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Covid-19 Diligence Briefing

Our briefing for Thursday, March 31, 2022:

  • The United States Senate is expected to vote early next week on a deal that is likely to secure $10 billion worth of Covid-19 relief funding. Democrats and Republicans are nearing a deal on a pandemic funding package that may now exclude money for the global vaccine effort that President Joe Biden has been trying to push through for most of his presidency. Republican Senate leader Mitch McConnell said the bill has been “skinnied down” from $15 billion to $10 billion as of Wednesday night. Senate Majority Leader Chuck Schumer expects the bill to be passed. “The gap has been narrowed greatly, and we’re intent on working with Republicans to cross the finish line because this is vital for our country if, God forbid, a new variant rises in the future, and that’s all too likely,” Schumer said. The agreement is a far cry from the $22 billion originally proposed by Biden earlier this month, and smaller still than the $15.6 billion that was scrapped from 2022 budget bill that would have seen money taken from a rescue package destined for state-level governments. The $5 billion intended for the global vaccine effort is likely to be dropped due to disagreements over where the money will come from. House Appropriations Chair Rosa DeLauro said the need for vaccines outside of the U.S. is still of great concern. “No amount of domestic preparedness can continue with an onslaught of new variants,” she said. Senator Roy Blunt, a Republican from Missouri has said that Congress is likely to propose another bill that will focus on Covid-19 aid outside the U.S. within two months.
  • In Canada, the economy continued on its streak of monthly gains in February, leading to expectations that the central bank will begin a tightening cycle to curb soaring inflation. According to preliminary data from Statistics Canada, the gross domestic product rose 0.8 per cent last month for the ninth straight month in a row, with economy rising 0.2 per cent in January alone. From the start of 2022, the country was able to keep an upward trajectory despite lockdowns brough on by the Covid-19 pandemic and was able to keep a steady pace heading into February when most of the country’s restrictions were lifted. Canada is now projected to grow at an annualized rate of 0.4 percent in the first quarter, nearly doubling January predictions from the central bank. “Heading into the year, some slowdown in activity was expected due to the pandemic restrictions, but, unlike in past waves, that wasn’t the case,” said Benjamin Reitzes, head of Canadian rates and macro strategy at BMO Capital Markets. Led by Governor Tiff Macklem, the central bank began a tightening cycle with a 25-basis-point hike earlier this month and now economists at Bank of America and Citigroup are expecting a 50-basis-point hike at each of Macklem’s next three decisions.
  • The number of patients in London hospitals testing positive for Covid-19 has reached a two-month high. As of Wednesday, 2,330 people were in hospital with the virus in the U.K. capital, which is the most since February 3. There are currently just over 100 patients requiring ventilators, down considerably from the peak in mid-January. Most cases of the virus are unknown when patients enter the hospital, with only 563 entering solely for Covid-related illnesses. A survey by the Office for National Statistics last week found that 3.4 million people in England had the virus in the week ending March 19, about 1 in every 16 people. Starting in April, people in the U.K. will no longer be provided with free PCR or lateral flow tests and will have to pay for testing out of pocket. However, based off of the most recent NHS data, deaths resulting from the virus still lag behind the number of people infected considerably.
  • More than 16 million people will be confined to their houses in the second phase of Shanghai’s Covid-19 lockdown. Residents are being asked to even avoid those in their own household as the virus circulates throughout the city. Residents in the western part of the city, which contains about two thirds of Shanghai’s population will begin a three-day lockdown starting at 3 a.m. on Friday just two hours before the eastern part of the city will be coming off their own lockdown which began on Monday. Most parts of the eastern section of the city will regain public transport on Monday, with particularly hard-hit areas remaining suspended. Shanghai’s communist party chief Li Qiang said late Wednesday that the city will attempt to curb the spread of the virus by using “whole-region static management,” a phrase that has previously indicated the most stringent level of lockdowns in other parts of the country. In the northeastern province of Jilin, static management meant that residents were completely barred from leaving their homes, many of whom have complained they were unable to receive basic necessities like groceries and were without health care as several medical facilities were closed.
  • India is witnessing a drop in Covid-19 cases as some states begin to do away with coronavirus restrictions. As the virus surges in other parts of Asia, on Thursday, the western state of Maharashtra announced it will lift all Covid-19 related restrictions on April 2 ahead of the Marathi New Year, a spring festival for Marathi and Konkani Hindus. Maharashtra was one the hardest hit areas of the country during the first and second waves of Covid-19, and although it will lift all restrictions, the government continues to advise the wearing of masks in public areas. The state is seeing roughly 100 new cases a day, and as of Monday, there was 963 cases across all 35 districts. In Delhi, the nation’s capital, authorities have decided to stop handing out fines for those not wearing masks in public, and only 113 new cases were reported. The city has gone multiple days this month without a death related to the virus and the country as a whole has seen cases drop dramatically over the last two months.

Covid-19 – Due Diligence And Asset Management

Anthony Scaramucci says he’s ‘not quite convinced’ on the recession signal the bond market flashed

Brief: A key signal of recession flashed in the bond market this week, but SkyBridge Capital’s Anthony Scaramucci told CNBC that he would be cautious on predicting there would be a downturn. On Monday, the U.S. 5-year and 30-year Treasury yields inverted for the first time since 2006. On Tuesday, the yield spread between the 2-year and the 10-year rate came close to inverting but stayed positive. Historically, the yield curve has inverted prior to recessions, indicating investors’ concern about the health of the economy. “So historically it would signal that we’re heading into a recession 12 to 18 months from now, but I will be cautious on that data,” Scaramucci said on CNBC’s “Capital Connection” on Wednesday. When the bond market is healthy, yields are higher for bonds with a longer time to maturity, and lower for short-term yields. Investors expect a bigger reward for lending their money for a longer time. But when the opposite occurs — meaning an inverted yield curve — short-term bonds pay a higher yield than long-term ones. That represents a distortion in the market and suggests bond investors are worried about the economy’s long-term prospects.

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Thiel-backed venture firm Mithril seeks to nominate candidates for Adagio's board

Brief: Mithril Capital Management, co-founded by Peter Thiel, intends to nominate candidates to the board of COVID-19 drug developer Adagio Therapeutics, according to a regulatory filing from the venture capital firm. Mithril Capital Management’s unit, Mithril II LP, owns a 10.1% stake in Adagio as of March 28 and has reached an agreement with some other shareholders to vote all of their respective shares in favor of the election of the nominees at the 2022 annual meeting. The battle for the board comes as the company announced on Wednesday plans to apply for U.S. emergency use authorization for its COVID-19 antibody, adintrevimab. Adagio’s shares jumped 54% to $5.94 before the bell. The company did not respond to a request for comment on Mithril’s filing.

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U.K. Economy Grew More Than Expected as Omicron Raged

Brief: The U.K. economy grew stronger than expected at the end of last year, displaying resilience as the omicron variant of the coronavirus spread. Gross domestic product expanded 1.3% in the fourth quarter, the Office for National Statistics said Thursday. That’s more than the 1% figure previously reported. Service industries expanded more quickly than the ONS had previously estimated, and exports also enjoyed a bigger jump. The figures also showed the collapse in the economy at the height of the pandemic was not quite as bad as previously thought. In 2020, GDP shrank 9.3% rather than the 9.4% previously estimated. The rebound in 2021 was correspondingly shallower, with growth of 7.4%, down from the earlier estimate of 7.5%. That’s still the largest increase in GDP in a single year since World War II.

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China’s Covid Lockdowns Strain Economy and Global Supply Chains

Brief: China’s Covid lockdowns are putting the economy under strain and threatening to disrupt global supply chains, prompting Beijing to call for more contingency plans to deal with the risks. Purchasing managers’ indexes for March showed lockdowns in the technology and trade center Shenzhen and automotive city Changchun cut factory activity in the month. Services have also been hit hard as restaurants and retail shops close because of renewed restrictions and tightened social distancing measures. Supply chain scares are intensifying as Shanghai -- home to the world’s largest container port -- battles mounting infections. Covid controls in the city are impacting operations and reducing efficiency at the port, while shipping giant AP Moller-Maersk has already shut some facilities in the city. “Beijing’s determination in maintaining its Zero Covid strategy for fighting the infectious omicron variant will very likely deal a severe blow to China’s economy and will also have a global impact,” economists at Nomura Holdings Inc. led by Lu Ting wrote in a note.

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Air Canada to ramp up capacity this year, but won't yet reach pre-pandemic levels

Brief: Air Canada plans to more than double its capacity this year compared with 2021, but says that is still below its pre-pandemic level. In its outlook for this year the airline says its capacity, measured by available seat miles, for 2022 will be up about 150 per cent compared with last year. However, Air Canada says its capacity will still only be about 75 per cent of where it was in 2019 as it continues to account for passenger demand, public health guidelines and travel restrictions. The airline says it expects its adjusted cost per available seat mile for 2022 to increase about 13 to 15 per cent when compared with 2019. Looking further into the future, Air Canada says it expects its capacity for 2024 to be about 95 per cent of its 2019 level.

