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10 things you probably don’t know about sovereign wealth funds

Posted on 02 February 2016 by VRS  |  Email |Print

Sovereign wealth funds are massive investment vehicles with trillions of dollars in assets. However, these wealth giants are little known and less understood than other types of investments vehicles.
We’ve assembled 10 facts to help you figure out what sovereign wealth funds are all about. Check them out below. The Kuwait Investment Authority was the first sovereign wealth fund ever created. In light of the discovery of oil, this fund was established in 1953 to invest excess oil revenues. One of the largest wealth funds in the world, it is estimated to have over $592 billion in assets………………………………………..Full Article: Source

Analysis: Norway’s Government Pension Fund Global

Posted on 02 February 2016 by VRS  |  Email |Print

A greater focus on real assets through the introduction of an unlisted infrastructure portfolio, and the expansion of the real estate exposure of Norway’s NOK7.1trn (€733bn) sovereign wealth fund, could soon bring to an end one of the great certainties among asset owners – the Government Pension Fund Global’s stable, almost static asset allocation.
The fund may also take on greater equity risk, and increase its strategic allocation beyond 60%, which currently means it owns about 2.5% of the European listed market and 1.3% of all listed stocks. The potential changes mark a sea change, as the strategic asset allocation at Europe’s largest asset owner has remained largely unchanged for nearly a decade………………………………………..Full Article: Source

Aberdeen Sees Sovereign Assets Shrink $19 Billion in Two Years

Posted on 28 January 2016 by VRS  |  Email |Print

Aberdeen Asset Management Plc has seen sovereign wealth-fund assets shrink by about 13 billion pounds ($19 billion) since a peak in 2013 as clients from oil-dependent countries cashed out and markets slumped.
Chief Executive Officer Martin Gilbert said SWF’s now represent about 2.5 percent, or 7 billion pounds, of Aberdeen’s total assets under management. That’s down from 10 percent two years ago. Aberdeen rose Wednesday after the company said outflows slowed in the first quarter and more cost cuts were announced………………………………………..Full Article: Source

Are Sovereign Wealth Fund Liquidations Responsible for Current Market Turmoil?

Posted on 21 January 2016 by VRS  |  Email |Print

The plunge continues apace. The S&P is now well below its August 24 panic lows, with the Nasdaq knocking on the door within 100 points of that critical support zone. The Dow Jones is about 300 to 400 points away.
With some blaming the rout on the possibility of more Federal Reserve rate hikes and others looking towards China, the real answer may actually be oil. The first Fed rate hike has not even remotely affected credit levels, so its effect on stocks can only be psychological and temporary. The December rate hike only served to neutralize excess bank reserves by $250 billion, and with $2.12 trillion (see table 2 column 1) in excess to go, there is plenty of room to hike rates further without affecting the credit supply at all………………………………………..Full Article: Source

Global Pension and Sovereign Wealth Fund Investment in Hedge Funds

Posted on 18 January 2016 by VRS  |  Email |Print

Our new industry survey, “Global Pension and Sovereign Wealth Fund Investment in Hedge Funds: The Impact of Direct Investing”, conducted through in-depth one-on-one interviews with global investors managing $1.65 trillion in assets under management as well as hedge fund managers representing $186 billion in assets under management, looks at both the increase in institutional assets and how a shift to “direct” investing presents both an opportunity and a set of challenges to hedge fund managers looking for this capital.
In the report we look at the macro pension and sovereign wealth fund environment in terms of its overall capital, growing focus on “Alternatives’ and growth of hedge fund allocations from these segments. In addition, we look at which hedge fund are optimal targets for pension and sovereign wealth fund investors, and discuss why size is a critical factor and how the criteria required to pass the institutional threshold have expanded since 2008………………………………………..Full Article: Source

Sovereign Wealth Funds Spent Less in 2015

Posted on 12 January 2016 by VRS  |  Email |Print

The total direct transaction amount in 2015 by sovereign funds is US$ 114 billion compared to US$ 122 billion in 2014. However, when calculating all public investors, which includes large public pensions, direct transactions total US$ 211 billion in 2015 versus US$ 186 billion in 2014.
Leading the charge for asset-rich pensions were Canadian institutional investors such as Canada Pension Plan Investment Board (CPPIB), Ontario Teachers’ Pension Plan (OTPP) and Caisse de dépôt et placement du Québec (CDPQ)………………………………………..Full Article: Source

Sovereign Funds Liquidating Assets Increases Pressure on Global Economies

Posted on 12 January 2016 by VRS  |  Email |Print

Tumbling oil prices are affecting more than just energy firms. The ripple effect has now hit global asset managers, as governments in the Gulf and beyond – short on cash – are withdrawing billions of dollars, the Financial Times recently reported.
State institutions withdrew at least $19 billion in the third quarter, mostly to close the gaps in national budgets and reduce borrowing, the piece stated – with more money is expected to be withdrawn in the coming months. Moreover, the Wall Street Journal reported that sovereign-wealth funds yanked roughly $100 billion from asset managers in the six months to Sept. 30………………………………………..Full Article: Source

