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Eastern Sovereign Funds Bullish on Asian Transformational Economies

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Temasek Holdings and other sovereign funds are taking big bets on Asia. Temasek has taken positions in Chinese banks such as China Construction Bank and the Bank of China; understanding that investing in financial institutions can be a profitable undertaking for a burgeoning economy. Confidence and optimism in China’s long-term economic growth play into Temasek’s investment themes. The Chinese government has made strides on making it easier for foreign investors to invest in domestic markets by lessening capital controls.

China, India, and Indonesia, along with other Asian nations are developing large middle classes, creating vast pools of consumers. In fact, it is projected in the next decade as much as 67% of global growth of the middle class will be derived from China and India. Annual household income levels continue to rise in the region; however, household incomes still dwarf nations such as Spain or the United States. On the other hand, the consumer credit market of Asia is beginning to expand, augmenting consumer spending. The West will still account for greater consumer spending power in the next decade, but Asia is providing a noteworthy alternative for multinational corporations.

Infrastructure investing is also an avenue for sovereign funds to capitalize on the growing middle class populations of India and China. On February 18, 2013, the United Arab Emirates and India created the India-UAE High Level Taskforce on Investment. The vehicle will be used to push through investments in industries such as infrastructure and the food supply chain.

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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