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Covid-19 Diligence Briefing

Our briefing for Wednesday, July 28, 2021:

  • In the United States, the Centers for Disease Control and Prevention (CDC) updated their mask guidelines on Tuesday as cases surged. The CDC now recommends that even fully vaccinated people should be wearing masks indoors and in other areas where there’s a high risk of transmission. They also recommend that all teachers and students should be wearing masks in the classroom, regardless of whether they’ve been vaccinated.  According to the CDC, 63% of U.S. counties have high transmission rates that should warrant mask wearing. Many Americans may choose not to follow the new recommendations as they are not binding.
  • In Canada, Prime Minister Justin Trudeau says the country now has enough doses of vaccine to inoculate every eligible Canadian.  Speaking at a vaccine clinic in New Brunswick, Trudeau encouraged all Canadians to get their shot, saying there are “no more excuses.” As of Tuesday the country had received 66 million doses, enough for all 33.2 million Canadians who are 12 and older. “Back in the winter I made a promise that we would have enough vaccines for all eligible Canadians by the end of September. Not only have we kept that promise, we've done it two months ahead of schedule,” Trudeau said.
  • In the United Kingdom, the government announced a change to international travel rules. The change will allow people who have been fully vaccinated in the U.S. or most of Europe to avoid quarantine if they’re arriving from amber list countries, beginning on August 4. Under the current rules, only those who have been vaccinated by the National Health Service (NHS) are eligible for a “Covid-19 pass” that allows them to skip quarantine if returning from an amber list country. The European countries included are all but one of the 27 EU member states, as well as Norway, Iceland and Switzerland, plus Lichtenstein, Monaco, Andorra and Vatican City. France is the only exception because it remains on the “amber plus” list, meaning quarantine is unavoidable even for fully vaccinated travellers.
  • In Japan, Tokyo has set another coronavirus record, reporting 3,177 new cases, the first time cases have exceeded 3000 in a day. Although Japan has kept its cases and deaths relatively low compared to other countries, its vaccination campaign started late and has been slow. While Japan is now averaging about 10 million shots a week, the country’s vaccination minister Taro Kono says the speed of the campaign is less important than getting jabs to young people. "Even if we slow down a little bit, I’m OK. Rather we need to reach out to the younger people, so that they would feel that it’s necessary for them to get vaccinated,” Kono said, speaking in English during an interview.
  • In South Korea case numbers have reached an all-time high as the country continues to deal with its fourth wave. There were 1,896 new cases reported on Tuesday, up from the previous record set on July 22. Tighter social distancing restrictions were enacted across most of the country, most areas are under a level three on a four-level scale. This means a 10 PM curfew and a ban on gatherings of more than four people. The greater Seoul area remains under level four curbs, which means gatherings of more than two people after 6 PM are banned.
  • In Australia, Sydney’s lockdown will be extended for at least another four weeks, officials announced. The lockdown, which began on June 26, will be extended until at least August 28. New South Wales state Premier Gladys Berejiklian reported 177 new cases on Wednesday, the most in a day since March 2020. After containing smaller outbreaks, Victoria and South Australia lifted their lockdown measures, but experts are warning that the restrictions in Sydney could last until September or even later. The nation’s vaccine program has struggled, with only 16% of the adult population fully vaccinated.

Covid-19 – Due Diligence And Asset Management

UK institutional investors show concern over economy coming out of pandemic

Brief: Almost forty per cent of UK institutional investors are optimistic about the economy as the country emerges from the pandemic, according to the latest Institutional Investor Compass Survey from MFS Investment Management. The survey found that almost half of respondents (48 per cent) are confident about achieving their three- to-five-year goals but are less certain (24 per cent) of meeting their shorter-term objectives, post-pandemic. Adding to this mixed sentiment, the survey showed that more than 57 per cent of institutional investors agree some industries will not recover, with more than 47 per cent agreeing that Covid-19 has created investment opportunities and 35 per cent agreeing that markets do not fully reflect the long-term economic impact of the pandemic.

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IBM Report: Cost of a Data Breach Hits Record High During Pandemic

Brief: IBM Security today announced the results of a global study which found that data breaches now cost surveyed companies $4.24 million per incident on average – the highest cost in the 17-year history of the report. Based on in-depth analysis of real-world data breaches experienced by over 500 organizations, the study suggests that security incidents became more costly and harder to contain due to drastic operational shifts during the pandemic, with costs rising 10% compared to the prior. Businesses were forced to quickly adapt their technology approaches last year, with many companies encouraging or requiring employees to work from home, and 60% of organizations moving further into cloud-based activities during the pandemic.

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Top UAE Banks See Profits Surge as Impairments Drop on Recovery

Brief: The three largest banks in the United Arab Emirates reported a drop in impairment charges by nearly a third in the first half as they took advantage of an economic recovery from the Covid-19 pandemic. Emirates NBD PJSC, Dubai’s biggest lender, and its counterpart in the UAE capital, First Abu Dhabi Bank PJSC, posted an increase in profit in the first half, supported by higher fee income and a drop in the cost of risk. Dubai Islamic Bank’s first-half impairments fell 29% even though profit dropped. The results reflect an improvement in economic conditions in the UAE, OPEC’s third-biggest producer, whose vaccine rollout fed an upswing in activity and as oil prices rebounded. Executives emphasized lower-than-expected loan-loss charges, pointing to their banks’ strengthening balance sheets and adequate provisioning while still sounding caution about the outlook.

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This Type of Day Is Price of Progress in Post-Pandemic Stocks

Brief: The Nasdaq 100 Index trades for 38 times earnings. Abby Joseph Cohen says it’s a market with “no margin for error.” It’s only July, and the S&P 500 Index has put in a gain that most fund managers would consider a stellar year. So when big drops like Tuesday’s land with no obvious bad news to explain them, it’s useful to consider how far the market has already come. “It’s priced to short-term perfection,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Partners. “Was yesterday the high? Because that’s what everyone is acting on. I don’t believe yesterday was the high of the year,” she added, citing views on earnings over the next six months.

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Everyone Is Losing It Over Inflation. Except Financial Markets

Brief: It’s everywhere. At the White House. In consumer data. On earnings calls: Anxiety that inflation is about to gut the economy. Two places it isn’t are the stock and bond markets, where investors have taken Jerome Powell’s “transitory” mantra to heart. Breakeven rates -- a gauge of bond market inflation expectations -- have barely budged in a month, even after the hottest price print in more than a decade. Meanwhile, tech giants -- thought to be vulnerable to a pickup in price pressures -- have overpowered cyclical shares, which normally fare better in an inflationary environment. The divide highlights a dynamic that has persisted since pandemic lockdowns began 16 months ago: Economic hardships crimping companies real time, while markets stay calm on grounds this too shall pass. So far it’s been a winning strategy for investors, who stood firm amid the deepest recession in generations and now seem bent on reprising the high-wire act as the latest stresses play out.

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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, July 27, 2021:

  • In the United States, travel restrictions will remain in place as the country continues to deal with the delta variant and rising coronavirus case numbers. The first round of travel restrictions was imposed by the U.S. on China in January 2020 to address Covid-19. Since then, more countries have been added and the ban now applies to most non-U.S. citizens who recently visited the U.K., the 26-nation Schengen bloc in Europe, Brazil, Ireland, India, Iran and South Africa. The announcement comes amid lobbying from airlines and the tourism industry to lift the restrictions before the end of summer. The Biden administration has not offered any indication as to when the restrictions might change.
  • In Canada, two Ontario ministers have asked Ottawa to ensure mixed vaccines will be recognized for international travel. Health Minister Christine Elliott and Solicitor General Sylvia Jones wrote to Intergovernmental Affairs Minister Dominic LeBlanc on Sunday. They asked the federal government to work with the World Health Organization to help guide international partners, so that they will recognize mixed vaccines as an accepted regimen. Ontario and other Canadian provinces have allowed citizens to mix Pfizer-BioNTech and Moderna vaccines, or to take an mRNA shot after a first of the Oxford-AstraZeneca vaccines.
  • In the United Kingdom, an expert from the Scientific Advisory Group for Emergencies (Sage) says the worst of the pandemic could be over by late September. Epidemiologist Neil Ferguson says it’s still too early to tell what effect the July 19 unlocking in England will have, but that vaccines are having a major impact. “We’re not completely out of the woods, but the equation has fundamentally changed. The effect of vaccines is hugely reducing the risk of hospitalisations and death. And I’m positive that by late September or October time we will be looking back at most of the pandemic,” he said. “We will have Covid with us, we will still have people dying from Covid, but we’ll have put the bulk of the pandemic behind us.”
  • In Spain, although the incidence rate of Covid-19 cases continues to rise, officials are starting to see some positive signs. The 14-day incidence rate reached 700 infections per 100,000 inhabitants on Monday, the highest rate registered in Spain since February 5. Deputy Health Minister Silvia Calzon told a press conference that 65% of new cases were among people below the age of 40, based on the way Spain has prioritized its vaccination program by age groups. “It looks like we are starting to observe a deceleration in the incidence's rhythm of growth,” she said. 
  • In Japan, just days after the Olympics began, Tokyo reported its highest number of new coronavirus cases. On Tuesday the city reported 2,848 new cases, which exceeds their former record of 2,520 cases set in January. According to experts, the sharpest increase in cases has been among younger, unvaccinated people. Japan’s vaccination drive has been slow and began late, according to the government 25.5% of Japanese have been fully vaccinated. The city of Tokyo is still under its fourth state of emergency, which will continue through to the end of the Olympics.
  • In Australia, the state of Victoria announced they will lift their lockdown restrictions after successfully curbing the spread of Covid-19. The neighbouring state of New South Wales reported 172 new Covid-19 cases in a 24-hour period on Tuesday, a new daily record. Victoria reported just 10 new cases on Tuesday, and all had been in quarantine while they were infectious.  Pubs, restaurants and schools will reopen in Victoria, although people will not be allowed to have visitors in their homes for another two weeks.

