Coronavirus Diligence Briefing

Our briefing for Tuesday April 6, 2021:

Written by Coronavirus | Apr 6, 2021 8:54:54 PM
  • In the United States, President Joe Biden and his administration are advising states to widen the vaccine eligibility by April 19th. The deadline is two weeks earlier than the previously announced deadline of May 1st and will target anyone over the age of 16 to get their vaccine shot if they so choose. The announcement means Americans no longer need to check with state and local websites to see whether they qualify. The White House administration has said since President Biden took office, four in 10 Americans have already received their first COVID-19 inoculation, a rate far ahead of most countries.

  • Canadian Conservative Leader Erin O’Toole said his government, if elected, would call a public inquiry to examine the federal’s government’s response to the COVID-19 pandemic. O’Toole accused the Justin Trudeau Liberal government of ignoring scientists’ warnings about the transmissibility of COVID-19 in the early days of the pandemic, of allowing national stockpile of personal protective equipment to become depleted and of defunding a key pandemic early warning system. “A public inquiry will ensure that all lessons learned from the crisis are publicly aired and improvements can immediately be adopted. Canada must be better prepared for future threats. We cannot afford to once again fail to keep Canadians safe,” said O’Toole. It has been rumoured that the leading Liberals might trigger a snap election in the fall, especially if the vaccine rollout goes well throughout the summer.

  • United Kingdom scientists are sounding the alarm that the government’s current easing of lockdowns could trigger a wave of COVID-19 infections, similar to last spring. The Scientific Advisory Group for Emergencies (Sage) aren’t as concerned about the next stage in reopening – April 12th of shops, hairdressers and pub beer gardens - but the proposed changes in May and June when social mixing is set to be permitted again. A paper from the London School of Hygiene and Tropical Medicine said their projections of stage four, when restrictions are set to be abolished could, “lead to a larger surge of cases and deaths comparable to that seen during the first wave.”

  • India’s Maharashtra state, home to the country’s financial capital, Mumbai, has ordered offices to work from home and shut malls and restaurants through April. India recorded more than 100,000 daily COVID-19 cases for the first time on Monday. An unexplained lull in recent months gave the country a false sense of security, which allowed businesses to reopen and fostered optimism among government officials about a recovery in growth. As of Monday evening, private offices were asked to work from home, with some allowances for banks and stock exchanges.

  • The United Arab Emirates (UAE) and Israel have started direct commercial flights between the two countries. UAE Ambassador to Israel, Mohamed Al Khaja and Israel’s head of mission to the UAE Eitan Na’eh were on the Etihad Airways inaugural flight. “As our countries recover from the COVID-19 pandemic, we have much to look forward to in commercial, diplomatic, technological, health, and tourism exchanges,” Khaja was quoted as saying by UAE state news agency WAM. Dubai has become a popular destination for Israeli tourists, even during the pandemic. It also doesn’t hurt that both countries are among the world’s fastest in their COVID-19 vaccination campaigns.

  • Australia and New Zealand have agreed to a quarantine-free travel bubble. New Zealand Prime Minister Jacinda Ardern made the announcement during a Tuesday news conference with the travel bubble set to begin on Sunday, April 18th at 11.59 pm. “This is an important step forward in our Covid response and represents an arrangement I do not believe we have seen in any other part of the world,” said Prime Minister Ardern. Under the new rules, travelers won’t be allowed to travel if they had a positive COVID-19 test in the previous 14 days or present flu-like symptoms.

Covid-19 – Due Diligence And Asset Management

IMF: COVID-19 Pandemic Recession Could Have Been Three Times as Bad

Brief : The International Monetary Fund (IMF) estimates that without government support through the COVID-19 pandemic last year, the global economic downturn would have been three times as large. A retroactive look from the IMF estimated that fiscal measures from governments around the world contributed about 6% to global growth in 2020, helping to soften a global shock that still contracted output by 3.3% in 2020. The IMF now says the COVID-19 recession is likely to leave a smaller scar on the global economy compared to the 2008 financial crisis. "Overall, the global economy seems to be coming back somewhat stronger than we had expected," IMF Chief Economist Gita Gopinath told Yahoo Finance on Tuesday. Still, the fund is recommending that countries with the ability to spend continue to support policy measures like unemployment insurance and stimulus checks through the economic reopening.

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China’s Growth Set to Drive World Economy in Post-Pandemic Years

Brief: China will drive global economic growth in the coming years as the world recovers from an pandemic that’s killed 2.9 million people, the International Monetary Fund predicts. China will contribute more than one-fifth of the total increase in the world’s gross domestic product in the five years through 2026, according to Bloomberg calculations based on IMF forecasts published Tuesday. Global GDP is expected to rise by more than $28 trillion to $122 trillion over that period, after falling $2.8 trillion last year in the biggest peacetime shock to output since the Great Depression.  The U.S. and India will be the second and third-biggest contributors to global growth in the period, according to the IMF, with Japan and Germany rounding out the top five.  Overall, the IMF forecasts that the global economy will expand 6% this year, before slowing toward a 3% pace by 2026. It also warned that growth in the coming expansion may be unevenly spread, with developing economies expected to have bigger losses and slower recoveries.  “Income inequality is likely to increase significantly because of the pandemic,” the Fund said in its World Economic Outlook report. “Close to 95 million more people are estimated to have fallen below the threshold of extreme poverty in 2020 compared with pre-pandemic projections.”

