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Covid-19 Diligence Briefing

Our briefing for Friday October 9, 2020:

  • In the United States, the on-again, off-again coronavirus stimulus talks are on again? Multiple media outlets are reporting the White House will take a $1.8 trillion coronavirus offer to Democrats as the sides work to strike a deal before the election next month. The plan is an increase from the $1.6 trillion offer the Trump administration previously proposed, but below the $2.2 trillion bill House Democrats passed earlier this month. House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin plan to talk on Friday about a possible deal on pandemic relief. This caps a confusing week where the stimulus plan was off the table altogether, brought back to life via piece-meal deals, and now whatever this round of negotiations may lead to. 

  • As Canada heads into its Thanksgiving long weekend, Prime Minister Justin Trudeau has warned the country is at a tipping point, with modelling showing as many as 20,000 new cases by October 17th. “Not only is the second wave underway, yesterday (Thursday) we hit the highest daily recorded cases, well above what we saw last spring. We flattened the curve before, we can do it again,” said Trudeau. Elsewhere in the country, Ontario reported 939 new cases of COVID-19 on Friday, the province’s highest single-day total yet, which has caused Premier Doug Ford to move three major “hot" zones – Toronto, Peel Region and Ottawa under stricter measures. As of Saturday, those areas will no longer have indoor dining and will close gyms, movie theatres and casinos. These measures will be in place for 28 days and the government is also calling on people in those areas to leave their homes only for essential purposes.

  • The United Kingdom’s hospitality sector has taken a beating from the COVID-19 pandemic and now they are taking more shots – this time from health authorities. Officials believe the normalization of eating out and drinking in pubs once the restrictions were lifted in the summer has contributed to the UK’s second wave of COVID-19. This response has triggered the rage of an already frustrated hospitality industry who say there is little, to no proof of that being the case and have called on the government and health officials to provide hard data to back up the need for a nationwide curfew and local lockdowns.

  • Spain and its central government have struck back hard after a Madrid High Court tried to put a roadblock in their COVID-19 restriction plans. The government has used their emergency powers to reimpose a ban on people leaving and entering Spain’s capital city – Madrid. The “state of alert” move gives national and regional authorities sweeping powers for the initial period of two weeks. The national government emphasized Madrid’s infection rate of 563 COVID-19 cases per 100,000 people over the past two weeks is more than twice the total for Spain as a whole. 

  • One day after Germany’s health minister considered the surge in cases as “alarming”, Chancellor Angel Merkel issued a warning of her own. Citing the country is in the midst of a watershed moment, Chancellor Merkel met with the mayors of Germany’s 11 largest cities and said they agreed to thresholds that would trigger tighter restrictions. Merkel will speak again to all those involved in two weeks to determine how effective the measures have been. Germany, which is Europe’s largest economy, has seen more than 4,000 new coronavirus cases for the second day in a row, but Chancellor Merkel has ruled out a shutdown as seen during the first wave. Instead, Merkel is urging citizens to respect hygiene and social distancing rules.

  • China has agreed to join a World Health Organization (WHO) initiative aimed at making sure a fair distribution of an eventual COVID-19 vaccine will be distributed around the world. China’s foreign ministry spokesperson said the move was evidence of the country’s commitment “to turn COVID-19 vaccines into a global public good.” The Covax initiative, which is headed by the WHO, along with two other organizations is aiming to provide two billion COVID-19 vaccinations throughout the world by the end of 2021.

Covid-19 – Due Diligence And Asset Management

EQT is said to Explore Takeover of $11 Billion Dutch Carrier KPN

Brief: EQT AB, the European private equity firm, is considering a takeover of Dutch phone company Royal KPN NV in what would be its largest-ever acquisition, people with knowledge of the matter said. The buyout firm is in the early stages of discussing the feasibility of a deal with potential advisers, the people said, asking not to be identified because the information is private. Shares of KPN have fallen 15% in Amsterdam trading this year, giving the company a market value of about 9.4 billion euros ($11.1 billion). No final decisions have been made, and there’s no certainty that EQT’s deliberations will lead to an offer, the people said. Any suitor would want to win the backing of KPN management and the Dutch government after the former telecom monopoly previously fought off an unwanted takeover. Representatives for EQT and KPN declined to comment. KPN, which is valued at about 16 billion euros including debt, has reported declining revenue for more than a decade. Its shares are trading near an all-time low amid fierce competition from regional giants like Vodafone Group Plc. The company appointed Joost Farwerck as chief executive officer a year ago. He took over a business that was cost cutting and in search of new revenue streams to ease competitive pressures in its home market, where rivals have been merging.

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‘Treasuries on Steroids’: U.S. Banks’ Mortgage Bond Trading Bonanza

Brief: Wall Street banks are on track for a record year of revenue from trading U.S. government-backed mortgage debt, industry sources told Reuters, amid a surge in demand - from the Federal Reserve in its battle against the pandemic, and from investors hunting yield. Revenue from trading bundles of home loans at the biggest global banks - including JPMorgan, Citi and Goldman Sachs among others - is expected to top $3 billion in 2020, one source with direct knowledge of the banks’ trading revenue said, besting last year’s peak of $2.5 billion. The source declined to be identified because the data isn’t publicly available. “Buying mortgages in March was one of the best trading opportunities in mortgages since the last financial crisis,” said Daniel Hyman, head of agency MBS portfolio management at Pacific Investment Management Company (PIMCO). The surge in demand and activity has also allowed new names to enter the space. Bank of Montreal, which acquired mortgage security broker-dealer KGS-Alpha Capital Markets in 2018, is now actively trading residential mortgage-backed securities or RMBS, according to the source.

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A Record Number of Private Equity Funds Are in the Market – But Closing Them Won’t Be Easy

Brief: The alternative investment data provider shows that a total of 237 private equity funds closed in the third quarter, which is the lowest quarterly total since at least 2015. Meanwhile, there are 3,968 in the market seeking capital, a record number of funds since 2015.  The coronavirus pandemic has changed private equity fundraising dynamics significantly: Most meetings are now conducted virtually, and the public market correction may have stalled fresh capital commitments, according to Preqin.  During the first three quarters of 2020, just 39 percent of funds closed in 12 months, according to the data. This is at least six percentage points lower than each of the previous five full-year periods. What’s more, 45 percent of funds took more than 18 months to close — the largest amount since 2015, per Preqin. There are, of course, anomalies. On October 1, for example, European private equity firm Nordic Capital announced that it had closed its tenth fund, which it raised fully remotely, with €6.1 billion (US$7.17 billion) to deploy. Likewise, on September 29, private equity firm Advent International closed a $2 billion fundraise for its seventh Latin American fund.  These fund closes are indicative of another trend Preqin pointed out: Despite the pandemic, fundraise sizes grew slightly quarter-over-quarter, to $536 million.

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Hedge Funds Stumble in September, as Stormy Markets Bring Five-Month Surge to an End

Brief: Hedge funds have suffered their first monthly loss since March, as fears over the growing spread of coronavirus in Europe and the US – combined with the imminent presidential election and uncertainty over the US economy – weighed down on managers of all hues in a decidedly patchy September. New data published by Hedge Fund Research shows that only event driven strategies emerged from September in positive territory, as losses swept through the equity, macro and relative value sub-sectors. The flagship HFRI Fund Weighted Composite Index – an across-the-board snapshot of all strategies - dumped 1.2 per cent last month, its first monthly decline since March, when markets were sent spiralling by the Covid-19 outbreak.  The index’s Q2 surge of 9.14 per cent was essentially halved during the following quarter, with the index gaining some 4.06 per cent between July and September.  The end of its five-month positive run last month has left the index flat for the year, at 0.5 per cent. The HFRI Equity Hedge (Total) Index – which measures the performance of a broad range of equity-focused managers – gave back 1.53 per cent in September. Only healthcare-focused equity hedge funds were up last month, rising 1.94 per cent, with fundamental equity, multi-strategy, quantitative and energy/materials strategies all registering losses. Overall, HFR’s equity benchmark remains up 2.24 per cent since the start of 2020.

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Hedge Fund-Pick Arcturus Gambles on a One-Shot Covid Vaccine

Brief: Two-and-a-half years ago Joseph Payne was ousted from Arcturus Therapeutics Holdings Inc., the biotech company he helped found, by what he calls a “dysfunctional board.” Four months later he was back at the helm and the now $1.2 billion firm is racing to push out a Covid-19 vaccine alongside the world’s leading contenders. The contentious transfer of power came after the previously private Arcturus gained access to the public markets in a reverse merger with Alcobra, a struggling biotech. Today, Arcturus’s goal is to develop a potent low-dose one-shot messenger RNA Covid-19 inoculation. Like other vaccine and drug developers chasing Covid medicines, Payne’s company has picked up steam since mid-March when U.S. states started shutting down. The shares have surged more than fivefold since then and climbed as much as 6.3% in Thursday trading. Hedge funds have taken notice, with actively managed firms making up 20% of the company’s holder base as of Oct. 4. Pure play health fund HealthCor Management LP has a 6.5% stake after adding almost 1.5 million shares in the third quarter, according to data compiled by Bloomberg. Arcturus kicked off a dose-finding study in Singapore in August and has clinched supply deals with the governments of Israel and Singapore. It wasn’t among the few companies singled out for the Trump administration’s Operation Warp Speed and it hasn’t signed any large-scale government contracts. But Payne, the company’s president and chief executive officer, sees this as an advantage.

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At a Crossroads: Coronavirus Upheaval Threatens Progress on Gender Diversity in Investment Industry

Brief: The asset management industry has reached a critical period for nurturing gender diversity, industry experts have advised, as investment firms choose how they will adapt to new challenges caused by the coronavirus pandemic. Baroness Helena Morrissey says the investment industry has always been “slow to shift gears” in the face of problems, including gender diversity and transparency over fees.  Baroness Morrissey founded the campaign group the 30% Club in 2010, which targeted a minimum 30 per cent female board members, in addition to being the former chief executive of Newton Investment Management and chair of the Investment Association.  She now chairs the Diversity Project, which works to improve diversity in all dimensions in the investment and savings industry and serves as a peer in the House of Lords. Recent progress has been “very tentative”, with the share of women in fund management roles reaching 11 per cent in 2020. In 2016, women accounted for 10.3 per cent of fund managers.  Citywire estimates that at the current rate of promoting women to senior roles, it will take two centuries before female fund managers achieve parity with their male colleagues.  Baroness Morrissey believes that even the slow progress the industry has made to hire and promote more women could slide backwards, if firms fail to make positive efforts now. “It's too soon for it to withstand a body blow in the form of people just taking their eye off the ball at this point,” she says. 

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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 October 8, 2020:

  • In the United States, the next presidential debate’s status is about as chaotic when Donald Trump and Joe Biden took the stage a little over a week ago. It all started Thursday morning when the Commission on Presidential Debates announced the second debate, scheduled for October 15th would be virtual due to President Trump’s recent positive coronavirus diagnosis. Joe Biden’s camp agreed to the virtual setting, but the Trump team declined and came back with a counteroffer of pushing back the debate one week to October 22nd. Joe Biden’s camp declined that option stating, “Donald Trump doesn’t make the debate schedule; the Debate Commission does.” 
  • In Canada, the government will be lifting COVID-19 cross-border travel restrictions for a wider range of family members. As of Thursday, Canada will allow entry to certain extended family members of citizens and permanent residents, including couples who have been dating for at least for a year and their children, as well as grandchildren, siblings and grandparents. The government will also consider “potential limited release from quarantine” for some visitors. In other COVID-19 related travel news, Bloomberg is reporting Canada is aiming to capitalize on its more conservative approach to its border closures once the pandemic subsides. The article notes Canada will look to promote itself as a safe destination for tourists as compared to other nations like the United States.
  • In the United Kingdom, a noticeable increase in coronavirus cases over the past week is highlighting the strain on the country’s test and trace program. For instance, the number of people testing positive for the coronavirus rose more than 50% over the last week and fewer than 70% of people who had been in contact with these cases were reached and advised to self-isolate. According to the test and trace program, positive cases, “have been rising steeply over the past five weeks with over seven times as many positive cases identified in the most recent week compared to the end of August.”
  • Spain’s efforts to contain the coronavirus surge suffered a setback on Thursday when a Madrid court blocked the regional government from applying curbs on movement in one of Europe’s most notable COVID-19 hotspots. The Madrid High Court ruled that restrictions which came into effect last Friday by Pedro Sanchez’s central government and regional administration, violated fundamental rights. The rules had officially banned people from entering and exiting the city without good reason such as work, or education. 
  • Germany’s health minister has noted the biggest surge in daily cases of coronavirus since April as “alarming”. The Robert Koch Institute (RKI), Germany’s main public health authority, recorded over 4,000 cases in the past 24 hours – 1,200 more than Wednesday. Lothar Wieler, head of the RKI said it’s possible that Germany could see 10,000 new cases a day and that “the virus would spread in an uncontrolled fashion.” The new spikes are concerning for a country that handled the first wave much better than some of their European counterparts, such as France and Spain.
  • Brazil surpassed five million cases of the coronavirus on Wednesday and while the country is doing better, health officials are worried about a quarantine hangover for a country known for its party atmosphere. At its height Brazil was recording more than 45,000 cases and 1,000 deaths per day. They are currently at about 27,000 and 700 deaths per day. Epidemiologist Pedro Hallal said a second wave of infections is unlikely this year because of how long Brazil’s crest lasted but a second wave in 2021 is “very likely”. “People thought it unacceptable that 1,000 people were dying every day two months ago, and now they are fine with 700 people dying every day. It simply doesn’t make any sense,” said Hallal.