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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, March 30, 2022:

  • In the United States, the Biden administration’s budget proposal shows a commitment to pandemic preparedness, although some say it doesn’t go far enough. The budget proposal includes an $82 million for the health and human services department over five years, “to prevent, detect and respond to emerging biological catastrophes.” Xavier Becerra, the health and human services secretary, says the administration needs to do more.  “That is a drop in the bucket compared to what it’s cost so far to deal with Covid,” he told reporters on Monday. Becerra added that these funds are different from the billions that the administration asked Congress for to address immediate needs. “What we need to continue to finish the job on Covid, we need immediately,” he said. “What we’re asking for in this budget for long term preparedness is very separate.”
  • Air Canada has seen a jump in its shares, by almost 4% on Tuesday, as the carrier expects to more than double its capacity from last year. The company says it expects to recover 75% of the total seats offered in 2019, which is a 150% jump over 2021. “With the pandemic receding and travel returning, Air Canada has put in place a strategy to return to profitability and increase long-term shareholder value,” Chief Executive Officer Michael Rousseau said. Looking even further into the future, Air Canada says it expects its capacity for 2024 to be at about 95% of its 2019 level. 
  • In the United Kingdom, free Covid-19 testing for the general public ends on Friday, as the government sets out its new “Living with Covid” plan. The government released the details of the new rules on their website, explaining that free asymptomatic testing will only be provided to those in high-risk settings like hospitals or long-term care homes.  Free symptomatic testing will be available to those in the community who are at risk of becoming seriously ill if they contract Covid. In the announcement the government also explained that 55% of people in hospital who have tested positive are not there were Covid as their primary diagnosis.
  • Brazil’s health regulator Anvisa has recommended an easing of travel restrictions as case numbers and deaths continue to fall. The new rules would see the elimination of quarantine for all travellers, even those who are unvaccinated, although they will still be required to provide a negative test when entering the country. Effective immediately, travellers’ health declarations used to track Covid-19 will no longer be needed, while testing for vaccinated travellers will be suspended as of May 1. Anvisa’s recommendations must still be approved by the Health, Justice and Public Security, and Transport ministries
  • South Korea’s health authorities have announced that the Omicron wave has peaked, with case numbers falling for the first time in more than two months. Case numbers are down to nearly half of what they were a week ago, and deaths are also on the decline. According to the Korea Disease Control and Prevention Agency (KDCA) Commissioner Jeong Eun-kyeong, it is likely that case counts will continue to trend downward, although the process will be slow because of the relaxing of restrictions and return to in-person learning.  The KDCA reported 187,213 new cases on Monday, the first time cases have fallen below 200,000 in 25 days. 
  • In South Australia, vaccine mandates have just ended for those in the school and public transportation sectors. That means unvaccinated teachers, school staff, taxi and ride share drivers and public transport workers were able to return to work as of midnight. Unvaccinated teachers and school staff are still required to wear a mask inside at all times, and to use a rapid test every day. Police Commissioner Grant Stevens made the announcement on Tuesday, explaining that the mandate has served its purpose despite being revoked only four months after its implementation. "The mandate under the Emergency Management Act was put in place so we could implement quick and effective changes that saw staff in critical sectors vaccinated as quickly as possible and getting those vaccination levels up to a high standard," he said. “That has been achieved."

Covid-19 – Due Diligence And Asset Management

Traders sleep by their desks as China’s financial hub locks down

Brief: China’s banks and investment firms are calling on essential staff to live at the office this week to avoid any trading disruption during Shanghai’s massive Covid lockdown. A person familiar with the matter told CNN Business that traders and fund managers were being offered between 500 and 2,000 yuan ($78 to $314) per night to camp out at work, with some companies placing folding beds under workers’ desks. Other firms have also provided staff with sleeping bags, food and toiletries to get by. Much of Pudong “is doing it,” the source added, referring to Shanghai’s financial district, which is home to more than 1,000 financial institutions, and China’s leading stock exchange — which is continuing to operate as normal.Zhong Ou Asset Management, a Chinese firm that says it has $98 billion in assets under management, said that several of its investment directors and fund managers had begun staying overnight earlier this month to ensure operations continued as the pandemic “began to escalate” in Shanghai.

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Anthony Scaramucci says he’s ‘not quite convinced’ on the recession signal the bond market flashed

Brief: A key signal of recession flashed in the bond market this week, but SkyBridge Capital’s Anthony Scaramucci told CNBC that he would be cautious on predicting there would be a downturn. On Monday, the U.S. 5-year and 30-year Treasury yields inverted for the first time since 2006. On Tuesday, the yield spread between the 2-year and the 10-year rate came close to inverting but stayed positive. Historically, the yield curve has inverted prior to recessions, indicating investors’ concern about the health of the economy. “So historically it would signal that we’re heading into a recession 12 to 18 months from now, but I will be cautious on that data,” Scaramucci said on CNBC’s “Capital Connection” on Wednesday. When the bond market is healthy, yields are higher for bonds with a longer time to maturity, and lower for short-term yields.

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Goldman Plans Full Return to Office in Hong Kong on April 19

Brief: Goldman Sachs Group Inc. plans a full return to its offices in Hong Kong starting in the middle of next month as the Asian financial hub begins to ease Covid measures amid declining virus cases. The New York-based bank on Wednesday started with a split-team arrangement and outlined a plan for a full return starting on April 19, according to a memo sent to staff that was seen by Bloomberg News. A spokesman for Goldman Sachs declined to comment. The lender will “welcome” all staff to return “in anticipated alignment with the government’s relaxation of social distancing measures and resumption of in-person school classes,” according to the memo. It added that if circumstances change, it will amend its approach accordingly. Hong Kong last week moved to scrap some travel curbs and laid out a road map for easing internal pandemic restrictions, acknowledging the damage its absolutist approach to Covid-19 has had on the city’s status as a financial hub. The moves were spurred by frustration in the banking community and wider population, which has endured more than two years of strict border controls.

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Manulife to Open All Canada Offices for Staffers From April 25 -Memo

Brief: Canadian insurer Manulife Financial Corp said on Tuesday that employees can return to its offices across Canada from April 25 regardless of vaccination status, amid a fall in COVID-19 infections. The country's biggest life insurer has asked staffers to return under a hybrid model with certain days of the week designated for remote work, according to an internal memo seen by Reuters. Guidelines on mask mandates and physical distancing will be set in line with local regulations, the memo said. Several financial firms across Canada and the United States that had postponed their back-to-office plans late last year are now looking to reopen offices and bring back employees with fresh coronavirus guidelines.Earlier this month, Manulife had opened select office locations as a part of its return-to-office plans in Canada after COVID-19 cases in the country declined.

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BlackRock President Says ‘Entitled Generation’ Now Learning About Shortages

Brief: BlackRock Inc. President Rob Kapito warned that inflation is having dramatic effects on the economy, with an entire generation now learning what it means to suffer from shortages. “For the first time, this generation is going to go into a store and not be able to get what they want,” Kapito said at conference held in Austin by the Texas Independent Producers and Royalty Owners Association. “And we have a very entitled generation that has never had to sacrifice.” The economy is reckoning with what he dubbed “scarcity inflation,” or the fallout from a shortage of workers, agricultural supplies and housing, and of oil in some regions. “I would put on your seat belts because this is something that we haven’t seen,” Kapito 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, March 29, 2022:

  • According to new data from the Centers for Disease Control and Prevention (CDC), the Omicron subvariant BA.2 is now the dominant strain of Covid-19 in the United States. Last week, the BA.2 variant made up for an estimated 54.9 per cent of new infections across the country. Hardest hit by the new variant is the Northeast, where over 70 per cent of new infections are being caused by BA.2, in the South and Mountain West, only a third of infections are being attributed to the highly contagious strain. Experts are still suggesting that a new surge is unlikely as overall case numbers have continued to remain below the record-breaking peak in January. The seven-day moving average for U.S. Covid-19 cases was 27,895 as of Saturday, up 4 per cent from the previous week. Most people in the U.S. are now living in places considered to have low Covid transmission according to CDC data that has moved away from case numbers and focuses more on hospitalizations. In the week ending March 19, BA.2 made up only 39 per cent of total Covid-19 cases.

  • In Canada, public health experts in Quebec are suggesting that the province is already in the middle of its 6th wave of the pandemic. According to Dr. Don Vinh of the McGill University Health Centre, the latest wave is a result of the BA.2 Omicron subvariant, and that it is so-far unclear on what the surge in Quebec could mean for the rest of the country. Vinh pointed to the rise in cases across nursing and long-term care homes, along with a 60 per cent increase in health care workers who are absent due to Covid. “I think these are signals that cannot be ignored and interpreted any other way than to say we are we are already started in that wave,” he said in an interview. On Sunday, interim public health director Luc Boileau said that despite the fact that BA.2 now makes up two-thirds of new cases in the province, he is reluctant to confirm a 6th wave. Hospitalizations and test-positivity rates have gone up in recent weeks in Quebec and across the country as most jurisdictions have lifted Covid-19 preventative measures.

  • The first round of fines has been handed out to those who attended parties held at the residence of U.K. Prime Minister Boris Johnson during Covid-19 lockdowns. British police have issued 20 fines in relation to the illegal parties but so far Johnson has not been on the list of recipients. The Metropolitan Police force said Tuesday that it does not plan on releasing the names of people who received fines, however, Johnson’s office said they would notify the public if the prime minister was given a fine. Johnson has already admitted to attending several events at 10 Downing Street between 2020 and 2021, including a “bring your own booze” party which he believed was supposed to be a “work event.” Opposition parties in the country are calling for Johnson’s resignation should he be given a fine for his involvement in the gatherings. The police force has said officers are still working through a “significant amount of investigative material” and that more fines could be issued. Questionnaires were sent out to over 100 individuals, including Johnson, and multiple interviews were conducted allowing police to gather evidence surrounding the parties.

  • On Tuesday, Germany’s Health Minister Karl Lauterbach urged his European Union counterparts to endorse a fourth Covid-19 vaccine or second booster for use in people over age 60. With over 300,000 new cases being reported daily in Germany, Lauterbach is citing data from an Israeli study that shows an 80 per cent decrease in the number of deaths caused by the virus in those who have had a fourth shot. “The situation in Europe, as far as the pandemic is concerned, is worse than people feel,” Lauterbach said. “We have very high case numbers — we have unfortunately also very high death rates.” Lauterbach made a proposal to the European Commission for common advice to be issued to all countries in the bloc, which was backed by a majority of ministers. Earlier this month, the European Medicines Agency (EMA) said there was not yet enough data to support a fourth dose, but said it hopes that more data will be available later in the spring. On Sunday, Israeli researchers said that in a study, people aged 60 to 100 had a 78 per cent lower mortality rate when a fourth dose of the Pfizer-BioNTech vaccine was administered versus those who received only one booster.

