Connect with us

3 Key Takeaways at SWFI’s Institute Fund Summit Europe in Amsterdam

Published

on

rivernet

Walking the streets of Amsterdam, often you must traverse across three lanes to make it to the sidewalk – two for automobiles and one for bicycles. It provides an apt metaphor – investors often see the cars, but fail to calculate the risk when crossing the third bicycle lane. SWFI recently held its fourth annual European summit in this historic city at Hotel Okura. Institutional investors, mostly from EMEA, were much more optimistic compared to our past two European events in London and Frankfurt, respectively. This event focused on responsible investing, ESG and the topic of decarbonization. Why? Well, the upcoming Paris talks on government climate change policies, coupled with a wider adoption among governments on the role of ESG, carbon policy and investing certainly provided a relevant backdrop. These “green” themes weaved many of the panel discussions together. And yes, Volkswagen came up in several instances and so did the emerging company risk of tax avoidance by large listed companies. Furthermore, heads swiveled, as one panel had over US$ 1 trillion in public institutional investor capital being represented.

Institute Fund Summit 2015 Europe, October 26, 2015 at Hotel Okura. Pictured: (L-R) Nadine Dereza, Mamadou-Abou Sarr, Northern Trust Asset Management.

Institute Fund Summit 2015 Europe, October 26, 2015 at Hotel Okura. Pictured: (L-R) Nadine Dereza, Mamadou-Abou Sarr, Northern Trust Asset Management.

1. Talk of Carbon Smart Beta and Decarbonization

Increasingly, pensions in Europe and in other parts of the world are forging a consensus on how to manage climate change risk by adopting some measures of portfolio decarbonization. Northern Trust’s Mamadou-Abou Sarr educated the audience on ESG implementation and the numerous ways asset owners can address carbon-related goals. Sarr expressed optimism about the possible historical significance of the upcoming Paris Climate Talks.

A group of pensions and wealth funds at the conference felt that carbon was a risk (though there views varied on how big of an actual risk.) Questions loomed on the quality and methodology when looking at true carbon exposure in a portfolio. Linked to this issue, a common theme throughout the summit was how to deem which companies are carbon compliant and which are not. One panelist brought up an example of a large French company that ranks not so high on several carbon indices, but the product that it manufactures reduces energy consumption and thus drastically positively impacts the overall environment.

Another debated topic was engagement. Is it better to exclude “fossil fuels” from a portfolio or include and fight for changes in practices to the board? One panelist compared this debate on whether to include or exclude carbon stranded assets similar to the active versus passive management argument. Also the idea of carbon stranded assets like coal, could be unstranded if carbon capture technologies were to make coal clean. Thus carbon risk can go both ways. One of the investor panelists talked about carbon smart beta and how it can be used as a factor.

Institute Fund Summit 2015 Europe, October 27, 2015 at Hotel Okura. Pictured: (L-R) Philip Menco, Fortunis, Kari Vatanen, Varma Mutual Pension Insurance Company, Yves Choueifaty, TOBAM, Hazel McNeilage, Northern Trust Asset Management.

Institute Fund Summit 2015 Europe, October 27, 2015 at Hotel Okura. Pictured: (L-R) Philip Menco, Fortunis, Kari Vatanen, Varma Mutual Pension Insurance Company, Yves Choueifaty, TOBAM, Hazel McNeilage, Northern Trust Asset Management.

And yes, we had a smart beta / factor-based panel that tackled emerging problems and innovations. One of the main things the panelists could agree on was that smart beta was not something new. A major issue that came up is knowing which factors work in certain time horizons. Several people expressed that value factors must be held for long periods of time. Mark Mansley, chief investment officer of the U.K. Environment Agency Pension Fund, illustrated a clear picture on how the pension fund evolved on its ESG position to take a more active stance.

2. New Ways to Measure GDP Growth

With rampant innovations in technology, the advent of the “sharing economy” and the proliferation of apps to solve daily tasks, are gross domestic product figures accurately capturing a nation’s true output in a post-modern era? Bundesbank board member Andreas Dombret kicked off the Institute Fund Summit Europe event highlighting this issue of GDP during questions. He also gave a detailed keynote on Europe, China and the current economic state of Germany, saying in his speech, “These changes will have an impact on public finances and potential output. In the future, there will be fewer people to finance public expenditure, but more people with claims on the government’s budget. This is not exactly beneficial for public finances. The European Commission expects age-related expenditure in Germany to rise by 5 percentage points of GDP by 2060. According to the German Council of Economic Advisors, this means that public debt will rise to almost 250% of GDP over the same timespan if policy remains unchanged.”

