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Covid-19 Diligence Briefing

Our briefing for Friday, October 1, 2021:

  • In the United States, a new Covid-19 variant that emerged is not an immediate threat, nor is it likely to become the dominant strain over delta, experts say. The R.1 strain was initially a concern because it has some mutations that could avoid anti-body responses. Delta continues to be the dominant variant in the United States, eclipsing other variants including Lambda and Mu. Nearly 700,000 people across the U.S. have died of coronavirus, an overwhelming majority of them unvaccinated. Despite its large supply of vaccines, the U.S. has one of the highest death rates of any country in the world.
  • In Canada, the province of Saskatchewan reported 601 new cases on Thursday, its highest daily rise since the beginning of the pandemic. With 72 people in intensive care, the province’s hospitals are under immense pressure, but officials have declined to bring in any new restrictions. Health Minister Paul Merriman refused to call the situation a crisis during an online news conference on Wednesday. “It’s an extremely challenging situation,” he said. “We’ve never seen this before. The word ‘crisis’ can mean different things to different people. It’s certainly an extremely challenging time.”
  • In the United Kingdom, case numbers are rising again as children head back to school and offices reopen. The U.K. reported 36,480 new Covid-19 cases on Thursday, and 137 new deaths. Transportation on roads has returned almost to pre-pandemic levels, although public transportation rates remain slightly below normal. Job vacancies have also soared as employers scramble to hire upon reopening. The U.K. has largely relied on vaccines to protect people from the spread of Covid-19 as they implemented their reopening plan. About 90% of the adult population in the U.K. have had their first dose of vaccine, while 83% are fully vaccinated. 
  • India will retaliate against the U.K. and impose strict travel measures on visitors arriving from that country. Beginning on October 4, travellers arriving in India from the U.K. will have to quarantine at a designated address for 10 days, regardless of their vaccination status. U.K. travellers will also have to have a Covid-19 test taken 72 hours before departure, upon arrival and on the eighth day after arrival. The U.K. recently imposed similar rules on Indian travellers, requiring them to quarantine upon arrival regardless of their vaccination status, although India was moved off the U.K.’s “red list.” 
  • The Philippines eased some coronavirus restrictions in the capital region after case numbers fell. Gyms can now reopen to fully vaccinated patrons, and restaurants and personal care services are allowed to double their operating capacity to 20%. Case numbers are averaging around 1700 daily in the past week, compared with nearly 4300 in the previous week. The total number of cases in the country since the beginning of the pandemic is now at about 2.5 million. The country has struggled because of limited access to vaccines, with only about 20% of the population fully vaccinated according to Bloomberg’s global vaccine tracker.
  • Australia will reopen its international border from November, allowing vaccinated citizens the freedom to travel again. Prime Minister Scott Morrison said the restrictions will be removed once a state reaches the 80% full vaccination milestone. “It’s time to give Australians their lives back,” Morrison said. In other news, New South Wales (NSW) State Premier Gladys Berejiklian has resigned, as a result of an investigation taking place by a corruption watchdog. The NSW Independent Commission Against Corruption said it’s investigating a matter that involved a breach of public trust. Berejiklian says she resigned because of the length of time the investigation will take, and because the state needs stable leadership throughout the coronavirus pandemic.

Covid-19 – Due Diligence And Asset Management

Vaccine Stocks Shed $84 Billion as Merck Pill Adds to Rough Week

Brief: For the world’s leading Covid-19 vaccine makers, news that Merck & Co.’s experimental pill cuts the risk of hospitalization and death in half was the latest blow in a very bad week. Stocks including Moderna Inc. and BioNTech SE have shed about $84 billion in combined value this week in the aftermath of a stock market slump that sent the two companies to their lowest level since July. Selling accelerated on Friday, with BioNTech and Moderna each declining as much as 16% in New York as Merck delivered the news on its experimental pill that Wall Street called a “game changer.” The drug, called molnupiravir, reduced the risk of hospitalization or death by 50% in a study, raising concerns about the long-term revenues for companies providing inoculations.“

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Two reasons for IPO surge during the pandemic: investment banker

Brief: SoftBank-backed Indian hotel chain Oyo Hotels on Friday filed for a public offering, just two days after trendy eyeglass unicorn Warby Parker (WRBY) went public on the New York Stock Exchange. The flurry of activity has become commonplace during a record-breaking surge of IPOs this year that's seen buzzy offerings from the likes of Robinhood (HOOD), Coinbase (COIN), and 23andMe (ME). In a new interview, Suzanne Shank — president and CEO of investment bank Siebert Williams Shank — said the IPO boom comes down to two main factors: companies repositioning themselves during the pandemic and the persistence of low interest rates from the Federal Reserve. "I think we're seeing companies that both benefited from the pandemic, as well as those that are sort of rebooting post-pandemic," she says. "That has really been sparking this increased deal flow."

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U.K.’s Coronavirus Recession No Longer Worst in Three Centuries

Brief: It may be no comfort for millions of workers and businesses, but the U.K.’s coronavirus recession was no longer the worst in three centuries. Revisions mean that gross domestic product fell by 9.69% in 2020. That makes it the deepest slump since 1921, when the economy shrank 9.71% in the aftermath of World War I. The decline was previously estimated at 9.85%. Until then, the devastation wrought by the pandemic was thought to have exceeded all recessions since 1709, when the Great Frost led to a 13.4% contraction. The revisions announced Thursday are part of the annual Blue Book, when the Office for National Statistics updates the national accounts based on new sources and methods. While ONS figures go back to 1948, long-run estimates are produced by the Bank of England.

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Zoom and Five9 abandon $14.7 billion acquisition

Brief: Zoom’s agreement to buy cloud contact center software company Five9 was scuttled on Thursday, after Five9 shareholders rejected the deal. Zoom said in July that it was acquiring Five9 in an all-stock purchase for $14.7 billion, its first billion-dollar-plus purchase and, at the time, the second-biggest tech deal of the year. The company has now lost an opportunity to quickly broaden its capabilities after its stock rallied during the coronavirus pandemic.Five9 shares fell 2% in extended trading following the statement from the companies. Buying Five9 “presented an attractive means to bring to our customers an integrated contact center offering,” Eric Yuan, Zoom’s founder and CEO, wrote in a blog post. “That said, it was in no way foundational to the success of our platform, nor was it the only way for us to offer our customers a compelling contact center solution.”

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Covid-19 catapults social issues to the top, Schroders survey reveals

Brief: The Covid-19 pandemic has catapulted social issues to the forefront of investors minds, according to the latest global investor study published by Schroders today (September 30).The survey of more than 23,000 people across Europe, Asia and the Americas, revealed that 57% of investors are now placing greater importance on social issues versus environmental issues (55%) compared to pre-pandemic levels. The definition of “people” in the context of the research means those who will invest at least €10,000 (or the equivalent) in the next 12 months or those who have changed their investments within the last 10 years.Whilst the environmental element of ESG investing has been firmly on the radar of global investors since the Paris Agreement, meaningfully addressing social issues – from the consistency of corporate behaviour towards employees during the pandemic to working conditions and a liveable wage – has traditionally been lacking.

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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, September 30, 2021:

  • In the United States, a new poll has found that a lower number of people are opposed to Covid-19 vaccines, compared with last month. The poll was conducted between September 13-19 by Gallup, involved 4034 adults and had a margin of error of plus or minus two percentage points. There were 75% of respondents who said they are either fully or partially vaccinated, 5% said they plan to be. The 80% is an increase from the 77% reported back in August, and the highest number this year according to Gallup. The results come amid a national push for higher vaccine rates, as officials urge citizens to roll up their sleeves and get the shot. To date about 55% of Americans are fully vaccinated.
  • In Canada, the province of Alberta is dealing with soaring case numbers and record numbers of deaths and hospitalizations. Pressure is growing for Premier Jason Kenney to take bold action to address the situation, as case numbers reach more than 20,000 and hospitalizations reach more than 1000. Doctors and health experts, as well as the Canadian Medical Association, are calling for lockdowns in the province - short, controlled lockdowns often known as “firebreakers.”  Kenney has previously told the media that he will not implement a lockdown, saying it would be a punishment for the vaccinated. 
  • In the United Kingdom, Scotland has delayed the enforcement of its vaccine passport system after receiving backlash from nightclubs. First Minister Nicola Sturgeon says she understands that venues need more time to adapt to the regulations. They will still come into effect on Friday October 1, but businesses will have a grace period until October 18 where they will not face punishment for non-compliance. The rules of the vaccine passport system require anyone age 18 or older to show proof of vaccination or exemption before they’re allowed in a nightclub, an indoor event with more than 500 people or an outdoor event with more than 4000 people.
  • A hospital chain in Brazil has been accused of giving unproven Covid-19 treatments to patients without their knowledge and covering up their deaths. The lawyer for a group of whistleblowing doctors, Bruna Morato, said at least nine patients died while they were receiving the experimental treatments. The treatments used drugs such as ivermectin and hydroxychloroquine, which are not proven to be effective for treating Covid-19. Morato says the hospitals were helping the Bolsonaro government who had been promoting the unproven drugs. The hospital chain, Prevent Senior, denied all the allegations, saying that they have never hidden or under-reported deaths. 
  • Singapore faced its second straight day of cases topping more than 2200 as the country deals with some of its worst numbers since the pandemic began. They reported a record number of eight deaths on Wednesday, bringing the total number of deaths since the beginning of the pandemic to 93. Of those deaths that were reported, six were among unvaccinated people, all of them were seniors ages 72-90, the health ministry said. The figures, though high for Singapore, are still extremely low compared to other countries. About 82% of the population over 12 in Singapore have been fully vaccinated. 
  • In Australia, the state of Victoria reported 1438 new infections, up from 938 the previous day, a more than 50% increase.  According to Jeroen Weimar, the state’s Covid-19 response commander, the rise in cases was the result of social gatherings that took place for the Australian Football League championship match. About 500 new cases were a result of such gatherings, Weimar said. “We’ve had the most activity on our roads over a three-day weekend of any lockdown weekend since the end of July,” he said. About 55% of the new cases reported were among men, many of them younger.

Covid-19 – Due Diligence And Asset Management

G-7 ministers set to meet on reopening international travel

Brief: Transport and health ministers of the G-7 countries are due to meet virtually on Thursday to discuss ways to restart international travel, according to people familiar with the matter. The meeting is being organized by the U.K., which holds the presidency of the Group of Seven nations this year, said the people, who asked not to be identified ahead of any official statement. It’s aimed at moving closer to a consensus on how to ease border restrictions. While some countries, notably members of the European Union, have used so-called vaccine passports to successfully resume cross-border travel, others including the U.S. have held back on implementing app-based technology over concerns ranging from politics to privacy or fairness between people who have and haven’t received the shots. Another sticking point has been whether to recognize vaccines in countries where they haven’t been approved.

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U.K. Economy Emerged From Lockdown More Strongly Than Estimated

Brief: The U.K. economy emerged from the winter lockdown more strongly than previously estimated, but the recovery is already running into trouble. Gross domestic product rose 5.5% in the second quarter instead of the 4.8% previously estimated, Office for National Statistics figures published Thursday show. The increase, which reflected the reopening of stores and the hospitality sector, left the economy 3.3% smaller than it was before the pandemic struck. Government spending, exports and business investment were all stronger than previously estimated by the ONS.  Hopes that the shortfall might be made up this year are fading, with consumers and businesses facing the twin headwinds of accelerating inflation and supply chain problems. Bank of England Governor Andrew Bailey on Wednesday said that output is unlikely to recover its pre-pandemic level until early next year, later than officials predicted in August.

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A $1.8 Billion Hedge Fund Soared 120% During the Covid-19 Pandemic

Brief: David Rogers is having a dream run at Castle Hook Partners, the $1.8 billion hedge fund backed by investors including billionaire Stan Druckenmiller. The fund is up about 120% since April 2020, according to people with knowledge of the matter, after taking a hit in the early part of last year in the pandemic’s initial selloff. It lost 10% in the first three months of 2020, said the people, asking not to be identified because the information is private. The turnaround is in sharp contrast to the fund’s modest returns since starting five years ago with about $900 million. The money included a substantial anchor investment from Druckenmiller who trained Rogers at his former hedge fund Duquesne Capital Management and once described him as an “extremely talented” money manager. Gains in 2020 were evenly split between wagers on equities, rates and foreign exchange, according to one of the people. The firm turned bullish on inflation and commodities late last year, themes that continued to drive performance in 2021, the person said.

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Pandemic recovery fuels deal craze as third-quarter M&A breaks all records

Brief: Global mergers and acquisitions hit new record highs in the third quarter as companies and investors shaped their post-COVID future through transformative deals while their advisers struggled to cope with transaction volumes never seen before. A frantic summer of merger activity produced deals worth $1.52 trillion in the three months to Sept. 27, up 38% from the same quarter last year and more than any other quarter on record, according to Refinitiv data. Third-quarter volumes drove global M&A activity in the first nine months of 2021 to an unprecedented record of $4.33 trillion, overtaking an all-time annual peak of $4.1 trillion hit before the financial crisis in 2007 and forcing investment banks to hike pay for overworked and disgruntled junior staff.

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Impact Investing: Embracing Change and Optimizing Long-Term Value

Brief: Expectations for the behavior of institutional investors are changing. As societies around the world deal with the challenges of climate change, a global pandemic, social upheaval and other adversities, institutional investors are being asked to take a much more expansive view of risk than many traditional investment models currently account for. Increasingly, this includes optimizing their investments and overall portfolio for environmental, social and governance (ESG) impact. According to Nuveen’s annual survey of institutional investors, almost 70% of investors indicated that they plan to seek out more ESG-oriented alternative investments in the near term. Additionally, over 70% agree that ESG is about fully integrating environmental, social and governance factors into investment decision-making. With this holistic view, investors can pursue the stability, diversification, financial performance and positive real-world benefits that underpin long-term value growth.

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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, September 29, 2021:

  • In the United States, Pfizer and its partner BioNTech submitted initial trial data for their Covid-19 vaccine in children ages five to 11. Data from the trial showed the vaccine generated a positive immune response for the age group, similar to that of the 16-25-year-old group. The drug makers said they also plan to submit the data to the European Medicines Agency and to other regulators. While Pfizer’s vaccine has been authorized for use by 12-15-year-olds in the U.S., Moderna’s vaccine has not been yet been authorized for use by teens.
  • In Canada, Prime Minister Justin Trudeau has laid out his post-election priorities, and all of them are focused on the Covid-19 pandemic. His first objective will be to bring in a vaccine mandate for federal public servants and for travellers on planes, trains and ships. His government is also working on a vaccine passport system for international travel that is intended to make things easier for Canadians when crossing borders. Trudeau also plans to send money to the provinces to help them implement their own proof-of-vaccine programs, and hopes to bring in legislation to criminalize anti-vaccine demonstrations outside of hospitals.
  • In the United Kingdom, Prime Minister Boris Johnson has promised to put bereaved families at the centre of a Covid-19 pandemic inquiry. Johnson, who met with the Covid-19 Bereaved Families for Justice group on Tuesday, also said he will appoint a chair to the public inquiry by Christmas. “And obviously, there’s very little I could say to mitigate their own suffering," Johnson said. “But what I did say was that we were determined to make sure that the experience of the bereaved was something we took account of.” The group said they were pleased by the meeting with the prime minister but still “disappointed by the lack of urgency” that he displayed.
  • France’s government announced that they will fully fund psychological treatments, beginning next year. Therapy sessions in the country will be made free for anyone who has a doctor’s prescription. French President Emmanuel Macron says there’s been a spike in suicide attempts, particularly among teenagers, and that about 20% of people in France suffer from depression. Keeping children out of school also significantly impacted mental health, as did the mask mandate for school children, which is set to be lifted next week. “The consequences of the pandemic are just as tangible in mental health,” Macron said.
  • New Zealand’s Covid-19 case numbers soared to 45, the highest they’ve been in nearly a month and more than five times the previous day’s number. The city of Auckland remains under a level three lockdown, having eased some restrictions last week. Officials are urging citizens to continue to follow the rules and to go get tested. “We’ve still got to hold our nerve here,” Covid-19 Response Minister Chris Hipkins said. “We’re still aiming to run this into the ground.” About 64% of New Zealanders have had their first dose of vaccine. 
  • In Australia, the federal government announced that it will end financial aid to state governments for Covid-19. In a statement, the government said once they reach the 80% double-dose vaccination milestone, they will end payments to workers who lost hours due to lockdowns after two weeks.  It will largely be up to the individual states to fund the cost of lockdowns, should they need to have them once the benchmark is reached. New South Wales reported 863 new coronavirus cases and 15 deaths. Neighbouring Victoria state reported a record number of 950 new cases , and seven deaths.

