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How Hurricane Harvey Will Impact Sovereign Funds?

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As of August 30, 2017, more than 30,000 Americans remain homeless from the disastrous effects of Hurricane Harvey. An estimated 100,000 homes are thought to have been destroyed or severely damaged by the hurricane and floods. The City of Houston and outlying towns remain impacted, while Texas Governor Greg Abbott commented that the disaster was “far larger” than Hurricane Katrina and Hurricane Sandy. One Moody’s analyst projected the total economic cost to be up to US$ 75 billion – a preliminary figure.

Sovereign wealth funds with exposures to the insurance sector and insurance-related assets are likely to be affected. Sovereign funds have public equity exposure to reinsurance companies. For example, Norway’s Government Pension Fund Global (GPFG) has owns 0.85% of Swiss Re at the end of December 2016. The Norwegian wealth fund also has exposure to logistics properties in Houston with its partnership with Prologis. These properties are: 14931 North Freeway, Houston, TX 77090, 9020 Jackrabbit Rd, Houston, TX 77095, and 9010 W Little York Rd, Houston, TX 77040.

Other investors in Houston real estate include Canada Pension Plan Investment Board (CPPIB). In late June, CPPIB closed a major deal to acquire 100% of Parkway, Inc., a Houston-based real estate investment trust, for US$ 1.2 billion.

Oil Prices

A significant portion of sovereign wealth capital is derived from fossil fuels, thus the price of oil has a direct impact on the growth of sovereign wealth assets. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Shaktikanta Das Named as New CB Governor for India

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The Indian government named Shaktikanta Das as the new Governor of the Reserve Bank of India. He will be the 25th governor to lead the central bank. Das is India’s former economic affairs secretary who stepped down in May 2017.

Das replaces Urjit Patel, who stepped down as central bank governor for “personal reasons.”

Urjit Patel had been arguing with India’s finance ministry on matters such as easing lending policies versus what the appropriate size of foreign reserves should be.

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UBS and APG Form Japanese Residential Property Venture

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Long horizon institutional investors are keen on taking advantage of appealing underlying fundamentals in select Japanese residential submarkets that have experienced population growth versus rural areas. The housing market in Tokyo has decoupled from the rest of Japan due to attractive demographics and low interest rates. Real estate valuations for Japanese housing in Tokyo is still at a distance relative to the very-much inflated market of the late 1980s. UBS Asset Management Real Estate & Private Markets business and APG Asset Management, which oversees the assets of Stichting Pensioenfonds ABP, formed a new property joint venture to invest in residential properties in Japan. UBS Asset Management will manage the fund and partnership, while APG will play a strategic role. APG will contribute US$ 175 million into the venture.

This platform will pursue a build-to-core investment strategy with some allocation to the reconfiguration of income-producing operating assets in cities such as Tokyo and Osaka.

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GIC Sells 2 Chifley Square to Charter Hall

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Singapore’s GIC Private Limited sold a 100% ownership stake in a large building in Sydney, 2 Chifley Square, for A$ 98.5 million to the Charter Hall Prime Office Fund, a wholesale real estate fund. Charter Hall Group owned the building next to Chifley, the Gresham building at 167 Macquarie Street.

Advisors for the transaction are Colliers International and KPMG Real Estate Advisory.

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