Sovereign wealth fund deals fall 13 pct in fourth quarter

Posted on 11 January 2016 by VRS  |  Email |Print

Sovereign wealth funds made $23.5 billion worth of overseas acquisitions in the fourth quarter of 2015, down 13 percent from the third quarter, although big infrastructure and property deals remained popular.
Thomson Reuters data showed that sovereign wealth funds (SWFs), which invest windfall revenues from oil and other commodities for future generations, were involved in 25 deals during the October-December period, down six from the previous quarter. Over the full year, SWFs invested in 127 transactions, down from 148 in 2014. The total value of 2015’s deals amounted to $68.7 billion, down 6.9 percent from $73.8 billion in 2014………………………………………..Full Article: Source

Sovereign wealth funds: What is Santiago for?

Posted on 07 January 2016 by VRS  |  Email |Print

Despite signing up to the Santiago Principles, most sovereign wealth funds don’t observe them, nor do they have to. Isn’t it time the markets lost patience with their ‘I signed, therefore I am transparent’ approach?
Peter Costello faced a challenging gig. The chairman of the Australian Government Future Fund, better known to many as the country’s longest-serving treasurer, under John Howard’s government, was presenting a keynote speech at a sovereign wealth funds conference in Milan, but found himself addressing a room full of people milling around a buffet table………………………………………..Full Article: Source

Top 10 Sovereign Wealth Fund Game-Changers of 2015

Posted on 05 January 2016 by VRS  |  Email |Print

For sovereign funds regarding the falling price of oil, it is worth recalling Friedrich Nietzsche’s aphorism: “That which does not kill us makes us stronger.” Sovereign funds in the Gulf have increased exercising discipline from the sizable allocations of 2009 and 2010. SWFI research staff have composed the top ten game-changers for sovereign wealth funds in 2015.
10.) Smart Beta Lives: Many active investment managers despise the term “smart beta.” According to Investopedia.com, smart beta was the most searched for term in its dictionary in 2015. Google searches for smart beta continue to grow. Wealth funds continue to tinker with smart beta strategies. Some sovereign funds and pensions even partner with providers to back new product launches………………………………………..Full Article: Source

With oil prices skidding, Gulf nations begin selling sovereign wealth fund assets

Posted on 04 January 2016 by VRS  |  Email |Print

Oil-rich Gulf sheikhdoms are being forced to raid their sovereign wealth funds to shore up their budgets. With US crude oil prices falling below $40 per barrel in December, they have no choice but to reach into these rainy-day savings. For now, they can hold on to some of their trophy assets, like strategic investments in Volkswagen or Barclays. But if crude prices keep tumbling, a fire sale will be hard to avoid.
During the most recent energy boom, the six members of the Gulf Cooperation Council — including Saudi Arabia, Qatar and Kuwait — amassed sovereign funds worth more than $2.3 trillion. These assets have traditionally comprised a mix of debt and other securities, in addition to influential stakes in some of the world’s biggest companies such as Glencore, VW and Barclays………………………………………..Full Article: Source

Arab sovereign wealth fund exodus just beginning

Posted on 30 December 2015 by VRS  |  Email |Print

Oil-rich Gulf sheikhdoms are being forced to raid their sovereign wealth funds to shore up their budgets. With U.S. crude oil prices falling below $40 per barrel in December, they have no choice but to reach into these rainy-day savings. For now, they can hold on to some of their trophy assets, like strategic investments in Volkswagen or Barclays. But if crude prices keep tumbling, a fire sale will be hard to avoid.
During the most recent energy boom, the six members of the Gulf Cooperation Council – including Saudi Arabia, Qatar and Kuwait – amassed sovereign funds worth more than $2.3 trillion. These assets have traditionally comprised a mix of debt and other securities, in addition to influential stakes in some of the world’s biggest companies such as Glencore, VW and Barclays………………………………………..Full Article: Source

‘Politicised’ SWFs earn lower returns

Posted on 30 December 2015 by VRS  |  Email |Print

Sovereign wealth funds that are “highly politicised” earn lower returns on their stock-market investments than more independent peers, according to new academic research. An analysis of more than 1,000 sovereign wealth fund investments in publicly traded companies found that shares in those companies rose less following a purchase by a sovereign wealth fund compared with almost 6,000 comparable stock purchases by private investors.
The so-called SWF discount was worse when funds with strict government oversight bought shares. There was no discount when Norway’s independently managed sovereign wealth fund bought shares, according to Veljko Fotak of the University at Buffalo, who wrote the report with Bernardo Bortolotti of Turin University in Italy and William Megginson of the University of Oklahoma………………………………………..Full Article: Source

