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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

Follow the Money – Episode 45

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This longer-than-normal episode covers a wide range of issues including such as sovereign wealth funds, bitcoin, cryptocurrencies, Indian real estate, ESG, investment exclusions, central banking and more.

EPISODE 45

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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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CalPERS Board Elects Priya Mathur as Board President

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The board of the California Public Employees’ Retirement System (CalPERS) elected Priya Mathur as board president. The current president Rob Feckner was named vice president of the board. Feckner previously served as board president and vice president.

Priya Mathur is serving her fourth term on the CalPERS Board of Administration. Mathur is a principal financial analyst for Bay Area Rapid Transit District (BART). Mathur represents public employees on the CalPERS Board, which she joined in 2002. She currently serves on four committees: Governance, Investment, Pension & Health Benefits, and Risk & Audit. She chairs the Pension & Health Benefits Committee and is vice chair of the Governance Committee.

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Oman SGRF Contemplates $1 Billion Infrastructure Fund

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Oman’s State General Reserve Fund (SGRF) is in discussions on forming a US$ 1 billion infrastructure fund. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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