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Sovereign Wealth Centers on 3 Major Infrastructure Deals

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. ]

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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