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3 Considerations in Liquidity Management for Sovereign Funds

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Sovereign investors and central bank reserve managers continually monitor price trends in exports, commodities and other macro-level inputs, as these factors can have a material impact on liquidity management strategies.

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On the sovereign wealth front, some of these institutional investors have a wide range of liabilities depending on government policy, applicable withdrawal legislation, funding sources and other factors. For example, Norway’s Government Pension Fund Global (GPFG) has a rule that 4% of the fund’s assets can be used for the country’s national budget per annum. In 2015, 179.6 billion NOK was transferred from the GPFG to the national budget. These scheduled cash calls and flows between official institutions, as well as anticipating unexpected events, supporting monetary policy, emerging funding, or urgent cash calls, are vital considerations when constructing an optimal liquidity profile. Another example is China’s central bank and the application of currency stability goals.

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Sovereign funds are engaging in greater scrutiny when selecting external managers for cash strategies and/or deposits. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

FIRRMA Bill is a Big Deal for Foreign Asset Owners

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The United States Treasury is analyzing options on further restricting investments into “sensitive” sectors, such as technology and defense, in the United States from Chinese state-owned capital. The U.S. Commerce Department, under the export control regime, banned U.S. companies from selling parts to ZTE Corporation, a Chinese telecommunications manufacturer, for seven years. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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AIMCo Posts 10.4% Return in 2017

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The Alberta Investment Management Corporation (AIMCo) posted its performance for the 12-month period trailing December 31, 2017, which saw its overall assets grow by 8.4% – or C$ 8.0 billion (US$ 6.1 billion) – to C$ 103.7 billion (US$ 82.3 billion). This represents returns net-of-fees on its C$ 88.2 billion (US$ 70.3 billion) worth of balanced fund investments in 2017 of 10.4%, against a 9.1% custom benchmark. Established in 2008, AIMCo represents the financial well-being of 32 pension, endowment, government, and specialty funds in the Canadian province of Alberta. This includes the Albert Heritage Fund.

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Mubadala Real Estate Targets JV Developers, Eyeing Local REIT Launch

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Mubadala Investment Company’s property arm is preparing to launch a local real estate investment trust (REIT) by 2020, and is currently in talks with several developers for international joint ventures on a plot-by-plot basis that are expected to be finalized in 2018, according to Ali Eid Al Mheiri, executive director of Mubadala Real Estate and Infrastructure. Ali Eid Al Mheiri is also Vice Chairman of ALDAR Properties PJSC and Chairman of Abu Dhabi Finance Company PJSC. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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