See his speech here

3. Sectors Not Countries (For Europe)

Another key takeaway that was debated on a number of panels is what sovereign wealth funds and large pensions look at when making strategic investments. Rather than focus on shifty macroeconomic figures, wealth funds seek out sectors where they have expertise, can navigate, find a local partner (government or private) and cherry pick at the right price. These investors also seek managers that can do this. One of the panelists commented, some Gulf sovereign funds are not looking at inflation as a major concern when investing large sums of money in Italy. Some sectors have much more attractive valuations in Europe than their American counterparts.

The views in this article are expressed by Michael Maduell.
Michael Maduell is President of the SWFI.
www.swfinstitute.org

Goldman Sachs Buys Weyerhaeuser Spin Off AM Unit from Lindsay Goldberg

Published

on

Increasingly, Goldman Sachs is buying up small alternative asset management groups across the United States. Goldman Sachs Asset Management (GSAM) is part of Goldman Sachs Group. GSAM inked a deal to purchase Aptitude Investment Management LP, a hedge fund-of-funds manager, from Lindsay Goldberg & Bessemer II AIV LP, a vehicle managed by Lindsay Goldberg. Aptitude Investment Management oversees around US$ 3.5 billion in discretionary assets. Aptitude Investment Management operates out of Seattle and Vancouver, British Columbia.

Before the creation of an in-house unit at Weyerhauser, Morgan Stanley was the sole investment manager of Weyerhauser’s retirement assets. Salim Shariff, formerly of Morgan Stanley Alternative Investment Partners, and Jeff Klein were hired as CIO and Deputy CIO of Weyerhaeuser Asset Management LLC in 2004. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

GIC Gets Exposure to Exchange Tower through Primewest Vehicle

Published

on

Singapore’s GIC Private Limited funded a deal through a fund to acquire the Exchange Tower in Perth. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

SWFI First Read, December 13, 2018

Published

on

Turkey Wealth Fund Could Tap Debt Markets in 2019

Turkiye Varlik Fonu or Turkey Wealth Fund could be issuing a large bond in 2019. The loan would most likely be short term in nature with a maturity of two years and be syndicated.

Rahm Emanuel Suggests Bonds to Help Support Chicago Pensions

The outgoing Chicago Mayor Rahm Emanuel revealed a plan on possibly issuing US$ 10 billion in bonds in funding Chicago’s underfunded pension funds. Chicago’s four pension funds have an average funding ratio of 26%. In March 2016, the Illinois Supreme Court ruled an earlier pension reform law effecting employees and laborers’ pension funds that was signed by then Illinois Governor Pat Quinn that the law was unconstitutional.

SoftBank and Alibaba Back PT Tokopedia

PT Tokopedia is an Indonesian generalist e-commerce site. Tokopedia raised US$ 1.1 billion in an investment round led by the SoftBank Vision Fund and Alibaba Group. Softbank Ventures Korea and other investors participated in the round as well. William Tanuwijaya is the CEO and Co-Founder of Tokopedia.

Tikehau Capital and Total SA Form Low Carbon Fund

Tikehau Capital and Total SA created a private equity fund to focus on supporting the energy transition to cleaner sources of energy. The fund held a €350 million first close and raised money from investors such as Bpifrance and Groupama as anchor investors.

Continue Reading

Popular

© 2008-2018 Sovereign Wealth Fund Institute. All Rights Reserved. Sovereign Wealth Fund Institute ® and SWFI® are registered trademarks of the Sovereign Wealth Fund Institute. Other third-party content, logos and trademarks are owned by their perspective entities and used for informational purposes only. No affiliation or endorsement, express or implied, is provided by their use. All material subject to strictly enforced copyright laws. Registration on or use of this site constitutes acceptance of our terms of use agreement which includes our privacy policy. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. SWFI facilitates sovereign fund, pension, endowment, superannuation fund and central bank events around the world. SWFI is a minority-owned organization.