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Public Pension

Lewis Fallout: Public Fund-Backed PE Firm Faces Stress Over HFT Investment

nyc_realestate_sovereignwealthfundSilicon Valley-based Silver Lake Partners, which touts public pensions and sovereign wealth funds as limited partners through its various funds, invested in New York-based Virtu Financial. An example is the Kuwait Investment Authority. Virtu Financial has postponed its planned US$ 100 million initial public offering indefinitely, due to fallout from Michael Lewis’ Flash Boys: Cracking the Money Code. The 53-year-old writer sold 130,000 copies of Flash Boys in the United States after the first week of publication. In late March, the New York Times reported Virtu Financial made money in equity markets in 1277 days out of 1278 days. Silver Lake-backed Virtu Financial has received a letter of inquiry from New York Attorney General Eric Schneiderman.

Silver Lake has invested in a slew of financial technology firms that aim to bring “efficiency” to markets.

The California Public Employees’ Retirement System (CalPERS) purchased a 9.9% interest in Silver Lake Partners back in early 2008 for a purported estimate of US$ 275 million. The technology-focused private equity firm has invested in deals involving Dell, Seagate and Skype. Silver Lake has invested in a slew of financial technology firms that aim to bring “efficiency” to markets.

Silver Lake allocated capital to Virtu back in 2011. In a May 2011 Virtu press release, the chairman and CEO of Virtu, Vincent Viola, stated, “Virtu’s mission is twofold. First, to provide market participants and regulators with access to its proprietary market data distribution, market surveillance, risk management, clearing and price discovery tools. Second, to provide retail and institutional investors with reliable, real time competitive prices so that they can continue to benefit from further compression of bid/ask spreads and reduced trading commissions.”

Goldman Sachs, Sandler O’Neill + Partners, L.P. and JP Morgan were the lead underwriters of the postponed Virtu IPO.

Taiwan Seeks to Merge Four Public Pension Funds

The government of Taiwan is seeking to merge the island’s four main public pension funds into one entity. Combined, the four pensions control around US$ 109 billion in assets. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Public Funds Commit to Waterton Precious Metals Fund II

Gold mine

Toronto-based Waterton Global Resource Management raised Waterton Precious Metals Fund II Cayman LP with just over US$ 1 billion in commitments. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

See Which Managers Won Mandates from the World’s Largest Pension Fund

gpif_strategy_aprilSource: GPIF

Japan’s US$ 1.26 trillion Government Pension Investment Fund (GPIF) is the largest public investor on the planet. The GPIF revised its investment strategy and has chosen 14 active-strategy funds and 10 passive-strategy funds. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

FRR Gives Out European and French Equity Mandates

Paris-based Fonds de réserve pour les retraites (FRR) has announced the winners of the active managed equities mandates for European and French stocks. The FRR introduced the request-for-proposal on May 17, 2013. These mandates are given for 4 years with the ability to extend an additional year.

European Small Cap Stocks – €500 Million Mandates French Small and Medium Cap Stocks €300 Million Mandates
Fidelity Gestion CM-CIC Asset Management
Montanaro Asset Management Limited CPR Asset Management
Standard Life Investments Limited Generali Investments Europe
Threadneedle Asset Management Limited ODDO Asset Management
  Sycomore Asset Management

APG and Prudential Real Estate Investors Launch RE Platform

Netherlands-based Algemene Pensioen Groep (APG) and Prudential Real Estate Investors (PREI), the real estate arm of Prudential Financial, Inc., have created Pramerica Real Estate Capital V (Netherlands), raising US$ 366.7 million of discretionary capital. The majority of the capital was provided by the APG.

Pramerica Real Estate Capital V (Netherlands) will target junior debt and preferred capital opportunities that are secured against commercial real estate. Country exposures will include the Netherlands and some areas of Belgium.

From the press release, Robert-Jan Foortse, Head of European Property Investments at APG Asset Management, commented, “The Dutch real estate market suffers from a funding gap, where the finance market remains tight and dislocated. At this moment, there is the opportunity in the Netherlands to provide junior debt and to capitalize on both acquisition as well as refinancing opportunities. Within APG Real Estate, we view this as the right moment to allocate capital to the Dutch real estate market through this exclusive debt mandate with PREI.”

