In 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%.
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.
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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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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