‘Politicized’ Sovereign Funds Earn Lower Returns, Study Says

Posted on 28 December 2015 by VRS  |  Email |Print

Sovereign-wealth funds that are “highly politicized” earn lower returns on their stock-market investments than more independent peers, according to new academic research. An analysis of more than 1,000 sovereign-wealth fund investments in publicly traded companies found that shares in those companies rose less following a purchase by a sovereign-wealth fund compared with almost 6,000 comparable stock purchases by private investors.
The so-called SWF discount was worse when funds with strict government oversight bought shares. There was no discount when Norway’s independently managed sovereign-wealth fund bought shares, according to Veljko Fotak of the University at Buffalo……………………………………….Full Article: Source

5 Things to Know About Sovereign-Wealth Funds

Posted on 28 December 2015 by VRS  |  Email |Print

Sovereign-wealth funds have surged in number and assets since 2007, bolstered in part by the climb in oil prices. Now with oil’s slump, some funds are shrinking. But because many of them don’t disclose their assets or strategy, they represent a large black box in the global financial system, The Wall Street Journal r​eports​.
Here are five things to know about sovereign-wealth funds: 1. They have gotten bigger: The world’s sovereign-wealth funds together have assets of $7.2 trillion, according to the Sovereign Wealth Fund Institute, which studies them. That is twice their size in 2007………………………………………..Full Article: Source

Petrodollars And Sovereign Wealth Funds

Posted on 18 December 2015 by VRS  |  Email |Print

Discussion of sub-$50 crude oil on SWFs (Sovereign Wealth Funds) and the resulting reversal in flows to equity, bond, commodity, capital and asset markets. Brief discussion of ED, or “euro/dollar,” liquidity. Brief discussion of the effects of a potential dollar melt up.
Funded by oil revenues, mostly, it is estimated that sovereign wealth funds have amassed at least $7 trillion in assets, and quite likely significantly more than that…. That sets up a sort of petro-stock flow, operating in an almost direct manner exactly as the wrongly characterized petro-dollar is thought to………………………………………..Full Article: Source

Outflow to Rise as Arab Sovereign Wealth Funds May Pull Out: Credit Suisse

Posted on 16 December 2015 by VRS  |  Email |Print

The sharp fall in crude prices, now at an 11-year low, is leading to withdrawal symptoms among sovereign wealth funds in the Arab world, which may hasten foreign capital outflows from the domestic market, Swiss brokerage Credit Suisse said. “At these oil prices, the West Asian economies are struggling to manage their budgets. Every 2-3 months, they put in redemption requests to some of the largest funds and then they are forced to sell. That selling pressure is hitting us,” managing director Neelkanth Mishra said.
The redemptions may not be immediate after every fall in crude prices and each sovereign wealth fund will take a call based on the budgetary pressures a particular country faces, he further said………………………………………..Full Article: Source

Mideast SWFs strike 38 global realty deals worth $65bn in 9 months to Sept

Posted on 16 December 2015 by VRS  |  Email |Print

Sovereign wealth funds (SWFs) in the Middle East remained “active purchasers” of global real estate this year with some 38 deals worth $65bn transacted in nine months up to September, data available with JLL, a real estate investment and advisory firm, show.
While the number of overseas transactions has declined from the 74 deals seen in 2013, the value of investment has remained high and is likely to exceed that experienced in 2014, JLL said. “The volume of investment is expected to decline in 2016 as we enter a prolonged period of lower oil prices that will cause sovereigns to reconsider their objectives and strategies,” JLL said………………………………………..Full Article: Source

Oil linked SWFs to hit marts

Posted on 16 December 2015 by VRS  |  Email |Print

While a rate hike by the US Federal Reserve could lead to outflow of funds from emerging market equities, another worrying factor that is now emerging on the global front is the persistent fall in crude oil prices, which if continues for an extended period of time could prompt some of the sovereign wealth funds (SWF) to cut their equity market investments. Among the various categories of FPI, sovereign wealth funds are the largest investors in the Indian market.
According to data available with the National Securities Depository Ltd, sovereign wealth funds hold equity assets worth `1.73 lakh crore as at the end of October 2015. “With the sharp fall in the global crude oil prices, most of the oil producing countries especially in the Middle-East would find it difficult to meet their budget deficits. If the oil prices continue to remain weak and fall further from the current levels, these sovereign wealth funds will not have any other option than to sell their equity market investments. But this will happen over a period of time,” said Gopal Agrawal, CIO, Mirae Asset Global………………………………………..Full Article: Source

