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How Falling Oil Prices Are Impacting Sovereign Wealth Funds

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offshore111To weather the boom and bust cycles of crude oil commodities, many oil-rich countries and states formed sovereign wealth funds to accumulate assets (see – sovereign wealth fund definition). At the beginning of 2008, sovereign wealth fund assets stood at US$ 3.43 trillion. As of March 2015, sovereign wealth funds have over US$ 7.1 trillion in assets under management. Of those assets, US$ 4.29 trillion come from oil & gas sovereign wealth funds. Sovereign wealth funds such as Norway’s Government Pension Fund Global (GPFG), Kuwait Investment Authority (KIA) and Qatar Investment Authority (QIA) were created to buffer their government’s fiscal budget from oil price volatility.

Sovereign wealth fund profiles

During the summer of 2014, oil prices hovered and peaked around US$ 115 per barrel. Months later, oil prices plummeted to the 60 dollar price range, roiling stock markets, energy exchange-traded funds (ETF), junior energy exploration companies and oil production projects. To make matters worse for oil producers who operate at the US$ 80 per barrel break-even price range, OPEC announced it will not restrain production to fight the decline in oil prices. Before the oil crash, a number of oil-based economies donned Panglossian spectacles when it came to their countries fiscal budget – spending lavishly on social programs and expensive infrastructure. Fallen oil prices have shifted the views of higher-risk countries exposed to oil wealth.

Non-US Sovereign Wealth Fund Ranking – Risk Levels of Depletion and Break Even Prices

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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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