Covid-19 – Due Diligence And Asset Management

Private Equity ‘a Shot in the Arm’ for Middle Market Businesses

Brief: In a recent snap poll by audit, tax and consulting firm RSM, almost three quarters (74 per cent) of private equity backed middle market businesses said that their investor has had a positive effect on their firm’s future prospects. Nearly seven in 10 (69 per cent) believed their private equity investor had a positive effect on their firm’s resilience during the global Coronavirus pandemic, as communication between businesses and investors increased for nearly three fifths of the companies (68 per cent). With 59 per cent of businesses saying that the pandemic has had a negative or very negative effect on trade, the findings highlight that the strength and guidance private equity investment brings has supported growing middle market businesses throughout a difficult year.

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The Firms Keeping Investors in the Know in Latin America

Brief: When the Covid-19 pandemic shut the world down last year, there was little time for anyone to adapt. But for the business of corporate access — which until last year connected investors and companies largely through travel and in-person events — the transition was especially stark. For Brazilian provider BTG Pactual, this happened in the middle of a roadshow where, after one day of meetings, the event went instantly, if unexpectedly, virtual on the second day. “Companies from their end understood that they had to be in contact with investors and clients and converted their interactions to online meetings as well,” recalls Carlos Sequeira, head of research at BTG Pactual. “Our straight relationship with IR and management teams helped to enhance the events calendar with several online group meetings since the first week of lockdown.”

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Hedge Fund Investors Pleased After Best Start To A Year Since 2009

Brief: The vast majority of hedge fund investors were pleased with the performance of their funds during the first half of this year, according to a new study from HFM and the Alternative Investment Management Association (AIMA). As a result, more than one-third of investors are planning to boost their allocation to hedge funds. The study is based on surveys and interviews with 108 investors in alternatives and 128 senior hedge fund investor relations and marketing professionals during the second quarter. With an 8.9% average return, hedge funds reported their most robust first half of a year since 2009, which is one reason investors were so pleased with their fund returns. HFM and AIMA also said investors have been rewarding hedge funds for their performance as inflows in the first five months of the year amounted to $57.8 billion, more than double the $23.4 billion recorded in the first five months of 2021.

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Europe's venture capital market booming in 2021

Brief: The last 16 months have provided every aspect of society with an unprecedented challenge, yet Europe's venture capitalists are fuelling a red-hot market that looks to be anything but challenged. While the startup market is booming globally, Europe's scene of private startup investment deserves close attention for the particularly astounding rate at which innovation is accelerating. According to Dealroom's latest report, Europe is the fastest growing major region by venture capital investment - outpacing both the US and China -  with investment in European startups having grown by 2.9x YoY to EUR49 billion in the first six months of 2021 alone.

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IMF Forecasts 6% Global Growth This Tear as Economies Reopen

Brief: The International Monetary Fund is sharply upgrading its economic outlook this year for the world’s wealthy countries, especially the United States, as COVID-19 vaccinations help sustain solid rebounds from the pandemic recession. But the 190-country lending agency has downgraded its forecast for poorer countries, most of which are struggling to vaccinate. Overall, the IMF said Tuesday that it expects the global economy to expand 6% this year — a dramatic bounce-back from the 3.2% contraction in the pandemic year of 2020. The IMF's forecast, unchanged from its previous estimate in April, would mark the fastest calendar-year global growth in records dating to 1980.

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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, July 26, 2021:

  • In the United States, the nation’s top infectious disease expert has warned that the country is going “in the wrong direction” as they struggle with rising coronavirus case numbers. Dr. Anthony Fauci said in an interview with CNN’s State of the Union program that vulnerable people who are unvaccinated are driving up the numbers. “It’s really an outbreak among the unvaccinated…which is the reason why we’re out there practically pleading with the unvaccinated people to go out and get vaccinated,” Fauci said.  He said government experts are still considering whether to recommend booster shots for people who are vaccinated.
  • Canada’s central bank will adopt a hybrid working model once it is safe for employees to return to the office. The Bank of Canada has said they will permanently allow their employees to work 50% of their hours remotely. They will continue to follow public health guidelines as they prepare for their offices to reopen, and will not mandate vaccines or expect employees to show proof of vaccine. The announcement comes at a time when employers across the country are in the process of developing return-to-work plans as provinces ease lockdown restrictions.
  • In the United Kingdom, case numbers have fallen for five days in a row, for the first time since February. It’s also the first time since the start of the pandemic that a national lockdown has not been in alignment with the sustained drop in cases. The U.K. reported 29,173 cases on Sunday, down from 48,161 reported a week earlier on July 18. Experts have said that warm weather could be partially responsible for the drop in case numbers, as more people are socializing outside. These figures don’t include the impact of the July 19 easing of restrictions.
  • In Germany, Chancellor Angela Merkel’s chief of staff says restrictions for unvaccinated people may be required if case numbers rise in the coming months. Chief of Staff Helge Braun told a newspaper that he doesn’t expect Germany will have another lockdown, but that unvaccinated people may be barred from restaurants, movie theaters and other venues because the risk is too high. Approximately 60% of Germans have had at least one dose of vaccine, while about 48% are fully vaccinated. Case numbers have been on the rise in Germany since early July, largely because of the spread of the delta variant.
  • In France, President Emmanuel Macron called for unity as people protested the government’s Covid-19 health pass over the weekend. The health pass requires people to show proof of vaccination, a negative test or recent recovery from Covid-19, in order to access restaurants and public venues, or when undertaking domestic travel. Around 160,000 people protested across the country on Saturday, expressing that the government shouldn’t tell them what to do. Macron said the protesters are “free to express themselves in a calm and respectful manner,” but he warned that demonstrations won’t end the pandemic.
  • In Australia, thousands of people marched over the weekend in an anti-lockdown protest that turned violent in central Sydney. State Police Commissioner Mick Fuller said around 10,000 people called the police hotline to report people breaching Covid-19 restrictions. Fuller said the calls were “an amazing outcry by the community, not just in terms of their disgust at the protest but at the way police were treated.” Protesters were opposing lockdown measures that were put in place over a month ago in Sydney to try to contain the delta variant. Currently only about 16% of Australians over the age of 16 are fully vaccinated.

Covid-19 – Due Diligence And Asset Management

New COVID variants tops list of market concerns - Deutsche Bank sentiment survey

Brief : New COVID variants now tops the list of concerns for financial markets, followed by inflation and economic growth, according to Deutsche Bank's monthly market sentiment survey for July published on Monday. A surging Delta variant of the coronavirus has rattled markets in recent weeks, fuelling concerns that world economic growth may have peaked. In a Deutsche Bank survey conducted July 21-23 covering around 550 market professionals globally, over 60% of respondents said they viewed new variants as more worrisome than they did back in April when it was last the top risk.