Covid-19 – Due Diligence And Asset Management

James Gorman Goes Hunting Again with $7 Billion Eaton Vance Deal

Brief: More than a decade into his tenure, James Gorman is busier than ever remaking his firm. The Morgan Stanley chief has carried out a dealmaking blitz that’s transformed the white-shoe firm, from a Wall Street specialist to a big player in the world of money management. If stealing away a wealth manager from Citigroup Inc. propelled the Melbourne-born banker to the top perch in 2010, his recent shopping spree guarantees that the 62-year-old executive’s mark will be left on Morgan Stanley long after he’s gone. Gorman’s two latest mega-deals -- the takeover of E*Trade Financial Corp., to go after millennials and other individual investors, and now the $7 billion purchase of asset manager Eaton Vance Corp., announced Thursday -- are the largest carried out by any of the big banks in Wall Street’s post-crisis reincarnation. And both were done in the span of just 10 months. The acquisitions guarantee Morgan Stanley’s wealth and asset-management group a standing that overshadows the bank’s core Wall Street operations, despite their dominance. And Gorman, who rose up through Morgan Stanley’s wealth business and has been bolstered by a stock price that’s outperformed major Wall Street rivals this year, said the 38% premium he’s paying to gain Eaton Vance’s roughly $500 billion in assets is worth it.

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SEC Reports 700 Enforcement Actions in Fiscal 2020, ‘Significant’ During Telework Period

Brief: The head of the U.S. Securities and Exchange Commission (SEC) said on Thursday that the agency has brought 700 enforcement actions in the 2020 fiscal year, a ‘significant’ amount after March 15. In a virtual address kicking off “SEC Speaks 2020,” an annual SEC enforcement conference put on in conjunction with the Practicing Law Institute, Jay Clayton said the agency had also obtained financial remedies of more than $4 billion, up from a year prior. The SEC has also reviewed disclosures of more than 10,700 funds--including more than 1,200 new funds--in 2020, an increase of 7% over last year, Clayton added. “While the pandemic significantly impacted how we do our work, it did not negatively impact the work itself,” Clayton said. "At the same time, we added to our work load," the top market's watchdog added in reference to the agency's extended telework period that began here on March 10 after an employee at its Washington, D.C., headquarters was treated for coronavirus symptoms.

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Mizuho Employees to get Option to Work Three Days a Week, but With Reduced Salary

Brief: Mizuho Financial Group Inc. plans to introduce a system that would allow employees to work a three- or four-day week, according to informed sources. It aims to launch the system in December after holding talks with its labor union. Mizuho Financial will be the first among the nation's megabanks to implement a permanent system allowing employees to take three or more days off every week. The group is adopting diverse work styles in response to the pandemic. The new work system will cover some 45,000 employees of the holding company and such operating units as Mizuho Bank, Mizuho Trust & Banking Co. and Mizuho Securities Co., the sources said. Each employee will be allowed to choose to work three or four days. Basic salary will be reduced to 80 percent of the current level for employees who work four days a week and to 60 percent for those working three days, according to the sources. Mizuho Financial seeks to prevent talented workers from leaving the group by creating an environment in which employees, many of whom need to take care of older family members or raise their children, find it easy to work according to their own circumstances. The new system is also intended to help employees take time to brush up their skills in their respective areas of work, according to the sources.

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Demand for Risk and Compliance Outsourcing Jumps Over 25 Per Cent in the Age of COVID-19

Brief: ACA Compliance Group (ACA) has identified a global spike in financial services firms turning to RegTech, outsourcing, and operational resilience solutions for risk and compliance management in the age of Covid-19.  The firm has seen a 25 per cent rise in demand for outsourced managed services when compared with pre-pandemic levels, with cybersecurity and regtech solutions also seeing an increase in demand. A key driver is that risk and compliance leaders are being asked to do more with less and reduce costs while enhancing operational resilience. The Covid-19 pandemic has forced financial services firms to abruptly change the way they work now – and in the future. As the global pandemic mutated into an economic crisis, it caused massive unemployment and social unrest. Fires and floods added additional environmental crises to the mix. All of these risks interacted and mutated to present firms with key risks and challenges, including business disruption, remote work, cyber threats, and ultimately risk and compliance monitoring challenges. At the same time, firms are seizing the chance to invest in new opportunities created by the disruption and to modernise their infrastructure to be more resilient, both of which will serve them well in the future. This is a phenomenon that ACA has termed RiskMutation.

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AIMA Plans ITN-Produced Content to Promote Hedge Funds’ Role in Global Economy

Brief: The Alternative Investment Management Association (AIMA), the hedge fund industry trade body, has paired up with ITN Productions to produce a news-style programme which aims to push the case for hedge funds’ role in the economic recovery following the coronavirus crisis.Due to launch in summer 2021, ‘Holding Strong: Alternative Investments in a Volatile Market’ will explore the role played by alternative assets and hedge fund managers in the global economy and their value to investors and markets, and how they offer allocators a differentiated risk/return profile and provide alternative funding avenues for borrowers. The programme will also examine how the alternatives sector is utilising technology, ESG and socially responsible investing in its investment strategies, and the steps firms are taking to strengthen diversity and inclusion at firms. ITN Productions, a commercial communications unit of ITN, produces creative content for broadcasters, businesses, brands, rights holders and digital channels. Its Industry News arm offers bespoke material for industry associations and trade bodies produced in a broadcast news-style programme format.

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Senator Warren asks Big U.S. Banks for Details on Pandemic Performance

Brief: U.S. Senator Elizabeth Warren is asking large U.S. banks to disclose how they performed under a recent Federal Reserve exam of their finances during the coronavirus pandemic. In a letter sent to 14 large firms Wednesday, Warren asked each to provide its results from a confidential Fed test, arguing the central bank’s “limited transparency” on whether banks could weather a severe economic downturn is insufficient. “The safety and soundness of the banking sector cannot be taken for granted, and the American people deserve full transparency regarding the health of the financial system,” the Democratic senator wrote in a letter seen by Reuters. Warren added that the recent collapse of negotiations for further economic stimulus makes the matter more pressing, as the Fed previously noted that some banks’ capital forecasts were “strongly dependent” on additional economic support. In June, the Fed announced that large banks could suffer as much as $700 billion in losses under a severe pandemic-driven recession. But the central bank only released those results in aggregate, citing the fact that the recent onset of the pandemic prevented it from conducting a full-blown stress test of each bank.

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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 October 7, 2020:

  • United States President Donald Trump has pulled the plug (or did he?) on stimulus talks due to the COVID-19 pandemic until after the election confusing many in Washington. President Trump made the declaration on Tuesday afternoon, claiming the stock markets were in great shape. Upon his announcement, the stock markets started to drop. Therefore, President Trump appeared to reverse course and pitched apparent side deals via Twitter for the airline industry, along with a standalone bill for stimulus checks ($1,200) to the American people. However, those connected with Capitol Hill are in general agreement the deals, which were already on shaky ground, are done for the time being. The news of stalled talks comes on the same day, a report from Swiss Bank, UBS and PwC notes the wealth of the world’s billionaires reached a record high during the middle of the pandemic as tech stocks rebounded. 

  • In Canada, Quebec set another single day record for COVID-19 cases on Tuesday prompting their health minister to call on Quebecers just to stay home, regardless of the alert level in their region. While Wednesday’s 900 new COVID-19 cases broke a string of five straight days with 1,000+ cases, the province is starting to see a sharp increase in deaths and hospitalizations. Health Minister Christian Dube said that contrary to the first wave where the pandemic seemed to be primarily concentrated in the Montreal region, the second wave is impacting the entire province and more regions could be classified as “red” zones later this week.

  • In the United Kingdom, Boris Johnson is coming under fire from the opposition Labour party for his government’s handling of the coronavirus. With infection rates in parts of England surging recently, despite restrictions being in place since July, Labour party leader Keir Starmer accused the Johnson government of governing in “hindsight”. “There is a pattern here on care homes, protective equipment, exams, testing – the prime minister ignores the warning signs, hurtles towards a car crash and then looks in the rear mirror and says ‘what’s all that about?, said Starmer. Elsewhere in the region, Scotland announced as of Friday they will be administering new closures and restrictions on pubs, restaurants and other hospitality venues for 16 days in order to counter rapid rises in COVID-19 cases.

  • In order to fight the worsening outbreak, Germany’s federal states have agreed on a ban on overnight accommodation for domestic visitors arriving from areas with high COVID-19 infection rates. Those with a negative COVID-19 test will be exempted, but the move comes after several states began imposing their own bans on visitors from high risk zones, especially those from the Berlin region, based on data from the Robert Koch Institute. As of this Saturday, Berlin authorities will impose a curfew that will close all bars, restaurants and shops at 11 PM.

  • Spain’s Prime Minister outlined his government’s plan to help the country out of its recession and to what life will look like once they are on the other side of the pandemic. Spain will be using 70% of the €140 billion European Union aid to transition the country into green energy and a digital economy. The new look has an aim of creating 800,000 jobs over the next three years. This week, Spain became the first EU country surpassing 825,000 coronavirus infections with its capital city, Madrid experiencing the worst outbreak during the feared second wave.

  • New Zealand has claimed to have beaten the coronavirus for a second time and will try to get back to a new normal. As of midnight, on Wednesday, the country largest city, Auckland will have its limits on public gatherings and activities lifted, although social distancing will still be advised. The country’s minister of health says there are six active cases. New Zealand went 102 days without community transmission of the virus, before an outbreak in Auckland led to 186 cases between August 11th and September 25th.

Covid-19 – Due Diligence And Asset Management

PIMCO sees Low-Return Environment Likely for Next 3-5 Years

Brief: In spite of the rally in risk markets this year, Pacific Investment Management Company (PIMCO) expects low returns across asset classes in the coming three to five years as the global economy recovers from the coronavirus pandemic. Published on Wednesday, the investment giant’s outlook argues that given the current high valuations in credit and equity markets, and the likelihood that interest rates will be kept near zero, investors should expect a stagnation or decline in profit as a percentage of gross domestic product. Credit and equity markets have been bolstered this year by investors’ hunt for yield. With interest rates near zero, share prices have risen and borrowing costs have fallen for riskier companies. But the pandemic’s economic realities still mean that revenue - especially in sectors like travel, entertainment and hospitality - won’t quickly recover, and central banks are unlikely to intervene to prevent defaults from rising.

