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SWFI First Read, March 11, 2019



IT’S HAPPENING: Deutsche Bank and Commerzbank Agreed to Informal Talks

Key executives at Deutsche Bank AG and rival Commerzbank AG have agreed to hold informal talks regarding a potential merger. This could be the most likely endgame scenario for two of Germany’s largest listed banks.

Docquity Raises Series B Round

Singapore-based Docquity raised US$ 11 million in a Series B round that was led by Japan-based Itochu Corporation and Singapore Press Holdings. Docquity is a social media network aimed at medical professionals. Formed in 2015, Docquity raised its Series A round in July 2018 – that round was led by Genesia Ventures.

Hana Alternative Asset Management Backs Echelon Seaport Project

Los Angeles-based developer Cottonwood Management received a US$ 300 million mezzanine tranche for the development of Echelon Seaport, a three-tower mixed-use US$ 950 million complex in the Seaport district of Boston. Hana Alternative Asset Management Co. Ltd. provided US$ 50 million of the US$ 300 million in mezzanine financing. Hana Alternative Asset Management then farmed out the US$ 50 million debt deal to ABL Life Insurance Co. Ltd. and Heungkuk Life Insurance Co. Ltd.

In addition, Hana Alternative Asset Management named Hee-seok Kim as Chief Executive Officer. Hee-seok Kim is the former global investment head of the National Pension Service of Korea (NPS).

Reliance Jio Infocomm Seeks Out Investors

Reliance Jio Infocomm, which owns a pan-Indian optic fiber network, plans to monetize its assets. The company hired three investment banks to reach out to investors. These banks are Citigroup, Moelis, and ICICI Securities.

Reliance Nippon Life Asset Management Up for Sale

Anil Ambani-controlled Reliance Capital initiated talks with potential buyers to sell its 42.88% stake in Reliance Nippon Life Asset Management. Reliance Nippon Life Asset Management runs the mutual fund business of Reliance Capital.

Yale’s Love Affair with Venture Capital Overshadows Other Asset Classes



Yale’s US$ 29.4 endowment has earned staggering returns of 7.4% per year over the past 10 years, racing past its benchmark and adding US$ 6.5 billion to the fund. In the year ending June 30 2018, Yale earned 12.3%. Yale’s success is due to active management, and an unconventional approach to investing, at least from the perspective of a university endowment. Yale is overweight venture capital and real estate, which has paid off handsomely over the last 10 years. Many properties throughout the country have returned to, or surpassed, their pre bubble-era prices. Yale has also actively participated in leveraged buyouts. Yale is underweight U.S. equities and its fixed income holdings are low, as is cash on hand.

Yale’s annual report notes, “The heavy allocation to nontraditional asset classes stems from their return potential and diversifying power.” Perhaps earning their Princeton Review # 3 ranking in 2018, Yale’s commitment to thinking outside the box is responsible for their recent investment philosophy: “Alternative assets, by their very nature, tend to be less efficiently priced than traditional marketable securities, providing an opportunity to exploit market inefficiencies through active management.” Alternative investments have been gaining steam among major players in the global markets, including US$ 6.5 trillion investment manager Blackrock Inc. Blackrock plans to open a new European alternative asset headquarters in Paris.

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eFront Finds a Home at BlackRock



BlackRock Inc. entered into an exclusive agreement to acquire eFront, a French software provider of risk management products for the alternative investments industry. Asset management firms are worried about margins and have increasingly acquired service provider firms to buffer revenues. BlackRock sells the Aladdin (Asset, Liability, Debt and Derivative Investment Network) platform, which is one of the largest portfolio operating systems in the investor community. BlackRock’s offer is to pay US$ 1.3 billion in cash for 100% of the equity of eFront. The seller of eFront is private equity firm Bridgepoint.

Bridgepoint acquired eFront in January 2015 in a transaction totalling approximately €300 million. In 2006 eFront listed on the Alternext Paris market of NYSE Euronext (ALEFT) and was taken private in 2011 by Francisco Partners. eFront was founded in 1999 by Olivier Dellenbach.

According to the press release, “The combination of eFront with Aladdin, BlackRock’s investment operating platform used by more than 225 institutions around the world, will set a new standard in investment and risk management technology.”

BlackRock is funding the eFront acquisition through a combination of existing corporate liquidity and debt.

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CDPQ Supports Domestic AI Fund



Institutional investor Caisse de dépôt et placement du Québec (CDPQ), which works primarily on behalf of pension funds and insurance plans, is opening a new fund dedicated to Québec businesses that specialize in AI, or artificial intelligence. Available funds are slated at US$ 250 million for the enterprise. The commercialization of AI seems to be a natural fit for CDPQ, “Since Montréal is emerging as a global beacon of excellence in artificial intelligence, we need to enhance our offering and ramp up the financial and development support we provide AI businesses through the various stages of their growth,” according to Executive Vice President of Quebec and Global Strategy, Charles Émond. Émond aspires to see AI spread throughout “all sectors of our economy.” The AI fund will be run by CDPQ’s Venture Capital and Technology team. They will look for companies that are already doing well in the sector.

Another program is targeting early stage organizations. Mila Quebec AI Institute, a research and development organization founded by three universities, is building a new complex to help facilitate CDPQ’s goals. The new complex will house early-stage AI companies. CDPQ is especially interested in companies that can accelerate their growth and enter markets quickly, providing speedy returns. There is a social component, whereby companies will be required to contribute to Mila. Michael Sabia, President and Chief Executive Officer of CDPQ, noted, “With this partnership, la Caisse is pursuing its commitment to helping Québec businesses in this new economy thrive and expand.”

Keywords: Caisse de depot et placement du Quebec

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