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Goldman Expects U.S. Economic Growth to Slow Sharply Next Year

Brief: U.S. economic growth will likely slow significantly in 2022 as the services sector’s recovery fades, according to Goldman Sachs Group Inc. The U.S. bank expects the world’s biggest economy to return to trend-like expansion in the second half of next year. It also cut its forecast for gross domestic product growth in the final two quarters of 2021 by one percentage point to 8.5% and 5% respectively. “Until a couple of months ago, our GDP growth forecast had been distinguished for the prior year by being well above consensus expectations,” economists led by Jan Hatzius wrote in a report to clients. “At this point, our forecast is instead distinguished from consensus expectations by the sharpness of the deceleration that we expect over the next year and a half,” they wrote

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Everybody take the week off, Wall Street firm tells staff

Brief: No calls, no emails and no meetings. That's the order this week from Aquiline Capital Partners to its staff. The private equity firm is putting all employees on vacation, people familiar with the matter said. It's an unusual move intended to recognize employees and avoid burnout from the physical and mental pressure of the COVID-19 pandemic and the frenetic pace of dealmaking. Aquiline has more than $6 billion in assets and over 60 employees in its New York headquarters and London office. The firm has canceled all internal meetings for the week and told employees to refrain from calls, emails and chatroom messages, the sources said. If a company owned by Aquiline has an emergency, an employee will step in, one added

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Jeremy Grantham's GMO says stocks are overvalued by every metric, but there are 3 strategies investors can use to weather a crash

Brief :Billionaire Jeremy Grantham's investment firm says stocks are too pricey, outlining their view as US equities sit at record highs, with the team offering their advice on how to navigate through what they call a global growth bubble. "Global equity markets rallied impressively in the quarter, pushing some year-to-date numbers into double-digit territory only halfway through the calendar year," said GMO in its second-quarter outlook published this week. Grantham, co-founder of investment firm Grantham, Mayo, van Otterloo & Co., is a legendary investor who is well known for calling for a burst of the 1989 Japanese asset-price bubble, the 2000 tech bubble, and the 2008 real-estate bubble.

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Churchill AM's Schwimmer: The Covid-19 crisis from a lender perspective

Brief: PEWire spoke to Randy Schwimmer, who heads up senior lending origination and capital markets at Nuveen affiliate Churchill Asset Management, to hear how he experienced the lending market throughout the crisis and how it keeps evolving into 2021. Churchill AM is structured as a private equity firm and is headquartered in New York but works with clients globally, and provides structuring, credit analysis, equity, debt, and capital investment to middle market companies, primarily those owned by private equity investment firms. From Schwimmer's perspective, he noted that the period going into 2020 was tainted with a certain degree of apprehension.

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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 July 23, 2021:

  • In the United States, three states account for almost 40% of the country’s new Covid-19 cases, CNN reports. White House Coronavirus Response Coordinator Jeff Zients says every person who gets vaccinated helps bring the pandemic to an end. "This week, just three states Florida, Texas and Missouri, three states with lower vaccination rates accounted for 40 per cent of all cases nationwide," Zients said at a White House news conference. "For the second week in a row, one in five of all cases occurring in Florida alone. And within communities, these cases are primarily among unvaccinated people." Right now the U.S. is averaging 34,056 new Covid-19 cases per day.

  • In Canada, the debate over whether or not there should be mandatory vaccines for healthcare workers is growing. France has required all healthcare workers to get vaccinated by September 15, while Italy and Greece have taken similar approaches. Healthcare workers were among the first to have access to vaccines in Canada. While the Ontario Medical Association and the Registered Nurses’ Association of Ontario call for mandatory vaccines for healthcare workers in Ontario, the province’s premier is against it, saying healthcare workers have a “constitutional right” to opt out of vaccination. 

  • In the United Kingdom, experts say more effort is needed to encourage young people to get the vaccine. In England, less than 60% of 18-25 year-olds have had their first dose, though the latest data from Public Health England (PHE) shows that case rates are highest among people in their 20s. Adults over the age of 18 have been eligible for Covid-19 vaccination since June 18. In response to the slowing vaccine uptake among young people Prime Minister Boris Johnson announced that crowded venues, such as nightclubs, may soon require patrons to be fully vaccinated in order to enter.

  • Spain is considering administering a third dose of vaccine, its health minister said, though she did not determine a timeframe. “Everything seems to suggest that we will have to [give a third dose]”, said Health Minister Carolina Darias. She also added that she expects people will have to take annual vaccines for Covid-19 “without a doubt.”  Spain has vaccinated 52.8% of the population, while 63.7% have had at least one dose. The World Health Organization recently came out against booster shots, saying that it’s more important to get vaccines to poorer countries.

  • In South Korea,  the government has said it will shut down a rally that planned to defy Covid-19 restrictions. The Korean Confederation of Trade Unions (KCTU) expected to hold the rally in Wonju, a rural city about 100 km east of Seoul.  The city of Wonju updated their restrictions to the highest level on Thursday at midnight, banning public rallies.  The South Korean government was recently criticized for being too lenient over a larger KTCU rally that took place on July 3, while at least three people have now tested positive as a result of the rally. 

  • New Zealand has suspended its quarantine-free travel bubble with Australia, as the country struggles with its latest Covid-19 outbreak. The travel pause will apply to all of Australia and will last for at least eight weeks.  Th government of New Zealand held an urgent cabinet meeting on Thursday to discuss the decision. At the press briefing on Friday Prime Minister Jacinda Ardern said the delta variant has made things more dangerous than when the bubble first opened. “Covid has changed, and so must we,” she said.

Covid-19 – Due Diligence And Asset Management

Investors Eye COVID-19 Spread, Golden Cross to Gauge U.S. Dollar Trajectory

Brief : A rally in the U.S. dollar has investors looking at a broad range of factors -- from global COVID-19 infections to yield gaps -- to determine whether the greenback will continue appreciating. The dollar is up 4% from its lows of 2021 and is among the world's best performing currencies this year, boosted by last month's hawkish shift from the Federal Reserve, burgeoning inflation and safe-haven demand driven by COVID-19 worries. Because of the dollar’s central role in the global financial system, its moves ripple out towards a broad range of asset classes and are closely watched by investors. For the United States, a period of sustained dollar strength would be a double-edged sword, helping tamp down inflation by increasing the currency's buying power while denting the balance sheets of exporters by making their products less competitive abroad.

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Stocks Climb To All-Time High at End of Wild Week

Brief: Another raft of blockbuster corporate profits pushed stocks toward a record at the end of a week that started with concern about a peak in earnings and a coronavirus resurgence. About 87 per cent of the S&P 500 companies reporting results so far this season have beaten Wall Street estimates, according to data compiled by Bloomberg. Twitter Inc. and Snap Inc. led a rally in social-media firms as sales blew past forecasts, while American Express Co. jumped after adding a record number of new customers to its tony Platinum card in the second quarter. Stocks extended their weekly advance, with most major groups moving higher. While the rapid spread of the delta variant has sown volatility in financial markets, thus far economists are maintaining their forecasts for a historically strong U.S. recovery. A measure of activity at U.S. service providers settled back in July to a five-month low, a separate manufacturing gauge climbed to a fresh record.

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Bank of Canada to Allow 50% Remote Work as Employees Return

Brief: The Bank of Canada will allow most of its employees to work remotely as much as 50 per cent of the time once public health guidelines allow it to fully reopen its offices.A limited number of staff are currently working in the central bank’s offices in Ottawa. The coronavirus pandemic has eased in Canada, with vaccinations rising and cases dropping, so the bank expects to bring back many employees after the summer. But it doesn’t see a return to normal conditions until 2022, an official said. “More employees will be allowed access over the fall, in line with federal and provincial public health guidelines. Based on current conditions, we are not anticipating full on-site staffing levels until the new year,” Chief Human Resources Officer Alexis Corbett said in an email. The 50 per cent guideline will be measured over two-week periods.

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NYC Hotels See Busiest Week Since Pandemic Struck, Mayor Says

Brief : New York City’s hotel industry is starting to revive as tourists return, driving demand for rooms to the highest since the city became an epicenter of the pandemic in March 2020, Mayor Bill de Blasio said. City hotels sold more than 481,000 room nights last week, a 17,000 increase from the previous week, de Blasio said. Visits to the Statue of Liberty were up 22% last week compared with the last week in June, and the mayor said the city is on its way to exceeding its weekly goal of 500,000 hotel room nights. “We need to see our economy coming back, our jobs coming back,” de Blasio said during a Thursday news briefing, when he spent much of the time promoting musical concerts intended to draw visitors back.

