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Facebook Fall Impacts Sovereign Wealth Portfolios

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Image: Screenshot, Facebook.com, July 30, 2018.

Many large sovereign funds are indirectly allocated to Facebook, either through external fund manager mandates or through direct holdings. A number of these large sovereign investors have embraced passive strategies that link their equity portfolios to massive shareholdings in Facebook and other social media companies. Some public funds also have exposure to Facebook through hedge fund investments. For example, Steve Mandel’s Lone Pine Capital went “bigly” on Facebook, doubling down its investment in the first quarter of 2018. Facebook had become Lone Pine Capital’s largest U.S. long position, according to filing data.

Is Facebook flaming out? Facebook suffered its largest one day loss after hours on Thursday, July 26th, which wiped out US$ 120 billion in equity in the company. Decelerating revenue, a heavy investment in cybersecurity, and the lack of a clear driver of growth caused consternation among investors, who dumped shares in the social media giant, which boasts 1.45 billion daily active users. A string of negative press also contributed to poor investor sentiment. The company has been in the spotlight recently for privacy violations and concerns over possible election rigging. There may also be disruptions in Facebook’s core business. Virtually all of Facebook’s revenue comes from advertising. This accounts for a gargantuan US$ 8 billion in global revenue. However, new regulations will force advertisers to make campaigns with broader appeal than they were accustomed to. This could hamper ad campaigns that target very specific demographics, and result in a loss of income for the company.

In its conference call, Facebook leadership touted the popularity of Messenger and WhatsApp, though both services are offered free of charge. Sheryl Sandberg suggested that these platforms would be monetized at some time in the future. Shares slid shortly after her remarks. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Calamos Investments to Acquire Timpani Capital Management

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Naperville, Illinois-based Calamos Investments signed a deal to acquire Milwaukee-based Timpani Capital Management LLC, which focuses on small and small-midcap growth investing. Founded in April 2008, Timpani Capital Management oversees around US$ 588 million in assets. The deal is expected to close in the second quarter of 2019.

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RDIF and Russia-Japan Investment Fund to Invest in Russian Subsidiary of SBI Holdings

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The Russian Direct Investment Fund (RDIF) and the Russia-Japan Investment Fund (launched by RDIF, the Japan Bank for International Cooperation and JBIC IG Partners) have reached an agreement with the Japanese corporation SBI Holdings to invest in SBI Bank LLC, SBI Holdings’ subsidiary in Russia. SBI Bank LLC will undergo a large-scale reorganization.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Ocasio-Cortez and Maxine Waters to Oversee US Banking System via House

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The youngest woman ever to serve in U.S. Congress – starting at the age of 29 – already has an opponent in her sights. Freshman U.S. Representative Alexandria Ocasio-Cortez, often dubbed AOC on Twitter, was appointed to the House Financial Services Committee, where the democratic socialist will oversee Wall Street. This committee oversees the banks and financial institutions of the United States. With Republicans controlling the U.S. Senate and the White House, and the Democrats controlling the House, one can expect less game-changing bills being turned into laws in the banking sector.

While bartending and waiting tables at the Flats Fix taco bar in Union Square, Ocasio-Cortez upset the more centrist Representative Joe Crowley, Chairman of the House Democratic caucus. Encouraged by her success, other far left democrats are planning to challenge moderate democrats in the 2020 primaries. Ocasio-Cortez is also expected to further strengthen the influence of Chairwoman Maxine Waters of the House Financial Services Committee. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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