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March 7, 2017

The World’s Biggest Wealth Fund Has A Huge Payday After The Trump Election

Many economists thought a Trump win would be a disaster for the stock market. Well, that didn’t happen. The opposite happened. The stock market has been on a roll since the November 2016 election. Several big wealth funds are lining their green pockets with hefty returns. The largest wealth fund, Norway’s sovereign wealth fund gained $53 billion after the election. Filled with an injection of paper profits, investors jumped into emerging and frontier markets once again. The Oslo-based $900 billion Government Pension Fund Global was a clear winner. That fund returned 6.9 percent in 2016 after a lackluster 2.7 percent return in 2015. The Norwegian Sovereign Fund manager said stocks gained 8.7 percent, bonds were up 4.3 percent, and real estate was up 0,8 percent in 2016. Strong equity returns in the second half of 2016 were the catalyst for the outstanding performance, according to Jim Dondero. Jim Dondero is the CEO of Highland Capital Management. James is an expert hedge fund investor. Dondero’s funds had an exceptional 2016 as well.

The interesting fact about share performance in 2016 is, fund holdings in Europe dropped by 2.1 percent, and North American shares were up 2.3 percent. Asian shares were off 0.2 percent, and emerging market shares were up 0.2 percent. The increase in emerging market shares was due to a higher dollar allocation for fixed income and other equities in emerging markets, according to Jim Dondero. Argentina was added to the fund’s list in 2016, and Dondero’s emerging market investments also include Argentinian bonds.

The pending question on the minds of investors in 2017 is when will the stock market settle down? According to Dondero, Trump will have to expose more of his agenda before the stock market makes the adjustment every investor is expecting. This is one of the few times in history when the U.S. Dollar, the U.S. Stock market, and gold are all performing better than expected. Most economists think the honeymoon will come to an end during the second half of 2017. There is too much mud in the political and economic water to continue to produce record-setting returns from all types of assets. But there are opportunities developing in emerging markets. Brazil and Argentina are enticing investors back, and India is still a good bet even though investment numbers fell off in 2016.

More than 16 major corporations are pushing for a border tax when Trump reforms the tax code. If a border tax is imposed, it might be good news for some, and bad news for other investors. Companies like Walmart, Best Buy, and Costco oppose the border tax, according to Dondero.

James Dondero is a very successful hedge fund investor. His funds produce consistent returns because he focuses on healthcare, emerging markets, oil, and retail and wholesale companies. Jim graduated from the University of Virginia. He went to work for American Express in 1985. In 1989, he joined a subsidiary of Progressive Life as Chief Investment Officer. In 1993, he co-founded Highland Capital Management. The Dallas-based investment firm has offices in Singapore, Seoul, Sao Paulo and New York. Dondero is known for his charitable contributions as well as being the Chairman of NexPoint, NexBank, CCS Medical, and Cornerstone Healthcare. He also sits on the board of American Banknote and MGM Studios.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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