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A New Secondary Market Is Rising Out of Pandemic-Fueled Changes to Real Estate

Brief: A still-fledgling secondary market for private real estate funds is getting a big push forward from institutional investors eager to invest in newly hot areas of real estate and sell off other, less desirable parts of the sector. “Secondaries are really coming into their own. Covid just accelerated the increase,” said Eric Adler, president and CEO of PGIM Real Estate. “Some investors want to stay in real estate, but others want out. Secondaries are becoming a good solution.” In private markets, secondaries trading allows investors to buy and sell fund stakes at any point in that fund’s life, rather than stay in a vehicle designed to be held for a decade or more.

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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 July 22, 2021:

  • In the United States, the government announced that the land border will remain closed to non-essential travel until August 21st, shortly after Canada announced it would open its border to fully vaccinated American travellers on August 9th. The existing U.S. border restrictions have been in place since March 2020 and were set to expire on Wednesday. Canadian Prime Minister Justin Trudeau said it’s not up to Canadians to “dictate” how the United States reopens its border. “I think every country should and does set its own border policies. We have been working with the United States to keep them informed to make sure that as much as possible our choices are aligned, but you will have seen, everyone will have seen that our countries took different approaches certainly during the beginning of the pandemic,” he said.
  • In Canada, the demand for vaccines has slowed, according to statistics provided by Our World in Data. Less than one per cent of Canadians were vaccinated per day over the last week, a decrease from the all-time high of 1.44 per day at the end of June. The drop is to be expected considering almost 80% of the population has now had at least one dose of vaccine. A new poll by Leger and the Association for Canadian Studies suggests that the majority of Canadians believe proof of vaccination should be required for all travellers. Travellers should be required to show a “vaccine passport” according to 58% of survey respondents, while about 30% say the document is not necessary.
  • The world is watching the United Kingdom, as they continue to live without Covid-19 restrictions while cases numbers rise. The daily numbers have been close to 50,000, higher than those reported in Brazil, India or South Africa. Nadhim Zahawi, the vaccine deployment minister, announced the rollout of the National Health Service (NHS) Covid-19 pass, which may soon be required at events where there are large numbers of people. “For proprietors of venues and events where large numbers are likely to gather and likely to mix with people from outside their households for prolonged periods, deploying the pass is the right thing to do,” Zahawi said. “The pass has an important role to play in slowing the spread of the virus and so we reserve the right to mandate its use in the future.”
  • France rolled out their Covid-19 health pass on Wednesday as new infections soared. People wanting to visit cultural venues like museums or cinemas now have to present the pass in order to do so. To get the pass, French citizens must show proof that they are fully vaccinated, have tested negative for the coronavirus or recovered from Covid-19. In August, the pass will be extended to include restaurants and shopping centres. On Tuesday France reported over 18,000 new infections in a 24 hour period. Authorities have warned that the rise in cases means France has officially entered a fourth wave of infections. 
  • In Germany, Chancellor Angela Merkel is urging citizens to get vaccinated as the country anticipates another rise in coronavirus case numbers. Although Germany’s infection rate remains very low compared to most European countries, Merkel says the numbers are rising with “worrying momentum.” Slightly over 60% of the German population has received a first dose of vaccine, while about 48% are fully vaccinated.  While she encouraged Germans to stick to mask wearing and social distancing rules, Merkel said vaccination is the only way out of the pandemic. “We all want our normality back,” she told reporters. “But we won’t get this normality back alone, only as a community. And for this we need significantly more vaccine protection.”
  • In Japan, Tokyo has hit a six-month high for new Covid-19 cases, just before the Olympic opening ceremony. There were 1,832 new cases reported on Wednesday, the highest number reported since January. Experts have warned that infections will likely worsen in the coming weeks, and noted that cases are rising among younger, unvaccinated people. The African country of Guinea pulled out of this year’s Olympics, citing concerns about Covid-19 and the need to protect the health and safety of their athletes.

Covid-19 – Due Diligence And Asset Management

Hedge Fund Assets Near USD4 Trillion as Fresh Inflation Fears Push Investors Towards Alternatives

Brief : Growing numbers of investors are turning to hedge funds to protect their portfolios in the face of inflationary fears, with total industry capital swelling to almost USD4 trillion and more allocators set to tilt towards alternative assets, new research shows. Alternatives technology provider Vidrio Financial’s latest allocator market survey suggests inflation fears during the first half of 2021 are driving further allocations to alternative asset classes, such as hedge funds and private equity, which have historically outperformed equities and bonds during periods of inflation. The Vidrio Financial Allocator Market Survey quizzed some 4,500 institutional investors globally in late June, collectively representing USD100 billion in assets under management and split roughly 60/40 between North America and EMEA,

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Investors Unlikely to Reward Pandemic-Boosted Canadian Bank Results: Analyst

Brief: Long-time Bay Street banking analyst Nigel D’Souza doesn’t think investors are poised to reward Canada's Big Six banks for their upcoming financial results that may see a boost from pandemic-related factors. D’Souza, the financial services investment analyst at Veritas Investment Research, said in a broadcast interview Wednesday that investors would likely look through the pandemic-related noise towards a more normalized operating environment, which could limit the upside for shares of the Big Six banks. “We think the market is no longer going to reward banks that do well on earnings based on temporary pandemic-related factors such as record or elevated capital market revenues and significant credit loss reversals,” he said.

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Embedded as a Risk, New COVID Cycle Could Challenge Fed, Recovery

Brief: Five weeks after dropping its reference to the coronavirus as a weight on the economy, the U.S. Federal Reserve is confronting a challenging new rise in cases that has fueled doubts about the global recovery and is already forcing other central banks to consider retooling their policies. The daily pace of new infections has more than doubled since the Fed's June 16 policy meeting, when Chair Jerome Powell said that while it was "premature to declare victory" given the appearance of the more infectious coronavirus Delta variant, a decline in infections, hospitalizations and deaths "should continue." It hasn't, and while the worst current outbreaks have been localized, news of rising case loads once again straining hospital capacity spilled into financial markets with a sharp Monday sell-off.

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Morgan Stanley: 'No Need' to Lower GDP Forecasts on Delta Variant Risks

Brief : The surge in COVID-19 cases from the Delta variant is not yet substantial enough to darken the U.S. economic outlook, said Morgan Stanley’s top U.S. economist. “I feel no need to take down GDP growth forecasts on the risks around the Delta variant,” Ellen Zentner told Yahoo Finance on Wednesday. “I think we’ve done a good job of self-policing all through COVID and that means it can dampen some of the effects.” On Monday, rising case counts rattled equity markets as the major stock indexes logged their worst declines since May. The fear: that the reinstatement of mask mandates in some corners of the country could foreshadow the return of lockdowns if the spread gets worse. Markets largely reversed those losses on Tuesday.

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Hedge Fund Born in Pandemic Reaps 23% Gain From AMC, Hertz

Brief: Hedge fund manager Dan Gropper was short AMC Entertainment Holdings Inc. when the Redditors began their moon launch of the movie theater chain. Just six months into running a new fund, he decided he wouldn’t be going down like that. Gropper, who had managed money at Aurelius Capital Management and Fortress Investment Group before starting Carronade Capital Management, covered 20% of his short on Jan. 26, when AMC closed under $5, and the rest a day later, as the stock soared to $20. AMC wasn’t even a directional short bet for Carronade, a multi-strategy credit fund that now runs $300 million. It shorted the stock as a hedge on an investment in AMC’s second-lien debt, which had been trading at deeply distressed levels. Gropper started buying the bonds at around 20 cents on the dollar, said a person familiar with the matter.

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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 July 21, 2021:

  • In the United States, the delta variant now accounts for an estimated 83% of all new coronavirus cases, according to the U.S. Centers for Disease Control and Prevention (CDC). “This is a dramatic increase, up from 50% for the week of July 3,” said Director Dr. Rochelle Walensky in a Senate Committee hearing. Walensky said that the percentage is even higher in some regions where vaccination rates are low. Although vaccines are proven to be effective against the delta variant, CDC data shows that less than half of the U.S. population is fully vaccinated.

  • In Canada, a new report shows that Canadians are anxious about returning to their workplaces after the pandemic. The latest LifeWorks Mental Health Index is based on 3000 survey responses collected online between May 28th and June 4th, 2021. According to the report, 25% of respondents said they are not clear about their employer’s return to work plan. These respondents reported lower mental health scores compared to those who said their employers had a sound return-to-work plan. Approximately 38% expect to return to their pre-pandemic work environments, while 17% said they believe they will be allowed to work remotely. 

