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Sovereign Funds Had Bet on QE and IT WORKED

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As financial equity markets further roiled during the precipitous fall of Lehman Brothers, institutional investors realized they would be facing a new landscape for the next decade. Central banks quickly pumped money into the global financial system, hoping to stave off a calamity. A number of sovereign funds took advantage and tactically allocated resources into specific markets of listed equities and distressed assets. Some funds like the Abu Dhabi Investment Authority got stung backing U.S. financial institutions like Citigroup or the Korea Investment Corporation’s lackluster investment in Merrill Lynch. By analyzing sovereign wealth fund transactions, allocation percentages and general trends over the past five to seven years, a clear majority of sovereign wealth funds pushed capital toward countries that participated in significant quantitative easing. According to the Sovereign Wealth Fund Transaction Database, from 2008 to 2014, sovereign wealth funds directly invested US$ 102 billion in the United States.

Sovereign funds that allocated to the U.S. when the Federal Reserve intervened by engaging in massive QE measures, performed higher than many SWFs that preferred greater allocation to emerging markets.

The effects of accommodative monetary policy worked very well for wealth funds like Australia’s Future Fund that sat on cash and then allocated big time to developed markets. From early 2009, the S&P 500 index plummeted around 700, eventually the broad stock market average reached new record peaks above 1,900. Performance clearly partially-attributed to the Federal Reserve injecting US$ 85 billion per month into Treasuries and mortgage-backed bonds, pushing down interest rates. These measures increased bond and stock prices in Western developed markets.

Again, funds like the New Zealand Superannuation Fund (NZSF) allocated more toward developed markets, while funds (a number of the Gulf funds) that placed bets in emerging markets had drags in performance. However, even with the gulf-based sovereign investors, allocation percentage-wise was greater in developed markets versus emerging markets.

New Zealand Superannuation Fund – Geographic Allocation

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Mergermarket Gets Ready to be Sold

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Private equity firm BC Partners hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to advise on the sales of Acuris. Acuris is a collection of financial news and data sites, which includes Mergermarket, Dealreporter, and Debtwire. In 2017, BC Partners sold around a 30% stake in GIC Private Limited.

Before the rebranding to Acuris, Mergermarket was part of The Financial Times Group until 2013 when it was sold off to BC Partners.

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Why Japan Post Sees Promise in Aflac

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Aflac Inc. is an American insurance company founded in 1955. The company is the biggest provider of supplemental insurance in the United States. Aflac also has major operations in Japan.

In December 2018, Japan Post Holdings (JPHLF) signaled it was spending US$ 2.64 billion for a 7-8 % stake in Aflac. The goal is that, in four years time, Aflac will become an affiliate of Japan Post. Japan Post hopes to accomplish this by becoming the largest voting shareholder of the company. The world’s 13th largest company, with 400,000 employees, Japan Post needs to expand to chase further growth, mainly because Japan Post expects the postal business to decline. Diversification is seen as the optimal route to long term stability for the holding company. Japan’s economy is worrying. Japan’s aging population means that many insurance companies are facing a shrinking customer base, Japan Post settled on a plan to expand overseas.

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RDIF and Development Agency of Serbia Agree to Explore Joint Investments

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The Russian Direct Investment Fund (RDIF) and the Development Agency of Serbia, also known as Razvojna agencija Srbije, reached an agreement to work together to identify attractive investment projects to strengthen bilateral economic ties and increase investment flows between Russia and Serbia. Russian capital and businesses are keen on investing in Serbia.

In addition, the two countries signed an agreement to cooperate on civil nuclear energy, according to state-owned Russian reactor builder Rosatom (Rosatom State Nuclear Energy Corporation). Rosatom continues to expand it business of nuclear cooperation deals in a wide number of countries.

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