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Breaking: Yellen to Continue Tapering

Credit: Federal Reserve

Credit: Federal Reserve

Yellen in her remarks and press briefing:

“The dots moved down a little bit in December relative to September and then moved up ever so slightly. I really don’t think it’s appropriate to read very much into it.”

“We have had a series of years now in which growth has proven disappointing.”

“5 percent of the labor force working part time on an involuntary basis, that is an exceptionally high number relative to the measured unemployment rate, and it’s so to my mind is a form of slack that is, adds to what we see in the normal unemployment rate, and is unusually large.”

“My predecessor was also devoted to that. Strengthening the financial system is a work in progress, and he made large inroads in strengthening the financial system.”

Yellen has stated the Federal Reserve will maintain tapering. Beginning in April, the Committee will add to its holdings of agency mortgage-backed securities at a pace of US$ 25 billion per month rather than US$ 30 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of US$ 30 billion per month rather than US$ 35 billion per month.

Federal reserve officials are perceiving the federal funds rate at the end of 2015 should be at least 1 percent.

In the statement, the Committee acknowledged that although unemployment has neared its target of 6.5 percent, “economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”

To add more, the FOMC statement in regard to the federal funds rate, “This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.”

Federal reserve officials are perceiving the federal funds rate at the end of 2015 should be at least 1 percent, a more optimistic read from the previous press meeting

Yellen served as vice-chair to Ben Bernanke. The benchmark federal funds rate has been practically at zero since late 2008. The U.S. unemployment rate and continued slack in labor markets has kept that rate low.

SWFI First Read, December 15, 2017

Gaw Capital Sells Cross Tower Shanghai Building

Hong Kong-based Gaw Capital Partners has agreed to sell the Cross Tower, a 24-storey commercial building in Shanghai, to World Union Investment Management, for 2.66 billion RMB (US$ 402 million). The tower is located in the Huangpu district.

RDIF Portfolio Company Geopharm Plans to Increase Insulin Production

Russia-based Geopharm is a portfolio company of the Russian Direct Investment Fund (RDIF). Geopharm signed a special investment agreement with the City of St. Petersburg, Russia. Geopharm plans to invest more than 3.3 billion rubles in building a complex to meet insulin production demands.

Norway’s KLP to Exclude Companies with Oil Sands Extraction via Revenue Threshold

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NZ Super Resumes Government Contributions

The New Zealand Superannuation Fund (NZ Super) has resumed receiving contributions from the New Zealand government in the face of rising obligations as an increasing proportion of the country’s population approaches retirement. According to a statement released by the fund’s managing Board of Guardians, the government plans on investing US$ 5.3 billion into NZ Super between now and June of 2022, with the first payment scheduled for December 15, 2017.

Policymakers believe the resumption of government contributions, which were halted in July of 2009, is expected to ease the burden on the country’s current taxpayers and future generations. Withdrawals from NZ Super are expected to peak in 2078, at which point the fund will be covering 12.8% of New Zealand’s pension obligations. The new wave of contributions will initially be invested in passive, low cost equity and bond investments, according to Catherine Savage, Chair of the Guardians.

Recent Performance & Leadership Change

NZ Super has enjoyed one of its best annual performances since its founding in 2001, with a reported return of 20.7% before tax for a 12-month trailing period ended June 30, 2017, up 5 billion NZD (US$ 3.6 billion) compared to 2016. NZ Super generated 21.85% annual return in its global equities, developed market portfolio, according to its 2017 annual report.

NZ Super faces a changing of leadership in the coming year with the exit of chief executive Adrian Orr, who will leave the Fund officially in March of 2018 to serve a five-year term as Governor of the Reserve Bank of New Zealand. Mr. Orr has earned a spot numerous times in the Sovereign Wealth Fund Institute’s Public Investor 100 annual ranking over the years, most recently in 2017 at #3.

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iZettle Raises US$ 47 Million in Series E, Prepares for 2018 Listing

Card transaction platform iZettle AB has raised another US$ 47 million in Series E funding, this time with new backing from Sweden’s AP4 and early-stage venture capital firm Dawn Capital. Previous investors in the Stockholm-based payments business include American Express, MasterCard, Intel, and Spain’s Santander Group. With US$ 235 million in equity to date, iZettle is quickly approaching an estimated valuation of US$ 1 billion.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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