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

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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%.

RDIF and Makara Capital form Technology Company Investment Joint Venture

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The Russian Direct Investment Fund (RDIF) and Singapore-based Makara Capital, a specialist in transaction financing and asset management, signed a deal to form a US$ 200 million joint investment platform to finance breakthrough innovative projects in Russia and Asia. Ali Ijaz Ahmad, the CEO of Makara Capital, is a board director of the Intellectual Property Office of Singapore (IPOS). Ali Ijaz Ahmad served as an adviser to Morgan Stanley and The Carlyle Group. He also had stints at the World bank and Goldman Sachs. Makara Capital was founded in 2005 as a joint venture with Credit Suisse AG and made independent by its founding partners in 2008.

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SVB Financial Group to Acquire Leerink Holdings

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Linking Boston to the San Francisco Bay Area in the world of pharmaceuticals, SVB Financial Group (SVB) announced that it has entered into a merger agreement to acquire Leerink Holdings LLC, the Boston-based parent company of Leerink Partners LLC, an investment bank focused on the healthcare and life science industries. Jeffrey A. Leerink formed Leerink in 1995. Santa Clara, California-based SVB Financial Group is the parent company of Silicon Valley Bank. SVB is big into life sciences and provides services to many healthcare companies and startups.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Digital Currencies Gaining Steam Among Central Banks

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At the Singapore Fintech Festival, International Monetary Fund head Christine Lagarde noted that central banks should consider issuing digital currency, as non-cash payments increased over the years – especially in developed markets. Digital currencies, also known as cryptocurrencies, such as bitcoin have lost tremendous value in recent months. Lagarde is referring to having the central bank issue digital currencies. Lagarde argued that a digital currency would be the liability of the state and not a private company. Saudi Arabia, China, Canada, Sweden, and even Uruguay have tinkered with possibly having digital currencies or some form. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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