Sovereign Wealth Fund Institute

As core real estate in London is growing in institutional investor demand, many buyers at the top in 2006 and 2007 are thinking about selling.  Maturing debt is putting pressure on real estate owners who purchased properties before the financial crises.  The Abu Dhabi Investment Authority (ADIA) and Rockpoint Europe Limited are planning to sell Devonshire Square Estate. Devonshire Square is an office block located in London which comprises of 12 buildings just east of Liverpool Street Station. The two organizations have hired CBRE Group Inc. to find buyers.

In October 2011, Rockpoint and ADIA secured an extension on debt which has been extended to April 23, 2013.  [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

UK utility infrastructure remains in high demand. The Abu Dhabi Investment Authority (ADIA) plans to purchase a 9.9% stake in Kemble Water Limited, the holding company of Thames Water. ADIA is purchasing the stake from a consortium of investors led by Macquarie called Kemble Water Holdings Limited. The private regulated utility company is responsible for the public water supply and waste water treatment in parts of Greater London, Thames Valley, Surrey, and other areas. The utility is regulated by the Office of Water Services.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The Abu Dhabi Investment Authority (ADIA) invested in Citigroup during the subprime crisis. In November 2007, ADIA agreed to invest US$ 7.5 billion into Citigroup. Recently, ADIA ended up converting their final tranche of equity units into 5.9 million shares of common stock. With all this being said, this is another occurrence for sovereign wealth funds to be keenly aware of bank bailouts during times of crisis.

Based on Citigroup’s filing, “On October 14, 2011, an arbitration panel issued a final award and statement of reasons finding in favor of Citigroup on all claims asserted by the Abu Dhabi Investment Authority (ADIA) in connection with its $7.5 billion investment in Citigroup.”

The Abu Dhabi Investment Authority (ADIA) has released their 2010 annual review. Some interesting notes about ADIA include that around 80% of assets are managed by external managers. An estimated 60% of assets are invested using index-replicating strategies.

ADIA also prefers to use separate accounts or in the UK, segregated accounts.

The report also gives details about the structural changes and procedures Sheikh Ahmed bin Zayed Al Nehayan implemented such as in asset allocation and risk management. According to the annual review, no more than 45% may be invested in developed equities.

Their asset allocation range into private equity is between 2 to 8% and 5 to 10% in real estate.

A range of 60 to 85% is targeted to invest in North America and Europe.

From 12/31/2010

Link: ADIA Reports

Nearly 80% of ADIA’s assets are managed externally, with 60% invested in index-replicating strategies. The Abu Dhabi Investment Authority is reorganizing its external equities team. At the top, the department will be divided into two sections, indexed-fund strategies (beta) and active management (alpha). One of ADIA’s primary goals for the restructuring was to simplify how they manage relations with external equity fund managers based on strategy. Indexed fund managers are usually monitored on how close they track a particular index or benchmark. On the other side of the spectrum, active managers are usually monitored by their various strategies, holdings, and risk profile.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The press release states, “Statoil ASA has decided to divest a 24.1% direct and indirect stake in Gassled joint venture (jv) for a consideration of NOK 17.35 billion. Following this transaction, Statoil will continue to own 5.0% in the jv.

The buyer is Solveig Gas Norway AS, a holding company that is approximately 45% owned by Canada Pension Plan Investment Board, 30% by Allianz Capital Partners, a subsidiary of Allianz SE, and 25% by Infinity Investments SA, a wholly owned subsidiary of the Abu Dhabi Investment Authority.

“This transaction contributes to a further streamlining of Statoil’s portfolio. The divestment is part of our continuous efforts to increase capital efficiency and maximize shareholder value creation,” says executive vice president for Marketing, Processing and Renewable in Statoil, Eldar Sætre.

Gassled is the owner of the integrated gas transportation grid and processing facilities on the Norwegian Continental Shelf (NCS), transporting Norwegian gas by pipelines from the producing fields to consumers on the European continent and United Kingdom. Gassled was established in 2003 by the merger of the majority of the gas pipeline joint ventures into one joint venture.
Gassled provides transportation services with third party access on a non-discriminatory basis to producers on the NCS. Statoil’s divestment in Gassled enables a re-deployment of capital into assets and projects that yield higher rates of return. This is part of Statoil’s continuous efforts to increase capital efficiency and create shareholder value.

Statoil is committed to the development and supply of Norwegian gas and will continue to be the largest shipper in Gassled.

“Reliable, safe and cost-efficient operation of the system is the key to secure continued interest for our gas among European customers. We are therefore fully committed to maintain our role as TSP for the major part of the transportation and processing systems,” Sætre says.

The financial effect of the transfer will be as of 01.01.2011

The transaction will be subject to government approval from the Norwegian Ministry of Petroleum and Energy (MPE) and the Norwegian Ministry of Finance (MF).”

Read More: Statoil

The United Arab Emirates is engaged in an aggressive campaign to diversify their reliance from the petroleum industry, a common problem for many MENA nations. South Korea’s Presidential Council for Future & Vision signed a memorandum of understanding (MOU) with the Government of Abu Dhabi for a strategic partnership in getting rights to develop oil fields. Bottom line, South Korea needs the energy resources to sustain GDP growth, while the UAE needs additional technical resources to achieve partial economic diversification. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

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Reuters reports, “German utility E.ON has granted a consortium of foreign bidders exclusive rights to make an offer for Britain’s second-largest electricity distribution network, the Sunday Times reported. E.ON has given a consortium comprising the Abu Dhabi Investment Authority, the emirate’s sovereign wealth fund, and Canada Pension Plan until mid-January to put together a firm bid, the paper said.

