REVEALED: Sovereign Wealth Funds and Pensions Boost Real Assets in February

cityviewIn recent times, sovereign wealth funds and public pensions have boosted exposure to real assets. According to research by the Sovereign Wealth Fund Institute, more large public investors will augment allocation to real assets while lowering allocations to domestic equity and fixed income. For example, near the end of 2013, Australia’s Future Fund has planned to expand real asset allocation from just over 10% to barely under 20%. Embracing infrastructure, the sovereign fund’s chief investment officer, David Neal, was involved on them acquiring a stake in Perth airport. In August 2013, Neal received flack from the local press about the idea of the Future Fund paying too much for the airport.

Common reasons on why institutional investors are betting on real assets include: anemic interest rates, the potential for long-term income streams, possibility of rising inflation and lackluster bond yields.

Sovereign Wealth Fund and Public Pension Real Asset Updates – February Trends

Colossal public investors like CalSTRS had its board increase authority for investment officers to dole out money directly to infrastructure investments – a clear sign on real asset allocation demand. Heading North, the CPPIB moved mounds of capital targeting Indian real estate in core markets by partnering with local companies. On February 26, 2014, LS Power Equity Advisors, LLC, a U.S. power and energy infrastructure manager raised $2.075 billion for LS Power Equity Partners III, L.P. The energy manager received capital commitments from Asian sovereign funds as well as Gulf-based funds. The Alaska Permanent Fund Corporation committed US$ 200 million to the new fund – its first investment with LS Power. LS Power Equity Advisors, LLC buys operating power generation assets.

Flying over to Malaysia, 1Malaysia Development Bhd. (1MDB) is seeking to construct the country’s largest solar power plant. In fact, 1 MDB is contending to develop the solar project that is being proposed by Malaysia’s Energy Commission and Sustainable Energy Development Authority. This project would enhance the country’s photovoltaic capacity by 56%.



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