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Reserve Managers Scout for Credible Alternatives

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Central banks and official reserve institutions are in change mode. Investment returns are ranked lower on criteria as compared to safety and liquidity. For some central banks, liquidity has a higher priority than capital preservation. Reserve managers face a tough dilemma, find a safe haven to park funds but be concerned about the U.S. credit downgrade and future value of the U.S. dollar.

In the past few months, several central banks have lowered exposure to bank commercial paper, certificates of deposits, and time deposits. The European financial crisis has shaken the confidence of reserve managers and many want to limit exposure in the banking sector. The European monetary union is under pressure, while member countries try to deal with mounting public debt. Many countries have lived beyond their economic means. The global crisis has caused a flight to safe haven government bonds such as the United States, Japan, the United Kingdom and Germany.

Demand for safe haven sovereign debt has lowered yields, giving rise to opportunistic investors in second tier debt markets.

The Japanese yen is enjoying safe haven status as it jetted to an 11-year peak against the euro in January 2012. Despite loose monetary policy by the Federal Reserve, globally reserve managers see U.S. treasuries as the safest liquid asset in absence of a credible alternative. Some central banks are leaving Eurozone government bonds besides Germany, France, and the Netherlands.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

BlackRock Contemplates Stake in Eurizon

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Asset management giant BlackRock is contemplating purchasing a 30% ownership stake in Intesa SanPaolo’s asset management unit called Eurizon Capital SGR S.p.A. BlackRock is keen on growing its technology business and increase market adoption of its Aladdin platform.

Intesa has been working with UBS to seek out strategic options for Eurizon. Intesa is keen on maintaining control over Eurizon.

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SWFI First Read, June 22, 2018

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JPMorgan Fund Buys 40% of Oxford Properties’ French Portfolio

A fund advised by JP Morgan Asset Management committed €400 million in Oxford Properties’ French portfolio. Essentially, Oxford Properties sold a 49.9% non-managing interest in 32 Rue Blanche, 92 Avenue de France and Paris Bastille. Oxford Properties made its maiden investment in Paris in 2014 when it acquired 32 Rue Blanche.

Oxford Properties is the real estate unit of OMERS.

Temasek Explores Further Cash Commitments to FirstCry

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DOL Fiduciary Role is Struck Down by Fifth Circuit Court of Appeals

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The U.S. Court of Appeal, Fifth Circuit, confirmed a March 15th decision to strike down the U.S. Department of Labor’s (DOL) fiduciary rule. The fiduciary rule is a series of seven different rules that broadly interpret the term “investment advice fiduciary” and redefine exemptions to provisions concerning fiduciaries that appear in the Employee Retirement Income Security Act of 1974 (ERISA). The 5th U.S. Circuit Court of Appeals overturned a decision by a Dallas federal court that had upheld the DOL fiduciary rule.

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