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Michael Maduell – Bold Predictions for 2015



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.

SWFI First Read, January 19, 2018



NY Governor Cuomo Seeks to Treat Carried Interest as Ordinary Income for State Taxes

On January 18, 2018, New York Governor Andrew Cuomo revealed he had submitted a bill to the New York State Legislature that seeks to treat carried interest as ordinary income rather than capital gains in regard to state taxes. Governor Cuomo in his press release said that the federal carried interest tax provision costs New York roughly US$ 100 million per year.

William Bain – Bain Founder Passes Away

Dated January 18, 2018, William Bain Jr. passed away at his home in Naples, Florida at the age of 80. Bain started at the Boston Consulting Group and left in 1973 to form Boston-based Bain & Co. By 1984, Bain formed Bain Capital alongside a number of colleagues including former 2012 Republican presidential nominee Mitt Romney. In a statement to the Boston Globe, Romney said, ” It’s hard for me to imagine my life and career without Bill Bain’s mentoring.”

Prostar Capital Gets Controlling Stake in Socar Aurora Fujairah Terminal

Prostar Capital now has a 90% control stake in Socar Aurora Fujairah Terminal FZC by purchasing 100% of the shares of Socar Aurora Terminals S.A. The Prostar Capital entities investing in the asset are Prostar Asia-Pacific Energy Infrastructure Fund and a co-investment fund managed by Prostar Capital for a large U.S. state pension plan. The storage terminals acquired in the Port of Fujairah in the United Arab Emirates.

Socar Aurora Fujairah Terminal FZC is a joint venture between State Oil Company of Azerbaijan Republic (SOCAR), Swiss-based commodity trader AURORA Progress, and the Government of Fujairah.

Prostar Capital started buying the terminal back in 2013 at 18.6%. The private equity firm eventually moved its ownership up to 40% on August 14, 2015.

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ISIF Plans to Back 20 Solar Farms in Ireland



The Ireland Strategic Investment Fund (ISIF) and Hamburg-based Capital Stage, a solar and wind park operator, are financially backing the development of 20 solar farms in Ireland which has an estimated cost at €140 million. ISIF is funding 25% of the costs, with Capital Stage providing 75% of the costs.

The generation capacity is estimated at 140 MW, with each farm ranging between 5 MW to 25 MW. The majority of the solar farms will be located along the east and south-west coasts of Ireland. Power Capital, a Dublin-based energy company formed by Peter Duff and Justin Brown in 2011, is overseeing the developments.

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PNB to Buy Stake from Malaysian Developers in Battersea Power Station Project



Malaysia-based Permodalan Nasional Bhd (PNB) inked plans to acquire a stake in the Battersea Power Station from Malaysian developers Sime Darby Property and SP Setia, which between them own 80 percent of the site located on the south bank of the Thames. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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