Negative Rates in Europe, Shifted Sovereign Fund Behavior


Asian and Middle Eastern sovereign wealth funds and large pension investors have been awarding a slurry of mandates to opportunistic credit managers. For example, in May, the £4.8 billion London Pensions Fund Authority hired Apollo Global Management for a £150 million allocation to target distressed debt, real estate debt, leveraged senior loans and private lending in developed markets. The China Investment Corporation (CIC) recently moved forward on a deal to invest in WLR Cardinal Mezzanine Fund, a €350 million debt fund, co-managed by private equity firm WL Ross & Co. and Dublin-based Cardinal Capital Group. These public institutional investors have been trying to decrease any unnecessary long-term exposure to the European sovereign debt market.

Meanwhile, chief investment officers and board members must face the daunting task of striking the right balance of liquidity versus capital preservation. A host of European government bonds are trading with a negative yield, presenting complex problems for institutional investors. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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