  • In Singapore, mask-wearing is now optional in public spaces and the group limit for restaurants and public gatherings has been raised to 10. The new rules came into place on Tuesday despite rising case number overs the last 9 days. The country reported just under 8,200 new cases and 4 new deaths bringing the total number of fatalities during the pandemic to 1,258. There are now 728 people in hospital, 83 require oxygen supplementation and 25 are in intensive care. Most of the Covid cases in the country are considered to be Protocol 2 cases, which means those infected are either doing well or are experiencing mild symptoms. Of the new reported cases, most are local in origin, meaning they have been contracted within the country, while 128 were “import cases” or contracted while abroad. Although cases have risen over the last several days, the week-on-week infection ratio is down slightly at 0.69, down from 0.73 last Monday. According to government data, a number under 1 means that the number of Covid-19 cases on a whole is falling. As of Monday, over 95 per cent of Singapore’s adult population has completed their full vaccination regimen as part of the national vaccination program.

Covid-19 – Due Diligence And Asset Management

Investor Redemptions from China Funds Hit Pandemic High

Brief: Global investors’ confidence in China is at the lowest since the start of 2021. The bearish mood can be clearly seen in the data about redemptions from Chinese stock and bond funds. In the third week of March, global investors pulled out more than $3 billion from Chinese equities, the highest since the first week of 2021, according to the latest report from Emerging Portfolio Fund Research, which is owned by Informa and tracks fund flows and allocations. China bond funds saw a weekly outflow of more than $1 billion for the first time, EPFR data showed. The sizable capital outflow is in sharp contrast to the bullish consensus assessment of Chinese securities not long ago. From September to the first week of March, over $50 billion was pumped into EPFR-tracked China equity funds and $11 billion into Greater China fund groups, the report said.

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Technology is a weapon in the fundraising war

Brief: 2022 will be the year the level of in-person and online meetings rebalance to create a new fundraising ‘normal’ for years to come. The private market fundraising process underwent a historic transformation through the various stages of Covid-19, but many of the adjustments made during 2020 and 2021 are now being reviewed by GPs and LPs as travel restrictions and lockdowns ease in the UK, Europe and the US. In 2020 fund managers relied mainly on existing relationships to raise and close funds virtually. Last year saw a shift back to engaging with new clients. “In 2021, the situation largely didn’t change, but we had to meet new managers and find new ideas,” says Kevin O’Donnell, global head of investment relations, Adams Street Partners. “And by doing so online, we raised double what we had in 2020, and it was a record year for the firm.” Over the past two years, LPs have been under pressure to allocate to existing GPs that have performed very well. There has been skepticism around investing in new managers virtually.

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SEC seeks to broaden definition of dealer to ease liquidity worries

Brief: The Securities and Exchange Commission on Monday proposed two rules that would force more trading firms to register as dealers and open their books to far greater regulatory oversight. The move, applauded by SEC Chair Gary Gensler, would require many firms that execute algorithm-based, high-frequency trades to come under the regulator’s scrutiny as it looks to ensure liquidity across U.S. financial markets. “I was pleased to support this proposal because I believe it reflects Congress’s statutory intent that firms engaging in important liquidity-providing roles in the securities markets, including in the U.S. Treasury market, be registered with the Commission,” Gensler said in a statement. The SEC’s new rules would require firms or persons to register as a dealer if they regularly make comparable purchases and sales of the same securities in the same day or turn profits primarily through bid-ask spreads. Those who have at least $25 billion of trading volume in U.S. debt in at least four of the prior six months would also be compelled to register. People or firms that manage less than $50 million would not be subject to the new rules.

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China's biggest COVID-19 lockdown in 2 years prompts new supply chain concerns

Brief: China's most extensive COVID-related lockdown in two years is underway in Shanghai, as the city of 26 million people undergoes a series of phased shutdowns to test a growing outbreak of the coronavirus. China's financial capital and largest city has implemented a two-phase partial lockdown for the next 10 days, starting with the Pudong financial district and nearby areas from Monday to Friday. This will allow mass testing to get underway after 3,500 new cases of COVID-19 were reported Sunday. In the second phase of the lockdown, the vast downtown area west of the Huangpu River that divides the city will start its own five-day lockdown. Residents will be required to stay home and deliveries will be left at checkpoints to ensure there is no contact with the outside world. Offices and all businesses not considered essential will be closed and public transport suspended. Bridges and tunnels in and out of the area are being strictly monitored.

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Pandemic fallout: Canadian workers losing 41 working days per year to absences and presenteeism

Brief: Manulife's 2021 Wellness Report highlights how the pandemic is affecting employee health, and underscores that two years into the pandemic, Canadian workers continue to struggle to take care of their health and wellbeing. "Employee mental health patterns could be K-shaped as we move through the next phase of the pandemic," said Dr. Georgia Pomaki, Director, Mental Health Best Practices, Manulife. "One arm of the K represents employees who are excited about reopening and returning to the office—the other represents a group of employees who are facing mental health challenges and significant fatigue: for this group, a return to office may feel overwhelming. Organizations need to consider both groups to design effective and supportive return to office programs." The Report highlights that 16% of working hours (41 days) were lost in 2021 due to absences and presenteeism, and close to half (48%) of employees are experiencing at least one work-related mental health risk factor. These findings suggest employers should consider placing significantly more focus on culture and wellness programs in 2022 and beyond, particularly as large employee populations return to Canadian offices in the near future.

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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, March 28, 2022:

  • In the United States, the Biden administration plans to move forward with the decision to offer second booster shots to adults aged 50 and older. The Food and Drug Administration (FDA) could authorize a second shot as early as next week, officials said, with the Centers for Disease Control and Prevention (CDC) following shortly after with its own recommendation. Unlike the first round of regulatory decisions surrounding booster shots, there will be no advisory committee meetings of either the FDA or the CDC ahead of the decision on second boosters. Officials have said that in the fall, Americans of all ages should get a second shot.
  • In Canada, Quebec’s Medicago vaccine has been denied authorization for emergency use by the World Health Organization (WHO), because of ties to a tobacco company. Philip Morris Investments, subsidiary of tobacco giant Philip Morris International, currently holds a 21% stake in the company which keeps the vaccine from being part of the Covid-19 Vaccines Global Access (COVAX) program. "It is our understanding that this decision is linked to Medicago's minority shareholder and not the demonstrated safety and efficacy profile of our COVID-19 vaccine," said Medicago president and CEO Takashi Nagao in a statement Friday. The WHO has said it is currently exploring policy options for other valid health products linked to the tobacco industry and will provide more information soon.
  • In the United Kingdom, new Covid-19 cases have rose by a million in one week, according to data from the Office of National Statistics (ONS). Driven by the highly infectious BA.2 Omicron subvariant, cases are now hovering at around 4.3 million, up from 3.3 million the week before. Rates are rising in England and Wales, and have reached an all-time high in Scotland, Northern Ireland is the only region where case numbers have decreased.  ONS data shows approximately one in 16 people in England are now infected, with hospitalizations also on the rise. There were approximately 17,440 patients in the hospital with the virus on March 24, with just over 300 in intensive care.
  • Israel’s prime minister has tested positive for Covid-19 and will be working from home over the next few days, his office confirmed. Naftali Bennett says he is still feeling fine and will continue with his schedule as planned, after holding a series of in person meetings that included U.S. Secretary of State Antony Blinken. A state department spokesperson has since confirmed that Blinken will be following Centers for Disease Control and Prevention recommendations, such as masking and undergoing appropriate testing. Nearly half of Israel, including Bennett, have received three vaccinations. 
  • China has announced its largest city-wide lockdown since the pandemic began two years ago. The city of Shanghai has been divided in half for a two-part lockdown which will take place over the course of nine days, as the city carries out mass testing. The eastern part of the city will be locked down from Monday until April 1, while the western part will be locked down from April 1-5. Public transportation will be suspended and companies must stop their operations or work remotely, authorities said. Chinese authorities have avoided lockdowns in Shanghai so far to prevent economic disruption, however, after the city recorded its highest daily number of cases on Saturday since the pandemic’s early days, they appeared to have changed course.
  • In Western Australia, Level 2 Covid-19 restrictions will begin to ease from Thursday, amid high vaccination rates and lower than anticipated hospital admissions. Almost three quarters of people aged 16 and older in Western Australia have had three vaccinations.  The changes to restrictions will include the abolition of mandatory check-ins, except for venues where proof of vaccination is required. Masks will still need to be worn indoors, and private home gatherings will be limited to 30 people. “Our numbers in hospital remain relatively stable and obviously our number of new cases actually has declined from where it was last week,” Premier Mark McGowan told reporters on Monday.  

Covid-19 – Due Diligence And Asset Management

Hedge funds performed well in February despite market turmoil, says PivotalPath

Brief: The PivotalPath Composite Index, a broad measure of overall hedge fund performance, was up 0.3 per cent in February, outperforming most major indices, according to data released by hedge fund research and intelligence specialist PivotalPath. The firm's Dispersion Indicator meanwhile, decreased during the month to 3.8 per cent. The firm writes in its Pivotal Point of Viuerw for March 2022, that strategies able to capitalise on the 'flattening yield curve rally in the energy complex and other factor trends', include Global Macro, Managed Futures, and Equity Quant. Multi-strategy, Managed Futures, Global Macro and Credit were also positive for the month, while commodities, especially oil, reached fresh highs not seen in a decade which, in turn, benefited Global Macro and Managed Futures funds.

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U.K. Would Be in Recession Were It Not for Post-Covid Bounce

Brief: A downgrade on that scale “in any ordinary year” would have left the economy in recession, David Miles, head of macroeconomic forecasting at the OBR, told U.K. lawmakers. That would be the third recession in 14 years. Rocketing energy prices are expected to drive the consumer prices index of inflation to a 40-year high of 8.7% later this year and trigger the worst household living standards crisis in over half a century. The economy is still rebounding from the pandemic, having only just recovered the output lost in 2020. That tailwind prevents a downturn. Normally, “if you’d seen the forecast of growth fall by around 2.5%, we would be in recession,” Miles said. Miles said the squeeze “hits consumption and that’s the biggest part of the downgrade in growth … it’s a hit to the standard of living of this country, it is a terms of trade shock. We are spending more on stuff we import and less on stuff we produce in the U.K.”