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Disney Activist Loeb Urges Using Dividend to Fund Streaming

Brief: Activist investor Dan Loeb is urging Walt Disney Co. to permanently suspend its dividend and redirect those funds to its streaming service, saying the entertainment giant needs to lean in to a massive industry shift. Loeb sent a letter to Disney Chief Executive Officer Bob Chapek Wednesday saying he believes $3 billion in annual dividends would be better spent on its direct-to-consumer streaming service, Disney+. He said doing so could more than double Disney+’s budget for original content, bring in additional subscribers, lower churn and boost pricing power. Disney’s shares rose as much as 2% Wednesday after Bloomberg reported on the letter. The company, which has a market value of $222 billion, had seen its stock decline 16% this year through Tuesday’s close. Disney has been the dominant studio at movie-theater box offices in recent years. But with brick-and-mortar cinemas suffering during the pandemic, the company needs to focus on streaming with new urgency, Loeb said. He cited the decision by Regal to temporarily close its U.S. theaters as a sign that cinemas are going away. “While we all share a certain sadness and nostalgia for this eventuality, I am sure that people felt similar emotions about horse-drawn carriages when the automobile was first introduced,” Loeb said in the letter, a copy of which was obtained by Bloomberg.

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Wells Fargo Cuts More Jobs as Part of Earlier Cost-Cutting Drive

Brief: Wells Fargo & Co WFC.N has started to cut jobs at its commercial banking unit as part of larger reductions that will impact nearly all of its functions and business lines, a company spokeswoman said on Wednesday.  The bank resumed job cuts in early August after it paused layoffs in March because of the COVID-19 pandemic. Wells Fargo said in July it would launch a broad cost-cutting initiative this year as the bank braces for massive loan losses caused by the pandemic and continues to work through expensive regulatory and operational problems tied to a long-running sales scandal. “We are at the beginning of a multiyear effort to build a stronger, more efficient company for our customers, employees, communities, and shareholders,” a spokeswoman said via email on Wednesday. “The work will consist of a broad range of actions, including workforce reductions, to bring our expenses more in line with our peers,” she added, without specifying the number of job cuts. Wells Fargo has cut 700 jobs as part of workforce reductions that could ultimately impact “tens of thousands” of staff, Bloomberg News reported on Wednesday citing people with knowledge of the matter.

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Morgan Stanley’s Sheets Goes All-In on V-Shaped Recovery Trades

Brief: A famous Wall Street bear-turned-bull is urging clients to double down on V-shaped economic bets, even as talks on fresh stimulus collapse. Spurred by conviction on reflation, Andrew Sheets is bullish on small-cap stocks and recommends selling defensive trades from technology firms to long-dated Treasuries. With investors already hedged for election-related volatility, Morgan Stanley’s chief of cross-asset strategy says the market rally has legs and more policy stimulus is coming soon enough. “The glass half-full view of stimulus talks is if you don’t get it today you’ll get it tomorrow from whomever wins the election,” Sheets said in an interview. “This V-shaped recovery is still intact.” His conviction that growth will continue unabated is in contrast with other strategists who say the U.S. is facing a multitude of risks. Lawmakers have been deadlocked for weeks on the details of a stimulus package and President Donald Trump surprised allies with a unilateral call on Tuesday to halt talks on a deal. Sheets’s recommendations are mirrored in hedge funds positioned ever more aggressively for a steeper U.S. yield curve, often seen as a bet on reflation. The latest data shows speculative net short positions in long bond futures have hit a record, while net long positions on 10-year Treasuries have climbed to their highest since October 2017.

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CommonPass Digital Health Pass and Global Trust Framework Launches to Enable Safer Travel and Accelerate Border Reopenings

Brief: The Commons Project Foundation and the World Economic Forum today announced international trials starting this week for CommonPass, a digital health pass for travellers to securely document their certified COVID-19 test status while keeping their health data private. CommonPass is built on the CommonPass Framework that establishes standard methods for lab results and vaccination records to be certified and enables governments to set and verify their own health criteria for travellers. The purpose of CommonPass and the CommonPass Framework is to enable safer airline and cross border travel by giving both travellers and governments confidence in each traveller's verified COVID-19 status. At present, COVID-19 test results for travel are frequently shared on printed paper — or photos of the paper – from unknown labs, often written in languages foreign to those inspecting them. There is no standard format or certification system. “Travel and tourism has been down across the board due to the COVID pandemic,” said Diane Sabatino, Deputy Executive Director, Office of Field Operations, U.S. Customs and Border Protection (CBP). “CBP wants to be part of the solution to build confidence in air travel, and we are glad to help the aviation industry and our federal partners stand up a pilot like CommonPass.”

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Private Equity Funds Posted Strong Gains Over a Six-Year Period. They Lost Them All in Six Months

Brief: Public markets have largely recovered since their lows in March and April, but private equity funds wiped out six years of gains in the first half of the year, according to the most recent data available from eFront, the private markets software and research firm owned by BlackRock. One of the best measures of performance — the ratio of the current value of investments in the funds (plus any distributions already made to investors) relative to what allocators have invested in the fund — declined to 2014 levels, according to eFront. “Performance of active funds globally, measured by total value to paid-in (TVPI), slumped from a near-record of 1.45x in late 2019 to 1.36x in Q1,” according to eFront’s quarterly performance report on the first half of 2020. Private equity fund performance also declined in the second quarter.  Buyout funds held on to companies slightly longer in the first and second quarters, as they focused on getting their businesses through the crisis, whether through layoffs and restructuring or by investing more cash. Although it has since recovered, the dealmaking environment cooled in the first half of the year as people worked remotely and financing proved scarce.

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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 October 6, 2020:

  • In the United States, the US Food and Drug Administration (FDA) are in a public tug-of-war with the White House after making clear Tuesday that it wants to see two months of follow-up data after volunteers receive their second dose of potential COVID-19 vaccines. The timeline pretty much kills any hope the White House has of having a COVID-19 vaccine ready before the November 3rd election, a claim continued to be made by President Donald Trump in a brief video appearance posted to his Twitter account Monday evening after returning to 1600 Pennsylvania Avenue. A recent New York Times Article claimed the statement made by the FDA Tuesday was submitted more than two weeks ago and that White House officials were stalling, trying to block the new federal guidelines.
  • In Canada, the country’s public health authority has given the green light to a new COVID-19 testing option. Health Canada on Tuesday approved a rapid antigen COVID-19 test produced by a U.S. based firm. Abbot Laboratories can now sell and distribute the Panbio COVID-19 AG Rapid Test Device, which can produce results in less than 20 minutes. Health Canada has authorized its use as a point-of-care test, which means it can be used by trained professionals in pharmacies, walk-in clinics, or doctors’ offices. The move comes as the federal government has been criticized by opposition parties for its lack of producing more testing options.
  • The United Kingdom will conduct an inquiry after a technical error identified close to 16,000 positive COVID-19 cases unaccounted for in the country’s test and trace program. Health Secretary Matt Hancock told MPs he was investigating following an announcement from Public Health England (PHE) that claimed 15,841 cases between September 25th and October 2nd failed to be included in their daily reporting of statistics, and thus left out of the test and trace program. Hancock blamed the error on failure in the “automated transfer files from the labs to PHE’s data systems.”
  • In Italy, the new COVID-19 daily case rate remains significantly lower than France or Spain, and the country would like to keep it that way and are announcing new restrictions. The country’s health minister plans to make face mask usage compulsory in all outside places. The new rule would be adopted across Italy but has already been in place since the summer in places like Lazio, Rome and Naples. Italy’s new daily COVID-19 case rate hit close to 3,000 on Saturday, the most since April when the country was already in lockdown. Prime Minister Giuseppe Conte is expected to extend Italy’s state of emergency, which will allow his government to continue to quickly put in place new measures to combat the virus if needed.
  • With the country still seeing close to 75,000 new COVID-19 cases a day, India is moving forward, allowing schools to reopen as of October 15th. Prime Minister Narendra Modi’s government ordered the schools to be shutdown back in March during their initial lockdown, which left close to 270 million children out of the classroom. Prime Minister Modi said the decision on when and how to reopen schools will rest with state governments. For instance, in New Delhi, the nation’s capital city, authorities have already ruled out children returning to school until at least October 31st.
  • Starting this Thursday, South Korea and Japan have agreed to allow business travellers access to each country without having to enter into a 14-day quarantine. The fast-track entry of business visitors comes about seven months after both countries imposed restrictions due to COVID-19. Under the special entry procedure, business travellers from both countries can plan a short-term stay of up to three months as long as they submit a written business plan and a negative coronavirus test result from the last 72 hours. Their travel will also be limited to areas near their workplace. Japan and South Korea are the third largest trading partners of each other.

Covid-19 – Due Diligence And Asset Management

Goldman Eyes $14 Billion for its Largest Fund Since 2008 Crisis

BriefGoldman Sachs Group Inc. boosted the size of a new credit fund to $14 billion in what is shaping up to be one of the largest debut investment vehicles ever raised. The bank, which set out with a target of $5 billion to $10 billion, is now expecting to finish fundraising with a $14 billion war chest to pour into companies in need of fresh liquidity. A Goldman representative confirmed the goal for the first in a new family of funds, called West Street Strategic Solutions Fund I. The $14 billion mark is notable for the first iteration of a fund series new to investors. Such funds seldom crack $10 billion on their first go-round barring one exception: the $100 billion SoftBank Vision Fund, which is in a league of its own. The Goldman credit fund will provide a boost to the bank’s goal of raising $100 billion for investing in what’s known in the industry as alternatives. Instead of guiding client cash into plain-vanilla asset classes such as stocks and bonds, the funds are focused on seeking outsize returns in less-trafficked corners of the market including distressed credit, real estate and private equity. Fundraising success will also help cement Julian Salisbury’s profile as one of Goldman’s most powerful executives. The 48-year-old Brit has climbed rapidly, from running a secretive and successful group betting Goldman’s money inside its trading group, to now helping run a newly created division that rivals the firm’s dealmaking group in size and profitability, second only to the markets division.

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TPG, Onex are said to Circle Bankrupt Hertz’s Donlen Unit

Brief: Private equity firms TPG and Onex Corp. are preparing bids for bankrupt Hertz Global Holdings Inc.’s car leasing business Donlen, according to people with knowledge of the matter. TPG and Onex are working on offers that could value Donlen at about $1 billion, said the people, who asked not to be identified because they weren’t authorized to speak publicly. Rivals of Hertz are also considering bids, the people said. A representative for TPG declined to comment. Representatives for Onex and Hertz didn’t respond to requests for comment. Donlen performs fleet management functions such as vehicle leasing, maintenance and registration, according to its website. Hertz sees the business as non-core and is willing to sell it to help pay down debt, the people said. Hertz listed $24.4 billion in debt when it filed for bankruptcy in May. The company is negotiating with its creditors for financing after months of funding itself during bankruptcy, people with knowledge of the talks said last month. It’s considering two tentative loan offers of $1 billion to $1.5 billion, which could help bolster operations that have been hurt by the coronavirus pandemic and slump in travel, according to one of the people. Donlen made about $100 million in earnings before interest, taxes, depreciation and amortization last year, Bloomberg News has reported. Hertz bought the Bannockburn, Illinois-based business for $947 million including debt in 2011.

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Covid-19 Prompts More than Half of Asset Management Firms to Accelerate Adoption of Digital Marketing Technology

Brief: A research report commissioned by SDL, the intelligent language and content company, reveals that more than half (52 per cent) of European asset management firms have implemented client engagement, and digital marketing and communications technology, sooner than anticipated due to the Covid-19 pandemic. The pan-European research, conducted by WBR Insights, also discovered that almost a third (32 per cent) of firms admitted experiencing technical problems while implementing new digital technology during the pandemic. “There is no doubt that the pandemic focused hearts and minds on the protection of clients and their investments,” says Christophe Djaouani, EVP Regulated Industries, SDL. “It’s been a wake up moment for the industry, and they know they need to implement more robust client engagement and communications technology if they want to stay ahead of the increasing demands of anxious clients.” Asset management firms also plan to embrace digital marketing communications much more with nearly half (48 per cent) expecting to implement their initiatives across all their available digital channels this year, according to the research. Almost a third (27 per cent) admit that ROI is the key driver that led their firm to adopt digital communications to meet their clients’ needs.

