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CalSTRS Announces Real Estate Partnership to Serve Urban Markets

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The press release states, “the California State Teachers’ Retirement System (CalSTRS) today announced the launch of a real estate joint venture focused on urban retail properties in underserved communities. The partnership has the potential of reaching $250 million in commitments.

CalSTRS partnered with Dallas-based Sarofim Realty Advisors in 2004 to form the Community Retail Development Fund (CRDF), which seeks to invest with local and regional partners on retail properties in underserved communities. Sarofim has served institutional investors with long-term investment horizons since 1982.

The fund has identified Primestor Development, Inc., a prominent Los Angeles developer and operator, to develop, redevelop and acquire retail properties with an eye toward establishing a stable portfolio of core assets over time. CalSTRS’ commitment includes the development of a community shopping center in South Gate, about seven miles southeast of downtown Los Angeles. The strategy for the South Gate project is to build a high quality retail asset to attract national and major regional retailers.

“We see our partnership with Sarofim and the CRDF commitment to Primestor as an excellent opportunity to develop a number of income-producing assets while also helping us achieve our goal in rebalancing the portfolio,” said CalSTRS Chief Investment Officer Christopher Ailman. “By building toward core, we also avoid the often overheated core buying market.”

“The fact that this project involves a prominent real estate emerging manager with expertise in urban areas and specifically within Latino communities is a real strength,” Ailman said. “This relationship advances our effective efforts to search for investment opportunities in the underserved urban markets throughout California and specifically in retail.”

CalSTRS has been seeking quality California investments to realign its real estate portfolio toward a more conservative, or core, emphasis. Assets defined as core are frequently existing, substantially leased, income producing properties, in prime metropolitan markets. They typically include office, retail, industrial and multi-family residential assets. However, CalSTRS has had success in developing and leasing assets to be included in its core portfolio.”

Read more: CalSTRS Press Release

US Treasury Sec Mnuchin May Have More Sanctions for Turkey

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U.S. Treasury Secretary Mnuchin revealed the United States is preparing more Turkey sanctions. This stems over the issues with an American pastor in Turkey. Turkey’s lira, has fallen to record lows recently.

The week before, U.S. President Trump announced the doubling of tariffs on Turkish steel and aluminium to 50 and 20 percent, respectively. Turkish president Recep Tayyip Erdoğan has called for a boycott of electronics products of the United States, which includes iPhones (a smartphone product of Apple).

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Scott Keller Returns to T. Rowe Price to Head up EMEA

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Scott Keller returns to T. Rowe Price as head of global investment management services for Europe, the Middle East and Africa from January 1, 2019. Keller is currently at UBS Global Asset Management, working in the Asia Pacific region, heading efforts in the bank’s institutional and intermediary distribution. Keller joined UBS in 2014. Before UBS, Keller was at T. Rowe Price.

Scott Keller is replacing Peter Preisler at T. Rowe Price. Preisler exited T. Rowe Price in August 2017.

At UBS, Nick Trueman will replace Scott Keller.

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Rising Interest Rates Impact Sovereign Wealth Strategies

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Sovereign wealth funds are paying closer attention to the U.S. Federal Reserve as it enters fresh territory under Jay Powell. Powell’s decisions are impacting foreign exchange holdings globally, as central bankers adjust to a newer environment of policy normalization. The United States is not the only country raising interest rates. The Philippines, Argentina, Indonesia, India, Czech Republic, Ukraine and Pakistan are just some emerging market countries that have raise interest rates.

Global institutional investors like BlackRock are concerned that the U.S. dollar could grind higher. In times of increased geopolitical or financial tensions, the greenback is seen as a safe haven by many central banks, sovereign funds and foreign public funds. July marks the 110th month of expansion, a streak that is one year away from becoming the longest in U.S. history. Stronger economic data – with U.S. gross domestic product hitting 4.1% for the second quarter of 2018, rising interest rates, and bids to lower U.S. trade deficits, are making sovereign funds rethink asset allocation or at least shift more assets out of markets like Turkey, South Africa and Brazil. The Turkish lira fell further in August, prompting the country’s central bank to take drastic action. The fallen lira sent jitters across emerging markets and to banks in Southern Europe who have exposure to Turkey. What are sovereign wealth funds doing now?

On the fixed income front, sovereign funds are paying much closer attention to their government bond holdings, keeping a close eye on countries that rely heavily on external funding. Shorter duration bonds and inflation-linked debt can act as a safeguard against rising rates and inflation. Sovereign funds, like Singapore’s GIC Private Limited, are recognizing that global equity returns are less synchronized, thus there is a move to identify select countries and regions being conducted for strategic asset allocation for 2019 and beyond. A stronger greenback, positive U.S. corporate earnings, and rising trade tensions between the U.S. and China are becoming a boon for active equity managers and smart beta funds, as public funds are requesting enhanced levels of skills in navigating stock selection. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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