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 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.
According to data from SWFI’s Sovereign Wealth Fund Transaction Database, Asian sovereign funds invested US$ 6.05 billion directly into companies and assets in the information technology sector from Jan 2017 to November 22, 2017. In a comparable time frame from Jan 2016 to November 22, 2016, this same group of Asian sovereign funds directly invested US$ 5.02 billion in the sector. These are direct investments, not fund commitments or manager allocations.
Asian sovereign funds such as GIC Private Limited, Temasek Holdings and the Korea Investment Corporation (KIC) have demonstrated bullish signals to the technology community over other sectors. GIC and Temasek have also been major investors in the private side of deals, funding a wide range of tech startups, while providing financial firepower in buyout transactions.
Some notable direct tech investments in 2017 by sovereign funds include Meituan-Dianping, SoundCloud, Nets A/S, Visma AS, Turn, Inc. and Vantiv.
The Australian government has appointed Robert Priestley – current non-executive chair of J.P Morgan for Australia and New Zealand (ANZ) and a non-executive director of ASX – to serve on the Future Fund Board of Guardians for a five-year term from November 7, 2017. Priestley replaces former Morgan Stanley Australia chief executive Steven J. Harker.
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Associated British Ports (ABP) – operator of 21 major ports throughout the United Kingdom – has announced a reboot of its ABP Property division, complete with a new team of specialists in commercial development and logistics led by Huw Turner, in order to identify and develop strategically significant locations in its 2,372 acre land bank.
ABP is owned in large part by a consortium of pensions and sovereign funds, including the Canada Pension Plan Investment Board (CPPIB) at 33.88% ownership, OMERS at 30%, Singapore’s GIC Ventures Pte Ltd at 20.00% ownership, and the Kuwait Investment Authority at 10.00% ownership. Large institutional investors such as sovereign funds, pensions, and endowments have slowly increased allocation towards infrastructure over the past six years as an alternative to equities and bonds, according to asset allocation data from SWFI.
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