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$100 Oil Can Change the Saudi Sovereign Wealth Fund Paradigm

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Crystal ball predictions of US$ 100 per barrel of crude oil have returned for the first time in four years as the U.S. sanctions Iran’s exports. U.S. President Donald J. Trump has been pushing OPEC to prevent supply shortages. However, OPEC and its allies have not committed to increasing their supply enough to reduce prices. Saudi Arabia and Iran are both members of OPEC. OPEC’s hesitance to drive prices lower, along with supply drops from Iran on the order of 1.5 million barrels a day, made for bullish sentiment at the meeting of the Asian oil industry in Singapore. In a different response in October, Saudi Arabia Crown Prince Mohammad Bin Salman Al Saud told media outlets that Saudi Arabia will meet its promise of any supply loss from the Iranian sanctions. The U.S. State Department continues to ask for OPEC to tap its reserve supplies. U.S. National Security Advisor John Bolton also delivered a clear message to India about Iranian oil, commenting that it is the United States’ objective that there will be no waivers from the sanctions regarding exports of Iranian oil and gas.

Supplies

To further complicate the picture, oil-rich Venezuela is only putting out 2.5 million barrels a day, from a proven supply of 300 billion barrels. Aging oil tankers, a lack of qualified professionals, and a shortage of foreign technology have reduced the country to baring empty store shelves and enduring riots in the streets. In October 2018, Saudi Energy Minister Khalid Al-Falih sees less cause for concern, “The reason Saudi Arabia didn’t increase more is because all of our customers are receiving all of the barrels they want.” The dip in oil prices experienced since 2014 has put a strain on oil-dependent nations. For instance, in the last six months of 2014, as oil prices cratered, the Russian ruble lost over half of its value relative to the U.S. Dollar. Living standards in the country fell with the currency.

Oil Investments

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BlackRock Experiences Outflows Among Institutional Investors

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Is BlackRock at peak earnings? BlackRock disclosed its third quarter 2018 results showing a growth of assets under management at US$ 6.4441 trillion at the end of September 2018 versus US$ 5.976892 trillion at September 2017. However, a large portion of the AUM growth has been in the ETF business, iShares, which tends to be very low in fees. The iShares business saw an inflow of US$ 33.7 billion for the quarter.

For the third quarter, BlackRock experienced US$ 24.8 billion in institutional investor outflows, with US$ 23.6 billion being on the index side, while US$ 1.2 billion being on the active side. Institutional investors such as pensions, insurers, and hedge funds withdrew from passive equity strategies. BlackRock saw US$ 4.745 billion in outflows in active equity on the institutional side, but seeing inflows of US$ 2.471 billion in multi-asset institutional and inflows of US$ 1.468 billion in alternatives institutional.

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GIC Buys Large Stake in Nordic Aviation Capital

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Singapore’s GIC Private Limited, a yield-hungry sovereign investor, invested in Denmark-based Nordic Aviation Capital A/S, becoming a significant minority shareholder. Other shareholders in Nordic Aviation Capital include EQT VI Limited fund, KIRKBI Invest (wealth origins tied to Legos), and Martin Møller, the founder of Nordic Aviation Capital. EQT VI will remain the largest shareholder of Nordic Aviation Capital. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Trump Wants Pharma Companies to Disclose Drug Prices in Advertisements

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U.S. President Trump is progressing on plans to mandate pharmaceutical companies to reveal their prices in drug advertisements. “The drug industry remains resistant to providing real transparency around their prices, including the sky-high list prices that many patients pay,” Health and Human Services Secretary Alex Azar said in a statement. “So while the pharmaceutical industry’s action today is a small step in the right direction, we will go further.”

The U.S. Health and Human Services Department would require pharmaceutical companies to include drugs’ sticker prices in their video advertisements. This would be similar to how drug companies disclose the laundry list of side effects.

Increasingly, sovereign funds like Temasek Holdings have backed mid-stage pharmaceutical companies and other therapies, while market investors like Norway’s GPFG have large holdings in listed pharmaceutical companies.

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