Covid-19 – Due Diligence And Asset Management

Central banks parse inflation risk as turn from pandemic policy begins

Brief: Central banks that launched massive emergency support to fight the pandemic last year are now planning a global turn in the other direction, with gaps already emerging in their perceived risk of inflation, the need to respond to it, and the pace of the likely return to normal monetary policy. They are confronted with common supply shocks and common risks around a pandemic that continues to shape commerce. "Globally we are still in for a long process," of reopening and adapting to the post-pandemic economy, St. Louis Federal Reserve President James Bullard said this week in a Reuters interview. But the reopening, and particularly the associated inflation, is being felt differently across the developed world, testing officials' understanding of the post-pandemic economy and their ability to hit a shared 2% inflation target without derailing global growth.

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United to fire workers who refuse COVID vaccine

Brief: United Airlines (UAL) is set to terminate employees who refuse to get the coronavirus vaccine, under a policy it first established in August. The Chicago-based company has a total of 593 staff members who have not yet been jabbed, and have not applied for an exemption on religious or medical grounds. They now face being fired by the airline for failing to comply with its vaccination rules, however, they will be given a final chance to fall into line, United said. United required its 67,000 US staff members to provide proof of vaccination by 27 September. Employees were given an added incentive of receiving an extra day’s pay if they got their full vaccination dose before 20 September.

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In Covid Era, ESG Investors Found to Have Health ‘Blind Spot’

Brief: Investors are generally ignoring the significant risks posed by poor human health, a glaring omission in the era of Covid-19. Much like climate change, health poses a systemic risk that investors “cannot diversify away from,” according to a new report from ShareAction, a U.K. nonprofit focused on responsible investing. Through interviews with 30 asset managers, the group found that most aren’t investing in a way that protects human health. The Covid-19 pandemic has made clear the link between health and economic performance. It has also shown that investors who profess to consider environmental, social and governance issues when allocating their capital have many blind spots. In pure financial terms, there’s a lot at stake. The U.K. loses around 300 billion pounds ($406 billion) in economic output each year due to the poor health of its citizens.

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Climate Change Replaces Pandemic as Insurers’ Biggest Worry

Brief: Climate change has returned to the top of the list of insurers’ biggest concerns as the vaccine roll-out and gradual lifting of health restrictions see pandemic fears ease in many countries. Global warming was ranked as the biggest risk to society over the next five to 10 years in a report released Tuesday by French insurance giant AXA SA. While that also topped the ranking in 2018 and 2019, it was outstripped by diseases and pandemics last year as the virus spread across the globe. “Climate change is back at the top of the agenda,” AXA Chief Executive Officer Thomas Buberl said in a statement. “This is good news, since last year we feared that the explosion of health risks may overshadow the climate emergency.” Insurers are being increasingly challenged by global warming as extreme weather events wrought by climate change are expected to keep rising.

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How the pandemic has changed the financial advice business

Brief: Working remotely in a business built around relationships means adapting in more ways than one. For most financial advisory firms, the pandemic accelerated advancements already underway in virtual communications and paperless transactions. The best businesses maintained their personal connections with clients and safeguarded customer data at the same time. “We are now fully in the cloud,” said Matthew Young, president and CEO of Richard C. Young & Co. in Naples, Florida. For the most part, the transition to operating entirely online has been beneficial for clients and their advisors, particularly with electronic paperwork. “It speeds up the process,” Young said. “We can track it easier and it gets to the client instantaneously.”

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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, September 28, 2021:

  • In the United States, the daily pace of Covid-19 vaccinations has slowed, according to data available from the Centers for Disease Control and Prevention (CDC). The seven-day average rate of people getting their shot at the beginning of September was 836,359, while as of September 23, it was 683,329, a drop of about 18%. The numbers are far below their peaks in April, when the country saw millions of shots administered per day. On Monday President Joe Biden received his coronavirus booster shot on camera, continuing his effort to push all Americans to get their vaccines. So far about 55% of the U.S. population is fully vaccinated.
  • In Canada, the province of Saskatchewan reported 289 people in the hospital with Covid-19 on Monday, breaking a record set the previous day. Federal Health Minister Patty Hajdu told the Canadian Press that the federal government is ready to assist the province with whatever it may need, including staff. Unlike the province of Alberta, Saskatchewan has not yet made a formal request for assistance, but Premier Scott Moe says the province won’t rule out the idea if cases fail to peak. The federal government is currently assisting Alberta with airlifting of Covid-19 patients and staffing, after the province made a formal request for help.
  • In the United Kingdom, the government has eased coronavirus rules for hospitals in an effort to deal with patient waiting lists. Health Secretary Sajid Javid accepted three key recommendations for elective care on Monday, all are effective immediately. The recommendations include cutting down on social distancing, eliminating the need for patients to isolate before operations, and downgrading cleaning standards to average levels. The changes are expected to help enable medical staff to see more patients. The numbers of patients requiring elective care has grown, with 5.6 million people waiting for treatment according to the National Health Service.
  • France will soon stop providing free coronavirus tests for non-medical reasons, Prime Minister Jean Castex confirmed on Sunday. Currently Covid-19 tests are free for everyone in France, regardless of vaccination status or the reasons for taking the test. Beginning on October 15, only tests for genuine medical reasons will continue to be reimbursed. Unvaccinated individuals will have to pay for all tests unless they have a doctor’s prescription. Vaccinated people will only have to pay for tests when they’re taken for non-medical reasons, such as for travel. Tests for children will continue to be free.
  • India will resume direct passenger flights to Canada as a months-long ban gets lifted. Transport Canada said in a post on Twitter that flights from India can land in Canada with additional health measures put in place. "Travellers must have proof of a negative COVID-19 molecular test from the approved Genestrings Laboratory at the Delhi airport taken within 18 hours of the scheduled departure of their direct flight to Canada," the department said. They added that airlines will be checking to confirm whether vaccinated travellers have uploaded their information to the ArriveCAN mobile app or website. 
  • In Australia, unvaccinated residents in Sydney will have a tough time even after stay-at-home orders lift in December. New South Wales Premier Gladys Berejiklian says unvaccinated residents could be denied entry to shops, restaurants and other venues even after December 1 because many businesses won’t accept them. Pubs, cafes, gyms and hairdressers are set to reopen to fully vaccinated people by October 11, with more restrictions expected to be eased at the end of the month. New South Wales reported 863 new coronavirus infections, up from 787 a day earlier.

Covid-19 – Due Diligence And Asset Management

Market makers take centre-stage in European liquidity provision during Covid-19 pandemic

Brief: The ability of independent market making firms to provide essential liquidity to Europe’s pension funds and other asset managers during the Covid-19 financial crisis has accelerated their recognition as a vital part of the European capital markets eco-system. A new research report surveying European buyside participants reveals for the first time how market makers stepped up to help the asset managers when some of the traditional providers of risk capital partially withdrew from certain market segments in Europe in the early stages of the pandemic. As asset managers – particularly small and mid-size funds -- were seeking additional sources of liquidity the independent market makers were able to step up. This was made easier as the increasing electronification of the markets enabled asset managers and market makers to engage whilst working from home.

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U.S. pandemic fraud crackdown yields first case against bank employees

Brief: U.S. prosecutors have brought what is believed to be the first case against bank employees who allegedly exploited multi-billion dollar programs aimed at helping small businesses survive the COVID-19 pandemic. In a case unsealed in Brooklyn federal court on Friday, prosecutors say Anuli Okeke, a former branch manager at Popular Bank in New York, conspired with other bank employees and tax preparers to apply fraudulently for more than $3 million in pandemic relief loans overseen by the U.S. Small Business Administration. Alex Moncion, a spokesperson for Popular Bank, which was not named in the complaint, said on Monday that the bank had alerted law enforcement and bank regulators to the conduct and terminated the employees involved.

