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Covid-19 Diligence Briefing

Our briefing for Monday, October 18, 2021:

  • In the United States, case numbers are improving slightly but Dr. Anthony Fauci, the country’s top infectious disease expert, says the future really depends on vaccination rates. Currently about 57% of the U.S. population are fully vaccinated. The good news, Fauci said, is that there may not necessarily be another wave of infections. "It's going to be within our capability to prevent that from happening," said Fauci. "The degree to which we continue to come down in that slope will depend on how well we do about getting more people vaccinated."   
  • In Canada, the government is considering whether to extend pandemic support programs for businesses and individuals as five programs are set to expire on October 23.  The Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy can be extended by the federal cabinet until November 30. The Canada Recovery Benefit, Canada Recovery Sickness Benefit, and the Canada Recovery Caregiver Benefit, can all be extended to November 20 by an order of cabinet. All programs would require new legislation to be introduced if they were to be extended beyond those dates. Deputy Prime Minister Chrystia Freeland says she’s consulting with businesses, economists and labour groups but did not give any further information.
  • In the United Kingdom, England will open walk-in clinics for children ages 12-15 to get their Covid-19 vaccinations. Currently in England the vaccination rate among the age group rests at just 14.2%, compared to 44.3% in Scotland, the Guardian reports. This is believed to be because Scotland allows 12-15-year-olds to attend walk-in clinics, rather than just having their vaccinations at school. Older children ages 16-18 can already attend walk-in clinics and have a 56.5% vaccination rate. Children ages 12-15 in England are testing positive for coronavirus at a higher percentage than any other age group. 
  • Japan’s recent Covid-19 success has left the rest of the world confused, as vaccination rates soar and case numbers plummet. Japan did things differently in the sense that it has never had an official lockdown, only a series of states of emergency with relatively simple curbs put in place. But now case numbers in Tokyo have fallen below 100 daily, and the government has slowly begun to reintroduce social and economic activity. Many credit the country’s vaccination campaigns with the recent success, as almost 70% of Japan’s population is fully vaccinated.
  • The Philippines will begin to administer Covid-19 vaccines to children ages 12-17, in an effort to reopen schools safely. According to a report by the United Nations Children’s agency UNICEF, the Philippines are one of 17 countries in the world where schools have been closed throughout the entirety of the pandemic. The news comes as the country reports 6943 new infections and 86 new deaths, bringing the total cumulative case number to over 2.7 million. So far the Philippines has vaccinated about 24 million of its 110 million population.
  • Australia’s city of Melbourne will reopen after withstanding the longest lockdown in the world. Premier Daniel Andrews made the announcement on Sunday, with the state projected to reach the 70% vaccination milestone later this week. The state has been under six lockdowns totalling 262 days, or almost nine months since March 2020. “Today is a day when Victorians can be proud of what they have achieved,” said Andrews. “As of 11:59pm on Thursday, there will be no lockdown, no restrictions on leaving home and no curfew,” he said. Victoria state reported 1838 new coronavirus cases on Sunday, and seven new deaths.

Covid-19 – Due Diligence And Asset Management

London Office Workers Still Spending Some of Their Week at Home

Brief: Offices are starting to fill up again, but it’s still not where Londoners are spending their entire work week. More than 80% of London-based office employees who participated in a JPMorgan Chase & Co. survey said working full time either from home or from the office were their least preferred options after the ending of pandemic restrictions, analysts led by Neil Green wrote in a note. The analysts polled about 650 workers between Sept. 30 and Oct. 12, with about two-thirds of respondents saying they were back in the office on a regular basis. Only 37% said they had been going in five days.“This data strongly supports the trend for flexible offices,” the analysts wrote. “Employee demands are evolving.”

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Industry argues stagflation fears based on misnomer

Brief: The “nightmare scenario” of stagflation rearing its head is less likely than many investors think, according to investment professionals, who say the current backdrop is not comparable to the last prolonged period of stagflation during the 1970s and early 1980s.However, they warn that expectations for stagflation could lead to a "significant reversal" across nominal bond and equity markets. Stagflation, when economic growth slows and unemployment increases while inflation ticks higher, creates a tough environment for investors, given consumer spending slows, companies' earnings fall and unemployment continues rising. It is a difficult cycle to break, as evidenced between 1973 and 1982, when the oil embargo of 1973 hit prices and first challenged the seemingly stable inverse correlation between inflation and unemployment.

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Boris Johnson Hosts Business Leaders’ Dinner Amid U.K. Investment Push

Brief: Prime Minister Boris Johnson will host a dinner Monday with 20 of the world’s most powerful executives ahead of a summit designed to boost investment into the U.K. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and Bill Gates will be among the guests, according to the Daily Telegraph. Stephen Schwarzman, co-founder of private equity firm Blackstone Inc., Barclays Plc CEO Jes Staley  andBanco Santander SA Chairman Ana Botin and will also be there, the newspaper reported. Chancellor of the Exchequer Rishi Sunak will host a separate dinner for other leading business figures on the same evening in the capital’s financial district alongside William Russell, the Lord Mayor of London. More than 200 top business people have been invited to Tuesday’s summit, which is aimed at boosting business investment in Britain.

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Top 500 managers see assets hit record USD119.5tn

Brief: Assets under management (AuM) at the world’s 500 largest asset managers have reached a new record of USD119.5 trillion, according to new research from the Thinking Ahead Institute. As of the end of 2020, this represents an increase of 14.5 per cent on the previous year when total AUM was previously USD104.4 trillion.The research, conducted in conjunction with Pensions & Investments, a leading US investment newspaper, confirms growing concentration among the top 20 managers whose market share increased during the period to 44 per cent of total assets. Of the top 500 managers, 221 names which featured on the list a decade ago in 2011 are now absent in 2021, demonstrating a quickening pace of competition, consolidation and rebranding.

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Wall Street banks set to profit again when Fed withdraws pandemic stimulus

Brief: Wall Street banks have been among the biggest beneficiaries of the pandemic-era trading boom, fueled by the Federal Reserve's massive injection of cash into financial markets. With the central bank nearing the time when it will start winding down its asset purchases, banks are set to profit again as increased volatility encourages clients to buy and sell more stocks and bonds, analysts, investors and executives say. The Fed has been buying up government-backed bonds since March 2020, adding $4 trillion to its balance sheet, as part of an emergency response to the COVID-19 pandemic. The strategy was designed to stabilize financial markets and ensure companies and other borrowers had sufficient access to capital. It succeeded but also resulted in unprecedented levels of liquidity, helping equity and bond traders enjoy their most profitable period since the 2007-09 financial crisis.

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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 15, 2021:

  • In the United States, a Food and Drug Administration (FDA) advisory panel has recommended a third dose of the Moderna vaccine for elderly and immunocompromised people and those whose jobs expose them to Covid-19. The panel met on Thursday and voted unanimously 19-0 to approve the mRNA booster. If the FDA gives final approval, the Centers for Disease Control and Prevention will determine exactly who gets the booster shots. The FDA often follows the advice of the advisory panel but it is not required to do so. An advisory committee will meet to weigh in on Merck’s Covid-19 pill on November 30.

  • In Canada, the province of Saskatchewan took over the operations of five nursing homes after officially ending their relationship with operator Extendicare. The government made the announcement on Thursday after the homes were reviewed. An ombudsman report from August found that Extendicare was ill-prepared to deal with a deadly Covid-19 outbreak that happened in 2020, killing 39 residents of its Parkside home in Regina. Scott Livingstone, CEO of the Saskatchewan Health Authority, apologized for not being able do more to prevent the situation. The health authority will take over the operations of the five Extendicare long-term care homes, home to more than 540 residents.  
  • In the United Kingdom, about 43,000 people may have been wrongfully given negative coronavirus tests, health officials said. The U.K. Health Security Agency announced suspension of operations at a private lab in central England, after an investigation found reports of people who tested positive on rapid tests were testing negative on PCR tests. “Around 400,000 samples have been processed through the lab, the vast majority of which will have been negative results, but an estimated 43,000 people may have been given incorrect negative PCR test results," the health agency said. Officials say the problem is an isolated incident that can be attributed to the one laboratory.

  • Italy is gearing up for more civil unrest as its strict vaccine mandate comes into effect. Beginning today, all workers in the public and private sectors are required to present a coronavirus health pass in order to enter their workplaces. The health pass requires a person to be fully vaccinated, have proof of a negative test taken within 48 hours or recent recovery from Covid-19. Failure to comply could result in fines or suspension without pay. Although 80% of Italy’s population over 12 are fully vaccinated, an estimated 2.5 million workers have yet to get their shots. More protests along with staff shortages are expected in the coming days.
  • India will reopen to fully vaccinated international travellers, the first time it has allowed foreign tourists for 19 months. Commercial flights will be able to enter the country beginning on November 15, officials announced. The country has not granted any tourist visas since March 2020, when the government closed borders to address the coronavirus pandemic. Travellers must be fully vaccinated and test negative within 72 hours of their flight. Daily case numbers in India have fallen below 20,000, down from their peaks of 400,000 in May, as more people get vaccinated. About 70% of the eligible population in India have had at least one dose of vaccine.

