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The Art of Liquidity Investing for Sovereign Funds

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Several sovereign wealth funds invest a portion of their assets to capture and harvest the illiquid premium. Hence the improved aggregate demand for private equity, real estate, and infrastructure investments. Given their long-term nature, more and more SWFs are searching for means to capture this premium and capitalize on it.

Take for instance Europe’s largest sovereign wealth fund, the Norwegian Government Pension Fund – Global (GPFG) which allocates most of its assets into fixed income and public equities. Norway’s GPFG has greater liquidity compared to most other similarly-sized sovereign wealth fund peers, university endowments, and larger pension plans. The fund has taken strides to invest in more illiquid assets such as its gravitation towards institutional real estate.

Other SWFs have been more aggressive by using the illiquid premium such as Singapore’s GIC which makes direct company investments into companies and the Qatar Investment Authority.

Over the long haul, some studies have shown that illiquid assets can generate amazing returns; this was seen in the early endowment model that many private university endowments followed. Sovereign investors need to advance with caution as the illiquid premium cost is contingent on the liquidity demands of liabilities. Unfortunately in 2008-2009, the crisis caused severe strain and turmoil rendering some fire sales and generating losses. Illiquid assets can be a major burden for investors. Sovereign funds on the other hand, especially ones without contingent liabilities can weather out longer holding periods.

PNB to Buy Stake from Malaysian Developers in Battersea Power Station Project

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Malaysia-based Permodalan Nasional Bhd (PNB) inked plans to acquire a stake in the Battersea Power Station from Malaysian developers Sime Darby Property and SP Setia, which between them own 80 percent of the site located on the south bank of the Thames. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Will Saudi Arabian Sovereign Wealth Be the Next Giant in Hollywood?

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Saudi Arabia’s growing Public Investment Fund (PIF) is reportedly looking into investing over US$ 500 million for a 5% to 10% stake in Hollywood’s Endeavor Talent Agency, the holding company for William Morris Endeavor Entertainment LLC (WME). WME is one of the biggest players in the business, representing well-known artists across a number of different mediums – including cinema, television, music, books, and theatre – as well as a roster of professional athletes from the National Football League (NFL) and National Hockey League (NHL). Discussions are in their initial stages, however, and no commitments have been made thus far. WME is constantly gathering new talent. Recently WME signed musician John Mayer and actor Nicolas Cage – both were with Creative Artists Agency (CAA).

A Logical Connection

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CDPQ Providers Firepower for Blackstone Buyout of PIRET

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Ivanhoé Cambridge, part of CDPQ, is a co-investor in Blackstone Group’s buyout of Pure Industrial Real Estate Investment Trust (PIRET), a listed Canadian warehouse owner. The actual Blackstone buyer is an affiliate of Blackstone Property Partners, its core real estate investment unit. The agreement was revealed on January 9, 2018. Blackstone moved to buy the REIT) for C$ 8.10 per Unit in an all-cash transaction valued at C$ 3.8 billion including debt. The transaction value without debt is C$2.48 billion.

Deal Advisors

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