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SWFI First Read, December 19, 2016

Former Och-Ziff Executive Gets Fresh Start at AMG

Hugh Cutler was named the Global Head of Distribution for Affiliated Managers Group (AMG). He replaces Andrew Dyson who exited AMG to become Chief Executive Officer of Quantitative Management Associates. Cutler will officially join AMG in March 1, 2017 and be based in London. Cutler was a Managing Director at Och-Ziff Capital Management Group.

Swiss National Bank Augments Currency Reserve Positions

The Swiss National Bank (SNB) revealed that its Bank Council had approved moving 4.6 billion CHF (US$ 4.49 billion) to 2016 currency reserve provisions. The SNB in a statement said that, “the annual allocation will continue to be determined on the basis of double the average nominal economic growth rate over the previous five years. However, a minimum annual allocation of 8 percent of the provisions will now also apply.”

Qatar Banks Contemplate Possible Merger

More Gulf banks are looking to merge in order to save on costs and create synergies. Masraf Al Rayan, the International Bank of Qatar and Barwa Bank have initiated discussions regarding a potential merger. Masraf Al Rayan and Barwa Bank are Islamic finance institutions. Qatar Holding, a sovereign wealth enterprise (SWE) of the Qatar Investment Authority, is the largest shareholder in Masraf Al Rayan.

KWAP Acquires Menara AIA Cap Square

Kumpulan Wang Persaraan (KWAP) purchased the 41-storey Menara AIA Cap Square from Germany’s Union Investment Real Estate GmbH. Menara AIA Cap Square is located in Kuala Lumpur. JLL Malaysia, part of Jones Lang LaSalle (JLL), was the financial advisor for Union Investment Real Estate GmbH.

BVK and Universal-Investment Acquire Irish Retail Property

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Adrian Orr Named Governor of Reserve Bank of New Zealand

NZ Super Fund CEO Adrian Orr is exiting the sovereign fund to take up a new executive role at the country’s central bank. Adrian Orr is becoming the Governor of the Reserve Bank of New Zealand. Orr will officially leave NZ Super in March 2018, effectively starting his 5-year term as central bank governor on March 27, 2018. Adrian Orr is returning to this central bank roots. He was previously a deputy governor at the Reserve Bank of New Zealand.

Catherine Savage, Chair of the Guardians of New Zealand Superannuation, in a news release stated, “I know that in working for the NZ Super Fund Adrian has valued the opportunity to make a contribution to New Zealand highly. The role of Governor of the Reserve Bank will enable him to continue to do this. While we are naturally disappointed to lose Adrian, we congratulate him and the Reserve Bank on his appointment, and wish them both well.”

Orr will take the helm of central bank governor from Grant Spencer, who became acting Governor on September 26, 2017. Grant Spencer was Deputy Governor of the central bank, taking over from Graeme Paul Wheeler, who was central bank governor from 2012 to September 2017. Wheeler was a former Managing Director and former Treasurer at The World Bank.

Orr was nominated numerous times on SWFI’s Public Investor 100 annual ranking.

1. 2013, #22
2. 2014, #16
3. 2017, #3

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Some Asset Owners See Treasury Bond Yields as Factor in Driving Equities

Revealed results from the fourth quarter 2017 SWFI Global Asset Owner survey released in early December shows that majority of institutional investor respondents, which include pensions, sovereign funds and other public funds, believe U.S. tax reform would be the largest driver of equity prices in the next six months. The quarterly survey excludes asset managers and targets asset owners. U.S. President Donald Trump calls the Republican party’s US$ 1.5 trillion tax cut as economic “rocket fuel”.

Treasury Bond Yields and Robust U.S. Job Creation

Even more enlightening was the number two finalist in the question, treasury bond yields, which almost tied U.S. tax reform. Institutional investors are carefully analyzing the figures being released by the U.S. Department of Labor (DOL), as the unemployment rate stayed at 4.1% and payroll numbers continues to improve. The U.S. economy added 228,000 jobs in November 2017, according to DOL data. Post-report the 10-Year U.S. Treasury yield fell lower. Sovereign funds still hold a large portion of investments in liquid fixed income investments, despite noteworthy large-scale infrastructure or buyout deals headlined by financial media.

The majority of Federal Open Market Committee members did not factor in U.S. tax reform in the September projections. The question looms if the U.S. Federal Reserve will keep pace on monetary tightening, as Janet L. Yellen is being pushed out of the chair spot. As Jerome H. Powell awaits in the wings, Yellen’s tenure as Fed chairman is the shortest since G. William Miller, who served from 1978 to 1979. Faster economic growth and better job numbers could lead to more interest rate increases. Depending on the adoption and speed, increased interest rate measures would deeply impact junk bonds and further accelerate the demise of troubled enterprises.

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Bagamoyo Project Revitalized, Oman and China Look to Move Forward

The Government of Tanzania is completing talks with Oman and China over the Bagamoyo Port project in the Bagamoyo Special Economic Zone at a cost of 22.3 trillion Tanzanian shilling (US$ 10 billion). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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