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ESTIMATE – Sovereign Funds Experienced $16.6 Billion in Net Losses from GFC Bank Bailouts

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Was it worth it? For a select group of sovereign funds the consensus answer is clearly “no” from a financial standpoint regarding tens of billions spent on bailing out financial institutions during the global financial crisis (GFC). Many of these institutional investors incurred losses from these lifeline investments.

SWFI estimates that US$ 56.48 billion was directly invested by sovereign funds during the global financial crisis regarding the subprime bailouts. At May 2017, SWFI estimates that in total, these wealth funds combined have experienced a net loss of US$ 16.58 billion. SWFI believes the net loss range could be as high as US$ 20 billion to as low as US$ 12.5 billion.

In early 2007, sovereign wealth funds started getting “real attention” from the financial press. By 2008, financial pundits had referred to sovereign funds as a new financial superpower and that caught the attention of bank CEOs and policymakers. Once banks started to panic in the early stages of the crisis, wealth funds were looked at as a potential alternative to domestic government money. Banks such as UBS, Merrill Lynch, Barclays and Citigroup had received capital lifelines from sovereign funds. For example, Singapore’s GIC Private Limited backed UBS, believing in the franchise value of its investment banking business. Years later, UBS pivoted toward wealth management and in May 2016, GIC had further sold down its ownership in the Swiss banking giant. In fact, GIC had sold some 93 million current common shares of UBS, an equivalent of 2.4% of the outstanding shares and voting rights.

At May 2017, SWFI estimates that in total, these wealth funds combined have experienced a net loss of US$ 16.58 billion based on internal calculations.

Years after the crisis, the sovereign investors involved in these deals were less hopeful in getting their money back, as the banks they had bailed out faced greater regulatory burdens from new laws enacted and a string of expensive lawsuits stemming from the subprime mortgage debacle. This was not the case for all sovereign fund subprime bailout investments, some wealth funds actually made a profit.

Subprime Bank Bailout Breakout – Net Loss

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Mergermarket Gets Ready to be Sold

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Private equity firm BC Partners hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to advise on the sales of Acuris. Acuris is a collection of financial news and data sites, which includes Mergermarket, Dealreporter, and Debtwire. In 2017, BC Partners sold around a 30% stake in GIC Private Limited.

Before the rebranding to Acuris, Mergermarket was part of The Financial Times Group until 2013 when it was sold off to BC Partners.

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Why Japan Post Sees Promise in Aflac

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Aflac Inc. is an American insurance company founded in 1955. The company is the biggest provider of supplemental insurance in the United States. Aflac also has major operations in Japan.

In December 2018, Japan Post Holdings (JPHLF) signaled it was spending US$ 2.64 billion for a 7-8 % stake in Aflac. The goal is that, in four years time, Aflac will become an affiliate of Japan Post. Japan Post hopes to accomplish this by becoming the largest voting shareholder of the company. The world’s 13th largest company, with 400,000 employees, Japan Post needs to expand to chase further growth, mainly because Japan Post expects the postal business to decline. Diversification is seen as the optimal route to long term stability for the holding company. Japan’s economy is worrying. Japan’s aging population means that many insurance companies are facing a shrinking customer base, Japan Post settled on a plan to expand overseas.

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RDIF and Development Agency of Serbia Agree to Explore Joint Investments

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The Russian Direct Investment Fund (RDIF) and the Development Agency of Serbia, also known as Razvojna agencija Srbije, reached an agreement to work together to identify attractive investment projects to strengthen bilateral economic ties and increase investment flows between Russia and Serbia. Russian capital and businesses are keen on investing in Serbia.

In addition, the two countries signed an agreement to cooperate on civil nuclear energy, according to state-owned Russian reactor builder Rosatom (Rosatom State Nuclear Energy Corporation). Rosatom continues to expand it business of nuclear cooperation deals in a wide number of countries.

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