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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.

Johnson Controls Sells Battery Unit to Brookfield and CDPQ

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Brookfield Business Partners L.P. and Caisse de dépôt et placement du Québec (CDPQ), announced that they have reached an agreement whereby Brookfield and CDPQ will acquire 100% of Johnson Controls’ Power Solutions business for in a cash valued transaction valued at approximately US$ 13.2 billion. Brookfield Business Partners is the flagship listed business services and industrials company of Brookfield Asset Management Inc. Closing of the transaction remains subject to customary closing conditions including regulatory approvals. Closing is expected to occur by June 30, 2019. The seller is Johnson Controls International plc. The unit employees roughly 15,000 people.

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MAS Seeks to Commit $5 Billion to Private Equity and Infrastructure Managers

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From U.S. pension funds to asset-heavy sovereign wealth funds, Singapore is calculating that more institutional investor assets globally are being committed to the Asia region. The Monetary Authority of Singapore (MAS), Singapore’s central bank, signaled and planned to commit US$ 5 billion with locally-based fund managers who will invest in private enterprises and infrastructure projects. The beneficiaries of the mandates will be private equity and infrastructure fund managers. MAS is seeking to lure top global asset managers to Singapore and firms that have a significant footprint in Singapore could be eligible for the funds. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Ivanhoe Cambridge Acquires Cap Ampere Campus from Natixis

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In one of the largest transactions in the French office sector, Ivanhoé Cambridge, real estate subsidiary of Caisse de dépôt et placement du Québec (CDPQ), has acquired a 90,000 square meter office-building campus from Natixis, in the Greater Paris area of Saint-Denis Pleyel. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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