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Timor-Leste Petroleum Fund Increases Equity Exposure up to 20%

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According to the press release, “The Minister of Finance, Her Excellency Emilia Pires, and the Governor of the Central Bank of Timor-Leste, Mr Abraão de Vasconselos, announced that following the revision of the Petroleum Fund law in 2011, significant progress has been made in implementing a new asset allocation of the Petroleum Fund.

Based on advice received from the Investment Advisory Board, the Governor of the Central Bank now has the mandate to progressively invest the Petroleum Fund in global equities up to 20% of the Fund.

The decision to invest 20% of the Petroleum Fund into global equities was made after careful consideration and in depth analysis of the benefits and risks associated with diversification. Firstly, the increased allocation to equities would increase the expected return of the Fund from 2.0% to 2.6%. This would allow the Fund to closer approximate the 3% Estimated Sustainable Income that will be necessary in the longer term to fund the General State budget and serve the needs of the People.

Secondly, the new allocation recognized the benefits of diversification, meaning that the increased investment in equities would be efficient in terms of balancing risk and return. A move to 20% equities would result in an increase of the Fund standard deviation from 2.6% to 3.9%. While the expected return would be higher, there would also be a chance that some quarters, or even years, would show negative returns. It is important to note, Timor-Leste is classified as a ‘long-term’ investor which means the fund should be evaluated on the long term results not the short term gains or losses. Due to the size of the fund, it can afford to incur the occasional rough spot in order to increase the average long-term returns.

Lastly, increasing the Fund’s equity allocation will be done progressively to avoid the risks associated with investing in the market at a single point in time. Proceeding in this way Timor-Leste will optimize the chance of investing at the average index price.

Mr Abraão de Vasconselos, Governor of the Central Bank, confirmed the Central Bank has commenced the equity purchase programme. The Central Bank appointed a new equity manager, State Street Global Advisors, in early January, and made further market purchases in February. As a result of these steps, the Fund has now invested 12.5% of its capital (approximately $ 1.2 billion) in 1,800 companies in 23 developed countries. The Central Bank will continue to increase the Fund’s investment in these markets progressively until the 20% target is reached at the end of June 2012.

The purpose of diversification in the fund’s investment strategy is to increase returns to the fund for the sovereign wealth owners, the People of Timor-Leste, to ensure long term growth as per global best investment practice.”

Read more: Press Release

Italian ANAS and RDIF Invest and Build the Fourth Section of Moscow’s Central Ring Road

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The Russian Direct Investment Fund (RDIF) inked a deal with ANAS S.p.A. (formerly known as Azienda Nazionale Autonoma delle Strade), the Italian state highway management company, to implement a concession agreement to build and operate the fourth section of the massive Moscow Central Ring Road. The transaction expects to be finalized in the first quarter of 2019. This is the final section of Central Ring Road, which is 96.5 kilometers long. According to the RDIF, “Under the terms of the concession agreement, the cost of construction is 85.4 billion rubles, of which the concessionaire will provide 49.7 billion rubles and private investors will provide 35.7 billion rubles.”

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Follow the Money – Episode 48

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This long-form podcast was recorded on December 11, 2018. Michael Maduell dissects the latest geopolitical trends that can impact institutional investors such as pensions, sovereign wealth funds, and endowments. Maduell lends his opinion on the lawsuit of Neiman Marcus and bumps in the road for augmented reality.

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CONTENTS
1:15 Huawei, Canada, Brexit, and Macron Headache
6:30 Sovereign Wealth Fund Asset Allocation
9:58 India Gets a New Central Bank Governor
13:26 Pensions Go Bust on U.S. Retailers
17:04 Augmented Reality and Sovereign Funds
22:00 Former CalPERS CIO Goes to Morgan Stanley Investment Management
24:30 Oman Investment Fund Goes on Defense in Public Markets
25:00 Japanese Scandals and Opportunities

EPISODE 48

Stream off Follow the Money

The views in this media are expressed by Michael Maduell and other participants and are not reflective of the Sovereign Wealth Fund Institute (SWFI).

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Danica Pensions Sells Danica Pension Sweden

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Danica Pension sold Danske Pension Försikringsaktiebolag (publ) (also known as Danica Pension Sweden) to a group of investors for around 2.6 billion SEK. Danica Pension is part of Danske Bank A/S. Of the total amount, 2.3 billion SEK is being paid in cash, while the rest is in the form of a debt instrument from Danica Pension.

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