  • In the United Kingdom, scientists are warning that mask wearing and other coronavirus restrictions could be reimposed in as early as three weeks, if hospital admissions continue to rise. Members of the Scientific Advisory Group for Emergencies (Sage) have said the prime minister should be prepared to reintroduce restrictions in the first week of August, to avoid excessive pressure on the National Health Service (NHS). On Tuesday, there were 46, 558 new cases, and 96 deaths, the highest daily death toll in nearly four months. Prime Minister Boris Johnson hasn’t ruled out the idea of reimposing restrictions, although he did say he wanted to avoid it.

  • In Italy, the government is expected to impose new restrictions on unvaccinated people as they try to curb the spread of the delta variant. Similar to the rules in France, the government may require people to be vaccinated in order to access some public spaces like indoor restaurants and bars, stadiums and cinemas. They are expected to make showing a “green pass” mandatory for passengers on domestic flights and long-distance trains. The government is expected to finalize their plans this week and changes could take effect as early as July 26th.

  • South Korea continues to grapple with the delta variant as cases surged this week. The country reported 1,784 new cases on Tuesday, breaking its previous record set last week. According to data from the Korea Disease Control and Prevention Agency (KDCA), genetic analyses of 2,381 cases last week found that nearly 40% were the delta variant. So far 32% of South Koreans have received at least one dose of a coronavirus vaccine, while the government hopes to vaccinate 70% by September. Despite the high case numbers, there have been no increases in hospitalizations or deaths.

  • In Australia, Prime Minister Scott Morrison refuses to apologize for the way his government handled the country’s vaccine program. To date, just over 11% of Australians are fully vaccinated. Frustrations are growing as 13 million people (more than half the population) are now living under lockdown. “We have had our problems, there is no doubt about that, and they are problems that are not always things within our control, that is the nature of Covid-19,” Morrison said during a radio interview. Morrison says his government has been focused on resolving the issues around the vaccine rollout.

Covid-19 – Due Diligence And Asset Management

What Companies Can Do To Mitigate Gender Parity Damage of Pandemic

Brief : The pandemic has set back gender equality on company boards in the UK by as much as four years, with new research suggesting that parity between male and female members won’t be reached until 2036. The annual Women Count report, published by consultancy The Pipeline, found that progress in boosting gender diversity has slowed significantly over the past year, with men now holding 78% of all executive committee roles in the FTSE 350 – and women holding just 22% of positions. Although women are in a better position than five years ago, the pandemic has slowed the rate of change. In 2021, we witnessed an increase of 2.5% on the previous year, but in 2020 this same annual measure was 2.7%.

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United Air Sees Profit on Horizon Despite Renewed Virus Fear

Brief: United Airlines Holdings Inc. expects to end a year and a half of losses this quarter despite rising investor anxiety about whether COVID-19 infections will upend a travel resurgence. The forecast for an adjusted pretax profit in the third quarter and another in the fourth quarter excludes any benefit from billions of dollars in federal airline aid, United said in a statement Tuesday as it reported earnings. While the carrier didn’t quantify how much it expected to earn, any profit would top the second-half losses expected by Wall Street. “Our airline has reached a meaningful turning point: We’re expecting to be back to making a profit once again,” United Chief Executive Officer Scott Kirby said in the statement.

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NatWest Chairman Says London Office Life Will Never Return

Brief: The changes wrought by the pandemic on U.K. office life are here to stay, according to the chairman of one of the country’s biggest banks. NatWest Group Plc’s Howard Davies said in a Bloomberg TV interview Wednesday that he doesn’t expect central London’s footfall to revert to pre-pandemic levels as office workers resist a return to five days a week in the office and the daily commute. “The days when 2,500 people walked in through our office door at Bishopsgate at 8:30 a.m. and then walked out again at 6 p.m., I think that is gone,” Davies said. While some workers -- particularly traders -- may remain desk-bound, the majority of NatWest’s staff are expected to come in only intermittently, he said.

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Stock Market is at Risk of a Correction if This Happens Amid the Spread of the Delta Variant

Brief : Most Wall Street strategists agree that Monday's market rout — fueled by yawning worries about the fast-spreading COVID-19 Delta variant — should serve as a wake-up call to investors who have sent stock prices to record valuations. And they also generally agree on what could send stocks spiraling even lower from here — a subpar second quarter earnings season chock-full of concerning guidance due to the ongoing uncertainty of the pandemic. "This market is vulnerable to a bigger pullback or correction if there’s a new negative introduced, and that negative could be disappointing earnings," warns Sevens Report Research founder Tom Essaye in a research note to clients. "If corporate earnings calls warn about (1) margins (which was hinted at by a few companies) or (2) overall economic activity (if management says activity declined in late June as COVID cases accelerated) then that will combine with the other issues (stretched valuations, complacent investors, summer doldrum trading) to cause a real pullback or a correction of 10% or more."

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CN Reports Strong Earnings Growth as Rail Traffic Recovers From Pandemic

Brief: Canadian National Railway Co. reported a strong uptick in earnings and revenues in its second quarter as the company begins to recover from the COVID-19 pandemic. The Montreal-based railway earned $1.03 billion or $1.46 per share, up from $545 million or $0.77 per share in the first quarter of 2021. Excluding one-time items, adjusted profits were $1.06 billion or $1.49 per share, compared with $988 million or $1.28 per share in the first quarter. Revenue for the three months ended June 30 was $3.60 billion, up from $3.21 billion the previous quarter. The company also declared a dividend for its third quarter, of 61.5 cents per share to be paid in September.In 2020, CN was forced to build longer and heavier trains due to the sharp retreat in rail volumes and customer demand during the COVID-19 pandemic. The company said in a news release that as the economy rebounds, it has been able to revert to its standard operating plan and improve train speeds.

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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 July 20, 2021:

  • In the United States, stocks tumbled on Monday, as investors fear the economic impacts of a resurgence of the coronavirus pandemic. With new cases and hospitalizations on the rise, President Joe Biden begged for more people to get vaccinated during a speech he gave about the economy. The Dow Jones Industrial Average closed down 2.1%, the S&P 500 index fell 1.6%, and the yield on the 10-year United States Treasury bill fell to its lowest level in five months. Biden said that economic recovery will depend on the country’s ability to get the pandemic under control, and that four states with low vaccination rates accounted for 40% of all new coronavirus infections last week.
  • In Canada, the federal government announced that it will open the border to fully vaccinated Americans beginning on August 9th. Travellers from other countries can enter by September 7th. Travellers will have to upload proof of vaccination to the ArriveCAN app or website before they board their flights, and also carry the vaccination certificate with them. The rules are similar to those rules for Canadians returning from non-essential travel, where a 14-day quarantine is not required. The Canada-U.S. border has been shut down to non-essential travel since March 2020, with the restrictions renewed each month since.
  • After the United Kingdom lifted almost all of their Covid-19 restrictions on Monday, some businesses are warning of a “pingdemic,” as a large number of people are receiving notifications on their phones telling them to self-isolate. The National Health Service’s test and trace app tells people when they’ve come into close proximity with someone who tested positive for the coronavirus by “pinging” them on their phones. Now, some businesses are warning of staff shortages as so many people are self-isolating, some have had to shut down as a result of key staff being pinged. Beginning on the 16th of August, people will no longer have to self-isolate if they are pinged by the app, they will instead be advised to take a test as soon as possible.
  • In Brazil, Anvisa, the country’s health regulator, has approved trials with a third dose of the AstraZeneca vaccine. Anvisa said that approximately 10,000 volunteers will receive the third shot between 11 and 13 months after receiving their second shot. Millions of Brazilians are already struggling to get their second shot, approximately 3.1 million have not had it yet, despite being eligible for it, according to vaccine researchers. Only about 40% of Brazilians have had one dose of vaccine and just 15% are fully vaccinated.
  • In Japan, just days before the Olympic opening ceremony is scheduled to kick-off, Tokyo is reporting 71 cases of Covid-19 linked to the event. Tens of thousands of athletes, staff and media are arriving in Japan in the middle of a state of emergency, and events are scheduled to begin on Wednesday, two days ahead of the formal ceremony. Japanese Prime Minister Yoshihide Suga told International Olympic Committee members that Japan can deliver a successful event despite the world’s situation. “We will protect the health and security of the Japanese people,” he said.
  • In Australia, three out of six states are now under lockdown, as the delta variant continues to spread. South Australia is the latest to announce a seven-day lockdown, which will be statewide and include schools and the construction industry. “We hate putting these restrictions in place but we believe we have one chance to get this right,” South Australia Premier Steven Marshall said. The state of Victoria extended their lockdown yesterday, while New South Wales has been under lockdown since June 25th. Experts warn that Sydney could be facing an indefinite lockdown until everyone is vaccinated.

