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Despising and Embracing Sovereign Wealth

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cityThe sheer size and reach of sovereign wealth funds steered government policymakers’ attention. In 2007, politicians asserted, “how can these governments buy up our prized national assets?”

In 2012, the message was “will they buy our bonds now?”

The protectionist attitude towards sovereign wealth funds has changed dramatically and it wasn’t because of the Santiago Principles or a change of heart. It was a necessity created by the financial crisis for Western nations to maintain their welfare state and standards of living. Spanish and Italian government officials have courted Asian sovereign wealth funds and central banks. British government officials have courted their Gulf partners. Sovereign wealth funds have been courted to purchase European sovereign debt, but they prefer companies, properties, and real assets.

The rapid growth of state-owned accumulated assets versus pension asset growth has spurred interest among fund managers and financial institutions. The finance media followed the bandwagon of the sovereign wealth moniker just as when private equity and hedge fund were trending.

April 2012, sovereign wealth funds are basically at US$ 5 trillion, Occidental governments have taken notice of this. In 2007, sovereign asset growth was projected by some investment banks to double or at least triple, but this did not come true because of the devastating effects of the financial crisis of 2008.

Funds and Ownership, KKR Partners with Shinhan Financial

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South Korean financial giant Shinhan Financial Group Co., Ltd. reached a preliminary agreement with KKR & Co. to form a series of global buyout funds that could raise up to 5 trillion KRW. KKR and Shinhan signed a Memorandum of Understanding (MoU) in Seoul in early October. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Norwegian Government Recommends SWF Remains at Central Bank

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There was speculation that Norway Government Pension Fund Global (GPFG) could be managed outside of Norges Bank. The Norwegian government shot down this idea and recommended Norway’s GPFG remain in Norges Bank. This recommendation came in the form of a white paper submitted to the Norwegian Parliament, Stortinget.

Norway’s Minister of Finance Siv Jensen, commented in a press release, “The Government proposes a new and modernised governance structure for Norges Bank. Moving forward, this new structure lays the foundations for the sound management of the central bank and of the GPFG.”

Some Central Bank Recommendations

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Invesco Buys OppenheimerFunds for $5.7 Billion

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Invesco Ltd. signed a deal to acquire OppenheimerFunds, Inc. from Massachusetts Mutual Life Insurance Company (MassMutual). In turn, MassMutual and the OppenheimerFunds employee shareholders will receive a combination of common and preferred equity consideration, and MassMutual will become a significant shareholder in Invesco, with an approximate 15.5% stake. This strategic transaction will bring Invesco’s total assets under management (AUM) to more than US$ 1.2 trillion. The transaction is expected to close in the second quarter of 2019, pending necessary regulatory and other third-party approvals. The transaction gives Invesco access to more third-party distribution platforms.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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