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11-Year-Low: Awful Oil Milestone for Gulf Sovereign Funds

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Backed by public pension fund capital, private equity money, hedge funds and Wall Street, recent fossil fuel production in the United States has transformed the global energy model, returning some economic power to the West. The story has changed with the force of the American shale revolution. After coming back from a signature climate deal in Paris, United States President Barack Obama reluctantly inked a bill to lift the U.S. export ban on selling oil. The U.S. Senate passed the bill with a vote of 65-33. Democrats were able to get in another 5 years of solar and wind tax credits in the bill. The export ban had its origins when the United States experienced oil shortages, especially during the Carter administration. The U.S. Energy Information Administration (EIA) mentions that the country’s current oil inventories stand at 490.7 million barrels. U.S. oil reserves are at an 85-year high, with refineries running at 92% capacity – the week ending December 11, 2015. To compound the aggressive oversupply issue, OPEC in December reiterated they have no plans to decrease production. In addition, Russian oil production reached a post-Soviet record. Will oil reach US$ 20 a barrel? The price of Brent crude oil fell to an 11-year low, getting stumpy at US$ 36.05 per barrel on December 21st. U.S. West Texas Intermediate futures rolled down to 33 cent to US$ $34.40 a barrel – lowest level since 2009.

Many of these Middle Eastern sovereign funds have been reluctant to tap into sovereign wealth reserves, opting to cut fiscal spending or raise government debt.

The Gulf Reaction

As of December 2015, 56.28% of sovereign wealth assets are derived from oil & gas related funds. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Altitude Infrastructure Gets Financing on Haute-Garonne Network Project

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Altitude Infrastructure SAS inked a 25-year concession agreement and closed a debt financing package for the deployment and maintenance of an ultra-high-speed broadband network in Haute-Garonne. Haute-Garonne is a department in the south of France.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Guggenheim Partners Agrees to Acquire Millstein & Co.

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On July 11, 2018, Guggenheim Partners inked a deal to acquire New York-based Millstein & Co., L.P., an advisory firm formed by Jim Millstein. Millstein will become co-Chairman of Guggenheim’s securities business. Millstein & Co. will become part of Guggenheim Securities, the investment banking division of the company. Ronen Bojmel will lead the combined Guggenheim restructuring team.

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GIC Holds Steady, Maintains Cautious Investment Stance

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Singapore’s GIC Private Limited returned a 5-year return of 6.6% ended March 31, 2018. At March 2018, GIC had increased cash and nominal bonds up 2% to 37% of the total portfolio, while lowering exposure to developed market equities from 27% to 23%.

GIC CEO Lim Chow Kiat commented in his annual letter in the FY 2017-2018 report that, “In view of the high asset valuations, the increased risk of monetary policy tightening across different jurisdictions and the elevated uncertainty, we maintain a cautious investment stance. Nevertheless, we remain ready to take advantage of potential dislocations. The jump in market volatility experienced in early 2018 offered an indication of potentially bigger market turbulence and opportunities in the future.”

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