The utility group delivers power to more than 5 million customers across Central England via its distribution business. It has hired JP Morgan to handle the sale while the consortium is being advised by Lexicon Partners and Goldman Sachs, the paper added. An agreement could be reached before the new year, the paper said, citing sources close to the process.”

Read more: Reuters

The Queensland Government press release states, “Treasurer Andrew Fraser today announced the signing of documents for the 99 year lease of the Port of Brisbane to the Q Port Holdings Consortium. Q Port Holdings includes major stakeholders Global Infrastructure Partners (GIP), Industry Funds Management (IFM) and funds managed by QIC Limited (QIC), and a minority stake held by Tawreed Investments Ltd., a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA). The sale delivers $2.1 billion in cash proceeds to the Consolidated Fund as well as the new owner agreeing to fund the future upgrade of section 3 of the Port of Brisbane Motorway, at an estimated cost of $200 million.

“The signing of the deal represents $2.3 billion worth of value to the Queensland taxpayer with the future development of the Port now the responsibility of a quality consortium,” Mr Fraser said.

“By achieving this value-for-money transaction, taxpayers will also avoid expected infrastructure expansions at the Port worth up to $1 billion.

“We are in the marketplace for the upgrade of the Port of Brisbane Motorway up to Pritchard Street now, and this deal will deliver the next extension of this state owned road.

“This is a quality group of investors with the skill and balance sheet to ensure the future development of the port. It includes leading players in port and airport operations and two of Australia’s largest superannuation fund managers.

“GIP, IFM and QIC each hold equal stakes of circa 27%, with the remaining minority stake held by ADIA.””

Read more: Press Release

The Abu Dhabi Investment Authority appoints James Kester as Chief Investment Officer for Private Equities.  Mr. Kester will be responsible for developing ADIA’s strategy in the private equity space and overseeing the activities of the private equity programme.  He will be based in Abu Dhabi and report to Hareb Al Darmaki, Executive Director of the Private Equities Department. Mr. Kester is replacing George Sudarskis, who left the SWF to start his own private equity firm, Sudarskis & Partners.

Mr. Kester joins ADIA from Zurich Asset Management in the United States, where he served as Head of Private Equity.  Prior to this, he spent 6 years as Co-CEO of Allianz Private Equity Partners in Munich, Germany.

According to the ADIA press release, “The Abu Dhabi Investment Authority said today it has appointed Ted Chu, as Chief Economist, effective immediately.

Mr. Chu, who will be based in Abu Dhabi, will be responsible for producing in-depth international and regional economic analyses and making recommendations based on this research.  As a member of ADIA’s Strategy Unit, he will also assist in developing, monitoring and assessing investment strategies across asset classes based on current and projected economic trends.

Mr. Chu joins ADIA from General Motors in Detroit, where he has served since 2006 as Chief Economist and Director of Global Economic & Industry Analysis, responsible for providing the Executive Committee with support on key investment decisions, business planning and strategic research.  He has also held other senior roles within GM since 1996, including senior economist Asia/Pacific, and manager for economic and industry analysis in the Americas, Asia Pacific, and Middle-East/Africa regions.

Before joining GM, Mr. Chu was a macroeconomist at the Central and Eastern European division of the World Bank in Washington.  He also served as an associate consultant specializing in energy and environmental economics at Decision Focus Inc, a Silicon Valley management science consulting firm.  Mr. Chu has an MA and Ph.D in economics from Georgetown University and a BA in economic management from the School of Management, Fudan University, Shanghai.

Commenting on the appointment, Jena-Paul, Head of ADIA’s Strategy Unit, said: “Ted brings with him an exceptional track record in macro strategy at the highest levels.  His knowledge and deep insights into global macro-economic trends will contribute significantly to ADIA’s long term asset-allocation strategy and ability to identify new asset class opportunities. We are very pleased to welcome Ted to the team.”

Mr. Chu said, “ADIA is one of the most prominent and respected organizations in global finance and I am delighted to be working alongside professionals with such deep experience across different asset classes and disciplines.”

Source: ADIA Press Release

According to Reuters, “The British government is selling “High Speed 1,” which has a 30-year concession to run a 110 kilometre (70 mile) railway linking London and the Channel Tunnel, to help cut its budget deficit. People familiar with the matter have previously told Reuters it could fetch 1.5 billion pounds.

The “GB Speedrail” group, already consisting of Eurotunnel, Goldman Sachs Infrastructure Partners and M&G’s Infracapital, has been joined by two financial backers, Britain’s Universities Superannuation Scheme, and France’s Caisse des Dépôts et Consignations, a spokesman for the group said.

“We will make an indicative bid today,” the spokesman said.

The five-strong group is vying with at least two rival teams.

One is made up of Morgan Stanley Infrastructure, 3i Infrastructure Plc and Abu Dhabi Investment Authority (ADIA). A second, Canadian partnership has allied Borealis, the infrastructure investment arm of Ontario Municipal Employees Retirement System (OMERS), with Ontario Teachers’ Pension Plan (OTPP).”

Read more: Reuters

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