  • Australia’s city of Sydney will allow fully vaccinated international tourists to enter without quarantine, authorities announced. Premier Dominic Perrottet said the new rules will come into effect on November 1. "We want people back, we are leading the nation out of the pandemic ... we are opening Sydney and New South Wales to the world," Perrottet told reporters in Sydney. The announcement comes as New South Wales approaches the 80% full vaccination milestone, well ahead of the rest of the country. Australia initially closed its borders in March 2020 in response to the pandemic.

Covid-19 – Due Diligence And Asset Management

Return-to-office plans are colliding with a shortage of key supplies

Brief: Your return to the office might come with no desk, toilet paper or refrigerator to stash your lunch. The supply-chain disruptions and chip shortages that have retailers fearing empty shelves for Christmas are complicating employers’ plans for a smooth reopening of offices, according to a report this week from consultancy Korn Ferry. Office managers are saying that orders for breakroom refrigerators they need in January may not be fulfilled until next summer, said Elise Freedman, a senior client partner at Korn Ferry who is advising companies on their return-to-work strategies. New desks are also months behind schedule, she said, though that’s a smaller issue as offices are slow to fill to capacity. With workers already reluctant to go back to the five-day office routine — a third of professionals responding to a Korn Ferry survey in August said they’re never returning full-time — each hiccup makes it harder for the employer to make reliable plans.

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CFA Level I Pass Rate Climbs to 26% Following Pandemic-Era Lows

Brief: The pass rate for the first level of the chartered financial analyst exam rose from the record low set in July. In August, 26% of candidates passed the Level I test, up from 22% for those who sat for the exam the previous month and 25% in May, according to the CFA Institute’s website. The 10-year average pass rate is now 41%. “We see a similar phenomenon in the lower-than-average pass rate from the August Level I administration as we did earlier this year,” Peg Jobst, managing director for credentialing at the institute, said in a statement Thursday. “As Covid-19 continues to challenge a large number of candidates on their journey through the CFA program, we continue to see the impact reflected in the lower pass rates.” The latest results follow historically low pass rates across all levels of the CFA exam. The institute said its pass rates would improve in the future, approaching pre-Covid levels as long as pandemic pressures subside.

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U.S. Economy Is Losing Its Bounce as Recovery Turns Into a Grind

Brief: Just a few months ago, the U.S. economy looked like it was roaring back from the pandemic slump. Now the recovery is starting to look more like a grind. The spread of the delta variant has held back millions of Americans from spending on services like restaurants and hotel rooms. Supply chains are still creaking and Hurricane Ida, which caused havoc in petrochemicals hub Louisiana as well as roughly $20 billion of flooding damage in the Northeast, may have made them worse. And high inflation is stretching household budgets. The Atlanta Federal Reserve’s real-time estimate of economic activity now predicts growth of just 1.3% in the quarter that ended in September. Two months ago it was forecasting 6%. Economists surveyed by Bloomberg are more upbeat. Still, the consensus growth forecast for the third quarter has dropped sharply since August. None of this means the U.S. rebound is heading into reverse, says Nathan Sheets, newly appointed chief economist for Citigroup Inc. “I think recession’s too strong,” he says. “But it’s certainly softer.” Here are five indicators that illustrate and explain the gathering gloom.

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Energy Crisis Fuels U.K.’s FTSE 100 Index Rally to Pandemic High

Brief: The U.K.’s benchmark equity index is clawing back pandemic losses, driven by a rally in mining, energy and banking stocks. The FTSE 100 Index rose as much as 0.5% to 7,242.73 on Friday, taking it to the highest level since February 2020, when market jitters about the pandemic started to surface. “Having underperformed for so much of the last 18 months, the FTSE 100 is now reaping the benefits of its heavy weighting of basic resources, energy and financials,” said Michael Hewson, chief market analyst at CMC Markets. A surge in metals and energy prices as well as rising yields are lifting miners, oil companies and banks higher, he said. Royal Dutch Shell Plc and BP Plc have both soared more than 15% over the past month, with HSBC Holdings Plc and Standard Chartered Plc also among the top performers. Meanwhile, reopening beneficiaries Rolls-Royce Holdings Plc and British Airways owner IAG SA have benefited from easing travel restrictions.

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Wall Street Bosses See Windfall Lasting, Fueling Pay and Hiring

Brief: The dealmaking and trading windfall that the pandemic unleashed on Wall Street firms just keeps piling up as the economy recovers -- and U.S. banking leaders are pointing to signs that it’s far from over. A fresh round of earnings reports by five of the nation’s largest lenders included revenue hauls from investment banking at Morgan Stanley and Bank of America Corp. that were at or near record levels, and dramatic surges in equities trading across the industry, such as a surprising 40% jump at Citigroup Inc. Closely watched Goldman Sachs Group Inc. reports its third-quarter results Friday. The latest phase of the 18-month frenzy was driven by companies eager to do deals as they adjust their businesses, and by traders betting on the pace of an economic recovery amid supply-chain woes and inflation worries. The outlook, according to several financial industry leaders, is more of that, along with mounting pressure on the Federal Reserve to reduce its emergency pandemic support for the economy.

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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 14, 2021:

  • In the United States, case numbers and deaths are falling and vaccination rates are rising, largely thanks to sweeping vaccine mandates put in place across the country.  White House officials announced on Wednesday that vaccination rates increased by 20%, and that 77% of eligible Americans have had at least one dose of vaccine. The vaccine mandates put in place by local and state governments, healthcare systems, social institutions and private businesses have all contributed to the increase in vaccination rates, said White House Covid-19 Response Coordinator Jeff Zients.  The Biden administration has pushed hard to bump up vaccine rates, announcing policies last month that require healthcare workers and federal employees to be fully vaccinated.
  • In Canada, the province of Quebec has extended the deadline for healthcare workers to get their shots, from October 15 to November 15. The move came as a surprise, as Health Minister Christian Dubé had been insisting on having the vaccine mandate in place by this Friday. He said his decision to extend the deadline was difficult but necessary to avoid losing staff. "I have the responsibility to protect the health-care network of Quebecers," Dubé said during a news conference. "The risk right now is too high, and it would be irresponsible to roll the dice with the health of Quebecers."

  • The United Kingdom is in for a difficult winter, even if Covid-19 cases remain low, said Professor Chris Witty, the government’s chief medical advisor. “The winter as a whole, I regret to say, is going to be exceptionally difficult for the (National Health Service) and general practice is going to be absolutely at the forefront of this, unfortunately…” Witty said at the Royal College of General Practitioners’ annual conference. “Zero Covid over this winter is a completely impossible dream...what we hope is we can keep it roughly to low levels.” The U.K. reported 42,776 coronavirus cases on Wednesday, up from 38,520 the day before and the highest number since mid-July.
  • In Japan, Prime Minister Fumio Kishida has dissolved parliament, setting up the country for a pandemic-era election. Kishida’s Liberal Democratic party is focusing largely on coronavirus measures, including a plan to provide oral antiviral medication this year. The campaign will officially start on October 19, with the vote taking place on October 31. Meanwhile, case numbers in Japan have begun to fall, on Monday the country reported 369 new infections while Tokyo reported 49, the lowest number since June 2020. The vaccine rollout in Japan has sped up, with almost 70% of the population fully vaccinated to date.
  • South Korea has assembled a panel that will debate a strategy on how to best live with Covid-19. As the country moves through the latest wave of infections, the health ministry said it will focus more on hospitalizations and deaths rather than daily case numbers. The government plans to relax coronavirus restrictions for fully vaccinated citizens and have milder Covid-19 patients recover at home as part of the strategy. Earlier they announced a phased plan to return the country to normal, which will start in November when 70% of the population is expected to be vaccinated. 
  • Australia’s state of Victoria is set to exit lockdown, despite hitting a record number of new cases. Victoria state reported 2297 new cases and 11 new deaths, surpassing the previous record of 1965 set on October 9. Despite the rising case numbers, Premier Daniel Andrews said the state is set to reopen next week once they reach the 70% vaccination milestone. “Save and except for this point – case numbers, particularly among unvaccinated people, will translate into a number of hospital patients,” he said. Concerns were raised about the high case numbers possibly affecting the state’s reopening, but case numbers are still within modelled predictions.