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Companies to Shrink Offices as Remote Work Becomes ‘New Normal’

BriefMore than half of companies plan to shrink their offices as working from home becomes a regular fixture after the Covid-19 pandemic ends, according to a survey by Cisco Systems Inc. Some 53% of larger organizations plan to reduce the size of their office space and more than three quarters will increase work flexibility. Almost all of the respondents were uncomfortable returning to work because they fear contracting the virus, the poll found. Cisco, the largest maker of networking equipment, recently surveyed 1,569 executives, knowledge workers and others who are responsible for employee environments in the post-Covid era. The findings suggest many of this year’s radical changes to work life will remain long after the pandemic subsides. The poll, conducted for Cisco by Dimensional Research, concluded that working from home is the “new normal.” More than 90% of respondents said they won’t return to the office full time. 12% plan to work from home all the time, 24% will work remotely more than 15 days of each month, while 22% will do that eight to 15 days every month. Cisco’s Webex video conferencing service has benefited from lockdowns that have kept millions of people working and studying from home. It’s also faces rising competition from Zoom Video Communications Inc.

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And the Top Alternative to Traditional M&A Deals Is… SPACs, of Course.

Brief: When it comes to post-pandemic deal-making, blank-check companies and other alternatives are winning out over traditional mergers and acquisitions, according to a survey from consulting firm Deloitte published on Tuesday. A record number of special purpose acquisition companies (SPACs), which raise money in an initial public offering to be used for any type of acquisition, have gone public this year, with business titans including Bill Ackman and Reid Hoffman, co-founder of LinkedIn, creating huge pools of capital to be invested. Forty-five percent of U.S. corporate executives said they are most interested in pursuing SPACs, alliances, and joint ventures, while only 35 percent cited traditional acquisitions or merging with another company, according to Deloitte, which polled 1,000 executives at companies and private equity firms… Deloitte had seen the trend toward alternatives in M&A before the Covid-19 pandemic struck in March, but the economic impact of the virus has forced companies to consider every option given the low-growth environment, said Mark Purowitz, principal, Deloitte’s mergers and acquisitions consulting practice, and leader of the firm’s Future of M&A initiative, in an interview.

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SEC Staff Releases Report on U.S. Credit Market Interconnectedness and the Effects of the COVID-19 Economic Shock

BriefThe Securities and Exchange Commission today published a staff report titled U.S. Credit Markets: Interconnectedness and the Effects of the COVID-19 Economic Shock, which focuses on the origination, distribution and secondary market flow of credit across U.S. credit markets. The staff report also addresses how the related interconnections in our credit markets operated as the effects of the COVID-19 pandemic took hold. In addition, staff will host a Roundtable on Interconnectedness and Risk in U.S. Credit Markets to discuss the issues raised in the report on the afternoon of Oct.14. In the U.S. credit markets, banking and non-banking entities and intermediaries are intricately and inextricably interconnected. These interconnections are essential for the functioning of the markets, the provision of credit and the distribution of risk. These interconnections can also transmit and amplify risks in times of stress. The report identifies these interconnections and, with that framework, discusses how the COVID-19 economic shock reverberated through the credit markets in March and April 2020. The principal purpose of the report is to identify and place in context key structural- and flow-related interdependencies in the U.S. credit markets as well as areas of stress revealed by the COVID-19 shock, with an eye toward informing policymakers as they seek to improve the functioning and resilience of our financial markets. The report does not make policy recommendations. The report is accompanied by a cover letter from SEC Chairman Jay Clayton and SEC Chief Economist S.P. Kothari and will be discussed at the roundtable, which includes policymakers and market participants, on Oct. 14.

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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 October 5, 2020:

  • In the United States, with close to 7.5 million confirmed coronavirus cases, there seems to be only one dominating the headlines and that is President Donald Trump. The president tweeted late Monday afternoon that he plans to leave the hospital late this evening and to not be afraid of the coronavirus, or let it dominate your life. The fallout from the president’s positive COVID-19 test has been interesting to say the least. In the past three days we have seen a hospital trip via Marine One, multiple doctor news conferences and a motorcade parade around Walter Reed Medical Center with President Trump in the backseat of an SUV waving to supporters while he should have been inside of his hospital room. President Trump has been receiving a combination of three drugs for his COVID-19 symptoms and will continue his treatment from the White House. So far, the number of people in President Trump’s inner circle who have tested positive has now reached the double digits with his wife, aides, Republican Senators and the White House Press Secretary just to name a few.

  • In Canada, two new benefits made available by the federal government are receiving new applications as of Monday. Canadians can apply through the Canada Revenue Agency for a new sick leave benefit and a new caregiver benefit for those forced to take time off to care for a dependent due to the pandemic. These benefits are part of Bill C-4, which will now replace the defunct $500-a week Canada Emergency Response Benefit (CERB). The CERB came to an end last week after helping almost nine million Canadians through the first few months of dealing with the coronavirus. 

  • The United Kingdom’s head of the government vaccine task force has tried to clear up the public’s “misguided” perception of the program’s end goal. Kate Bingham said Britons expecting everyone in the country to eventually get vaccinated against COVID-19 “was not going to happen” and added, “we just need to vaccinate everyone at risk.” Once a successful vaccine is found, the UK government is looking to vaccinate about 30 million people, compared with the actual population, which is about 67 million. Bingham said “there’s going to be no vaccination of people under 18. It’s an adult-only vaccine, for people over 50, focusing on health workers and care home workers and the vulnerable.”

  • France has placed the Paris region on maximum virus alert as of Monday. The new restrictions will be in place for the next two weeks and will place bans on festive gatherings and require all bars to close, but restaurants will be allowed to remain open. Paris’ regional health director said there is about 3,500 new cases of the infection confirmed on average each day and 36% of ICU beds in the area are occupied by COVID-19 patients.

  • A Bloomberg report on Russia via a statistics agency has stated the country’s death toll is double the amount of what the government has laid out. Rosstat, Russia’s federal statistics service said 45,663 people died from the coronavirus between April and August. Russia’s government virus-response staff puts the death toll at 21,475 from the start of the pandemic until October 4th. Rosstat includes deaths both directly attributed to the coronavirus and cases where it was listed as an “important condition” leading to the lethal outcome. Russia has reported the fourth-largest number of COVID-19 cases in the world, but their government death toll has them with one of the lowest death rates due to the virus. Rosstat figures put Russia’s COVID-19 performance more in line with other countries who have also suffered large outbreaks. 

  • China is set to expand its experimental coronavirus vaccine trials beyond frontline health workers as it looks to get a leg up on dominating the potential COVID-19 vaccine supply chain. Last month, a representative from state-owner China National Biotec Group, or Sinopharm revealed that hundreds of thousands of Chinese citizens have already taken the company’s two leading experimental COVID-19 vaccines. The program is now set to expand to include large portions of the population, including transit workers, people travelling to countries with high COVID-19 infection rates and staff in supermarkets or other enclosed spaces. Health experts say this is a high-risk strategy for vaccine developers to distribute and test products before they hit the global market.

Covid-19 – Due Diligence And Asset Management

Managers Find Personal Touch Vital Ingredient for Fundraising

Brief: Alternative money managers are finding it harder to attract investments from new clients in the era of virtual meetings despite strong interest in their strategies as asset owners resume investing during the pandemic. The problem, sources said, is the reluctance in most cases for institutional investors and managers to meet face-to-face given the global COVID-19 restrictions. Despite a much-improved facility by managers in presenting their investment strategies and providing information for due diligence checks via remote communication channels, industry observers said many asset owners still are not comfortable with a digital-only acquaintance. "There's an abyss that asset owners have to jump over when it comes to getting to know potential investment managers for your fund via a Zoom meeting. There's a natural human-comfort factor that comes from meeting in person," said James Neumann, a New York-based partner and CIO of investment consultant Sussex Partners U.K. Ltd., London. "There's a bias toward expanding relationships with existing managers because it's much harder to go from an initial call to hiring a new manager, especially in this environment," Mr. Neumann added.

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JPMorgan Boss Jamie Dimon said up to 30% of Staff Could Work From Home Permanently

Brief: JPMorgan chief executive Jamie Dimon said that up to 30% of employees could work from home permanently. Dimon, who has been vocal in the past few weeks about the need to bring more staff back to the office in a bid to restore corporate culture and spur creativity, told the Sibos conference that the Covid-19 crisis is likely to lead to a proportion of JPMorgan’s staff to remain working from home on rotation. “There will be some permanent work from home, people who work from home or permanently rotate, or have a schedule of three days in and two days out, something like that,” he said during a virtual interview with Takis Georgakopoulos, global head of wholesale payments. “I don’t think it will be 100% of the population, I think it will be 20-30% ... and it’s got to work for the company and the clients. It’s not just whether we like it as employees,” he said. JPMorgan had 256,710 employees at the end of the second quarter. Daniel Pinto, the chief executive of its corporate and investment bank, told CNBC in August that staff could rotate between home and the office, but did not put a figure on his prediction. Dimon’s comments echo those of outgoing UBS chief executive Sergio Ermotti, who said in July that up to a third of the Swiss bank’s staff could stay home permanently.

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The Pandemic Has Only Increased Our Economic Growth Obsession

Brief: The coronavirus pandemic has shown that policymakers will sacrifice business activity if it’s necessary for public safety. Climate activists have warned for years that society’s quest for growth threatens our planet, and some economists encourage using different metrics to judge an economy’s success. So we asked an array of economic policy experts whether anything has really changed. This pandemic forces us to rethink economic growth and, in many respects, the way our economies and societies function. Artificial intelligence and major structural changes have to be taken into account, including working from home and relocalization of activities. Sustainability, mobility, resilience, fairness, and inclusiveness are key policy aims with enormous challenges in the years to come. But the logic of economic growth cannot simply be dismissed. Debts, public and private, have continued to grow in the past decade. The financial crisis has not reduced the propensity to borrow around the world. The pandemic has forced governments to increase their budget deficits and, consequently, public debts. I would add that the stock of debt will not be less of an obsession. The new context for monetary policy, due to substantially lower natural rates, should not make us complacent about the size of debts. Countries need to manage their debts over the long run. Moreover, markets discriminate among economies. And one cannot take low inflation as a given forever. Especially if monetizing debts will be resorted to, increasingly.

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Managers not Scrimping on Tech Budgets

Brief: Despite an economic downturn as a result of the pandemic, money managers are committed to their long-term technology investment plans, migrating client and investment data to the cloud, enhancing remote work capabilities and automating more business operations for better efficiency, sources said. While some firms have attempted to wring out savings by renegotiating contracts with third-party service providers offering investment market data, research and cloud-sourcing arrangements, most global money managers are ultimately spending more on technology as they strive to meet new remote work demands, said Tyler Cloherty, senior manager and head of the knowledge center for Casey Quirk, a practice of Deloitte Consulting LLP, New York. "There's been increased costs for laptops and collaborative software, like Zoom and Microsoft Teams," Mr. Cloherty said. Additionally, costs have increased as money managers continue to make longer-term investments in migrating company data to the cloud and on research portals for investment team data sharing, he added. "I think during the initial downturn in March and April, there was a hesitation to embark on substantial new investments. Since the market has bounced back … third-quarter margin numbers are going to look much better," Mr. Cloherty said.

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Goldman Sees ECB Boosting Pandemic Asset Purchases in December

Brief: Goldman Sachs Group Inc. foresees the European Central Bank boosting its pandemic bond-buying program by 400 billion euros ($470 billion) in December, after euro-zone inflation weakened further. The ECB is also likely to extend the emergency asset-purchase operation, known as PEPP, by six months through the end of 2021, analysts at the U.S. bank wrote in a note to investors Monday. Reinvestments of maturing assets under the plan should continue to the end of 2023, they wrote, adding that the central bank may also target high-yield bonds for purchase. “A PEPP expansion is likely to be more powerful in supporting the recovery of the euro-area economy -- particularly in southern Europe, where it is most needed -- than a rate cut or an expansion of the regular asset-purchase program,” Goldman analysts including Soeren Radde wrote. That’s because PEPP “would be more powerful in compressing credit spreads.” Speculation of further monetary easing has grown for a host of reasons -- from the recent uptick in coronavirus infection rates in Spain and France to a decline in euro-area core inflation to a record-low 0.2% in September. The latter prompted ECB officials to comment that they were uncomfortable with almost nil price growth. Goldman previously expected the PEPP -- with a current limit of 1.35 trillion euros -- to end in mid-2021 and for the ECB to provide additional support through its regular asset-purchase program launched in 2015.

