Connect with us

3 Patterns Heading into 2017 for Sovereign Funds and Asset Owners

What trends will bleed into 2017 with regard to sovereign wealth funds, pensions and other asset owners?

ted_calpers_green

U.S. Equity Markets Look Attractive to Some Mega Asset Owners
Was the Trump victory rally just representing a reversion to the mean in U.S. equity markets? Renewed confidence in the U.S. economy and greater certainty has galvanized institutional investors such as the Korea Investment Corporation (KIC) and California Public Employees’ Retirement System (CalPERS) to rethink tactical allocation in public equities. With positive manufacturing data, healthier earnings growth prospects and possible changes in U.S. regulatory policy, U.S. equities could ride out into the 2017 sunset. Some institutional investors, like Australia’s Future Fund, are deploying more smart beta strategies, honing in on select factors, to catch the equity wave, rather than spending money on active managers. Smart beta strategies are subject to a wide dispersion of returns due to the growing number of factors to be selected. However, as U.S. pensions pile into low-volatility strategies, others are opting out, growing weary of its popularity.

Sovereign funds like GIC Private Limited are on the front line, partnering with non-banking financial institutions to lend money in a variety of markets such as the U.S., U.K. and even rapidly-developing economies such as India.

Asian Asset Owners Seeking Reliable Income
Asian institutional investor giants such as Japan Post Group are seeking reliable income overseas, in both traditional and non-traditional yield-oriented investments. Japan Post is looking to possibly allocate capital to real estate managers, targeting U.S. real estate, while other institutional investors like Japan’s Government Pension Investment Fund (GPIF), less further along in moving capital, hired CBRE Advisors to study the American property market. Some Asian investors are investing in mezzanine debt. As confirmed by SWFI Compass, an RFP and opportunity tracking service, South Korea’s Military Mutual Aid Association has conducted a study to see the advantages of investing in offshore non-performing loans and private credit funds. Other Korean public funds have invested in mezzanine debt in offices in Silicon Valley that have marquee tenants such as Alphabet (formerly Google).

Harvesting the Illiquidity Premium in Private Credit
Lock up too much in private credit, and the institutional investor may encounter liquidity issues, while committing too little, the asset owner may not receive the return given its intended allocation. Sovereign funds like GIC Private Limited are on the front line, partnering with non-banking financial institutions to lend money in a variety of markets such as the U.S., U.K. and even rapidly-developing economies such as India. With prolonged deleveraging in the banking system, wealth funds, pensions and private equity funds continue to generate risk-adjusted returns in exchange for being patience. U.S. pensions like the Orange County Employees’ Retirement System (OCERS) opted for allocating capital toward private credit managers even though the pension is contemplating lowering its credit allocation from 14% to 13%. OCERS is also considering eliminating its absolute return program, which consists of hedge funds and global tactical asset allocation (GTAA) strategies. OCERS’ pension peer, the State of Wisconsin Investment Board, recently allocated US$ 40 million toward Arbor Debt Opportunities Fund I, a captive subordinated debt fund managed by Chicago-based Arbor Investments.

CIC Sells 10% Logicor Stake to Blackstone Fund

The China Investment Corporation (CIC) is selling a 10% stake of in European warehouse firm Logicor Ltd to a real estate fund managed by The Blackstone Group. Furthermore, CIC also hired Blackstone to oversee and manage Logicor’s warehouses and logistic properties portfolio.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

Fintech Affirm Raises $200 Million in Series E Led By Singapore’s GIC

Affirm Inc., a financial technology firm which provides instant loans to consumers as an alternative to credit cards for their online shopping, has raised US$ 200 million in a Series E round lead by Singapore’s GIC Private Limited, with participation from Khosla Ventures, Lightspeed Venture Partners, Spark Capital, Caffeinated Capital, and Ribbit Capital. The new infusion of capital brings the San Francisco-based company’s total funding to US$ 450 million and a reported valuation of US$ 2 billion.

The company is founded by Max Levchin, a co-founder of PayPal (part of the PayPal mafia, dubbed by the tech press). Max Levchin is also an advisory board member of the Consumer Financial Protection Bureau (CFSB) in the United States.

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

Continue Reading

CHANGE: Saudi Arabia to Re-Open Movie Theaters, PIF Inks MoU with AMC

The Saudi Arabian government is ending its 35-year ban on cinemas. Next year, the government will allow cinemas to open. This watershed moment provides opportunities for entertainment companies to invest in Saudi Arabia and the surrounding region.

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

Continue Reading

Popular

© 2008-2017 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.