Covid-19 – Due Diligence And Asset Management

UK social impact investment market swells to a record GBP6.4bn in year of the pandemic

Brief: Social impact investing in the UK has increased by almost eight-fold over nine years from GBP833 million in 2011 to GBP6.4 billion in 2020, according to new figures released by Big Society Capital, a UK social impact investor. The data, from Big Society Capital’s Annual Market Sizing Report, shows there has been consistent growth year-on-year with a particular acceleration between 2019 - 2020, the year of the pandemic, which saw a 26 per cent increase in the value of social impact investments in the UK (26 per cent 2019-2020 vs 21 per cent increase 2018-2019). Social property funds continue to account for the largest portion (45 per cent) of the social impact investment market and has seen eight-fold growth since 2016. Social lending accounts for 43 per cent of the market, seeing three-fold growth since 2011.

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Pandemic and climate change are biggest deal blockers in next 12 months, say UK dealmakers

Brief: UK dealmakers are equally convinced that the biggest threats to completing deals in the next 12 months will be issues stemming from the pandemic and climate change. That's according to a survey of 400 UK and US-based dealmakers by Datasite, a leading SaaS technology provider for mergers and acquisitions (M&A) professionals. The research shows that 41 per cent of UK dealmakers expect the biggest M&A dealbreaker in the next 12 months to be Covid-19, just ahead of climate change at 40 per cent. By contrast, 48 per cent of US dealmakers expect climate change to be the biggest dealbreaker in the next 12 months, followed by Covid-19 at 32 per cent. “Britain’s economy has certainly come a long way following the darkest days of the pandemic, but we still have some labour and supply chain issues to resolve,” says Merlin Piscitelli, Chief Revenue Officer for Datasite in Europe, the Middle East and Africa.

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The trends shaping post-pandemic property investments

Brief: Now that more than 18 months have passed since Covid-19 started sweeping the world, we have a good understanding of how the pandemic has affected real estate investments. In some ways, it has changed the game. In other ways, it has simply underlined a number of trends that were already shaping the sector. These ‘megatrends' will likely cross decades and decades, and have big implications for real estate - boosting some sectors and disrupting others. Below is a snapshot of the trends that have shaped 2020 to now, and how we see them developing in the coming decade. While we are not predicting the end of the office tower, we do expect a fall in their popularity with tenants. Global lockdowns have proven the viability of remote working and, even as the world normalises, many companies are adopting a hybrid working model going forward.

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Covid-19 puts spotlight on range of ESG issues, RBC Global Asset Management Survey finds

Brief: The adoption of environmental, social and governance (ESG) integration remains strong amongst global institutional investors, while a significant group has also placed greater emphasis on ESG considerations as a result of the Covid-19 pandemic, according to the 2021 RBC Global Asset Management (RBC GAM) Responsible Investment Survey. The 2021 survey highlighted that while ESG adoption remains near peak levels amongst institutional investors globally, there is a sizable group of institutional investors (29 per cent) who have placed greater emphasis on ESG considerations as a result of the Covid-19 pandemic. These investors are also the most vigorous supporters of ESG as an enabler of investment performance, as nearly all of this group (97 per cent) believe ESG integrated portfolios are likely to perform as well or better than non-ESG integrated portfolios, a significant difference compared to the overall global respondents who said the same (83 per cent).

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Ray Dalio says the workplace is never going back to the same way it was pre-Covid

Brief: Billionaire investor Ray Dalio believes the workplace will never return to pre-pandemic conditions as flexibility and technology became the major driving forces in the new world. “The future of the workplace is going to be characterized by probably two things — customization and technology. We’ve been given a gift to be able to rethink what we are doing,” Dalio said Wednesday at CNBC’s @Work Summit. “I don’t think we are going to go back to the old world.” “It’s going to be an erratically different kind of work — what is employment? How will technology be replacing people? How will that be dealt with? How will the wealth gap be dealt with...there are going to be many, many changes over the next five years,” Dalio added.

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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 13, 2021:

  • The United States will open the U.S.-Canada land border to fully vaccinated visitors in November. The border has been closed for non-essential travel since the beginning of the pandemic in March 2020. The requirements will be similar to those for international air travellers, but officials did not give many details on the new rules. It is unclear whether the AstraZeneca vaccine, which has not been approved for use in the U.S., will be accepted, or whether those who mixed vaccine doses will be eligible. Unvaccinated visitors will still be banned from entering the U.S. at the land borders.  
  • In Canada, the province of B.C. has expanded a mask mandate that now requires children ages five and older to wear masks indoors. The initial mandate applied to children ages 12 and older, but it was expanded to keep the rules consistent, said Dr. Bonnie Henry, the province’s top doctor. "I continue to be amazed by the adaptability and resilience of children across this province," she said during a news conference. Henry added that she hopes vaccines for children ages five to 11 will be available by as early as November. Pfizer has already made a request for approval from Health Canada. 
  • In the United Kingdom, job vacancies hit a record high of 1.2 million in September, as employers scrambled to hire through staff shortages caused by Brexit and the pandemic. Unemployment rates fell to 4.5%, between June and August, down from 4.6% in the previous quarter. Officials are still concerned that unemployment rates could rise again following the end of a government support program that came out of the pandemic. The support program at its peak helped 11 million people but that number fell to 1 million as more people went back to their jobs and the program was phased out. 
  • In France, a study published on Monday found that vaccines cut the risk of death or serious illness from Covid-19 by 90%. The study was conducted by a science group set up by France’s health system, Epi-Phare, as well l’Assurance Maladie and the country’s medicines agency. As the Guardian reports, the study was the largest of its type and compared 11.3 million vaccinated people over 50 with the same number of unvaccinated people from the same age group. The study found that vaccines reduced the risk of serious illness and death by 84% in those over 75, and 92% in the 50-74 age group.
  • India has recommended emergency use of its Bharat Biotech Covid-19 shot for children ages two to 18. Bharat Biotech’s Covaxin vaccine was trialled in children back in June, with the trial data being submitted to the Drugs and Comptroller General of India at the start of this month.  If approved by regulators, the made-in-India vaccine will be the first available to children ages two to 12. The World Health Organization has not yet granted emergency use authorization of the two-dose shot, though Covaxin has submitted the documentation and is currently undergoing the review process. 
  • Australia’s state of Victoria kicked off their regional vaccine passport trials over the weekend, with around 70,000 people downloading the Service Victoria app. The trials are leading up to October 26, when the state expects to have 70% of the eligible population fully vaccinated. At the same time, Pfizer and Moderna vaccines are now available to all eligible age groups, as the state expanded the eligibility criteria. “As we push to 70 and 80% double doses and beyond, it’s time to throw open the doors of all of our clinics, more than 60 of them across the state, to the mRNA vaccines … for all comers,” said Victoria’s health minister, Martin Foley.

Covid-19 – Due Diligence And Asset Management

Jamie Dimon says worst of pandemic may soon be over

Brief: JPMorgan Chase CEO Jamie Dimon is not known for mincing words or hiding his emotions. So the fact that the leader of America's largest bank sounds very upbeat about the health of the US economy is noteworthy. Dimon said he is not worried about the possibility of inflation heating up in the next few months during a call with reporters about JPMorgan Chase's third quarter earnings Wednesday. He bluntly said "that's life" and added that the fact that we're even talking about inflation is a good thing because it's a sign that the worst of the Covid-19 pandemic, despite Delta variant fears, may soon be over. "We should all thank our lucky stars," Dimon told reporters about his expectation that the US may soon be turning a corner with regards to Covid-19 cases. Dimon even dismissed worries about all the headlines regarding supply chain disruptions due to the pandemic.

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Pandemic makes workplace meetings more inclusive, study shows

Brief: The pandemic has made workplace meetings more inclusive and efficient, according to a survey of more than 600 business leaders across Singapore, Australia and Japan. In Singapore, more than half of C-Suite executives who responded said they tried to open up conversations to a wider group of staff, the analysis from Tableau Software Inc. and YouGov showed. The loss of face-to-face interactions was a concern for two-thirds of executives in Australia, and leaders in Japan aged 44 and under said they had seen an improvement in workplace conversations, according to the study. Decision-making got faster during the pandemic, said JY Pook, senior vice president for Asia Pacific and Japan at Tableau, a data visualization software firm. “

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Finance jobs remain attractive to graduates, but firms must do more to showcase ‘purpose’, says new CFA Institute survey

Brief: CFA Institute, the global association of investment professionals, has released results from a survey it conducted on the career outlook of more than 15,000 current university students and recent graduates aged 18-25 from 15 markets. The results find that globally, 58 per cent of respondents still feel confident about their future career prospects in the wake of the Covid-19 pandemic. The findings also indicate that traditionally stable fields, such as finance, remain attractive for graduates navigating these uncertain times. In fact, respondents across all 15 markets ranked finance as one of the top five most valuable majors for finding a career. Overall, graduates felt that medicine/science was most stable and attractive, followed by healthcare and then education. 

