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Bridgewater and Strategic Investing, American Public Pensions are Becoming More Innovative

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Britt Harris

Public markets have taken a beating in 2011 and treasuries are producing low yields. Public investors across the United States have had board conversations to reduce their target rate of return. There has been a significant shift of more American public pensions of either moving towards alternatives or growing existing exposure. A number of public pension plans are trying to be more creative and opportunistic when investing plan assets.

The Teacher Retirement System of Texas (TRS) approved a US$ 250 million dollar investment in Bridgewater Associates Intermediate Holdings, LP. Founded in 1975, Bridgewater Associates manages around US$ 120 billion in assets and is privately owned. The investment is a non-voting equity stake in an investment management company, a first for the public pension fund.

Trustees viewed the opportunity as a different type of risk, another way of earning a risk-adjusted return.

Basically, TRS will receive annual profit distributions based on their equity ownership percentage. The value of TRS’ equity interest has the possibility of increasing if the firm can attract more clients; asset managers get paid when they manage more assets.

The chief investment officer of the TRS, Britt Harris briefly served as chief executive of Bridgewater Associates. He recused himself from the process and has no personal financial interest in Bridgewater for more than five years. Ray Dalio, who founded Bridgewater, and his family trust will maintain around a 10% to 20% equity stake at the end of a ten year period. CalPERS made a similar move investing in the Carlyle Group along with Mubadala Development Company.

Moving along the alternative spectrum

Recently, the Georgia State Senate approved legislation to allow Georgia’s public pension funds to invest in alternatives, private placements, and other private instruments. The bill would allow public funds to invest up to 5% of total assets in alternative investments managed by firms with at least US$ 100 million in assets under management. In February, the California State Teachers’ Retirement System (CalSTRS) gave Industry Funds Management, an infrastructure mandate worth US$ 500 million. CalSTRS has made a big thrust into infrastructure investments, similar to their neighbor CalPERS.

In addition, they’ve made a strategic investment into Bridgewater Associates. On another note, the Wyoming Retirement System has developed plans to make its first private equity investments. The US$ 6.5 billion public pension received board approval on February 17, 2012.

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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