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Frozen Deal Market Turns Frenzied as Election Approaches

Brief: The frozen mergers & acquisitions market of just a few months ago has turned into a frenzy as sellers look to lock in capital gains before year-end. Company founders and CEOs are hedging their bets against any tax law changes, including the treatment of capital gains and carried interest, that could come in 2021 if former V.P. Joe Biden, the Democratic nominee, defeats President Trump in the November election.  “It’s going to be a busy three months here before year-end,” said Art Penn, founder and managing partner of PennantPark Investment Advisers, which focuses exclusively on middle market lending. “It’s a combination of good asset values for sellers and concern about potential tax law changes next year if there’s a change in administration.” Not all companies will get sold. Companies that have been hard hit by the quarantine and slowdown caused by Covid-19 likely won’t have buyers right now, even if their sector is expected to improve once the economy returns to normal. A lawyer involved in a number of M&A transactions that haven’t yet closed said there’s too much uncertainty about a potential vaccine, government aid, and companies’ future growth projections. “There’s a real unease about what will be permanently changed by the coronavirus,” she 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 October 2, 2020:

  • United States President Donald Trump and First Lady, Melania Trump have tested positive for the coronavirus. The news broke early Friday morning on the east coast of America after White House aide, Hope Hicks had a positive COVID-19 test confirmed on Thursday. The White House Chief of Staff said President Trump and his wife are experiencing mild symptoms but were deemed to be in good spirits and the president was “very energetic”. President Trump will now quarantine for the time being at the White House and will perform his presidential duties from there. If Trump’s condition worsens, Vice President Mike Pence, who tested negative for the virus, would likely take over duties. The positive test has now set off a chain reaction of mass testing and tracing due to President Trump’s busy schedule in the middle of an election. Just this week alone, Trump was in multiple states for rallies, fundraisers and a televised Presidential debate. His rival in that debate, Democratic nominee Joe Biden was tested for the virus on Friday, along with his wife and both results came back negative. President Trump joins United Kingdom Prime Minister Boris Johnson and Brazil President Jair Bolsonaro as key world leaders who have contracted COVID-19 during this pandemic. 
  • In Canada, with Ontario recording a new record of daily COVID-19 cases for the second time this week, Premier Doug Ford is considering adopting Quebec’s colour-coded alert system. Ontario recorded 732 new cases on Friday and if the province were to adopt the colour-coding system, it is likely the provincial capital Toronto, the national capital, Ottawa and Peel Region would be classified as “red zones”. The declaration of a red zone would come with tighter public health restrictions for restaurants, gyms, workplaces and meeting spaces.
  • In the United Kingdom, Prime Minister Boris Johnson said during a BBC interview that citizens became “complacent and a bit blasé” about social distancing rules in the last few months, which has left the country in the situation they are currently in. While Prime Minister Johnson is blaming the public, fingers are also being pointed in his direction. The UK leader has faced growing criticism for his handling of the pandemic, even from those inside his own Conservative Party – accusing the administration of mixed messaging and overly complicated local restrictions.
  • Spain’s late summer surge of coronavirus cases appears to have handcuffed the country that greatly depends on its tourism industry. Total expenditures made by international tourists visiting Spain in August reached £2.5 billion, a 79% decrease compared with August 2019. Tourism accounts for a larger share of Spain’s economy than any other major European country.
  • While countries in Europe struggle with the second wave of COVID-19, Italy has seemingly learned from its harsh lesson the first time around. During the first wave, Italy was devastated by COVID-19 with close to 36,000 deaths, but while countries such as France and Spain are seeing new cases in the 12-16,000 range per day, Italy sits at 1,700, now among the lowest infection and death rates in Europe. Italy credits the initial strict lockdown with making residents take the pandemic seriously. For instance of lessons learned, Rome’s Fiumicino Airport was the first airport in the world to receive a five-star top score by ranking site Skytrax as a result of hygiene and other preventative measures for coronavirus.
  • Australia has agreed to a travel zone with New Zealand. As of October 16, New Zealanders will be able to fly from the country to New South Wales and the Northern Territory and avoid mandatory quarantine. This will be the first reopening of either country’s international borders since COVID-19 restrictions were imposed back in March. At first travel will be limited to New Zealanders with Australia’s Deputy Prime Minister stating the decision on when Australians may be able to visit New Zealand would be up to its Prime Minister, Jacinda Ardern.

Covid-19 – Due Diligence And Asset Management

Trump’s Positive COVID-19 Test Throws Markets Pre-Election Curveball

Brief: Investors, already skittish ahead of U.S elections in November, now have another thing to worry about: the president’s health. President Donald Trump’s COVID-19 diagnosis triggered a sell-off in stocks and oil as investors moved away from risk assets on Friday. “The president of the United States has got a disease which kills people. People are de-risking because of that,” said Chris Weston, head of research at brokerage Pepperstone Group in Melbourne. But where investors go from here depends, to a large degree, on how Trump copes with a disease which has killed more than a million people around the world…  Aside from the Trump news, investors were digesting a jobs report showing U.S. employment growth slowed more than expected in September and back-and-forth negotiations over a U.S. coronavirus relief plan. If Trump’s symptoms turn out to be mild and he recovers quickly, markets could stabilize and the Republican president could use the experience to project his image as a fighter in the campaign against Democratic challenger Joe Biden. But if the 74-year-old gets very sick and has to be hospitalized, as British Prime Minister Boris Johnson was earlier in the year, or the virus spreads to other members of his administration, investors will be alarmed.

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Financial Institutions are set for a once in a Generation Change, says PwC Report

Brief: The primary role of a traditional bank providing financing and capital is set to be challenged further in a post Covid-19 world by non-banks, according to a PwC report, “Securing your tomorrow, today – The future of financial services,” which predicts that alternative providers of capital are set to become an even more important part of the global financial system. In the last 10 years, aggregate lending in USD by non-banks has outstripped the pace of growth of traditional lenders, with non-banks seeing a compound annual growth rate (CAGR) of lending 2.3 per cent, compared to 0.6 per cent CAGR to banks. This trend is likely to accelerate as declining core capital ratios – caused by asset impairments resulting from the Covid-19 pandemic - will limit the lending capacity of banks, particularly in Europe. Non-traditional sources of finance such as private equity, sovereign wealth funds, credit funds and governments themselves will need to step into the breach to finance the recovery and its aftermath. In 2019, non-banks – including private equity funds and sovereign wealth funds – lent 41 trillion dollars compared to the 38 trillion dollars lent by traditional lenders. In particular, the analysis by PwC shows that private debt has seen substantial growth, which is set to propel the asset class into a significant category of non-bank lending.

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Pandemic Pushes Investors Toward Biggest Alts Managers

Brief: Institutional investors are increasingly favoring the biggest, most established alternative managers as they make allocations during a global pandemic. Alternative investment fund clients surveyed by SS&C Intralinks reported an increased preference for $1 billion-plus and $5 billion-plus fund managers in the investment technology firm’s global poll of around 200 limited partners. For example, 15 percent of surveyed LPs said they were favoring general partners with more than $5 billion in assets under management, compared with just 5 percent last year. Meanwhile, the proportion of respondents prioritizing mid-sized managers — those with between $100 million and $500 million in assets — fell from 53 percent to 41 percent. “It suggests that LPs are looking to back the most trusted names in the industry to guard against reputation risk, as well as appease investment committees who might be cautiously minded in the current market,” SS&C Intralinks said in a report on the findings. “Another factor could be that large-cap managers are more likely to have experienced a market downturn, such as in ’08, and considered a safe pair of hands.”

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COVID-era Interview Questions at Banks and Hedge Funds

Brief: Investment banks might be hesitant about hiring too much experienced talent right now, but junior recruitment is proceeding as normal. Hirevue interviews have been underway since late July and virtual super days and Zoom interviews abound. For the most part, the interview questions being asked are the same as usual: if you're applying for a markets role you'll almost certainly need an opinion on how to invest $1m+; if you're applying for a corporate finance role you'll need to know how to explain a DCF to your 80 year-old grandmother.  Peppered in among the questions students say they're being asked at banking interviews this year, however, are questions specifically related to the pandemic. As we noted in May, you'll also need a good story about how you've handled the pandemic personally and have used it as a chance to 'grow' etc etc. You might also want to prepare answers to the questions below, which recent interviewees claim to have been asked in postings on Wall Street Oasis and Glassdoor. As ever, some of wildest/most philosophical questions are being asked at hedge fund Bridgewater, where some people have been working in the woods since the pandemic began...

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Private Debt Fundraising Squeezed by Pandemic Jitters, Election

Brief: Private credit fundraising slumped globally to US$8.3 billion in the third quarter, down 68 per cent from the same period a year ago, as investors took a wait-and-see approach amid uncertainty caused by the pandemic. The last quarter’s figures compare to US$37.6 billion brought in for the asset class in the second quarter, according to London-based research firm Preqin Ltd. In North America -- the biggest hub for alternative lending -- fundraising fell to $7.8 billion in the third quarter, down from US$24.6 billion the prior quarter and compared to $8.6 billion in the same period in 2019. “What we’ve seen in the third quarter is a real reduction in the number of funds closed and the amount of capital raised, because investors have already allocated the capital potentially or it could just be the fact that Covid has not disappeared like some hoped,” David Lowery, Preqin’s head of research insights, said in a Wednesday interview. In the U.S., investors keeping an eye on the Nov. 3 president election could also lead to them taking a “wait-and-see approach,” Lowery said. Raising capital in the wake of a pandemic has undoubtedly been a challenge -- particularly when a credit manager is connecting with new investors, according to Theresa Shutt, chief investment officer at Canada-based Fiera Private Debt.

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U.S. Tech Venture Investing Gets a Boost from Pandemic

Brief: Brian Bell, chief executive of Split Software, was in a meeting pitching investors when California announced the shelter-in-place policy to prevent the spread of the coronavirus in March. In the days that followed all of his meetings were delayed or canceled as venture capital investments froze. But since then things haven’t just thawed, they are boiling over. According to previously unreleased data from PitchBook, in the first nine months of 2020, U.S. venture capital firms invested $88.1 billion in tech startups, up from $82.3 billion in the first nine months of 2019. Tech investments represented 78% of venture capital investments last year and 74% in 2018. Venture capitalists say $3 trillion in stimulus funding has investors looking to put cash to work, and top venture capital firms continue to launch massive funds. Greylock Partners, an early investor in Airbnb, started raising money for its latest fund during the pandemic and announced a billion-dollar fund in September. Lightspeed Venture Partners, the first outside investor in Snap, in April announced it raised more than $4 billion for three new funds to support early- and growth-stage startups. Investors say they are betting the pandemic will have the lasting effect of pushing more economic activity online, making up for the businesses boarding up on Main Street. And they are investing in startups that aim to enable the further digitization of sectors like banking, retail and healthcare.

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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 October 1, 2020:

  • In the United States, one of the drug companies pegged with developing a COVID-19 vaccine dealt a blow to President Donald Trump’s plan of having it ready before the elections in November. In a Financial Times interview, Stephane Bancel, the chief executive of Moderna Therapeutics said his company would not be able to apply for authorization of a vaccine until at least late November. Bancel also added he didn’t expect Moderna to have full approval to distribute the drug to all sections of the population until next spring. The news comes in direct conflict to what President Trump said during a contentious debate earlier in the week in which he said a vaccine would be ready “a lot sooner”.

  • During a news conference on Thursday, Canadian Prime Minister Justin Trudeau announced his government’s plan to spend $10 billion on infrastructure initiatives. The money will go towards projects such as broadband, clean energy and agriculture and is part of a plan to also add one million jobs to an economy left reeling due to the coronavirus pandemic. Elsewhere in the country, Quebec’s two major cities – Montreal & Quebec City – along with one other region are now under the province’s strictest COVID-19 restrictions. The “red” zone includes restrictions on home gatherings and closures of bars and restaurants until October 28th. The police will also be on higher alert in those areas, issuing fines up to $1,000 to those who don’t comply and will have access to obtain warrants faster to crackdown on potential house parties.

  • In the United Kingdom, recent data from the country’s test and trace program revealed a 60% increase in positive COVID-19 cases over the past week. The latest figures show 31,373 people tested positive during the week of September 17th. During the same time period, close to 30,000 people were transferred to the contact tracing system and of those, only 71.3% were reached and asked to provide information about their contacts, down from close to 81% the week earlier. The numbers need to be in the 80% range for the test and trace program to be deemed effective.

