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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. ]

SWFI First Read, September 21, 2018

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U.S. Public Becomes More Aware that Gmail Scans Emails

Alphabet is a major stock holding for sovereign wealth funds and large pensions. Search giant Google is under fire for allowing third-party partners and companies, like Return Path Inc and other advertisers, to share data from Gmail accounts. Many experts and tech observers already knew this, but more people in the public are becoming aware of Google’s practices when it comes to privacy. Google disclosed in a letter to U.S. lawmakers this finding. The Wall Street Journal reported that in some instances, app companies were able to read people’s emails in order to improve their algorithms. In 2017, Google said they would stop scanning all of one’s Gmail messages for the goal of personalized ads.

GPIF Infrastructure Exposure Almost Reached 200 Billion Yen in March 2018

Japan Government Pension Investment Fund’s (GPIF) exposure to infrastructure real estate was 196.8 billion JPY at the end of March 2018. At that period, 57% of the exposure was to the UK, 15% was to Australia, 15% to Sweden, 10% to Spain and 3% to Finland. 21% of GPIF’s infrastructure portfolio was linked to airports versus 27% to ports.

AIMCo-backed sPower Closes $498.7 Million Bond Deal

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Iceland Contemplates a Sovereign Wealth Fund

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The Government of Iceland is looking to possibly form a sovereign wealth fund to stabilize the country from unforeseen shocks to the national economy. The Iceland government released a statement saying, “The state’s contributions to the Fund will be equivalent to new revenues from publicly owned power production companies which are expected to accrue in the coming years.”

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CBRE Global Wins First GPIF Global Real Estate Mandate

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Japan Government Pension Investment Fund (GPIF) awarded its first global real estate mandate by hiring CBRE Global Investment Partners Limited. This is a global core real estate fund-of-funds separate account. Overseeing this mandate as a gatekeeper is Asset Management One Co., Ltd., which is a unit of Mizuho Financial Group. This RFP was launched in April 2017.

CBRE Global Investment Partners is the multi-manager arm of CBRE Global Investors.

In addition, on August 8, 2018, GPIF hired two custodians for short-term investments. These custodians are Trust & Custody Services Bank, Ltd and The Master Trust Bank of Japan, Ltd.

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