shutterstock_1629512083

Coronavirus Diligence Briefing

Our briefing for Wednesday June 2, 2021:

Jun 2, 2021 2:51:23 PM

  • In the United States, President Joe Biden is expected to make his push to the American public to get vaccinated ahead of his self-imposed July 4th long weekend goal. Nearly 51% of the American population has received at least one dose of a COVID-19 vaccine and nearly 41% are fully vaccinated, according to the latest Centers for Disease Control and Prevention data. Last month, President Biden said he wanted at least 70% of Americans to have at least one shot by July 4th – America’s Independence Day. In order to boost those numbers, the Biden administration will mobilize national organizations, community based and faith-based partners, celebrities, athletes and thousands of volunteers, just to name a few. Twelve out of fifty states have reached President’s Biden’s goal of having at least 70% of their population with at least one inoculation of a COVID-19 vaccine.

  • The Canadian federal government is doubling its monetary commitment to the global vaccine sharing alliance known as COVAX. International Development Minister Katrina Gould made the announcement that Canada would be increasing its commitment from $220 million to $440 million. However, there was no mention of Canada sharing excess vaccines with the COVAX initiative. Canada has been heavily criticized as being the only G7 nation to accept doses from COVAX, which was ideally designed for poorer nations to receive vaccines. The government has previously stated they will donate excess vaccine doses to COVAX but have never outlined when or how many.

  • Speaking to the Jenner Institute in Oxford on Wednesday, United Kingdom Health Minister Matt Hancock revealed that the government has started commercial negotiations with AstraZeneca to secure a “variant vaccine”. The inoculation will be adapted to tackle the variant first discovered in South Africa. “Once again we’re leading the way and backing projects with potential, so we can keep our vaccination programme one step ahead of the virus and protect the progress that we’ve all made,” said Hancock. The health minister was singing the praises of the AstraZeneca vaccine, made in partnership with Oxford University on Wednesday, noting more than half a billion doses have been released to low and middle income countries as official figures show at least three-quarters of UK adults are said to have at least one COVID-19 vaccination in their system. Hancock also touted the vaccine’s affordability and storage capabilities as other reasons the vaccine is so important to help in the world’s global vaccination against COVID-19.

  • Germany, Greece and five other European Union (EU) nations have introduced a vaccination certificate system for travellers, weeks ahead of the July 1st rollout program for the entire EU bloc of nations. The certificates are being issued to people fully vaccinated, as well as to those who have already contracted the virus and developed antibodies, along with others who have a PCR test conducted within the previous 72 hours. The documents will be available in digital and/or paper form, delivered free of charge, distributed in the national language, plus English and be valid in all EU bloc countries. Many EU nations such as Greece, France, Italy and Spain rely heavily on tourism and are looking for that boost to the economy over the summer months.

  • While the EU looks to be very open to the idea of welcoming back tourists, according to Bloomberg, China is in no such rush. The article notes while China is rolling out a world-leading 20 million COVID-19 vaccine doses a day, the country has yet to signal any attention they plan to open their borders or relax strict quarantine for foreign arrivals, and aggressive lockdowns when flareups return. Bloomberg, citing reports from local media, said Beijing has more than 80% of its people with at least one dose of its domestic-made shot. China’s National Health Commission declined Bloomberg’s request for comment on the country’s plan to reopen.

  • Addressing a parliamentary committee on Wednesday, Japan’s top medical adviser, Shigeru Omi, said hosting the Olympics during the current state of infections in the country is “not normal”. Omi went on to add that organizers should explain to the public why the Games are going ahead in the middle of a pandemic. Since the start of the pandemic, Japan has reported more than 750,000 cases of the coronavirus and only 2.7% of its population have been fully vaccinated and the current phase targeting older adults isn’t expected to finish before the Games start on July 23rd.

Covid-19 – Due Diligence And Asset Management

BlackRock CEO Larry Fink sees Potential for ‘Big Shock’ From Inflation

Brief : BlackRock Inc. Chief Executive Officer Larry Fink said that investors may be underestimating the potential for a spike in inflation. “Most people haven’t had a forty-plus year career, and they’ve only seen declining inflation over the last 30-plus years,” Fink said at a virtual event hosted by Deutsche Bank AG on Wednesday. “So this is going to be a pretty big shock.” Concern about higher inflation has already seeped into U.S. markets with the cost of goods including lumber and steel rising this year. Fink began his career at First Boston Corp. in 1976, in a period of elevated inflation. The U.S. Consumer Price Index touched a high of 14.8% in March 1980. Fink, who now runs the world’s biggest asset manager, added that central banks may have to reassess their policies if higher prices become a concern. The Federal Reserve has committed to keep rates near zero in the near term and has indicated it will tolerate inflation above its 2% target to make up for the period where it dipped below that level. If the Fed were to reconsider that, it could seem discordant with separate fiscal stimulus, Fink said. President Joe Biden has proposed additional measures to stimulate the U.S. economy, including a $1.7 trillion infrastructure spending plan.

READ MORE...


