Sovereign Wealth Fund Institute

Russia’s Oil Reserve Fund Received Cash Injection

Web Director — Thu, 02 Feb 2012 07:13:06 +0000

Russia’s oil reserve fund increased to 1,863 billion rubles (US$ 61.36 billion) from 811.5 billion rubles in January. The oil reserve fund received a one-time cash injection since the Russian Government ran a fiscal surplus in 2011. The reserve fund has grown large in its early times and shrunk during the financial crisis. Russia has two major sovereign funds, the other fund is the National Welfare Fund.

CIC to Invest in EIG Global Energy Partners

Web Director — Thu, 02 Feb 2012 06:47:58 +0000

EIG Global Energy Partners, LLC (EIG), an institutional investor in the global energy sector, has reached a definitive agreement with the China Investment Corporation (CIC). The CIC is in agreement to purchase a minority stake in EIG. The CIC is an investor in EIG-managed funds.

The China Investment Corporation is betting big on natural resources, energy, and global infrastructure. By investing in an asset manager that specializes in energy and infrastructure, the CIC could potentially learn and benefit from possible expertise and robust deal flow.

Separated in January 2011, EIG was formerly the Energy & Infrastructure Group at Trust Company of the West (TCW). The CIC has also invested in Chesapeake Energy Corporation. In November 2011, Chesapeake sold EIG $500 million of perpetual preferred shares of a newly formed entity, CHK Utica, L.L.C.

CPP Investment Board Completes Acquisition of 24.1% Stake in Gassled Alongside Two Consortium Partners

Web Director — Thu, 02 Feb 2012 06:17:00 +0000

The press release states, “CPP Investment Board (CPPIB) announced today that a consortium including CPPIB has completed the acquisition of a 24.1% stake in the Gassled Joint Venture (Gassled) from Statoil ASA. The consortium entered into an agreement to acquire this stake in June 2011.

The buyer is Solveig Gas Norway AS, a holding company that is approximately 40% owned by CPPIB, 30% by Allianz Capital Partners, a subsidiary of Allianz SE, and 30% by Infinity Investments SA, a wholly owned subsidiary of the Abu Dhabi Investment Authority. The total value of the transaction as announced on June 6, 2011 is NOK 17.35 billion or approximately C$3.18 billion.

André Bourbonnais, Senior Vice-President, Private Investments for CPPIB, said, “We are pleased to close this significant transaction alongside our consortium partners. Gassled is a good fit with CPPIB’s infrastructure portfolio and long-term investment strategy, and we look forward to becoming an important strategic partner in the future development of the Gassled network.”

Established in 2003, Gassled is an unincorporated joint venture which owns the majority of the gas transport infrastructure on the Norwegian Continental Shelf. It is a core infrastructure asset and a strategic asset in the Northwestern Europe energy landscape. Gassled is expected to benefit from the growth in European gas demand and Norway’s long term position as a key supplier of gas to Europe.”

Mexico Hedges Oil Revenues in 2012, Uses Put Options

Web Director — Wed, 01 Feb 2012 06:25:16 +0000

Mexico is a country that is economically dependent on its petroleum industry. Revenue volatility from one budget to the next, as business cycles tend to coincide with oil cycles, and the proficient use of oil revenues increases remain significant challenges for Mexico. Also, Mexico must deal with the scenario of decreased oil revenues as production is in steady decline and proven reserves are shrinking. The Government of Mexico has purchased put options at the US$ 85 a barrel level. This is to protect Mexico’s finances in case of a potential drop in the average price. The put options may be exercised in the event Mexico’s basket of export crude treads below an average of US$ 85 a barrel. This is nothing new as comparable hedging strategies have been used in the past to protect against oil price volatility.

The oil coverage program is applied through Mexico’s Oil Revenues Stabilization Fund.

In 2010, the Government of Mexico hedged at US$ 57 a barrel at a cost of over US$ 1 billion. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

OMERS Ventures Invests in Extreme Startups

Web Director — Wed, 01 Feb 2012 03:35:11 +0000

OMERS Ventures has allocated capital to seed investments. It recently co-invested with Extreme Venture Partners, Rho Canada Ventures, BlackBerry Partners Fund and BDC in a new startup accelerator program called Extreme Startups. The amount co-invested by all participants in total was $7 million. Startup companies in Extreme Startups can receive up to $200,000 of investment: an initial investment of $50,000, with up to $150,000 in a convertible note provided by BDC. Seed companies will also have access to industry partners and collaborators such as Google, Microsoft, Autodesk, RIM, Twitter, and Salesforce.com.

New Zealand SF Releases Performance Data

Web Director — Tue, 31 Jan 2012 05:18:36 +0000

The New Zealand Superannuation Fund (NZSF) has a -5.28% FYTD return in 2011/2012. Since inception it has an annualized return of 6.63%. Returns are after fees but before New Zealand tax paid. In FY 2009-2010, the fund returned 15.45% and in FY 2010-2011 the fund returned 25.05%. 58.6% of the portfolio was exposed to global equities. 10.6% is exposed to infrastructure.

The NZSF owns 10.11% of Auckland International Airport.

Future Fund Releases Performance

Web Director — Tue, 31 Jan 2012 05:01:18 +0000

According to the press release, “Since the first contribution to the Future Fund on 5 May 2006, the Fund has generated a return of 4.2% per annum.

The Future Fund’s return for the calendar year 2011 was 1.6%. The return for the quarter to December 2011 was minus 0.2% and for the first six months of the financial year it was
minus 3.1%.

