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5 Signs Showing Sovereign Funds Gearing for Spending in 2017

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1. Sovereign Investors are Falling Short on Infrastructure Targets

There is a compelling reason why many sovereign fund executives attend conferences, chat with bankers constantly and spend internal resources on networking. Finding quality infrastructure investments is a tough endeavor. Long-term wealth funds have revamped their allocations over the past few years to target more real assets such as properties and infrastructure. According to SWFI’s standardized fund flow data, wealth funds have 0.74% of their assets allocated in infrastructure. However, actual targeted allocation data toward infrastructure is more than 1% for sovereign funds. SWFI research suspects this number will rise due to the possibility of increase greenfield infrastructure being built in the West, rapid privatization of brownfield assets and the recycling of capital from infrastructure funds.

2. Asian Sovereign Funds Want a Slice of the Indian Financial Industry

According to SWFI’s Sovereign Wealth Fund Transaction Database, sovereign funds directly invested over US$ 4.56 billion into India in 2015. In early December, Singapore’s Temasek Holdings and private equity giant KKR, acquired a 3.9% ownership interest in life insurer SBI Life Insurance Company Limited for Rs 1,794 crore (US$ 264 million) from the State Bank of India (SBI). Specifically, a sovereign wealth enterprise (SWE) of Temasek Holdings is purchasing 1.95 crore shares at Rs 10, while an investment vehicle affiliated with the KKR-managed funds is doing the same. Temasek is purchasing a 1.95% interest for Rs 897 crore (US$ 133 million) in SBI Life. This values SBI Life at around Rs 46,000 crore. Temasek Holdings’ legal advisor was Khaitan & Co. Before the deal, SBI Life Insurance was a 74:26 joint venture between SBI and BNP Paribas Cardiff, the life, property and casualty insurance unit of BNP Paribas.

3. Gulf Sovereign Funds Contemplated Bank Bailouts

Sovereign wealth funds were the white knights for many financial institutions during the 2008 financial crisis. Still there is some speculation that the struggling Banca Monte dei Paschi di Siena S.p.A., an Italian bank, could still do a private recapitalization from the likes of the Qatar Investment Authority (QIA). The QIA could invest €1 billion in Monte dei Paschi di Siena. Even if the QIA deal does not go through, it is an indication that wealth funds will be optimistic going into 2017.

4. Redeploying Cash from Winning Investments

Many sovereign funds are stitching up deals late in 2016, whether in real estate or exiting illiquid company vehicles that have gone through an initial public offering. For example, Bermuda-based Athene Holding Limited, a fixed annuity service provider, had its initial public offering at US$ 8.25 billion. Athene was backed by Apollo Global Management LLC, but also had investors such as the Teacher Retirement System of Texas (TRS) and Cayman Islands-based Procific, a sovereign wealth enterprise of the Abu Dhabi Investment Authority (ADIA). The stock offering raised approximately US$ 1.08 billion, all for selling shareholders such as TRS and ADIA. Citigroup, Goldman Sachs and Wells Fargo were the underwriters for the Athene offering.

5. Asian Sovereign Funds Readjust Property Portfolios

Asian sovereign funds continue to realign their property portfolios. In May 2016, SAFE Investment Company, through its unit Gingko Tree, sold Adlerwerke in Frankfurt’s Gallus district to occupational pension fund Berliner Ärzteversorgung. Gingko Tree acquired the property in 2014 for €110 million going through Pramerica Real Estate Investors.

RCIF Stake Sale in Children’s Retailer Detsky Mir Blocked By Courts

A joint offering of shares of in Detsky Mir by by the Russia-China Investment Fund (RCIF) and Sistema was blocked by a Russian court at the request of state-controlled oil company Rosneft. Sistema’s 50% stake in the company was frozen as part of the injunction, which also froze its holdings in other companies, including MTS-Bank, and Sistema Telecom Assets, according to Russian News Agency TASS. Sistema is currently the target of a number of lawsuits by Rosneft’s owner, oil magnate Igor Sechin.

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SWFI First Read, December 16, 2017

Facebook Concedes that Using FaceBook Could be Bad for Consumers

David Ginsberg is Facebook’s director of research. Moira Burke is a computational social psychologist on the Data Science team at Facebook since early 2012. They published a post on Facebook entailing the impact the social network has on peoples’ moods. According to the December 15, 2017 blog post titled “Hard Questions: Is Spending Time on Social Media Bad for Us?”, they commented that, “University of Michigan students randomly assigned to read Facebook for 10 minutes were in a worse mood at the end of the day than students assigned to post or talk to friends on Facebook.”

The post adds, “A study from UC San Diego and Yale found that people who clicked on about four times as many links as the average person, or who liked twice as many posts, reported worse mental health than average in a survey. Though the causes aren’t clear, researchers hypothesize that reading about others online might lead to negative social comparison — and perhaps even more so than offline, since people’s posts are often more curated and flattering. Another theory is that the internet takes people away from social engagement in person.”

UBS Asset Management Wins Colonial First State Australian REIT Mandate

Sydney-based Colonial First State awarded an approximate A$ 170 million sub-advisory mandate to UBS Asset Management to oversee an Australian real estate investment trust strategy, essentially 50% of the FirstChoice Property Securities fund. The previous advisor of the mandate, Colonial First State Global Asset Management, was terminated.

State Street Global Advisors Names Betty Ng as MD and COO of Asia ex-Japan

State Street Global Advisors hired Betty Ng as managing director and chief operating officer for Asia ex-Japan. This is a new position. Betty Ng started effective December 11, 2017. She will report to June Wong, the company’s senior managing director and head of Asia ex-Japan.

Before this role, Betty Ng was General Manager of Private Wealth Management at the Agricultural Bank of China in Hong Kong.

Kroger to Exit from Central States Pension Fund

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Umirzak Shukeyev Exits Samruk-Kazyna, Promoted as Deputy Prime Minister

Kazakh President Nursultan Nazarbayev appointed Umirzak Shukeyev as Deputy Prime Minister and Minister of Agriculture. Umirzak Shukeyev exited as Chief Executive Officer of Samruk-Kazyna. No interim leader has been named for Samruk-Kazyna.

Samruk-Kazyna is in the midst of floating a number of state-owned companies such as Air Astana and JSC National Atomic Company Kazatomprom.

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