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
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.
Since the beginning of the year, Abu Dhabi-based Mubadala Investment Company has been looking at owning the distressed Brazilian infrastructure company Invepar SA for quite some time. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
Knowlton Development Corporation (KDC) has made its latest acquisition with the purchase of Aromair Fine Fragrance Company Inc., a U.S. subsidiary of Aromair Group that specializes in air care products, from London-based Strategic Value Partners. The terms of the transaction, which was completed on November 8, were not disclosed. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
Norges Bank penned a letter to its Ministry of Finance recommending the removal of oil and gas stocks from the GPFG’s benchmark index. At the moment, oil and gas stocks make up roughly 6% of the wealth fund’s benchmark index, or just around 300 billion NOK. Norway’s wealth fund is a major holder of oil companies such as ExxonMobil, Chevron, BP, Total and Royal Dutch Shell. Oil and gas stocks were a major driver of positive equity returns in previous quarters.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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