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SOVEREIGN FUNDS: Everything You Need to Know About the Recent Davos of the Desert

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A number of important events regarding the world of sovereign wealth funds occurred at the Future Investment Initiative (FII) 2018 in Riyadh, which has been dubbed the Davos of the Desert. Keeping this briefing concise, Saudi Arabia’s Public Investment Fund (PIF) disclosed updates on its investments domestically and internationally. The massive event attracted thousands of businessmen and executives, including asset owners from various continents and some of the largest sovereign investors.

Despite the political clouds that surrounded the mega conference, approximately US$ 56 billion worth of deals were announced at the 3-day event. These deals were in excess of 25, and most of them were signed with U.S. companies. About US$ 34 billion of the deals involved oil giant Saudi Aramco. Saudi Aramco and French oil major Total SA signed a deal. Saudi Aramco also signed deals with Halliburton Co. and Hyundai Heavy Industries Co. Commodities trading house Trafigura Group revealed a joint venture with Riyadh-based Modern Industrial Investment Holding Group to develop a smelter and refining complex.

PIF Gets Bigger

PIF has made progress with its staff size approaching 500 people. PIF revealed it has almost 10% of its assets held abroad and has a target to raise that allocation by 50% internationally by the year 2030, according to the organization’s managing director. PIF doubled the value of its US$ 3.5 billion investment in Uber, as the taxi app company revealed a US$ 120 billion valuation for a planned offering in the future.

PIF recently supported domestic stocks through banks, fund managers, and other intermediaries due. More large institutional investors are investing in Saudi Arabia’s growing stock market. Norway Government Pension Fund Global (GPFG) has 6.9 billion SAR worth of assets in Saudi Arabia, which are divided in over 42 companies. In an October 26, 2018, Reuters interview, Norges Bank Investment Management CEO Yngve Slyngstad disclosed the wealth fund is expected to double its investment in the Saudi Arabian stock market as the country will be included in the fund’s reference index months from now. He told Reuters at the time, “We invest in companies, not countries. Our investments in companies based in Saudi Arabia will not be changed based on political developments.”

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China’s Central Bank Creates Macro-Prudential Management Bureau

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The People’s Bank of China (PBOC) created a new department to oversee and attempt to eliminate financial risks to the system. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Like its U.S. Peers, Legg Mason Seeks to Trim Costs

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Legg Mason Inc., a Baltimore-based asset manager, has announced a reduction in workforce as is prepares to streamline operations and save money. Legg Mason’s leadership commented that assets under management fell 5 % year-on-year. Legg Mason currently manages US$ 727.2 billion (as of December 31, 2018), which is down from the previous US$ 767.2 billion. CEO Joseph A. Sullivan noted that a global operating platform will centralize fund administration, IT, and other departments that work with affiliates. Sullivan did not discuss the number of layoffs expected, or specify which areas would be impacted. Legg Mason disclosed they planned to close a quarter of its exchange-traded funds in March 2019. These three ETFs include a U.S. strategy, emerging markets, and a developed markets strategy outside the U.S. However, these funds run around US$ 28 million in assets under management.

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Monetary Authority of Singapore Establishes Corporate Governance Advisory Committee

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On February 12, 2019, the Monetary Authority of Singapore (MAS) revealed the creation of a Corporate Governance Advisory Committee (CGAC). CGAC was formed to advocate for good corporate governance practices among listed companies in Singapore. Bobby Chin, Director of Singapore Telecommunications Limited, will be the Chair of CGAC. According to a MAS press release, “CGAC will identify current and potential risks to the quality of corporate governance in Singapore.”

MAS formed the Corporate Governance Council (Council) in February 2017. The Council was dissolved after it pushed out a publication of its final recommendations on August 6, 2018.

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