After glory days, cheap oil forces sovereign funds to retreat

Posted on 15 December 2015 by VRS  |  Email |Print

The glory days of some oil-based sovereign wealth funds could be behind them now that cash-strapped governments are raiding the coffers to plug yawning budget gaps, with investment returns too weak to make up the shortfall. This is forcing some funds to sell assets to find ready cash, raising concerns that if this process accelerates, it could drive down the price of equities and other assets - creating a vicious circle.
Over the past two decades, sovereign wealth fund (SWF) assets have grown to as much as $7 trillion, according to Morgan Stanley, including everything from direct stakes in companies to luxury property assets. But those funds that rely on their governments’ oil export revenues for their main source of new money - such as in Saudi Arabia, Russia or Norway - now face a double whammy………………………………………..Full Article: Source

S&P affirms AAA rating, stable outlook for Temasek

Posted on 15 December 2015 by VRS  |  Email |Print

Ratings agency Standard & Poor’s (S&P) affirmed Temasek Holdings’ AAA long-term credit rating and stable outlook yesterday. It made the finding on the basis that the firm will continue to adhere to strict investment guidelines that support the “strong credit characteristics” of its assets portfolio.
S&P’s report said Temasek’s limited debt supports its investment capabilities, allowing it to mobilise “substantial funds on a timely basis to seize opportunities”. Its affirmation of Temasek’s corporate credit ratings also took into account its view of an “extremely high” likelihood of extraordinary support from the Singapore Government, if necessary………………………………………..Full Article: Source

Moody’s affirms Botswana’s outlook stable

Posted on 15 December 2015 by VRS  |  Email |Print

Moody’s Investors Service has affirmed Botswana’s A2 government bond and issuer ratings with a stable outlook. The sovereign wealth fund, the Pula Fund, had more than $5 billion, or 36.9 per cent of GDP forecast for 2015, at end-September 2015. Moody’s expects that the economic stimulus package the government considers will be limited in size and hence will neither significantly reduce the Pula Funds’s large assets, nor raise Botswana’s government debt-to-GDP ratio.
Low government debt and the large foreign asset positions of the Bank of Botswana (BoB) put the sovereign in a strong net creditor position of about 40% of GDP at the end of 2014. In 2014, the Pula Fund’s foreign assets were twice as high as the government’s outstanding debt………………………………………..Full Article: Source

RAM Ratings reaffirms Qatar’s ratings

Posted on 15 December 2015 by VRS  |  Email |Print

RAM Ratings has reaffirmed Qatar’s respective global- and ASEAN-scale sovereign ratings of gAA3(pi)/stable and seaAAA(pi)/stable. Besides having the lowest fiscal breakeven oil price in the GCC region after Kuwait, Qatar’s huge sovereign wealth – accumulated from past fiscal surpluses – and reserves totalling 172 per cent of GDP underpin its credit strength and should help it weather a period of low oil and gas prices.
As the downtrend in LNG prices lags that of oil, Qatar is still expected to record a current account surplus of 4.6 per cent of GDP in 2015 (2014: 26 per cent of GDP). Although diversification efforts over the long term (in line with the 2030 Qatar National Vision) has strengthened the State’s resilience, depressed oil prices have led to delays and a re-prioritisation of development projects………………………………………..Full Article: Source

Sovereign Wealth Funds Grow Assets in 2015

Posted on 14 December 2015 by VRS  |  Email |Print

In line with the release of the 2015 Preqin Sovereign Wealth Fund Review in April 2015, we found that AUM for sovereign wealth funds globally reached $6.31tn as at March 2015 – increasing by more than $900bn in 18 months. This is despite falling commodity and oil prices, which many of these institutions rely on for funding. Assets therefore grew from continued funding from reserves and governments, as well as from investment returns.
Alternative assets are an increasingly important part of these institutions’ portfolios, particularly as they seek to diversify their portfolios and acquire assets that can generate yield and help meet their long-term objectives. As at December 2015, total assets for sovereign wealth funds that are looking to invest in private equity stands at $6.0tn………………………………………..Full Article: Source

The Sovereign Wealth Fund Discount: Evidence From Public Equity Investments

Posted on 26 November 2015 by VRS  |  Email |Print

By some measures, SWFs have already been extensively researched. Yet extant empirical research offers incomplete evidence about the impact of Sovereign Wealth Fund investments on the value of publicly traded companies.
Studies that examine SWF investments using event-study techniques (Dewenter, Han, and Malatesta 2010; Kotter and Lel 2011) find positive announcement-period returns. Unfortunately, these results offer little insight into the role of SWFs as investors, as corporate finance research consistently documents positive announcement-period abnormal returns for all types of direct stock purchases by institutional investors………………………………………..Full Article: Source

Sovereign Wealth Funds Redemption Risk Overblown?

