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Michael Maduell – 2013 Intersection of Sovereign Funds and Capital Markets



Michael Maduell, President, Sovereign Wealth Fund Institute

Michael Maduell, President, Sovereign Wealth Fund Institute

2013 has been a fantastic year for the Sovereign Wealth Fund Institute. We want to thank our sponsors, members, clients, subscribers and readers for participating and consuming our information daily in this fast-paced and evermore demanding space. Additionally, our SWFI membership program is gaining traction with some of the largest asset managers.

From the start of 2008 until the end of 2013 (December), Sovereign Wealth Fund assets grew by 87.4%; this is a massive surge of public investor capital.

In 2014, we will be rolling out new solutions and innovative products catering to our demanding client base. One of these products will make asset managers’ lives easier, while providing extensive analysis and peer review for asset owners. Among other activities, we are planning to execute on additional events, increase research coverage and grow new portals of intelligence.

With that being said, I wanted to highlight a few thoughts about 2013 and how 2014 could play out.

Size of the Sovereign Fund Market

The Sovereign Wealth Fund Institute covers nearly all types of public asset owners in terms of events, news and research. Frankly speaking – sovereign wealth funds have surpassed US$ 6 trillion in assets. From the start of 2008 until the end of 2013 (December), Sovereign Wealth Fund assets grew by 87.4%; this is a massive surge of public investor capital.

2012 Sovereign Wealth Funds vs. Pension Market Size

Investor Class Billions USD
Total US Pension Assets 16,851
Total SWF Assets 5,198 (2013 – Over US$ 6 trillion)
Total UK Pension Assets 2,736
Total Australia Pension Assets 1,555
Total Canada Pension Assets 1,483
Total Global Pension Assets 29,754

Source: Towers Watson Global Pension Assets Study 2013, Sovereign Wealth Fund Institute (SWF Data)

This new normal is not a regular environment for investing, but people have adapted, and, quite possibly, have done so at their own detriment.

Excess Capital and Consequence

Excess capital has deluged markets, pushing up asset prices – a serious consequence of central bank quantitative easing (QE) and bailouts. New money is basically being printed and used to purchase primarily government and government-backed securities on the open market. Analyzing the monetary base of the United States, one can view tremendous growth in M2. From the start of 2003 until November 2013, M2 has grown 89.5%, or approximately US$ 5.2 trillion.

Monetary Base: Sum of currency in circulation and reserve balances

M1: Sum of currency held by the public and transaction deposits at depository institutions

M2: M1 plus savings deposits, small-denomination time deposits and retail money market mutual fund shares
Source: Federal Reserve

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Citing Improving Economy, Federal Reserve to Raise Rates



Jerome H. Powell made his debut by expressing optimism in the United States economy. The Federal Reserve agreed to increase interest rates by a quarter of a percentage point – benchmark interest rate from1.5% to 1.75%. This is the sixth time the Federal Reserve raised rates since the global financial crisis. The central bank also signaled a possible two more rate raises in 2018 and three rate increases in 2019.

At the press conference, Powell commented that the U.S. economy was healthier than it had been in 10 years.


Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.

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Temasek Leads Series E in 17ZUOYE



17ZUOYE (also known as Homework Together) is an online education platform that is owned by Beijing-based Sunny Education Inc. 17ZUOYE was founded by Liu Chang and Xiao Dun in October 2011. The company raised US$ 250 million in a Series E round in funding led by Singapore’s Temasek Holdings. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Abu Dhabi Investment Council to Consolidate into Mubadala



UAE President Sheikh Khalifa bin Zayed Al Nahyan issued a groundbreaking law that restructures the Abu Dhabi Investment Council (ADIC) to be under the Mubadala Investment Company group. Under the new law, the Mubadala Investment Company Board of Directors will now become the Board of Directors for the Abu Dhabi Investment Council. Furthermore, ADIC management will continue to run the council. Eissa Mohammed al Suwaidi will continue to lead ADIC as its Chief Executive Officer, and will report to Mubadala Group CEO and Managing Director Khaldoon Khalifa al Mubarak.

In a release, he commented, ADIC becoming part of the Mubadala Group is yet another step in Abu Dhabi’s efforts to accelerate the diversification of the UAE’s economy. With an investment vehicle of significant scale, world-class talent and wide geographical reach, we enhance the country’s competitive position.”

Earlier in 2017, Mubadala Development Company merged with International Petroleum Investment Company (IPIC). This is a trend in Abu Dhabi to create economies of scale within these large state-owned entities.

In 2007, ADIC started operations after it splintered off from the Abu Dhabi Investment Authority (ADIA). A significant portion of ADIC’s holdings include stakes in large financial institutions in the UAE.

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