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Some Asset Owners See Treasury Bond Yields as Factor in Driving Equities

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Revealed results from the fourth quarter 2017 SWFI Global Asset Owner survey released in early December shows that the majority of institutional investor respondents, which include pensions, sovereign funds and other public funds, believe U.S. tax reform would be the largest driver of equity prices in the next six months. U.S. President Donald Trump calls the Republican party’s US$ 1.5 trillion tax cut economic “rocket fuel”.

Treasury Bond Yields and Robust U.S. Job Creation

Even more enlightening was the number two finalist in the question, treasury bond yields, which almost tied U.S. tax reform. Institutional investors are carefully analyzing the figures being released by the U.S. Department of Labor (DOL), as the unemployment rate stayed at 4.1% and payroll numbers continue to improve. The U.S. economy added 228,000 jobs in November 2017, according to DOL data. Post-report the 10-Year U.S. Treasury yield fell lower. Sovereign funds still hold a large portion of investments in liquid fixed income investments, despite noteworthy large-scale infrastructure or buyout deals headlined by financial media.

The majority of Federal Open Market Committee members did not factor in U.S. tax reform in the September projections. The question looms if the U.S. Federal Reserve will keep pace on monetary tightening, as Janet L. Yellen is being pushed out of the chair spot. As Jerome H. Powell awaits in the wings, Yellen’s tenure as Fed chairman is the shortest since G. William Miller, who served from 1978 to 1979. Faster economic growth and better job numbers could lead to more interest rate increases. Depending on the adoption and speed, increased interest rate measures would deeply impact junk bonds and further accelerate the demise of troubled enterprises.

SWFI First Read, January 19, 2018

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RDIF Portfolio Company PhosAgro Raises Bond Issue

PhosAgro is a portfolio company of the Russian Direct Investment Fund (RDIF). The company price out a US$ 500 million 5.25-year Eurobond issue that has a coupon of 3.949%.

Alison Swonnell Named Global Head of Institutional Marketing at Fidelity International

Alison Swonnell was hired on as Global Head of Institutional Marketing at Fidelity International. She will be based in London and report to Chuch McKenzie, the firm’s global head of institutional clients. Before Fidelity, Swonnell was Director of Fund Operations for LCM Partners, an alternative investment management firm.

NY Governor Cuomo Seeks to Treat Carried Interest as Ordinary Income for State Taxes

On January 18, 2018, New York Governor Andrew Cuomo revealed he had submitted a bill to the New York State Legislature that seeks to treat carried interest as ordinary income rather than capital gains in regard to state taxes. Governor Cuomo in his press release said that the federal carried interest tax provision costs New York roughly US$ 100 million per year.

William Bain – Bain Founder Passes Away

Dated January 18, 2018, William Bain Jr. passed away at his home in Naples, Florida at the age of 80. Bain started at the Boston Consulting Group and left in 1973 to form Boston-based Bain & Co. By 1984, Bain formed Bain Capital alongside a number of colleagues including former 2012 Republican presidential nominee Mitt Romney. In a statement to the Boston Globe, Romney said, ” It’s hard for me to imagine my life and career without Bill Bain’s mentoring.”

Prostar Capital Gets Controlling Stake in Socar Aurora Fujairah Terminal

Prostar Capital now has a 90% control stake in Socar Aurora Fujairah Terminal FZC by purchasing 100% of the shares of Socar Aurora Terminals S.A. The Prostar Capital entities investing in the asset are Prostar Asia-Pacific Energy Infrastructure Fund and a co-investment fund managed by Prostar Capital for a large U.S. state pension plan. The storage terminals acquired in the Port of Fujairah in the United Arab Emirates.

Socar Aurora Fujairah Terminal FZC is a joint venture between State Oil Company of Azerbaijan Republic (SOCAR), Swiss-based commodity trader AURORA Progress, and the Government of Fujairah.

Prostar Capital started buying the terminal back in 2013 at 18.6%. The private equity firm eventually moved its ownership up to 40% on August 14, 2015.

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ISIF Plans to Back 20 Solar Farms in Ireland

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The Ireland Strategic Investment Fund (ISIF) and Hamburg-based Capital Stage, a solar and wind park operator, are financially backing the development of 20 solar farms in Ireland which has an estimated cost at €140 million. ISIF is funding 25% of the costs, with Capital Stage providing 75% of the costs.

The generation capacity is estimated at 140 MW, with each farm ranging between 5 MW to 25 MW. The majority of the solar farms will be located along the east and south-west coasts of Ireland. Power Capital, a Dublin-based energy company formed by Peter Duff and Justin Brown in 2011, is overseeing the developments.

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PNB to Buy Stake from Malaysian Developers in Battersea Power Station Project

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Malaysia-based Permodalan Nasional Bhd (PNB) inked plans to acquire a stake in the Battersea Power Station from Malaysian developers Sime Darby Property and SP Setia, which between them own 80 percent of the site located on the south bank of the Thames. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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