Government Fund Weekly News Roundup — Risk Factors, Budget Deficits and Diamonds

July 15, 2016 by Michael Englefield

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Diamonds
Image: Ultima_Bruce.

In the news this week: The Sovereign Wealth Center (SWC) publishes an exclusive interview with PSP Investments’ CIO Daniel Garant. South Korea’s National Pension Service (NPS) makes new allocations to hedge funds and real estate. Qatari Diar, a subsidiary of the Qatar Investment Authority, partners with a renowned New York developer to build a commercial landmark on Long Island. And Russia liquidates more state-owned assets to meet its budget deficit.  

PSP Investments’ CIO Talks Risk and Reconfiguration with SWC

SWC published an exclusive interview with Daniel Garant, CIO of Canadian pension fund manager the Public Sector Pension Investment Board (better known as PSP Investments), on Thursday. Garant, who took the top job at PSP in June 2015, has faced a difficult macroeconomic environment during his first twelve months: Almost as soon as he started, bond yields crashed through the floor and the global oil prices plunged. But the Canadian energy-markets expert has met these challenges head-on and launched a major reconfiguration of PSP’s portfolio strategy. 

In speaking to SWC, Garant outlined his plans to introduce a total-portfolio approach to PSP’s asset-allocation framework and risk analysis. This new approach involves breaking down assets into their constituent risk factors (such as sensitivity to inflation or fluctuations in interest rates), and aggregating risks across the portfolio. He also detailed PSP’s recent moves into specific market sectors, including logistics and renewable-electricity generation.

Extending Its Reach: South Korea’s NPS Branches Out

South Korea’s National Pension Service (NPS) has appointed four external asset managers: two to manage its inaugural hedge fund investments and two to deploy fresh capital in the South Korean real estate market.

NPS chose BlackRock Financial Management, a unit of New York-based investment giant BlackRock Inc., and Chicago-based alternatives specialist Grosvenor Capital Management to take charge of its inaugural fund of hedge fund investments. In a move to diversify its portfolio, the fund plans to entrust the two firms with up to $500 million each to execute its first-ever allocations to hedge funds.

Later in the week, NPS announced the appointment of two Seoul-based asset managers, IGIS Asset Management Co. and Samsung SRA Asset Management Co. (an investment subsidiary of life insurer Samsung Life Insurance), to run its new local real estate investment fund. The two firms will have up to 500 billion won ($432.8 million) to invest over the next two years, with instructions to focus on high-quality office property in South Korea with stable tenants.

Qatar Firm Looks to Build on New York’s Long Island

Qatari Diar Real Estate Investment Co., a subsidiary of the Qatar Investment Authority, is partnering with New York City-based real estate developer Tishman Speyer to develop a $700 million office-and-retail complex on New York’s Long Island. The 1.1 million sq. ft. project will contain two 27-story office towers joined by a four-story retail and food court area.

The office towers have already attracted the attention of two New York-based corporate tenants: upscale department operator Bloomingdale’s and workspace provider WeWork have reportedly signed leases for office space in the complex.

QIA’s funding will come as a relief to Tishman — the property developer has been searching for a partner to finance the development for more than six months. Also investing in the project is Little Rock, Arkansas-based Bank of the Ozarks.

Russia’s RDIF Helps Government Turn Diamonds into Hard Cash

When Russia’s state development fund, the Russian Direct Investment Fund (RDIF), ditched its stake in state-owned diamond-mining company Alrosa earlier this year, it appeared diamonds weren’t forever after all. 

But it didn’t take long for RDIF to reconsider. The Russian government has been selling off state-owned assets to plug a yawning budget deficit; this week, the government put 10.9 percent of Alrosa under the gavel. The privatization fetched 52.2 billion roubles ($813 million) or 65 roubles per share. RDIF not only bought 10 percent of the shares on offer but also acted in the capacity of an investment bank, underwriting the deal and reportedly brokering introductions to other state-owned funds, including the Abu Dhabi Investment Authority and the emirate’s sovereign development fund Mubadala Development Co. 

 


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