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Boeing Predicts Travel Back at 2019 Levels in Two or Three Years

Brief: Boeing Co. forecasts that commercial aviation should be back to 2019 levels in two to three years, buoyed by a strong domestic recovery in China and parts of Europe, the U.S. planemaker’s China head said. Various countries’ vaccination rates and differing quarantine requirements will pose some hurdles but “we’re anticipating in the next two to three years that the aviation market will fully recover to 2019 levels,” Boeing China President Sherry Carbary said on the sidelines of Airshow China 2021 in the southern city of Zhuhai on Tuesday. Carbary also said that Boeing was working very closely with the Civil Aviation Administration of China as it waits for its 737 Max model to be cleared by Chinese regulators. China -- the first to ground the Max following the jet’s second fatal crash in Ethiopia in March 2019 -- still hasn’t lifted its ban, though a test flight was conducted in the country in August. Other markets in Asia including India and Singapore have cleared the model to fly in recent months.

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Investors’ Preference for Later Stage Tech Deals During the Pandemic is Expected to Continue

Brief: During the pandemic, investors hedged their risks by putting money into more mature technology start-ups, but the trend is expected to endure well beyond Covid-19. The growing interest in later stage funding rounds that started last year as a hedging tool amid Covid-19 also comes as tech companies stay private longer and as so-called moonshot companies blow through capital. Companies developing self-driving cars, for example, require huge amounts of money for multiple years of research and development, according to a technology report from Bain & Company, the global management consulting firm. The number of late-stage deals grew 165 percent from the first quarter of 2020 to the first quarter of 2021, according to Bain & Co.

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Senators call for governments to craft a grand post-pandemic plan to grow economy

Brief: A group of senators is calling on the federal government to strike a grand economic plan with provinces, territories, businesses and civil society to drive growth coming out of the pandemic. The report includes calls to rethink how to deliver skills-training programs, to streamline the regulatory system to encourage entrepreneurs and for companies to invest in themselves. The document also says the federal government must come up with a more credible plan to manage the nation's burgeoning debt through new rules to guide budgetary decisions. Senators say the Trudeau Liberals must consider finding more new sources of revenue and suggest the government increase the value of federal sales tax. The report made public today is the culmination of work that started last November and included interviews with some 70 domestic and international experts about how Canada could avoid another era of low economic growth.

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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, September 27, 2021:

  • In the United States, the director of the Centers for Disease Control and Prevention (CDC) admits there is some confusion around who should get a booster shot. Last week the CDC backed the decision to authorize boosters for people 65 and older, adults who have underlying medical conditions and adults in high-risk jobs. CDC Director Rochelle Walensky overrode a recommendation from an advisory panel that the shots should be available only to a smaller group of people. The advisory panel wanted to exclude those people working in high-risk jobs, citing concerns about the recommendation being too broad. "This was a scientific close call. In that situation, it was my call to make," Walensky told reporters at a White House briefing. For now, boosters are only being made available to those who originally received the Pfizer vaccine.
  • In Canada, an inaccurate study on Covid-19 vaccines has spread rapidly on the web and social media before finally being retracted. The study, which has not been peer reviewed, was released last week by researchers at the Ottawa Heart Institute.  The study reported extremely high rates of heart inflammation linked to Covid-19 vaccines, but the researchers made a critical mathematical error and as such, the findings are false. The study has spread around the world on social media and has appeared on numerous anti-vaccination websites as so-called evidence of the damage caused by Covid-19 vaccines. 
  • In the United Kingdom, the government has largely gone their own way when it comes to Covid-19 restrictions. Despite objections from some experts, Prime Minister Boris Johnson removed nearly all restrictions for England back in July, ending social distancing, mask requirements and limits on gatherings. England does not require proof of vaccination for access to restaurants or even crowded venues like nightclubs. Also, while countries like Italy and the U.S. have made vaccines mandatory for millions of workers, Johnson’s government only requires them for nursing home staff. The government has argued that their strategy is working, and that they can change course anytime if necessary.
  • Japan plans to lift a state of emergency by the end of the month, broadcaster NHK reports. Prime Minister Yoshihide Suga told the media that he will seek the advice of a government panel on Tuesday before making any final decisions. The current emergency restrictions have been in place now for nearly six months, with curbs requiring restaurants to close early and not serve any alcohol.  Tokyo will consider keeping some curbs in place, for example, they may limit the opening hours for restaurants and only have alcohol served at pre-approved locations.
  • New Zealand will begin a pilot program to allow a small number of vaccinated overseas travellers to self-isolate at home. Currently, New Zealanders have to isolate for two weeks in government-approved hotels when they return home from abroad. Prime Minister Jacinda Ardern said the pilot will start next month and will involve 150 business travellers who are fully vaccinated. “The only reason that we are running this self-isolation pilot now is in preparation for a highly vaccinated population,” Ardern said at a news conference. “The intention is that in the first quarter of 2022 when more New Zealanders are vaccinated, it will be safer to run self-isolation at home.”
  • In Australia, New South Wales (NSW) Premier Gladys Berejiklian says she expects the state to reach the 80% double-vaccinated milestone by the end of October. At this point, the state can enter its next phase of reopening, which will include increased access to venues like restaurants and cafes, the option to travel freely and different limits on visitors. This builds on the first phase of the reopening which will happen at the 70% double vaccination milestone, around October 11, Berejiklian said. A third phase of the reopening will happen on December 1 and will see more freedoms for unvaccinated people, as well as eased restrictions on some venue capacities.

Covid-19 – Due Diligence And Asset Management

Biden Gets Covid Booster and Says He Wants More Vaccine Mandates

Brief: President Joe Biden received a booster shot Monday of the Pfizer Inc.-BioNTech SE Covid-19 vaccine in front of cameras at the White House and said he’ll press for more vaccination mandates to improve the U.S. inoculation rate. Biden, 78, meets guidelines issued last week by the Food and Drug Administration and the Centers for Disease Control and Prevention that those over age 65 get a third vaccination. “If you’re fully vaccinated, you’re highly protected now from severe illness even if you get Covid-19. You’re safe and we’re going to do everything we can to keep it that way with the boosters,” he said before getting his shot. “The most important thing we can do is to get more Americans vaccinated.”

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Great Reopening Trade Is Back as Hedge Funds Add Stock Longs

Brief: With a helping hand from the Federal Reserve, the great reopening trade is staging a return on Wall Street as money managers bet the U.S. consumer won’t be cowed by the delta-virus variant. Equities tied to the economic cycle including value and financials are rebounding, while investors just sank $5.5 billion into the largest ETF tracking the Russell 2000 Index of small-cap companies -- the most in five years. Last week’s hawkish U.S. central bank meeting is powering rate-sensitive trades as inflation-adjusted yields hit the highest since June.JPMorgan Chase & Co. data shows hedge funds are re-building exposure to stocks hitched to the expansion, with plenty of ammo to extend longs anew. Meanwhile, an index of economic-data surprises is rebounding from recent lows, suggesting supply-side woes have yet to derail the recovery in investment and consumption as much as feared.

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New Survey Finds Post-Pandemic Travel Will Pose Challenges Old and New

Brief: Wise today released the Wise International Travel Survey, assessing U.S. international travelers’ attitude and willingness to travel abroad. This comes on the heels of the White House announcing that the U.S. will reopen in November to air travelers from 33 countries who are fully vaccinated against COVID-19. According to the three market study of consumers, 82% of U.S. travelers say that as things get back to normal, international travel is one of the things that they’re looking forward to most. While 72% expressed that they are currently planning an international trip. "While the Delta Variant still presents challenges for international travel, consumers are keen to go abroad again," said Lindsey Grossman, director of product, North America for Wise.

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Beaten-Down Airline Stocks Celebrate Easing of Travel Rules

Brief: The easing of U.S. and U.K. travel restrictions is breathing new life into European airline stocks. British Airways owner IAG SA has been the star of the show in the last two weeks, soaring 21% after the White House said America would open up to vaccinated foreigners and the U.K. relaxed coronavirus testing requirements for fully jabbed arrivals. Air France-KLM and Deutsche Lufthansa AG have also rallied strongly, as have budget carriers such as Ryanair Holdings Plc. But investors are divided on whether the gains can last and the industry has been a laggard for a long time. European airlines remain about 25% below pre-pandemic levels, underperforming sectors like industrials and retail, which are up as much as 30% from where they were back then.

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Australia’s Morrison Tells States Their Borders Can’t Stay Shut

Brief: Australian Prime Minister Scott Morrison said state premiers must not keep borders closed once agreed Covid-19 vaccination targets are reached. “We can’t stay in second gear,” he said on a Sunday morning television program. “We’ve got to get to top gear in living with the virus.” State governments where Covid-19 cases are low, such as Queensland and Western Australia, have been reluctant to open their borders. Morrison says that will need to change when fully-vaccinated rates reach 80%, which he expects to happen before the end of the year. “I can’t see any reason why Australians should be kept from each other,” the leader said. “And so that puts a heavy, heavy responsibility on those who would seek to prevent that from happening.”

