Bank of England Keeps Rates at 0.75% | Chief Investment Officer

Following the Federal Reserve’s decision to raise interest rates by a quarter-point, the Bank of England also made a much-anticipated move this week when its monetary policy group decided to keep its rates at 0.75%.

The committee voted unanimously to leave policy rates unchanged to meet its 2% inflation target so the British economy can help sustain growth and employment.

It also agreed to keep non-financial investment grade corporate bond purchases, as well as UK government bond purchases. The central bank reserves have corporate and government bonds with values listed at £10 billion and £435 billion, respectively. The Fed is reducing its stockpile of government and mortgage bonds.

The BoE’s short-term outlook for global growth is softer now as more downside risks appeared in 2018, particularly in corporate credit markets. The committee also predicts the UK’s consumer price index will drop below 2% in the next several months due to the slide in oil prices. It also expects the UK gross domestic product to rise by “about 0.3%” by the end of its forecast period.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Additionally, domestic inflationary pressures keep mounting. The labor market is tightening despite increases in employment growth, and the committee said unemployment should stay “around 4% in the near-term.”

As for the long-term outlook, the bank said that would “continue to depend significantly on the nature of EU withdrawal,” specifically new trade deals between the European Union and the UK, as well as how households, businesses, and markets react. Monetary policy will come down to such economic forces as supply, demand, and the exchange rate.

Another concern is the now omnipresent Brexit, which the group said has “intensified considerably” since its last meeting, affecting the UK’s markets. Volatility swings, bank funding costs, and high-yield spreads have increased, and more so than in other developed economies. Meanwhile, stocks have tanked, not to mention the depreciation of the sterling.

Despite all these concerns, the bank is committed to keeping its target inflation rate at its 2% target.

The bank will next announce its rate policy thoughts February 7.

Tags: 2019 Economic Forecast, Bank of England, Interest Rates, Monetary Policy

The board of the Maine Public Employees Retirement System (MainePERS) recently approved a motion shepherded by Chief Investment Officer Andrew Sawyer to withdraw several of its commitments to private equity managers investing in infrastructure assets.

The decision was to redeem approximately five to six commitments to private infrastructure managers out of the approximately 13 relationships the pension plan has in the asset class, in an effort to “rebalanace” the portfolio. The remaining managers would be of the “highest conviction,” according to a memo prepared by the $14.1 billion retirement system

The selection of which managers to terminate relationships with is an “ongoing process,” Sawyer told CIO. He declined to comment further on the deliberation.

Sawyer and his staff recently approved a $150 million commitment to Global Infrastructure Partners IV, a $20 billion fundraising effort which likely will exclude the high-profile infrastructure manager from possible commitment redemption.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

MainePERS’s infrastructure and energy portfolio is inclusive of the following, as of June 30, 2018.

Fund Name	Commitment	Total Distributions	Interim Net IRR
Alinda Infrastructure Fund II	$50m	$52.352m	4.25%
Brookfield Infrastructure Fund II	$100m	$32.947m	9.8%
Brookfield Infrastructure Fund III	$100M	10.781m	n/a
Carlyle Infrastructure Partners	$50m	$61.900m	2.7%
Cube Infrastructure	$44.845m	$23.239	7.5%
EQT Infrastructure III	$68.382	$3.270m	n/a
Global Infrastructure Partners	$75m	$145.478m	17.0%
Global Infrastructure Partners II	$75m	$89.109m	21.3%
Global Infrastructure Partners III	$150m	$6.108m	4.0%
First Reserve Energy Infrastructure Fund	$50m	$39.513m	3.5%
First Reserve Energy Infrastructure Fund II	$100m	$60.870m	43.99%
IFM Global Infrastructure Fund	$100m	$16.652	10.8%
KKR Infrastructure Fund	$75m	$55.854m	10.1%
KKR Global Infrastructure Investors II	$150m	$19.264m	10.5%
KKR Global Infrastructure Investors III	$100m	–	–
Meridiam Infrastructure	$11.211m	$3.878m	9.0%

The memo did not disclose specific timing, manager selection, or other details. Penalties are traditionally imposed on investors who withdraw capital before the end of a private equity fund’s lifecycle, an effective deterrent for behavior that in aggregate could significantly impair a fund.

Tags: Andrew Sawyer, Infrastructure, Maine Public Employees Retirement System (MainePERS), Private Equity