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Push for open SWFs risks investment shift

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According to the Reuters, “Leading sovereign funds formed the International Working Group of Sovereign Wealth Funds in 2008, announcing a set of 24 principles and best practices, known as the Santiago Principles, last October. The group — whose members include the United Arab Emirates, Kuwait, Singapore, China, Korea, Russia and Norway — meets once a year to exchange views on issues of common interest and the next gathering is due in October in Baku, Azerbaijan. Gary Smith, head of central bank, supranational and SWF business at BNP Paribas Investment Partners, warns that an excessive push for transparency, coupled with recent poor performance, could lower the risk appetite of SWFs and encourage them to favor safer instruments such as bonds.

‘Following the whole push toward transparency, funds opened themselves up for a monitoring process which did not exist,’ Smith said.

‘We have transparency problems for them. The consequences are that these guys are being marked to market on a daily basis by domestic constituents. It’s uncomfortable, particularly when the assets under management shrink.’

Sponsoring governments therefore need to spell out the mandate of their SWFs with a clearer investment horizon — thereby allowing them to ride out short-term portfolio fluctuations and protecting them from domestic criticism.

‘Obviously we believe transparency is a good thing. The problem of transparency is — daily performance, daily this, daily that — that we create an obsession which often detracts from what you are trying to achieve from a particular portfolio,’ said John Green, global head of business development at Investec.

‘There should be governance structures, transparency, disclosure but you don’t want to drive the investment strategies through public opinion,” said Green, whose clients include African official institutions.'”

read more: Reuters

CPPIB and Ares-Owned Neiman Marcus Faces Lawsuit from Marble Ridge Capital

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The storied Neiman Marcus Group is a highly-leveraged luxury retailer as the result of two leveraged buyouts (LBO). After its second LBO, Neiman Marcus was stuck with US$ 4.91 billion in funded debt. Neiman Marcus’ profits are in sharp decline starting from 2015. Neiman Marcus is facing short term debt maturities.

Hedge fund Marble Ridge Capital LP, a New York-based firm, is suing Neiman Marcus Group, Inc., and the investors behind it in Dallas County, Texas. Marble Ridge Capital claims the parent company of Neiman Marcus defrauded creditors of Neiman Marcus by transferring assets worth approximately US$ 1 billion of value to the parent company for no consideration. Maple Ridge Capital claims the scheme was perpetrated for the benefit of the indirect beneficial owners of the company – Ares Management, L.P. and the Canada Pension Plan Investment Board (CPPIB), according to the lawsuit. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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SWFI First Read, December 10, 2018

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IMF Bentham Opens New London Office

IMF Bentham Limited opened a new London office called IMF Litigation Funding Services Limited. The division will provide litigation finance, investment capital and strategic services for disputes in the EMEA region, which includes the United Kingdom, Europe, Middle East, and Africa.

Falck Renewables Buys Portfolio of Windfarms in France

A subsidiary of Falck Renewables acquired a portfolio of five onshore windfarms in north-eastern and western France from a fund affiliated with Glennmont Partners for €37 million. The sale was due to the fund’s divestment plan. These windfarms are located in Bois Ballay, Les Coudrays, Mazeray, Eol Team, and Noyales.

Carlos Ghosn Charged by Japanese Prosecutors

Japan government prosecutors indicted Carlos Ghosn, the former chairman of Nissan Motor, and the auto company. The indictment accuses the parties of violating Japanese financial laws by underreporting his compensation. Nissan disclosed Ghosn’s misconduct which included underreporting his compensation and using corporate funds for personal expenses.

OIF Plans to Go Defensive on Public Equities

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First Inning on Augmented Reality a Strike for SWFs

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Augmented reality (AR), which is not the same as virtual reality, is an industry that sovereign wealth capital has slowly permeated. The impressive technology has not made inroads into mainstream U.S. culture – remember Google’s efforts with Google Glasses. However, these augmented reality glasses may have industrial purposes such as in car production or logistics.

Malaysia’s Khazanah Nasional Berhad backed London-based Blippar, an augmented reality studio company. Blippar appears to be on the brink of financial collapse, according to a number of media sources. There is a dispute between investors Khazanah and Nick Candy, in which the SWF had blocked emergency fundraising. This fundraising effort would have most likely lowered Khazanah’s equity stake. In June 2018, Blippar raised an extra £20 million from investors to keep things running. David Rubin & Partners LLP was hired by Blippar as insolvency practitioners.

Magic Leap

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