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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, September 24, 2021:

  • In the United States, the state of Alaska is experiencing its worst wave of the coronavirus pandemic yet, as hospitals come under extreme pressure. The state is averaging 125 new cases per day for every 100,000 people, more than any other state in the country, according to the New York Times.  On Wednesday the state announced that they were implementing crisis care standards for their entire hospital system, which gives hospitals legal grounds for making difficult triage decisions. Under half of the population of Alaska is fully vaccinated, compared with about 55% of the national population. 
  • In Canada, hospitals in the province of Alberta are seeing record numbers of patients admitted for critical care. The average number of intensive care unit admissions over the past five days has been 23 per day, according to Alberta Health Service officials. Across the province there are 226 people in total in intensive care with Covid-19. Meanwhile in Saskatchewan, pediatric intensive care beds are being used to treat adults because of a lack of capacity. The Jim Pattison Children’s Hospital in Saskatoon is currently treating two adults, one of whom has Covid-19. As of Tuesday, 262 people in Saskatchewan are in the hospital with Covid-19, while 54 of them are in intensive care.
  • In the United Kingdom, male life expectancy has dropped for the first time in 40 years because of the coronavirus pandemic. The Office for National Statistics (ONS) reports that a boy born between 2018 and 2020 is expected to live until he is 79, down from 79.2 for the 2015-17 period. The numbers for females are largely unchanged, with a girl born between 2018 and 2020 expected to live until age 82.9, the same as for the 2015-17 period. The ONS said that the coronavirus pandemic led to a greater number of deaths in 2020, so as a result, life expectancy for females saw no improvements, while for males it fell back to 2012-14 levels. 
  • South Korea has set another record for daily coronavirus cases, at 2434, after the country’s biggest holiday drew to a close. The government is currently working on a plan for how the nation can better live with Covid-19, which includes 80% of adults being fully vaccinated by late October. President Moon Jae-in told reporters on Friday that he feels the country is in a good place for vaccinations. "There is no problem at all with the amount of vaccines secured for this year," Moon said. "The vaccine shipment got off to a slower start than other countries, which delayed the vaccination programme, but I believe by next month, we will catch up and be a leading country by inoculation rate."
  • Japan’s Prime Minister Yoshihide Suga announced that the nation would be doubling its commitment of vaccine donations to the world. "Today, I am pleased to announce that, with additional contributions, Japan will provide up to approximately 60 million doses of vaccine in total," Suga said in a pre-recorded video message to the United Nations General Assembly. Of the 30 million previously committed doses, the country has already donated about 23 million of them to countries like Taiwan, Vietnam and Indonesia. Nearly 2100 new coronavirus cases were reported across the country, with 235 of them being in Tokyo.  
  • In Australia, the state of Victoria reported its highest number of daily cases on Thursday at 766. The state will roll out the Moderna vaccine starting next week as they strive to hit 80% first-dose vaccination rates. So far in the state some 76.2% of adults have received their first dose while about 46.2% are fully vaccinated. The state will receive 32,000 Moderna doses to be administered through state vaccination sites. The state’s health minister, Martin Foley, says record numbers of Victorians have come forward to get vaccinated over the past week. He says the state will reach 80% first doses within a week, at which point a small number of restrictions can be eased.

Covid-19 – Due Diligence And Asset Management

Powell Hears Covid-19 Ruptures Still Dog Economy as Fed Listens

Brief: Federal Reserve Chair Jerome Powell listened to a litany of ways in which the U.S. economy remains distorted by Covid-19 as he and his colleagues calibrate withdrawing emergency pandemic support. “I’ve never seen these kind of supply-chain issues, never seen an economy that combines drastic labor shortages with lots of unemployed people and a lot of slack in the labor market,” Powell told a virtual Fed Listens panel Friday. He didn’t address the economic outlook or monetary policy during the hour-plus event, but got plenty of food for thought: The U.S. central bank gets “tons and tons of data,” he said, but “it doesn’t really live for us until we hear your stories.”

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Office vacancies in Canada hit highest level since 1994

Brief: Canadian office vacancies have reached their highest point in more than a quarter century, surpassing the levels of both the dotcom bubble and the global financial crisis. The distress in the commercial real estate market comes as the COVID-19 pandemic continues to keep workers home and as employers reconsider how much space they’ll need long term. The national vacancy rate reached 15.7 per cent in the third quarter, the highest since 1994, according to a report released Friday by commercial real estate brokerage CBRE Group. Across the country, office buildings that began construction before the pandemic are being completed and hitting the market even as many tenants are walking away from the space they have now, the report says.

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Property in a post-pandemic world

Brief: With government bond yields in the US and UK yielding 1.3% and 0.6% respectively, lower than where they started in 2020, and corporate bond spreads narrowing to levels below those seen pre-Covid, the search for sustainable yield in global asset markets has once again become very challenging. Against this backdrop, the hunt for yield is pushing investors further up the risk curve, while pricing suggests investors accept the benign view that current levels of inflation will not persist. The question now is whether there remain any areas to invest where yields remain attractive, economic recovery is not fully reflected in valuations, and which provide some protection in the event inflation proves less transitory than expected. One sector that fulfils these three criteria is property.

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European VC shakes off effects of Covid-19

Brief: Invest Europe, in partnership with the European Investment Fund (EIF), has published ‘The VC Factor - Pandemic Edition’, a new report illustrating European venture capital’s continued strong support for innovative and fast-growing start-ups in the immediate aftermath of the Covid-19 pandemic in 2020. The study is the second edition of the ground-breaking collaboration between Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, and the EIF - Europe’s largest investor in venture capital funds. It draws on data from 2,611 firms investing into VC and 32,114 start-ups between 2007 and 2020.

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DC schemes largely unaffected by Covid-19 market volatility

Brief: The 2021 edition of The DC Future Book, published by the Pensions Policy Institute in association with Columbia Threadneedle Investments, finds that positive trends in the UK Defined Contribution (DC) pension market have continued despite the backdrop of volatile investment markets due to Covid-19. However, the unprecedented nature of the market volatility should encourage DC schemes to assess the resilience of their default funds allowing them to derive and implement suitable measures to improve member outcomes. As an established annual compendium of statistics, The DC Future Book provides insight into the current state of DC workplace pensions and their likely direction of travel.

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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, September 23, 2021:

  • In the United States, the Food and Drug Administration (FDA) authorized booster doses of the Pfizer vaccine for people 65 and older, those at risk of health complications and those whose jobs expose them to Covid-19. The authorization came on Wednesday and could see boosters be made available as early as this week. It will allow boosters for groups like healthcare workers, teachers, daycare staff and other essential workers. Last week an advisory panel to the FDA voted against the proposition that boosters will be needed by the broader population. The advisory panel said there is currently not enough evidence to support booster shots for all.
  • In Canada, deliveries of Covid-19 vaccines have been put on pause because supply in the country exceeds demand. Canada currently has a stockpile of 18.7 million doses, more than enough to vaccinate the remaining eligible population. About 80% of Canada’s eligible population is fully vaccinated, so at most 11 million doses would be needed to finish vaccinating everyone over 12. All provinces have stopped requesting new doses and the country has told suppliers to stop shipments. Canada will work with suppliers and other countries to determine how its excess doses of Pfizer and Moderna can be donated.
  • In the United Kingdom, England’s Chief Medical Officer Chris Whitty has warned it is inevitable that almost all unvaccinated children will get Covid-19 at some point. Speaking to MPs on Wednesday, Whitty explained that transmission rates are highest among those ages 12-15.  “It won't necessarily be in the next two or three months but they will get it sooner or later because this is incredibly infectious and because immunity wanes, we're not going to see a situation where it just sort of stops at a certain point," Whitty said. Last week the government accepted a recommendation to offer jabs to 12-15-year-olds. Whitty says the vaccines will reduce the risk of infection by 50% or maybe more.
  • Germany will stop paying compensation to unvaccinated workers who are forced to quarantine, Health Minister Jens Spahn announced on Wednesday.  The new rules come into effect on October 11 and will cover people who test positive for the virus as well as people returning home from trips to countries deemed “high risk.” Critics have said the new rules are too similar to a vaccine mandate, arguing that many people can’t afford to stay home without pay. “We should see this differently," Spahn told the media. "It's about fairness. Those who protect themselves and others via a vaccination can rightly ask why we should have to pay somebody who ended up in quarantine after a holiday in a risk area."
  • New Zealand’s Prime Minister Jacinda Ardern says she hopes to avoid lockdowns in the future, and sees vaccinations as “the golden ticket” out of the pandemic. The country reported 15 new locally transmitted cases of Covid-19, down from 23 on Wednesday. New Zealand has taken a different approach to the virus than most countries, aiming to completely eliminate the outbreak in Auckland through a series of measures including lockdowns, at least until vaccination rates pick up.  So far about 62% of New Zealanders have had at least one dose of vaccine, while about 40% are fully vaccinated.
  • In Australia, the government of New South Wales (NSW) announced a trial vaccine passport system for certain regions. The trial will take place for two weeks from October 6 and will allow people to use the Service NSW app to show their vaccination status, which is the same app people can currently use to check into venues. NSW Minister for Customer Service Victor Dominello said the trial will be a closed pilot for between 100-500 people. The regional areas where the trial will run haven’t been selected yet, but the government decided against running it in Sydney.

