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2015: Strong Start for Sovereign Wealth Fund Deals



Direct Sovereign Wealth Fund Transactions


Despite a possible future slowdown in the global economy, direct sovereign wealth fund transactions for the first half of 2015 conquered the first half of 2014. According to the Sovereign Wealth Fund Transaction Database (SWFTD), wealth funds generated US$ 64 billion worth of deals in the first half of 2015 versus US$ 52 billion in the first half of 2014. While this trend is promising in regard to wealth funds acquiring more in the first half of 2014, SWFI recorded 910 observations versus 833 observations in the first half of 2015. These institutional investors became slightly more bullish in direct investing in developed markets in 2015. In Europe, the United Kingdom received the most wealth fund inflows of direct investment in the first half of 2015, some US$ 21.1 billion, trumping their peers. However, more sovereign investors embarked on investing in continental Europe real estate versus a strong preference toward London. In March 2015, ADIA and GIC invested in Unicredit-Piazza Cordusio in Milan. China paved the way for Asia for the first part of 2015, generating US$ 6.4 billion in direct sovereign fund transactions. A number of wealth funds participated as cornerstone investors in unique opportunities. The Modi effect has stimulated wealth fund investment in the sub-continent. Wealth funds like GIC, Temasek Holdings and the Abu Dhabi Investment Authority (ADIA) remain particularly active in the country. Deal amounts are far lower than their Eastern Asian and Western counterparts. Sovereign investors made deep strides into Indian real estate developments, technology companies and pharmaceuticals.

For deal flow, sovereign investors exerted influence on their positions as limited partners at name brand private equity firms.

Real Estate

Whereas over a two decades ago, these institutional investors heavily relied on commingled real estate funds, today wealth funds are competing against them in varied instances or taking on separate account programs. Real estate managers competing for core properties in markets fear that wealth funds and some Canadian pensions are fine with acquiring prices at unjustifiable cap rates. Sovereign wealth funds exhibited a greater preference toward direct real estate investing in the first half of 2015 at US$ 17.1 billion versus 1H 2014 at US$ 9.8 billion. A few notable deals in the first half of 2015 include the Investment Corporation of Dubai (ICD) picking up some hotels – notably the W Hotel in Washington, D.C. and the Mandarin Oriental in New York.

Sovereign Wealth Centers on Buyouts

For deal flow, sovereign investors exerted influence on their positions as limited partners at name brand private equity firms. Firms like the Blackstone Group, 3i and Thoma Bravo, consider sovereign funds to be helpful sources of capital when deals need an extra shot of financial juice. Total control of a target company tends to be an afterthought in most cases. In 2015, wealth fund investors participated in a number of large buyout deals. For instance, one deal is the May 2015 transaction of investing in the merged company merging O2 U.K. and Three U.K. called Hutchison 3G UK Holdings (CI) Ltd. This mega U.K. telecommunications deal attracted massive pension allocators like CPPIB and Caisse de dépôt et placement du Québec (CDPQ), but also two major sovereign funds – GIC and ADIA.

Big Funds Eye Change in Corporate Governance

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Crown Property Bureau Moves Assets to Thailand King Under 2017 Law



In December 2016, Crown Prince Maha Vajiralongkorn became King of Thailand, succeeding his father King Bhumibol Adulyadej who passed away in October 2016. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Three Successful Traits in Asset Management CEOs



by Michael Maduell

In my frequent and vast interactions with chief executives of small-to-large asset management firms, I’ve witnessed a number of traits that successful firms – meaning growing and retaining assets under management plus getting real respect in the industry – are able to properly execute. Besides generating amazing returns and matching the right solutions for the asset owner clients, CEOs need to be advancing their firms. Of course, quality client service should remain front of mind for fund management firms. In this short piece, I will focus on three traits that successful fund managers tend to possess.

1. Abundant Charisma from Founders
What is memorable and what will stick in one’s mind? A cadre of asset managers possess charismatic chief executives. BlackRock’s Larry Fink, DoubleLine’s Gundlach and Rajiv Jain of GQG Partners are some prime examples that come to mind. DoubleLine is a relatively new player compared to BlackRock and already amassed over US$ 100 billion in assets. Being a founder of the fund management company also helps, as CEO hires (often bringing a book-of-business contacts) may tend to look elsewhere unless generously compensated.

Having an effective cheerleader CEO is essential in nurturing and growing a sustainable franchise in a monochromatic industry of imitators. Too often, CEOs of some asset management firms are pure “salespeople” – too pushy or fake, or a highly-bright number-cruncher with low or nil emotional intelligence.

2. Not Drinking Too Much of One’s Own Kool-Aid
“We are a data-driven, technology, ESG-focused, smart-beta, solutions-led provider of services.” Hey, 2018 did I get that right?

Yes, your stuff does not stink. Like a broken clock, many CEOs rely on the flavor of the year or grappling a playbook, beating the idea over the heads of pensions and sovereign fund clients and prospects. In the long-run – meaning maintaining assets over a lengthy period of time – I find it’s better to be more objective when discussing potential strategies. I’m talking about a healthy dose of informative marketing. However, being overly-transparent or even talking yourself out of the strategy is not what I am directly advocating. It is important to be realistic about the strategy or thematic idea, as the attractiveness of these concepts shift over time.

3. Stirring up Controversy – Strategically
Shaking the tree and stirring the pot – this trait can surely backfire if not properly executed. Being the brightest crayon in the box can work. Even virtue signaling – latching onto a social current – can work in some instances, but CEOs that can deliver impactful counter-culture statements that shock the conscience tend to draw attention – and capital. This might not be the best example; however, upon the ascendancy of Abraaj Group, the firm’s founder, Arif Naqvi, often commented to not describe countries like China, India, etc. as emerging markets but as global growth markets – then creating a comparison to Wall Street and its risks. Abraaj was able to raise a ton of capital, before its downfall stemming from early 2018.

Boards need to diligently examine the CEOs they select. Does the firm want to grow or hold the line for the planned dividend? My belief is that if you are not growing, you are decaying, as the world moves faster and faster.

The views in this article are expressed by Michael Maduell.
Michael Maduell is President of SWFI.

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SWFI First Read, June 16, 2018



State Street Names Maria Cantillon for Head of Sectors Solutions, EMEA

State Street named Maria Cantillon as head of sectors solutions for Europe, Middle East and Africa (EMEA). She will report to Liz Nolan, CEO of EMEA at State Street. Cantillon replaces Joerg Ambrosius who moved to another role at the firm. Previously, Cantillon was Global Head of Alternative Asset Manager Solutions at State Street.

Theranos Founder Elizabeth Holmes and Ramesh Balwani Face Federal Charges

Elizabeth Holmes, the founder of blood-testing company Theranos, is facing federal fraud charges. Also facing charges is Ramesh “Sunny” Balwani. Both individuals were indicted on charges that they engaged in schemes to defraud investors, doctors and patients, according to the U.S. Department of Justice (DOJ). They both face two counts of conspiracy to commit wire fraud and nine counts of wire fraud. These criminal charges were levied after Holmes had settled civil fraud charges initiated by the U.S. Securities and Exchange Commission (SEC).

Russian Investors Chopped Treasury Holdings in April

Revealed in a report from the U.S. Treasury, Russian investors dropped U.S. Treasury holdings in March 2018 from US$ 96.1 billion to US$ 48.7 billion in April 2018. Before March 2018, U.S. Treasury holdings by Russian investors remained steady in the US$ 100 billion range.

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