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
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.
Since the beginning of the year, Abu Dhabi-based Mubadala Investment Company has been looking at owning the distressed Brazilian infrastructure company Invepar SA for quite some time. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
Knowlton Development Corporation (KDC) has made its latest acquisition with the purchase of Aromair Fine Fragrance Company Inc., a U.S. subsidiary of Aromair Group that specializes in air care products, from London-based Strategic Value Partners. The terms of the transaction, which was completed on November 8, were not disclosed. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
Norges Bank penned a letter to its Ministry of Finance recommending the removal of oil and gas stocks from the GPFG’s benchmark index. At the moment, oil and gas stocks make up roughly 6% of the wealth fund’s benchmark index, or just around 300 billion NOK. Norway’s wealth fund is a major holder of oil companies such as ExxonMobil, Chevron, BP, Total and Royal Dutch Shell. Oil and gas stocks were a major driver of positive equity returns in previous quarters.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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