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Sovereign Wealth Funds Dominate Public Funds

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As an institutional investor class, sovereign wealth funds make up a majority of investors in a top-10 global ranking of the largest public funds. This ranking includes sovereign funds, pensions and other public funds. However, wealth funds are far fewer in number compared to the vast number of retirement funds. You can view all other sorts of rankings here.


SWFI League Table of Largest Public Funds

Rank Fund Country Type June 2015
1 Social Security Trust Funds United States National Pension 2,789.50
2 Government Pension Investment Fund Japan National Pension 1,150.00
3 Government Pension Fund – Global Norway Sovereign Wealth Fund 882
4 Abu Dhabi Investment Authority (ADIA) United Arab Emirates Sovereign Wealth Fund 773
5 China Investment Corporation (CIC) China Sovereign Wealth Fund 746.7
6 SAMA Foreign Holdings Saudi Arabia Sovereign Wealth Fund 671.8
7 Kuwait Investment Authority (KIA) Kuwait Sovereign Wealth Fund 592
8 SAFE Investment Company China Sovereign Wealth Fund 567.9
9 National Pension Service of Republic of Korea South Korea National Pension 455
10 Stichting Pensioenfonds ABP Netherlands Public Pension 440
11 Federal Retirement Thrift United States Public Pension 422.2
12 GIC Private Limited Singapore Sovereign Wealth Fund 344
13 CalPERS United States Public Pension 304.1
14 Qatar Investment Authority Qatar Sovereign Wealth Fund 256

 
Actually top 14


Sovereign wealth fund assets continue to expand, despite the slowdown in oil prices and account surpluses in Asian countries. However, retirement plan assets, especially in the defined-benefit space, witnessed growth in countries like the United States. Defined benefit assets are over US$ 10 trillion in assets compared to around US$ 7.3 trillion in sovereign wealth fund assets. In the aggregate, many of these investors have been pushed into equities and alternatives such as real estate and private equity, as the world experienced years and years of quantitative easing policies. This type of compensation invites more risk taking.

Maiden Lane I Ends, Federal Reserve Aims to Shrink Balance Sheet

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The U.S. Federal Reserve’s balance sheet has been set to decline automatically since 2017, as the central bank has been liquidating funds from its US$ 4 trillion in Treasury bonds and mortgage-backed securities. As holdings matured, the Fed refrained from reinvesting them. This amounts to US$ 40 billion in monetary tightening monthly. Meanwhile, interest rates have slowly, and continuously, risen. The maturation of these Fed assets could exert upward pressure on long-term yields.

Mortgage rates, applications, and home sales have been falling, likely due to the rising rates. While rates are still historically low, U.S. President Trump has criticized the rate hikes. However, the Fed has no interest in changing course, and rates are set to continue to rise. According to Fed meeting minutes, “The Chairman suggested that the Committee would likely resume a discussion of operating frameworks in the fall.”

The size and content of the Fed balance sheet going forward will be a point of discussion for Chairman Jerome Powell. While there is no end in sight for the Fed’s plans to tighten economic policy, changing conditions may warrant further examination. With the U.S. stock market thriving, there is no indication that tightening has had a material impact on the economy. However, conventional wisdom asserts that the Fed will raise rates “until something breaks.” Market commentators have also suggested that, in the event of an emergency, the Fed will have a harder time stepping in due to the size of its balance sheet. A large part of the Fed’s monetary strategy is based around communications, and Fed-watchers have made a habit of hanging on every word. The Fed announced a shrinking balance sheet well in advance, and made gradual moves in that direction. The process has been smooth thus far. The Fed’s tightening will reach its peak, US$ 50 billion, in October. It is unclear exactly how much stimulus is still needed in the economy to reach the Fed’s 2% inflation target. The Fed’s easing policies have been criticized for the lopsided benefits they provided, more for Wall Street than Main Street. However, the easing will reduce their role in the market.

The End of Maiden Lane I

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QIA Gets a New CEO

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Sheikh Abdullah Bin Mohammed Al-Thani exited as CEO of the Qatar Investment Authority (QIA). He has been appointed as minister of state by Amiri Order No. (4) of 2018.

Mansoor bin Ebrahim Al-Mahmoud is appointed as the new CEO of QIA. He held positions in various organizations such as CEO of Qatar Development Bank and worked at Qatar Museums.

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SWFI First Read, September 19, 2018

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QIA Eyes Investment in Chinese Lender Lufax

The Qatar Investment Authority (QIA) is in talks about a possible investment into Shanghai-based Lufax, one of China’s largest online lenders. The seller of the possible stake is China’s Ping An Insurance (Group) Co. Ltd. Lufax’s official name is Shanghai Lujiazui International Financial Asset Exchange Co. Ltd.

Wealth Funds Back Hotpot Giant

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