  • Germany is planning to move ahead with a law that will give its citizens the legal right to work from home. The announcement was made by the country’s labour minister with the draft law to be published in a few weeks time. The goal is to ensure workers have the option of working from home when possible, as well to regulate home office work, such as limiting hours. COVID-19 has made many employers and employees reconsider office life, forcing many into a mass experiment of mobile work.

  • In Spain, 19 regions including Madrid, will have two days to implement a national order that will limit social gatherings, shops’ opening hours and restrict trips in and out of any large cities. Madrid will carry out the order, but its regional president said she will fight the Spanish government’s resolution in the courts because she deems it arbitrary. 

  • In Turkey, the country’s health minister admitted to publishing only a partial tally of confirmed coronavirus infections, which now brings into question the true scale of the pandemic in the country. In July, as countries were reopening their borders around them and rebooting their tourism industry, Turkey changed the way it reported its coronavirus cases, replacing the words “today’s number of cases” to “today’s number of patients”. The changing of the wording meant “patients” were considered people who tested positive and displayed symptoms. Those who tested positive but were asymptomatic were not included in the tally. The World Health Organization (WHO) defines confirmed cases as the following: “a person with laboratory confirmation of COVID-19 infection, irrespective of clinical signs and symptoms.”

Covid-19 – Due Diligence And Asset Management

Private Equity Firms Bet on Booming Demand for Online Shopping

Brief: Private equity firms are betting that the rise in online shopping is here to stay, with some of the world’s biggest investment funds eyeing deals for everything from warehouses to delivery companies. Clipper Logistics Plc, which supports the e-commerce operations of retailers from Asos Plc to Superdry, is attracting interest from buyout firms, people with knowledge of the matter said. Cinven is among potential suitors that have been evaluating the 496 million-pound ($638 million) company, while CVC Capital Partners has also looked in the past, according to the people, who asked not to be identified because the information is private. Silver Lake recently participated in a $650 million funding round for Klarna AB, which lets shoppers pay for online purchases in installments. In August, Advent International acquired a controlling stake in the U.K. operations of package delivery service Hermes. The coronavirus crisis has created rising e-commerce demand, with customers stuck indoors ordering everything from food delivery to clothing and items for home improvement. That’s attracted private equity firms, which are eager to spend the record piles of capital they’ve amassed even as they grapple with the effects of Covid-19 on the companies they already own. Permira led a $300 million funding round last month for Mirakl, the French startup behind a platform used to create digital marketplaces, while Warburg Pincus invested in Boston-based Salsify Inc., which helps brands manage their online presence.

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Goldman Job Cuts Drive 2020 Global Bank Cull Toward 70,000

Brief: The global cull of banking jobs continues with Goldman Sachs Group Inc. joining the growing list of lenders resuming cuts paused during the coronavirus pandemic. The Wall Street firm is embarking on a plan to eliminate about one per cent of its workforce, or roughly 400 positions, according to people with knowledge of the matter, who asked not to be identified as the information isn’t public. Adding that to disclosures this week by other banks would take the total announced this year to 67,844, according to figures compiled by Bloomberg. More than 30 lenders -- from Europe, North America, Asia and Africa -- are behind the planned reductions. The actual total is probably higher because many banks eliminate staff without disclosing their plans. The banks cited a need to reduce expenses to offset the cost of credit souring during the pandemic as well as spending to comply with stricter regulation and invest in digital technology. Goldman’s plans suggest that the pandemic is outlasting the financial industry’s resolve to offer jittery employees stability through the economic downturn. They add to a bad week for banking jobs. Italy’s Intesa Sanpaolo SpA said on Wednesday that it agreed with trade unions on at least 5,000 voluntary job reductions. Banco de Sabadell SA’s U.K. unit said this week it will eliminate more than 900 roles.

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Big U.S. Banks to Report Profit Plunge as Pandemic Recession Takes Hold

Brief: As big U.S. commercial banks close their books on the third quarter, analysts expect them to report a 30% to 60% plunge in profits on the year-ago period due to the pandemic-induced recession and near record low interest rates. That slump in third quarter net income comes even though lenders are not going to make outsized provisions for expected loan losses as they did in the first and second quarters. And, while capital markets and investment banking revenue is expected to be up from 5% to 20%, that won’t be enough to make up for the decline in interest income from loans and securities. “You have soft loan growth and you’re still feeling the impact from aggressive Fed actions earlier this year,” said analyst Jason Goldberg of Barclays. Citigroup IncC.N and Wells Fargo & CoWFC.N, the third- and fourth-biggest U.S. banks by assets respectively, will report net income down by about 60%, according to I/B/E/S analyst survey data from Refinitiv.

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Private Capital Overwhelmingly Expects Economic Rebound in 2021, but Braces for Second Wave of COVID-19

Brief: Private equity and venture capital fund managers are anticipating the economy will improve in 2021 but are actively preparing for the impact of a second wave of the pandemic, according to BDO’s Private Capital Pulse Survey. Three-quarters (74.5%) of all fund managers surveyed expect the economy to improve next year—28% expect it to be “much better” and 46.5% “slightly better.” Only 15.5% of PE and VC fund managers surveyed said they expect the economy to perform worse in 2021, and the remainder, 10%, said the economy would fare about the same. At the same time, PE and VC fund managers are preparing for a potential second wave of the coronavirus in various ways: by conducting a business continuity risk assessment (55%), by making changes in forward-looking valuation metrics (47%), by activating a crisis response task force (39.5%), by considering applying for a government loan (36.5%), and by assessing EBITDA for asset impairments (32%). Just 4.5% of respondents say they are not doing anything to prepare for a second wave.

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Heirs to Asian Fortunes Tested on Sustainability Commitments by Pandemic

Brief: As markets tumbled this year, Mary Ann Tsao faced a tough choice. Her fourth-generation family office in Singapore had adopted sustainable investing principles, but the coronavirus was trashing the global economy. Relatives suggested a return to the old ways. "They'd say 'don't lose any money - never mind about the ESG (environmental, social and corporate governance)','" she said. "But we have to ask: what is the purpose of investing money in the first place?" In a sign of how Asia's ultra-rich family offices are slowly embracing the sustainability trend, the Tsao Family Office has tried to stay the course, buying into the Brown Advisory US Sustainable Growth Fund and adding to its investment in the Robeco Sustainable European Stars Fund after the pandemic began. For sustainable investing to take hold in Asia as it's started to in Europe and North America, family offices like Tsao's are key. Families run 85 per cent of the businesses in Asia, according to Ernst & Young estimates, a much higher proportion than the rest of the world. As fortunes get passed on to next generations, the push to do well by doing good is gathering steam.

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BlackRock Unlocks £3.1 Billion British Property Fund from COVID Freeze

Brief: BlackRock BLK.N said on Wednesday it had lifted the suspension of its 3.1 billion pound ($4 billion) British property fund, one of several to resume dealings after a six-month freeze due to uncertainty about valuations. Much of Britain’s 70-billion-pound ($90 billion) property fund sector was frozen in March as a result of the COVID-19 pandemic, but surveyors lifted an uncertainty warning earlier this month. Dealing in the BlackRock fund, which was suspended on March 20, will start again on Oct. 30, the U.S. asset manager said in a statement emailed to Reuters, as the fund’s assets were no longer subject to “material uncertainty”. “The fund has sufficient liquidity to meet the current level of redemption requests,” the statement said. Legal & General LGEN.L, Royal London, St James's Place SJP.L and Columbia Threadneedle have also lifted the suspension of their funds. Aegon AEGN.AS, Aviva AV.L, Janus Henderson JHG.N and Standard Life Aberdeen SLA.L said on Wednesday theirs remained suspended. Some funds have said they are checking market activity, redemption queues and cash levels before reopening.

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Contact Castle Hall to discuss due diligence

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

Our briefing for Wednesday September 30, 2020:

  • In the United States, seven former commissioners of the US Food and Drug Administration (FDA) wrote a commentary for the Washington Post condemning the White House’s pressure on the agency they once were the head of. “The White House has said it might try to influence the scientific standards for vaccine approval put forward by the FDA or block the agency from issuing further written guidance on its criteria for judging the safety and benefits of a potential COVID-19 vaccine,” they wrote. The former commissioners, who had served under both Democratic and Republican administrations, said actions like these were undermining close to 115 years of work the FDA has put in to build public trust. The group of seven said if people doubt the safety of any COVID-19 vaccine, they won’t get immunized.
  • With 625 new COVID-19 cases confirmed on Wednesday, Canadian health authorities are saying the country’s most populous province situation is about to get worse, before it gets better. The new forecasting from Ontario’s provincial government say the region could see 1,000 cases per day during the first few weeks of October. The number of new cases are doubling every 10 to 12 days, which will account for the “remarkably high surge” in the coming weeks. Health officials will wait to see if measures such as closing strip clubs and limiting hours of operation for bars and restaurants will help limit the spread of the virus before possibly implementing any further restrictions.
  • In a televised address on Wednesday, United Kingdom Prime Minister Boris Johnson, flanked by his chief medical and scientific advisers implored its citizens to observe social-distancing rules. The plea was made on a day where the UK confirmed over 7,100 new cases and Johnson said he would “not hesitate” to enact further restrictions to slow the spread of COVID-19 in the country. Prime Minister Johnson’s comments are seen as a show of defiance to Conservative MPs who are becoming increasingly worried about the economic damage caused by further restrictions. 
  • Spain and its government are planning new national coronavirus rules that will impose tougher restrictions on country hotspots, such as Madrid. The government plans to reintroduce rules restricting people’s movements and gatherings in urban areas with high levels of infections and hospitalizations. The new controls come just over three months after Spain emerged from a tough three-month lockdown. As of Tuesday night, the health ministry confirmed 10,000 active cases in Spain, with a third of them in Madrid, the country’s capital city. 
  • A Bloomberg article notes India’s recent explosion in COVID-19 cases is thanks in large part to super-spreaders. The conclusion is based on a study conducted by United States researchers and published in the journal “Science”. A group of patients that included about 8% of India’s confirmed cases later led to almost two-thirds of its total infections. The research was based on tracing more than three million contacts in the southern states of Andhra Pradesh and Tamil Nadu through August 1st. Researchers said COVID-19 transmitters tended to spread the virus during prolonged close contact on buses and other forms of transportation. In settings such as these, there was a concerning 79% chance of an infection occurring.
  • In Japan, the government announced a plan on Wednesday to offer vacations against COVID-19 free of charge to all of its citizens. The government is expected to spend ¥670 billion up until June 2021 to secure sufficient supplies of a COVID-19 vaccine, whether it be domestically, or abroad. The government has already signed basic agreements with U.S. drugmaker Pfizer and British drugmaker AstraZeneca PLC to secure vaccines when they become available. On top of the funds to purchase COVID-19 vaccines, Japan will also ensure local governments have the funding to provide vaccinations to their residents.

Covid-19 – Due Diligence And Asset Management

Hedge Funds May Escape Fed Blame Over Market Mayhem in March

Brief: Hedge funds can rest easier for now. Federal Reserve Vice Chairman for Supervision Randal Quarles said he doesn’t think the investment firms deserve the lion’s share of blame for tumult that swept financial markets in March -- contrasting statements from other policy makers that the funds’ overly leveraged Treasury trades were a crucial factor. “Our view is that was not a significant source of the pressure that we were seeing in the Treasury market,” Quarles, who also heads the Financial Stability Board of global regulators, said Tuesday during a University of Maryland webinar. Still, he added that market watchdogs lack the “granular data” to fully substantiate that assessment. The comments are significant because Quarles has been leading an effort by global central banks to examine whether hedge funds and other non-bank financial firms should face more oversight. Hedge funds have feared that regulators would clamp down on them since June when the Bank for International Settlements called the firms’ rapid unwinding of so-called basis trades “a key driver” of the March turmoil. The transactions involve buying Treasury securities using leverage via repurchase pacts while simultaneously selling futures contracts.

