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Sovereign Wealth Centers on 3 Major Infrastructure Deals

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airportsSovereign wealth funds are honing in on some major infrastructure deals. The UK government’s stake sale in Eurostar has lured two cash-rich Asian sovereign wealth funds to the table. Eurostar, a high-speed rail operator, connects London and Paris through the Channel Tunnel as well as Brussels. The China Investment Corporation (CIC) and Singapore’s GIC Private Limited are looking to acquire a 40% share in Eurostar. The UK government hired UBS investment bankers to manage the sales process to find qualified buyers for the government’s 40% stake in Eurostar. The UK Treasury desires to reduce the country’s debt, by privatizing a number of state-owned assets. The last major asset that was privatized by the UK government was Royal Mail, which had sovereign funds such as Kuwait Investment Authority (KIA) and GIC Private Limited as major backers.

Being lumped into the real asset bucket, sovereign wealth funds and large Canadian pension investors like CPPIB and OMERS are lured by infrastructure’s investment characteristics.

Other prospective Eurostar bidders include 3i, a UK private equity firm, partnering with French life insurance Predica, a unit of Credit Agricole, on a joint bid. The Eurostar deal could raise £300 million. On the French side, the majority owner is French rail operator SNCF, which owns 55% of Eurostar. The Belgian government owns the remaining 5%. The SNCF may use its pre-emption purchase rights to block certain bidders, protracting the sales process.

Infrastructure is an almost perfect coda to the investment progression of an institutional investor: allocating to fixed income, hiring managers for external equities, then hiring consultants to find top quartile private equity fund, then taking a hard gander at real asset inclusion into the portfolio. Being lumped into the real asset bucket, sovereign wealth funds and large Canadian pension investors like CPPIB and OMERS are lured by infrastructure’s investment characteristics. These multigenerational institutional investors often seek investments that can be considered boring, predictable and produce long-term sustainable cash flows. Furthermore, a few of these public institutional investors don’t factor an exit price when it comes to acquiring an infrastructure asset – assuming they will hold the asset indefinitely or until the conclusion of the concession.

Toronto Airport Terminal

A bidding process is underway for a passenger terminal at Toronto’s Billy Bishop Airport. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Altitude Infrastructure Gets Financing on Haute-Garonne Network Project

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Altitude Infrastructure SAS inked a 25-year concession agreement and closed a debt financing package for the deployment and maintenance of an ultra-high-speed broadband network in Haute-Garonne. Haute-Garonne is a department in the south of France.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Guggenheim Partners Agrees to Acquire Millstein & Co.

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On July 11, 2018, Guggenheim Partners inked a deal to acquire New York-based Millstein & Co., L.P., an advisory firm formed by Jim Millstein. Millstein will become co-Chairman of Guggenheim’s securities business. Millstein & Co. will become part of Guggenheim Securities, the investment banking division of the company. Ronen Bojmel will lead the combined Guggenheim restructuring team.

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GIC Holds Steady, Maintains Cautious Investment Stance

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Singapore’s GIC Private Limited returned a 5-year return of 6.6% ended March 31, 2018. At March 2018, GIC had increased cash and nominal bonds up 2% to 37% of the total portfolio, while lowering exposure to developed market equities from 27% to 23%.

GIC CEO Lim Chow Kiat commented in his annual letter in the FY 2017-2018 report that, “In view of the high asset valuations, the increased risk of monetary policy tightening across different jurisdictions and the elevated uncertainty, we maintain a cautious investment stance. Nevertheless, we remain ready to take advantage of potential dislocations. The jump in market volatility experienced in early 2018 offered an indication of potentially bigger market turbulence and opportunities in the future.”

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