May 23, 2017

Perspective

FT – Elliott makes distressed debt hires in expectation of downturn – Lindsay Fortado 5/17

  • “In a letter to investors earlier this month, explaining why they were opening to new capital, Mr. Singer said he believes ‘that there has never been a larger (and more undeserved) spirit of financial market complacency in our experience.'”

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – This Is Your Brain On Annuities – Anthony Isola 5/22

  • Max out your work-sponsored plans and IRA contributions before you even think about annuities.

FT – How the great bull run can have a constructive end – Mohamed El-Erian 5/21

Tech

BloombergBusinessweek – Waze Wants to Help You Hitch a Ride – Adam Satariano and Mark Bergen 5/18

  • “The traffic app tries its hand at carpooling.”

Sovereign Wealth Funds

FT – Money flowing into sovereign wealth funds declines to $7.4tn – Attracta Mooney 5/21

  • “Sovereign wealth funds are feeling the strain from lower oil prices and government raids on rainy-day funds, with the amount of money managed by state-backed investment vehicles falling slightly to $7.4tn.”
  • “Between March 2015 and March 2017, the collective assets overseen by SWFs — which often owe their origins to money generated from a country’s excess oil revenues — decreased 0.5%. That compares with the 14% increase in the two years to March 2015, according to the Sovereign Wealth Fund Institute, a research organization.”
  • “The fall in assets has raised concerns that state funds will withdraw more money from external investment managers, which have already suffered several years of redemptions from these large investors.”
  • “The oil price has more than halved since its 2014 high of about $115 a barrel, to less than $50 a barrel now, forcing governments to pull money from SWFs to prop up their economies.”
  • “In the two years to the end of 2016, SWFs withdrew at least $85bn from investment houses, according to figures from eVestment, the data provider.”
  • “The assets of Saudi Arabia’s Sama Foreign Holdings fund, the world’s fifth-largest SWF, fell 14% to $514bn in the year to March 2017, while assets at Russia’s reserve fund tumbled by two-thirds to $16.2bn, according to SWFI.”
  • “Assets also fell at China’s Safe vehicle and Azerbaijan’s state oil fund, while the amount of money managed by the Abu Dhabi Investment Authority and the Kuwait Investment Authority, the third- and fourth-largest SWFs, were flat over the past year, SWFI estimated.”
  • “Asset managers including Aberdeen, BlackRock, Franklin Templeton and Invesco were among those who are thought to have suffered large outflows from SWFs, particularly in 2015 and 2016.”
  • “According to SWFI, the assets managed by state-backed vehicles that owe their origin to oil and gas fell 1.5% over the past two years, compared with growth of about 0.7% for non-oil or gas-related funds.”
  • “Sven Behrendt, managing director of GeoEconomica, the consultancy, said: ‘The price of oil has been the largest driver for asset growth across the sovereign fund industry. Since oil has come down, asset growth has shrunk.’”
  • “SWFs have been forced to increase their allocations to riskier investments in an attempt to improve returns and increase assets. The SWFI data show that the value of assets invested in infrastructure, property and private equity grew rapidly over the past two years, while assets invested in fixed income fell.”
  • “He added that many SWFs were set up with the assumption that their financial returns would complement and eventually replace oil revenues as a significant source of funding.
  • “’This is a crucial moment for sovereign wealth funds, in particular oil-based ones,’ he said. ‘With the oil price lower, the question that will be asked of sovereign asset managers is to make good on that promise [to replace oil revenues].'”

China

FT – China looks to capture millions of tons of CO2 – Emily Feng 5/21

  • “China is planning to capture millions of tons of carbon dioxide generated by its energy and steel plants for use in extracting crude oil from the country’s increasingly barren oilfields.”

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