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Sovereign Wealth Funds Pursue Institutional Real Estate

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Ever since the end of 2010, direct sovereign wealth fund transactions in institutional real estate have risen. Larger sovereign funds tend to take on direct investment opportunities, while public investors under US$ 30 billion in assets rely heavily on real estate funds. Sovereign wealth funds with renewed confidence are investing directly into core real estate, creating competition among pension funds, REITs and real estate fund managers. Quantitative easing has demolished interest rates, making real estate assets particularly attractive. Risk-averse sovereign funds favor major European and American cities in prime markets, especially when investing without real estate fund managers.

Sovereign wealth funds are enhancing allocation to real estate.

Traversing up the risk spectrum, some sovereign wealth entities like Qatari Diar have mandates to partake in co-investment developmental projects. CityCenterDC and Hudson Yards are two major developmental projects in the Eastern United States where Gulf government investors have allocated capital.

Direct Sovereign Wealth Fund Transactions – Real Estate – Billions in USD – Click to Enlarge Graphic
SWFTD_RE_June2013
Source: Sovereign Wealth Fund Transaction Database

According to data from the Sovereign Wealth Fund Transaction Database, 2012 was a noteworthy milestone for direct sovereign fund real estate transactions touching US$ 15.13 billion. Norway’s Government Pension Fund Global had a major impact on the figure, choosing to go direct versus allocating purely to commingled real estate funds.

2013 results are over US$ 5 billion so far.

US Becomes the Largest Crude Oil Producer in the World

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With the onset of fracking technology and a flood of capital entering the Texas energy market over the past decade, the United States is now the largest producer of crude oil. According to the U.S. Energy Information Administration, on September 12th, they revealed, “The United States likely surpassed Russia and Saudi Arabia to become the world’s largest crude oil producer earlier this year, based on preliminary estimates in EIA’s Short-Term Energy Outlook (STEO). In February, U.S. crude oil production exceeded that of Saudi Arabia for the first time in more than two decades. In June and August, the United States surpassed Russia in crude oil production for the first time since February 1999.”

Light sweet crude oil grades have rapidly expanded since 2011.

With two months remaining before U.S. sanctions go into effect against Iran, Iran’s crude exports are falling fast. European oil companies are exiting Tehran fearful of the repercussions of sanction violations, coupled with the country’s currency crisis. Iran’s influence over global oil prices have dwindled.

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Trump Goes Across the Political Aisle to Nominate Nellie Liang to Federal Reserve Board

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U.S. President Trump nominated Nellie Liang to the Federal Reserve Board of Governors. She is a long-time staff member of the Federal Reserve, joining in 1986 as a research economist. Liang must still be confirmed by the U.S. Senate pending the job post. She is a graduate of University of Notre Dame in 1979 and received her doctorate from the University of Maryland in 1986.

Ms. Liang is a registered Democrat.

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Ivanhoé Cambridge to Acquire Callahan Capital Properties

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Ivanhoé Cambridge, a unit of Caisse de dépôt et placement du Québec (CDPQ), signed a deal to acquire Callahan Capital Properties (CCP). Eastdil Secured advised on the transaction. CCP is Ivanhoé Cambridge’s investment partner of six years.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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