Covid-19 – Due Diligence And Asset Management

Slumping Stocks Might Derail Busiest-Ever Summer for IPO Market

Brief : The great IPO boom of 2021 has already smashed the record for the busiest summer ever, and there are plenty of big deals still to come. Now wobbly markets are threatening to cool the frenzy. Since the start of June, listings by the likes of F45 Training Holdings Inc., the provider of fitness classes backed by actor Mark Wahlberg, Membership Collective Group Inc., the company behind the Soho House members clubs, and ride-hailing giant Didi Global Inc. have raised more than $90 billion through initial public offerings, according to data compiled by Bloomberg. Stock indexes at record levels, until last week at least, and cash-rich investors have lured private equity sponsors and startup founders alike to the equity market. But now investors have been spooked by the resurgent coronavirus, sending the MSCI World Index down for six straight sessions, heading for its longest losing streak since the pandemic began.

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Moderna Stock 'Has Taken on a Life of its Own' Ahead of S&P 500 Entrance

Brief: Moderna (MRNA) is set to join the S&P 500 index on Wednesday, replacing Alexion Pharmaceuticals Inc. (ALXN). The stock has soared amid the pandemic after its vaccine became instrumental in the fight against coronavirus. Moderna stock has “taken on a life of its own,” Michael Yee, Managing Director and Senior Research Analyst at Jefferies, told Yahoo Finance (video above). “It's priced in a huge amount of assumptions over the next ten years that haven't played out yet. People believe it’s the Tesla of biotech.” That the biotech firm would be so well-recognized and valued at over $113 billion was no sure bet. For those who invested early in the company, that wager paid off.

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Delta Variant Will Likely Create a 'Sloppy' Stock Market This Summer: Strategist

Brief: A likely summer of concerning COVID-19 Delta variant headlines sets the stage for an ugly stock market in the near-term, said Keith Lerner, Truist Advisory Services' chief markets strategist. "Our view is we're seeing another corrective period within a bull market trend," Lerner said in a note to clients after Monday's brutal start to trading. "While the Delta variant complicates the near-term picture, and is likely to lead to a continuation of sloppy trading through the seasonally-weak summer months, our base case remains that the primary trend over the next 12 months remains higher." To be sure, Monday's session was quite sloppy as investors reassessed their risk appetite with growing COVID-19 infections globally at the hands of the Delta variant.

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JPMorgan’s Kolanovic Sees Reflation Trade Revival Coming Soon

Brief : The recent selloff in stocks set to benefit most from an improving economy has gone too far and a reversal is imminent, according to JPMorgan Chase & Co. chief global markets strategist Marko Kolanovic. The unwinding of the so-called reflation trade accelerated on Monday with the delta variant of the coronavirus quickly spreading and concerns flaring that the U.S. is reaching peak economic growth. Traders have been piling into growth sectors such as technology that are viewed as safe havens. But Kolanovic sees further gains in those value names that benefit from faster inflation as the global economy recovers from the pandemic.

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Hedge Fund Short Sellers Capitalise on UK ‘Freedom Day’ Fears as Rising Covid Rate Sinks FTSE Stocks

Brief: Hopes that the easing of most Covid-19 restrictions in England this week – with 19 July having been dubbed ‘Freedom Day’ – would help accelerate the UK’s nascent economic recovery were soured as travel, manufacturing and retail names were all dented. Travel and tourism-related stocks were among the hardest hit amid continued uncertainty surrounding the UK’s traffic-light quarantine system for travellers, which threatens summer holidays for many. EasyJet dropped 6.8 per cent and IAG, which owns British Airways, fell 5.5 per cent at one point. Hedge funds betting against EasyJet’s share price include AHL Partners and Kintbury Capital, according to FCA regulatory disclosures. Carnival – the cruise line operator which is one of DE Shaw’s short positions – also fell in value on Monday.

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Wall Street Eyes COVID-19 Delta Variant as Return to Office Looms

Brief: As the Dow Jones Industrial Average posted its worst day since October of last year over pandemic fears, FOX Business has learned that top executives at the Big Banks are closely monitoring the spread of the coronavirus Delta variant and how it may impact plans to re-open offices particularly in large urban areas such as New York City. People at banks such as JPMorgan, Morgan Stanley and Goldman Sachs say that so far they’ve made no changes to their re-opening plans. JPMorgan and Goldman have already told employees to begin to return to the office after about a year of at-home working during the worst of the pandemic. While Morgan Stanley has said it expects employees to return to the office after Labor Day.

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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 July 19, 2021:

  • In the United States, with coronavirus cases on the rise, the surgeon general raised concerns about the millions of people who are still unvaccinated. Dr. Vivek Murthy said in a CNN interview that he’s worried about the future, as the majority of coronavirus-related deaths are among unvaccinated people. He also mentioned social media networks, saying that they’re causing harm by spreading misinformation about vaccines. “We know that health misinformation harms people’s health. It costs them their lives,” Murthy said. President Joe Biden commented on Friday that social media networks were “killing people” by spreading misinformation. Facebook fired back on Saturday, saying it’s not their fault that Biden failed to meet his vaccination goals.

  • In Canada, the federal government is set to receive 7.1 million vaccine doses this week, as Canada adjusts its distribution strategy around increased supply and slowing demand. The new deliveries will include about 3.1 million doses of Pfizer and 4 million doses of Moderna. Canada’s vaccination rate remains among the highest in the world; as of Friday, almost 70% of Canadians had received at least one dose, and nearly 49% were fully vaccinated. Canada has also said it will donate 17.7 million doses of the AstraZeneca vaccine to the COVAX global vaccine-sharing alliance.

  • As the United Kingdom lifts their Covid-19 restrictions, Prime Minister Boris Johnson is urging caution. “Please, please, please be cautious. Go forward tomorrow into the next step with all the right prudence and respect for other people and the risks that the disease continues to present,” Johnson said in a statement on Sunday night. The removal of restrictions means nightclubs will be able to open for the first time since the UK first went into lockdown in March last year. Social distancing rule are gone, and face masks will no longer be required by law although they will be recommended in some public spaces.

  • In France, two vaccination centres have been ransacked as protests against coronavirus rules continue across the country.  Fire hoses were used to flood one site in the southeast of France while another in the southwest was partially destroyed by an arson attack, officials said. More than 100,000 people came out on Saturday to protest the government’s new rules which include mandatory vaccines for healthcare workers and vaccine health passes to access public spaces. The government is trying to curb the spread of the delta variant, which authorities fear could put pressure on hospitals if not enough people are vaccinated.

  • In South Korea, military aircraft were dispatched on Sunday to replace the crew of a naval destroyer, after nearly 70 of the 301 crew members tested positive for the coronavirus. Officials said aerial tankers will bring the new crew and then take home the 301 sailors who were taking part in an anti-piracy operation off the coast of East Africa. Officials say the offloaded crew will be taken to hospitals or quarantine facilities once they arrive back in South Korea. The outbreak comes as South Korea struggles with a rise in coronavirus case numbers that has placed the capital region under a strict lockdown.

  • Australia’s two largest cities, Sydney and Melbourne, are still under lockdown as Australia tries to curb the spread of the delta variant. Melbourne extended their lockdown on Monday, but state Premier Daniel Andrews hasn’t said how long it will last.  Sydney has been under lockdown since June 26th, with a planned end date of July 30th. On Saturday, New South Wales introduced new restrictions and ordered all non-essential stores to close. New South Wales recorded 111 new coronavirus cases in 24 hours, up from 97 the day before.

Covid-19 – Due Diligence And Asset Management

European Airlines Fall as COVID Variants Threaten Travel Revival

Brief : European airline and travel stocks tumbled Monday after Britain reimposed quarantine rules for people returning from France, stoking concern that the spread of coronavirus variants could halt a tourism rebound. U.K. discount carrier EasyJet Plc dropped as much as 6.5 per cent, British Airways owner IAG SA slumped 5.9 per cent, Ryanair Holdings Plc, which has its biggest hub at London Stansted airport, fell 4 per cent and package-holiday giant TUI AG slipped 4.3 per cent. Air France-KLM was down as much as 4.6 per cent. The declines were triggered by the British government’s decision late Friday to continue requiring fully vaccinated arrivals from France to isolate amid concern about the beta COVID variant, creating a new category between moderate and high-risk in its “traffic-light” system. As of Monday, inoculated U.K. residents returning from amber nations are no longer required to quarantine.

