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Sovereign Funds Went Big in the Final Quarter of 2016

Despite a succession of political shockwaves, sovereign wealth funds went back to plowing money into direct investments in the fourth quarter of 2016, investing US$ 60.31 billion versus US$ 30.43 billion in 4Q 2015, according to data from the Sovereign Wealth Fund Institute (SWFI). The SWFI transaction database tracks direct transactions made by sovereign funds, pensions and other public funds. Sovereign investors rallied in listed equities in the final quarter of 2016, with the United States far ahead.

Direct Transactions by Sovereign Wealth Funds – Billions USD

Source: Sovereign Wealth Fund Transaction Database, Extracted April 17, 2017

Source: Sovereign Wealth Fund Transaction Database, Extracted April 17, 2017

Sovereign investors rallied in listed equities in the final quarter of 2016, with the United States far ahead.

Energy and Real Estate

The energy sector contributed a whopping US$ 12.3 billion in the fourth quarter of 2016 by wealth fund direct investments. Next, the real estate sector represented US$ 11.4 billion in direct investments by sovereign funds in the fourth quarter of 2016. Some major real estate deals boosted the total, such as the China Investment Corporation (CIC) acquiring Canada Pension Plan Investment Board’s (CPPIB) 45% ownership stake in 1221 Avenue of the Americas, a Manhattan office property. The sales price for the stake was US$ 1.03 billion, with net proceeds to CPPIB of approximately US$ 950 million before closing adjustments.

Betting on Banks

Arguably one of the central reasons why global institutional investors bet large on banks is the probable rise of U.S. interest rates, coupled with possible reforms on the U.S. Dodd–Frank Wall Street Reform and Consumer Protection Act. The financial sector was a significant contributor to the total amount of direct wealth fund transactions in the ending quarter. Direct investments in the financial sector by sovereign funds surged to US$ 6.56 billion in the fourth quarter of 2016 compared to US$ 3.49 billion in the third quarter of 2016. Some notable transactions include large purchases of positions of listed equities in Comerica and Aviva.

SWFI First Read, December 15, 2017

Gaw Capital Sells Cross Tower Shanghai Building

Hong Kong-based Gaw Capital Partners has agreed to sell the Cross Tower, a 24-storey commercial building in Shanghai, to World Union Investment Management, for 2.66 billion RMB (US$ 402 million). The tower is located in the Huangpu district.

RDIF Portfolio Company Geopharm Plans to Increase Insulin Production

Russia-based Geopharm is a portfolio company of the Russian Direct Investment Fund (RDIF). Geopharm signed a special investment agreement with the City of St. Petersburg, Russia. Geopharm plans to invest more than 3.3 billion rubles in building a complex to meet insulin production demands.

Norway’s KLP to Exclude Companies with Oil Sands Extraction via Revenue Threshold

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NZ Super Resumes Government Contributions

The New Zealand Superannuation Fund (NZ Super) has resumed receiving contributions from the New Zealand government in the face of rising obligations as an increasing proportion of the country’s population approaches retirement. According to a statement released by the fund’s managing Board of Guardians, the government plans on investing US$ 5.3 billion into NZ Super between now and June of 2022, with the first payment scheduled for December 15, 2017.

Policymakers believe the resumption of government contributions, which were halted in July of 2009, is expected to ease the burden on the country’s current taxpayers and future generations. Withdrawals from NZ Super are expected to peak in 2078, at which point the fund will be covering 12.8% of New Zealand’s pension obligations. The new wave of contributions will initially be invested in passive, low cost equity and bond investments, according to Catherine Savage, Chair of the Guardians.

Recent Performance & Leadership Change

NZ Super has enjoyed one of its best annual performances since its founding in 2001, with a reported return of 20.7% before tax for a 12-month trailing period ended June 30, 2017, up 5 billion NZD (US$ 3.6 billion) compared to 2016. NZ Super generated 21.85% annual return in its global equities, developed market portfolio, according to its 2017 annual report.

NZ Super faces a changing of leadership in the coming year with the exit of chief executive Adrian Orr, who will leave the Fund officially in March of 2018 to serve a five-year term as Governor of the Reserve Bank of New Zealand. Mr. Orr has earned a spot numerous times in the Sovereign Wealth Fund Institute’s Public Investor 100 annual ranking over the years, most recently in 2017 at #3.

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iZettle Raises US$ 47 Million in Series E, Prepares for 2018 Listing

Card transaction platform iZettle AB has raised another US$ 47 million in Series E funding, this time with new backing from Sweden’s AP4 and early-stage venture capital firm Dawn Capital. Previous investors in the Stockholm-based payments business include American Express, MasterCard, Intel, and Spain’s Santander Group. With US$ 235 million in equity to date, iZettle is quickly approaching an estimated valuation of US$ 1 billion.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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