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2015: Strong Start for Sovereign Wealth Fund Deals

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Direct Sovereign Wealth Fund Transactions

swf_trans_aug82015

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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Anne Sheehan to Retire, CalSTRS 1st Corp Gov Director

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Anne Sheehan, the first Corporate Governance Director at California State Teachers’ Retirement System (CalSTRS) and the current one, plans to retire March 30, 2018. Sheehan’s team manages an activist portfolio worth around US$ 4.1 billion, seeking to influence and help turnaround its large portfolio holdings in select public companies. Sheehan was hired back in 2008.

Christopher J. Ailman, CalSTRS’ chief investment officer, said in a organization release, “Anne has been my most unconventional, best hire.”

A replacement search is underway.

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Temasek Rides with Google on Go-Jek

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Singapore’s Temasek Holdings has reportedly joined forces with Google LLC and Chinese on-demand service provider Meituan-Dianping as part of a US$ 1.2 billion fundraising effort for Indonesian ride-hailing startup Go-Jek that has put regional rivals like Uber and Singapore-based Grab on notice.

Screen Shot Go-Jek, January 19, 2018

Although exact figures for individual stakes have so far been kept secret, the new infusion of capital puts Go-Jek, incorporated as PT Aplikasi Karya Anak Bangsa, at a valuation of roughly US$ 4 billion. Samsung Venture Investment Corporation also participated in funding, as well as existing private equity investors KKR & Co. LP and Warburg Pincus LLC.

Google’s direct involvement in Go-Jek’s growth – rather than through its Google Ventures unit – highlights its faith in the latent potential of ride-sharing services – and the tech-enabled consumer services sector as a whole – in Southeast Asia. Home to more than 640 million potential customers, the region was identified as the fastest growing emerging market for e-commerce globally in an industry report published jointly by Google and Temasek last December. According to data compiled by the internet-giant and the Singaporean sovereign wealth fund, ride-sharing in Southeast Asia is expected to grow into a US$ 20.1 billion industry by 2025, compared to US$ 5.1 billion in 2017.

2011 Origin Story

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Temasek Leads Series B Round for Chinese Robo Startup Rokid

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Rokid Corporation Limited, a Chinese robotics startup that specializes in smart devices assisted by artificial intelligence (AI), announced the closing of a Series B extension round through its WeChat account on January 18, 2018. The capital-raising effort was led by Singapore’s Temasek Holdings, with additional contributions from Credit Suisse Group, China Development Bank’s overseas investment arm CDIB Capital International, and existing investor IDG Capital. Although Rokid did not disclose the size or terms of the deal in its announcement, the technology company reportedly secured US$ 100 million in funding.

Founded in 2014 by chief executive Mingming Zhu and chief financial officer Eric Wong, Rokid’s core products consist of its smart speakers, the Rokid Pebble and Alien, as well as the newly debuted Rokid Glass augmented reality spectacles. The company’s most exciting offering, however, is its Full Stack Open Platform, a collaborative effort made in partnership with Alibaba that gives third-party developers backdoor access Rokid’s software suite and hardware integration and will – it hopes – help give its offerings the accessibility and recognition they need to thrive outside its home market of China.

Rokid is particularly keen on bringing its products to the U.S., where it believes it can challenge Google and Amazon’s dominance in the smart home arena. Amazon makes the Amazon Echo, while Google has Google Home.

The Series B

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