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Possible Future for a Peruvian 10 Billion SWF

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Luis Miguel Castilla

Luis Miguel Castilla

The Latin American country of Peru is the globe’s second largest silver, copper, and zinc producer. Regards to gold producing Peru ranks number six. 60% of Peru’s exports come from mining activities. 20% of Peru’s fiscal revenues are derived from mineral reserves. It is fair to say commodity prices have a significant impact on Peru’s economy and national budget.

Peru’s southern neighbor Chile has two sovereign wealth funds, one is a stabilization fund. Currently, Peru only has a fiscal stabilization fund.

Government officials are debating the requirements for establishing a sovereign wealth fund in Peru. The proposed fund could be US$ 10 billion in size. Peru’s Minister of Economy and Finance Luis Miguel Castilla wants to see stabilization in the global commodity markets before they can finalize plans. Like other commodity-based sovereign funds, proceeds from mineral exports would be deposited into the sovereign wealth fund. The sovereign fund would invest the money overseas. Peru’s international reserves have doubled since the onslaught of the global financial crisis to around US$ 60 billion.

Since 2002, Peru has been able to pay down public debt. Peru’s Fiscal Responsibility and Transparency Law (FRTL) also called Ley de Responsabilidad y Transparencia Fiscal has been effective in helping the country reduce its debt. Public sector gross debt was reduced from 44% of GDP in 2004 to 24% of GDP in 2010.

Peru’s Fiscal Stabilization Fund
Peru has a fiscal stabilization fund (FEF). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Japan’s GPIF Awards Nissay Asset Management with ESG Disclosure Mandate

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Increasingly asset owners across the Asia-Pacific region are studying the impacts of environmental, social, and governance factors on listed companies. As more Japanese pensions augment asset allocation to listed equities, the importance of corporate non-financial disclosures and practices becomes clear. These disclosures can have a material impression on company stock prices. In addition, Japanʼs Stewardship Code and Corporate Governance Code in 2014 and 2015 were launched, respectively. These codes helped the (environmental, social, and governance) ESG concept gain momentum in Japan.

Japan’s Government Pension Investment Fund (GPIF), the largest public pension fund in the world, awarded a research mandate to Nissay Asset Management Corporation. The mandate entails studying ESG disclosures. The study will conduct a comparable analysis on ESG standards and practices, while taking into account input from both investors and companies. With around US$ 110.5 billion in assets under management, Nissay Asset Management is owned by Japanese life insurance giant Nippon Life Insurance Company.

As GPIF boosted its allocation to domestic equities, the asset owner took a deeper look into the impact of ESG on equity investing. GPIF is keen on improving efficiencies in Japan’s capital markets. GPIF is a universal owner of stocks, similar in some aspects to what Norway’s Government Pension Fund Global (GPFG) does.

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Norges Bank Real Estate Management Buys Central Paris Property

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Norges Bank Real Estate Management, the real estate unit of Norges Bank Investment Management (oversees Norway Global Pension Fund Global), has signed an agreement to acquire a 100 percent interest in an office property located on 54-56 rue la Boétie in central Paris.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Schlumberger Gets Closer to Eurasia Drilling Company

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Russia’s sovereign wealth fund, the Russian Direct Investment Fund, and American oilfield services giant Schlumberger (SLB) have planned a deal to invest in Russia’s Eurasia Drilling Company Limited. RDIF CEO Kirill Dmitriev made the announcement. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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