has largely been kept under control. Papua New Guinea has reached out for help with sourcing vaccines as healthcare workers in the country continue to contract the virus due to lack of resources in the developing nation.

Covid-19 – Due Diligence And Asset Management

One year on: How Covid-19 has impacted private equity

Brief : Spear Capital’s Bryan Turner reflects on the last year and analyses the impact of the pandemic on private equity. Over the past year or so, we’ve all become familiar with a whole host of terms we knew nothing about at the start of 2020. “Lockdown”, “rate of transmission”, and “social distancing” all entered our collective vocabularies. At the same time, we had to get used to new ways of working and doing business. That’s as true for private equity (PE) as it is for any other sphere of business. And, initially, it looked like the economic devastation wrought by Covid-19 would hit global private equity markets incredibly hard. But after falling off a cliff in April and May, deal and exit value snapped back vigorously in the third quarter. Even as the mass rollout of vaccines around the globe brings a glimmer of hope that life may return to some semblance of normal, it’s likely that the conditions of 2020 will be with us for some time to come. It’s therefore imperative that private equity firms, their investors, and the firms they fund use the lessons of 2020 to inform their approach going forward.

Read more...


Taper Tantrum, Inflation Becomes The New Fear of Fund Managers; Not Covid-19: BofA Survey

Brief: Since its inception and unstoppable spread of Coronavirus across the globe, the investors feared it as a “tail risk”, but not anymore! The latest survey of global Fund Managers by Bank of America (BofA) shows that the global pandemic Covid-19 is not the major cause of worry for the fund managers, instead the inflation and the “Taper Tantrum”. In the survey for March by Bank of America (BofA), Fund managers view higher-than-expected inflation (37% of the total investors) and a tantrum (35% of the total investors) in the bond market can pose a danger to the market, making the market less attractive and worrisome to investors. 220 investors with $630 billion in assets under management were polled between March 5 and 11, showing the mean cash balance increasing to 4.0% from 3.8%, hedge funds’ net exposure to equities ticks highest since June 2020, and hedge fund allocation to commodities is an all-time high. The survey says, 48% of the fund managers expect the economy of the world, which includes Indian economy, to deliver a V-shaped recovery, as compared to only 10% in the May 2020 survey.


Read more...


Analysis: Private equity investors fret over record U.S. buyout prices

Brief: Private equity firms are paying more for leveraged buyouts to keep pace with soaring valuations of acquisition targets, making some investors leery of whether the industry can keep delivering on promises of lucrative returns. The booming stock market and cheap debt financing have helped push leveraged buyout prices to a record high, driven by sectors that have grown as people work and stay at home during the COVID-19 pandemic, such as technology and business services. Private equity firms paid an average 13.2 times a company's annual earnings before interest, tax, depreciation, and amortization (EBITDA) for U.S. leveraged buyouts in 2020, an all-time high, up from 12.9 times in 2019, according to financial data provider Refinitiv. Some investors are growing concerned about whether buyout firms can deliver the 15% to 20% annual returns they target when they raise new funds. "We can tilt towards better valuations and opportunities," said David Holmgren, who oversees $3.5 billion in endowment and pension assets at Connecticut-based hospital system Hartford HealthCare. He said he has been shifting his portfolio away from private equity funds that invest in pricey buyouts to those that specialize in middle-market deals and emerging markets.

Read more...


Centaur Hedge Fund clients produce strong performance in 2020

Brief: Hedge fund clients of Centaur Fund Services performed strongly in 2020, according to data released by the independent fund administrator. The company says that increased market volatility caused by the Covid-19 pandemic, optimism over vaccines, US elections and huge government stimulus programmes created a set of opportunities for hedge funds to prove their worth, and on the whole, they responded well. Almost 10 per cent of Centaur's clients generated returns in excess of 50 per cent, with nearly 25 per cent of our clients posting gains of over 20 per cent. In addition, more than 35 per cent of our client portfolios grew between 10-20 per cent. While most strategies produced positive returns, the stand out performers tended to focus on equity long/short based strategies with strong gains in a number of sectors including technology, emerging markets and healthcare. Centaur's data set is broadly in line with published industry data.

READ MORE...


UK tech investment hits record $15bn despite COVID and Brexit

Brief: Tech venture capital investment in the UK hit a record high of $15bn (£10.8bn) in 2020 despite the economic fallout of the coronavirus pandemic and complications of Brexit, a new study revealed. According to Tech Nation's latest report, health and wellness companies raised $38bn in 2020, an increase from $28bn in 2019. The report quoted UK prime minister Boris Johnson as stating that: "In North West England we saw an increase in health tech investment of over 200%, while across the UK our digital sector continues to make an enormous contribution to fighting the pandemic: from connecting locked-down patients with their GPs to offering NHS staff free access to workplace mental health platforms." He added that 2020 was "a year in which the brutal necessity of restricting human contact has escalated the importance of tech of all kinds, from the NHS app to Zoom calls." Augmented reality, e-sports and gaming accounted for over $2.4bn of total venture capitalist investment to companies including US-based Caffeine, which raised $126m for their gaming, entertainment and creative arts broadcasting platform.

Read more...


Omers Survey Finds Dealflow Rose or Held Steady During Covid-19 For Most Canadian VCS

Brief: One year into the pandemic, research suggests that for the majority of Canadian venture capital (VC) firms deal activity has increased or remained relatively consistent, according to a recent survey conducted by OMERS Ventures. In January, OMERS Ventures, the tech-focused investment arm of OMERS, one of Canada’s largest pension funds, surveyed 99 VC firms across North America and Europe, 24 percent of which were Canadian. Given that the pandemic is likely going to have a lasting impact on the way that VCs evaluate companies for investment, OMERS said it decided to share its findings to help the community adapt. The new report, which was released today, follows OMERS’ July 2020 survey and aims to illustrate how VC behaviour and activity have changed due to COVID-19. “We felt now was a good time to conduct our study once again, to capture current sentiment around how VCs are approaching investing today, and any lasting changes we should expect to see in the deal process in a post-COVID world,” wrote Alyssa Spagnolo, associate at OMERS Ventures. Of the Canadian VC firms OMERS spoke to, 46 percent have seen the same amount of deals compared to before COVID-19, while 25 percent have seen more deals than normal. On the flip side, 21 percent have seen deals decline by at least a quarter, while eight percent have seen deals decline by at least half.

Read more...


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

Topics:Coronaviruscovid-19