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Hedge funds eye “potent” anti-viral Covid-19 drug molnupiravir

Brief: US multinational pharmaceutical manufacturer Merck’s new drug – which is designed to help reduce Covid-19 symptoms for people with Covid-risk factors including age, obesity, and diabetes – offers “great potential” to fully re-open the global economy, Man Group noted in market commentary on Tuesday. The London-listed global hedge fund giant’s ‘Views From The Floor’ note observed how the Goldman Sachs US Global Health Risk equities basket, which lagged the S&P 500 for much of 2021, has risen on the back of encouraging trials of molnupirarvir. The Health Risk equities basket – which includes airlines, tour operators and hospitality names including such as Royal Caribbean, Expedia, Delta Airlines, and Nordstrom – relies on the post-pandemic economic reopening, which has stalled in recent months after powering 2020’s stock market rebound. “

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Private equity market "softens" after strong pandemic

Brief: Certain key private equity numbers turned to point downwards in the third quarter of the year, including fundraising which fell by 21% year-on-year.Private equity, which was described as “performing well since the pandemic”, also saw ‘exit’ values fall by over 2% and Prequin - the data firm which published the Q3 figures - said “some signs of market softness may be appearing”.Aggregate private equity capital raised was $83 billion, down 21% year-on-year. Preqin said private equity exit activity had “cooled down slightly” and that exit values were down 2.4% year-on-year. However, North America remained the dominant source of “buyout deal flow”, having registered $107.2 billion in aggregate during Q3, compared to only $61.5 billion in the same period last year.

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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 12, 2021:

  • In the United States, the AstraZeneca vaccine will now be recognized for international travel, the Canadian Press reports. The Centers for Disease Control and Prevention (CDC) said on Monday that they will accept any vaccine approved by the World Health Organization or the Food and Drug Administration. It is still unclear whether this includes people who had mixed vaccine doses, which is about 3.9 million people in Canada. The Canadian government has been working with the U.S. to recognize different vaccine regimens, including mixing doses. The CDC says it will provide more information as the requirements are finalized. 
  • In Canada,  the country is preparing for staff shortages across the healthcare sector as vaccine mandates begin to take effect. Officials are especially concerned about the impacts of layoffs on already overburdened healthcare systems. As CBC News reports, 36% of staff were placed on unpaid leave at a long-term care home in Toronto after they refused to be vaccinated.  Healthcare workers in Quebec have until October 15 to get their shots before they face suspension without pay, while B.C. recently extended the deadline for long-term care workers to have their first dose.
  • In the United Kingdom, a new report from lawmakers has found that the British government failed to act quickly enough to stop the spread of Covid-19. “Decisions on lockdowns and social distancing during the early weeks of the pandemic – and the advice that led to them – rank as one of the most important public health failures the United Kingdom has ever experienced,” the report said. The 150-page report resulted from a cross-party inquiry that began in October 2020. It includes the testimony of more than 50 witnesses across government policy, health and science sectors. The report did highlight some positives, including the government’s quick and effective vaccine rollout.
  • In Italy, violent protests broke out in Rome over the weekend as people opposed some of the toughest vaccine mandates in the world. Italy’s “green pass” was first introduced back in June for international travel, and since then its scope has expanded. Beginning on October 15, the green pass will be required for all workers in both public and private sectors. Protesters say the requirements infringe on their rights and freedoms. Police arrested 12 people including Roberto Fiore, the leader of right-wing extremist group Forza Nuova. On the same day as the protests, Italy reached a milestone of having 80% of citizens over 12 fully vaccinated.
  • New Zealand will require healthcare workers and teachers to be fully vaccinated, Prime Minister Jacinda Ardern announced on Monday. Ardern also extended lockdown restrictions in Auckland for another week as 35 new cases were reported, bringing the total for this outbreak to 1622. Healthcare workers must be fully vaccinated by December, while those working in the education sector must be fully vaccinated by January. “New Zealand is at one of the trickiest and most challenging moments in the COVID-19 pandemic so far," Ardern told reporters in Wellington. She explained that moving forward, New Zealand would be looking to live with the virus by boosting vaccination rates.
  • Australia’s Prime Minister Scott Morrison encouraged citizens to “enjoy the moment,” as some Covid-19 curbs were lifted in Sydney on Monday. "Today is a day so many have been looking forward to - a day when things we take for granted, we will celebrate," he said. Gyms, pubs and hairdressers opened their doors to fully vaccinated customers after being locked down for 106 days. New South Wales reported 496 new Covid-19 cases, continuing the downward trend, while vaccination rates rose above 70%. NSW plans to hit the 80% vaccination rate by late-October at which time it will ease more restrictions.

Covid-19 – Due Diligence And Asset Management

IMF foresees a slight drop in global growth from pandemic

Brief: The International Monetary Fund is slightly downgrading its outlook for the global recovery from the pandemic recession, reflecting the persistence of supply chain disruptions in industrialized countries and deadly disparities in vaccination rates between rich and poor nations. In its latest World Economic Outlook being released Tuesday, the IMF foresees global growth this year of 5.9%, compared with its projection in July of 6%. “The global recovery continues but the momentum is hobbled by the pandemic,” IMF Chief Economist Gita Gopinath told reporters at a briefing. For the United Sates, the world's largest economy, the IMF predicts growth of 6% for 2021, below its July forecast of 7%. The downward revision reflects a slowdown in economic activity resulting from a rise in COVID-19 cases and delayed production caused by supply shortages and a resulting acceleration of inflation.

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Traders Working at Home Should Expect a Knock at the Door

Brief: Traders and investment banking staff who plan to work from home regularly should expect the U.K.’s markets watchdog to come knocking. The Financial Conduct Authority on Tuesday warned regulated firms that it has powers to visit any address where work is performed and that includes private residences. The FCA could visit a home for ongoing supervision, not just as part of an investigation, the watchdog said. The updates come as staff across the financial services sector move to a hybrid working model. The FCA said firms will now need to prove that remote working arrangements don’t increase the risk of financial crime or hurt competition.

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Hong Kong Risks Global Status as Singapore Opens Up to World

Brief: The divide between Asia’s two main financial hubs in handling the pandemic is growing ever wider, with one opening up to global travel and the other maintaining one of the world’s harshest quarantine policies. In Singapore, officials are taking steps to reconnect with the global economy even as the government faces pressure to favor locals over foreigners for well-paying jobs. Speaking in a televised address over the weekend, Prime Minister Lee Hsien Loong said that Singapore can’t stay “locked down and closed off indefinitely” and residents should prepare to see “many Covid-19 cases for some time to come.” Hong Kong Chief Executive Carrie Lam has taken the opposite approach, stressing in a Bloomberg Television interview Monday that even a single death would be a “major concern” as she follows China’s Covid Zero approach that tolerates no local infections.

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Why ESG Investing Thrives in Chaotic Times

Brief: Another COVID-19 variant; melting ice caps cause cities to sink below the water level; wars breaking out over diminishing supplies of potable water. Cyberattacks bankrupting global corporations and crippling governments. Corrupt autocrats plundering their countries for wealth and power. They aren’t just dystopian fantasies. Some are already occurring around the world. They’ll likely only increase in the coming year and decade. Each could exert a monumental impact on our lives—and on markets. Yet the impact won’t be uniformly negative. For investors, alpha is possible amid the chaos. The trick is adopting a mindset to take advantage of the possibilities that disruption brings.

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Pharmacy M&A deals jump 26 per cent as sector thrives during pandemic

Brief: The number of UK pharmacy M&A transactions has jumped 26 per cent to 408 in the last year, up from 325 the year before, says UHY Hacker Young, the national accountancy group. Pharmacies were one of few sectors to benefit from a surge in customer demand during the pandemic. As one of the few designated “essential retailers”, they were also allowed to remain open throughout lockdown. Sales of PPE, along with Covid testing has opened up a whole new business lines for pharmacies. This has not only increased their appetite amongst pharmacies to acquire smaller operators  but also made pharmacies a more attractive target for buyers from outside of the sector. UHY Hacker Young says both regional and national pharmacy groups are making acquisitions, including first time buyers that have not previously made acquisitions. Private equity buyers have also been showing increased interest in the sector.

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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 8th, 2021:

  • In the United States, CNBC’s Global CFO Council for the fourth quarter of 2021 view a COVID-19 outbreak as the biggest external risk factor that their businesses face. The American media outlet’s CFO Council features a group representing public and private companies from various major sectors including Facebook, IBM, BNP Paribas and Johnson & Johnson, just to name a few. A COVID-19 outbreak marks the second straight quarter for the biggest external risk factor. The first two quarters saw cyberattacks and inflation as CFO’s biggest concerns. The majority of the firms are also in favour of President Joe Biden’s vaccine mandate where he recently ordered all federal workers and contractors to be vaccinated. Eighty percent of CFO’s surveyed say they “totally support” the Biden administration’s mandate, while 15% said they totally oppose it.

