With modifications in asset allocation strategy with regard to including listed real estate investment trusts (REITs) in its real estate allocation, Norway Government Pension Fund Global (GPFG) gobbled up shares globally in this industry over the past six months.
Despite the increase in allocation, listed real estate returned -10.3% in 2018 for Norway’s GPFG. At that period, the wealth fund had 81 billion NOK allocated to listed REITs, or roughly 1% of the fund.
Select REIT Investments by Norway’s Sovereign Wealth Fund
|Company||Country||Dec 2018 Ownership||Holding in Million NOK|
|Shaftesbury Plc||United Kingdom||24.6%||6,913|
|Great Portland Estates Plc||United Kingdom||9.6%||1,946|
|Vornado Realty Trust||United States||9.5%||9,684|
|Paramount Group Inc||United States||8.3%||2,134|
|Capital & Counties Properties Plc||United States||7.9%||1,703|
|Land Securities Group Plc||United Kingdom||7.3%||4,806|
|Deutsche Wohnen SE||Germany||7.2%||10,195|
|Svenska Cellulosa AB SCA||Sweden||7.2%||3,408|
|Boston Properties Inc||United States||6.9%||10,318|
|JBG SMITH Properties||United States||6.1%||2,211|
Source: Norges Bank Investment Management Annual Report 2018
Yale’s US$ 29.4 endowment has earned staggering returns of 7.4% per year over the past 10 years, racing past its benchmark and adding US$ 6.5 billion to the fund. In the year ending June 30 2018, Yale earned 12.3%. Yale’s success is due to active management, and an unconventional approach to investing, at least from the perspective of a university endowment. Yale is overweight venture capital and real estate, which has paid off handsomely over the last 10 years. Many properties throughout the country have returned to, or surpassed, their pre bubble-era prices. Yale has also actively participated in leveraged buyouts. Yale is underweight U.S. equities and its fixed income holdings are low, as is cash on hand.
Yale’s annual report notes, “The heavy allocation to nontraditional asset classes stems from their return potential and diversifying power.” Perhaps earning their Princeton Review # 3 ranking in 2018, Yale’s commitment to thinking outside the box is responsible for their recent investment philosophy: “Alternative assets, by their very nature, tend to be less efficiently priced than traditional marketable securities, providing an opportunity to exploit market inefficiencies through active management.” Alternative investments have been gaining steam among major players in the global markets, including US$ 6.5 trillion investment manager Blackrock Inc. Blackrock plans to open a new European alternative asset headquarters in Paris.
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BlackRock Inc. entered into an exclusive agreement to acquire eFront, a French software provider of risk management products for the alternative investments industry. Asset management firms are worried about margins and have increasingly acquired service provider firms to buffer revenues. BlackRock sells the Aladdin (Asset, Liability, Debt and Derivative Investment Network) platform, which is one of the largest portfolio operating systems in the investor community. BlackRock’s offer is to pay US$ 1.3 billion in cash for 100% of the equity of eFront. The seller of eFront is private equity firm Bridgepoint.
Bridgepoint acquired eFront in January 2015 in a transaction totalling approximately €300 million. In 2006 eFront listed on the Alternext Paris market of NYSE Euronext (ALEFT) and was taken private in 2011 by Francisco Partners. eFront was founded in 1999 by Olivier Dellenbach.
According to the press release, “The combination of eFront with Aladdin, BlackRock’s investment operating platform used by more than 225 institutions around the world, will set a new standard in investment and risk management technology.”
BlackRock is funding the eFront acquisition through a combination of existing corporate liquidity and debt.
Institutional investor Caisse de dépôt et placement du Québec (CDPQ), which works primarily on behalf of pension funds and insurance plans, is opening a new fund dedicated to Québec businesses that specialize in AI, or artificial intelligence. Available funds are slated at US$ 250 million for the enterprise. The commercialization of AI seems to be a natural fit for CDPQ, “Since Montréal is emerging as a global beacon of excellence in artificial intelligence, we need to enhance our offering and ramp up the financial and development support we provide AI businesses through the various stages of their growth,” according to Executive Vice President of Quebec and Global Strategy, Charles Émond. Émond aspires to see AI spread throughout “all sectors of our economy.” The AI fund will be run by CDPQ’s Venture Capital and Technology team. They will look for companies that are already doing well in the sector.
Another program is targeting early stage organizations. Mila Quebec AI Institute, a research and development organization founded by three universities, is building a new complex to help facilitate CDPQ’s goals. The new complex will house early-stage AI companies. CDPQ is especially interested in companies that can accelerate their growth and enter markets quickly, providing speedy returns. There is a social component, whereby companies will be required to contribute to Mila. Michael Sabia, President and Chief Executive Officer of CDPQ, noted, “With this partnership, la Caisse is pursuing its commitment to helping Québec businesses in this new economy thrive and expand.”
Keywords: Caisse de depot et placement du Quebec
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