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Morgan Stanley Said to Start Search for New London Headquarters

Brief: Morgan Stanley has begun looking for a major new London headquarters, countering fears the coronavirus crisis will crush demand for office space in the world’s financial capitals. The U.S. lender has contacted a handful of developers as it assesses options for a potential move from its current premises in Canary Wharf, people with knowledge of the process said. The bank wants at least 600,000 square feet (about 55,740 square meters) of space and will likely focus on options in the east London financial district as well as developments in the City of London, the people said, asking not to be identified as the process is private. The search is at an early stage and is unlikely to result in a deal until late next year at the earliest, with no certainty a move will take place at all, the people added. A spokesman for Morgan Stanley declined to comment. Morgan Stanley would become the latest in a series of major investment banks to move to new premises in London as firms seek modern, efficient buildings that can help attract and retain staff, and keep a lid on costs. While the search for a potential new building comes several years before the bank’s current leases expire, there’s a scarcity of large new development plots in the capital, and putting up a building on such a scale would take years. The lender currently occupies about 800,000 square feet of space across two buildings in Canary Wharf. One option being considered is to move into a single large new premises, bringing all of its London staff together. 

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M&A Spikes in Record Third Quarter as Boards go on Pandemic Deal Spree

Brief: Mergers and acquisitions came back with a bang in the third quarter as executives rushed to revisit deals left on hold at the height of the coronavirus pandemic and boardrooms regained confidence after a roller-coaster year. A deal frenzy in September led to a record third quarter with more than $1 trillion worth of transactions around the world, mostly focused on coronavirus-resilient sectors such as technology and healthcare, according to Refinitiv data. The third-quarter spike, however, failed to take up all the slack after a lacklustre start to the year. M&A deals overall were down 21% at $2.2 trillion in the first nine months of 2020, with U.S. transactions coming in at $800 billion, a 43% slump from the same period last year. "The way out of this crisis is through M&A and we have started to have really engaging conversations with CEOs and boards around strategic positioning post-COVID," said Alison Harding-Jones, Citigroup's C.N head of M&A for Europe, the Middle East and Africa (EMEA) and vice chairman of EMEA banking, capital markets and advisory.

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Most Executives Think Covid-19 Changed Their Companies Forever

Brief: Many of the changes to global business triggered by Covid-19 will prove lasting. A survey released Wednesday by the IBM Institute of Business Value identified a “culture shift” at corporations worldwide, and concluded that “executives must accept that pandemic-induced changes in strategy, management, operations and budgetary priorities are here to stay.” One big dividend from this culture shift: Two-thirds of respondents said they’ve been able to complete initiatives that encountered resistance in the pre-Covid work world. The survey of almost 3,500 executives in 22 countries found cash flow along with cost and liquidity management among the highest priorities through 2022. About 60% said they were accelerating the digital transformation of their organizations. Three-quarters plan on building more robust IT capabilities. The digital transformation is expected to increase the actual number of jobs, “but the skills required for those jobs are going to be very different,” said Jesus Mantas, senior managing partner of IBM Services. That means potentially millions of workers who can’t transition to the new world of work could be left behind. In a move away from the recent practice of just-in-time delivery, 40% of executives highlighted the need for spare capacity in their supply-chains.

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Sarasin & Partners Poised for Further Growth After Weathering Covid Storm

Brief: Sarasin & Partners, a global thematic investment manager which invests responsibly on behalf of charities, private clients and institutions, has seen its assets under management (AuM) rise by 5.4 per cent (from GBP14.7 billion at the end of 2019 to GBP15.5 billion as at 9 September, 2020) over the course of a highly volatile 2020. This follows a period of significant growth for the Sarasin Group in the prior year, when a GBP338 million net investment inflow, coupled with strong market performance, which helped grow Sarasin & Partners’ AuM by 19 per cent over the course of 2019. Managing partner Guy Matthews attributes the robust performance and AuM growth to its strong foundations, solidified by the completion of a four-year restructuring and reinvestment programme and the maintenance of a commitment to continue investing in people, processes and technology. “While much of our immediate focus has turned to the pandemic and addressing operational continuity and client service excellence, we want to take this success and build it out even further,” says Matthews. A primary factor behind the AuM growth has been strong investment performance for its thematic global equity and multi-asset capability – successfully enhanced under head of global equities Jeremy Thomas and head of multi-asset Phil Collins respectively.  Sarasin’s global thematic approach to investing, which has underpinned the group’s equity selection process since 1996, along with its commitment to stewardship, has been further refined to both capitalise on long-term secular megatrends shaping the global economy such as ageing, digitalisation, automation, evolving consumption and climate change, and all the while integrating responsible stewardship principles such as embedded ESG analysis and active ownership.

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Hedge Fund Launches at “Historically Low” Levels Despite Q2 Recovery, but Liquidations Ease Following Covid Crash

Brief: The rate of new hedge fund launches grew between April and June following the coronavirus-fuelled first quarter slump, as hedge fund performance recovered – but the number of new roll-outs over the past 12 months remains “historically low”, Hedge Fund Research says. New hedge fund launches totalled an estimated 129 in the second quarter. That number was a sharp increase on Q1 which proved the highest quarterly launch total since 153 funds were rolled out in Q2 2019, according to HFR’s latest Market Microstructure Report. But the number of estimated fund launches during the preceding four quarters reached just 404 – an “historically low” figure - stemming in part to the Covid-19 pandemic which drove down Q1’s launch total. At the same time, the industry appears to be recovering from a spike in hedge fund liquidations, which reached a four-year high in the three-months between January and March this year. An estimated 178 funds liquidated in Q2 2020, down from 304 liquidations the previous quarter. But just as virus volatility has driven fund launches to fresh lows, fund liquidations over the past four quarters are at an “historically high” 821.

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Contact Castle Hall to discuss due diligence

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

Our briefing for Tuesday September 29, 2020:

  • As the coronavirus has now claimed over one million lives worldwide, United States President Donald Trump announced the federal government will be distributing 150 million rapid tests. One hundred million of those tests will be sent to states with the President wanting governors to use them in nursing homes, assisted living facilities and schools, so in-person instruction can either resume or continue full-time. However, once the tests are obtained by the states, it will be at the governor’s discretion on how they want to distribute. America has surpassed 100 million COVID-19 tests in the last week, but public health experts say even more testing is needed as the country moves into the autumn and winter months.

  • In Canada, Quebec, the province hit hardest by COVID-19 are ordering new restrictions to help curb the “more complex” second wave. Premier Francois Legault announced the curbing of social gatherings and limiting bar and restaurant service to takeout only for the next 28 days, as of this Thursday. The restrictions will be in place for Quebec’s largest city Montreal and two other regions. Businesses and schools in the three regions will remain open. 

  • In the United Kingdom, thousands of students across the country have been forced into a two-week isolation just weeks after arriving for their academic year due to outbreaks across several campuses. For instance, 1,700 students in a northern England university were asked via email to self-isolate in their residences for the next two weeks, regardless of whether or not they have symptoms. Officials claim the outbreaks are linked to illicit parties, while students claim it is unfair to blame them when they received little support from schools, or the government.

  • German Chancellor Angela Merkel claimed the country could be facing 19,000 new infections per day by Christmas unless more efforts are made to curtail the virus. Chancellor Merkel issued new rules on social gatherings – a maximum of 50 people can gather in public or rented premises and those rules will only apply in areas where there has been 35 or more coronavirus cases per 100,000 people over the last week. Germany has seen its daily COVID-19 case count rise from 300 in late July to 2,400 in late September.

  • Philippine President Rodrigo Duterte has extended the partial COVID-19 restrictions in the capital region of Manila until October 31st in order to keep the spread of the virus in check. The country continues to have the highest COVID-19 case count in Southeast Asia with over 307,000 confirmed infections and close to 5,400 deaths. People must still wear masks, face shields and observe one-metre social distancing, while children, elderly and pregnant women are urged to stay home. President Duterte also appealed to the country’s telecommunications firms to “do a better job” as public schools are set to resume classes remotely on October 5th. Many areas of the Philippines have been struggling with preparations due to access, availability and speed of data services.

  • In China, the capital of Beijing has ordered importers of frozen foods to avoid countries suffering from severe COVID-19 outbreaks after several incidents of imported seafood tested positive for the virus. While health authorities, such as the World Health Organization (WHO) and America’s Centers for Disease Control and Prevention (CDC) have claimed the possibility of obtaining COVID-19 through food supply is low, China has for the most part, stopped domestic transmission of the virus and are on high alert for any possible resurfacing.

Covid-19 – Due Diligence And Asset Management

Airline, Hotel Industry Reps Both Say Their Rebound Depends on the Return of the Travel Business

Brief: U.S. airlines received $25 billion of payroll stimulus help from the government back in April. Now that relief is set to expire this week, the near future for the industry is little improved, and now its workers are desperate for another $25 billion in government help. Delta Air Lines, United Airlines, and American Airlines all have plans to lay off or furlough tens of thousands of airline employees this week if Congress doesn’t agree on another relief package. Air travel has yet to return to even half of the pre-pandemic daily levels, and the International Air Transport Association (IATA) in July pushed back its target to 2024 for when air travel will return to pre-pandemic levels. Much has been made about whether Americans are ready to travel again and feel safe doing so, but industry representatives say the issue isn’t passenger comfort level or pleasure travel: it’s the dearth of business travel. (Business passengers typically comprise 75% of airline profits.) Over the Labor Day weekend, airlines on average saw 50% passenger capacity from one year prior, which was actually an improvement over the past few months. But they only saw 25% of the revenue from one year prior, due to blocked-off seats, slashed ticket prices, and lack of business travelers.

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Haywire Signals Leave Investors Guessing on Business Cycle

Brief: The once-in-a-century pandemic is wreaking havoc on the market’s tried-and-tested barometers for the business cycle. At first glance, Wall Street looks like it’s teeming with the kind of greed usually reserved for the end of an economic expansion. Corporations globally have already issued a record $2.7 trillion of debt. Private-equity firms are borrowing to pay lavish dividends. Tech stocks are at dot-com-era valuations. Yet that’s the wrong interpretation, according to market players like the strategists at Morgan Stanley and fund managers surveyed by Bank of America Corp. They reckon an economic recovery is just getting started, and once the virus is controlled it will power the cross-asset rally in earnest. That makes it a confusing time for anyone allocating assets based on where we are in the cycle. “You’ve got this early cycle and late cycle melding going on,” said Kevin Gaynor, founder of Rational Research and former head of international economics at Nomura Holdings Inc. “You’ve got a really simple answer for that: it’s interest rates.” Lower borrowing costs have helped juice market valuations since the March maelstrom as investors tried to front-run a recovery. The danger now is that risky assets are priced for the best-case scenario, offering none of the premiums that might be up for grabs at the start of an economic upswing.

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Rich Finance Workers to Flee Britain over Virus and Brexit Fears

Brief: The City is bracing for Brexit — but not the one you think. Some of the finance sector’s richest are planning to leave the UK as a double-whammy threat of a second Covid-19 wave and the Brexit fallout forms “a dark cloud” over the country, according to wealth, property and tax advisers. Wealth manager London & Capital’s clients, who include hedge fund managers, have indicated that the UK is the “least attractive” place to live amid the pandemic, according to Iain Tait, the head of its private investment office. Tait, who advises around 100 wealthy individuals with assets totalling around £1.25bn, said some of his clients were considering moving out of the UK to avoid a second lockdown and the ramifications of the impending end of the Brexit transition period. “There’s definitely been a pickup in enquiries that might give high-net-worth families greater optionality, if this pandemic and the potential for lockdowns continue,” Tait said. “[Clients] want to continue to have lifestyle and business optionality, both post-Brexit and [without] a continuing Covid cloud over one’s family life,” he added. “It’s a mixture of the two, which together form a pretty dark cloud [over the UK for] high net worths that we work with.”

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How do Family Offices Manage Risk Amid Pandemic?

Brief: Anyone longing for a return to a more predictable economic era? A time when a rise in interest rates immediately triggered more overseas investment, leading to an inevitable strengthening of a country’s currency? Well, get prepared for a rather long wait, as ultra-low rates and aggressive central bank monetary supply – not to mention the ongoing geopolitical uncertainty around the US election – signals anything but a move to more conventional times. It is not like we have not been here before. What we are currently living through draws parallels with the post-World War I period, which led to hyperinflation and a prolonged global recession. The difference this time, other than inflation currently being kept down due to ultra-low interest rates, is that this environment will likely be concentrated into a much shorter time period, as opposed to the decade of pain experienced after 1923.   If the macro was not enough to think about, there is also a particular global health pandemic fundamentally disrupting traditional working practices. This begs the question, with remote working looking likely to be here for some time and markets bracing themselves for a second wave of volatility, just how does a family office, set in its ways, manage risk right now?