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BOE’s Haskel Says It Would Be a Mistake to Tighten Policy Now

Brief: Bank of England policy maker Jonathan Haskel signaled he remains opposed to paring back stimulus for the economy now, saying the U.K. faces headwinds from a tighter fiscal stance and from a surge in the delta variant of the coronavirus. The remarks indicate divisions on the central bank’s Monetary Policy Committee likely to play out next month as the eight-member panel debates how to respond to an unexpected jump in inflation above its 2% target. Two members of the MPC last week said the BOE should consider reining in its bond-buying program. Haskel, who for months has been on the dovish end of the debate, acknowledged that the pace of investment in the economy and productivity gains due to home working may reducing scarring from the pandemic. However, he said that the U.K. is still at risk from a rapid spread of the delta variant of Covid-19 and that much of the growth the U.K. has enjoyed was spurred by government support measures are now in retreat.

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COVID-19 Surge Sparks Bond Rally, Stocks on Worst Run in 18 Months

Brief: Investors moved away from risky assets on Monday as a rise in worldwide coronavirus cases crushed bond yields and left stocks facing losing streaks, with Wall Street falling more than 1%. New COVID-19 cases rose in England and Asia, with U.S. infections soaring 70% last week, dampening optimism on the economic recovery. The 10-year yield fell 8.7 basis points to 1.212%, a low last seen in February, while the S&P 500 fell for a third straight session. “Investors shed risk assets in early morning trading amid fears of a surge in COVID infections that have the potential to curtail global growth," said Peter Essele, head of investment management for Commonwealth Financial Network, in an e-mailed statement. "The risk aversion was most pronounced in the 10-year Treasury yield, which fell to its lowest level since the early days of 2021.

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Fund Managers Ride Out Pandemic by Sticking With Old Playbooks

Brief : Covid-19 upended almost everything, including the trajectory of the U.S. economy, which sank into one of the worst recessions in history and then rebounded into the fastest expansion in decades. One thing that barely changed this whole time? Professional stock pickers’ tastes. Active fund managers still favor stable growth stocks over cheap ones and are avoiding economically sensitive shares like banks and energy, just as they did during the market’s tumble in March 2020. Except for a growing aversion to industrial firms, managers’ preferences across sectors are almost identical to what they were almost 16 months ago, data compiled by Bank of America Corp. show. In fact, almost three-quarters of the same beloved stocks remain in their portfolios.

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Aegon Asset Management’s Pandemic-Era Makeover

Brief: In 2019, Bas NieuweWeme became the chief executive officer of Aegon Asset Management, a global firm with around $447.3 billion in assets under management. Soon after he joined, NieuweWeme got to work on streamlining the business. Then, the Covid-19 pandemic hit. About a year into his tenure and a month into a restructuring campaign, NieuweWeme’s original plan to globalize the active asset manager was derailed. So, as he told Institutional Investor, the firm adapted. In the past year, Aegon has retired two of its brands, eliminating some overlap between businesses.

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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 July 16, 2021:

  • In the United States, the number of Americans applying for unemployment benefits fell to its lowest level since the beginning of the pandemic. According to data from the US Bureau of Labour Statistics, claims fell by 26,000 to 360,000 last week. Numbers have been steadily falling since early January when they topped 900,000, which shows how quickly the U.S. is emerging from the pandemic recession. Some forecasters have even predicted that the economy will grow by approximately 7 per cent this year. Despite the recent rise in numbers, vaccine rollouts have been successful at reducing new viral cases.
  • In Canada, Brig.-Gen. Krista Brodie, the military general in charge of overseeing vaccine distribution across the country, says the supply of doses could potentially outweigh demand. She says Canada needs a “more nuanced” approach to distribution as provinces currently have an inventory of almost 9 million doses, and there are two million doses already being held back because provinces aren’t able to use them. The goal now is to avoid waste by not distributing doses that provinces don’t need, so that Canada can determine whether to start donating those doses to other countries.
  • As the United Kingdom inches closer to the end of all pandemic restrictions next week, or what some are calling “Freedom Day,” the government’s top medical advisor issued a warning. Chief Medical Officer Chris Witty warned people late Thursday not to underestimate how quickly the pandemic can bring trouble. Witty says hospitalizations could reach “quite scary” levels if current trends continue, where the number of people in hospital with Covid-19 is doubling about every three weeks. "We are not by any means out of the woods yet on this, we are in much better shape due to the vaccine program, and drugs and a variety of other things," he said. "But this has got a long way to run in the U.K., and it's got even further to run globally."
  • In Spain, infections are soaring in unvaccinated young people, as the country faces an uptick in numbers caused by the spread of the delta variant. Barcelona and the surrounding northeast corner of Spain are shutting down and imposing a curfew from 1 am to 6 am amid the rising case numbers. The regional government had already said on Thursday that it was looking to impose the restrictions, pending approval from the courts. This comes after the Spanish constitutional court ruled some lockdown restrictions imposed by the government were unconstitutional.
  • In the Netherlands, a music festival has led to over 1000 new coronavirus infections. The Verknipt outdoor festival, which took place in early July in Utrecht, was attended by over 20,000 people in two days. All attendees of the festival had to show either proof of vaccination or a negative Covid-19 test. While organizers insisted the event was carefully planned, the event exposed problems in the “test for entry” process. People were allowed to show negative Covid-19 tests up to 40 hours before the event. People were also allowed to get festival passes immediately after being vaccinated, when it actually takes several weeks for immunity to build.
  • In Australia, there have been some cases reported of fully vaccinated people contracting the delta variant. In New South Wales on Tuesday a nurse tested positive despite being fully vaccinated and wearing personal protective equipment. Experts are warning that such breakthroughs can happen, that vaccines are not perfect, and people can still get infected despite doing all the right things. New South Wales Chief Health Officer Dr. Kerry Chant confirmed on Friday that one of the 18 people in intensive care had received a single dose of AstraZeneca.

Covid-19 – Due Diligence And Asset Management

As stock prices peak, markets begin to fear looming threats

Brief : With the U.S. economy humming, corporate profits flowing and stock prices peaking, investors on Wall Street are beginning to pose an anxious question: Is it all downhill from here? Financial markets are always trying to set prices now for where the economy and corporate profits are likely to be in the future. And even though readings across the economy are still at eye-popping levels, investors see some areas of concern. New variants of the coronavirus are threatening to weaken economies around the world. Many of the U.S. government’s pandemic relief efforts are fading. Inflation is raging as supplies of goods and components fall short of surging demand. And the beginning of the end of the Federal Reserve’s assistance for markets is coming into sight.

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Sunak May Wait to Spring for Next Budget Key to U.K.’s Recovery

Brief: Rishi Sunak may wait until the spring to deliver his next U.K. budget, people familiar with the matter suggested, giving the Chancellor of the Exchequer time to assess the economic damage caused by the pandemic. After delivering his last budget in March, Sunak was expected to deliver a fresh spending blueprint in the fall, given his predecessor Philip Hammond had shifted the annual statement to that period from the spring in 2016 to give businesses more time to prepare for any tax changes in the new financial year. But on Friday, two people familiar with the matter left open the prospect of a spring budget, telling Bloomberg no decision had been taken on its timing.

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U.S. stocks fall as ebbing sentiment dents confidence

Brief: Stocks declined as an erosion in U.S. consumer sentiment added to concern about the sustainability of the economic expansion. Crude oil futures fluctuated and the dollar strengthened. Energy and material shares led the S&P 500 lower, reversing an earlier gain posed after a report showed June retail sales topped all estimates in a Bloomberg survey. The S&P has closed at either a gain or a loss every other day this week. Moderna jumped after the vaccine maker was named to the U.S. equity benchmark. The 10-year Treasury yield rose for the first time in three trading sessions. 

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Gundlach says the dollar is ‘doomed’ over the long term because of rising U.S. deficits

Brief : DoubleLine Capital CEO Jeffrey Gundlach offered a dire long-term assessment on the U.S. dollar Thursday, telling CNBC in an interview he thinks the greenback is “doomed.” “Ultimately, the size of our deficits — both trade deficit, which has exploded post-pandemic, and the budget deficit, which is, obviously, completely off the charts — suggest that in the intermediate term — I don’t really think this year, exactly, but in the intermediate term — the dollar is going to fall pretty substantially,” Gundlach said on “Halftime Report.”

