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Sovereign Funds Ramp Up Healthcare Investments

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With the United States experiencing an economic recovery, the healthcare industry is expected to prosper as it remains a significant proportion of the country’s gross domestic product (GDP). Sovereign investors are increasing positions in health-related industries such as pharmaceuticals, genome analysis and diagnostic technologies, while large Canadian pension plans have been investing in specialty healthcare chains.


May 11, 2017 Correction, the earlier graph had billions, it should be millions.

Sovereign funds continue to tap their extensive deal network when it comes to identifying large-scale healthcare opportunities in the United States. Many of these sovereign funds, such as the Abu Dhabi Investment Authority (ADIA), are limited partners in private equity funds that target pharmaceuticals and healthcare companies. For example, in April, ADIA and Singapore’s GIC Private Limited acquired minority ownership interests in Pharmaceutical Product Development, LLC (PPD), a clinical research company based in North Carolina. The recapitalization deal scored PPD at an enterprise value of US$ 9.05 billion. In a much smaller investment transaction, Australia’s Future Fund participated in a US$ 200 million growth equity funding round into El Segundo, California-based Radiology Partners. Radiology Partners claims it’s the largest on-site physician-led radiology practice in the United States.

According to data from the Sovereign Wealth Fund Institute (SWFI), sovereign funds directly invested over US$ 6.2 billion into the global health care sector in 2016. This figure does count externally-managed funds or private fund vehicles. In 2015, wealth funds directly invested US$ 6.9 billion and in 2014 directly invested US$ 4.3 billion. In the final quarter of 2016, direct investments by sovereign investors into healthcare was buoyed by global equity markets.

Pharmaceuticals

Pharmaceuticals have always intrigued sovereign funds. For example, in mid-to-late 2016, Norway’s Government Pension Fund Global (GPFG), in the open market, invested well over US$ 100 million into Abbott Laboratories. In the summer of 2016, the Korea Investment Corporation (KIC) had partnered with CDC International Capital, the multi-asset class investment company of the Caisse des Dépôts Group to back Ethypharm, a specialty pharmaceuticals company focus on treating pain and addictions. Permanent funds such as the Alaska Permanent Fund Corporation invested in South San Francisco-based Denali Therapeutics Inc. in 2016. Denali Therapeutics is constructing a portfolio of therapeutics, focusing in areas such as the triggers or effectors of neurodegeneration. AFPC has a track record of backing emerging pharmaceutical companies such as Seattle-based Juno Therapeutics. All in all, the trend line shows that wealth fund capital is not backing away from the healthcare sector.

Funds and Ownership, KKR Partners with Shinhan Financial

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South Korean financial giant Shinhan Financial Group Co., Ltd. reached a preliminary agreement with KKR & Co. to form a series of global buyout funds that could raise up to 5 trillion KRW. KKR and Shinhan signed a Memorandum of Understanding (MoU) in Seoul in early October. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Norwegian Government Recommends SWF Remains at Central Bank

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There was speculation that Norway Government Pension Fund Global (GPFG) could be managed outside of Norges Bank. The Norwegian government shot down this idea and recommended Norway’s GPFG remain in Norges Bank. This recommendation came in the form of a white paper submitted to the Norwegian Parliament, Stortinget.

Norway’s Minister of Finance Siv Jensen, commented in a press release, “The Government proposes a new and modernised governance structure for Norges Bank. Moving forward, this new structure lays the foundations for the sound management of the central bank and of the GPFG.”

Some Central Bank Recommendations

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Invesco Buys OppenheimerFunds for $5.7 Billion

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Invesco Ltd. signed a deal to acquire OppenheimerFunds, Inc. from Massachusetts Mutual Life Insurance Company (MassMutual). In turn, MassMutual and the OppenheimerFunds employee shareholders will receive a combination of common and preferred equity consideration, and MassMutual will become a significant shareholder in Invesco, with an approximate 15.5% stake. This strategic transaction will bring Invesco’s total assets under management (AUM) to more than US$ 1.2 trillion. The transaction is expected to close in the second quarter of 2019, pending necessary regulatory and other third-party approvals. The transaction gives Invesco access to more third-party distribution platforms.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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