  • The Canadian job market received some good news on Friday. According to Statistics Canada, the country added 157,100 jobs last month, returning the job market to pre-pandemic levels. According to Bloomberg, Canada lost roughly 3 million jobs to the pandemic and the news is a welcoming sign to the nation’s economy – showing that employers are willing and able to hire workers as virus restrictions ease and vaccination rates continue to climb. The employment numbers will also bolster the predictions by Bank of Canada officials that the economy will post a strong rebound in 2021 after contracting earlier in the year.

  • In the United Kingdom, British Airways was reporting a nearly 400% increase in website searches for popular sun destinations as the country slashed its travel red list to just seven countries and PCR tests will no longer be required on travellers return to England, as long as they are fully vaccinated. As of 4 AM Monday, places such as Mexico, South Africa, Seychelles, and Thailand are some of the 47 places being take off the red list. The only countries that remain will be Panama, Columbia, Venezuela, Peru, Ecuador, Haiti, and the Dominican Republic – those that choose to travel there still must stay in hotel quarantine for 11 nights upon their return at a cost of £2,285 per adult.

  • Germany has vaccinated 3.5 million more citizens than previously stated. The announcement was made on Thursday by the country’s health minister after Germany’s disease control center, the Robert Koch Institute, stated almost 80% of Germans are fully vaccinated with 84% receiving at least one shot. So how did Germany lose track of almost 3.5 million people? “The discrepancy between the numbers that had been reported so far and those that the Robert Koch Institute now found out about in surveys is due to the fact that some vaccinations may not have been reported,” Health Minister Jens Spahn told reporters in Berlin. Spahn also pointed out that vaccinations of employees at large companies, mobile vaccination teams in nursing centres and surveys not including those under the age of 18, as reasons for vaccinations not being fully reported.

  • In Japan, the country’s new prime minister gave his first policy speech on Friday and promised to strengthen the country’s response to the coronavirus pandemic in case of another resurgence. Prime Minister Fumio Kishida pledged to be more attentive to public concerns and needs and prepare virus measures based on “a worst-case scenario.” Those measures included improving crisis management before the weather turns cold, approving drugs for treatment of COVID-19 by the end of December and digitization of vaccine certificates as Japan gradually expands social and economic activities.

  • With Sydney, Australia prepared to relax restrictions after more than 100 days in lockdown next week, doctors are sounding the alarm. Stay-at-home orders are expected to be lifted on Monday in New South Wales after hitting its 70% target of full vaccination, but Australian doctors warned a too-rapid easing of COVID-19 curbs could put pressure on health systems and risk lives. While government officials already previously planned to ease travel restrictions upon hitting the 70%, they also decided to bump up permitted limits for home gatherings, weddings, and funerals – drawing the ire of the Australian Medical Association.

Covid-19 – Due Diligence And Asset Management

Asset Management Industry Emerges Unscathed from the Pandemic

Brief: The global asset management industry reached an all-time high of $114.7 trillion in assets under management in 2020, according to a McKinsey report released yesterday. That made 2020 the second-best year since the financial crisis in terms of AUM growth, according to the report. It was not just driven by performance: Net new flows of assets grew at 2.7 percent in 2020, just slightly down from 2019. “In North America, 2020 was a story of the updraft in the U.S. markets in particular, in large part because U.S. media, technology, and healthcare companies were overrepresented in the circle of winners of the global pandemic economy,” McKinsey said in the report. Yet even as assets surged, asset manager revenues and operating profits have grown at a slower pace. In North America, AUM grew at 13 percent last year, while revenues and operating profits grew at 7 percent and 9 percent, respectively. McKinsey pointed out that despite the market shocks and the prolonged suspension of in-person interactions caused by Covid-19, the asset management industry has picked up some tailwinds as the U.S. economy quickly recovered to the pre-pandemic level. 

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Challenges and Opportunities: How Hedge Funds are Grappling with ESG, Remote Working and the ‘Portfolio Conundrum’

Brief: With traditional equity and credit returns set for a squeeze, and ESG, Covid-19 and remote working upending the hedge fund industry from both an investment and operations perspective, managers face both considerable challenges and sizable opportunities up ahead, speakers at EisnerAmper’s 6th annual Alternative Investment Summit said this week. Opening this year’s event, the ‘Future of Hedge Funds’ panel explored an assortment of industry themes and trends – including the increased importance of ESG considerations, the far-reaching operational changes stemming from the Covid-19 pandemic, and the range of emerging investment opportunities coming down the pipeline. Simon Fludgate, head of operational due diligence of Aksia, described a “cataclysmic shift” in how much investors care about ESG, but observed how different people want different things from ESG policies, acknowledging a contrast between sentiments in US and Europe.

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Global Financial Assets Reach Magic €200trn for the First Time

Brief: Allianz has unveiled the twelfth edition of its ‘Global Wealth Report', which puts the asset and debt situation of households in almost 60 countries under the microscope to reveal a sizeable growth in financial assets over the last year. 2020 was the year of extreme contrasts. Covid-19 destroyed millions of lives and livelihoods and the world economy plunged into its deepest recession since World War II. At the same time, monetary and fiscal policy mobilized unimagined sums to support the economy, markets and people. Incomes were stabilised and stock markets recovered quickly. With this tailwind, households' wealth weathered the Covid-19 crisis: Global gross financial assets increased by 9.7% in 2020, reaching the magic EUR 200 trillion mark for the first time. Savings were the main driver: As lockdowns drastically reduced consumption opportunities, the global phenomenon of "forced savings" was born. Fresh savings jumped by 78% to EUR 5.2 trillion in 2020, an absolute record. Inflows into bank deposits - the default option of forced savings, simply leaving unspent income in the bank account - almost tripled (+187%).

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Facebook Set for Longest Streak of Weekly Losses Since Pandemic

Brief: Facebook Inc. shares rose on Friday, though not by enough to prevent what is set to be the social-media company’s longest streak of weekly losses since the pandemic started. The stock climbed 0.5% today, but remains down 3.6% for the week. Should the stock end the week in negative territory, that would mark its fourth straight weekly loss, the longest such streak since a five-week decline that ended in March 2020. At current levels, Facebook shares are down more than 13% off a September peak. Over the past month, the stock is down 12%, making it the weakest performer among Wall Street’s biggest names. Recent losses reflect a rise in Treasury yields, which have broadly weighed on growth stocks, along with a number of company-specific headwinds. This week saw a lengthy global outage of the company’s sites, along with Senate testimony from a former insider turned whistle-blower, who argued that Facebook puts profits ahead of user safety. 

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Pandemic Fuels Activity in Health Care’s Billing Industry

Brief: Money is flowing heavily into the business of medical billing as hospitals and doctors — whose revenues were disrupted by the coronavirus — focus on maximizing every dollar they can collect from patients and insurers. The big picture: The rise and even existence of the billing industry is the result of a fragmented system that is designed around multiple types of insurance plans and a system that has increasingly forced patients to shoulder more of the costs of their care. The state of play: Companies involved with billing and collections, called "revenue cycle management" in industry jargon, increasingly advertise themselves to health care providers as one-stop shops for all things involving payments. Driving the news: The pandemic drastically shrank revenue among hospitals and other providers, and although that drop was relatively short-lived, it spurred even more revenue cycle activity.

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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 7, 2021:

