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Economic Crisis in Southern Europe, an Opportunity for SWFs?

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This article is written by Adrián Blanco Estévez, an economist. He is at the University of Santiago de Compostela. These are the views of the contributor, not of the Sovereign Wealth Fund Institute.

The Southern European countries began to suffer a deep economic crisis three years ago. The story is well known. First, the government of Greece was not able to meet its public debt obligations, and in April 2010 the Greek bond was downgraded to junk status. The following month, the IMF and the European Union agreed on a more than €100 billion bailout loan to save Greece. As a result, economic policy was transferred from Athens to Brussels, Berlin and Washington. After the Greek event the international funds (both public and private) started to differentiate between the countries in the North and South of Europe; therefore, countries such as Italy, Spain or Portugal had problems to allocate their public debt in the international markets. These countries began to experience strong increases in credit default swaps and bond spreads, as well as a huge pressure to refinance their public debt. As a result, in 2011 a €78 billion bailout was given to Portugal and in 2012 the Spanish government asked for a €100 billion loan for its financial sector. For Greece, the fiscal policy of Portugal and Spain started to be influenced by Brussels and Berlin, which had borrowed the money through different financial vehicles (mainly through the European Central Bank).

In this complicated economic context in Southern Europe, one very interesting question arises regarding sovereign wealth funds (SWFs); what does the current economic situation in Southern Europe offer to SWFs in terms of investment opportunities?

First of all, it is relevant to know SWFs have invested in Southern Europe since the beginning of the crisis. As far as Italy is concerned, some very relevant deals were made since then. In 2009, the Libyan SWF signed a MoU with Finmeccanica (aeronautic and defense) and also this year there was a rumor indicating a possible investment by the China Investment Corporation (CIC) over Enel (energy) but the transaction did not materialize. In 2010, Aabar and the Libyan SWF made two separate deals over Unicredit bank. In 2012, Qatar Holding bought luxury properties in Costa Smeralda and also the government of Qatar agreed to invest €1 billion in “made in Italy” companies (national industry leaders). In addition to SWFs, some state-owned enterprises, like Russian Lukoil (which acquired a 49% share in ERG’s oil refinery in Sicily), made important deals in Italy in recent years.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, September 21, 2018

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U.S. Public Becomes More Aware that Gmail Scans Emails

Alphabet is a major stock holding for sovereign wealth funds and large pensions. Search giant Google is under fire for allowing third-party partners and companies, like Return Path Inc and other advertisers, to share data from Gmail accounts. Many experts and tech observers already knew this, but more people in the public are becoming aware of Google’s practices when it comes to privacy. Google disclosed in a letter to U.S. lawmakers this finding. The Wall Street Journal reported that in some instances, app companies were able to read people’s emails in order to improve their algorithms. In 2017, Google said they would stop scanning all of one’s Gmail messages for the goal of personalized ads.

GPIF Infrastructure Exposure Almost Reached 200 Billion Yen in March 2018

Japan Government Pension Investment Fund’s (GPIF) exposure to infrastructure real estate was 196.8 billion JPY at the end of March 2018. At that period, 57% of the exposure was to the UK, 15% was to Australia, 15% to Sweden, 10% to Spain and 3% to Finland. 21% of GPIF’s infrastructure portfolio was linked to airports versus 27% to ports.

AIMCo-backed sPower Closes $498.7 Million Bond Deal

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

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Iceland Contemplates a Sovereign Wealth Fund

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The Government of Iceland is looking to possibly form a sovereign wealth fund to stabilize the country from unforeseen shocks to the national economy. The Iceland government released a statement saying, “The state’s contributions to the Fund will be equivalent to new revenues from publicly owned power production companies which are expected to accrue in the coming years.”

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CBRE Global Wins First GPIF Global Real Estate Mandate

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Japan Government Pension Investment Fund (GPIF) awarded its first global real estate mandate by hiring CBRE Global Investment Partners Limited. This is a global core real estate fund-of-funds separate account. Overseeing this mandate as a gatekeeper is Asset Management One Co., Ltd., which is a unit of Mizuho Financial Group. This RFP was launched in April 2017.

CBRE Global Investment Partners is the multi-manager arm of CBRE Global Investors.

In addition, on August 8, 2018, GPIF hired two custodians for short-term investments. These custodians are Trust & Custody Services Bank, Ltd and The Master Trust Bank of Japan, Ltd.

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