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How Timor-Leste May Prove Naysayers Wrong

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timor1Emerging from past conflict, the post-colonial nation of Timor-Leste is ushering in a new era to nurture economic vitality. During the nation’s infancy, the country had very little infrastructure and money. On May 20, 2002, independence was restored, as the administration of the United Nations handed over the keys. Nearly a decade later, on December 31, 2012, the United Nations peacekeeping mission in Timor-Leste concluded operations. With a population above one million, the country has been able to grow fast by exporting oil, gas and coffee. Timor-Leste coffee growers can thank Starbucks for being a big buyer of their coffee beans. Excluding petroleum and gas exports, coffee accounts for 90% of the nation’s merchandise exports.

Since 2007, Timor-Leste had an average growth rate of 11.9%. Coupled with low tax rates and abundant natural resources, the young country is on an ambitious path to transform their home from an agriculture-centric to an industrial one by 2030.

The Timor-Leste Petroleum Fund, their oil-based sovereign fund, had a slow start and by 2007 accumulated US$ 1.8 billion. Managed by the Banco Central de Timor-Leste, the fund’s investments are conservative compared to other sovereign funds like the Abu Dhabi Investment Authority or the Kuwait Investment Authority. The 2011 amended Petroleum Fund Law states that the objective of the investment policy is to maximize the risk-adjusted return.

A maximum of 50% of the sovereign fund can be invested in equities.

Fast forward in time with the advances in storage technology and massive investments in energy transportation, the sovereign fund has mushroomed to US$ 13.6 billion – surpassing Botswana’s Pula Fund and Chile’s Pension Reserve Fund. According to the Timor-Leste government, since January 2013, the sovereign fund has increased on average US$ 324 million each month. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, May 25, 2018

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MedInvestGroup Pushes Investment into Russian High-Tech Oncology Centers

The Russian Direct Investment Fund (RDIF) and Mubadala Investment Company have attracted MedInvestGroup, which manages a network of the PET Technology regional oncology and radiological centers, as a strategic investor in the joint management and development of a network of cancer diagnosis and treatment centers. The deal aims to significantly improve the efficiency of the already functional centers in Podolsk and Balashikha. The corresponding agreement was announced today at the St. Petersburg International Economic Forum.

Southern Satellite City and RDIF Reach a Financing Agreement

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French Industrial Giants Find Opportunity with RDIF

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A number of French industrial companies continue to invest within Russia, finding opportunities within the mega country. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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CPPIB Targets 33% in Emerging Markets by 2025

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The Canada Pension Plan Investment Board (CPPIB) generated a net return after expenses and pension contributions of 11.6% for the fiscal year ended March 31, 2018, versus its reference portfolio of 9.8%. For the reported fiscal year, CPPIB grew its net assets to a new high of C$ 356.1 billion (US$ 277.2 billion), compared to C$ 316.7 from the year previous.

Mark Machin, President and Chief Executive Officer at CPPIB, attributed the performance to the rising tide in public equity markets across most geographies, whose volatility in recent months was buoyed by significant fourth quarter earnings in the fund’s private holdings. Public and private equities, CPPIB’s first and third largest asset classes by exposure at 38.8% and 20.3%, saw estimated returns of 11.4% and 16.1%, respectively. Machin joined CPPIB in 2012 and was moved to the top in June 2016, following the departure of Mark Wiseman. Machin has a knack for the Asian region, being CPPIB’s first president for Asia and also spent nearly 20 years in Asia, working at Goldman Sachs. CPPIB plans to continue heavily investing in the APAC region, along with India.

Emerging Markets

“By 2025, we will invest up to a third of the Fund in emerging markets, which by that time are anticipated to account for 47% of global GDP,” said Machin in his section of the annual report outlining the pension’s updated strategic plan. CPPIB currently has C$ 56.1 billion invested in emerging markets, C$ 22.4 billion of which is wrapped up in China.

Foreign and emerging markets continued to dominate in CPPIB’s private equity investments with returns of 16.0% and 19.5%, compared to 1.8% for their Canadian counterparts. Asia was a standout market for the pensioner, which raised its exposure to private equity deals in the region by nearly 28% from C$ 13.4 billion to 17.1 billion, closed six direct investments worth C$ 1.6 billion, committed C$ 1.7 billion towards eight funds, and completed three secondary transactions for C$ 400 million.

With 275 global transactions completed over the fiscal year, CPPIB’s geographic exposure places 15.1% of its assets at home in Canada, 37.9% in the neighboring United States, 13.2% in continental Europe, 5.6% in the United Kingdom, 3.1% in Australia, and a whopping 20.4% in Asia.

Public Equities

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