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Real Estate Saves the Day for Sovereign Fund Transactions

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According to the Sovereign Wealth Fund Institute’s sovereign wealth fund transaction database (SWFTD), direct transactions aggregated by total deal amount was lower third quarter 2013 compared to third quarter 2012. The -14.97 percent drop in total deal amount reflects a pattern of smaller deal sizes being committed by sovereign wealth funds. Furthermore, 434 direct sovereign wealth fund transaction were recorded for the third quarter 2013 versus 238 for the 2012 third quarter. Progressively, sovereign wealth funds are engaging in more open market transactions, typically smaller than off-market transactions.

Core real estate maintains itself as a prime asset class for sovereign funds, clocking US$ 11.09 billion worth of deals so far for 2013.

Direct Sovereign Wealth Fund Transactions by Quarter – Billions USD
swftd_nov2013_quarterly
Source: Sovereign Wealth Fund Transaction Database

Core real estate maintains itself as a prime asset class for sovereign funds, clocking US$ 11.09 billion worth of deals so far for 2013. During the summer, private equity firms like the Blackstone Group LP, embarked on a major sell off of real estate assets – most notably the Broadgate complex deal. In direct real estate transactions, comparing the last twelve months ending third quarter 2013 (US$ 18.71 billion) versus second quarter 2012 (US$ 9.32 billion), there was a 100% increase in total deal amount. Recent flows of Asian sovereign wealth capital, coupled with Gulf capital, can explain a significant portion of the increase in deal amount. Despite Asian sovereign wealth funds echoing caution in developed markets, in the second and third quarters, these funds accelerated investments into real assets.

Infrastructure appears to be overheating, at least in the SWF direct transaction space. Institutional investors are cautious about overpaying for certain highly-illiquid regulated assets. Analyzing direct infrastructure deals, the last twelve months ending third quarter 2013 (US$ 2.92 billion) versus second quarter 2012 (US$ 6.89 billion), a conclusion can be drawn that there are not enough good deals.

Saudi Aramco Contemplates SABIC Stake from PIF

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Oil giant Saudi Aramco is in early discussions on whether to pursue an ownership stake in Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund (PIF). At the moment, Saudi Aramco has no plans to buy publicly-held shares of SABIC. SABIC was founded in 1976 by Saudi royal decree to convert oil by-products into useful chemicals, polymers, and fertilizers.

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SWFI First Read, July 19, 2018

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GIC Eyes Provenance Land

GIC Private Limited is nearing a deal to purchase up to 50% of Provenance Land. Provenance Land owns India’s first Four Seasons hotel.

Eduard van Gelderen Leaves UC Regents for PSP Investments CIO Role

Eduard van Gelderen exited his position as Senior Managing Director at the University of California Regents’ Office of the Chief Investment Officer. His role will not be replaced. He accepted an offer to be Chief Investment Officer of the Public Sector Pension Investment Board (PSP Investments).

PAAMCO Prisma Holdings CEOs to Exit

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Google Fined Big Time by EU Regarding Antitrust Violations

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The European Union (EU), through its competition commissioner, levied a €4.34 billion fine against Alphabet Inc., the owner of Google. The fine is over Google having “imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search,” according to the European Commission (EC).

The European Commission is requiring Alphabet to cease from its conduct that it is accused of within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company.

Commissioner Margrethe Vestager, in charge of competition policy, said in a press release, “Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. In this way, Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”

The EC press release added, “In particular, Google: 1. has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google’s app store (the Play Store); 2. made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and 3. has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called “Android forks”).”

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