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SWFI First Read, January 14, 2018

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MSCI Decision Tabled for June 2018 on EM Inclusion

MSCI issued a status update on the possible reclassification of the MSCI Saudi Arabia Index to emerging market status. A decision is expected to be released in June 2018, which is part of the company’s MSCI 2018 Market Classification Review. MSCI believes the size of the Saudi Arabian listed equity market will increase with the Saudi Aramco initial public offering.

Saudi PIF Keeps Leverage Options Open

Saudi Arabia’s Public Investment Fund (PIF) is analyzing options on whether to use leverage in its activities by possibly raising US$ 5 billion in 2018 from banks.

Swiss National Bank Expects Large Profit for 2017

The Swiss National Bank (SNB) is expecting a profit of 54 billion CHF (US$ 55 billion) for the 2017 calendar year. SNB has stepped up its investment in listed equities in recent years. However, most of SNB’s profit is due to currency movements – which amounted to 49 billion CHF in 2017. The central bank holds nearly all of its assets in foreign currencies.

PineBridge Investments Hires Former SSgA EMEA Executive

PineBridge Investments scooped up Michael Karpik to be the firm’s chief operating officer. He replaces Julian Sluyters who exited PineBridge Investments.

Karpik was CEO of EMEA at State Street Global Advisors (SSgA). Additionally, Karpik served in Chairman and CEO roles across their UK, France, and Ireland entities and has significant investment, fund product, and governance experience. He also held roles in Europe as Head of Investments; Chief Operating Officer; Head of UK, Ireland, and Middle East; Global Head of Cash Investments; and EMEA Head of Cash Investments. Before his role at State Street, Karpik worked at Sallie Mae as a senior funding manager in Washington, DC.

He will report to PineBridge CEO Gregory Ehret and be based in New York.

Bank Indonesia Issues Warnings on Cryptocurrencies

Bank Indonesia issued another warning about cryptocurrencies viewing them as high risk, not a legal medium of exchange in Indonesia and prone to speculation. Many central banks have issued concerns that cryptocurrencies could be used to facilitate money laundering and fund terrorism. Others argue that physical cash already does facilitate money laundering and fund terrorism.

LAPFF Explores Direct Real Estate Investing

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The Los Angeles Fire and Police Pensions (LAFPP), a smaller pension compared to its larger peers such as the Los Angeles County Employees Retirement Association, is considering forming a direct real estate investment strategy that would be managed internally. LAPFF staff requested the pension’s real estate consultant The Townsend Group to explore the feasibility of creating an in-house real estate managed portfolio.

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Could Russian Government Opt for Some Cryptocurrencies over Treasuries?

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The problem with fiat money is that it is backed by governments and countries, subject to the whims of policymakers versus a tangible item like gold. Russia has sold nearly US$ 100 billion worth of Treasury bills, bought gold, yuan, and other non-U.S. dollar currencies, and saved a significant allocation that may be earmarked for Bitcoin. These moves are intended to help Russia evade U.S. sanctions. Vladislav Ginko, an economist at the Russian Presidential Academy of National Economy and Public Administration, noted that the government is working to “protect its national interests” since fewer U.S. dollars are expected to flow into the country in exchange for oil and gas. Ginko estimates the crypto investment at US$ 10 billion. If enacted, Bitcoin could spike on the purchase. Purchases could begin at any time. The Central Bank of Russia has not yet discussed its intentions. However, six months after making any financial transactions, the bank publishes them. If Russia were to carry out the plan, it would swallow over 15 % of the world’s Bitcoin.

Financial technology companies continue to built out platforms to service institutional clients. For example, San Francisco-based Anchorage, cryptocurrency custody service, raised US$ 17 million in a Series A round that was led by Andreessen Horowitz and joined by Khosla Ventures, Max Levchin (co-founder of PayPal), Elad Gil, Mark McCombe of Blackrock (Senior Managing Director, Head of the Americas region), and AngelList’s Naval Ravikant.

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PSP Investments Allocates Capital to Specialty Insurance Brokerage

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Public Sector Pension Investment Board (PSP Investments) made an investment into Newport Beach, California-based Alliant Insurance Services, Inc. In addition, funds managed by Stone Point Capital LLC also made an investment into Alliant Insurance Services. Post-transaction, funds managed by Stone Point Capital LLC will remain Alliant’s largest institutional shareholders while the company’s management and producers will continue to own the majority of the firm.

Alliant Insurance Services provides property and casualty, workers’ compensation, employee benefits, surety, and financial products and services to clients nationwide, including public entities, tribal nations, healthcare, energy, law firms, real estate, construction, and other industry groups.

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