Covid-19 – Due Diligence And Asset Management

Investment management AUM grows to £9.4trn despite tumultuous 2020

Brief: Assets under management held by Investment Association (IA) members grew to £9.4 trillion in the UK by the end of 2020, an increase of 11% compared to the previous year, according to the Investment Management Survey. The annual assessment of the state of the industry found that total funds under management for UK investors also saw an 11% increase year on year, reaching £1.4 trillion in 2020. The recovery and resilience of the industry's recovery through the Covid-19 pandemic has been attributed to quick adaptation to home working, a focus on delivering for customers, and crucial interventions from the central banks. Chris Cummings, chief executive of the Investment Association said: "The investment management industry demonstrated its long termism through the pandemic by supporting the companies it invests in. The swift action of the central banks supported the global economy and the industry rallied to the cause injecting over £22bn into businesses to help them ride out the storm."

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Nuveen’s Nick Says Dovish Fed Provides Solid Support for Stocks

Brief: Nuveen’s Brian Nick is among the several strategists who think economic growth has already peaked as the effect of trillions of dollars in fiscal stimulus wears off. Yet he remains optimistic about the stock market. “We still have an overall positive view of where the economy is going to be going over the next five or six quarters,” Nick, the chief investment strategist at the wholly owned TIAA subsidiary, said in an interview on Bloomberg TV’s Surveillance Thursday. “That includes a deceleration in year-on-year earnings growth and deceleration in GDP growth, but there is still much more positive than negative out there. “Federal Reserve Chair Jerome Powell said on Wednesday that the U.S. central bank could begin scaling back asset purchases in November and complete the process by mid-2022, after officials revealed a growing inclination to raise interest rates next year.

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UAE Says It’s Unwinding Pandemic Stimulus as Economy Recovers

Brief: The United Arab Emirates has begun winding down an economic support program launched in response to the coronavirus pandemic as the economy shows signs of gradual recovery, the central bank said in a statement. The reduced reserve requirements for banks won’t change for now and neither will the lower loan-to-value ratio required for first-time home buyers seeking mortgage loans, the bank said. The loan deferral component of the Targeted Economic Support Scheme will expire by the end of 2021 with financial institutions able to carry on tapping a collateralized 50-billion-dirham ($13.6 billion) liquidity facility until the middle of 2022, in line with earlier guidance.

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US jobless claims tick up from near a pandemic low

Brief: The number of Americans applying for unemployment aid rose last week for a second straight week to 351,000, a sign that the delta variant of the coronavirus may be disrupting the job market's recovery, at least temporarily. Thursday's report from the Labor Department showed that jobless claims rose by 16,000 from the previous week. As the job market has strengthened, unemployment aid applications, which generally track layoffs, have tumbled since topping 900,000 early this year, reflecting the economy's reopening after the pandemic recession. The four-week moving average of claims, which smooths out week-to-week swings, registered its sixth straight drop — to a pandemic low of 336,000. Jobless claims still remain somewhat elevated: Before the virus tore through the economy in March 2020, they generally numbered about 220,000 a week.

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Investor confidence in PM's recovery plan falters

Brief: A new survey of investors has found that the majority lack faith in the government’s ability to tackle record levels of public debt and rebuild the economy post-pandemic. Forex platform HYCM surveyed 1,479 UK investors — all of whom have more than £20,000 ($27,292) invested. Some 60% of that number do not think Boris Johnson and the government have handled the pandemic competently. Some 59% also lack faith in the government’s ability to tackle record levels of public debt. Meanwhile, just under half (48%) believe Rishi Sunak is the right person to be chancellor. However, Sunak does appear to have the backing of wealthier investors, as this figure increases to 70% among those with portfolios worth in excess of £1m.

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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, September 22, 2021:

  • In the United States, President Joe Biden is expected to announce that the country is doubling its purchase of Pfizer’s Covid-19 shots from half a billion to one billion, for the sake of sharing with the world. The purchase reflects the country’s commitment to the goal of vaccinating 70% of the global population within the next year. Biden will make the announcement at a virtual vaccination summit that he is leading as part of the United Nations General Assembly. Biden’s plan is to use the summit to push other developed nations to ramp up their vaccine sharing plans. The U.S. global response has been criticized as being too modest, however the U.S. has donated around 160 million shots, more than the rest of the world combined.  
  • In Canada, Ontario Premier Doug Ford is calling for unity as the province’s vaccine passport system comes into effect.  The premier says the issue is one that has caused emotions to run high during the federal election, as he knows many are concerned about the policy impeding on their civil liberties. Ford’s government reversed course and brought in a vaccine passport system for the province after saying for months that they would not do so, due to a surge in cases caused by delta.  Although the system has come into effect, the government’s app for scanning QR codes won’t be available for another month. 
  • In the United Kingdom, travel guidance has been amended to include the Indian-made version of AstraZeneca as an approved vaccine.  India’s Covishield, which was developed in the U.K. and manufactured in India, was initially not recognized as an approved vaccine by the U.K. under their new travel rules. The rules that come into effect next month would require Indians visiting Britain to quarantine for 10 days even if they are fully vaccinated by Covishield. Britons who have been vaccinated with the same Indian-made doses do not have to quarantine. The policy sparked outrage in India, with authorities calling it “racist” and “highly discriminatory.” Although the travel guidance has since been amended to include Covishield, It is unclear whether Indians travelling to the U.K. will still have to quarantine.
  • Brazil’s health minister has tested positive for Covid-19 after attending the United Nations General Assembly in New York. According to a statement provided by the Brazilian president’s office, Health Minister Marcelo Queiroga is “doing well,” and the other members of the Brazilian delegation have tested negative. Queiroga said last week that he’s been vaccinated with the Chinese-made CoronaVac vaccine, although he did not say when he received it. He told CNN that he will be quarantining in New York for 14 days and won’t be leaving with the rest of his delegation.
  • South Korea will receive one million doses of the Pfizer coronavirus vaccine as part of a swap deal with the U.K. South Korea will return the same number of doses to the U.K. by the end of the year, according to the U.K.’s Department of Health and Social Care. The extra doses will help South Korea reach their target of having 70% of the population fully vaccinated by the end of October. South Korea is aiming to step up its vaccination campaign amid the country’s worst wave of infections.
  • Australia is planning to open its borders by Christmas at the latest, according to the country’s minister for tourism, trade and investments. "I do empathize with the Australians who have been denied the opportunity to travel overseas this year," said Minister Dan Tehan."It's another reason why everyone should get vaccinated and we have to stick to the national plan that will see our international border open up -- at this rate by Christmas at the latest." Australia’s plan is to reopen its borders once the country reaches an 80% full vaccination rate. So far about 38% of Australians have been fully vaccinated.

Covid-19 – Due Diligence And Asset Management

U.K. Job Creation During Pandemic Concentrated in High-Pay Roles

Brief: U.K. job creation was concentrated in high-skilled, high-pay roles during much of the pandemic, while job destruction occurred mostly among low-paid, low-skilled roles. That’s according to a report published Wednesday by the Institute for Public Policy Research. Noting that the decline in employment has been unevenly spread across sectors, the research group warned that most people who lost their jobs during the crisis are likely to lack the skills and training required to be hired in a the newly created role. The government should “boost it like Biden,” with a stimulus that would mean “employers compete for workers, rather than workers competing for jobs,” IPPR Executive Director Carys Roberts said.

