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Michael Maduell – Bold Predictions for 2015

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pathThe end of the year is a fantastic time for lists, rankings and predictions. If 2014 proved anything, it’s that guessing what’s going to happen in the world of asset owners is a vain and even slightly embarrassing endeavor. Indeed, who could have expected that sovereign wealth funds would reach US$ 7 trillion in assets, Bill Gross would be departing from PIMCO, the adoption of smart beta among institutional investors would increase, EBOLA, oil price declines, the fall of the ruble and SWFs investing in startups like Uber and Xiaomi? Nevertheless, at the risk of subjecting myself to future criticism, my place as the Editor-In-Chief at SWFI all but necessitates I engage in such vanities. These predictions will focus mostly on finance, investments and geopolitics.

Stock Market Will Be Up in 2015 – Thanks Fed
Of course, past performance is no guarantee of future results. Despite what everyone says, the stock market goes up in most years. With loose money flowing around, corporate profits still holding and more money being dumped into the market, the laws of economy gravity appear to be working for stock market investors.

Private Equity Bubble Grows, Tough Year for Energy-Focused PE
More and more institutional investors are committing to private equity funds. We have seen record amounts of raises in energy-focused private equity funds. Yet, the price of oil is dropping sharply and energy small cap funds have had horrible performance in late 2014. 2015 will be a difficult one for energy-focused private equity funds.

PIMCO Will Be Fine
Every financial media outlet obsessively wrote about the departure of Bill Gross and how it would impact PIMCO and Janus. Know-it-all writers opined about Gross’ lunacy and why it was a good idea for him to leave. Behind the scenes, PIMCO was prepping for this, carefully assembling a team of CIOs to avoid key man risk again. Despite some redemptions, PIMCO will ride out the storm.

Smart Beta and Factor-based Investing Adoption Will Continue
We did a survey this year, covering 72 public institutional investors with over US$ 2.9 trillion in assets, and found a number of fascinating things. More asset owners will be embracing factor investing and smart beta approaches, putting excessive pressure on the traditional asset management industry. This will be a very interesting trend to watch in 2015 and beyond. We look forward to, once again, act as thought leaders in this sphere.

Hedge Funds Face Greater Scrutiny
Hedge funds will face greater scrutiny in 2015. The California Public Employees’ Retirement System (CalPERS) dumping of its absolute return portfolio is a sign that pension investors will rethink hedge funds. CalPERS saw hedge funds as too costly and complicated. Granted, CalPERS had a relatively tiny allocation to hedge funds. But the performance of many hedge funds in relation to the fees they charge will continue to be a big issue for asset owners. Last, if there is a major disruption in financial markets in 2015, hedge fund assets will drop.

Greece Will Not Leave the Eurozone
The ongoing political crisis in Greece is not enough to boot the country from Europe. Despite the growth of populist parties on both the left and right in Greece, government powers of moderation are strong in Greece. The “Grexit” will be knocked back by powers of the status quo, and a grand coalition will lead Greece with another year of more austerity and miniscule growth.

Happy New Years!

Michael Maduell

The views in this article are expressed by Michael Maduell.
Michael Maduell is President of the SWFI.
www.swfinstitute.org

Ping An Good Doctor Lures Big Public Asset Owners

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Ping An Good Doctor, formerly known as Ping An HealthCare and Technology Company, is a Chinese online healthcare platform that is part of Ping An Insurance (Group) Company. This unit is planning to be offered in a Hong Kong initial public offering that could raise as much as 8.8 billion HKD in shares at 50.80 or 54.80 HKD per share.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Temasek and Schneider Electric Eye L&T Electrical Unit

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Singapore’s Temasek Holdings and France-based Schneider Electric are in talks to acquire Larsen & Tourbo’s electrical and automation business. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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CalPERS Allocates $1 Billion Internally to a Global ESG Strategy

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In February 2018, the California Public Employees’ Retirement System (CalPERS) allocated US$ 1 billion to an internally-managed QSI Global ESG strategy. The internally-managed strategy was developed by New York-based QS Investors, LLC, a subsidiary of Legg Mason. CalPERS entered into a 5-year contract with QS Investors, with a possible spend of over US$ 1 million per annum.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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