Posted on 25 November 2015 by VRS  |  Email |Print

The MS analysts begin by highlighting that both media reports and some management commentary have suggested that certain “petrodollar-related” sovereign wealth funds have been withdrawing billions of dollars from asset managers because of growing national deficits and to minimize exposure to volatile equity markets given much lower crude oil prices.
Cyprys et al. argue that these SWF redemption concerns are really overblown given that only 60% of SWF assets are held by oil-reliant economies, and, moreover, current fiscal pressures vary dramatically………………………………………..Full Article: Source

Khazanah Research to help clarify TPPA benefits, pitfalls

Posted on 17 November 2015 by VRS  |  Email |Print

Khazanah Nasional Bhd is among the key outfits helping to analyse various benefits and pitfalls for Malaysians with the nation’s participation in the Trans-Pacific Partnership Agreement (TPPA). “We hope the analyses would show in terms of what the benefits are and in terms of what the costs are and whether the benefits outweigh the costs,” said Khazanah Research Institute managing director Datuk Charon Mokhzani.
The highly publicised 12-country trade agreement has received both praises and criticisms in Malaysia and TPPA member nations, based on details leaked earlier and initial impressions after the full text was made public last week. “It’s a 6,000 page document and it’s very hard for us today to tell you what the overall impact (just yet). To be able to make a proper comment on this is too early. We need time to understand the document.”………………………………………Full Article: Source

Fears over sovereign wealth funds pulling assets overblown, Morgan Stanley says

Posted on 17 November 2015 by VRS  |  Email |Print

Fears that sovereign wealth funds would pull out of equity markets - say, as some countries tried to shore up their public finances in the face of lower oil prices - and the impact that might have on asset managers and banks were “overblown,” analysts at Morgan Stanley found.
Only 60% of SWF’s assets, totalling approximately $7tn (£4.64bn), are held by oil producing nations and the pressures on their state finances vary depending on the economy in question, they argued in a research report sent to clients. An “extreme” bear-case suggested potential earnings risk of 0.1-7.1% (average: 2.1%) if all SWFs redeemed all externally managed assets, the broker said……………………………………….Full Article: Source

SWF assets to decline further due low oil prices -Moody’s

Posted on 16 November 2015 by VRS  |  Email |Print

Sovereign wealth fund (SWF) assets will grow more slowly or even decline as governments are forced to tap funds to finance budget deficits resulting from persistently low oil prices, credit ratings agency Moody’s said on Thursday. The $4.5 trillion SWF industry has grown rapidly over the last decade but with 73 percent of SWF assets funded from oil and gas revenues, countries like Russia, Saudi Arabia and Norway have already begun tapping into their reserves.
These drawdowns have been prompted by a fall of over 50 percent in global oil prices, with Brent crude futures plunging from $115 a barrel in June 2014 to around $45 a barrel today. With the oil supply glut persisting, the situation is not expected to change soon………………………………………..Full Article: Source

Sovereign Wealth Funds Have Buffers Against Oil Shock: Moody’s

Posted on 16 November 2015 by VRS  |  Email |Print

As a November 12th report from Moody’s Investors Service highlights, both the number and the AUM of global sovereign wealth funds (SWFs) have grown rapidly over the last decade and change. Moreover, SWFs are becoming a crucial part of the international financial system, and were an important stabilizing force in the financial crisis a few years ago.
Finally, as Elena H. Duggar and the rest of the Moody’s team note: “SWFs facilitate the intergenerational transfer of proceeds from nonrenewable resources, allow for greater portfolio diversification than traditional central bank reserves, and contribute to exchange rate stability by managing excess inflows. SWFs also increasingly fund investments in infrastructure.”……………………………………….Full Article: Source

SWFs: Buddies or baddies?

Posted on 06 November 2015 by VRS  |  Email |Print

As it turns out, sovereigns don’t always win: many thought Malaysia’s Khazanah Nasional had a done deal when it offered €750 million for Globalvia last summer – only to see Spanish-based Bankia and FCC, current owners of the concessions business, sell the asset to Canada’s OPTrust, the Netherlands’ PGGM and the UK’s USS this week after the pensions matched the fund’s bid.
1MDB, another Malaysian state-backed fund, is divesting assets rather than hunting for them. It is now hoping to get about $3 billion for its energy unit. The institution’s troubles are largely down to gross mismanagement; it doesn’t help that $700 million have mysteriously disappeared from its coffers, with the Prime Minister accused of channelling the money to his personal accounts. Still, it shows that sovereigns sometimes have their own particular issues to deal with………………………………………..Full Article: Source

Sovereign wealth funds face a rainy day

Posted on 30 October 2015 by VRS  |  Email |Print

The 46 countries that have at least one sovereign wealth fund have largely set them up for a rainy day. Now that day has come for most of them. Commodity prices are so depressed that governments need to unseal their piggy banks and with profitable investment opportunities scarce there is little incentive not to. This could end up putting downward pressure on global financial markets.
Of the top 30 sovereign funds, 18 are filled with revenues from oil and gas. The largest of the funds, set up in 1990 to safeguard Norway’s oil wealth for future generations, posted its biggest loss in four years this week. It shed $32 billion in the third quarter, all in the stock market, which accounts for 60 percent of its investments………………………………………..Full Article: Source

