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3 Key Political Factors for Attracting Sovereign Funds

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In the past year, a number of sovereign wealth fund CIOs have spent quite a bit of time revisiting their geographic exposures.

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Is this a country that will respect our fiduciary capital? Are there other foreign asset owners investing significant sums of money into this country? There is a reason why sovereign wealth funds directly invested over US$ 29.4 billion (not counting fund investments and the majority of non-convertible bond purchases) into the United Kingdom during 2015, according to SWFI’s Sovereign Wealth Fund Transaction Database.

Factor 1: Private Ownership Laws and Historic Rights

Wealth funds, often perceived as opportunistic scavengers by the financial media, are quite conservative when allocating billions to a new country. These sovereign investors are attracted to nations where rule of law when it comes to private property is applied fairly and reasonably. Yes, there are many instances in which SWFs will invest in countries where ownership rights are not sacrosanct, but these usually involve a co-investment allocation from that host country into a particular company or asset. For instance, Russia has been able to court a number of wealth funds from China, United Arab Emirates, Saudi Arabia and other Eastern nations on co-investment deals into Russian growth or mature businesses.

The United States and the United Kingdom remain favorite investment destinations for many sovereign funds and the equity transaction figures prove it. Countries that have weak private ownership laws face the uncomfortable truth of receiving less sovereign wealth fund capital in general. In 2015, institutional investors, including a sovereign wealth fund in the group (Abu Dhabi Investment Authority), lost a court case in which the Oslo District Court ruled the Norwegian government can cut tariffs on the Gassled gas pipeline network. ADIA, Canada Pension Plan Investment Board (CPPIB), UBS and other institutional funds invested in a massive natural gas network, finding out later that they will miss out on an approximate US$ 2 billion in lost revenue from as the Norwegian government has the power to cut tariffs on the network.

Factor 2: Openness to Foreign Institutional Investors

This factor is partially related to private ownership. Obviously, wealth funds want to be welcomed when they scheme to allocate billions into a country or state. Being tarred and feathered, and shrieks of protectionism, are sure ways to avoid wealth funds from investing into one’s country on a heavier scale. However, in the last decade, sovereign wealth funds as a group have improved transparency in its many forms, according to an analysis of the Linaburg-Maduell Transparency Index over the years. This coupled with the need for long-term institutional capital into a country from the hangover of the global financial crisis, has lowered levels of protectionism in the West and even a number of Asian countries.

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Ascendas-Singbridge Acquires Three Hotels in Osaka

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Singapore’s Ascendas-Singbridge has acquired three hotels in Osaka for 10.29 billion JPY to tap tourism growth in Japan’s third-largest city.

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BlackRock Contemplates Stake in Eurizon

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Asset management giant BlackRock is contemplating purchasing a 30% ownership stake in Intesa SanPaolo’s asset management unit called Eurizon Capital SGR S.p.A. BlackRock is keen on growing its technology business and increase market adoption of its Aladdin platform.

Intesa has been working with UBS to seek out strategic options for Eurizon. Intesa is keen on maintaining control over Eurizon.

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SWFI First Read, June 22, 2018

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JPMorgan Fund Buys 40% of Oxford Properties’ French Portfolio

A fund advised by JP Morgan Asset Management committed €400 million in Oxford Properties’ French portfolio. Essentially, Oxford Properties sold a 49.9% non-managing interest in 32 Rue Blanche, 92 Avenue de France and Paris Bastille. Oxford Properties made its maiden investment in Paris in 2014 when it acquired 32 Rue Blanche.

Oxford Properties is the real estate unit of OMERS.

Temasek Explores Further Cash Commitments to FirstCry

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