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Traditional Active Managers Fear Smart Beta Adoption

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Institute Fund Summit Europe 2014, October 27, Smart Beta Panel.  Pictured: (L-R) Michael Maduell, SWFI, Mark Sodergren, Northern Trust, Luciano Siracusano, WisdomTree, Riti Samanta, SSgA, Simon Lansdorp, Robeco.

Institute Fund Summit Europe 2014, October 27 at the Jumeirah Carlton Tower – Smart Beta Panel. Pictured: (L-R) Michael Maduell, SWFI, Mark Sodergren, Northern Trust, Luciano Siracusano, WisdomTree, Riti Samanta, SSgA, Simon Lansdorp, Robeco.

Factor-based strategies are gaining foothold among institutional investors of all stripes. One compelling reason is that investors are concerned about the risks of cap-weighted indices. These indices tend to favor large companies and can perpetuate a cycle of overvaluation – think of Enron and Lehman Brothers. These rules-based indices are exhibiting visigoth behavior on traditional managers, as a swath of institutional investors continue to seek out more information about smart beta. The large sovereign funds like the Abu Dhabi Investment Authority and Norway’s Government Pension Fund Global manage mega portfolios of listed equities. Smart beta is a way to cut down on costs. Japan’s Government Pension Investment Fund (GPIF), has hired a number of smart beta managers including Goldman Sachs Asset Management, which benchmarks itself using S&P GIVI (Global Intrinsic Value Index), a S&P Dow Jones rules-based index focused on intrinsic stock value. With a cost structure lower than active management, but allowing more control than traditional index funds, smart beta seems like a promising concept for investors. Active managers critique smart beta on that it cannot reliably and consistently beat the markets. Countering, proponents of smart beta say what strategy has ever, consistently beat markets.


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Globally, institutional investors are probing deeper into smart beta. From a historical standpoint, European pensions were the early institutional investor adopters of smart beta. According to the Sovereign Wealth Fund Institute’s smart beta survey, which includes 72 public institutions, featuring 16 sovereign wealth funds, with over US$ 2.9 trillion in public investor capital, 67% claim to already have smart beta allocations or are currently in the evaluation process. When it comes to sovereign wealth funds in the survey sample, 37% say that they have allocations to smart beta, while another 25% say that they are currently evaluating a smart beta strategy.

PSP Investments and Blue Sky Alternative Investments End Strategic Partnership Agreement

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Blue Sky Alternative Investments Limited informed Canada’s Public Sector Pension Investment Board (PSP Investments) that it agreed to terminate its strategic agreement effective March 31, 2019. In December 2017, Blue Sky Alternative Investments forged an agreement with PSP Investments to assist in committing capital in a number of agricultural investments.

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Yield-Hungry Korean Insurance Capital Backs TSX Broadway

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Mirae Asset Daewoo Co., Ltd., the Seoul-based investment banking firm, has provided a US$ 375 million loan for a redevelopment in New York’s Times Square. It joins L & L Holding Company, Maefield Development, and Fortress Investment Group who are bringing the development known as TSX Broadway to life. The building is at 1568 Broadway in Manhattan. TSX Broadway, a US$ 2.5 billion project when all equity financing is added in, will allow for renovations and expansion of the 46-storey building. An LED screen, which is not an uncommon sight in the Big Apple, will wrap around the corner of the tower. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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OFFICIALS: Saudi Crown Prince Denies Interest in Acquiring Manchester United

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The Saudi Arabian government dispelled rumors that Saudi Crown Prince Mohammed bin Salman will acquire football club Manchester United. However, Saudi Arabia’s Public Investment Fund (PIF) had talks regarding sponsorship with the football club. Manchester United signed a partnership deal with Saudi Arabia’s General Sports Authority in 2017.

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