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Eastern Sovereign Funds Bullish on Asian Transformational Economies

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Temasek Holdings and other sovereign funds are taking big bets on Asia. Temasek has taken positions in Chinese banks such as China Construction Bank and the Bank of China; understanding that investing in financial institutions can be a profitable undertaking for a burgeoning economy. Confidence and optimism in China’s long-term economic growth play into Temasek’s investment themes. The Chinese government has made strides on making it easier for foreign investors to invest in domestic markets by lessening capital controls.

China, India, and Indonesia, along with other Asian nations are developing large middle classes, creating vast pools of consumers. In fact, it is projected in the next decade as much as 67% of global growth of the middle class will be derived from China and India. Annual household income levels continue to rise in the region; however, household incomes still dwarf nations such as Spain or the United States. On the other hand, the consumer credit market of Asia is beginning to expand, augmenting consumer spending. The West will still account for greater consumer spending power in the next decade, but Asia is providing a noteworthy alternative for multinational corporations.

Infrastructure investing is also an avenue for sovereign funds to capitalize on the growing middle class populations of India and China. On February 18, 2013, the United Arab Emirates and India created the India-UAE High Level Taskforce on Investment. The vehicle will be used to push through investments in industries such as infrastructure and the food supply chain.

GIC Sells Arizona Biltmore to Blackstone

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Blackstone Real Estate Advisors, part of the Blackstone Group, acquired the 740-room Arizona Biltmore hotel, located in Phoenix, for US$ 403.4 million. The deal closed on April 20, 2018.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Mubadala Acquires Stake in Growing Hedge Fund Phoenician Capital

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Mubadala Investment Company, through its unit Mubadala Capital, purchased a minority stake Phoenician Capital, LLC. Although terms and size of the deal were not disclosed, the agreement grants Mubadala Capital rights to invest in a fund managed by the New York-based firm, which generated respective returns of 40.8% and 33.0% in 2016 and 2017, against benchmarks of 12.0% and 21.8% for the S&P 500. The hedge fund runs the Phoenician Offshore Fund Ltd.

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

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Large Asset Managers Continue to Move Operations Out of California

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In the 2010s, Fisher Investments, an investment firm run by Ken Fisher, moved a large number of employees from the Woodside and San Mateo campuses to a town called Camas in Washington, near Portland. Vanguard has a large operational presence in Arizona, while Charles Schwab Corporation has expanded its technology operations and client services in places like Denver, Dallas, Austin and Phoenix. Dimensional Fund Advisors moved its headquarters in 2008 from Santa Monica, California to Austin.

While asset managers reap profits and try to lower employee head count costs, looking to fly-over country seems appealing.

The Pacific Investment Management Company (PIMCO), part of the Allianz family, selected Austin, Texas as its new office to hire more client services and technology talent. The PIMCO Austin office will open later in 2018. PIMCO is headquartered in Newport Beach, California, with an office in New York City.

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