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3 Ways Asset Owners Are Preparing for Slower Global Growth in Fixed Income

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Last week, the Organization for Economic Co-operation and Development (OECD) lowered its estimate on worldwide gross domestic product for a second time in three months. OECD forecasted the global economy would grow by 2.9% versus 3% this year – and a lower 3.3% in 2016 from 3.6%. A major reason for the revised projection is the deceleration of China’s economic engine and its impact on emerging markets. In the OECD’s latest Economic Outlook No. 98, “China’s transition from infrastructure investment and manufacturing and towards consumption and services is one important reason for the decline in commodity prices, and may be reducing its role in global value chains as well.”

Some sovereign funds are attracted to U.S. credit spreads given low-expected returns estimated for traditional bond investments. In addition, many pension economists predict a slurry of U.S. corporate bond defaults. On November 13th, Fitch Ratings released the energy trailing 12-month default rate for October. It was at 5.3%, the highest point since a peak of 9.7% back in 1999.

The large in-house asset owners like OMERS and the Abu Dhabi Investment Authority (ADIA) have extensive capabilities with their fixed income teams.

#1. Continued Thirst for Yield

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ADIA Seeks to Sell KIC Headquarters

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The Abu Dhabi Investment Authority (ADIA) is seeking to sell the building that houses the headquarters of the Korea Investment Corporation (KIC). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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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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