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Despising and Embracing Sovereign Wealth

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.

Mubadala Inches Closer to Invepar Ownership

Since the beginning of the year, Abu Dhabi-based Mubadala Investment Company has been looking at owning the distressed Brazilian infrastructure company Invepar SA for quite some time. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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KDC’s Latest Acquisition a Breath of Fresh Air

Knowlton Development Corporation (KDC) has made its latest acquisition with the purchase of Aromair Fine Fragrance Company Inc., a U.S. subsidiary of Aromair Group that specializes in air care products, from London-based Strategic Value Partners. The terms of the transaction, which was completed on November 8, were not disclosed. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Norges Bank Recommends Dropping Oil Stocks for Sovereign Fund

Norges Bank penned a letter to its Ministry of Finance recommending the removal of oil and gas stocks from the GPFG’s benchmark index. At the moment, oil and gas stocks make up roughly 6% of the wealth fund’s benchmark index, or just around 300 billion NOK. Norway’s wealth fund is a major holder of oil companies such as ExxonMobil, Chevron, BP, Total and Royal Dutch Shell. Oil and gas stocks were a major driver of positive equity returns in previous quarters.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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