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Friday SWFI News Roundup, May 20, 2016

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MOODY’S: U.S. Tech Giants Hold Massive Pools of Cash

Ratings agency Moody’s Investors Service put out a study showing that Apple, Microsoft, Alphabet (formerly called Google), Cisco Systems and Oracle are sitting on US$ 504 billion, or 30%, of the US$ 1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015. The cash concentration is higher in 2015 compared to 2014, in which the companies mentioned held 27% of cash and 25% of cash in 2013.

December 2015 – Financial Data – Cash in Billions

    Apple, AAPL, US$ 215.7
    Microsoft, MSFT, US$ 102.6
    Alphabet, GOOGL, US$ 73.1
    Cisco Systems, CSCO, US$ 60.4
    Oracle, ORCL, US$ 52.3

Source: Moody’s Investors Service

CPPIB Posts Lowest Return Since Great Recession

The Canada Pension Plan Investment Board (CPPIB) posted an annual return of 3.4%. This is its lowest rate of return since the Great Recession. CPPIB released its latest annual report.

Korean Investors Buy IZD Tower in Vienna

CBRE Global Investors acquired IZD Tower in Vienna, Austria for Korean separate account institutional clients. The office tower is located in the district of Donau City. The seller is a fund managed by Vienna-based Signa Real Estate Capital Partners.

QIA Interested in Asia Square Tower I

Another sovereign wealth fund is taking a crack at a large Singapore office property. The Qatar Investment Authority (QIA) has expressed interest in the Asia Square Tower 1 in Singapore. The seller is BlackRock.

Hermes Investment Management Buys Out Future Fund’s Stake in Southern Water

Hermes Investment Management, owned by the U.K.’s BT Pension Scheme, acquired a 17% stake in British utility Southern Water that was owned by Australia’s Future Fund. The Future Fund indicated it was looking to dispose of its position in Southern Water. Hermes Investment Management now owns 21% of Southern Water.

STT Buys Large Stake in Data Center from Tata

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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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