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NBIM Proposes Major Changes to SWF Bond Portfolio

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Yngve Slyngstad

Norges Bank penned a letter to Norway’s Ministry of Finance, “Letter to the Ministry of Finance, 1 September 2017”.

The letter essentially recommended four major changes to the Norway Government Pension Fund Global’s (GPFG) fixed income portfolio.

Four Recommendations.

1. The Bank recommends that a specific currency list is drawn up for the bond index. The currency list must ensure that the index is liquid and investable for the fund. The currency list should consist of US dollars, euros and British pounds.

2. The Bank’s recommendation is that the benchmark index for bonds should comprise nominal government bonds issued in currencies on a currency list.

3. The maturity of the bond index should be managed. We recommend setting an upper limit for maturity of around ten years for bonds included in the index. A shorter maturity will help reduce uncertainty about the fund’s volatility.

4. A portfolio equal to the current bond index is sufficiently liquid given the fund’s liquidity needs. The Bank’s recommendations in this letter may improve liquidity further, and so we believe that there is no need to amend the management guidelines in this area.

Source: Letter to Ministry of Finance, 1 September 2017.

What This Means?

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HKMA Intervenes to Support Currency Peg for First Time Since May 2018

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The Hong Kong Monetary Authority (HKMA) intervened to defend its peg to the U.S. dollar. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Genoa Motorway Bridge Collapses

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The 51-year-old Genoa bridge death total has risen to 35 people. On August 14, 2018, a highway bridge, known as the Morandi Bridge, in the center of Genoa had collapsed in torrential rains. The roadway, which was built of reinforced concrete, fell as much as 45 meters. The cause of the collapse was under investigation, according to Angelo Borrelli, chief of the Civil Protection Department. A good number of Italy’s viaducts, galleries and bridges were built during the 1950s and 1960s. Italy-based Autostrade is a motorway operator controlled by Atlantia S.p.A. Autostrade was conducting maintenance work on the bridge. Autostrade said it had been strengthening the road foundations of the bridge.

The Italian Benetton family founded the Benetton Group S.p.A. fashion company in 1965. Sintonia SA is the Luxembourg financial holding company controlled by the Benetton family, which has about a 30.25% stake in Atlantia. Singapore’s GIC Private Limited owns 8.14% of Atlantia as of March 31, 2018. BlackRock holds a 5.12% ownership stake in Atlantia during the same time period.

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Bill Gross Can’t Save Janus Henderson

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Speculation is swirling that legendary bond king Bill Gross could be ousted from the fund he oversees at Janus Henderson (JHG). However, Janus Henderson CEO Dick Weil is firm in his belief that Gross is fit for the position, though he also stated that Gross has been performing in a way that was “challenging and disappointing.” Bloomberg’s Francine Lacqua suggested that Gross could “taint” the overall picture at JHG.

After acknowledging that Gross was struggling, Weil was quick to defend him, pointing to his successful 40 year career in the industry. Weil expects Gross to recover from his current investment woes “in time.” He went on to underscore his unshakable confidence in Gross, “Bill’s a terrific investor, and a terrific, strong player.” Gross, for his part, is said to have admitted to making “bad bets,” according to Weil. Weil was only recently chosen over contender Andrew Formica, his Co-CEO, to serve as sole CEO of the company. Australian-born Formica was dismissed by JHG’s board of directors. JHG’s single largest shareholder is Japanese life company Dai-Ichi Life.

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