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Amid the Pandemic, Hedge Funds Grapple with Investments in New Tech and Alternative Data

Brief: The Covid-19 pandemic shifted the professional world to the online office. Yet despite the demands of the virtual space, only around half of hedge fund managers are spending money on new technology. According to a recent survey from the Alternative Investment Management Association, Simmons & Simmons, and Seward & Kissel, 47 percent of hedge fund managers answered “no” when asked if they were investing in new technologies. Those who answered “yes” are focused on one major trend: alternative data. In the survey, hedge fund managers and investors were asked a series of questions about the health of, and trends in, the hedge fund industry. The survey, which gathered data during the fourth quarter of 2020, asked questions of over 300 industry professionals, a majority of whom were hedge fund managers accounting for an estimated $1.3 trillion in assets under management. “The industry is investing in technology — period,” said Tom Kehoe, managing director and global head of research and communications at AIMA, in an interview. “Across the board, hedge funds were using technology more in the past 12 months. If we look at the next 12 months, our sense is that the industry will double down on the use of technology.”

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Hundreds of Bankers Return to JPMorgan, Goldman London Offices

Brief: Hundreds more JPMorgan Chase & Co. and Goldman Sachs Group Inc. bankers have returned to their London offices since the U.K. government eased its “stay at home” guidance on March 29. About 15% of JPMorgan’s staff in the city -- about 1,800 people -- came into the office last week, up from about 10% since Christmas, according to a person familiar with the matter. Goldman is expecting attendance to increase in the coming weeks to about 20% of its roughly 6,000 workers in the U.K. capital, another person said, asking not to be named discussing private information. Spokespeople for the banks declined to comment. The U.K. is inching out of its third Covid lockdown and banks of all types are looking to establish future working practices. Some financial firms are starting to entice employees back to deserted offices and an empty City of London, while other have moved to embrace remote work. “Organizations need to understand what their employees need and what will enable them to do their best work,” said Allison English, deputy chief executive officer of workplace research firm Leesman. “The decision is certainly not a binary ‘home or office’ one.” The property market is watching the return to work. A 37-storey skyscraper in the heart of the City is being put up for sale for 1.8 billion pounds ($2.5 billion), according to the Telegraph. The price tag -- a record for a London office building -- will be a test of investor appetite for offices following the pandemic.

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Covid Success to see Cashing in ‘Surge’ Over Pension Freedoms

Brief: UK investment platform provider A J Bell is predicting a significant increase in withdrawals from pension pots compared to the unusual circumstances caused by the Covid pandemic over the last year. In five of the six years since the pension freedoms launched in April 2015, the first three months of the tax year has seen the highest volume of flexible withdrawals. The exception is the 2020/21 tax year, when withdrawals dipped to £2.3bn amid severe stock market uncertainty. Total withdrawals have been between 10% and 33% higher between April and July than the next largest quarter in every other tax year. Tom Selby, senior analyst at AJ Bell, said "While most of us still have fewer things to spend our money on at the moment - particularly given restrictions on foreign travel - the success of the Coronavirus vaccine and more stable market conditions mean we should expect to see a significant jump in withdrawals in the coming quarter." Selby emphasised how until 2020, the beginning of a new tax year has traditionally been peak pension withdrawal season, with UK savers taking advantage of a fresh set of tax allowances to access larger amounts from their retirement pots.

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How Covid-19 has Accelerated e-commerce Trends

Brief: We are witnessing a sizeable and lasting shift to e-commerce across the economy - a shift that has been underway for decades, entirely catalysed by a single, revolutionary technological advancement - the emergence of the internet. The internet made it possible for businesses and individuals to buy and sell items and services online, and in a very short period, consumers had the convenience of almost unlimited selection available to them from the comfort of their homes, 24/7, with just a few clicks of a button. As it stands today, global e-commerce is an area of tremendous opportunity, as the disruption we see is only just beginning. The effect of Covid-19 on corporate and consumer behaviour has been pronounced and significant. This period has been a tailwind for e-commerce at a level unseen since the advent of mobile phones. For the first time in history, we saw an acceleration in e-commerce adoption despite gross domestic product declining globally. The pandemic has created some of the greatest retail, payment, and distribution challenges in our lifetime. In a matter of months, the pandemic catapulted the industry forward, accelerating the adoption of online shopping, digital communications, website creation and other industry trends at a pace that had previously taken years. 

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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.