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Sovereign Wealth Fund Takes Legal Action Against Banco de Portugal Over Costly Debt Transfer

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Adrian Orr, CEO of the New Zealand Superannuation Fund

Adrian Orr, CEO of the New Zealand Superannuation Fund

On July 3, 2014, New Zealand Superannuation Fund (NZSF) invested US$ 150 million in notes issued by Oak Finance Luxembourg SA. The vehicle Oak Finance was arranged by Goldman Sachs as an independent entity to assist in the financing of trade transactions being made by Lisbon-based Banco Espírito Santo. For example, one trade deal was Banco Espírito Santo’s backing of a financing agreement between Venezuela’s state-owned oil firm Petróleos de Venezuela SA and China-based Wison Engineering Services Co. Banco Espírito Santo provided letters of credit to Petróleos de Venezuela SA with regard to an oil refinery project in Puerto la Cruz.

Oak Finance lent US$ 784.6 million to Banco Espírito Santo in the form of senior debt. Bad news in the press trickled out regarding allegations of fraud, money-laundering and document falsification at Banco Espírito Santo. On August 3, 2014, Banco Espírito Santo failed and the Oak Finance loans, along with other senior loans, were moved to a successor bank Novo Banco. Here is where it gets interesting.

Losing Out

On December 22, 2014, Banco de Portugal, Portugal’s central bank, moved the loan back to Banco Espírito Santo – essentially an entity where the sovereign wealth fund has virtually no shot of being repaid. A law brought on August 1, 2014, made it so any shareholder that owns more than 2% of the insolvent bank would be prohibited from transferring liabilities to the new bank. Banco de Portugal moved the loans back because it saw Oak Finance as a vehicle for Goldman Sachs, the loan arranger. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

CDPQ Supports Domestic AI Fund

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Institutional investor Caisse de dépôt et placement du Québec (CDPQ), which works primarily on behalf of pension funds and insurance plans, is opening a new fund dedicated to Québec businesses that specialize in AI, or artificial intelligence. Available funds are slated at US$ 250 million for the enterprise. The commercialization of AI seems to be a natural fit for CDPQ, “Since Montréal is emerging as a global beacon of excellence in artificial intelligence, we need to enhance our offering and ramp up the financial and development support we provide AI businesses through the various stages of their growth,” according to Executive Vice President of Quebec and Global Strategy, Charles Émond. Émond aspires to see AI spread throughout “all sectors of our economy.” The AI fund will be run by CDPQ’s Venture Capital and Technology team. They will look for companies that are already doing well in the sector.

Another program is targeting early stage organizations. Mila Quebec AI Institute, a research and development organization founded by three universities, is building a new complex to help facilitate CDPQ’s goals. The new complex will house early-stage AI companies. CDPQ is especially interested in companies that can accelerate their growth and enter markets quickly, providing speedy returns. There is a social component, whereby companies will be required to contribute to Mila. Michael Sabia, President and Chief Executive Officer of CDPQ, noted, “With this partnership, la Caisse is pursuing its commitment to helping Québec businesses in this new economy thrive and expand.”

Keywords: Caisse de depot et placement du Quebec

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RDIF and Aggreko Reveal Strategic Partnership on Microgrids

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The Russian Direct Investment Fund (RDIF) and Glasgow-based Aggreko plc, a listed company that provides power, heating and cooling, signed a deal to cooperate on the development of microgrids. The parties plan to invest in the construction of facilities that will provide uninterrupted power supply and temperature control to industrial enterprises and utilities in the Russian regions. Aggreko operates one of its 6 global hubs in Tyumen, Western Siberia, through an entity called Aggreko Evraziya, OOO. In 2017, Aggreko plc acquired Younicos, a company specialized in the development of modular batteries and Microgrids control solutions.

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China and Russia Buy Up More Physical Gold

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The worst fears of the Federal Reserve may be coming true. The barbarous relic is once again offering some resistance to Fed policy as it maintains its uptrend from mid-November, and is being snapped up from central banks worldwide. Former Fed chairman Paul Volcker shared the central bank view that “Gold was the enemy.” If so, the enemy is gaining ground. China’s gold reserves quietly grew from December 2018 to February 2019. The People’s Bank of China disclosed in February 2019 that it increased its gold reserves by 10 tonnes that month, following purchases of 11.8 tonnes in January 2019, and 9.95 tonnes in December 2018. Goldman Sachs has listed central bank purchasing as the reason for the uptrend. Goldman Sachs expects to see gold at US$ 1,400 over the next six months, which would lift it well above its long-held resistance at US$ 1,350. China’s gold holdings are now US$ 79.5 billion. China, which is emphasizing diversification from the U.S. dollar, has been a fan of precious metals for years, and it has been encouraging its citizens to purchase gold and silver for a decade, when previous controls on precious metals were done away with. Now anyone in China can trade gold internationally with the swipe of a card.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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