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The Continual Shift to Passive Investing

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In a growing trend, public investors are embracing passive investing for a number of reasons. In the past decade, active equity risk has not been rewarded for many public investors; focus has been placed on investment process and risk management. The cost of passive investing is inherently inexpensive compared to active management. There is little career risk for investment officers in passive investing; the blame can go to beta, rather than picking a bad performing active manager. Some public investors feel that passive mandates give them greater oversight on manager underperformance and the ability to quickly identify downside risk. In addition, with passive investing there is usually a defined systematic process. Investment transparency provides asset allocators with greater insight to risk exposures.

Funds like the Abu Dhabi Investment Authority have a major passive investing allocation. It is difficult to find active managers who can generate sustainable alpha. In addition, there can be periods where good managers can under perform. Active management for investing consumes more financial and time resources. Additional due diligence costs and constant monitoring are additional tasks that are undertaken. Many CIOs believe that the majority of investment returns come from asset allocation rather than external manager selection.

Newer forms of passive investing are emerging to bridge the gap to active management. The traditional market cap-weighted indices are not the only solution. Alternative indices and customized betas solutions are being implemented. Alternative beta products are popping up everywhere, some based on factors such as dividends, volatility, or fundamental factors.

Saudi and Other Gulf Country Bonds to Join JPMorgan Emerging Market Bond Index

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In a boost for Gulf-based debt, JPMorgan is adding their debt compositions to two influential emerging market bond indexes. These emerging market indexes are the most widely tracked among asset managers in the industry. Saudi Arabia, the United Arab Emirates, Bahrain, Kuwait, and Qatar are being added to the J.P. Morgan EMBI Global Diversified Index and the EMBI Global, starting January 31, 2019. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Central Bank of Nigeria Reveals Plan for New National Micro-Finance Bank

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The Central Bank of Nigeria has announced plans for a new national micro-finance bank. The proposed bank will promote small and medium enterprises.

CBN’s governor, Godwin Emefiele, noted that the bank will partner with the Bankers Committee, the Nigeria Incentive-based Risk Sharing System for Agricultural Lending, and the Nigerian Postal Service. Emefiele laid out the vision for the bank in his remarks in Abuja: “The bank will serve as an efficient channel for the disbursement and monitoring of key intervention funds by the CBN.” Nigeria’s micro-finance bank will be focused on meeting financial inclusion targets, promoting financial stability within the country, and fostering widespread economic growth.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Mergermarket Gets Ready to be Sold

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Private equity firm BC Partners hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to advise on the sales of Acuris. Acuris is a collection of financial news and data sites, which includes Mergermarket, Dealreporter, and Debtwire. In 2017, BC Partners sold around a 30% stake in GIC Private Limited.

Before the rebranding to Acuris, Mergermarket was part of The Financial Times Group until 2013 when it was sold off to BC Partners.

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