Effects of Utilizing Sovereign Co-Investors for Private Equity Firms

Significant direct investment in companies is becoming a more common occurrence for sovereign investors. Sovereign funds that have typically allocated capital to private equity firms to manage are wanting in on the deals themselves. We even find special situations in where the sovereign wealth fund takes a substantial ownership stake in the private equity firm. This benefits the private equity firm by receiving governmental capital, enhancing future fund raising prospects, and increasing firm liquidity for fund management.  Earlier this year, the Kuwait Investment Authority (KIA) and the Government of Singapore Investment Corp purchased a stake in TPG.

There is a rising trend among some large sovereign wealth funds and other long-term public pensions regarding co-investing alongside private equity funds or themselves on direct company purchases. One example includes the case of Temasek Holdings that purchased a large stake in Frac Tech Holdings alongside RRJ Capital in April 2011. Together they bought a 70% stake in the Frac Tech Holdings.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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