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MODI EFFECT: SWFs and Pensions Intensify Direct Investments in India

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Source: Sovereign Wealth Fund Transaction Database - June 2016.  Direct data on sovereign wealth funds and public pensions.  Billions USD.

Source: Sovereign Wealth Fund Transaction Database – June 2016. Direct data on sovereign wealth funds and public pensions. Billions USD.

Narendra Modi was sworn in as Prime Minister of India on May 26, 2014. Somewhat stronger private property rights, slightly-loosened regulation and friendlier foreign investment laws have increased the flows of foreign institutional investor capital. Since 2013, direct investments by sovereign funds and public pensions into India have ramped up, according to time-series data from SWFI’s Sovereign Wealth Fund Transaction Database (SWFTD). This data is adding in both sovereign wealth funds and large public pensions (mostly Canadian public investors). In 2006, just US$ 101 million was directly invested into India by public institutional investors. Most capital flowing in before the global financial crisis were private equity investors. In 2012, US$ 1.38 billion was directly invested into India by public institutional investors. By 2015, the number amounted to US$ 5.44 billion.

“Despite a prolonged slowdown in oil prices and turmoil in select emerging markets, long-term public investor capital seems committed to India in an upward steady pace,” commented Michael Maduell, President of SWFI.

Modi’s economic reformist agenda has lessened the historic fears of institutional investors. Increasingly, wealth funds are participating in more investment channels and with higher capital amounts such as being cornerstone investors in IPO deals. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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.

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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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