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Survey Reveals Global Asset Owners Still View Trade Wars as the Largest Tail Risk

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According to the quarterly SWFI Global Asset Owner Survey conducted in May 2018, sovereign funds, endowments and pensions take the observation that trade wars and increased protectionism is currently the biggest tail risk, a similar response from the March 2018 survey results. The survey was conducted before the June G-7 conference in Quebec in which U.S. President Donald Trump considered pulling the U.S. out of the group. Trump also accused Canadian Prime Minister Justin Trudeau, the host nation of the G-7 conference, of “false statements,” after the Canadian Prime Minister had remarks at a news conference. Trump tweeted after the G-7 meeting, “”PM Justin Trudeau of Canada acted so meek and mild during our @G7 meetings only to give a news conference after I left saying that, ‘US Tariffs were kind of insulting’ and he ‘will not be pushed around,'” Trump added. “Very dishonest & weak. Our Tariffs are in response to his of 270% on dairy!”

German Foreign Minister Heiko Maas countered Trump’s remarks asking European nations to stick together, saying in a statement to reporters in Berlin, “It’s actually not a real surprise. We have seen this with the climate agreement or the Iran deal. In a matter of seconds, you can destroy trust with 280 Twitter characters. To build that up again will take much longer.”

The G-7 (Group of Seven) is a group of countries that include U.S., Japan, Canada, United Kingdom, Germany, France and Italy. The survey revealed that geopolitical risk and interest rate risk were key risks toward global financial stability.

Asset owners in the survey indicated an overweight in geographic asset allocation to Japan, India and Europe ex-UK in the next 12 months. Asset owners were bearish on allocations to listed infrastructure, gold and commodities, while bullish on credit strategies, active emerging market equities, active U.S. equities, active international equities, private real estate and cash.

Earnings Growth

Reaching a new level, 50% of respondents voted for seeing better earnings expectations for listed companies.

The quarterly survey targets sovereign funds, pensions, endowments, superannuation funds, foundations, government funds and other asset owners. Totaled estimated survey sample size was over US$ 1.14 trillion of assets under management.

According to Michael Maduell, president of SWFI, “Clearly, trade disputes among Western nations and interest rate risks are key concerns for global asset owners. Sovereign funds and pensions continue to seek out conviction managers in emerging market and international equities that can outperform. Last, Japan and India continue to attract institutional investor allocations.”

More About the Global Asset Owner Survey

This is SWFI’s fourth quarterly survey for asset owners. To participate in the next quarterly survey, CONTACT research@swfinstitute.org.

SWFI First Read, June 21, 2018

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PSP Investments Nears Deal on Azelis

PSP Investments and EQT Partners (through fund EQT VIII) are in exclusive talks to acquire Belgium-based Azelis S.A. from funds managed by Apax Partners. Formed in 2001, Azelis is a specialty chemicals and food ingredients distributor. The transaction is subject to regulatory approvals.

Oxford Properties Wins Rights on Barangaroo Office Development

Melbourne-based Grocon Pty Ltd selected Oxford Properties, the real estate unit of OMERS, as a preferred partner for it’s a A$ 2 billion, 5.2-hectare Barangaroo Central project development. This is an office tower development. Oxford Properties essentially won the rights toward the project (rumored at a price of A$ 100 million), freeing the developer from a high-cost finance deal with Maxcap, a lender.

Investment Management Corporation of Ontario Selects Jean Michel as CIO

The Investment Management Corporation of Ontario named Jean Michel as chief investment officer. This role is effective July 3, 2018. Michel was executive vice president, advisory services to depositors and strategic analysis, at Caisse de Depot et Placement du Quebec (CDPQ).

Wil Warren Named President of Lexington Partners

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Large Public Asset Owners Commit to Goodman Brazil Logistics Partnership

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Canada Pension Plan Investment Board (CPPIB) unveiled plans to commit 500 million BRL (C$ 175 million) in equity for a 20% interest in the newly established Goodman Brazil Logistics Partnership to invest in prime logistics and industrial assets in the key gateway cities of São Paulo and Rio de Janeiro. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Mubadala Supports Two European Aquaculture Transactions

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Mubadala Investment Company is keen on growing exposure to agribusinesses whether in farming or aquaculture. With money from Mubadala and AMERRA Capital Management LLC, Andromeda Group acquired Nireus SA (at 74.34% stake) and Selonda SA at (79.62% stake), two European aquaculture companies that focus on sea bream and sea bass. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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