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Asian Sovereign Wealth Funds Go Big in Europe

Sovereign wealth funds are comfortable investing directly into Europe. Given geopolitics, the investment environment and a deep history with Asia and the Middle East, Europe maintains its status as a center for sovereign wealth assets. By analyzing the top 25 sovereign wealth funds ranked by assets, a significant portion of them have European operations, particularly in London.

Across the pond, sovereign wealth funds are also heavily allocated to the United States, but not directly. In the U.S., with the exception of institutional real estate, sovereign wealth funds extensively use intermediaries and local partners to channel their monies. This approach directly contrasts that of their European investments.

Direct Sovereign Wealth Fund Transaction Amounts by Recipient Country (Last Four Quarters)*
Click to Enlarge
SWFDirect_country_11.5.13_SWFTD_rsd

Period: 3QY2011 to 2QY2012
Source: Sovereign Wealth Fund Transaction Database (Sovereign Wealth Fund Institute)

Data Table

Country Billions USD
United Kingdom 18.9
Germany 7.73
France 2.74
Switzerland 2.63
Russia 1.91
Spain 1.38
United States 5.48

 

It is interesting to note that despite apparent cracks in European financial stability, sovereign funds continue to favor Europe, picking up real estate properties in London, Paris and other prime locales. Singapore’s two sovereign wealth funds, GIC Private Limited and Temasek Holdings, have augmented their presence in European investment affairs. Just in the past few months, GIC Private Limited became the second largest private shareholder of Royal Mail plc. The Singapore wealth funds also invested in Rothesay Life – getting exposure to the insurance sector. Broadgate, the massive London office and retail complex, was courted by the GIC. This is not a recent phenomenon – Asian sovereign funds made key inroads into Europe during the global financial crisis. They provided liquidity to European institutions like UBS, Barclays and Credit Suisse.

The Korean peninsula hosts a number of mega asset owners such as the Korea Investment Corporation (KIC) and Korea’s National Pension Service (NPS). Both opened up London offices. The trend of Asian public investors wanting greater exposure to European real estate, fixed income, equities and infrastructure is growing. For example, Korea’s NPS, the fourth largest pension investor in the world, moved billions into the UK by investing in assets such as London’s Gatwick Airport and Canary Wharf. The China Investment Corporation (CIC) and Qatar Investment Authority (QIA) mirrored these investments.

Similar deals and transactions akin to these abound. The take away message is this: there is a conspicuous and increased level of investment in Europe particularly by Asian funds. And, more notably, these funds are willing to invest directly – as opposed to using intermediaries – into these various assets.

Concerns Raised at Potential BlackRock Takeover of CalPERS’ Private Equity

The California Public Employees’ Retirement System (CalPERS) has been analyzing options on what to do with its massive US$ 26 billion private equity program. The pension system has embraced the mantra of reducing cost, reducing complexity and reducing risk, the hallmark of its program called “INVO 2020”. CalPERS also wants less, but more strategic relationships with external money managers. At one point, CalPERS was contemplating increasing its direct investment staff to model Canadian pension funds such as Canada Pension Plan Investment Board (CPPIB), OMERS and the Ontario Teachers’ Pension plan. The pendulum has begun to swing the other way as reported earlier by SWFI research staff.

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CDP Signs €1.7 Billion Infrastructure Loan Agreement with Atlantia Group

Cassa depositi e prestiti S.p.A. (CDP) and Atlantia Group’s Autostrade per l’Italia (ASPI) have signed a €1.7 billion loan contract dedicated to upgrading motorways in Italy under concession to ASPI. €1.1 billion will come in the form of a term loan with a 10-year tenure, with the remaining €600 million wrapped up in a five-year revolving loan.

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Sovereign Funds Commit to Integrating Climate-Related Risks at One Planet Summit

Representatives from a number of sovereign wealth funds who collectively govern over US$ 2 trillion in assets came together at the One Planet Summit at the Élysée Palace in Paris in order to discuss what public asset owners can do to incorporate climate change-related risks and opportunities into investment considerations.

The newly formed committee – called the One Planet Sovereign Wealth Fund Working Group – includes as its founding members the Abu Dhabi Investment Authority (ADIA), Kuwait Investment Authority (KIA), Qatar Investment Authority (QIA), Norges Bank Investment Management (manager of Norway’s Government Pension Fund Global), Saudi Arabia’s Public Investment Fund (PIF), and the New Zealand Superannuation Fund.

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