Texas Teachers’ Hires Energy Investment Consultant

Austin-based Teacher Retirement System of Texas (TRS) is big on energy and natural resource investments. Being located in Texas, allows the pension giant insight in a burgeoning energy renaissance in industries like natural gas. Sovereign wealth fund capital from China, Singapore and New Zealand have found their way toward energy-generating assets and companies in Texas.

The US$ 123.9 billion TRS created the energy and natural resources (ENR) investment initiative. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

More Public Asset Owners Open Offices in London

On March 28, 2014, Singapore’s Temasek Holdings celebrated the official opening of its European office in London at the fancy Millennium Copthorne Mayfair Hotel. Guests included Prime Minister of Singapore Lee Hsien Loong and Temasek Chairman Lim Boon Heng.

Prime Minister Lee said to an audience during his London trip, “Singapore and London are two cities, perched off the shores of two continents, but connected by an intertwined history and many personal ties and friendships.”

Increasingly, public asset owners are choosing London as their European office destination. In another note, the $100 billion British Columbia Investment Management Corporation (bcIMC) announced intentions to open its first foreign office in London. bcIMC has around $12.4 billion invested in UK and European markets.

“We consider the UK and Europe to be an important market with long-term growth opportunities,” said Doug Pearce, Chief Investment Officer / Chief Executive Officer, bcIMC in a press release. “Having a bcIMC presence in London reflects our global focus. It will strengthen our existing relationships with investment partners and enhance our ability to commit patient capital within European markets and in so doing, grow the long-term financial value of our clients’ funds.”

In the beginning of the year, the Alberta Investment Management Corporation (AIMCo), that manages public wealth from Alberta, opened a London office. AIMCo had similar reasons of opening a London office compared to other large Canadian public investors.

Sovereign Wealth Funds Make Up More Than 25% of U.S. Retirement Assets

retirement

The Investment Company Institute published retirement data stating that December 31, 2013 retirement U.S. assets amounted to US$ 23 trillion. These assets increased 5% from 3 months ago. Employer-based defined contribution assets in the U.S. totaled US$ 5.9 trillion, in which US$ 4.2 trillion were in 401(k) plans.

As of March 2014, sovereign wealth funds total US$ 6.357 trillion in assets surpassing 401(k) assets, U.S. government pensions and U.S. private defined-benefit plans.

Increasingly, asset managers and private equity funds are courting sovereign wealth funds, mainly due to the massive growth of the investor class in the past decade.

Investor Class Comparisons

Investor Class Trillions USD
Total U.S. Retirement Assets 23
IRAs 6.5
Sovereign Wealth Funds 6.4
U.S. Government Pensions 5.6
U.S. Private Defined-Benefit Plans 3

Source: Investment Company Institute (Dec 2013 Data), Sovereign Wealth Fund Institute

Even 11 Billion-Orange County ERS May Dump PIMCO

Personnel changes at asset management firms are risky business, especially in the cases where asset owners were pitched high-profile names. This is not an uncommon reason why asset owners may dump asset managers; the firm pitches their ability on the strength of a single or handful of executives only to see those executives leave for bigger paychecks or political differences. The resignation of Mohamed El-Erian, who was CEO and co-CIO of PIMCO, has caused issues with asset owners allocating to the self-proclaimed “Global Authority on Bonds”.

The doubt could “trickle up” to its larger clients such as sovereign wealth funds and public pensions.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Ontario Teachers’ Pension Plan Gambles on Irish National Lottery

Ontario Teachers’ Pension Plan (OTPP) made further inroads into the international lottery sector after finalizing a licensing agreement to operate the Irish National Lottery. The Toronto-based pension fund announced February 27 it paid the Irish government €405 million (US$ 554 million) to have OTPP-led consortium Premier Lotteries Ireland Ltd (PLI) manage the lottery for 20 years.

“Teachers’ is an experienced investor in lottery operators and we look forward to working with our partners in Ireland to grow the National Lottery through innovation and technology investments that grow sales,” said Lee Sienna, OTPP’s Vice-President of Long-Term Equities and chairman of PLI, in the press release. “The Irish license is a significant milestone in our strategy of building a leadership position in the international lottery sector.”

