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Sovereign Funds Embrace Direct Real Asset Deals

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The thirst for real assets has not abated for sovereign wealth funds. Clear statistics derived from the Sovereign Wealth Fund Institute’s transaction database sheds light on the impact sovereign wealth funds have in acquiring investments in the real asset economy. The Sovereign Wealth Fund Transaction Database has recorded over $600 billion worth of direct transactions made by sovereign funds. The increase in direct transactions reveals that large institutional investors like sovereign wealth funds have built up sufficient internal capacity to go out on their own. For the time being, there is no slowdown in sovereign wealth funds investing in real assets.

European core real estate is a chief driver for direct sovereign wealth fund transaction growth. $9.26 billion in direct sovereign wealth fund transactions were recorded in institutional real estate for the last half of 2012. In comparison, to the last half of 2011, $7.13 billion worth of direct transactions were recorded. Let’s not let Europe hog all the glory, Norway’s Government Pension Fund Global (GPFG) purchased 49.9% of five U.S. office properties through a joint venture with TIAA-CREF – properties were valued at $1.2 billion. A secondary cause of the increase is the proliferation of sovereign wealth funds being engaged in developmental real estate – particularly with Gulf funds. Hudson Yards and CityCenterDC, two monstrously large U.S. developmental projects are examples of major deals.

Direct Sovereign Wealth Fund Transactions – Real Asset Sector – Click to Enlarge
Billions in USD
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Source: Sovereign Wealth Fund Transaction Database, August 2013

In the majority of cases, acquiring infrastructure without intermediaries takes longer than buying property. A smidge after the first quarter of 2013, Tawreed Investments Limited, a sovereign wealth enterprise of the Abu Dhabi Investment Authority, was part of a consortium including Industry Funds Management, Australian Super and QSuper to buy the lease on Port Botany and Port Kembla. Combined, the two port deals equaled AUD 5.07 billion.

For the time being, there is no slowdown in sovereign wealth funds investing in real assets.

Energy and Materials
Spiking in the first semester of 2012, energy-related transactions amounted to $7.53 billion. Singapore’s Temasek Holdings invested hundreds of millions in KrisEnergy, an upstream oil and gas company focusing on Southeast Asia. KrisEnergy started as a portfolio company backed by First Reserve Corporation. Shifting to material-related transactions, in the first half of 2013, it totaled $6.5 billion. By late June 2013, Norway’s sovereign wealth fund owned a little more than 3 percent of BASF SE, the world’s largest chemical company. Another German chemical company in which the wealth fund owns a growing stake is The Linde Group.

Google Fined Big Time by EU Regarding Antitrust Violations

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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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Mubadala, RCIF and UFC Agree to Form UFC Russia Joint Venture

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Endeavor (formerly WME | IMG) is taking its UFC brand into Russia. Endeavor is financially-backed by investors such as Silver Lake Partners, CPPIB, KKR and Singapore’s GIC Private Limited. The global talent agency company inked a deal with the Russia-China Investment Fund, Mubadala Investment Company (UAE) to form a platform to focus on the development and expansion of UFC’s mixed martial arts (MMA) business in Russia and CIS countries. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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ValueCAP CEO Steps Down at End of July

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ValueCAP’s CEO, Sharifatu Laila Syed Ali, is stepping down at the end of July 2018. She has a 16-year tenure at ValueCAP (Valuecap Sdn. Bhd.), joining the company in 2002. She is being replaced by Rosalina Rahman. Expected to be joining ValueCAP in August, Rahman is currently a Managing Director of Amundi Asset Management’s Malaysia unit. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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