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European Asset Owners Rally Behind Billion Plus EM Green Bond Fund

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The International Finance Corporation (IFC) and French asset manager giant Amundi revealed the close of a US$ 1.42 billion green bond fund focused on capacity-building activities in emerging markets, made possible with backing of a number of European pensions, including France’s Etablissement de Retraite Additionnelle de la Fonction Publique (ERAFP), and Swedish funds Alecta, AP3, and AP4.

Thought to be the world’s largest targeted green bond fund to date, the Amundi Planet Emerging Green One (EGO) saw its start with a US$ 256 million cornerstone investment from the IFC, and is approximately 80% funded by private financiers, with the remaining 20% coming from public institutions.

Catalyst

Launched nearly a year ago, the Luxembourg-listed fund is expected to deploy up to US$ 2 billion in funds towards emerging market green bonds through 2025 as proceeds are reinvested over the course of its seven year lifespan – and thereby increase the capacity of banks in the developing world to fund climate change-related investments. Investment guidelines for the fund stipulate that capital will initially go towards listed securities issued by sovereign and quasi-sovereign financial institutions that will be screened against a robust set of internationally recognized environment, social, and governance (ESG) criteria. Geographically, the fund will maintain a minimum exposure of 15% in each of its three target regions: Eastern Europe and the Mediterranean, the Americas, and Asia. Approximately 30% of the fund’s capital has been invested so far, according to Jean-Jacques Barbéris, co-head of institutional clients coverage at Amundi.

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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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