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.
Oil giant Saudi Aramco is in early discussions on whether to pursue an ownership stake in Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund (PIF). At the moment, Saudi Aramco has no plans to buy publicly-held shares of SABIC. SABIC was founded in 1976 by Saudi royal decree to convert oil by-products into useful chemicals, polymers, and fertilizers.
GIC Eyes Provenance Land
GIC Private Limited is nearing a deal to purchase up to 50% of Provenance Land. Provenance Land owns India’s first Four Seasons hotel.
Eduard van Gelderen Leaves UC Regents for PSP Investments CIO Role
Eduard van Gelderen exited his position as Senior Managing Director at the University of California Regents’ Office of the Chief Investment Officer. His role will not be replaced. He accepted an offer to be Chief Investment Officer of the Public Sector Pension Investment Board (PSP Investments).
PAAMCO Prisma Holdings CEOs to Exit
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The European Union (EU), through its competition commissioner, levied a €4.34 billion fine against Alphabet Inc., the owner of Google. The fine is over Google having “imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search,” according to the European Commission (EC).
The European Commission is requiring Alphabet to cease from its conduct that it is accused of within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company.
Commissioner Margrethe Vestager, in charge of competition policy, said in a press release, “Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. In this way, Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”
The EC press release added, “In particular, Google: 1. has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google’s app store (the Play Store); 2. made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and 3. has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called “Android forks”).”
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