It’s the weekend, which means I have some news and research for your reading enjoyment.
First, here's the news:
- My Hero: Recognizing that it is in fact possible to find an alternative to paying external managers high fees to access private equity or hedge fund strategies, the CEO of the Oman Investment Fund plans to shun external managers in the alternatives space and build a direct investment program. Dude: How can I help?
- Pink Slip: Kazakhstan's SWF Samruk-Kazyna will lay off 2000 administrative personnel, which raises the question... Why did it have 2000 admins? That's more than ADIA's total head count.
- Happy Fee Machine: A Bloomberg op-ed defends the high fees charged by Wall Street’s alternatives managers, focusing on the notion of net-of-fee-returns. But here's my question: Where’s the concept of risk-adjusted returns in here? Second question: Who’s to say pensions can’t find (or create) more aligned access points to these same assets classes? Did you see 'my hero' above? The assumption in the op-ed that accessing alternatives can only be done through Wall Street is incorrect. Food for thought...
- Payback: Abu Dhabi's IPIC has repaid in full a $2 billion loan it took out in 2011.
- White Knights: India is hoping it can convince SWFs from Australia and Asia to buy its debt.
- Population Aging: New Zealand Superannuation Fund has agreed to buy a stake in a retirement and aged-care provider.
And now, the research:
- CIC’s Energy Appetite: Xiaolei Sun, Jianping Lia, Yongfeng Wang, and Woodrow W. Clark have a new paper entitled, "China's Sovereign Wealth Fund Investments in overseas energy: The energy security perspective." Here’s the abstract: "Sovereign Wealth Funds (SWFs) are state-owned investment funds that invest in real and financial assets. Since the global financial crisis in 2008, SWFs' investments have resulted in national security concerns of host countries because SWFs continue to expand rapidly and have become increasingly active in real-time strategic transactions. Given this background, China, which has the biggest SWF in the world, is facing severe challenges of energy resources shortages while its plan is to accomplish social and economic development goals. Energy security is a key driving force of the energy investment policy of China's SWFs. This makes the SWF investments more complicated and more politically sensitive. The combination of sovereign rights and the strategic importance of energy also makes geopolitics more complicated and brings more uncertainty to SWF investments. This article explores the relationship between energy security and energy investments of China's SWFs. It is recognized that the energy investment of SWFs must follow a sustainable path to coordinate energy security, economic growth, return on investment and national security concerns. Government policymakers are urged to balance the financial and political returns on SWFs against potential negative effects. The conclusion presents insights for policymakers, energy scholars and SWF researchers."
- Financial Expertise: Dane P. Rook of Oxford has a new paper entitled, "Paying Attention (Due) to Memory Structure: Rethinking Expertise in Financial Cognition". Here’s a blurb: "This paper proposes a redefinition of the concept of expertise in financial cognition that is rooted in the distinction between two types of memory identified by neuroscience: semantic and episodic. The interrelation between these sibling memory systems parallels Bayesian notions of beliefs and data, respectively, and promises to unify many of the disparate phenomena and mechanisms identified by behavioral economics and finance over recent decades. In particular, a memory structure perspective can potentially resolve one shortcoming of recent models of bounded rationality in economics: the inability to capture comfortably both endogenous salience and neglect. Distinguishing between semantic and episodic memory systems permits more elegant modelling of transitions between exogenous and endogenous direction of attention, and sidles nearer toward more robust models of framing effects and ambiguity aversion. Furthermore, it facilitates another useful distinction between two sorts of neglect error: myopic and scotomatous. Among other applications for economic research, a new, qualitative rendering of bubble dynamics and financial crashes becomes possible from this expertise-memory structure paradigm.
Enjoy your weekend!