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CFTC Charges Georgia Man with Fraudulent Scheme to Profit from COVID-19

Brief: The Commodity Futures Trading Commission today announced that it has filed a complaint in the U.S. District Court for the Northern District of Texas against Kenzley Ramos, a Georgia resident, charging him with fraudulent solicitation, misappropriation, operation of an unlawful commodity pool, and failure to register with the CFTC.  According to the complaint, Ramos falsely promised individuals the ability to profit from the COVID-19 pandemic by trading in off-exchange foreign currency (forex) and binary options with guaranteed 300 percent weekly returns. This is the second enforcement action brought by the CFTC alleging misconduct directly tied to the pandemic. [See CFTC Press Release No. 8195-20 “We will continue monitoring our markets and will pursue any individuals who choose to use COVID-19 as part of their illegal schemes,” said Division of Enforcement Director James McDonald… The complaint alleges that from at least December 2015 until the present, Ramos fraudulently solicited individuals across the country by using online advertisements and aliases to further his ongoing scheme, incorporating COVID-19 into his solicitations earlier this year. He falsely represented himself as a highly successful and experienced binary options and forex trader who could profit from the coronavirus even while stock prices were falling.

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U.S. Pension Funds Sue Allianz After $4 Billion in Coronavirus Losses

Brief: Pension funds for truckers, teachers and subway workers have lodged lawsuits in the United States against Germany’s Allianz, one of the world’s top asset managers, for failing to safeguard their investments during the coronavirus market meltdown. Market panic around the virus that resulted in billions in losses earlier this year scarred many investors, but no other top-tier asset manager is facing such a large number of lawsuits in the United States connected to the turbulence. In March, Allianz ALVG.DE was forced to shutter two private hedge funds after severe losses, prompting the wave of litigation the company says is "legally and factually flawed". Together, the various suits filed in the U.S. Southern District of New York claim investors lost a total of around $4 billion. The fallout has also prompted questions from the U.S. Securities and Exchange Commission, Allianz has said. A spokesman for Allianz Global Investors said in a statement to Reuters: “While the losses were disappointing, the allegations made by claimants are legally and factually flawed, and we will defend ourselves vigorously against them.”

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Contact Castle Hall to discuss due diligence

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

Our briefing for Monday September 28, 2020:

  • In the United States, House Democrats are preparing a new coronavirus relief package that will be a scaled down version of the one proposed back in May. Speaker Nancy Pelosi has instructed her committee chairs to put together a proposal with a topline of about $2.2 trillion - one trillion less than what the Democrats originally proposed back in May. However, this scaled back version is still almost one trillion more than the high-end Republicans are willing to agree to. A few weeks ago, the Trump administration said it would be willing to consider a proposal around $1.5 trillion. Even politicians are seemingly fed up with the process with one Democratic representative saying if this new proposal is nothing more than a messaging exercise by his party, it will be worthless. 
  • In Canada, the country’s most populous province had its highest daily COVID-19 case count since the outbreak began in late January. Ontario reported 700 new cases on Monday and Premier Doug Ford said the province is indeed experiencing its second wave, which will be more complicated and complex than the first wave. While Premier Ford has called the case count deeply concerning, he is not yet willing to move on any new public health measures, but a group of medical doctors and experts want the government of Ontario to return to Stage 2 of its reopening plan, which would put a halt to things such as indoor dining. Elsewhere in the country, Quebec is expected to move its two largest cities – Montreal and Quebec City from orange to its highest COVID-19 alert level – red. Both cities have experienced triple digit numbers in daily cases, and the province’s health minister has urged the public to stop socializing for the next month to help slow the spread of the virus. 
  • In the United Kingdom, Boris Johnson’s government has raised the prospects of even tougher coronavirus rules as they try to get the latest wave under control. Speaking on BBC radio, health minister Helen Whately was asked if the government was considering a “total social lockdown” and her response was that it couldn’t be ruled out. The Times are reporting new restrictions under consideration include a ban on different households mixing and shutting down pubs, bars and restaurants yet again.
  • In France, hospitals in the Paris and Marseille regions are delaying scheduled operations to free up space for COVID-19 patients. Coronavirus admissions in southern France have tripled since the beginning of September with 55 ICU beds occupied on September 1st and 170 by September 27th. Due to the situation getting more dire in the Marseille region, bars and restaurants will be closed for seven days as of Sunday night and will be reviewed upon completion. If the situation shows no improvement, the closures could be extended.
  • India surpassed six million coronavirus cases over the weekend. Concerns are now mounting the situation could get worse as the country approaches its autumn festival and wedding season. This will cause people to gather for religious ceremonies and social celebrations. India’s capital city of Delhi is also bracing for its pollution season, which is caused by farmers in the surrounding areas burning the stubble of their rice fields. Health experts have warned the pollution could worsen the conditions of people infected with the virus.
  • In Australia, the premier of Victoria state and the Prime Minister of the country seem to be at odds on a lockdown implemented almost two months ago. Over the weekend, Victoria state Premier Daniel Andrews announced the end of a night curfew in Melbourne sooner than originally expected as infections in the country’s second largest city slows. However, Prime Minister Scott Morrison is looking to urgently reboot Australia’s struggling economy and needs Melbourne to do so. “As it stands this lockdown is already longer than that faced by residents in many cities around the world, said Morrison. We remain deeply concerned about the mental health impacts of a prolonged lock down on Melbourne residents.” Premier Andrews has angered pro-business groups in the region with his plan to keep most businesses and restaurants closed until the state reduces its 14-day rolling average to 5 new cases per day. The figure is currently 20.3 as of Monday.

Covid-19 – Due Diligence And Asset Management

Foresight White Paper Reveals Significant Differences in Pandemic Resilience Across Infrastructure Sub-Sectors

Brief: A new study published today by Foresight Group (Foresight) into the resilience of infrastructure to global pandemics reveals that renewable energy, telecoms and primary care have proved to be the most pandemic resilient.The analysis, which examines 23 infrastructure sub-sectors spanning economic and social infrastructure, shows that while infrastructure as an asset-class has proved to be highly pandemic resilient, with many sub-sectors largely immune to the impact, there are substantial differences in the performance of various infrastructure sub-sectors. Foresight’s white paper “Infrastructure Pandemic Resilience: a true test of infrastructure’s defensive characteristics”, considers the resilience of infrastructure to global pandemics through five investment fundamentals: revenues; costs; financials; political and regulatory environments; and operations. The study was based on a proprietary pandemic resilience framework developed by Foresight, a leading independent infrastructure and private equity investment manager.

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Investors ‘Freaking’ Over Possible Contested Outcome of US Election

Brief: A disputed result in November’s US presidential election is now the number one concern for investors – even ahead of a second wave of Covid-19, according to a new global survey. The poll carried out by deVere Group, one of the world’s largest independent financial advisory and fintech organisations, asked more than 700 clients ‘What is your biggest investment worry for the rest of 2020?’ A contested U.S. election was the number one (72%); the impact of a Covid-19 second wave (18%) and U.S.-China trade war (5%). The remaining 5% was made up of other geopolitical issues, including Brexit. 735 people resident in the UK, North America, Europe, Asia, Africa, Latin America and Australasia took part in the poll. Of the poll’s findings, deVere Group CEO and founder, Nigel Green said, “Investors around the world are beginning to freak about the U.S. presidential election. “But not about whether Trump or Biden wins, rather over the looming possibility of a disputed outcome. “President Trump is already questioning the legitimacy of the election, heightening the chances of a contested result and an ensuing constitutional crisis in the world’s largest economy.

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Geopolitics and Investment in Emerging Markets After COVID-19

Brief: As investors ponder the impact of the world’s greatest economic crisis since the Great Depression, emerging markets (EMs) face a swift reversal of fortune. Some of the fastest-growing economies in the world have been brought to a virtual standstill, reeling with the effects of an exogenous shock to demand, a public health emergency, and nascent infrastructure with which to combat the pandemic.While multilateral development banks and international financial institutions have moved swiftly to address critical funding shortfalls, the COVID-19 pandemic has dealt severe challenges to the EM growth model — and to the livelihoods of people within these countries. As governments in emerging markets and developing economies (EMDEs) have less fiscal space at their disposal — but harbour an ongoing need for spending on relief and stimulus measures — credit downgrades from the ratings agencies may be inevitable.Yet, even in the wake of downgrades, this juncture of COVID-induced distress might open up a propitious opportunity for international investors and companies to invest in infrastructure in EMDEs.

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Eurozone Recovery Could Face More Setbacks

Brief: The next stage of the eurozone's recovery from the impacts of the COVID-19 outbreak could be challenging, according to a report by S&P Global Ratings. The rating agency and research firm revised its forecast for eurozone gross domestic product downward to 7.4% this year, from the 7.8% it estimated in June. The firm said the eurozone will see a 6.1% rebound in 2021, up from the 5.5% it forecast in June. "We are lowering slightly our expectations for unemployment, which we forecast will peak at 9.1% in 2021," said Marion Amiot, senior European economist, in a news release. S&P's report said the eurozone's unemployment rate will gradually reduce to 8.4% in 2022 and 7.8% in 2023. The unemployment rate is currently 8.1%, up from 7.6% in 2019. European economies are operating at around 5% below their pre-COVID-19 output levels and are estimated to return to pre-COVID-19 levels only in 2022. The eurozone recovery is currently considered to be shaped like a check mark, with flat growth expected to follow the 2021 rebound, according to the firm's analysis. "The eurozone is now entering a tricky transition period from gradual withdrawal of government support toward implementation of the European Union's economic reform program. Liquidity, households' behavior and demand will be crucial in enabling the European economy to weather this transition, and much could go wrong along the way," Ms. Amiot said.

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Hedge Funds Are Slow-Walking Wall Street’s Return to the Office

Brief: As the finance world tiptoes back into the office, some of the biggest hedge funds are opting to keep their workers at home into 2021. While Wall Street firms including JPMorgan Chase & Co. and Citigroup Inc. ramp up attendance at their global headquarters, staff at Bridgewater Associates, D.E. Shaw & Co. and Two Sigma Investments are unlikely to be back until next year, according to people familiar with the matter and company officials. Banks often have their own buildings, but hedge funds usually work in shared locations with less control over how the lobby and elevators are managed. Some are choosing to wait and learn from how others’ returns pan out, a position helped by the fact that productivity has stayed high, according to the people. Two Sigma, which has about 1,500 U.S. employees, told workers they won’t be required to return before July 4, one of the people said, asking not to be named because the information isn’t public. Those who miss being at their desks can go in from January. Still, some hedge funds are pushing ahead. About 40% of Capstone Investment Advisors’ New York staff is in the office. To give employees time for creative thinking, the firm has created “meeting-less Wednesdays.”

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Emerging Markets on Edge as Goldman and Deutsche Bank Flag Risks

Brief: Emerging markets are heading toward the end of the third quarter with more reasons to be cautious than optimistic. Developing-nation stocks, currencies and bonds had their worst week in the five days through Friday since the coronavirus pandemic rocked global markets in March. The gap between implied volatility in emerging-market currencies and their Group-of-Seven peers is at the widest since June amid concerns over renewed lockdown measures and delays to further U.S. fiscal stimulus. Emerging-market exchange-traded funds suffered the biggest weekly outflow since early July as assets tumbled. Manufacturing reports from China, India, Brazil and South Africa that are being published this week are potentially less decisive for investors than the global sentiment toward risky assets. Investors are bracing for higher price swings around the U.S. November elections, with the first presidential debate between Donald Trump and challenger Joe Biden scheduled for Tuesday. And they’re being encouraged to move to the sidelines. Deutsche Bank AG is taking a “more defensive stance” on emerging-market credit as it expects increased volatility from the U.S. election to fuel a selloff in risky assets. Never mind that the wave of central-bank stimulus and investors’ hunger for yield had lifted developing-nation dollar debt for five months.

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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.

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