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Investors Exit Istanbul’s Huge New Airport as Virus Halts Growth

Brief: Smaller investors in Istanbul Airport, set to be the world’s highest-capacity hub when completed, have agreed to exit the project after the coronavirus pandemic slowed travel and delayed expected profits. Limak Yatirim Holding AS and Mapa Insaat AS are each selling their 20% stakes in the operating company IGA Havalimani Isletmeleri AS, according to people with direct knowledge of the matter. The two remaining partners Kalyon Insaat AS and Cengiz Insaat AS will raise their holdings to 55% and 45%, respectively, after the transaction, the people said, asking not to be identified because the talks are confidential.  Limak, Kalyon and Cengiz declined to comment. Mapa Insaat, owned by Istanbul-based MNG Group, didn’t immediately respond to requests for comment. When signed, the deal will mark the second exit by the original builders that won the rights to build and operate the airport in a joint venture with equal stakes in 2013. Kolin was the first to sell its stake in 2019.

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Poor and Rich in U.K. Hit Hardest in Pandemic’s First Year

Brief: Household incomes in the U.K. continued to grow on average in the first full year of the coronavirus pandemic but the poor fared worse than others, official figures show. Adjusted for inflation, the median after-tax income rose by 2% in the year through March 2021 to 31,385 pounds ($41,270), the Office for National Statistics said Monday. It followed a 4.1% gain the previous year. However, the pandemic had a disproportionate impact, with the poorest fifth of the population experiencing a 2% fall in income. Many found themselves furloughed on reduced wages when businesses were shuttered to fight the spread of Covid-19, and an increase in welfare benefits only partially made up for the hit, the ONS said.The richest fifth also lost income, although not to the same extent, and the gap with the lowest-income households remained at almost 50,000 pounds.

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China Economy Faces Worst Slowdown Since Pandemic, Nomura Says

Brief: China’s economy faces its worst downward pressure since the spring of 2020 when it was hit by the first wave of Covid-19, according to Nomura Holdings Inc. The slowdown in China’s growth worsened in the first quarter and markets should be concerned about a further slide in the second, Nomura Holdings Inc. economists including Lu Ting wrote in a note Saturday. Economic activities “may notably deteriorate across the board” in March, weighed down by increasing mobility restrictions across the country and a continued property sector slump, they said. With the outbreaks suppressing a wide range of sectors, including in-person services, construction and some manufacturing activity, “it’s getting harder for Beijing to achieve its ‘around 5.5%’ GDP growth target for 2022,” the 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 Friday, March 25, 2022:

  • In the United States, Moderna announced on Wednesday its plan to apply to the Food and Drug Administration for emergency use of its coronavirus vaccine for children aged six months to five years. An outside panel of experts will advise the agency on whether or not the shot should be authorized.  The shot has proven safe for the age group, but its efficacy was weakened in the face of the Omicron variant. With Omicron, vaccine effectiveness fell to about 40%, following the pattern also seen in adults, though the data has not yet been published or peer reviewed. Currently there are no coronavirus vaccines authorized for this age group in the United States. 
  • In Canada, the Conservative Party is urging the federal government to remove all remaining Covid-19 restrictions, pushing for a return to normal after two years of the pandemic. They tabled a motion in the House of Commons on Thursday, legislation that would see the end of measures like vaccine mandates for federal workers. The motion is expected to fail, with opposition parties saying they’re still in favour of the keeping those measures in place. The government has said they will keep certain curbs for now, like blocking travel for unvaccinated foreign nationals and requiring proof of vaccination on planes and trains. 
  • In the United Kingdom, the latest Covid wave has brought hospitals under pressure, with the numbers expected to rise until at least the beginning of April. Professor Chris Whitty, England’s chief medical officer, warned on Wednesday that the Covid-19 pandemic “is not over,” and that the latest wave is being driven by the Omicron BA.2 subvariant. Speaking at the annual conference of the Local Government Association and the Association of Directors of Public Health, Whitty explained that new variants could emerge any time, and that the Covid-19 crisis is likely to be a “significant problem” for the rest of our lives.  
  • Japan’s government has reached an agreement with Shionogi and Co. for supplies of its oral Covid-19 treatment, the firm announced on Friday. It added in a statement that the government is considering buying a million doses of the drug should it get regulatory approval. Shionogi sought approval of the drug last month, hoping to become the third antiviral pill approved in Japan, after Pfizer’s and Merck’s. Japan’s government announced on Thursday its plans to spend 439.7 billion yen ($3.61 billion) on Covid-19 treatment drugs. The country will also start administering fourth shots of coronavirus vaccines, although it isn’t clear yet who will be eligible.
  • Singapore announced on Thursday that it will ease some coronavirus restrictions, in a move towards living with the virus. Prime Minister Lee Hsien Loong said in a televised speech that “our fight against Covid-19 has reached a major turning point.” Lee said quarantine requirements for all vaccinated travellers will be lifted next month, as well as mask mandates and limits on social gatherings. They will also remove a 10:30 PM curfew on alcohol and dining, while continuing to monitor the situation. "After this major step, we will wait a while to let the situation stabilise," he said. "If all goes well, we will ease up further."
  • In Australia, pre-departure Covid-19 testing for international arrivals will soon be scrapped. Health Minister Greg Hunt made the announcement on Thursday, explaining that the new rules will come into effect from April 17. "Given that the vaccination requirements remain and the masking requirements, the medical advice is that [the test] would no longer be required,” Hunt said.  "Particularly as there are some challenges in some jurisdictions in having access to those tests or proving those tests." Travellers will still have to be fully vaccinated and wear masks during flights. Pre-departure tests were introduced in Australia at the beginning of last year to help curb the spread of Covid-19.

Covid-19 – Due Diligence And Asset Management

Costs of going unvaccinated in America are mounting for workers and companies

Brief: Nearly a year after COVID vaccines became freely available in the U.S., one fourth of American adults remain unvaccinated, and a picture of the economic cost of vaccine hesitancy is emerging. It points to financial risk for individuals, companies and publicly funded programs. Vaccine hesitancy likely already accounts for tens of billions of dollars in preventable U.S. hospitalization costs and up to hundreds of thousands of preventable deaths, say public health experts. For individuals forgoing vaccination, the risks can include layoffs and ineligibility to collect unemployment, higher insurance premiums, growing out-of-pocket medical costs or loss of academic scholarships. For employers, vaccine hesitancy can contribute to short-staffed workplaces. For taxpayers, it could mean a financial drain on programs such as Medicare, which provides healthcare for seniors.

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Moderna Sees 1-in-5 Odds of Dangerous Future Covid Variant

Brief: Chances are roughly one in five that new Covid-19 variants will arise that are more dangerous than the current versions, Moderna Inc.’s chief executive officer said. The more likely scenario is that vulnerable people, such as the elderly and immunocompromised, will need annual boosters for protection against strains that are similar in virulence to omicron, Moderna CEO Stephane Bancel said Thursday in an interview with Bloomberg TV. The CEO spoke on the day of a company event detailing its research and progress with messenger RNA vaccines. Moderna is working to reassure investors about its longer-term growth prospects as the new cases decline following the winter spread of highly transmissible omicron. However, omicron’s BA.2 subvariant continues to circulate, leading to concerns about a resurgence and the emergence of new strains of the virus with greater power to infect and sicken.   

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BlackRock’s Larry Fink, who oversees $10 trillion, says Russia-Ukraine war is ending globalization

Brief: Larry Fink, CEO and chairman of the world’s biggest asset manager, BlackRock, said Russia’s invasion of Ukraine has upended the world order that had been in place since the end of the Cold War. “The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades,” Fink said in his 2022 letter to shareholders. “It has left many communities and people feeling isolated and looking inward. I believe this has exacerbated the polarization and extremist behavior we are seeing across society today.” Fink’s letter came a month into Russia’s invasion of Ukraine with Moscow’s forces bombarding cities across the country and killing civilians unable to escape. The U.S. and its allies have imposed unprecedented sanctions on Russia and provided military assistance to Ukraine.

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How Singapore Stacks Up Against Financial Centers on Covid Rules

Brief: Singapore announced Thursday significant easing in its Covid-19 curbs, with a plan to lift most restrictions for fully vaccinated visitors and a requirement to wear masks outdoors as part of its shift toward living with the virus. The loosened domestic social measures come into effect on March 29, while easier travel rules apply from April 1. Here’s how the city-state’s regulations will compare with some global financial centers.

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Private markets bounced back from pandemic-driven turbulence to reach new heights in 2021, according to a new report by McKinsey

Brief: Private Markets Rally to New Heights, a comprehensive analysis of the dynamics and performance of the private investing industry, encompassing private equity, real estate, debt, and infrastructure and natural resources, shows that fundraising was up by nearly 20 per cent year over year to reach a record of almost USD1.2 trillion. In addition, dealmakers were busier than ever, deploying more than USD3.5 trillion across asset classes, while assets under management (AUM) grew to an all-time high of USD9.8 trillion as of July 2021, up from USD7.4 trillion the year before. Private equity continued to drive global growth in private markets. Fundraising rebounded across regions, and global totals fell just short of the pre-pandemic peak established in 2019.

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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, March 24, 2022:

  • The chief executives of several major airlines in the United States are urging President Joe Biden to end the federal mask mandate on airplanes and pre-departure Covid-19 test requirements. The chief executives of American Airlines, United Airlines and Delta Airlines said in a letter that the current restrictions are “no longer aligned with the realities of the current epidemiological environment.” Earlier this month the Biden administration extended the mask mandate in airports, train stations, and ride-share programs until April 18, the mandates were originally slated to end on March 18. Delta Airlines CEO Ed Bastian in a separate statement said, “considering the improved public health metrics in the US and medical advancements to prevent the worst outcomes of COVID-19, the federal mask mandate and pre-departure testing no longer fits with the current environment.” The White House did not comment on the letter but said that it had tasked the Centers for Disease Control and Prevention (CDC) with developing a “a revised policy framework for when, and under what circumstances, masks should be required in the public transportation corridor.” Last week the U.S. Senate voted 57 to 40 to overturn the public health order requiring masks on airplanes and public transportation, which Biden threatened to veto if it passes.

