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SWFI First Read, December 28, 2016

Actis Disposes Remaining Stake in Umeme

London-based Actis, through its holding entity Umeme Holdings Limited (UHL), disposed its entire 14.3% minority stake, some 232,214,521 shares, in Uganda-based Umeme Ltd, an electricity distribution and supply company. Actis sold an over-subscribed block of 12% in Umeme to institutional investors including the Uganda National Social Security Fund (NSSF) as well as a number of international funds; subsequently, the remaining 2.3% stake was offered to domestic retail investors and Umeme management. In 2005, Actis, through UHL, originally invested in Umeme. In November 2012, UHL sold 39.9% of its stake in Umeme through an initial public offering (IPO) on the Uganda Securities Exchange. As of June 30, 2014, the Uganda National Social Security Fund had 231,722,771 shares in Umeme, owning 14.27% of Umeme at the time.

QIA Seeks to Refinance Milan Porta Nuova Properties

The cash-rich Qatar Investment Authority (QIA) has extensive exposure to a number of large properties in Milan. The QIA seeks to refinance its debts on two Milan properties in Porta Nuova, Milano Porta Garibaldi and Varesine. QIA has around a €1 billion in lines of credit from several banks including Banca Intesa Sanpaolo, Banca Popolare di Milano, BNP Paribas, and UniCredit. Mediobanca is the financial advisor for QIA regarding the refinancing.

Toshiba Corporation to Face Massive Write-Down on U.S. Nuclear Unit

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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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