  • In the United States, the government announced they will be purchasing an additional 180 million at-home rapid Covid-19 tests. The purchase will help quadruple the availability of rapid tests by the end of the year, the White House said. “We’ll continue to pull every lever to expand manufacturing production of tests which will have the impact of driving down the cost per test and making sure that tests are widely available and convenient,” said Jeff Zients, the White House Covid-19 coordinator. About half a billion tests per month will be made in the U.S. by December.
  • In Canada,  a group of healthcare professionals has warned that action is needed from all levels of government to address the Coviid-19 healthcare crisis. An emergency summit that brought together members of over 30 healthcare organizations including the Canadian Nurses Association and Canadian Medical Association took place on Tuesday night. Leaders from both organizations reported high levels of staff burnout and the need for government to intervene following the summit. They asserted more supports are needed for healthcare workers including mental health supports, and better ways of addressing staff shortages. They also said they wanted government to take responsibility for its role in the Covid-19 crisis.  
  • In the United Kingdom, the government is expected to announce changes to its “red list” for international travel. On Monday the government’s traffic light system was replaced by a single red list. Currently there are 54 countries on the red list, including Mexico, all of mainland South America, and southern and eastern Africa. The government is expected to cut the list down to about a dozen countries. Red list countries are those that the U.K. advises should not be visited, except in rare circumstances. Anyone returning from a red list country is still required to quarantine for 10 days in a government-approved hotel. 
  • Sweden and Denmark have paused the use of Moderna’s Covid-19 vaccine for younger people because of an increased risk of heart inflammation, which is a rare side effect. Sweden has said it will pause the shots for anyone 30 and under, while Denmark has said they won’t offer it to those under 18. Both countries’ decisions were based on an unpublished Nordic study that pointed to an increase in myocarditis and pericarditis among young adults that had been vaccinated by Moderna. There is only a very small risk of being affected.
  • South Korea has secured 20,000 courses of Merck’s oral antiviral medication for Covid-19, following countries like Australia and Singapore. Prime Minister Kim Boo-kyum said on Wednesday that South Korea is also looking to buy other antiviral drugs. "We already have secured a budget enough for treatment of around 40,000 people and have signed a pre-purchase deal for 20,000 courses," Kim said in a Covid-19 response meeting. Molnupiravir’s treatment involves patients taking four pills twice a day for five days. It is on track to become the first available oral antiviral medication for Covid-19. 
  • Australia’s New South Wales (NSW) announced some changes to their roadmap, with an increased focus on reopening. From October 11, visitors in homes will be allowed to increase to 10, double what the previous roadmap had outlined. Premier Dominic Perrottet also changed the limit on outdoor gatherings from 20 to 30, and increased the cap for weddings and funerals from 50 to 100. Perrottet said the changes to the roadmap do not mean that he disagrees with his predecessor, Gladys Berejiklian. NSW reported 587 new cases as infections continue to trend downward.

Covid-19 – Due Diligence And Asset Management

The World Bank is More Upbeat on Mideast’s Post-Covid Recovery

Brief: The World Bank has revised upward its economic growth projections for the Middle East and North Africa to 2.8% this year from an earlier estimate of 2.2%, as vaccine campaigns gather pace and pandemic restrictions ease. The Washington-based lender now calculates the total cost of the pandemic at around $200 billion in terms of gross domestic product losses, according to its latest regional economic review published on Thursday. Growth in 2021 will still lag behind pre-pandemic levels and is seen at 4.2% next year, as some countries have been slower to address the public health crisis. The Middle East and North Africa was hit hard by the coronavirus pandemic last year and, like the rest of the world, lockdown measures introduced to combat the spread of the virus left many of its economies in distress. Going forward, governments must ensure efficient vaccination campaigns to prevent public health from deteriorating once again, the report said.

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IMF urges governments to make fiscal plans to tame pandemic debt

Brief: Governments should start planning a return to more sustainable budgets with policies that win the trust of investors, after unprecedented fiscal stimulus to fight the COVID-19 pandemic, the International Monetary Fund said on Thursday. But each country must determine the appropriate timing and pace of fiscal consolidation based on its own individual circumstances, the IMF said in its Fiscal Monitor report. The fiscal plans needed to consider the stage of the pandemic, existing fiscal vulnerabilities, the risk of economic scarring, pressures from aging populations, development needs and historical difficulties in collecting revenues. "There are countries where the pandemic is still raging and therefore the priority continues to be the health emergency," IMF deputy fiscal affairs director Paulo Mauro told Reuters in an interview.

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Investor sentiment falls on government recovery plans

Brief: UK-based investors are losing faith in the Government’s ability to rebuild the economy following the pandemic, HYCM research has found. The survey of nearly 1,500 investors with investments of more than £20,000 excluding property, savings and workplace pensions, found that 60% do not believe Prime Minister Boris Johnson and the Conservative Government have handled the pandemic properly. An additional 59% said they lack faith in the government's ability to tackle the record levels of public debt that was accrued during the coronavirus pandemic, while half of UK investors said they are concerned about the potential of acute economic austerity over the coming years. "As recent policy reforms would suggest, the government is already taking significant action to repay the large level of public debt accumulated during the pandemic.

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Asset Managers Are Losing Out on Talent. Executives Think Culture Is to Blame.

Brief: The ways people work are changing, and some asset management executives are worried the industry won’t be able to keep up. Asset management executives surveyed by Accenture expressed concerns around changes in technology and permanent adoption of remote work. For instance, 68 percent of respondents answered “yes” when asked if they believed their firm’s culture is resistant to adopt new technologies. The survey, which included 100 c-suite asset management executives, is expected to be released Thursday. Respondents were largely based in the U.S. and included a range of positions, including chief information officers, chief operating officers, and chief technology officers. Firm types included asset management subsidiaries, alternative asset managers, and standalone asset managers.

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Bank of America offers $200 to vaccinated Merrill staffers going to office

Brief: Bank of America Corp will pay out $200 awards to its employees at Merrill Lynch Wealth Management who have been fully vaccinated and going to office regularly, according to a memo shared with Reuters on Wednesday. The awards will be offered to client associates, administrative support and operations staff at BofA-owned Merrill Lynch, a spokesperson for the bank said. For now, only those staffers who have confirmed they have received their vaccines were asked to return to office, the spokesperson said. “While there is no vaccine mandate across the company, we strongly recommend employees be vaccinated and to notify us of their status.” More than 80% of Merrill employees have voluntarily reported their vaccination status and have or are returning to the office, the spokesperson added.

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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 6, 2021:

  • In the United States, Johnson & Johnson is seeking approval from the Food and Drug Administration (FDA) for emergency use authorization of a booster shot. They are looking to have boosters authorized for anyone 18 and older who previously had their single-dose vaccine. The FDA has already authorized booster doses of the Pfizer vaccine for people 65 and older, those at high risk of health complications and those whose jobs expose them to the virus. Moderna also submitted an application to the FDA last month seeking authorization of a booster shot, and a panel will meet next week to make a decision.
  • In Canada, the provinces of Alberta and B.C. are expanding their eligibility for booster shots as they battle the latest wave of infections. Now anyone in Alberta 75 and older, and First Nations, Inuit and Metis people who are 65 and older, can book a third dose of vaccine, as long as it has been six months since their last shot. “We’re doing this because older Albertans remain uniquely at risk and will benefit from more protection," said Premier Jason Kenney. Neighbouring B.C. announced it will expand the group of immunocompromised people who are currently eligible for a vaccine, meaning that about an additional 100,000 people will receive an invitation for a third dose.
  • In the United Kingdom, plans to vaccinate children ages 12-15 in England are being delayed because of high infection rates in schools. Officials had determined that the mid-term in autumn would be an ideal target to have vaccinations completed, after receiving complaints that England is falling behind other countries. But the program has yet to rollout in many areas and others have said they had challenges meeting the high demand. High infection rates are also causing further delays, as students who test positive for the virus have to wait a period of 28 days before they can receive their vaccination. According to numbers from the Department for Education, about 204,000 students in England were absent due to Covid-19 last week.
  • In the United Arab Emirates (UAE), Abu Dhabi’s crown prince has announced that life is going back to normal after the coronavirus pandemic. Sheikh Mohammed bin Zayed made the announcement on Wednesday as virus cases in the Emirates fell. “I bring you good news. The health situation in the United Arab Emirates is good,” he said. New cases in Emirates have fallen below 200 per day, the lowest they’ve been in over a year. “We thank God that we have emerged from this crisis, well, with goodness, honor, safety, health and experiences that we have paid for but that have brought us a lot of knowledge,” Sheikh Mohammed said.
  • Spain approved administering third doses of the Pfizer and Moderna vaccines for people ages 70 and over. The booster campaign will begin at the end of October and will aim to keep vulnerable people safer, the health ministry said. Until now Spain has only offered third doses to home care residents and some people who are immunocompromised. The European Medicines Agency has approved booster doses of both the Pfizer and Moderna vaccines for people who are seriously immunocompromised. About 78% of Spain’s population is fully vaccinated as of Tuesday.
  • Western Australia announced a vaccine mandate for all employees who work with natural resources. People who work in oil and gas exploration or mining will need to have their first dose of vaccine by December 1, and be fully vaccinated by January 1. The mandate will apply to around 141,000 workers in the natural resource sector and is intended to protect vulnerable indigenous communities. Western Australia has only seen a total of 1109 cases and nine deaths since the beginning of the pandemic. It has vaccinated about 54% of its population, compared with 46% nationally.

Covid-19 – Due Diligence And Asset Management

Private equity GPs to increase exposure to energy sector over next five years

Brief: An overwhelming majority (93 per cent) of private equity fund managers expect to make an investment in the energy sector over the coming five years as they seek to capitalise on the post-pandemic rebound in global demand for power and government-backed stimulus programmes. Of these, over half (51 per cent), stated they were ‘extremely likely’ to invest in energy. The findings are revealed in a new study, Recovery to Rediscovery: Capitalising on a Changed Private Equity Landscape, which was commissioned by Auxadi, a leading provider of accounting, tax and payroll services to private equity, real estate, and multinationals. It was based on interviews with senior-level private equity investors with average assets under management of EUR14.4 billion.