  • In Canada, wastewater data is suggesting a rise in Covid-19 cases in several provinces. According to analysis by Global News, Ontario, Saskatchewan, and British Columbia are seeing resurgences of the virus as pandemic restrictions are being lifted. Dr. Steve Hrudey, chair of the research advisory group of the Canadian Water Network COVID 19 Wastewater Coalition said, “the reality is that as all of the restrictions come off in terms of masking and the other measures which have been in place for some period of time, we can expect that more cases are going to be out there.” Experts say that wastewater testing provides a more accurate representation of the prevalence of Covid-19 at a time when testing measures fluctuate throughout different municipalities. “Wastewater testing provides a true picture of COVID-19 community health, especially in the current situation when resources for clinical testing may be limited in some areas,” said Anna Maddison, a Public Health Agency of Canada (PHAC) spokesperson. Dr. Peter Juni, a professor of medicine and epidemiology at the University of Toronto said that wastewater analysis has shown a “relatively steep increase” in coronavirus prevalence across all regions in Ontario.

  • The number of people in hospital due to Covid-19 has risen for the 19th day in a row in the United Kingdom. On Thursday, the U.K. reported that 16,975 people were in hospital due to complications caused by Covid-19, an increase of 216 from Wednesday. The number of patients in intensive care units requiring ventilators was at 302, that number has remained relatively constant throughout the last few weeks. People aged 75 or higher are being particularly affected, as hospitalizations for that age group have jumped to their highest levels in over a year. Nearly 75 in every 100,000 people over age 75 in the country have Covid-19, that number is up from 59 the week previous, and in the over 85 age category 178 per 100,000 have contracted the virus. All regions in the country are seeing an increase in cases and experts are suggesting that numbers will continue to rise.  Dr Susan Hopkins, Health Security Agency chief medical adviser said the figures are “a reminder to us all that the pandemic is not over.” She added, “hospital admissions and cases of Covid-19 have continued to rise, and we can expect to see further increases before we start to see a decline.”

  • The European Medicines Agency (EMA) is recommending the use of AstraZeneca Plc’s antibody drug for adults and children over 12 who have not yet contracted Covid-19. Over the last several weeks, Europe has seen a spike in cases and a stagnation of vaccination rates in adults. The EMA is suggesting that the AstraZeneca drug can also be used by people whose immune systems may be too weak to respond to vaccines. While vaccines require an intact immune system to fight off the virus, AstraZeneca’s EVUsheld contains antibodies designed to linger in the body for months and will contain the virus in case of infection. In an independent lab study, EVUsheld was proven to be effective against both BA.1 and BA.2 strains of the Omicron variant. The studies show that EVUsheld was able to cut the risk of symptoms resulting from infection by 77 per cent with protection lasting roughly six months. The EMA’s decision to recommend the drug is expected to soon be followed by the European Commission.

  • China has recorded over 2,000 new cases of Covid-19 for the third straight day and the government is now putting the blame solely on the transmissibility of the BA.2 strain of the Omicron variant. “Omicron BA.2 caused this outbreak, and spreads faster and more easily than previous viruses,” the export-heavy province of Fujian said in an online statement Tuesday, it continued by saying the BA.2 variant is “stealthier” than the previous Omicron variant, but it is causing mainly mild or asymptomatic cases. Scientists across the world have described BA.2 as a “stealth” variant because it contains mutations that make it less distinguishable than the previous Delta variant when using a PCR test. China is currently relying on local governments to impose restrictions based on the severity of the outbreaks in their jurisdiction and negative Covid tests are being required to travel throughout different regions of the country.

Covid-19 – Due Diligence And Asset Management

Hong Kong Holds Third Spot in World’s Financial Centers Ranking

Brief: Hong Kong, in the midst of an exodus of residents as it grapples with its largest ever outbreak of Covid-19, held its third place ranking among the world’s financial centers, trailing New York and London, according to a survey. In the main areas of competitiveness, Hong Kong ranked in the top four for business environment, human capital, infrastructure and general reputation, but out of the top 10 in financial sector development. Its overall hold on the third spot came as financial centers in Asia “generally recovered losses” experienced in the previous study, suggesting restored confidence in the region’s economic strength, according to the Global Financial Centres Index published by Z/Yen and the China Development Institute. Shanghai and Shenzhen moved up to fourth and 10th place, respectively. Hong Kong’s strict pursuit of Covid zero, coupled with a brain drain over the past years amid a political crackdown on media and civil society groups, has prompted warnings over the city’s status as a financial hub.

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Private equity's pandemic-era health care push

Brief: Private equity firms invested nearly $70 billion in the life sciences and medical device industries last year — a sign that the pandemic's disruptions didn't cool interest in the sectors, according to a new report by the American Investment Council. Why it matters: The influx of capital could help bring more lifesaving drugs and medical technologies to market. But private equity's growing presence in health care isn't always viewed positively, particularly when it's associated with price increases or reduced access to care. By the numbers: Private equity deals in the life sciences sector were worth nearly $26 billion in 2021, the highest amount in a decade. Medical devices and supplies deals were worth nearly $44 billion last year, which was also the highest value over the last decade — by far. Private equity has invested more than $280 billion into the sectors over the last decade, according to the report. What they're saying: "What COVID brought was probably a bigger focus on health care gaps and needs in the country, and I think you saw more money going into this sector as a result of a new focus on exposing some of the challenges we have in the health care system," American Investment Council CEO Drew Maloney said in an interview.

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Record-Setting Venture Capital Market Shows Signs Of A Slowdown

Brief: When pandemic-induced lockdowns started to spread in March 2020, partners at some venture capital firms became concerned about an overdue correction. Instead, the opposite happened, and the pandemic pushed the market into one of the strongest bull periods on record. Now, amid a geopolitical crisis and a downward-trending stock market, some in the industry say the overheated venture capital climate is finally beginning to cool down. Investors tell Forbes that late-stage deal activity — which set records for both deal count and investment volume in 2021 — has slowed considerably over the past few weeks. They say that crossover investors who helped drive the breakneck pace in 2021 may have overindulged at the late stages. The broader venture ecosystem is realizing the swollen price tags they were willing to buy into to get into the hottest deals of 2021 were inflated, these investors say.

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Nearly 50% of foreign firms in Hong Kong plan to relocate staff

Brief: Nearly half of the European companies in Hong Kong plan to fully or partially relocate operations and staff out of the city, a new survey suggests, in the latest sign that the world's toughest Covid-19 travel and quarantine restrictions are eroding the appeal of Asia's main finance hub. Around 25 per cent of responding companies said they planned to fully relocate out of Hong Kong in the next year, according to a new survey from the European Chamber of Commerce in Hong Kong, while another 24 per cent said they are planning to partially move out of the city. Roughly 34 per cent of firms said they were uncertain about their plans, while just 17 per cent said they had no desire to relocate over the next 12 months. The negative results, which come amid a surprisingly chaotic coronavirus outbreak, are the latest measure of declining business confidence in a once-freewheeling city that has been increasingly isolated from the world over more than 2 years.

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Will the world economy avoid an inflationary bust?

Brief: Today’s high inflation is being compared to the 1970s. However, robust consumer spending, fuelled by pandemic savings, makes for a different set of circumstances. Memories of the 1970s were evoked as the price of Brent crude oil temporarily climbed above $139 a barrel in the wake of Russia’s invasion of Ukraine. That was a period when very high oil prices and elevated rates of consumer inflation plunged some of the world’s major economies into recession. Using the definition of recessions from the National Bureau of Economic Research (NBER), there have been seven such downturns in the US since the 1970s. The first four were all preceded by a pick-up in inflation and interest rates (see chart, below). The decision by the US Federal Reserve (Fed) to raise interest rates amid signs of inflationary pressures broadening out in the US – as they did in the 1970s – has further put parallels with the past back into focus. Could this “economic cycle” play out like those from the 1970s, 80s and 90s, when economic conditions were seemingly more akin than to those seen over the past two decades? The economic cycle, which is sometimes referred as the business cycle, is the period in which an economy moves from a state of expansion to one of contraction, before expanding again.

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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, March 23, 2022:

  • In the United States, government data now shows that one in three Covid-19 cases are caused by the BA.2 subvariant, though overall infections are still on the decline. In New York, New Jersey and Massachusetts, BA.2 now makes up more than half of all cases, according to the Centers for Disease Control and Prevention (CDC). As of March 19, the seven-day average of Covid-19 cases was 27,747, down 18% from a week earlier. As per the CDC’s new guidelines that prioritize hospitalizations over case counts, most of the country is at a low transmission rate. Experts note that the U.S. tends to lag behind the U.K. for about three weeks, so an uptick in BA.2 cases would start to show in about a week or so.
  • In Canada, as restrictions continue to lift across the provinces, many unvaccinated residents are frustrated that they still can’t board planes or trains. Canada’s vaccine mandate came into effect in November 2021, preventing unvaccinated people from boarding commercial planes or trains to either domestic or international destinations. Some other countries have dropped all Covid-19 restrictions and welcomed back unvaccinated travellers, including England, Ireland, Iceland and Norway. But Canada’s Chief Public Health Officer Dr. Theresa Tam says the plan to drop travel restrictions in Canada could be delayed by the emergence of new variants. "The potential for the Omicron resurgence, particularly the subtype BA.2 can still occur. So I think this is just waiting to see what happens with that situation," Tam said.
  • In the United Kingdom, the government of Wales is considering extending mask and isolation rules beyond their planned expiry date of March 28. Hospitalizations and rising case numbers have caused ministers to consider the extension, although it is unclear exactly which rules would be extended, as ministers suggested that they would be picking and choosing from the legislation. Currently, masks are required in Wales on public transportation, indoor shops and in hospitals. Scotland had initially planned to scrap mask mandates on March 21, but will now keep them in place until at least April 4. 
  • A study out of Italy has suggested that proper ventilation systems in schools can reduce Covid-19 transmission by more than 80%. The study, published on Tuesday, compared coronavirus contagion in 10,441 classrooms in Italy’s central Marche region. The 316 classrooms with mechanical ventilation systems had significantly lower rates of Covid-19, with the reduction in cases being more pronounced based on the strength of the system. Most of Italy’s schools do not have proper ventilation systems, with teachers instead being encouraged to keep windows open. The experiment was carried out between September 2021 and January of this year and overseen by the Hume foundation think tank.
  • As South Korea’s case numbers reach 10 million in total, funeral homes and crematoriums are coming under increasing pressure. On Monday the health ministry instructed 60 crematoriums across the country to burn for longer hours, raising the capacity from 1,000 cremations per day to about 1,400. But Health Ministry Official Son Young-rae says long waits and a backlog of bodies are reported in the greater Seoul area.  Crematoriums will be asked to take reservations from outside of their regions – something that doesn’t typically happen – to deal with the backlog. "There have been regional differences in Covid-19 deaths because of various factors, such as the size of the elderly population in each community, and there's also a difference in the capacity of cremations each region can handle," Son said. 
  • In Australia, isolation rules for Covid-19 aren’t likely to change anytime soon, despite Prime Minister Scott Morrison calling them “redundant” in recent weeks. Health Officials in New South Wales and Victoria are hesitant to make any changes after receiving new modelling on caseload trajectories. As the highly transmissible Omicron BA.2 subvariant begins to take hold across the country and vaccine immunity wanes, health officials are becoming increasingly nervous at the thought of abandoning the seven-day isolation rule for household contacts. The discussion on isolation rules comes as the Australian Technical Advisory Group on Immunisation is expected to sign off on a fourth coronavirus vaccine dose for some Australians.