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Pandemic Boosts U.S. Demand for Cloud Solutions as Companies Seek Greater Agility

Brief: U.S. demand for cloud-based solutions has continued to grow during the COVID-19 pandemic, as companies recognize they can better prepare for major disruptions by subscribing to software and infrastructure as services, according to a new report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm. The 2021 ISG Provider Lens™ Enterprise Application-as-a-Service Platforms report for the U.S. finds the pandemic led to more cloud adoption as companies raced to implement remote work and improve their customers’ digital experience. Cloud applications was the only segment of IT spending that did not decline due to the pandemic, and it continues to grow, ISG says.

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Moody's chief economist: US debt default would cost economy $15trn

Brief: The United States could wipe out 6 million jobs and about $15trn in household wealth if Congress fails to raise the debt ceiling, according to new analysis. Mark Zandi, chief economist at Moody's Analytics, warned of a "catastrophic" fallout that Congress has weeks to avoid if it cannot come to an agreement on whether to raise how much the US government can borrow. While the report notes that shutting down the government would not immediately cause a recession, estimates of the previous 2018-2019 government shutdown put the cost to the US economy at $11bn. The true danger to the economy comes when the Treasury exhausts its funds and defaults on its debt, which the report states would happen around 20 October. If the limit is not lifted by mid-October, the economist predicts gross domestic product falling by nearly 4%, with the unemployment rate rising from 5% to 9%.

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Paris Airports Need More Than U.S. Reopening to Recover Traffic

Brief: The reopening of transatlantic flights to the U.S. is “great news” for Paris, but it won’t bring air traffic back to where it was before the pandemic, according to the operator of the city’s airports. Paris serves as a hub to connect various continents, and “as long as Asia is closed, notably China,” all incoming traffic to Paris that normally goes to China from Africa, Latin America or North America is being slowed down, Aeroports de Paris Chief Executive Officer Augustin de Romanet said during a media event at Paris Charles de Gaulle airport on Wednesday. “As long as this stickiness exists, we fear we may not return to 2019 levels of traffic,” he said. Romanet said he still expects pre-pandemic traffic to return between 2025 and 2027. For this year, he predicts between 30% and 40% of 2019 levels. ADP will most likely deploy more staff for the expected increase in passengers once flights to the U.S. resume to minimize waiting times, he said.

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Asia below pre-pandemic levels as variants slow rebound

Brief: Developing economies in Asia will likely grow at a slower pace than earlier expected due to prolonged COVID-19 outbreaks and uneven progress in vaccinations, the Asian Development Bank said in a report Wednesday. The regional lender lowered its outlook for economic growth to reflect renewed coronavirus outbreaks as variants spread, prompting fresh pandemic precautions. The Manila, Philippines-based ADB expects 7.1% growth in 2021, falling to 5.4% in 2022. The forecast in April was for 7.3% growth this year and 5.3% in 2022. Most regional economies will remain below their pre-pandemic levels into 2022, and some of the losses from the crisis will be permanent, ADB 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 Tuesday, September 21, 2021:

  • In the United States, President Joe Biden will ease travel restrictions beginning in November for foreign nationals who are fully vaccinated. White House Covid-19 Coordinator Jeff Zients announced the new policy on Monday, explaining that all foreign travellers flying into the U.S. will have to demonstrate proof of vaccination before boarding, as well as show a negative Covid-19 test taken within three days of the flight. Unvaccinated Americans travelling outside of the country will now be required to take a test upon departure as well as after they return. Fully vaccinated travellers will not be required to quarantine, Zients said.
  • In Canada, Pfizer says it plans to provide Health Canada with the data to demonstrate that their vaccine is effective for children. On Monday they pointed to research that shows their product generated an immune response in five-to-11-year-olds in their clinical trials. “These trial results provide a strong foundation for seeking authorization of our vaccine for children five to 11 years old, and we plan to submit them to the FDA (Food and Drug Administration) and other regulators with urgency," Pfizer Chief Executive Albert Bourla said in a news release. Health Canada says there are several studies being conducted by vaccine manufacturers around children, and that it anticipates they will provide data in the coming months.
  • In the United Kingdom, 36,100 new coronavirus cases were reported in the last 24-hour period, and 49 more deaths. Hospitalizations are currently at 7847, the first time in weeks that they’ve fallen below 8000. Prime Minister Boris Johnson says he hopes to avoid lockdowns during the colder months but hasn’t ruled out any possibilities. Last week he laid out the government’s plans for managing the pandemic throughout the autumn and winter, which include jabs for 12-15-year-olds and a booster program. The National Health Service announced that about 1.5 million people will be contacted this week as they’re now eligible for booster shots. 
  • Germany will likely make a Covid-19 vaccine available for children under 12 beginning early in the new year. Health Minister Jens Spahn says he also expects a recommendation from the Standing Committee on Vaccination to follow. “I am assuming that the approval for a vaccine for children under 12 years of age will come in the first quarter of 2022," Spahn told Funke media group. "Then we could protect the younger ones even better." The European Medicines Agency has said that they cannot speculate around a possible timeline for approval.
  • New Zealand announced greater fines for those who breach coronavirus restrictions, as they try to contain their current outbreak in Auckland. "Our success has been really based on the fact that people by and large have been compliant," Prime Minister Jacinda Ardern told media. “However, there has been the odd person that has broken the rules and put others at risk.” Fines for people who intentionally fail to comply with Covid-19 measures will increase from NZ$4000 to NZ$12,000 and could also come with six months imprisonment.  The changes will take effect in November if the Covid-19 Public Health Response Amendment Bill passes.
  • In Australia, violence broke out in the city of Melbourne as more than 1000 demonstrators took to the streets to oppose vaccine mandates and Covid-19 restrictions. Authorities said they arrested more than 40 people and at least three officers were injured.  Police used pepper balls, smoke bombs and rubber bullets as crowd control measures. The protests came after the state government announced the forced shutdown of the construction industry for two weeks, citing concerns about poor compliance with public health orders. Victoria state reported 603 new coronavirus cases and one death in the past 24 hours.

Covid-19 – Due Diligence And Asset Management

Middle-Market PE Firms Successfully Weather the Pandemic Storm

Brief: Middle-market private equity sponsors have made a remarkably smooth transition during the pandemic, according to research by New York Life Investments Alternatives, an investment advisor, and Coalition Greenwich, a consulting and research firm. Their success is reflected in a stellar performance in deal volume this year, according to data from PitchBook. Middle-market PE sponsors have closed 1,721 deals in the first half of the year for a combined $264.6 billion, putting 2021 on track to break the prior annual record of $416.3 billion in 2019. “Companies that have shown resiliency through 2020 and into 2021 are tracking very, very high values,” said Chris Taylor, head of NYLIA.  “And I don’t see that changing anytime soon.”

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Ratings Companies Reacted Slowly to Covid Crisis, Research Shows

Brief: Ratings companies reacted slowly to the Covid-19 crisis, raising questions about the reliability of creditworthiness scores and their impact on financial stability, according to the first study into the effect of the pandemic on sovereign ratings. The paper, to be published by the International Review of Financial Analysis, shows the largest three rating agencies (S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings) only reviewed sovereign scores when they were scheduled for regulatory purposes rather than as a fast response to the global spread of coronavirus. Regulations permit the companies to conduct reviews ahead of schedule when circumstances require. The lack of fast movement on ratings “is very worrying because sovereign debt accounts for a large amount in investment portfolios and is clearly not being assessed in a timely manner,” said Patrycja Klusak, a lecturer in banking and finance at the University of East Anglia, one of the authors of the paper.

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Virgin Atlantic, British Airways Bookings Jump on U.S. Reopening

Brief: Virgin Atlantic Airways Ltd.’s U.S. bookings surged more than 600% overnight Monday from a week earlier after the Biden administration moved to allow most fully vaccinated foreigners to fly there again. New York saw the biggest surge in demand, the U.K. airline said Tuesday, while leisure destinations also performed well. Sales to Orlando, Miami and Las Vegas soared. British Airways said its vacation division saw an almost 700% increase in searches week-on-week to destinations including Los Angeles and Boston. The shares of European airlines and other travel-related companies gained for a second day following the U.S. decision. British Airways’ parent IAG SA led the way with a 7% advance after an 11% gain Monday. Deutsche Lufthansa AG rose as much as 5% and Air France-KLM as much as 3.8%.

