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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.

Carlyle Group Completes Deal on 19.9 Percent Stake in Fortitude Re

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More private equity firms are scooping up reinsurance assets. The Carlyle Group finalized its acquisition of a 19.9% stake in Fortitude Group Holdings, LLC, whose group companies operate as Fortitude Re (formerly DSA Re) from American International Group, Inc. (AIG) The transaction was first announced on August 1, 2018. Part of this deal included Fortitude Re inking an investment management agreement (IMA) whereby US$ 6 billion of assets will be committed into a variety of Carlyle investment strategies.

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RDIF, Indorama Corporation, and Yadran Oil Ink Joint Investment in Tartarstan

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The Russian Direct Investment Fund (RDIF), and Singapore-based Indorama Corporation Pte Ltd, a chemical corporation in Asia, and JSC Yadran-Oil, the company authorized by the Government of the Republic of Tatarstan, have agreed to jointly implement investment projects in Russia. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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DENIED: Bank of England Refuses to Release Venezuelan Gold

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“Whoever has the gold makes the rules,” the King famously said in 1964’s comic strip, The Wizard of Id. England is proving the old truism to be accurate. Keynes’ “barbarous relic” is showing tremendous staying power in a world awash in cryptocurrencies and virtual wealth.

Austria, Germany, and the Netherlands have all repatriated gold reserves in recent years, and they can now count Venezuela among the countries attempting to do the same. Venezuela’s government made the decision to repatriate 14 tons of gold bars on the heels of U.S. sanctions. The custodian, the Bank of England, has refused to release the gold, worth a total sum of US$ 550 million, to Caracas. The British are citing anti-money laundering regulations. The specific concern is that Nicolas Maduro may personally seize the gold and use it for personal gain. Washington’s new rules for Venezuela target the country’s gold exports, based on reports of Maduro spending the country’s current precious metals illegally. Venezuela’s economy collapsed when oil revenue plunged. Supplies of food, medicine, and consumer staples were affected. Shortages and hyperinflation have resulted.

National Security Advisor to the United States, John Bolton, labeled Venezuela a member of a “troika of tyranny,” along with Cuba and Nicaragua. Bolton railed against the “triangle of terror stretching from Havana to Caracas to Managua.” He called it “the cause of immense human suffering, the impetus of enormous regional instability, and the genesis of a sordid cradle of communism in the Western Hemisphere,” Cuba has been accused of assisting the Maduro government. “The Cuban military and intelligence agencies must not disproportionately profit from the United States, its people, its travelers, or its businesses,” Bolton declared. For its part, Nicaragua is in hot water due to a violent crisis that sprung up when President Daniel Ortega announced that there would be changes coming to Nicaragua’s social security system. The U.S. is pushing for free elections.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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