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4 Horrible Performing Investments for Institutional Investors in 2014

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ruble energy

As Santa Claus sprinkles down bow-tied gifts on U.S. stock market investors, not all was well for investors in 2014. The equity capital markets laid traps for institutional investors. At times, even the “smartest minds” in investing make serious errors when allocating assets. For example, the AllianceBernstein All Market Real Return Portfolio, which actively shifts in an array of real assets, posted a -11.66% year-to-date return from December 26th. The real return fund, having a high exposure to the energy sector, is managed by John Ruff who has co-authored articles in finance publications and holds pedigrees from top finance schools. No matter how much research is consumed, consultants and advisors hired, there are going to be times when institutional investors make lousy calls. Some investment strategies have performed abominably this year, costing investors significant losses.

Below, the SWFI editorial staff highlighted some really bad investments for 2014.

#4 Small-Cap Energy Funds

A large number of small-cap energy funds performed horribly in 2014, especially the funds heavily allocated to debt-laden junior energy companies. The shale boom opened up the credit valve for many of these junior energy companies. Some funds that suffered lousy performance were Fidelity Select Energy Service Portfolio, which if an investor allocated US$ 10,000 on January 1, 2014, they would have US$ 7,810 on December 21th. Another example is Schroder International Selection Fund. This fund invests in equity and equity-related securities in junior energy firms, posted a -33.1% year-to-date return from November 28, 2014. This is in a year where in six months, oil went from US$ 111 per barrel to US$ 59 per barrel.

Yet despite the bad news, energy private equity funds are raising massive amounts of money from institutional investors. Private equity firms like Warburg Pincus, KKR and the Carlyle Group raised energy-focused private equity funds attracting pension and sovereign wealth dollars.

#3 Crude Oil

For most of 2014, the price of crude oil has been slipping, being a boon for U.S. consumers. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Deutsche Bundesbank to Slowly Add Renminbi into Foreign Reserve Mix

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Deutsche Bundesbank’s executive board made a decision to invest in Chinese renminbi in the summer of 2017 as part of its foreign currency reserves. The German central bank on January 15, 2018, confirmed it will start investing in Chinese renminbi and also consider investing in additional foreign currencies. The move mimics the European Central Bank (ECB), which already considers the Chinese renminbi as a reserve currency. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Bpifrance, CDB and Cathay Capital Launch Third Cross Border Fund

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Bpifrance, China Development Bank Capital Co., Ltd. (CDB Capital) and Cathay Capital agreed to launch Sino French Midcap Fund II. This is the second fund the group is launching after the €500 million Sino French Midcap Fund I from June 27, 2014. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Carillion Falls into Compulsory Liquidation

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U.K.-based Carillion plc, a construction and facilities management giant, has fallen into compulsory liquidation on January 15, 2018. In July 2017, the listed company issued a warning on its profits, while its CEO quit at the time. The company warned it was near a breach of debt covenants and was in need of a fresh capital injection. Carillion faced a downturn in new business, while dealing with expensive contract delays. U.K. lenders such as the Royal Bank of Scotland (RBS), Lloyds Banking Group and Barclays are facing the news of having hundreds of millions of pounds default.

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

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