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Why Many Investment Bankers are Heading to the Gulf

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Increasingly, sovereign wealth funds and other large public institutional investors have boosted their activity in direct investments, participating in acquisitions globally. A portion of those deals and capital raises are occurring in the GCC region, attracting a swath of investment bankers. Despite geopolitical headwinds like the Iraq government and Kurds battling ISIS over Mesopotamia, and turmoil in Syria, bankers see opportunity in the Middle East M&A market.

In 2013, according to the Sovereign Wealth Fund Institute Transaction Database, GCC-based sovereign wealth funds made US$ 20.2 billion in direct transactions, an increase from US$ 18.32 billion in 2012.

Big banks like JP Morgan Chase welcome an opportunity to expand in the Middle East, eager to play catch up to competitors like Lazard. Other U.S. banks like Charlotte-based Bank of America Merrill Lynch (BAML) and Moelis have made aggressive strides to expand internationally. JP Morgan was one of the joint global coordinators and bookrunners in Emaar Properties’ US$ 1.6 billion initial public offering. Emaar Properties was the second most popularly-traded stock on the bourse on October 7th.

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SWFI First Read, June 22, 2018

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JPMorgan Fund Buys 40% of Oxford Properties’ French Portfolio

A fund advised by JP Morgan Asset Management committed €400 million in Oxford Properties’ French portfolio. Essentially, Oxford Properties sold a 49.9% non-managing interest in 32 Rue Blanche, 92 Avenue de France and Paris Bastille. Oxford Properties made its maiden investment in Paris in 2014 when it acquired 32 Rue Blanche.

Oxford Properties is the real estate unit of OMERS.

Temasek Explores Further Cash Commitments to FirstCry

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DOL Fiduciary Role is Struck Down by Fifth Circuit Court of Appeals

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The U.S. Court of Appeal, Fifth Circuit, confirmed a March 15th decision to strike down the U.S. Department of Labor’s (DOL) fiduciary rule. The fiduciary rule is a series of seven different rules that broadly interpret the term “investment advice fiduciary” and redefine exemptions to provisions concerning fiduciaries that appear in the Employee Retirement Income Security Act of 1974 (ERISA). The 5th U.S. Circuit Court of Appeals overturned a decision by a Dallas federal court that had upheld the DOL fiduciary rule.

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Supreme Court Ruling on Online Shoppers Sales Tax Could Impact SWF Investing

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In a 5-4 ruling, the U.S. Supreme Court ruled that U.S. states could mandate online shoppers to pay sales tax when they make online purchases. This new ruling overturns a ruling from 1992.

Sovereign wealth funds directly invested at least US$ 9 billion in internet-related retail businesses from January 1, 2015 to March 31, 2018, according to SWFI transaction data. This is not counting fund commitments or funds invested. Sovereign funds have been plowing capital into online mega giants such as Amazon and Expedia, while spending big on e-commerce startups in the United States.

“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States. These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause,” Justice Anthony Kennedy penned in an opinion joined by Justices Clarence Thomas, Samuel Alito, Ruth Bader Ginsburg, and Neil Gorsuch.

“Retailers have been waiting for this day for more than two decades,” the National Retail Federation said in a statement.

Already a number of U.S. states enacted laws mandating online marketplaces to collect sales taxes on behalf of third-party sellers.

The case is South Dakota v. Wayfair, 17-494.

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