Covid-19 – Due Diligence And Asset Management

Investors shun money market safe haven despite February uncertainty

Brief: Amid ongoing uncertainty in Europe – from war in Ukraine to Covid – investors turned away from European mutual funds en masse in February, but ETFs managed to attract inflows, the latest data from Refinitiv shows. Bucking tradition, money market funds led the redemptions. European mutual funds lost net €67.6bn during the second month of the year, while ETFs took in €9.2bn. Overall flows for mutual funds and ETFs were negative at €58.4bn.Detlef Glow, head of EMEA research at Refinitiv Lipper, said: "It was not surprising that February 2022 was in general a negative month for the European fund industry given the geopolitical situation in Europe, the still ongoing Covid-19 pandemic, and the sluggish market environment." What did come as a surprise, however, was the fact that investors sold out of money market funds, which are usually seen as a safe haven in times of uncertainty.

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Global mid-market M&A remains buoyant in Q1 2022 as entrepreneurs exit on a market high

Brief: Global mid-market M&A activity has continued robustly in the first quarter of 2022, says audit, tax and consulting network RSM, as it announces it worked on 614 completed deals in Europe last year. However, the war in Ukraine – which in addition to its dire humanitarian impact is causing inflation in the cost of raw materials and commodities – could impact deal activity and broader economic confidence in the months ahead. RSM’s advisers supported unprecedented levels of global deal activity in 2021. Among the 614 transactions completed by RSM Firms in Europe last year, the technology, media, and telecom (TMT) sector was the driving force, with 152 deals, followed by 90 completed in the engineering and manufacturing sector.

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UBS to Offer 100% Remote Work Option for Eligible US-based Employees

Brief: Today, UBS announced the launch of its Virtual Worker Framework, a new industry-leading approach to flexible working that will provide US employees in eligible roles with the opportunity to work 100% remotely. UBS will begin a phased implementation of the framework over the coming months to select current and prospective employees across the country. The Virtual Worker Framework represents a natural extension and evolution of UBS’s current hybrid work model. In a global survey, 86 percent of UBS employees stated that they value greater flexibility, including the ability to maintain a remote or hybrid work arrangement. With continued technology enhancements and positive adoption of virtual work, the firm is finding new ways to engage with clients and build trusted relationships. “Hybrid working has positively reshaped the future of our workplace,” said Tom Naratil, President of UBS Americas.

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What’s at Stake When the Majority of Institutional Investors Say That They’re Rethinking Their Portfolios?

Brief: Institutions aren’t just worried about the effect of inflation, the pandemic, and what they fear are outdated asset allocation rules. They’re potentially moving a vast amount of money that will create opportunities and challenges for asset managers — and move markets. Those are some of the findings from Nuveen as part of its 2022 global institutional investor study, which is expected to be published on Wednesday. Sixty-four percent of investors told the asset manager that the current market environment is pushing them to entirely rethink their portfolio construction strategies.In the survey of 800 institutions, each of which had a minimum of $500 million in assets, Nuveen found that the overhaul is being prompted by multiple head-shaking developments —  including inflation rates that haven’t been seen in 40 years, the pandemic, and climate change — that are affecting the value of assets not just in the future, but today.

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Partners Group's Strong Corona Rebound

Brief: After reporting strong results for 2021, the investment firm is raising its dividend in line with its assets under management growth. Zug-based Partners Groups posted a profit increase of 82 percent amounting to 1.46 billion Swiss francs ($1.60 billion) in 2021, it said in a statement Tuesday, after signaling the upward trend in January. The private equity company's assets under management (AuM) swelled to 17 percent totaling $127 billion, while performance fees increased by 46 percent of total revenues driven by «record exit activity and strong portfolio performance post COVID-19,» it said. The company will propose a dividend increase of 20 percent to 33 francs per share, in line with its AuM growth. Partners Group reconfirmed its guidance of gross client demand in the range of $22-26 billion in 2022. Its investment exposure to Russia and Ukraine was below 0.2 percent of AuM, it 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, March 22, 2022:

  • United States drug maker Pfizer Inc. announced on Tuesday that it will sell four million courses of its Covid-19 pill Paxlovid to Unicef for use in 95 low-income countries. The deal will make up nearly 3 per cent of the 150 million courses that Pfizer expects to produce in the coming year. The 95 countries to receive the shipments make up 53 per cent of the world’s population.  Pfizer Chief Executive Albert Bourla said that the deal was part of the company’s strategy to make sure the pill was available to everyone "regardless of where they live or their circumstances." While the transaction price was not disclosed, Pfizer has said the low to middle-income nations will receive the pill at a not-for-profit price, while higher income nations will pay more. In clinical trials, the Paxlovid pill has shown it is up to 90 percent effective in preventing hospitalizations caused by Covid-19, which is significantly better than the Merck & Co. antiviral pill molnupiravir. Paxlovid is a two-dose treatment that pairs nirmatrelvir with ritonavir and is to be taken over a five-day period after symptoms of Covid-19 are present.

  • The Canadian government is still hesitant to release any information on when the country will see an end to all Covid-19 restrictions. Health Minister Yves Duclos fielded a number of questions from Conservative and NDP members of the House of Commons on Monday, who wanted to know what conditions needed to be met for Canada to end restrictions once and for all. Duclos said the decision will rely on several factors, including vaccination rates, hospital capacity and the epidemiological effects of long-Covid. “To be responsible means that you need to follow the evidence, the science and the precautionary principle and adjust or analyze policies as things evolve,” he said. Opposition parties have long called on the government to disclose their decision-making process for federal Covid guidelines and how public health requirements are set. “I find that quite shocking, that there’s not an answer to be given, that it’s much too complex for the health committee and for Canadians to understand,” Conservative MP Stephen Ellis said to the minister at committee.

  • In the United Kingdom, the number of people in hospital has reached record highs in several areas as the BA.2 subvariant sweeps across the nation. In Scotland, 2,128 people are in hospital up from its previous peak of 2,053 last January. In the south east and south west of England cases are breaking records set in the height of the second wave in February 2021. In the whole of the U.K., nearly 15,000 people are in hospital which makes a week over week increase of 22 per cent. The spike in cases has in part been caused by the relaxation of all covid restrictions that came in to place on February 24. Last week, First Minster of Scotland Nicola Sturgeon announced that the law requiring masks to be worn on public transport and other close-proximity settings would not be scrapped as initially planned due to the current spike in cases. It is now thought that one in every fourteen people in Scotland has Covid-19 which is up from one in every eighteen the week previous.  

  • France is reporting a 36 per cent rise in new Covid-19 cases after most restrictions were lifted in the country on March 14. The 7-day average is closing in on 89,000 compared to just 60,000 the week previous. French President Emmanuel Macron – who is up for re-election in three weeks’ time – decided to lift the restrictions citing a mass-decline in case numbers. The people of France are no longer required to wear masks in public settings, except for on public transport, in hospitals and in other medical facilities. The government has also lifted vaccine passport requirements for bars and movie theaters. Hospitalizations in the country continue to drop, but at a slower pace than the previous weeks at just 1.7 per cent, the slowest decline since February. The Alsace region, which was also hit hard at the beginning of the pandemic is seeing the largest increase in cases with over 1000 per every 100,000 inhabitants. 

  • China has locked down the industrial city of Shenyang late Monday night as nearly 5,000 new cases of the virus were recorded across the country on Monday. The city of 9 million inhabitants was put into an emergency lockdown overnight after fearing that cases from the neighboring province of Jilin have spread to Shenyang and the province Liaoning. Shenyang recorded 47 new cases on Tuesday causing major manufacturers, like BMW, to close their housing complexes and barred residents from leaving without a 48-hour negative test result. The country recorded two deaths resulting from complications caused by the virus on Saturday marking the first deaths in over a year. President Xi Jinping has said there is a need for the country to “minimize the impact” of Covid-19 on the economy but has remained steadfast in his Covid Zero policy. Several larger cities, like Shanghai have avoided a full-scale lockdown but have instead isolated individual buildings, and for the first time is looking to American drug maker Pfizer’s antiviral drug Paxlovid to combat severe infection in country. China received 10,000 courses of the drug on Sunday.