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Bridgewater’s Jensen Says Stagflation is ‘Real Risk’ to Assets

Brief: While inflation concerns mount for the U.S. economy, the real danger may be the combination of rising prices and a stagnating economy, said Bridgewater Associates co-Chief Investment Officer Greg Jensen.  “The problem is stagflation -- that’s the real risk, and so many portfolios are massively exposed,” Jensen said Wednesday at the Bloomberg Invest virtual conference. Policymakers have limited options to handle that, Jensen said in an interview with Stephanie Flanders of Bloomberg Economics. “The Fed faces certainly the problem of inflation being well above their target and the inability to be as easy as they’d like to be and being pulled along by that -- and certainly the increasing odds that we’re facing bubbles,” he said.

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European Firms Mull Moving Staff From Hong Kong, Chamber Says

Brief: European companies are discussing relocating staff from Hong Kong, the region’s local chamber of commerce said, as the city commits to a “Covid Zero” strategy that almost every country apart from China is abandoning. Hong Kong’s strict quarantine measures have led many businesses to consider restructuring at least part of their operations to places such as Singapore, Frederik Gollob, chairman of the European Chamber of Commerce in Hong Kong, said Wednesday on Bloomberg Television.“You can assume that in most boardrooms across Europe and Hong Kong this is a subject of discussion,” he said. “You can’t really avoid it, looking at the restrictions. “His comments come a day after Chief Executive Carrie Lam said Hong Kong’s ties with mainland China were more important than the international business and global travel connections that helped cement the city’s status as an Asian financial center.

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The Stock Market Hasn't Been This Frenetic Since Early in the Pandemic

Brief: Pick a direction, and don’t go with it. That’s the story in stocks of late, with the S&P 500 alternating between gains and losses of at least 1% for four straight sessions -- the longest stretch since June 2020. It’s the same in fixed income, with 10-year Treasury yields swinging wildly around 1.5%.    The harrowing reversals reflect a particularly stark divide between bull and bear cases in markets right now. On one side, risk appetites are being constricted by lingering uncertainty over the government debt ceiling, tightening Federal Reserve policy and disrupted supply chains. At the same time, sentiment is being buttressed by improving Covid trends, an economy that keeps chugging along and forecasts for more double-digit earnings growth from corporate America.

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RBC cuts Air Canada rating amid 'lower for longer' recovery

Brief: RBC Capital Markets downgraded its rating on Air Canada to the equivalent of hold from buy, citing a “heightened risk” that COVID-19 variants will cap the stock’s near-term performance.“The [Delta] variant has undoubtedly impacted the pace of the recovery while also adding a layer of uncertainty regarding the timing of the industry’s ‘return to normal,’” Walter Spracklin and Ryall Stroud, analysts at RBC, wrote, arguing investors should prepare for a more stubborn recovery that stays “lower for longer.” Tuesday’s downgrade represents the first time the bank’s analysts have lowered Air Canada’s stock rating since 2013. Their outperform rating remained untouched through the thick of the pandemic, as the airline slashed capacity and global travel collapsed. But new data indicates the recovery will be “choppier” and longer than previously assumed, Spracklin and Stroud wrote.

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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 5, 2021:

  • In the United States, New York City’s Covid-19 vaccine mandate for teachers and school staff has come into effect. The vaccine mandate applies to about 150,000 people who work in the school system including teachers, principals, custodians and lunch workers.  Mayor Bill de Blasio said that about 95% of all full-time school staff have received their first dose of vaccine, and that includes 96% of teachers and 99% of principals.  Vaccination rates rose significantly after the mandate was announced on August 23, de Blasio said. Some 8000 employees have been placed on unpaid leave because of a refusal to be vaccinated. 
  • In Canada, the government is working to demonstrate the effectiveness of mixed vaccines to other countries including the United States. Chief Public Health Officer Dr. Theresa Tam says the Public Health Agency of Canada has presented data on the effectiveness of mixed doses to the U.S. and other countries. Many countries including the U.S. only recognize people with two identical doses as being fully vaccinated.  Tam says Canada is working to provide information on the effectiveness of mixing the AstraZeneca vaccine with mRNA vaccines like Pfizer and Moderna. "They have not used AstraZeneca vaccine in the U.S. and certainly not a mixed-dose schedule. As a result, they don't have domestically generated information on that front," said Tam at a news briefing.
  • In the United Kingdom, experts are warning that the worst of Covid isn’t over yet. As the weather gets colder and students return to school, and offices reopen again, the U.K. could very well see another major surge in cases. Covid-19 cases in the U.K. have been averaging around 35,000 per day, with hospitalizations and deaths kept relatively low as a result of high vaccination rates. But keeping the vaccination rates up will be crucial as the colder months unfold, says Professor Mark Woolhouse of Edinburgh University. “We need to finish the job and give the maximum number of jabs,” Woolhouse told the Guardian. “Unfortunately, our vaccination programme has stalled and rates are regularly dropping below 100,000 doses a day – that’s lower than many other countries, including many in Europe.”
  • India will pay compensation to the families of Covid-19 victims, as a top court approved the decision on Monday. Around 50,000 Indian rupees will go to every family who lost a loved one to the coronavirus (about $670).  Families of the more than 448,000 people who died are eligible for the compensation. If the compensation is provided to everyone who already lost someone, it will end up costing provincial governments around 300 million. The government has outlined a process for submitting a claim, and the Supreme Court says the compensation should be paid no more than 30 days after the claim is submitted.
  • New Zealand’s Prime Minister Jacinda Ardern says the country will no longer pursue a Covid-19 elimination strategy. As the delta variant continues to spread, New Zealand’s latest outbreak has grown to more than 1300 cases, with some of them detected outside of Auckland. As she announced a plan to ease some restrictions in Auckland, Ardern acknowledged that the country must learn to live with the virus. “For this outbreak, it’s clear that long periods of heavy restrictions has not got us to zero cases,” Ardern said. “But that is OK. Elimination was important because we didn’t have vaccines. Now we do, so we can begin to change the way we do things.”
  • Australia has ordered 300,000 courses of Merck’s antiviral drug used to treat Covid-19. Molnupiravir would be the first oral treatment for coronavirus if it is approved by regulators. It’s a capsule that gets taken twice a day for five days by patients with Covid-19 symptoms. Though still in its late clinical trials, Molnupiravir has proven to be effective at preventing hospitalizations, serious illness and deaths. Prime Minister Scott Morrison says the treatments mean the country will better be able to live with the virus. If approved by the country’s regulator, the drug could be available in Australia by as early as next year.

Covid-19 – Due Diligence And Asset Management

Gen X Leaves Boomers Trailing With 50% Wealth Jump in Pandemic

Brief: Generation X, the oft-overlooked demographic group squeezed between the Baby Boomers and Millennials, has experienced a wealth boom in the U.S. since Covid-19 was declared a national emergency. During the pandemic, household wealth distribution has shifted from older generations to those who are reaching their peak earnings years, according to data from the Federal Reserve. Gen Xers, who are age 41 to 56, saw robust gains in equities and pension entitlements, while their share of the nation’s consumer debt declined, the data show. The Covid-19 crisis marks a rebound of sorts for the cohort that was worst-hit by the 2008 financial crisis. Millions of Gen Xers, who were in their 30s and early 40s at the time, lost jobs and housing wealth.

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Ken Griffin Sees Young People Making ‘Grave Mistake’ Working at Home

Brief: Employees just starting out are risking their career advancement by continuing to work remotely, hedge fund manager Ken Griffin said. “If you are early in your career, you are making a grave mistake not being back at work,” Griffin said Monday in a conversation with Bloomberg’s Erik Schatzker at the Economic Club of Chicago. “It’s incredibly difficult to have the managerial experiences and interpersonal experiences that you need to have to take your career forward in a work-remotely environment.” Griffin, who runs Citadel’s hedge fund business and Citadel Securities, also said working outside the office hinders innovation and indicated it may hurt the country’s competitiveness. Workers in China have returned “literally from almost the start” of the pandemic, he said.

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JPMorgan bans business travel for unvaccinated U.S. employees - memo

Brief: JPMorgan Chase & Co said on Monday it will restrict business travel for U.S. employees who are unvaccinated or have not disclosed their vaccination status to the bank, according to an internal memo seen by Reuters. The bank has also mandated such staffers to be tested twice a week, and said they would need to contribute a higher cut of their pay towards medical insurance, to account for testing expenses. The Wall Street bank has urged its employees to get their COVID-19 shots, but not mandated vaccines, in line with peers such as Bank of America Corp and Wells Fargo & Co. JPMorgan Chase will also require proof of vaccination from employees participating in client events in-person, effective immediately, according to the memo.