In March 2010, OTPP acquired UK National Lottery operator Camelot Group for €389 million. Camelot Global Services, a subsidiary, will provide consulting services to the Irish National Lottery’s current management.

The Irish National Lottery is expected to transition to PLI leadership by the end of the year. Dublin-based An Post, which provides postal, communication, retail and financial services, and An Post pension funds hold minority stakes in PLI. An Post currently operates the Irish National Lottery through a subsidiary.

OTPP is the largest single profession pension plan in Canada with C$ 129.5 billion in net assets as of December 31, 2012.

CalPERS CIO Passes After Cancer

Joseph Dear passed away at age 62 from prostate cancer according to a statement from CalPERS. His illness was made public in June 2013. Dear was the chief investment officer of CalPERS, taking the helm in March 2009 when the fund suffered a US$ 96 billion loss.

Under Dear’s investment watch, pension assets surpassed pre-recession levels in May 2013. In 2013, CalPERS returned 16.2%, the largest gain in 11 years.

According to the official CalPERS Facebook post, “Ted Eliopoulos will continue as the Acting Chief Investment Officer until the CalPERS Board of Administration makes any announcements about a search for a new Chief Investment Officer.”

Key February Sovereign Wealth Fund and Public Pension Personnel Changes

The California Public Employees’ Retirement System (CalPERS) has appointed Wylie A. Tollette as the pension’s chief operating investment officer (COIO). Tollette starts on March 31, taking over from Janine Guillot who left CalPERS in July 2013. Previously, Tollette was senior vice president for portfolio analysis and investment risk management at Franklin Templeton Investments. He spent more than 19 years at the firm. Tollette is a CFA charterholder and CPA. He has a bachelor’s degree from University of California, Davis and a master’s degree from the University of London.

CalPERS: Dan Bienvenue Appointed Senior Investment Officer for Global Equity

Dan Bienvenue was appointed senior investment officer for global equity. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Consortium-Backed Rothesay Life Buys Metlife Unit

In recent years, there has been consolidation occurring in the U.K. annuity industry. Pension de-risking is experiencing growth in England. Employers in the U.K. are looking to insurers to deal with obligations from former employees.

Insurer Rothesay Life Ltd. is purchasing the U.K. annuity business of New York-based Metlife Inc. This business unit manages around £3 billion in assets. Rothesay Life has investors that include the Blackstone Group LP, Goldman Sachs, Massachusetts Mutual and Singapore’s sovereign wealth fund (GIC Private Limited). From Metlife’s perspective, annuities tend to be relatively capital intensive compared to other types of insurance products. Metlife has also struggled in gaining new business in this particular area.

On September 9, 2013, the Sovereign Wealth Fund Institute reported GIC’s intent on taking a 30% stake in Rothesay Life.

In 2011, Rothesay Life acquired their competitor Paternoster.

Rothesay Life was advised by Goldman Sachs and Linklaters LLP.

CPPIB and Piramal Ink $500 Million Alliance in Indian Residential Development Debt

The CPPIB is making further inroads into India by betting on the country’s real estate sector. CPPIB Credit Investments Inc., a subsidiary of the CPPIB, and Piramal Enterprises Limited inked a deal for providing rupee debt financing to residential developments across India’s urban corridors. These corridors include Mumbai, Delhi, Bangalore, Pune and Chennai. Project debt financing will target best-of-breed local developers that have substantial track records in high-quality residential projects. The CPPIB is playing on India’s emerging middle class and urbanization of the country.

Piramal Enterprises is a diversified company with a portfolio in financial services, real estate, pharmaceuticals and information management (Decision Resources Group). The CPPIB and Piramal, through Indiareit Fund Advisors (real estate arm), have each committed US$ 250 million. Indiareit has been appointed as an advisor.

Vikram Gandhi, founder of VSG Capital Advisors, advised CPPIB with regard to the deal. Macquarie Capital advised Piramal Enterprises in the deal.

In 2013, the CPPB embarked on a major deal with Shapoorji Pallonji Group to purchase Indian office buildings in major cities.

CPPIB Hires Carrasquillo, Expand Hedge Fund Strategies

Whispers of a long/short equity hedge fund are starting to escape from the Canada Pension Plan Investment Board (CPPIB).

