The 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!
The views in this article are expressed by Michael Maduell.
Michael Maduell is President of the SWFI.
Sveriges Riksbank has appointed Olof Sandstedt to lead its financial stability department on a permanent basis, effective November 14, 2017. Sandstedt has been the department’s acting head since June 7, 2017 when he took over for Kasper Roszbach, who departed Riksbank to take up a new position at Norges Bank as director of its research division.
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Since the beginning of the year, Abu Dhabi-based Mubadala Investment Company has been looking at owning the distressed Brazilian infrastructure company Invepar SA for quite some time. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
Knowlton Development Corporation (KDC) has made its latest acquisition with the purchase of Aromair Fine Fragrance Company Inc., a U.S. subsidiary of Aromair Group that specializes in air care products, from London-based Strategic Value Partners. The terms of the transaction, which was completed on November 8, were not disclosed. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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