David Murray, Chair of the Future Fund Board of Guardians said that significant stresses on the global financial system remained. “While there have been some positive signs in the US economy, underlying pressures remain and Europe continues to wrestle with debt-related challenges and the risk of recession. The prospect of a lengthy period of adjustment and subdued economic growth is generally apparent as signalled in global and domestic securities markets.

“In this environment, the Board continues to place a premium on patience and liquidity, ensuring that the portfolio is prudently positioned to take up attractive opportunities while avoiding excessive risk.

“Notwithstanding the current environment, the Future Fund was set up as a long term investment fund and the Fund’s statutory purpose and mandate leads the Board to continue to position the portfolio to achieve its long term objective,” said Mr Murray.”

EBRD and RDIF Buy into Russia’s MICEX-RTS Exchange

Web Director — Tue, 31 Jan 2012 04:57:01 +0000

The press release states, “The EBRD and the Russian Direct Investment Fund (RDIF) have agreed to acquire a 6.29 percent and 1.25 percent stake respectively in Russia’s MICEX-RTS stock exchange. The investment is part of a long-term strategy to promote the development of local capital markets in Russia and broaden the regional and international appeal of this recently unified exchange.

EBRD and RDIF’s equity investment supports Russia’s goal of transforming Moscow into a globally important and competitive international financial hub. This investment breaks new ground for the Bank as this is the first time the EBRD has invested in a trading exchange in one of its 29 countries of operation. For the RDIF, the transaction represents its first investment only six months after being established.

The RDIF, established in 2011 under the aegis of the Russian government, is a USD 10 billion investment fund that seeks to maximize returns by making investments in the leading companies of fast-growing sectors across the Russian economy, investing in partnership with leading financial institutions and corporations.

“The turmoil in the world economy gives added urgency to the need to strengthen and deepen Russia’s capital markets so that they can provide the liquidity which the domestic economy needs to access and the creation of a unified exchange represents an important milestone in that process,,” said the EBRD’s Varel Freeman.

“Through this investment, the EBRD hopes to contribute to increasing the attractiveness of MICEX-RTS so that it becomes the preferred exchange for Russian issuers and traders, as well as investors with an appetite for Russian stocks and other financial instruments,” Mr. Freeman added.

“This transaction verifies RDIF’s core mission of attracting investment capital to support market-leading Russian companies. In addition, this investment is an important building block in strengthening Moscow as an international financial center. The RDIF can now fully leverage its extensive relationships with sovereign wealth funds and other leading investors to pursue additional pre-IPO investment in MICEX-RTS and to further improve its IPO prospects,” said Kirill Dmitriev, Chief Executive Officer of the RDIF.

“We are excited to welcome these new shareholders of the biggest Russian exchange. This investment proves that the reforms that are being implemented in Russia contribute considerably to creating and promoting a favourable investment climate that attracts high-calibre financial investors. This is a vital factor for building in Moscow an international financial centre,” said MICEX-RTS’s President, Ruben Aganbegyan.

“The presence of such prominent institutions among the shareholders also shows that the exchange pursues best practices, meets the highest international standards and has significant growth potential. We thank our new shareholders for their confidence in our company and look forward to doing business together,” Mr. Aganbegyan added.

The EBRD’s stake will give the Bank the right to nominate a candidate for election to its 19-strong Board of Directors, a body which determines the exchange’s development strategy and agrees listing and reporting standards.

Russia’s stock market is the most developed in the Commonwealth of Independent States (CIS). MICEX-RTS presents itself as one of the top-20 global securities exchanges in terms of trading volume, as well as one of the top-10 global futures and options markets as regards derivatives, again as measured by trading volumes.”

New Mexico SWF Updates Private Equity Strategy

Web Director — Mon, 30 Jan 2012 07:58:50 +0000

The New Mexico State Investment Council (NM SIC) is updating its long-term strategy for its private equity portfolio. One major change includes committing around $350 to $450 million per year to private equity until 2016. In addition, like other public investors, the long-term strategy includes larger commitments to a smaller pool of managers, thus limiting relationships to fewer than 50 and less than 100 funds. Another big change is a shift in geographic strategy to increase allocation to emerging markets and Asia which now represents 3% of the private equity portfolio.

Three major themes:

Focus on quality core relationships
Bigger commitments to fewer managers
Improve diversification by geography and strategy

NM SIC Approved Private Equity Strategy

Venture Capital: 0% – 10% and 0 to 5 managers
Growth: 10% – 20% and 5 to 10 managers
Buyout: 50% – 70% and 12 to 17 managers
Special Situations: 10% – 25% and 4 to 8 managers

*Special situations include distressed debt trading, mezzanine, energy, fund of funds and secondary strategies.

Fed vs. China’s Balance Sheet Growth

Web Director — Mon, 30 Jan 2012 00:12:05 +0000

This graph plots a change in the growth of the balance sheet of the Federal Reserve versus the People’s Bank of China (PBOC) in a percentage of local gross domestic product (GDP). In recent years, China has expressed serious concern about the unprecedented growth of the Federal Reserve’s balance sheet and how it can impact the value of China’s over three trillion in foreign currency reserves. It is common knowledge that Chinese trade surpluses generates major flows of dollars back to China. The PBOC purchases foreign exchange entering China. These purchases are financed with the issuance of bills denominated in renminbi.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Source: People’s Bank of China, Federal Reserve, BEA, National Bureau of Statistics, China