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Should Pension Giants Still Back Low-Vol Strategies?

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As occidental central banks cautiously signal a retreat from loose monetary policy, will there be greater bouts of volatility in the near future? The low-volatility trade has worked like magic – post the global financial crisis.

The early February sell-off rankled the feathers of U.S. pension trustees, sending plausible-sounding studies in low-vol strategies to the toilet. CBOE’s Volatility Index, or VIX, closed high during the period of market mayhem. For CIOs, should the selling of volatility continue, or should the trade be nixed?

Selling risk or volatility has been profitable for a cadre of U.S. pensions as they sought yield in a low interest rate world of quantitative easing. The falling of interest rates to near zero, zero and even negative in some countries, forced asset owners to rethink yield strategies to help pay for liabilities such as pensions, insurance claims or college expenditures. Public pension funds in the United States and even in Europe have augmented investment proportions in real estate, credit and private equity at the expense of lower-yielding bond instruments over the past 20 years. Investment giants like CPPIB and the Abu Dhabi Investment Council have participated in selling off risk via investments in the reinsurance industry, while smaller pensions have utilized option strategies.

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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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