Here’s what Temasek Holdings & GIC do with your money

Posted on 23 October 2015 by VRS  |  Email |Print

It’s high time someone talks about the elephant(s) in the room (Singapore) that has been the talk of this election and conspiracy theorists: Temasek Holdings and GIC. Sovereign wealth funds (SWFs) have been accused of having hidden agendas, being state economic weapons. At the same time, they’ve also been hailed as saviors, buoying up banks during the financial crisis when capital markets were frozen.
Singapore isn’t the only nation with a SWF; many other nations (mainly net exporters) that enjoy current account surpluses and hoard reserves have a SWF as well. SWFs manage vast amounts of money, also often seen as the true lender of last resort in its home country. The below table shows the world’s largest SWFs:……………………………………….Full Article: Source

UBS Sees Sovereign Assets Shrinking by $1.2 Trillion

Posted on 15 October 2015 by VRS  |  Email |Print

Central bank and sovereign wealth fund assets will shrink by $1.2 trillion, or almost 7 percent, by the end of the year as China and petrostates including Russia and Saudi Arabia dip into their savings amid slower growth and lower crude revenues, according to UBS Group AG.
The decline will be driven by China withdrawing its foreign exchange reserves, while oil-producing countries tap foreign assets to support government spending, Massimiliano Castelli, head of global strategy at UBS Asset Management, said in a phone interview from Zurich Tuesday………………………………………..Full Article: Source

Should markets fear the great sovereign wealth fund liquidation trade?

Posted on 14 October 2015 by VRS  |  Email |Print

After decades of investing billions in bonds, shares and hedge funds, sovereign wealth funds are turning into sellers and redeemers. They’re the largest and most secretive investors in the world, but after decades of investing billions in bonds, shares and hedge funds, these investors are now turning into sellers and redeemers.
Sovereign wealth funds, which control about $US7 trillion ($9.5 trillion) of assets largely created out their nation’s vast mineral riches, are drawing down on their financial wealth as resources decline, creating a potentially vicious feedback loop for financial markets. Last month the Financial Times reported Saudi Arabia’s sovereign fund, SAMA, had declined by $US73 billion, hitting several funds with large redemptions, as the fourth-largest sovereign fund shrunk by one-tenth………………………………………..Full Article: Source

A Key Argument Against Sovereign Funds Spending More is Evaporating

Posted on 13 October 2015 by VRS  |  Email |Print

According to the Sovereign Wealth Fund Transaction Database(SWFTD), which tracks direct sovereign fund and pension transactions, wealth funds in the first half of 2015 invested more capital compared to the first half of 2014. In the initial six months of 2015, sovereign funds invested directly US$ 63.4 billion versus 2014’s comparable period figure of US$ 51.9 billion.
In the first half of 2013, these institutional investors directly invested US$ 44.6 billion. Clearly, this shows sovereign funds investing larger amounts of capital directly, despite global low oil prices, a slowdown in China’s economy and price weakness in other global commodities. Some wealth fund target sectors have witnessed noticeable growth. Healthcare investing has become a popular theme for sovereign investors………………………………………..Full Article: Source

Sovereign funds double deal value

Posted on 05 October 2015 by VRS  |  Email |Print

Sovereign wealth funds spent a total of US$24.9 billion (S$35.6 billion) on overseas acquisitions in the third quarter of 2015, almost double the previous quarter as they chased after trophy assets. Thomson Reuters data shows that these funds, which invest windfall revenues from oil and other commodity exports for future generations, were involved in 28 deals in the July-September period, down 10 from the previous quarter.
Singapore’s investment funds GIC and Temasek were part of separate consortiums that featured in the top two deals in that quarter. Total value is still shy of the US$30.6 billion peak reached in the last quarter of last year, when sovereign funds were buying up assets at their fastest rate since the financial crisis………………………………………..Full Article: Source

Sovereign wealth funds double deal volumes to $24.9 bln in Q3

Posted on 02 October 2015 by VRS  |  Email |Print

Sovereign wealth funds spent a total of $24.9 billion on overseas acquisitions during the third quarter of 2015, almost double the previous quarter as they chased after trophy assets. Thomson Reuters data shows that sovereign wealth funds, which invest windfall revenues from oil and other commodity exports for future generations, were involved in 28 deals during the July-September period, down 10 from the previous quarter.
Deal volumes are still shy of the $30.6 billion peak reached in the last quarter of 2014, when sovereign funds were buying up assets at their fastest rate since the financial crisis. But it marks a significant rebound from the first quarter when deal value slipped to $5.4 billion for 32 transactions………………………………………..Full Article: Source