Covid-19 – Due Diligence And Asset Management

How the pandemic shaped Gen Z's approach to saving and investing for retirement

Brief: Jason Dorsey, Gen Z Researcher and Author, joins Yahoo Finance Live to discuss how Gen Z and millennials are approaching retirement savings and finances emerging from the shocks of the pandemic. Video Transcript. DAVE BRIGGS: Is there a generational gap when it comes to saving for the future? Well, study after study has, indeed, shown that, but it might not be exactly what you think. Let's talk about it with Jason Dorsey. He is a Gen Z researcher and the author of "Z Economy." Jason, good to have you on, my friend. So tell me- JASON DORSEY: Thank you for having me. DAVE BRIGGS: --how are Gen Zers preparing for the future? Are they, indeed, putting away money for retirement? JASON DORSEY: They are, and it's pretty shocking. When we talk about Gen Z, the oldest members are about 25 years old. And what our research shows in multiple studies is that Gen Z is actually saving money. They're trying to hold on to the money that they were going to spend. They'll even have a birthday party. Keep the money, and then ask their parents for money to go spend, which is pretty funny. The Gen Z, right now, 70% of them say that they need to be saving money today in order to be able to retire one day.

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Are MSMEs ready for private equity, venture capital? What experts say

Brief: India's MSME sectors were highly affected by the wrath of Covid-19. According to CII, MSME sectors employ about 12 crore people and about half of the Indian exports. According to experts the root problem from the domestic MSME sector is failure to attract the private capital into their business, leading to constant starvation for funds. “MSME owners and entrepreneurs should thrive to rope in professional money. Without any predetermined rate of interest, private investments are the most expensive form of capital for a business. One should use this capital in areas where the return on investments is higher than the cost of capital. Investing this capital judiciously in the needed business areas can fetch much higher returns than the actual cost. Lenders are not active participants of your business, whereas PE funds or VCs participate in the growth actively and give a professional structure to the business.

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Traders Sleep in Offices to Keep Working Amid Shanghai Lockdowns

Brief: As China’s major financial centers confront their worst Covid outbreaks to date, many fund managers are rolling out sleeping bags on trading floors across Shanghai and Shenzhen. Traders are volunteering to take turns camping out in their offices to avoid restrictions sweeping through the cities at a time when Chinese capital markets are experiencing the biggest bout of volatility since mid-2020. With Shanghai becoming one of the nation’s epicenters for new coronavirus infections, employers are preparing for the possibility of sudden lockdowns that could forcibly quarantine traders at homes or work for days or even weeks. That means making sure workers have enough provisions on hand in case they get stuck in the office. At AXA SPDB Investment Managers Co., for example, staff is being supplied with airbeds, instant noodles and emergency kits.

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Former White House Adviser Targets Viral Threats in New CEO Role

Brief: Former White House biodefense adviser Rajeev Venkayya is taking the reins at a new venture-backed company that aims to fill a gap in treatments to combat Covid-19 and future pandemic threats. Venkayya, who stepped down as head of Takeda Pharmaceutical Co.’s vaccines unit last month, is now the chief executive officer at Aerium Therapeutics, a biotech company backed by Omega Funds. The company launched Tuesday with an initial focus on developing new monoclonal antibodies against Covid. The drugmaker is advancing with two such antibodies that have shown promise against the delta variant as well as omicron and its offshoots in animal tests, according to Aerium. The data will be submitted to a medical journal, meaning it hasn’t yet been peer-reviewed. Aerium sees an opportunity to expand in the field and a need for new tools to help patients, especially vulnerable people who haven’t been able to benefit from vaccines, after omicron overpowered some antibody treatments and raised questions about the efficacy of others. “The virus evolved very quickly around vaccines and therapeutics,” Venkayya said in an interview. “We increasingly will be trying to get away from the variant-chasing game and into the space of broadly protective therapeutics.”

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Inflation protection: Is gold still the best hedge?

Brief: Gold’s comeback amid Russia’s war in Ukraine and monetary policy uncertainty, the role of gold exchange-traded commodities (ETC) in a multi-asset portfolio and combining precious metals with ESG were the topics discussed at ETF Stream’s recent webinar in partnership with HANetf. The webinar, titled Inflation protection: Is gold still the best hedge?, started by looking at the dramatic return of gold ETCs to favour after a subdued COVID-19 recovery period in 2021. Anthony Bamber, head of business development at The Royal Mint, which co-created the Royal Mint Physical Gold Securities ETC (RMAU), said: “Towards the end of February, we saw gold jump around 6% which was the largest monthly gain since May 2021. “As everything in Russia and Ukraine began to escalate further in March, it got up to its record highs again. It was these escalations plus other underlying issues such as inflation and the energy crisis that caused this.

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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, March 21, 2022:

  • In the United States, the country’s top infectious disease expert says a new surge of cases is likely thanks to the BA.2 virus subvariant. Dr. Anthony Fauci told ABC’s This Week on Sunday that the latest surge will not be a dangerous one, and also added that he thinks the country is “clearly going in the right direction” on the coronavirus pandemic. According to Fauci, the BA.2 variant is about 50-60% more transmissible than Omicron. “So the bottom line is we likely will see an uptick in cases as we’ve seen in the European countries, particularly the UK, where … they have BA.2,” Fauci said. “Hopefully, we won’t see a surge. I don’t think we will. The easiest way to prevent that is to continue to get people vaccinated. 
  • In Canada, the popular organization known as Vaccine Hunters will shut down its operations after one year of helping Canadians hunt for vaccines across the country. Vaccine Hunters launched in March 2021 and quickly grew in popularity on several social media channels. The organization became so widely known that it partnered with the City of Toronto and got shoutouts from Prime Minister Justin Trudeau and Dr. Theresa Tam. “While Canada’s fight against COVID-19 isn’t over, we are happy that millions of Canadians are fully vaccinated with vaccines now being readily available for anyone who is looking,” the group said in a news release. To date, 85% of Canadians are fully vaccinated, 89% of eligible Canadians have received at least one dose and 47% have received their boosters.
  • In the United Kingdom, the National Health Service (NHS) has started offering second booster shots to those who are at higher risk from Covid-19. Approximately 5 million people will be eligible; those who are 75 and over, those living in long-term care homes and those who are immunocompromised. These groups will be contacted by NHS and advised to book an appointment online or by phone. The rollout comes after the Joint Committee on Vaccination and Immunisation advised the government last month that the three at-risk groups be offered a second booster to deal with waning immunity. Covid-19 cases and hospitalizations in the U.K. are on the rise, which experts say is linked to the lifting of restrictions.
  • Germany’s parliament voted on Friday in favour of abolishing all remaining coronavirus restrictions, despite rising case numbers and hospitalizations. The new legislation would see the end of mask mandates except in places like long-term care homes and public transportation. Initially the new rules were supposed to take effect from Sunday, but a transitional period will take place until April 2 after some opposition from Germany’s 16 state leaders. Health Minister Karl Lauterbach defended the decision. "We can't continue to put the entire country under a shield in order to protect a small group of people who are unwilling to get vaccinated," he said. "The balance is being shifted."
  • Hong Kong will ease some coronavirus restrictions next month, in an apparent shift from the country’s zero-Covid policy to living with the virus. Chief Executive Carrie Lam announced that a ban on flights from nine countries will be lifted, quarantine will be reduced and schools reopened, after much backlash from businesses and citizens. A ban on flights from Australia, Britain, Canada, France, India, Nepal, Pakistan, the Philippines and the United States will be lifted from April 1, as Lam says the ban is “no longer timely or appropriate.” Restrictions on gathering limits, masking and business operations will begin to lift in three phases from April 20. Schools will resume face-to-face learning on April 19, and the country’s mandatory mass testing scheme has been suspended for now.
  • In Australia, the federal government has announced a new $75.5 million support package for those in the travel industry dealing with Covid-19. The new program, which will consist of grants between $7,500 and $90,000, intends to offer targeted assistance to travel agents and tour arrangement providers. The funds are to be directed to helping travellers rebook trips with Covid-related credits. Dan Tehan, the country’s tourism minister, said the package would help the industry rebound from the pandemic downturns. “Australia’s tourism industry is bouncing back, with international and state borders now open and a date set for the resumption of cruising,” he said.

Covid-19 – Due Diligence And Asset Management

KKR Says Investors Will Need to Take More Risk to See Returns

Brief: KKR & Co. warned that investing will require more risk given the market turmoil driven by Russia’s invasion of Ukraine. There may be opportunities in beaten-down growth stocks, liquid credit and inflation-hedging proxies including real estate and infrastructure, KKR’s Henry McVey and Racim Allouani said in a March 9 report to clients. Tightened financial conditions are also creating the prospect of partnering with companies facing temporary business disruptions or that have weak capital structures, they said. Low rates and government stimulus have boosted markets in recent years, with investors enjoying outsized returns even with relative safe portfolios. The war has created turmoil across asset classes from stocks and bonds to commodities and “tremendous volatility,” they noted.“The current crisis makes forecasting risk parameters such as risk of loss, volatilities, and correlations only more challenging,” said McVey, KKR’s head of global macro, balance sheet and risk, and Allouani, a managing director.

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The stock market is depressed, and apparently that's great

Brief: Markets have rallied nicely off the early March lows that were triggered by the start of Russia's war on Ukraine, but they are still dealing with a bout of depression. The percentage of individual investors who consider themselves bullish has averaged just 23.9% over the past 10 weeks, according to the American Association of Individual Investors (AAII). Truist co-chief investment officer Keith Lerner points out this is the lowest average level of bullishness since the June 2016 Brexit referendum and one of the least optimistic readings since the survey's inception in 1987.  So what has this level of depression historically meant for the stock market in the months ahead? You guessed it, a rally! Historically, these low levels on the survey have been followed by consistent and positive returns on a six- to 12-month basis for the S&P 500, Lerner notes. Only in the land of investing does bad equal good (maybe it does in other places, who knows).

