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SWFI First Read, December 21, 2018

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CalPERS Investment Committee to Discuss New Private Equity Model in March 2019

The Investment Committee of the California Public Employees’ Retirement System (CalPERS) is expecting progress on the pension giant’s move for a new private equity investment model. A discussion on the model plans to be presented in March 2019. The idea of creating an external entity to run private equity investments is not without controversy. CalPERS seeks to divide the private equity model into four pillars, a slight change in descriptions from earlier proposals in 2018. CalPERS nixed a plan to have an outside partner run its commingled fund private equity activities.

1. Continual investment in commingled funds, separate accounts, and co-investments.
2. Continuing a fund-of-funds portfolio approach to invest in emerging managers.
3. Direct investment strategy managed by a separate limited liability company focused on long-cycle holdings (Warren Buffet-style).
4. Direct investment strategy managed by a separate limited liability company focused on venture-type, late-stage investments (unicorns?).

CQS Hires Xavier Rolet as CEO

London-based hedge fund CQS named Xavier Rolet as chief executive officer, effective January 14, 2018. The hiring of Rolet permits current CEO Michael Hintze, founder of the firm, to focus on investment management. Rolet served as CEO of the London Stock Exchange Group until November 2017.

Blackstone Gets Some Shanghai Assets from MapleTree Investments

Singapore-based MapleTree Investments sold an office and retail complex in Shanghai to The Blackstone Group for US$ 1.25 billion. The sold assets are known as MapleTree Business City Shanghai and VivoCity Shanghai, comprising 270,000 square meters in the southwestern district of Minhang. MapleTree Investments engaged the 5.5 billion RMB development in 2012. Blackstone plans to rebrand the acquired mall as Westlink.

Bank of England Maintains Low Interest Rate

The Monetary Policy Committee of the Bank of England kept interest rates at 0.75%.

CPPIB Inches Toward More Distressed Spanish Debt

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Qatar Steps Up for Lebanon, Plans $500 Million Bond Purchase

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Qatar Sheikh Tamim bin Hamad Al Thani appeared at an Arab economic summit and it was revealed that Qatar plans to purchase US$ 500 million of Lebanese government bonds. Earlier, there was speculation Qatar was going to deposit US$ 1 billion in Banque du Liban (Bank of Lebanon), which was never confirmed by the bank.

Lebanese officials in January revealed the possibility of a debt restructuring. The International Monetary Fund calculated that public debt in Lebanon is at over 160% of gross domestic product this year and could raise to around 180% by 2023.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Turkey Wealth Fund Could Provide Support to Credit Card Debt Market

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Recep Tayyip Erdoğan, the President of Turkey, has a new reform to jump start the consumer debt-laden economy, and it involves Turkey’s sovereign wealth fund. His strategy is to offer money to those facing overwhelming credit card debt. Ziraat Bank (Türkiye Cumhuriyeti Ziraat Bankası) will allow borrowers to apply for debt rescheduling and secure lower interest rates. Erdogan announced that “Any retail client from any bank can apply.” Credit card debt is a monstrous problem in the country. Consumer credit has exploded due to low rates, government assistance, and easy credit availability. Last summer, non-housing debt reached US$ 97 billion. Half of this is credit card debt. Over US$ 30 million is non-performing. The debt was accumulated in foreign currencies, because they used to provide the lowest interest rates. Unfortunately, as the Turkish lira’s exchange rate cratered, much of the debt became impossible to service. The lira is among the world’s weakest currencies. Erdogan expects a smooth transition, “They will pay off their debt with a loan from Ziraat, and will pay it back according to the level of their monthly earnings.” Ziraat Bank is managed by Turkey’s sovereign wealth fund, which is chaired by President Erdoğan.

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KIC Sells City of London Office to South African Investor

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Investec Structured Property Finance, part of Investec, provided a £107 million loan to a South African investor being represented by London-based Pembrey Asset Management Ltd to acquire an office in London at One Bartholomew Lane. The Korea Investment Corporation (KIC) is the ultimate owner of the office and is selling it through Hines UK, part of Hines. BNP Paribas Real Estate acted on behalf of Pembrey Asset Management and CBRE acted on behalf of Hines.

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