Market upheaval forcing many sovereign-wealth funds to adapt

Posted on 30 September 2015 by VRS  |  Email |Print

As representatives of dozens of the world’s sovereign-wealth funds gather at Milan’s posh Hotel Principe di Savoia this week for their annual conference, they will have more than networking on their minds. The ending of a commodities bull market and the uncertainty created by China’s economic slowdown have prompted the massive funds to reassess a fast-changing global landscape.
Assets managed by sovereign-wealth funds grew more than 20% annually between 2011 and 2014, in large part because of higher oil prices. But with oil falling lately—and, perhaps, poised to fall further—experts say the funds will be forced not only to review their investments but also take on greater risk to sustain yields………………………………………..Full Article: Source

Has The Qatar Investment Authority Really Lost $12 Billion?

Posted on 30 September 2015 by VRS  |  Email |Print

The Financial Times splashed with an article saying that the Qatar sovereign wealth fund, the Qatar Investment Authority, had suffered a $12 billion paper loss in the third quarter of 2015. It’s a big claim. But is it right?
The QIA does not publish accounts, so we don’t truly know either what its total holdings are, or what it owns, or how it is performing. So the FT has reached its conclusion by looking at the performance of assets where QIA’s ownership is publicly known, and has crunched the numbers on Blooomberg compilations of regulatory filings………………………………………..Full Article: Source

Mideast sovereign wealth funds ready for challenges

Posted on 28 September 2015 by VRS  |  Email |Print

The plunge in oil prices is expected to reduce funding and increase withdrawal risk, but Middle East sovereigns, which control more than one-fourth of the $7.09 trillion global sovereign wealth funds, or SWFs, are now better-placed to manage these challenges than in the past.
Established Middle East sovereigns have concerns over withdrawal and funding risk but also feel they are better placed to cope with the challenges than before the global financial crisis, investment management firm Invesco said in a recent study. Nick Tolchard, head of Invesco Middle East, said emerging-market infrastructure is a key sub-asset class for established Middle East sovereigns and they are keen to expand sovereign and private sector relationships to ensure access to attractive deals………………………………………..Full Article: Source

Sovereign funds wake up to fiscal reality

Posted on 22 September 2015 by VRS  |  Email |Print

Unlike men, diamonds linger, Dame Shirley Bassey sang. For more than 20 years Botswana has maintained an insurance policy just in case. The country, a major producer, invests export earnings through its Pula sovereign wealth fund, turning finite resources into permanent financial income. Even though they are often seen as mysterious players in many markets, with powers to buy and sell vast quantities of US Treasuries, or to invest heavily in private equity, this is a basic fiscal role for sovereign funds.
“The general view for many is about investment, and the return on investment,” says Dr Khalid Alsweilem, the former head of the Saudi Arabian Monetary Agency’s investments portfolio. “But the importance of a sovereign wealth fund is being a cornerstone of a fiscal framework.”……………………………………….Full Article: Source

Time to review sovereign investment funds

Posted on 17 September 2015 by VRS  |  Email |Print

Now is the time for policymakers to review their sovereign investment funds and question whether different objectives could be beneficial for their economy. Since the financial crisis, sovereign investors have become an increasingly important feature of the global economy. For example, the total global assets Sovereign Wealth Funds manage increased from around US$3 trillion at the end of 2008 to just over US$6 trillion in March 2015.
Over this time, the global economy has changed with knock-on effects on SIs, say PwC economists: Moving on from the crisis: The economic downturn had a significant impact on some SIs which had to provide funding to their governments or prop up domestic financial sectors. For example, Ireland’s National Pensions Reserve Fund was initially set up to fund future pension payments, but during the crisis, a large chunk of its assets were used to bailout the banks………………………………………..Full Article: Source

The Role Of Sovereign Wealth Funds As Activist Or Passive Fund Managers

Posted on 16 September 2015 by VRS  |  Email |Print

Sovereign Wealth Funds (SWF) have attracted a lot media attention with recent investments in publicly listed companies. Repeatedly, concerns have been raised, such as the fear of industrial espionage or geopolitical threats. We analyze whether SWF managers acquire stakes in foreign publicly listed firms 1) to play an active role which would support concerns or 2) passively select investments to increase the portfolio diversification, for instance.
We find that SWF target firms are more profitable, pay higher dividends and have a higher financial stability than their industry peers. This is in line with SWF managers passively seeking for further portfolio diversification in foreign public equity markets. We cannot find an improvement in operating or market performance after the engagement of SWF……………………………………….Full Article: Source

