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2014 Looks to Beat 2013 in Sovereign Wealth Fund Transactions

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sovereign wealth fund transactionsIncreasingly, sovereign wealth funds are investing directly. The larger sovereign funds are getting involved in more deals, whether in institutional real estate, partaking as a group member in a company acquisition or buying more shares on the open market. As a whole, the world of sovereign wealth funds is rapidly expanding due to numerous factors. One significant factor is the number of new sovereign wealth funds cropping up, particularly in Africa and the Americas. Our rankings put sovereign wealth fund assets, as of September 2014, at US$ 6.7 trillion. In September 2009, sovereign wealth fund assets were at US$ 3.9 trillion. It is true that sovereign wealth is concentrated in the upper echelon of the fund rankings; however, some of the mid-sized to smaller funds are taking a more active approach to investing. These smaller funds are also increasing allocation to real estate and private equity. For example, the Texas Permanent School Fund boosted private equity allocation in 2014 to 10% from 6% in 2013. Some sovereign funds are attempting to take advantage of the illiquidity premium associated with some alternative investments.

Sovereign Wealth Fund Transaction Database

According to the Sovereign Wealth Fund Transaction Database, as of September 2014, the first half of 2014, we recorded US$ 51.13 billion in direct transactions. For the first half of 2013, we recorded US$ 42.39 billion. This 20.6% increase in sovereign wealth fund direct transactions can be greatly explained by increased real estate deals (many being larger in size).

This unique group of institutional investors engages in a variety of investment styles and asset allocation. Some of the younger sovereign funds will embark on fixed income and public equities initially, before dabbling into alternative assets like real estate, private equity and hedge funds.

BMO and OTPP Test Blockchain Canadian Dollar Debt Deal

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The Bank of Montreal (BMO) and the Ontario Teachers’ Pension Plan (OTPP) participated in a landmark blockchain Canadian-dollar debt transaction. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Just Group Acquires Corinthian Pension Consulting

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Just Group plc acquired a 75% ownership stake in the holding company of Corinthian Pension Consulting Limited (Corinthian Pension Consulting). Operating in the institutional world for over 12 years, Corinthian Pension Consulting provides advisory services to defined-benefit pension scheme trustees and scheme sponsors undertaking bulk scheme exercises. The remaining 25% will be retained by current shareholders of Corinthian Pension Consulting. Robert MacGregor will continue to lead Corinthian Pension Consulting, as its Chief Executive Officer. Furthermore, Corinthian Benefits Consulting Limited and Corinthian Affinity Solutions Limited will continue to operate as before, becoming part of a newly formed holding company, Corinthian Group Holdings Limited.

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President Trump Asks SEC to Review Semi-Annual Corporate Reporting

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U.S. President Donald Trump is giving a possible gift to long-term institutional pension funds and sovereign funds that clamor for “long-termism” when it comes to publicly-traded companies. Many large Canadian pension funds, like CPPIB, have decried that listed companies operate in short-termism earnings philosophy, trying to focus on a quarter by quarter basis. BlackRock’s CEO Larry Fink has publicly heavily opined on short-term corporate think on quarterly earnings. Listed company CEOs are heavily incentivized to produce strong quarterly earnings, which is often linked to corporate compensation.

President Trump requested the U.S. Securities and Exchange Commission (SEC) to study the impact of allowing companies to file reports in a six month time framer versus the traditional quarterly time frame.

On Twitter, President Trump tweeted, “In speaking with some of the world’s top business leaders I asked what it is that would make business (jobs) even better in the U.S. ‘Stop quarterly reporting & go to a six month system,’ said one. That would allow greater flexibility & save money. I have asked the SEC to study!”

Listed companies in the U.S. are required to file earnings reports every quarter. This move could reduce filings to two times per year. The investor community is divided as long-term institutional investors typically want companies to report less, while other investors favor more disclosure – keeping corporate executives accountable to generating returns for shareholders.

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