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India’s $1 Trillion Opportunity

Brief: India’s digital economy is poised to mirror China’s, and is expected to be worth a staggering $1 trillion in the next five to six years. According to a white paper by Investcorp, expected to be released Monday, India’s digital advancement has further accelerated amid the pandemic as consumers relied on technology to meet everyday needs — from purchasing groceries and other essentials to accessing education and healthcare services. In a country that has been one of the hardest-hit by the pandemic, 11 new unicorns (private tech companies with a valuation of at least $1 billion) were created in 2020 — the equivalent of the previous three years combined. In the first half of 2021, India boasted 15 new unicorns, which raised a total of $6 billion at an aggregate valuation of $28 billion. Investcorp now estimates that 100 new unicorns will be created in the country by 2025.

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Are we on the cusp of a global capex boom?

Brief: It has been an eventful time for petrol stations across the UK. Panic buying of fuel has seen demand overwhelm supply. More broadly, the huge pent-up savings from the pandemic has seen a significant demand surge for goods. While global manufacturing continues to supply goods at a record pace, supply chains have not been able to keep up - from used cars, semiconductors and furniture, to Nandos' chicken. This has been further exacerbated by global capital expenditure (capex) levels having slumped in recent years. Capex levels have not kept pace with depreciation since 2017, and the pandemic unsurprisingly caused a further depression in capital spending. The MSCI AC World Capex to depreciation ratio (ex-financials) dropped to around one in 2020, indicating companies in recent years have mostly been spending on maintenance - investing ‘for balance sheet rather than for growth'.

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

Our briefing for Monday, October 4, 2021:

  • The United States is turning a corner on Covid-19 says Dr. Anthony Fauci, U.S. top infectious disease expert. Even as the death toll surpasses 700,000 in the country, there have been signs that the latest wave of the virus is on the decline. The number of Americans hospitalized with Covid-19 fell by about 25% since September 1, and daily deaths have fallen about 10% since September 20. “We certainly are turning the corner on this particular surge,” Fauci said in a Sunday interview on ABC’s “This Week”. “The way to keep it down, to make that turnaround continue to go down, is to do what we mentioned: get vaccinated.”
  • In Canada, there are no Johnson & Johnson vaccines available for the provinces, the federal government says. Federal Health Minister Patty Hajdu said the country currently has no supply of the single-shot vaccine after Alberta made a request for 20,000 doses. British Columbia and Saskatchewan have also made requests for the Johnson & Johnson shot, but in the summer the federal government said it had no plans to purchase additional shipments of the vaccine. "Currently we don't have usable doses on hand, and so we're looking for additional doses so that we can get them very quickly to the provinces and territories," Hajdu said in a news conference.
  • The United Kingdom simplified their new travel rules, scrapping their traffic light system in favour of a singular “red list.” Fully vaccinated travellers arriving from non-red list countries do not need to take a test prior to departure, they only need a single test on the second day after arrival. Unvaccinated travellers must take a test prior to departure, on the second and eighth days after arrival, and must quarantine for 10 days at home. Travellers arriving from a red list country must still quarantine for 10 days in a government-approved hotel. The red list, which currently has 54 countries on it, is due to be updated later this week. 
  • In Japan, Fumio Kishida took office as the new prime minister, faced with leading the country out of the coronavirus pandemic. Kishida also named a new vaccines minister, Noriko Horiuchi, who is one of only three women in Kishida’s cabinet. Kishida replaces Yoshihide Suga, who resigned after only one year in office when he was widely criticized for his government’s handling of the pandemic and decision to hold the Tokyo Olympics. Kishida, who says his top priority will be the economy, will have to balance social and economic activities with the vaccine campaign and other measures to prevent a resurgence of the virus. 
  • South Korea has extended social distancing curbs as the latest wave of the virus continues to impact the country. The curbs, which will now remain in place until October 17, involve a ban on gatherings of more than two people after 6 p.m. and a ban on eating at restaurants after 10 p.m. Last week South Korea’s daily numbers topped 3000 for the first time since the beginning of the pandemic, averaging out at more than 2635 over the past week. The government is offering new incentives to people to get vaccinated, including allowing higher numbers of wedding attendees for vaccinated people.
  • Australia’s Health Minister Greg Hunt announced that coronavirus cases are starting to level off as the country reaches target vaccination rates. About 80% of Australians have had their first shots according to Hunt, and the government expects to reach 80% full vaccination rates by the middle of November. "There are important reasons for hope," Hunt told a news conference.  New South Wales reported 623 new coronavirus cases, down from 900 daily cases reported last week, and Victoria state reported 1377 new Covid-19 infections, up slightly from the 1220 reported the day before. 

Covid-19 – Due Diligence And Asset Management

Goldman Says Rishi Sunak Is Still Worried About U.K. Unemployment Jump

Brief: Chancellor of the Exchequer Rishi Sunak may be touting a recovery in the U.K.’s job market, but his latest spending pledge shows he’s still concerned about a spike in unemployment now his furlough plan has ended, according to Goldman Sachs Group Inc.In a speech to the Conservative Party Conference on Monday, Sunak heralded the performance of the U.K.’s labor market during the pandemic, and announced 500 million pounds ($680 million) of funding to help get people back to work after the expiry of the wage-support program. For Goldman economists, that extra spending, while low compared with the billions spent on furlough, is a sign the Chancellor is still harboring concerns about the outlook for the labor market even as he insists it was right to end the support in September.

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Back in black: U.S. Supreme Court returns from COVID-19 telework

Brief: U.S. Supreme Court justices are set to don their black robes and sit once more behind a mahogany bench in their grand courtroom on Monday as they resume in-person oral arguments for the first time since COVID-19 pandemic disruptions started last year. In a tentative step toward normalcy, the nine justices will be joined by lawyers, court staff and journalists in their spacious column-lined courtroom as they begin their new nine-month term. No members of the public will be present. The court building has been closed to the public since March 2020 due to the pandemic, with the justices hearing oral arguments via teleconference. In a sign of how planning during the pandemic is constantly in flux, preparations for the new term were disrupted on Friday when Justice Brett Kavanaugh tested positive.

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RBNZ Set to Raise Rates Even as Delta Outbreak Shackles Economy

Brief: New Zealand’s central bank is expected to embark on a series of interest-rate increases to tame inflation and rein in soaring house prices, even as a coronavirus outbreak that has now spread beyond Auckland poses a greater risk to economic growth. Reserve Bank policy makers will raise the official cash rate by a quarter percentage point to 0.5% Wednesday in Wellington, according to 20 of 21 economists in a Bloomberg survey. Most predict it will follow up with a succession of hikes over the coming year, taking the rate to around 1.5% by August 2022, though the persisting outbreak of the highly infectious delta strain of Covid-19 could interrupt the tightening cycle. “We expect the RBNZ to go ahead with hiking the OCR on Wednesday, while noting downside risks to the outlook,” said Sharon Zollner, chief New Zealand economist at ANZ Bank in Auckland. “There’s no question that the situation is grimmer than we were all assuming back in August. We thought we were looking at a relatively short, successful lockdown and then we would be Covid-free, and that’s not likely at all any more.”

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Property Deals Reach Record $108 Billion After Pandemic Plunge

Brief: Deals by real estate investment trusts totaled $108 billion this year through September, beating the annual record as ample capital fueled transactions in the recovering economy, according to Jones Lang LaSalle Inc.  The U.S. deal surge signals the beginning of a new cycle emerging from the pandemic-related economic halt, according to Sheheryar Hafeez, a managing director in the capital markets group at JLL. “There is renewed confidence in the runway ahead of us in 2022 and beyond,” said Hafeez, whose company released a report on REIT transactions Monday.REIT mergers and acquisitions had plunged to $17 billion last year. Even before the pandemic, deals were slowing from the recent high of $86 billion in 2018 as investors worried about the decade-plus bull market coming to an end, according to Hafeez. The all-time high was $103 billion in 2006.

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Airlines Sees Covid-Related Losses Exceeding $200 Billion

Brief: Airline losses from the coronavirus pandemic are set to surpass $200 billion as travel curbs weigh on corporate and long-haul demand well into 2022, according to the industry’s main lobby. Carriers are poised to post a collective deficit of $11.6 billion next year, the International Air Transport Association said Monday in Boston at its annual meeting. The trade body also increased its loss estimate for this year, and revised upward the shortfall for 2020. The combined $201 billion in net losses over the pandemic-blighted period eclipses close to nine years of industry earnings, based on IATA figures. While domestic and regional travel have begun to rebound, there’s been little recovery in the globe-spanning business routes so crucial to many carriers. The U.S. is poised to open its borders to trans-Atlantic visitors next month, but other long-haul markets remain in the doldrums, especially those connecting Asia with Europe and North America.

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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.