The Triple Threat Facing Sovereign Wealth Funds

Posted on 10 September 2015 by VRS  |  Email |Print

From the Mendenhall Glacier in Juneau to Prudhoe Bay above the Arctic Circle, Alaskans by the thousands will soon tear open crisp white envelopes containing the dividend checks they receive each year from the Alaska Department of Revenue Permanent Fund Dividend Division, which doles out money from the state’s $52.8 billion sovereign wealth fund.
They may be happily surprised. Despite the 60 percent drop in crude prices since June 2014, each oil-fueled check should top $2,000, by our estimates. That’s up from the $1,884 each of Alaska’s approved recipients got last year and just may be the highest total since the fund began paying such dividends in 1982. With oil near its lowest price since the 2008-09 financial crisis, the payout is testimony to discipline - and to the power of diversification………………………………………..Full Article: Source

The infrastructure kings

Posted on 09 September 2015 by VRS  |  Email |Print

Infrastructure funds could soon be benefiting from a Middle East sovereign wealth fund (SWF) client base. The region’s SWFs are growing in, and hiring in, expertise in infrastructure investment. Consequently, the jump from direct equity, where opportunities are limited, to secondary infra fund investment looks more and more certain.
Sovereign wealth funds went from being threats to the established financial order, to its saviours in the years after 2007. Now they are part of the global economy’s establishment, their assets under management swelling on the back of, until recently, persistent high oil prices. The funds have slowly and cautiously diversified out of real estate, listed equity and fixed income holdings in the last several years. Alternative assets, including private equity and infrastructure, have been comparatively recent areas of focus………………………………………..Full Article: Source

The Use of Debt by Sovereign Wealth Fund

Posted on 07 September 2015 by VRS  |  Email |Print

In this paper we document the use of debt capital by Sovereign Wealth Funds (SWFs). According to our estimates, as of 2014 there are 10 levered SWFs with outstanding debt around USD 180 billion. We identify three main reasons why SWFs may decide to resort to debt capital, namely: i) increasing their size and diversify their sources of funding; ii) contributing to the development of their domestic bond market, and; iii) optimizing their cost of financing at the group level.
Characteristics of levered SWFs — as opposite to funds restrained from using debt — are consistent with these goals. The use of debt is less common among SWFs from democratic countries, where it can entail higher political risk. Finally, we address the credit risk of levered SWFs and its relationship with the credit risk of their countries’ governments………………………………………..Full Article: Source

The Role of Sovereign Wealth Funds as Activist or Passive Fund Managers

Posted on 01 September 2015 by VRS  |  Email |Print

Sovereign Wealth Funds (SWF) have attracted a lot media attention with recent investments in publicly listed companies. Repeatedly, concerns have been raised, such as the fear of industrial espionage or geopolitical threats. We analyze whether SWF managers acquire stakes in foreign publicly listed firms 1) to play an active role which would support concerns or 2) passively select investments to increase the portfolio diversification, for instance.
We find that SWF target firms are more profitable, pay higher dividends and have a higher financial stability than their industry peers. This is in line with SWF managers passively seeking for further portfolio diversification in foreign public equity markets. We cannot find an improvement in operating or market performance after the engagement of SWF. Overall, our results indicate strong evidence that SWF managers primarily act as passive investors instead of pursuing activism strategies like private equity funds………………………………………..Full Article: Source

$7.1 Trillion In Global Sovereign Wealth Fund Assets

Posted on 31 August 2015 by VRS  |  Email |Print

As Credit Suisse notes, “oil exporting countries hold about $1.7trn of official reserves but as much as $4.3trn in sovereign wealth fund assets.” And while the composition of the SWF asset pool is likely to be far more multifarious than the makeup of official FX reserves making it more difficult to assess i) how quickly they could be liquidated in a pinch, and ii) what effect that liquidation would have on USD assets, especially USTs, the important point is that if we have indeed entered a new era in which crude and commodities are destined to trade at comparatively depressed levels, the pressure on exporters to adapt to the new reality could force them to begin drawing down the vast store of SWF assets.
Thus, if one wants to understand how large the petrodollar unwind could potentially be in the worst case scenario, it’s important to take stock of SWF assets………………………………………..Full Article: Source

Global alternative assets reach 15.3 trillion by 2020

Posted on 18 August 2015 by VRS  |  Email |Print

Worldwide assets under management (AuM) will hit $101.7 trillion by 2020, of which the alternative asset market is set to take up an increasing share, growing to between $13.6 trillion and $15.3 trillion. As part of their remit to citizens, sovereign wealth funds (SWF) and public pension reserve funds (PPRF) will need to continue to seek high levels of transparency.
Regionally the number of sovereign investments funds is set to rise, from the 125 today to 146 by 2020, with particularly the Asia-Pacific region adding funds. Sovereign wealth funds are expected to, depending on their objectives, invest part of their wider funds into the alternative market. According to the research, sovereign investors with capital maximisation objectives will search for higher alpha and diversification, lifting their alternatives portfolio to 14% in 2020 with the majority invested in real estate (41%) followed by private equity (38%)………………………………………..Full Article: Source

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