SWFI Trend Report: A Tale of Two Europes

European sovereign wealth fund dealsIn terms where sovereign wealth funds and large pensions directly invest, there exist two Europes. In the North, wealth funds are comfortable investing directly. These institutional investors still utilize external managers and commit massive amounts of capital to private funds. Analyzing the Iberian Peninsula and across to Italy, these pension and sovereign investors have a preference investing directly in real, tangible assets – such as infrastructure and office properties. Within this realm, often wealth funds partner with local groups and work through domestic financial intermediaries. Southern Europe has posed challenges for some sovereign wealth funds. The New Zealand Superannuation Fund (NZSF) is in a legal dispute with Portugal’s central bank over a significant debt investment, while Greece is facing a pending default.

Sovereign Wealth Fund Trends

According to our research, sovereign wealth funds and large public institutional investors have chosen to invest a clear majority of their capital directly into the United Kingdom in the last twelve months from March 31, 2015. The UK takes the top position in Europe for inbound direct investment by public institutional investors, totaling US$ 28.4 billion in the Sovereign Wealth Fund Transaction Database. Primarily looking at sovereign wealth funds for the same 12-month period, US$ 21.1 billion was invested in the UK. Specifically, sovereign funds have been drawn to institutional-quality real estate in London and other metropolitan areas. When thinking about sovereign funds investing in London properties, many professionals highlight the Qatar Investment Authority – Canary Wharf transaction. Yet, there is a property deal that didn’t receive ample coverage from financial media back in August 2014. The Crown Estate, the entity that manages property owned by the Queen of England, partnered with Gingko Tree Investment Ltd, a sovereign wealth enterprise nested under China’s SAFE Investment Company, to acquire Fosse Shopping Park. The property is a shopping center in Leicester – the transaction amounted to £345.5 million.

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Source: SWFI – Sovereign Wealth Fund Transaction Database -www.swftransaction.com

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