According to Financial News, a subsidiary of Dow Jones & Company, CPPIB has decided to build out a long/short portfolio that will target Europe, the Middle East and Africa (EMEA). The news came in conjunction with the hire of Dureka Carrasquillo from Tranberg Capital Management.

Alain Carrier, head of Europe for CPPIB, played down the suggestion of an “in-house hedge fund,” electing to equate it to a strategy CPPIB has in play in Toronto.

The CPPIB is known in asset management circles as being a sophisticated investor, bringing significant investment expertise in house. This recent move to expand their in-house EMEA equity team identifies with this perception.

Prior to joining the US$ 175 billion CPPIB as the senior portfolio manager of EMEA, Carrasquillo was the CEO of Tranberg Capital Management. She also held senior positions at Partner Fund Management, Powe Capital Management and Invesco.

Edwin Cass Promoted to Chief Investment Strategist at CPPIB

The Canada Pension Plan Investment Board (CPPIB) has announced the appointment of Ed Cass to the position of SVP and chief investment strategist and a member of the senior management team. He will be promoted from his current role as VP and head of global tactical allocation asset allocation in public markets. His new post will be effective April 1.

Cass will be replacing Donald Raymond who revealed he would be stepping down from the position effective March 31.

According to a statement, In his new role Cass will be responsible for “overall fund level investment strategy and will chair the Investment Planning Committee, which approves all new investment programs and oversees all portfolio risks, including passive, active, credit and liquidity risks.”

Prior to joining CPPIB, Cass held senior positions at Fortress Investment Group’s Drawbridge Relative Value Fund, Deutsche Bank Canada and TD Securities.

CPPIB Opens São Paulo Office

Mark Wiseman

Mark Wiseman, CEO and President, CPPIB

On February 5, 2014, the Canada Pension Plan Investment Board (CPPIB) opened an office in São Paulo, Brazil to focus on Latin American investment deals and opportunities. The office is located in the Faria Lima financial district – slated to be operational by April 2014. Increasingly, Canadian public investors are allocating more capital to Latin America and doing larger deals. The Sovereign Wealth Fund Institute recently reported how the CPPIB took a stake in Transportadora de Gas del Perú S.A.

In a press release, Mark Wiseman, president and CEO of CPPIB, stated the, “CPPIB already has significant investments in the region, with nearly C$5 billion invested in real estate, public and private equity and infrastructure investments. The office will support our efforts to gain access to the best investment opportunities in the region and will help us to continue to forge important relationships with local partners.”

With investing billions of capital directly into a region through large deals, the CPPIB believes it makes sense to have an onsite presence. The CPPIB chose São Paulo because they perceive it as the financial capital of Brazil and a key business hub in Latin America. The CPPIB also has global offices in places like Hong Kong, London and New York.

5 Key Markets for CPPIB – Latin America Efforts

  • Brazil
  • Chile
  • Colombia
  • Mexico
  • Peru

France’s FRR Seeks Passive Global Manager

France’s Fonds de réserve pour les retraites (FRR) is seeking a passive global manager. Translated in English to the French Pensions Reserve Fund, the passive mandate will be across all asset classes. The €36.6 billion public fund manager’s contract with Amundi, a global asset manager, will expire in September.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Bachher Gets CIO Job at UC Investment Board

Seeking a warmer climate, Jagdeep Singh Bachher, who has been with the with Alberta Investment Management Corp. (AIMCo) since 2009, has been appointed chief investment officer of the University of California’s Office of the President. He will join the university on April 1st, reporting directly to the UC Board of Regents. Bachher will be the steward of more than US$ 80 billion in assets.

He succeeds Marie Berggren who retired in 2013 after an 11 year stint. Bachher was chosen after a long international search followed by Berggren’s retirement.

“I’m grateful and humbled by this phenomenal opportunity to join the University of California,” Bachher said in a press release. “I know that working to ensure the health and longevity of the university’s financial assets has a direct impact on UC’s educational, research and public service mission. This is a chance to really make a difference.”

According to the press release, Bachher will receive an annual base salary of US$ 615,000 per year. In addition, he will be able to participate in an incentive plan with a target award of 100% of his base salary. There is a maximum of potential award of 165% of his base salary.