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Wells Fargo Says Office Return to Look ‘Mostly’ Like Pre-Covid

Brief: Wells Fargo & Co., the U.S. bank with the most employees, is laying out a back-to-office plan set to begin in September, telling staff their schedules will look a lot like they did before the pandemic. The firm, which has almost 260,000 workers, will start calling those who have been working remotely back to the office on Sept. 7, and the process will continue through October, according to an internal memo Friday. It will also begin collecting employees’ vaccination statuses next week.“When we return, our schedules will mostly resemble our pre-pandemic working approach, with additional flexibility,” Chief Operating Officer Scott Powell wrote in the memo. “Choosing not to get vaccinated will not influence your ability to work remotely.”

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ESG in a time of crisis: Why ESG scores cannot mitigate risk

Brief: When the coronavirus pandemic spread around the world in 2020, investors quickly grasped the gravity of the situation and a sense began to emerge that it was perhaps a moment when firms with strong environment, social and governance (ESG) would be less negatively affected than others. It quickly became evident, however, that this was not the case. During the initial stages of the pandemic when equity markets fell, the established ESG indexes did not appear to capture the outperformance of ESG that many believed to be there. In fact, over the whole of the first quarter of 2020 the difference in performance between a number of ESG indices and the MSCI World Net index was less than 1%.

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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 July 15, 2021:

  • In the United States, President Joe Biden has kept a ban on European travellers, causing frustration among European governments. Although the U.S. eliminated most of their domestic pandemic rules, they have remained strict on international travel as they try to curb the spread of the highly infectious delta variant. According to diplomats, the Biden administration hasn’t said anything about when the rules might change. Europe already eased many restrictions for American travellers back in June. The issue will likely come up when German Chancellor Angela Merkel visits Washington on Thursday. 

  • In Canada, experts are left to wonder whether rising case numbers in the United States will have an impact on Canada’s border reopening. With the delta variant and slowing vaccine rates, infections in the United States have more than doubled in the past three weeks.  The Canadian border remains closed to foreign travellers, with a few exceptions, until at least July 21st Prime Minister Justin Trudeau reiterated in a news conference on Wednesday that Canada would be taking a cautious approach. “The reality is we know how unbelievably costly and heartbreaking it would be to fall into a fourth wave of this pandemic. We are going to make sure that we don’t do that,” he said.

  • In the United Kingdom, for the first time since January, daily Covid-19 case numbers have exceeded 40,000. As the government prepares to lift all remaining restrictions by next Monday, experts estimate that approximately a third of the population is still unprotected from getting infected. Some scientists strongly oppose the decision to unlock next week, saying the government has decided to achieve herd immunity by letting the virus infect young people, which will lead to disruptions in healthcare and education. Approximately half of the population is now fully vaccinated.

  • In Japan, the Tokyo Olympics are scheduled to start in eight days, despite a surge in Covid-19 case numbers. Tokyo is under its fourth state of emergency, which began on Monday and requires restaurants and bars to close early and not serve alcohol during the Olympics. Government officials noted that the largest increase in serious cases and hospitalizations was among people in their 50s and younger who are largely unvaccinated.  Athletes will be expected to put medals around their own necks to protect against the spread of coronavirus, a significant change from traditional ceremonies. 

  • In France, protests erupted in Paris and other cities on Wednesday over new coronavirus restrictions. On Monday the government announced mandatory vaccines for healthcare workers and plans to bring in a vaccine health pass for most public spaces. This means unvaccinated people who want to eat in restaurants will have to show proof of a negative Covid-19 test. A record number of people booked vaccine appointments following the announcement. French authorities estimated the total number of protesters at 19,000. According to an opinion poll published on Tuesday, most French people approve the new safety measures. 

  • Australia’s second largest city of Melbourne entered a five-day lockdown, the city’s fifth one since the pandemic began. “We must do this,” Victoria state Premier Daniel Andrews said. “You only get one chance to go hard and go fast. If you wait, if you hesitate, if you doubt, then you will always be looking back wishing you had done more earlier.” The country’s slow vaccine rollout is part of the reason why they have been particularly vulnerable to the delta variant. New Zealand has suspended a travel bubble with New South Wales and Victoria in response to the outbreak.

Covid-19 – Due Diligence And Asset Management

Wall Street Itches for Office Return as Variants Muddy Recovery

Brief : Wall Street leaders are pressing ahead with bringing employees back to the office, seeking to resume something that resembles normal work life as soon as possible, even as they keep a wary eye on Covid-19 variants. “At the beginning of Covid, in February of 2020, when I was asked how would this end up, I think I said that I felt 80% of all employee hours worked would be done in one of our offices,” said Morgan Stanley Chief Executive Officer James Gorman. “And that’s probably where it’s going to end up -- not 100% but not zero percent. ”Bank of America Corp.’s Brian Moynihan said he hopes to bring younger staff in front of their bosses soon, but the virus will dictate plans. Citigroup Inc., also watching the evolving delta variant closely, is forging ahead with its flexible approach.

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Asia’s Air Travel May Take Three Years to Recover From Pandemic

Brief: Asian air travel may take another three years to recover fully from the devastation wrought by the pandemic, lagging behind rebounds in other regions and offering a stern headwind for refiners making jet fuel.It’ll take until 2024 for international air travel across the region to reach pre-virus levels, a year after global traffic hits that milestone, according to the International Air Transport Association. Similarly, consultancy Energy Aspects says jet fuel consumption will reach pre-pandemic volumes only in 2023-2024.The drawn-out timelines highlight the difficulties facing Asia and the likely consequences for jet fuel, a traditionally prized part of the oil-products market. Low rates of vaccination in many countries, the challenge posed by the fast-spreading delta variant, and persistent lockdowns have all set back the recovery even as the U.S. and Europe press on. All that means Asia’s aviation industry is unlikely to offer significant support to the region’s hard-pressed refineries, which process crude from the Middle East and elsewhere into fuels.

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Two Major Pension Plans Bet Big on Return-to-Work With Co-Investment Deal

Brief: Two large pension plans are wagering that U.S.-based workers will be returning to the office following the Covid-19 pandemic. The Canada Pension Plan Investment Board and Singapore’s GIC announced Wednesday that they have partnered with Boston Properties, a publicly-traded office space developer, owner, and manager, on a $1 billion co-investment deal. Through the co-investment program, the three firms will acquire office properties in Boston, Los Angeles, New York, San Francisco, Washington, DC, and Seattle. The deal comes as office spaces begin to reopen following the pandemic. Employers remain mixed on whether office workers will ditch working from home, although major financial institutions like JPMorgan and Goldman Sachs have reportedly already encouraged employees to return. 

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RBC says hybrid work 'here to stay' as bank plots office return

Brief : Royal Bank of Canada is formulating hybrid, flexible work arrangements for its employees and doesn’t plan any “one-size-fits-all mandate” on how much time its staff will need to be in the offices when they reopen.“We believe that flexible and hybrid work models are here to stay, and that the role of the office has forever changed,” Chief Executive Officer Dave McKay said in a post on LinkedIn. “This means we’re going to hold onto the best of what we’ve learned over the past 18 months and recapture the best of everything we’ve missed from the pre-pandemic world.”Decisions on working arrangements will be made to match employees’ “diverse everyday experiences” and their clients’ needs, with the hope of strengthening the bank’s culture, encouraging collaboration and ensuring employees feel supported, said McKay, who oversees Canada’s second-largest lender by assets.“Over the next few months, we’ll test and learn as we go and adjust our plans along the way,” McKay, 57, said. “We need to get this right, and we’re confident that client and employee feedback will continue to inform our journey, and that ultimately we will emerge from this crisis even stronger.”

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K-listed companies to double earnings - JO Hambro

Brief: JO Hambro's new UK Profit Index, showed there was a 19%, or £349bn, decline in UK plc revenue during the first year of the pandemic outbreak - April 2020 to March 2021. However, the asset manager now expects companies to return pre-pandemic levels within an additional year. Alexandra Altinger, CEO, UK, Europe and Asia, at JO Hambro, said: "After the shock of the pandemic, the change of mood in Britain's boardrooms is palpable. "The recovery is now very strong indeed: high government spending, low interest rates, strong consumer demand, resurgent employment and a buoyant housing market mean that profits are now growing very fast, much faster than market expectations."

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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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