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Germany Trims Planned Debt Sales as Pandemic Impact Recedes

Brief: Germany cut planned debt sales in the fourth quarter by 4 billion euros ($4.7 billion), suggesting the surge in borrowing triggered by the coronavirus pandemic is receding. The federal government will raise 1 billion euros less in 15-year bonds, and trim sales of short-term discount paper by 3 billion euros compared with a plan published at the end of last year, the Federal Finance Agency said Tuesday. That means that total debt issuance for 2021 will work out at 500 million euros more than projected, it added. The pandemic brought years of German frugality to an abrupt end, with tens of billions distributed to offset the impact of the disease on the economy and borrowing climbing to a record in 2020.

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Fifth of UK investors' "knocked off course" by Covid

Brief: Over a million UK investors feel Covid-19 threw their finances off track, according to research by Capital Group.The investors said they were either not on track with their financial plans, or completely thrown off course.The research indicated that one in five investors was knocked off course by the pandemic and that it could take them at least five years to restore their long-term financial plans back to health. In total, 1,003 retail investors aged over 45 years with £50,000 or more in investments were surveyed. The survey was designed to give results that were nationally representative. Findings included that more than a third (37%) of those without a financial adviser lacked confidence in the performance of their investments over the next 12 months, compared to only a fifth of those with an adviser (21%).

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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, September 20, 2021:

  • In the United States, the average daily death toll for Covid-19 over the past seven days reached 2000 over the weekend, the highest it’s been since March according to the New York Times. More than 30% of those deaths were in Texas and Florida – Texas has vaccinated about 50% of its population while Florida has vaccinated about 56%. A Food and Drug Administration (FDA) expert advisory panel recommended on Friday that boosters be provided to those 65 and older as well as those with underlying health conditions.  Health experts have said they expect the FDA to expand that recommendation to the broader population in the coming days.
  • In Canada, as the federal election arrives, leaders are divided over their stances on vaccine passports and other Covid-19 related measures.  Prime Minister Justin Trudeau’s Liberal Party favours both vaccine passports and mandatory vaccination policies. New Democratic Party Leader Jagmeet Singh is also in favour of a national vaccine passport system, but Conservative Party Leader Erin O’Toole rejects the idea. His party still supports vaccinations but also favours alternatives like rapid testing.  Experts have weighed in and said vaccine passports are probably inevitable, pointing to the examples of Alberta and Saskatchewan, where two conservative premiers brought in vaccine passport measures after saying for weeks that they would not do so.
  • In the United Kingdom, a former prime minister has said 100 million Covid-19 vaccines are due to expire and be thrown away. Gordon Brown, referencing a new report by the research group Airfinity, said the world is facing a “vaccine waste disaster” and blasted world leaders for not developing plans to redistribute doses. The research by Airfinity predicts that 12 billion vaccines will be available around the world by December. Brown says it’s critical to determine how and where the vaccines will be distributed, pointing out that there is currently no plan to outline who will provide vaccines to poor countries. Brown sent the Airfinity research to political leaders including the U.S. president and the U.K. prime minister.
  • Italy has seen an uptick in vaccine appointments after the government announced that their health pass would be required for all workers. Italy’s pandemic commissioner Francesco Figliuolo said in a statement that there was an increase between 20% and 40% in bookings for the first dose, compared to last week. Last Thursday Italy became the first big European country to announce that their Green Pass would be required for all workers, public and private. “The Green Pass is an instrument of freedom that will help us make workplaces safer," Health Minister Roberto Speranza told a news conference. "The second reason is to reinforce our vaccine campaign."
  • New Zealand will ease some lockdown restrictions for its biggest city, as the government announces 22 new Covid-19 cases in the community. Prime Minister Jacinda Ardern says she is confident that there is no undetected transmission of the Delta variant, but tough curbs will still remain in place for Auckland after the alert drops from level 4 to level 3.  Schools and offices will stay closed, while residents will have to keep to their “bubbles.” Auckland will stay at a level 3 alert for at least two weeks, while the rest of the country remains under level 2. 
  • In Australia, New South Wales (NSW) reported 935 new Covid-19 cases, down from 1083 on Sunday and the lowest number since August 27th. "We're feeling more positive than we have in a couple of weeks... but I don't want any of us to sit back and think the worst is behind us," said State Premier Gladys Berejiklian. Some restrictions in NSW were relaxed for Sydney’s worst-affected suburbs; vaccinated people can now gather outside in groups of up to five, and time limits for outdoor exercise were lifted. Neighbouring Victoria state reported 567 new infections, its biggest daily rise this year.

Covid-19 – Due Diligence And Asset Management

U.S. to Open Air Travel to Most Vaccinated Foreigners

Brief: The U.S. will soon allow entry to most foreign air travelers as long as they’re fully vaccinated against Covid-19 -- while adding a testing requirement for unvaccinated Americans and barring entry for foreigners who haven’t gotten shots. The measures announced Monday by the White House are the most sweeping change to U.S. travel policies in months, and widen the gap in rules between vaccinated people -- who will see restrictions relaxed -- and the unvaccinated. The new rules will replace existing bans on foreigners’ travel to the U.S. from certain regions, including Europe. While the move will open the U.S. to millions of vaccinated people and was celebrated by the airline industry, the White House cast the measure as a crackdown, pointing to stricter testing rules and a new contact tracing regime. The new policy will take effect in “early November,” according to the White House, though the precise date isn’t yet clear.

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Covid crisis bruises Vietnamese trusts despite strong fundamentals

Brief: While the UK is making plans to protect itself from another Covid crisis it is easy to forget that some nations are in the middle of fighting the deadly virus. Vietnam is one such country. Up until the end of April it was a world leader in virus containment. However, since then a deadly fourth wave has caused significant disruption and markets have noticed. All three investment trusts that cover Vietnam are trading on double-digit discounts, despite achieving hefty returns across one and five years, according to figures from Association of Investment Companies (AIC) and FE fundinfo. Vietnam Enterprise Investments (VEIL) has returned 62.7% in one year and is trading on a 14.1% discount, VietNam Holding (VNH) has returned 88.7% and is trading on a 17.9% discount and VinaCapital Vietnam Opportunity (VOF) has returned 40.9% and is trading on a 20.6% discount.

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Corporate leverage returns to pre-pandemic levels

Brief: U.S. and European companies have marked another milestone in their road to recovery from COVID-19, seeing their debt levels relative to profits tumbling to the lowest since before the pandemic erupted in 2020. Net leverage, an important gauge of a company's financial health, refers to net debt as a proportion of EBITDA - earnings before accounting for interest, taxes, depreciation and amortization. At U.S. companies rated investment-grade, it fell in the second quarter to the lowest since 2018, according to BNP Paribas, while European leverage is the lowest since 2019.The trend is a good sign for corporate debt markets, where the lowest-rated segments are outperforming this year, signalling normalising credit quality.

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The City of London Finally Gets Back to the Office

Brief: On the lower floors of HSBC Holdings Plc’s Canary Wharf headquarters, the desks are filling up. Traders, salespeople and close support staff not currently in the office have been told they are expected to be at their workstations on the second to fourth floors of the tower five days a week, according to people familiar with the matter. The only exceptions will be for domestic emergencies and unavoidable family commitments.It's a sign that, after several false starts, the City of London's return to the office is at last gathering pace. At times over the past two weeks, trains have been at their busiest since the pandemic broke out, while the streets have been thronged with workers again.

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UAE central bank sees COVID-19 increasing money-laundering risks

Brief: The United Arab Emirates central bank sees increased risks of illicit financial flows emerging from the COVID-19 pandemic, including money-laundering and terrorism financing, it said in a report published on Sunday. The use of unlicensed money service providers for money laundering has increased during the coronavirus crisis last year, the report said, as well as the use of e-commerce to launder money. "Widespread lockdowns have resulted in a significant surge in e-commerce. Due to limited ability to move funds and goods during the pandemic, illicit actors are turning to e-commerce as a money laundering tool", it said. The number of so-called "money mules" - people who receive illicit funds into their bank accounts to hold or withdraw and wire elsewhere, taking a commission for their services - increased, the bank said, with accounts in the majority of cases belonging to low income individuals from Africa and Asia.

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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.