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Companies Shelve $25 Billion of Fund-Raising Deals as War Rages

Brief: Firms across the globe are ditching fund-raising deals at a quickening pace, as volatility destabilizes credit markets following Russia’s invasion of Ukraine. Electric car giant Tesla Inc. is the latest big name firm to scrap financing plans, as it postponed a $1 billion offering of bonds backed by leases on its vehicles last week. Almost 80 companies, nearly half from the U.S., have put at least $25 billion of deals on hold since the start of the war nearly a month ago.  “There has been a severe jolt to investor confidence since the invasion of Ukraine as sanctions have been slapped on Russia and commodity prices roared upwards,” said Susannah Streeter, senior investment and markets analyst with Hargreaves Lansdown Plc. The caution has reached all corners of the globe. India’s Mumbai International Airport Ltd. recently delayed a dollar bond deal, SS&C Technologies Holdings Inc. halted a $1.7 billion buyout loan on Wednesday and Brazil’s Trocafone SA scrapped an initial public offering.

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Pandemic hiring boom: Federal government added nearly 20,000 workers in a single year

Brief: The Trudeau administration spent so much money during the first year of the pandemic that it was easy to lose track of the profound growth taking place in the size of the federal government’s workforce.Employment across the country jumped more than six per cent year over year to 319,600 for all departments and agencies, according to data compiled by Treasury Board. That’s an increase of nearly 20,000 between the first three months of 2020 and the same period last year. Last year’s increase was more than double the average annual employment gains posted by federal government workers between 2015 and 2020, covering years the Liberals have been in power. The financial impact was significant: The federal government’s total payroll reached nearly $60 billion in fiscal 2021, up $4.4 billion from the previous year, according to the public accounts.

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Investor behavior in Europe is mirroring the market’s worst crises, new research shows

Brief: European fund flow patterns so far this year are emulating historical crisis periods for markets, including the 2008 global financial cash, according to new research from data firm Refinitiv. A sluggish market environment, lingering concerns around the Covid-19 pandemic and the emerging geopolitical tensions in Europe meant the continent’s fund industry saw net outflows in February that took overall flows so far this year to -57.2 billion euros (-$63.2 billion), according to the research. Mutual funds — pools from investors allocated by fund managers into stocks, bonds, money market instruments and other securities — faced 67.6 billion euros of outflows in February alone. Meanwhile exchange-traded funds (ETFs) — baskets of securities that trade on regular stock exchanges — enjoyed inflows of 9.2 billion euros.

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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, March 18, 2022:

  • In the United States, the Biden administration’s COVID-19 team will be undergoing a change as COVID-19 coordinator Jeff Zients and his deputy Natalie Quillian are leaving the administration next month. The White House announced on Thursday Dr. Ashish Jha, the dean of the Brown University School of Public Health will serve as their replacement. The Associated Press notes the changeover comes as the Biden administration has come under criticism for confusing public messages around the virus as many restrictions and mandates are easing. Therefore, it is not surprising the White House’s statement highlighted Dr. Jha’s communication skills and familiarity to Americans as he has been a fixture on cable news outlets during the pandemic.
  • Canada’s population grew by nearly half a million in 2021, closer to the record population growth the country was experiencing pre-pandemic. According to Statistics Canada, the number of people living in the country rose 1.2% or 457,888, to 38.5 million in 2021. The number is up from 2020 when the COVID-19 pandemic first took hold, when the population only increased by 160,273 people. Most of the population gain came from international migration as the Canadian federal government eased most travel restrictions for those coming to the country for work, school, or family reunification – with the numbers increasing to four times as many as compared to 2020. 
  • In the United Kingdom, a cross-section of parliamentary MPs have said the Coronavirus Act was passed in an “unsatisfactory” manner. The Guardian reported ministers failed to allow parliament enough of an opportunity to scrutinize the 329-page Coronavirus Act of 2020 as sweeping laws were passed to tackle the COVID-19 pandemic. “It is unsatisfactory that since the Coronavirus Act was passed, in just three sitting days in March 2020, parliament has been unable to substantively debate its provisions as was promised during its passage,” said the committee chair, William Wragg. The committee points to the two-year “sunset clause” to the bill and if it was right approach attaching “stronger and broader powers” than they might otherwise not have been willing to accept.
  • In South Korea, government officials are trying to calm public fears that the coronavirus pandemic response is faltering. On Thursday it was reported there were 429 deaths due to COVID-19 in the last 24 hours, nearly 140 more than the previous record set on Tuesday. The 621,266 coronavirus cases registered on Thursday also shattered the previous high of 400,624 set on Wednesday. The outbreak has been significantly larger than what had been forecast by government officials, who maintain the Omicron variant is nearing its peak. However, even though South Korea set a record for COVID-19 deaths, it has a much lower death rate, in relation to population size, than the United States or many European nations, which officials attribute high vaccination rates as more than 68% of the South Korean population have received booster shots.
  • Japan’s government have formally decided to lift all remaining coronavirus emergency curbs as scheduled, starting next week. Tokyo is one of 18 other areas expected to see restrictions end on Monday March 21st. When the Omicron variant was making its way through Japan earlier in the year, 36 prefectures were subject to some kind of coronavirus related restriction. When the measures are lifted it will be the first time since January 8th, Japan has been free of such measures, but Prime Minister Fumio Kishida said there will still be a transition period where Japanese citizens should continue to take maximum caution against spread of infection. 
  • The World Health Organization (WHO) have stated the evaluation of Russia’s Sputnik V coronavirus vaccine has been postponed due to the country’s ongoing war in Ukraine. A WHO vaccine expert had stated the United Nations’ health agency was originally scheduled to visit Russia on March 7th to assess the facilities where Sputnik V is produced, but due to the war that inspection had been postponed for a later date. The WHO has been evaluating Russia’s Sputnik V vaccine since last year and its authorization would allow the Russian-made vaccine to be purchased as part of the UN-backed COVAX effort to distribute vaccines worldwide and would lend creditability to the jab that some other countries have been slow to take up.

Covid-19 – Due Diligence And Asset Management

Ukraine War Hits World Economy Like an Earthquake, IMF Head says

Brief: The war in Ukraine is like a powerful earthquake that will have ripple effects throughout the global economy, especially in poor countries, according to the head of the International Monetary Fund. The conflict will lead to lower growth and faster inflation worldwide, Managing Director Kristalina Georgieva said Friday on an IMF panel about the lender’s strategy to support fragile and conflict-affected nations. Countries, businesses and households will face more serious debt problems after a jump in borrowing during the first year of the pandemic, she said. Ukraine and Russia together account for more than a quarter of the global trade in wheat, and a fifth of corn sales. The longer Russian forces remain in Ukraine, the longer tractors and combines to harvest the nation’s crops stay idle, threatening food security far beyond the region, Georgieva said. “We would have some very significant problems that would be particularly difficult for fragile states,” Georgieva said. The world tends to focus on “front-page issues, and not on this second- and third-order-of-impact consequences,” she said.

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Fed Governor Waller says half-point rate hikes could be needed as ‘inflation is raging’

Brief: Federal Reserve Governor Christopher Waller told CNBC on Friday that the central bank may need to enact one or more 50-basis-point interest rate hikes this year to tame inflation. Though he voted this week for just a 25-basis-point move due to uncertainty from the Russian invasion of Ukraine, Waller said he thinks the Fed may need to be more aggressive soon. “I really favor front-loading our rate hikes, that we need to do more withdrawal of accommodation now if we want to have an impact on inflation later this year and next year,” he told CNBC’s Steve Liesman during a live “Squawk Box” interview. “So in that sense, the way to front-load it is to pull some rate hikes forward, which would imply 50 basis points at one or multiple meetings in the near future.” In addition to the rate hikes, Waller said he thinks the Fed needs to start reducing its bond holdings soon. The central bank balance sheet has ballooned to just over $9 trillion, and officials are preparing the process to start rolling off some of their holdings. Waller said that process should start “in the next meeting or two.” “We’re in a different place than we were before,” he said. “We have a much bigger balance sheet, the economy’s in a much different position. Inflation is raging. So, we’re in a position where we could actually draw down a large amount of liquidity out of the system without really doing much damage.”

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American private equity firm Sycamore has designs on fashion chain Ted Baker

Brief: An American private equity firm is weighing a potential takeover bid for Ted Baker, the British fashion chain. Sky News has learnt that Sycamore Partners is working with advisers to examine a potential offer for the London-listed company. Sycamore specialises in investments in the retail sector, having previously owned brands such as the upmarket footwear label Kurt Geiger. This week, it was linked with a $9bn takeover bid for Kohl's, the US department store chain. It was also reported to be among the suitors circling Boots, Britain's biggest chain of high street chemists, although City insiders have expressed scepticism about Sycamore's eventual involvement in the auction.

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50% of companies want workers back in office 5 days a week-why experts say this strategy could fail

Brief: After two years of working from home – and seeing return-to-office plans derailed by new Covid-19 variants – a growing number of companies are eager to get employees back to the office. About 50% of leaders say their company already requires or is planning to require employees to return to in-person work full-time in the next year, according to new research fromMicrosoft, which surveyed 31,102 workers around the world between January and February. This number stands in sharp contrast, however, to what employees really want:flexibility. In the same report, 52% of workers said that they are thinking of switching to a full-time remote or hybrid job in 2022.  “A lot of business leaders have told me that they don’t believe in hybrid work, that it has no place in their culture,” Elise Freedman, a workforce transformation practice leader at Korn Ferry who is helping companies coordinate their return-to-office plans, tellsCNBC Make It

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Hedge Fund Manager Pierre Andurand Sees a Path to $200 Oil By End of the Year

Brief: Commodities trader Pierre Andurand sees a path for crude oil to get to $200 by the end of the year as historically tight markets struggle to ramp up production and replace lost supply from Russia. He estimates some 4 million barrels per day have been taken out of circulation as a result of Russia’s invasion of Ukraine and subsequent restrictions on doing business with the Putin government. While releasing oil from strategic petroleum reserves could help boost supply in the short-term, it’s likely that the energy industry won’t be able to increase capacity to fully offset the lost barrels. Russian oil will likely be out of the market even if Putin agrees some sort of imminent ceasefire with Ukraine, the founder of Andurand Capital Management LLP said on the latest episode of the Odd Lots podcast. Meanwhile, shale producers and some OPEC members will also struggle to boost production after years of underinvestment.

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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.