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A Key Argument Against Sovereign Funds Spending More is Evaporating

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Source: Sovereign Wealth Fund Transaction Database

Source: Sovereign Wealth Fund Transaction Database

According to the Sovereign Wealth Fund Transaction Database (SWFTD), which tracks direct sovereign fund and pension transactions, wealth funds in the first half of 2015 invested more capital compared to the first half of 2014. In the initial six months of 2015, sovereign funds invested directly US$ 63.4 billion versus 2014’s comparable period figure of US$ 51.9 billion. In the first half of 2013, these institutional investors directly invested US$ 44.6 billion. Clearly, this shows sovereign funds investing larger amounts of capital directly, despite global low oil prices, a slowdown in China’s economy and price weakness in other global commodities. Some wealth fund target sectors have witnessed noticeable growth. Healthcare investing has become a popular theme for sovereign investors. In the first half of 2015, wealth funds invested US$ 3.7 billion directly into the healthcare sector versus 2014’s comparable figure of US$ 591 million directly. The two trending sub-industries in wealth fund healthcare investing are pharmaceuticals and hospitals. In March, Singapore’s GIC Private Limited, bought two large stakes in Rede D’Or São Luiz, Brazil’s biggest independent hospital operator from the Moll Family and investment bank BTG Pactual SA.

For the first half of 2015, sovereign funds allocated over US$ 16.9 billion in direct real estate, compared to US$ 9.8 billion in the first part of 2014 directly – almost a two-fold jump.

Institutional Real Estate’s Major Contribution

As local European investors focus on harvesting profits and rebalancing their property portfolios, wealth funds are gobbling them up. Unlisted real estate allocation is a key contributor of wealth fund direct investment activity. For the first half of 2015, sovereign funds allocated over US$ 16.9 billion in direct real estate, compared to US$ 9.8 billion in the first part of 2014 directly – almost a two-fold jump. Norges Bank Investment Management (NBIM) is a significant property trend contributor. For instance, in March, NBIM partnered with TIAA-CREF in a Washington D.C. office property that was valued at US$ 307 million. NBIM bought a 49.9% stake in the building which touts Google as a key tenant for US$ 60.8 million. The building is a few blocks from the United States Capitol.

Digging deeper, another popular wealth fund investing trend is backing logistics, whether through a company, a portfolio of assets or a warehouse development. In 2015, GIC partnered with Ontario Teachers’ Pension Plan and PSP Investments in providing over a billion to Greenwich, Connecticut-based XPO Logistics, a provider of freight transportation services. Sovereign investors also have an insatiable appetite for developed market infrastructure. In fact, wealth funds have formed subsidiaries to tackle these investments – Kuwait Investment Authority formed Wren Infrastructure and SAFE Investment Company formed Gingko Tree. In the first six months of 2015, Qatar Holding, a sovereign wealth enterprise (SWE) of the Qatar Investment Authority (QIA) invested in HK Electric Investments, getting exposure to Hong Kong’s utility industry. Qatar Holdings has invested in a slew of assets including Vinci, Volkswagen, Credit Suisse and Barclays.

SWFI First Read, May 24, 2018

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Temasek Preps for Astrea IV

A unit of Temasek Holdings is planning to launch Astrea IV, a private equity bond that will have three tranches. One of the tranches is targeted toward retail investors. In total, Astrea IV hopes to be US$ 500 million in size, with a retail tranche worth S$ 242 million.

CONSOLIDATION: FIS Group to Buy Piedmont Advisors

FIS Group agreed to buy Piedmont Investment Advisors. Post-deal, Piedmont will operate as a subsidiary of FIS Group. At the moment, FIS Group oversees roughly US$ 5.6 billion in assets, while Piedmont has approximately US$ 4.7 billion in assets under management.

REPORTS: Funds from Malaysian Central Bank Land Deal Used to Pay for 1MDB Debt Payment

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Norway SWF Votes Down Paris Climate Targets at Shell Shareholder Meeting

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Norges Bank Investment Management (NBIM), which oversees Norway Government Pension Fund Global, voted down a proposal put forward by some investors at Royal Dutch Shell’s annual general meeting calling on the company to set emissions targets in line with the Paris climate accords of 2015. The challenge was shot down by 94.5% of Shell shareholders at Tuesday’s proceedings. Its defeat was followed by a statement from the oil giant calling the resolution “unnecessary” in light of the firm’s plans revealed in November to halve its carbon footprint by 2050. Some investors believe Shell would be in a better position to set their own goals on addressing issues like climate change.

The US$ 1.1 trillion sovereign wealth fund – which is itself reliant on cash-streams from Norway’s hydrocarbon stores – announced last July it would be asking the banks in which it invests nearly a quarter of its equity assets to disclose how their lending contributes to greenhouse emissions, and is currently considering whether to drop its exposures in oil and gas companies constituting roughly 6% of its overall portfolio ahead of a parliamentary vote on the proposed policy change later this year.

The climate change motion was featured by 60 long-term institutional investors representing more than US$ 10 trillion in assets – including HSBC, BNP Paribas, Fidelity, Swedish buffer fund AP7, France’s ERAFP, and the United Kingdom’s National Employment Savings Trust (NEST) – in an open letter published during the week of May 16th by The Financial Times urging fossil fuel companies to “clarify how they see their future in a low-carbon world,” without going so far as to openly support its approval.

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PSP Investments Finished Deal on Equity Stakes in AEA and AELO in Portugal

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On May 11, 2018, ROADIS, which is owned by PSP Investments, finalized the purchase of equity interests in Portugal´s Auto Estradas do Atlantico (AEA) for 50% ownership and Auto Estradas do Litoral Oeste (AELO) for 60% ownership from MSF Group (Moniz da Maia, Serra & Fortunato, Empreiteiros) and Lena Group (known locally as Grupo Lena). This is ROADIS’ first investment into Portugal.

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