It’s Friday, which means I’ve got some weekend reading for you:
- Pass the Popcorn: The New Zealand Super Fund is suing the Bank of Portugal for allegedly misapplying new banking rules retroactively, thereby costing the Kiwi SWF around $150 million. On the surface (i.e., based on news reports I read on a plane), it’s difficult to come up with a defense of Portugal’s actions that would justify the long-term implications and potential costs. In my view, Portugal’s action would seem to have taken what was already a risky environment (where the downsides of investing could at least be identified, priced and mitigated via insurance, as the NZSF tried to do) and transformed it into an uncertain environment (in which the potential downside of transactions are unknowable). But here’s the problem for Portugal: Capital. Flees. Uncertainty. So, it should be very interesting to see how this all plays out ...
- Risky Business: Without getting into too many details on the NZSF deal above, let me just say that losing money as a result of a European government changing an obscure banking rule and applying it retroactively is not something that can be easily identified as a “risk” pre-investment. Neither would it be easy to write credit default protection (which NZSF had) that could cover such an eventuality. So, while New Zealand’s politicians are rightly asking questions about the losses on this deal, they should take a deep breath and exercise patience. Even the best investors get caught up in this kind of mess.
- Locked Up: Most venture capital funds have 8 to 10 year life spans, right? Wrong. The average VC fund life is, according to new data, 14 years! Which, in case you’re keeping score, is nuts. With that kind of illiquidity, VCs should be crushing public markets (and, FYI, they’re not).
- New SWFs: The government of Papua New Guinea, which decided quite publicly NOT to set up a new SWF last year, is now working hard to set up a new SWF.
- Positive Thinking: The future of asset ownership will include “less passivity and consumption, and more collaboration and disruption.”
- China: Sweden’s AP2 generated 59% returns on its Chinese equities book last year ... So, you know, more of that please.
- New SDFs: The Strategic Banking Corporation of Ireland is now, officially, a thing. It will have €800 million for SMEs, but it will allocate that capital through intermediaries such as banks and non-bank entities.
- Don’t Mess With Canada: Texas Teachers will ramp its principal investing activities in a bid to leverage its unique ability, at least outside of Canada, to write $150 million checks on a direct basis.
- Nerds: Universities are looking to catalyze and capture economic value through new venture funds. I think that’s smart.
- Infrastructure: China’s $40 billion Silk Road infrastructure fund is now up and running.
- Wedding Loans: Yes, wedding loans.
- Volatility: Here’s what the Canada Pension Plan has to say about a looming market dislocations: “Bienvenue.”
- Divestment I: NZ Super Fund has been called upon to divest from fossil fuels. The CEO says, “The world is just not that straightforward.”
- Divestment II: Andrew Ang body slams divestment: “By definition you can’t have direct aggregate impact by divesting.”
Have a great weekend!
