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American Fiscal Chaos Pushes Nations to Pursue Yuan

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qingmingWhile Republicans and Democrats in the United States were taking debt negotiations toward another potential cliff, China was not so silently making deals to bypass using the U.S. dollar when handling bilateral trades.

On October 11th Chinese media Xinhua announced an agreement between the European Central Bank (ECB) and the People’s Bank of China (PBOC) to swap currencies to the tune of 350 billion yuan (US$ 57 billion). According to the report, the agreement will last 3 years but may extend longer if both parties agree to extend it.

The deal marks the second largest currency swap the PBOC has made to date. The first being a 360 billion yuan (US$ 58.7 billion) agreement with South Korea that took place in two waves, first in 2009 and then in 2011. The deal is set to expire in October 2014 barring mutual agreement to keep it active.

The increase in currency swaps between China and other foreign central banks suggests a rise or at least further solidification in trade. However, some Chinese exporters are getting nervous as the yuan is starting to gain ground against the dollar. Further currency appreciation, they fear, could negatively affect exports. Chinese officials in Beijing, on the other hand, seem to welcome the strengthening yuan. A stronger currency could mean increased domestic consumption, the sign of a balanced economy.

Open Currency Swap Agreements – China[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, September 21, 2018

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U.S. Public Becomes More Aware that Gmail Scans Emails

Alphabet is a major stock holding for sovereign wealth funds and large pensions. Search giant Google is under fire for allowing third-party partners and companies, like Return Path Inc and other advertisers, to share data from Gmail accounts. Many experts and tech observers already knew this, but more people in the public are becoming aware of Google’s practices when it comes to privacy. Google disclosed in a letter to U.S. lawmakers this finding. The Wall Street Journal reported that in some instances, app companies were able to read people’s emails in order to improve their algorithms. In 2017, Google said they would stop scanning all of one’s Gmail messages for the goal of personalized ads.

GPIF Infrastructure Exposure Almost Reached 200 Billion Yen in March 2018

Japan Government Pension Investment Fund’s (GPIF) exposure to infrastructure real estate was 196.8 billion JPY at the end of March 2018. At that period, 57% of the exposure was to the UK, 15% was to Australia, 15% to Sweden, 10% to Spain and 3% to Finland. 21% of GPIF’s infrastructure portfolio was linked to airports versus 27% to ports.

AIMCo-backed sPower Closes $498.7 Million Bond Deal

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Iceland Contemplates a Sovereign Wealth Fund

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The Government of Iceland is looking to possibly form a sovereign wealth fund to stabilize the country from unforeseen shocks to the national economy. The Iceland government released a statement saying, “The state’s contributions to the Fund will be equivalent to new revenues from publicly owned power production companies which are expected to accrue in the coming years.”

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CBRE Global Wins First GPIF Global Real Estate Mandate

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Japan Government Pension Investment Fund (GPIF) awarded its first global real estate mandate by hiring CBRE Global Investment Partners Limited. This is a global core real estate fund-of-funds separate account. Overseeing this mandate as a gatekeeper is Asset Management One Co., Ltd., which is a unit of Mizuho Financial Group. This RFP was launched in April 2017.

CBRE Global Investment Partners is the multi-manager arm of CBRE Global Investors.

In addition, on August 8, 2018, GPIF hired two custodians for short-term investments. These custodians are Trust & Custody Services Bank, Ltd and The Master Trust Bank of Japan, Ltd.

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