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.
If you thought red meat-centric investments ended back in 2007 with Trump Steaks, think again. Singaporean sovereign wealth funds Temasek Holdings and GIC Private Limited are reportedly working alongside London-based Metric Capital Partners to buy a US$ 200 million minority stake in D.ream Group, according to the Financial Times. An entertainment-focused subsidiary of Turkey’s Doğuş Group valued at nearly US$ 1.5 billion, D.ream owns of a number of high-end dining establishments – including the steakhouse chain founded by Turkish chef Nusret Gökçe, better known on social media platform Instagram as Salt Bae.
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Mitsubishi Corporation sold a 5% stake in Capula Investment Management LLP, a hedge fund, to Dai-Ichi Life Insurance Company.
Mitsubishi sold the stake to focus on other areas of investments such as real estate and logistics.
Mitsubishi acquired the hedge fund stake in October 2008. Capula Investment Management was formed in 2005 by Yan Huo and Masao Asai, as a spin-off from Mitsubishi UFJ Securities International. In 2012, the Petershill fund managed by Goldman Sachs acquired a 20% stake in Capula Investment Management.
OMERS Infrastructure Management, formerly known as Borealis, signed an agreement to buy Leeward Renewable Energy, LLC, a U.S. wind-power developer, owner and operator from affiliates of infrastructure management firm ArcLight Capital Partners, LLC. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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