Connect with us

Are Asset Managers More Profitable When SWFs Invest in Them?

Published

on

It is no secret that listed asset managers and private equity firms are in the business of managing money for fees. In recent years, a number of sovereign wealth funds have been taking large stakes in investment firms. Some examples include the China Investment Corporation in Blackstone and Morgan Stanley, Mubadala in the Carlyle Group, Kuwait Investment Authority in Blackrock, etc. Note that in general the effect of the financial industry downturn, industry consolidation, fund product specialization, and increases in bringing investments in-house has had a significant impact in the asset management fee business.

Are investment firms more likely to be profitable when invested by a sovereign investor, or is it really the case of any large institutional investor? When SWFs invest in the actual asset manager, is there pressure to lower management fees?

Sovereign wealth funds investing in the asset management business may not want fees to be lowered, since they are investing in the business. With that being said, there is no way to track if management fees were scaled back directly, if the SWF decided to invest in a fund operated by the manager.

The below is not a scientific study but an observation:

On September 20, 2007, Mubadala invested $1.35 billion for a 7.5% stake in The Carlyle Group. They also committed $500 million to a Carlyle Fund. Mubadala was anticipating an IPO from the Carlyle Group soon, so they amped their stake in the middle of December 2010.

Data in USD Millions FY 2008 FY 2009 FY 2010
Fund Management Fees $811.40 $788.10 $770.30
Fee-Earning Assets Under Management (at period end) $76,326.40 $75,410.50 $80,796.50
Fund Mgmt Fees / Fee-Earning AUM 1.063% 1.045% 0.953%

Source: SEC Filings – The Carlyle Group

With publicly-traded asset managers (majority non-alternative) the relationship or correlation is non-existent, see below. We postulate the downturn had more to do with profit margins compressing in FY 2010. Sell-side analysts think profit margins will increase in the projected fiscal years.

Select Publicly-Traded Investment Managers – Profit Margins
[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Saudi Aramco Contemplates SABIC Stake from PIF

Published

on

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.

Continue Reading

SWFI First Read, July 19, 2018

Published

on

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

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

Google Fined Big Time by EU Regarding Antitrust Violations

Published

on

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”).”

Continue Reading

Popular

© 2008-2018 Sovereign Wealth Fund Institute. All Rights Reserved. Sovereign Wealth Fund Institute ® and SWFI® are registered trademarks of the Sovereign Wealth Fund Institute. Other third-party content, logos and trademarks are owned by their perspective entities and used for informational purposes only. No affiliation or endorsement, express or implied, is provided by their use. All material subject to strictly enforced copyright laws. Registration on or use of this site constitutes acceptance of our terms of use agreement which includes our privacy policy. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. SWFI facilitates sovereign fund, pension, endowment, superannuation fund and central bank events around the world. SWFI is a minority-owned organization.