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PROMOTION: Mubadala Petroleum Has a New CEO

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Mubadala Petroleum, a sovereign wealth enterprise of Mubadala Development Co, has promoted Mussabeh Al Kaabi to be CEO. He succeeds Maurizio La Noce who will remain a senior adviser to the company’s energy platform reporting to Dr. Sultan Al Jaber, the platform CEO. Mussabeh Al Kaabi was the company’s chief growth officer, joining Mubadala Petroleum in 2013 from Abu Dhabi National Oil Company (ADNOC). At ADNOC, Al Kaabi led the organization’s exploration activity and initiated joint ventures. He was a geoscience team leader at ADNOC.

Dr. Sultan Al Jaber commented in a press release, “Musabbeh has shown he has all the necessary capabilities to lead Mubadala Petroleum into the future. The company is expanding its footprint through a portfolio of growth projects and world-class partnerships across the Eastern Hemisphere. Musabbeh‘s technical knowledge and leadership skills, coupled with his solid experience in the oil and gas business, will re-enforce Mubadala Petroleum’s aspiration to strengthen its leadership regionally and globally.”

See Mubadala’s Executives

Currently, Mubadala Petroleum is developing the Manora and Nong Yao oil fields in Thailand.

Rising Interest Rates Impact Sovereign Wealth Strategies

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Sovereign wealth funds are paying closer attention to the U.S. Federal Reserve as it enters fresh territory under Jay Powell. Powell’s decisions are impacting foreign exchange holdings globally, as central bankers adjust to a newer environment of policy normalization. The United States is not the only country raising interest rates. The Philippines, Argentina, Indonesia, India, Czech Republic, Ukraine and Pakistan are just some emerging market countries that have raise interest rates.

Global institutional investors like BlackRock are concerned that the U.S. dollar could grind higher. In times of increased geopolitical or financial tensions, the greenback is seen as a safe haven by many central banks, sovereign funds and foreign public funds. July marks the 110th month of expansion, a streak that is one year away from becoming the longest in U.S. history. Stronger economic data – with U.S. gross domestic product hitting 4.1% for the second quarter of 2018, rising interest rates, and bids to lower U.S. trade deficits, are making sovereign funds rethink asset allocation or at least shift more assets out of markets like Turkey, South Africa and Brazil. The Turkish lira fell further in August, prompting the country’s central bank to take drastic action. The fallen lira sent jitters across emerging markets and to banks in Southern Europe who have exposure to Turkey. What are sovereign wealth funds doing now?

On the fixed income front, sovereign funds are paying much closer attention to their government bond holdings, keeping a close eye on countries that rely heavily on external funding. Shorter duration bonds and inflation-linked debt can act as a safeguard against rising rates and inflation. Sovereign funds, like Singapore’s GIC Private Limited, are recognizing that global equity returns are less synchronized, thus there is a move to identify select countries and regions being conducted for strategic asset allocation for 2019 and beyond. A stronger greenback, positive U.S. corporate earnings, and rising trade tensions between the U.S. and China are becoming a boon for active equity managers and smart beta funds, as public funds are requesting enhanced levels of skills in navigating stock selection. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Senator Warren Seeks Greater Federal Government Controls over Big Business

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U.S. Senator Elizabeth Warren of Massachusetts introduced a bill to mandate large U.S. corporations to obtain a federal charter and give up board seats to company employees. Taking a page from the German economic playbook, the legislation called the Accountable Capitalism Act, seeks to bring more stringent federal government controls onto large American corporations. This law would apply to both public and private U.S. companies. Countries like China, India and Germany have embraced a variety of forms of state capitalism.

Federal Charter for Large U.S. Businesses

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More U.S. Institutional Investors are Adopting ETFs, While Smart Beta Rises

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New research out of Deutsche Bank indicates that exchange-traded funds (ETFs) are primarily funded by U.S. institutional investors, accounting for US$ 2 trillion of the US$ 3.3 trillion total allocated to the funds. This is a 40 % increase from the numbers just two years ago, in 2016. Deutsche Bank strategist Chin Okoro notes, “Institutions are increasingly using ETFs as vehicles for more sophisticated portfolio solutions.”

The SPDR S&P 500 ETF (SPY) is the most popular, with US$ 185 billion of its investment coming from institutional investors. Other in-demand ETFs include the iShares Core S&P 500 ETF (IVV), iShares MSCI EAFE ETF (EFA), Vanguard FTSE Developed Markets ETF (VEA), and Vanguard FTSE Emerging Markets ETF (VWO). Smart beta funds are also gaining ground as the ETF universe matures.

Smart Beta Continues to Rise

Smart beta funds or factor-based ETFs, a type of fund that uses alternative index construction rules instead of the typical market cap-weighted index strategy, are also gaining adoption by pensions, sovereign wealth funds and insurance companies. At the end of 2017, smart beta funds had surpassed US$ 1 trillion in assets for the first time. The low cost of managing the funds makes them especially attractive for investors. A smart beta fund’s offering of intentionally-chosen, diversified holdings could spell trouble for active managers. Recently, Janus Henderson CEO Richard “Dick” Weil suggested as much on Bloomberg TV, and he vowed to make the case that actively managed funds could still provide a higher return than passive funds. Goldman Sachs, State Street, Franklin Templeton, and Fidelity International have all launched smart beta funds in recent years.

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