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What Should Sovereign Wealth Funds Do Now?

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Should they buy or sell stocks? How will oil-based sovereign funds experience a slowdown in the accumulation of financial assets? When equity returns become an important factor for Gulf sovereign fund asset growth, the impact of falling listed equity markets raises issues of fund liquidity. This is why a number of Gulf funds have been redeeming equity mandates in late 2015. This appears to have been a smart move as 2016 is off to a terrible beginning with China and U.S. equity markets in free fall. Why? Just to name a few – concerned about yuan devaluation, low growth in emerging markets, and falling manufacturing figures in China. On January 7th, 2015, the People’s Bank of China lowered its reference rate for the yuan by 0.5%. The central bank policy move triggered panic; the Chinese equity market closed only 29 minutes after opening when the 7% decline threshold was met. Heading West, since the beginning of the year, the Dow Jones Industrial Average (DJIA) lost 5.2% of its value. If a global financial crisis were to break out, sovereign funds may not be in the position of being white knights like back in 2008. However, some will remain very opportunistic in distressed plays. Practically speaking, a number of strategies are getting greater recognition by SWFs such as smaller direct deals, generating steady income and keeping money at play in Europe and Japan.

With the exception of large real estate transactions, according to the Sovereign Wealth Fund Transaction Database (SWFTD), wealth funds are spending on average, smaller amounts on companies.

Concerns About Global Liquidity

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SWFI First Read, September 19, 2018

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QIA Eyes Investment in Chinese Lender Lufax

The Qatar Investment Authority (QIA) is in talks about a possible investment into Shanghai-based Lufax, one of China’s largest online lenders. The seller of the possible stake is China’s Ping An Insurance (Group) Co. Ltd. Lufax’s official name is Shanghai Lujiazui International Financial Asset Exchange Co. Ltd.

Wealth Funds Back Hotpot Giant

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Japanese Government Capital Provides Initial Life for Texas Bullet Train

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Dallas-based Texas Central Partners, LLC is the developer of a proposed high-speed rail system, dubbed the Texas Bullet Train, between Dallas and Houston. Project costs are estimated between US$ 12 billion to US$ 15 billion. The developer secured US$ 300 million in project loans from Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN) and the Japan Bank for International Cooperation (JBIC). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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DOJ Investing Tesla Over Musk Comments

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The U.S. Department of Justice (DOJ) is conducting a fraud investigation over Tesla as its CEO Elon Musk made public statements on twitter. This is a criminal probe. In addition, earlier, SWFI reported the U.S. Securities and Exchange Commission (SEC) is conducting a civil inquiry into Elon Musk regarding his statements.

This all surrounds Musk tweeting in August that he was thinking of taking Tesla private and had “funding secured” for the transaction. Both government authorities are seeing if Musk misled investors and violated federal securities laws with his public statements.

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