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Should Sovereign Wealth Follow Fundamentals or Central Bank Tunes?

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Institutional investors are living in a low-return environment, in which quantitative easing (QE) policies and negative interest rates have puffed up financial markets. As sovereign funds navigate the world of listed equities, would it be prudent for them to follow company and country-economic fundamentals versus paying more attention to monetary policy? Monetary policy divergence appears to be slowly receding, as the European Central Bank (ECB) and Bank of Japan (BOJ) continue easing, while the Federal Reserve plans to limit the number of interest rate hikes it expects in 2016.

In addition, SWFI Compass, an RFP and opportunity tracking service by SWFI, has witnessed an increase in U.S. equity mandates by public institutional investors such as pensions, since the start of January 2016.

What Happened in March

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SouthGobi’s CEO Arrested, CIC Struggles with Investment

The China Investment Corporation (CIC) has long struggled with its investments in coal assets, specifically in globally-listed coal miner SouthGobi Resources Ltd, which operates its flagship coal mine in Mongolia. In November 2009, CIC and SouthGobi Resources inked a convertible debenture deal. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Qatar Central Bank Deals with MSCI

MSCI, a stock index company whose benchmarks influence investor behavior, has tremendous indirect power impacting the stock markets of smaller economies. In 1988, MSCI released its emerging markets index, a now-widely-used benchmark for many institutional investors wanting access to growth markets. China and South Korea make up the majority of the benchmark, but smaller economies such as Poland, Chile and even Qatar make up other pieces of it.

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bcIMC Buys into Bottling Business with PAI in €1.623 Billion Takeover of Refresco

Dutch soft-drink bottler Refresco Group N.V. has agreed to a buyout offer for all 81.2 million of its shares from French private equity firm PAI Partners SAS (PAI) and Canadian pension manager British Columbia Investment Management Corporation (bcIMC) in exchange for €20 in cash per ordinary share for a total consideration of €1.623 billion. Refresco’s major shareholders, which includes 3i Group, and shareholding members of its boards, who represent 26.5% of outstanding shares, have said they stand behind the deal.

Refresco’s board rejected an initial offer from PAI in April 2017 of €1.4 billion, which they felt did not adequately capture the value added by their plans to bolster its presence in North America through the acquisition of Canadian bottler Cott TB, a deal that went through in July for US$ 1.25 billion.

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