The $10 Billion Bright Spot in the Battered World of Office Real Estate

Brief: Even as the remote-work era clouds the future for offices, one segment of the business is drawing cash from investors including Blackstone Group Inc. and KKR & Co. More than $10 billion has gone toward buying buildings used for life sciences and other research this year, according to Real Capital Analytics Inc. That accounted for approximately 4% of all global commercial real estate transactions through May, double the share from last year. That estimate doesn’t count new construction, and fresh buildings are breaking ground in U.S. cities including Boston, San Diego and San Francisco -- many without having signed major tenants. Unlike workers in conventional offices, many scientists don’t work remotely. And as vaccines help fuel the economic rebound, funding for medical innovations is expected to drive the need for more space, particularly in the U.S. and U.K. “The pandemic only amplified the demand growth, but it’s a trend we think will continue for years,” Nadeem Meghji, Blackstone’s head of real estate Americas, said in an interview. “This is about, broadly, advances in drug discovery, advances in biology and a greater need given an aging population.” Last year, as social-distancing emptied out office buildings and damped investor interest in malls and hotels, life science building sales and refinancing totaled about $25 billion, up from roughly $9 billion in 2019, according to Eastdil Secured.

READ MORE...


Data and Due Diligence to Help GPs Thrive

Brief: “The Coronavirus pandemic (Covid-19) highlighted the importance of GPs having deep sector knowledge, expertise and awareness in the sectors they invest in,” Alice Langley, Partner, Investor Relations, IK Investment Partners comments. “With significant uncertainty around the long-term effects of the pandemic on the global economy and businesses alike, having a comprehensive understanding of what recovery might look like for businesses within a specific sector, will stand GPs in good stead. “Having this level of data and insight enables firms to utilise any opportunities as well as mitigate risks by building this into their value creation plans. At IK, we invest across four main sectors; Business Services, Healthcare, Consumer and Industrials. Having deemed this as a sensible approach for many years, Covid-19 simply supported our thesis of investing in businesses within non-cyclical industries.” The pandemic also forced an acceleration of digitisation as the new normal saw GPs and LPs move to remote working and virtual due diligence. Langley notes: “I anticipate digitalisation to be high on the priority list for PE firms with the aim of harnessing technology to streamline operations for themselves and their portfolio companies.

Read more...


EU to Keep Pandemic Economic Safety Net in Place Next Year

Brief: European Union countries will continue to benefit from an economic safety net through next year to help their economies recover from the damage inflicted by coronavirus restrictions, the EU’s executive branch said Wednesday. As COVID-19 spread throughout Europe and sent the EU spiraling toward its deepest recession, the European Commission activated a “general escape clause” in March 2020 that allowed member nations to deviate from normal budgetary rules. But with vaccination programs now taking hold and the number of new coronavirus cases dropping, the commission predicts the EU economy will expand by 4.2% in 2021 and by 4.4% in 2022. Given the positive trend, Commission Executive Vice President Valdis Dombrovskis said that “we are prolonging the general escape clause in 2022, with a view to deactivating it in 2023.” Dombrovskis said the decision comes “with our recovery around the corner but with the road ahead still paved with unknowns. We will therefore continue to use all tools to get our economies back on track.”

READ MORE...


Global Economy Will Still be 23 Million Jobs Short Next Year

Brief: The Covid-19 pandemic will cause a “sustained and pronounced increase in unemployment” with low- and middle-income countries that have lagged behind in vaccinations suffering the biggest blow, according to the International Labor Organization. The ILO fears not enough jobs will be created to accommodate those who lost employment as a result of Covid-19, plus new labor-market entrants. The global shortfall is estimated to be 75 million this year, and 23 million in 2022. “Projected employment growth will be too weak to provide sufficient employment opportunities for those who became inactive or unemployed during the pandemic and for younger cohorts entering the labor market,” the ILO said. “Many previously inactive workers will enter the labor force but will not be able to find employment.” The Geneva-based body’s prediction is the latest evidence that the pandemic has reversed years of progressive gains to welfare around the world. Not only has unemployment risen in many countries despite furlough programs to help firms retain staff, but the headline rate masks the extent of the damage. Many people, particularly women and the young, have left the labor market and aren’t being counted. In addition, schooling has been disrupted in many places due to the need to stem spread of the disease. The ILO estimated that those jobs that are created are likely to be lower quality, with the problem most severe in poorer countries with large informal economies.

READ MORE...


What Consumer Data says About Opportunities in Emerging Markets

Brief: Across the globe, consumers’ desires are shifting — and that has implications for investors. A decrease in the consumption of basic goods, like food and personal hygiene products, may present new opportunities for investors in emerging markets, according to a recent paper from investment firm Polen Capital. “We believe the investment opportunities in emerging markets are hard to overstate,” portfolio manager Damian Bird and analyst Pamela Macedo wrote in the paper. “A McKinsey study estimates that by 2025 consumers in emerging markets will spend an estimated USD 30 trillion annually, a future it calls ‘the biggest opportunity in the history of capitalism.’”For their study, Bird and Macedo compiled macroeconomic and industry-specific data from global industries over the past 20 years. They first noted a shift away from the “classic consumer product S-curve,” a visualization that illustrates historical trends of consumers in early-stage developing economies. According to that model, consumers at first tend to purchase low levels of consumer products. However, as a country’s economy grows and individuals acquire more wealth, consumption of consumer products starts to slowly increase, gaining speed as the country’s economy expands.

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