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Mainland China Experiencing Slowdown in Wealth Fund Direct Deals

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With China experiencing a deceleration in economic growth, heightened geopolitical tensions, and rising risks in the country’s traditional financial sector, wealth fund direct investments have slowed down to a crawl in 2016 compared to 2015.

Direct Transactions into Mainland China by Sovereign Wealth Funds – Billions USD

Source: Sovereign Wealth Fund Transaction Database, Extracted February 7, 2017.

Source: Sovereign Wealth Fund Transaction Database, Extracted February 7, 2017.

Even though there is an abundance of institutional investor capital chasing deals globally, the number of suitable opportunities for these large sovereign investors within China shrunk, as well as deal size. This had required both cash-rich wealth funds and pensions to augment on-the-ground resources across Asia. In reality, overseas wealth funds, at times, are competing against adventurous Canadian pensions, deep-pocketed corporate investors, private equity firms and domestic players when it comes to investing in Chinese emerging companies. Lucrative Chinese initial public offerings are competitive.

While overall direct deals made by wealth funds slightly pulled back in 2016, mainland China suffered a significant reduction in incoming direct sovereign investor capital. According to data from the Sovereign Wealth Fund Transaction Database (SWFTD), wealth funds directly invested US$ 4.05 billion in mainland China in 2016 versus US$ 13.16 billion in 2015. In 2014, the figure was US$ 8.096. The United States was a beneficiary for 2016 when it came to direct sovereign fund transactions. However, according to SWFI Compass, an RFP and opportunity tracking service, external fund mandates toward mainland China were in demand by both wealth funds and pensions across the United States.

Realignment

Wealth funds are also realigning their Asia portfolios, seeking to lower exposure toward traditional financial institutions, while trying to identify investments in China’s consumer, technology and real estate sectors. In 2015, HIP China Logistics Investments Ltd., a sovereign wealth enterprise of the Abu Dhabi Investment Council (ADIC), kicked in US$ 750 million more toward its joint venture with Prologis Inc. called Prologis China Logistics Venture. Meanwhile, some sovereign funds were selling bank stocks. For example, in early 2017, according to Hong Kong filings, Qatar Investment Authority (QIA) trimmed 3.84 million H shares of Agricultural Bank of China Ltd. The shares were sold at an average price of HK$ 3.26 per share on January 27, 2017. Post-transaction, the QIA has a 11.99% stake in the Agricultural Bank of China from its previous 12% ownership stake.

Despite these headwinds, mainland China is on track to have more initial public offerings from very large Chinese companies. One example is China Reading (also known as Yuewen Group), China’s biggest online publishing and e-book company. China Reading, which is backed by Chinese giant Tencent Holdings, hopes to raise up to US$ 800 million in a 2017 IPO.

ADIA Takes a Bet on UK Pension Buyouts

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After months and months of speculation and rumors, the Abu Dhabi Investment Authority (ADIA) pulled the trigger to acquire up to 21.4% of the shares of the Pension Insurance Corporation Group from funds advised by J.C. Flowers & Co. Pension Insurance Group Corporation is the parent company of Pension Insurance Corporation (PIC), a specialist insurer and provider of bulk annuities to U.K. corporate pensions schemes. PIC has in excess of £25 billion in financial assets. Increasingly, U.K. companies are keen on reducing or removing financial and operational risks related to their defined benefit pension obligations.

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Matt Whineray Officially Named CEO of NZ Super Fund

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On June 19, 2018, the Board of the Guardians of New Zealand Superannuation (NZ Super Fund) officially appointed Matt Whineray as chief executive officer. He has been acting CEO of the sovereign wealth fund since March 2018. Whineray joined the organization in 2008 as general manager, private markets and in 2014 became chief investment officer. The appointment is effective July 1, 2018.

An executive search was conducted when Adrian Orr decided to take the governor job at New Zealand’s central bank.

Here is an interview SWFI conducted with Matt Whineray.

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SWFI First Read, June 19, 2018

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Tronc to Revert to Original Name – Tribune Publishing

Publishing company Tronc will go back to its current name Tribune Publishing. Tronc is the parent company of the New York Daily News and Chicago Tribune. Tronc stood for Tribune Online Content, but received vast ridicule from the U.S. media community.

Denholm to Lead as CIO of Solutions Unit at Aviva Investors

Al Denholm was named Chief Investment Officer for the new solutions unit at Aviva Investors. This is a new position and Denholm is based in London. He will report to Aviva Investors CEO Euan Munro. Denholm was Chief Executive Officer at Prudential Portfolio Management Group.

Hostetter Gets Fresh Start at Russell Investments

Robert Hostetter was named Global Head of Product at Russell Investments. He will report to Michelle Seitz, CEO and Chair of Russell Investments. Previously, Hostetter was Managing Director and Global Head of Product Strategy at AllianceBernstein.

President Trump Wants a Space Force Branch

U.S. President Donald Trump revealed plans at directing the Pentagon to form a new space force branch of the military.

Greenpeace Occupied AP3’s Offices Last Week

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