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Sovereign Funds Pursue Insurance Companies

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Warren Buffet likes insurance companies. In general, insurance companies generate money through premiums and sometimes investment returns. Sovereign wealth funds are keen on investing in insurance companies that have resilient balance sheets and monopolistic positions in various insurance markets.

Investing in an Asian insurance company provides the possibilities of high returns, since most parts of Asia, ex-Japan are still building up their insurance industries. Mature insurance markets like in the United States offer less of a high equity investment return.

Back in 2010, the Kuwait Investment Authority (KIA) committed about US$ 1 billion to the AIA Group Ltd’s initial public offering (IPO). Other public investors participated in the IPO. AIA Group is a major Asian life insurer which was part of the American International Group Inc. In 2011, the Government Investment Corporation of Singapore joined in with investors including Goldman Sachs to purchase AXA’s stake in Chinese insurer Taikang Life Insurance.

AIA Group Limited

Fiscal Year 2011 – Total Assets by Geographic Segment Billions USD
Hong Kong 28.03
Thailand 21.52
Singapore 23.216
Malaysia 7.613
China 8.85
Korea 9.827
Other Markets 11.068
Total Assets 110.124

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SWFI First Read, June 22, 2018

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JPMorgan Fund Buys 40% of Oxford Properties’ French Portfolio

A fund advised by JP Morgan Asset Management committed €400 million in Oxford Properties’ French portfolio. Essentially, Oxford Properties sold a 49.9% non-managing interest in 32 Rue Blanche, 92 Avenue de France and Paris Bastille. Oxford Properties made its maiden investment in Paris in 2014 when it acquired 32 Rue Blanche.

Oxford Properties is the real estate unit of OMERS.

Temasek Explores Further Cash Commitments to FirstCry

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DOL Fiduciary Role is Struck Down by Fifth Circuit Court of Appeals

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The U.S. Court of Appeal, Fifth Circuit, confirmed a March 15th decision to strike down the U.S. Department of Labor’s (DOL) fiduciary rule. The fiduciary rule is a series of seven different rules that broadly interpret the term “investment advice fiduciary” and redefine exemptions to provisions concerning fiduciaries that appear in the Employee Retirement Income Security Act of 1974 (ERISA). The 5th U.S. Circuit Court of Appeals overturned a decision by a Dallas federal court that had upheld the DOL fiduciary rule.

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Supreme Court Ruling on Online Shoppers Sales Tax Could Impact SWF Investing

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In a 5-4 ruling, the U.S. Supreme Court ruled that U.S. states could mandate online shoppers to pay sales tax when they make online purchases. This new ruling overturns a ruling from 1992.

Sovereign wealth funds directly invested at least US$ 9 billion in internet-related retail businesses from January 1, 2015 to March 31, 2018, according to SWFI transaction data. This is not counting fund commitments or funds invested. Sovereign funds have been plowing capital into online mega giants such as Amazon and Expedia, while spending big on e-commerce startups in the United States.

“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States. These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause,” Justice Anthony Kennedy penned in an opinion joined by Justices Clarence Thomas, Samuel Alito, Ruth Bader Ginsburg, and Neil Gorsuch.

“Retailers have been waiting for this day for more than two decades,” the National Retail Federation said in a statement.

Already a number of U.S. states enacted laws mandating online marketplaces to collect sales taxes on behalf of third-party sellers.

The case is South Dakota v. Wayfair, 17-494.

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