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Friday SWFI News Roundup, October 23, 2015

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Want to Lead a Massive SWF’s Real Estate Unit?

Norges Bank Investment Management (NBIM) is advertising a newly-created role of chief executive officer for Norges Bank Real Estate Management. The person will report to NBIM’s CEO.

OMERS Ventures Invests in Kaleo Software

OMERS Ventures, the venture capital arm of OMERS, invested in El-Segundo-based Kaleo Software, an enterprise cloud platform for capturing and sharing employee expertise. OMERS Ventures led the US$ 7 million venture capital round. Saturn Partners also participated in the round. Prior investors such as Karlin Ventures, Qualcomm Ventures, Double M Partners and Greycroft Partners, participated in the funding round as well. Founded in 2012 by Hui-Bon-Hoa, Kaleo Software’s clients include Dell, Randstand, Lennar, Toyota Financial Services, Bacardi and Viacom.

Imperial County Employees’ Retirement System Terminates Active Managers, Not Paying for Itself

Imperial County Employees’ Retirement System, a retirement system near the U.S.-Mexico border in El Centro, California, appointed BlackRock to manage a US$ 60 million passive, all-cap domestic equities portfolio. The pension’s investment consultant is Seattle-based Verus.

The pension terminated:

Manager Amount in Millions USD Mandate
T. Rowe Price Group 28 Active Domestic Small-Cap Value Equity
TimesSquare Capital Management 32 Active Domestic Midcap Growth Equity
Franklin Templeton Investments 62 Active International Equity

 

Legg Mason Finalizes RARE Infrastructure Acquisition

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Apple’s Ginormous Corporate Cash Pile Plans to Come Home

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The positive economic effects of U.S. President Donald Trump’s tax reform have already altered the financial behaviors of major U.S. companies such as Wal-Mart Stores, Apple Inc. and AT&T.

In response to the tax law reform, many American businesses, large-to-small in annual revenues, have issued bonuses, granted awards and signaled plans to increase capital expenditures in the United States. For example, Apple announced plans to give its employees US$ 2,500 each in stock awards. A key section of the new U.S. tax reform law includes a provision for firms to take advantage of a one-time payment of 15.5% on repatriated funds down from the 35% rate.

Initial Plans

With the Dow Jones Industrial Average (DJIA) reaching new highs and the tax reform deal signed into law, Apple revealed they would invest US$ 350 billion into the United States economy over a period of five years, as they repatriate massive piles of money from overseas. The iPhone maker estimates they will payout roughly US$ 38 billion in tax payments from the overseas repatriation – thus shifting back some US$ 245 billion out of the US$ 252.3 billion it has held offshore. Apple also plans to spend an estimated US$ 30 billion in capital expenditures over the next five years, with roughly US$ 10 billion in U.S. data centers, according to the company. Apple has plans for 20,000 more jobs to create. The company that was once led by Steve Jobs had faced substantial criticism in the press over outsourcing its manufacturing to China to avoid paying U.S. taxes and lower manufacturing costs. Many of those facilities in China had labor issues such as environmental concerns, slave-like wages and extremely long work hours.

“We believe deeply in the power of American ingenuity, and we are focusing our investments in areas where we can have a direct impact on job creation and job preparedness,” said Apple CEO Tim Cook in a statement on January 17, 2017. He added, “We have a deep sense of responsibility to give back to our country and the people who help make our success possible.”

Liquid Financials and Fixed Income Changes

The sales growth of the iPhone has been a major factor in the growth in Apple’s cash pile. In 2006, Apple moved to act, forming a subsidiary in Nevada to manage investments, initially starting with around US$ 13 billion to manage. Nevada has no corporate income tax and no capital gains tax. Apple manages its investments through an outfit in Reno, Nevada called Braeburn Capital Inc. (Braeburn is a type of Apple), a subsidiary of Apple. Apple also employs some 40 to 50 external fund managers to handle the massive portfolio, according to sources. Braeburn has tried to reduce money management costs by using more separate accounts, while reducing dependence on money market funds.

As of September 30, 2017, Apple has a large investment portfolio worth an excess of US$ 300 billion, with US$ 194.714 billion in long-term marketable securities. Some US$ 128.645 billion are in current assets, with US$ 20.289 billion in cash and cash equivalents.

Focusing on the investment portfolio, some US$ 152.724 billion is held in corporate securities, with US$ 55.245 billion in U.S. Treasuries. Most of the portfolio is held in fixed income investments, including mortgage-backed securities – generally mandating investments be investment-grade and the avoidance of losing principal. Since 2012, Apple has been hoarding more corporate debt, rivaling some bond funds. Only about US$ 799 million are held in mutual funds (non-money market). Apple is also a major buyer of commercial paper across the globe. For example, the company participated in a US$ 500 million issue of 3-year floating notes from Hyundai Capital Services. The tech giant even uses derivatives to hedge against currency and interest rate movements.

The Old Scheme Ends

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CPPIB Partners with Lendlease on £1.5 Billion U.K. Build-to-Rent Venture

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The Canada Pension Plan Investment Board (CPPIB) has announced the launch of a £1.5 billion venture with Australian listed construction giant Lendlease Group centered around the development of build-to-rent private housing in the United Kingdom. The new infusion of capital will bolster the £800 million already committed to various projects in the Britain’s housing sector by Lendlease, which will develop, construct, and manage homes built through the partnership.

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Mubadala-Owned Falcon Bank to Begin Accepting Blockchain

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Zurich-based Falcon Private Bank Limited, which is owned by Abu Dhabi-based Mubadala Investment Company, has announced that it will now be accepting wealth originating from new and existing clients’ blockchain assets, reaffirming its position in the private banking industry as a first-mover in adopting distributed ledger technology. Assets will be accepted provided that they pass required due diligence to ensure full compliance with anti-money laundering (AML) and know-your-client (KYC) regulations and laws. The Swiss bank’s auditor PricewaterhouseCoopers (PwC) has reviewed the process, according to a press release.

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