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SWFI Trend Report: Sovereign Wealth Fund Direct Infrastructure Investments, 2003-2014

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sovereign wealth fundSovereign wealth funds surpassed US$ 7 trillion in assets before the end of 2014. These institutional investors typically have unique liabilities compared to public pensions. Many of the large sovereign wealth funds, funds with over US$ 30 billion in assets, seek long-term investments. When it comes to infrastructure, sovereign wealth funds pursue accommodating investment regimes, low political risk, assurances from government and opportunities to earn stable financial returns.

According to our research, Asia and Europe top the list as the largest recipients of direct infrastructure investment by sovereign wealth funds, followed by Australia and New Zealand. The Americas ranks dead last, even behind Africa. Breaking apart the Americas, South America has few large direct infrastructure investments by sovereign funds, the bulk going to North America. Notable infrastructure investments by sovereign wealth funds include investment in natural gas infrastructure – sovereign wealth funds’ private infrastructure investment in Cheniere Energy’s Export LNG Plant. Sovereign wealth funds also tend to favor investing in airports in Western Europe and transportation infrastructure in Australia. The vast majority of sovereign wealth funds investing in direct infrastructure prefer energy, transportation and telecommunication infrastructure.

“North America ranks behind Asia and Europe when it comes to sovereign wealth funds directly investing in infrastructure. Clearly, there is an opportunity for wealth funds to contribute to U.S. infrastructure,” said Michael Maduell, President of the SWFI in regard to the report.

It is important to note, however, that for this report SWFI looked at direct transactions into infrastructure, not fund commitments into infrastructure funds that invest in those regions. The importance of the allocation to infrastructure funds should not be discounted. Many sovereign wealth funds invest in infrastructure funds, especially investors with smaller balance sheets, to access opportunities with lower committed capital amounts, greater liquidity and lower idiosyncratic risk.

Outlook on Direct Infrastructure by Sovereign Wealth Funds

Infrastructure is key asset class for sovereign wealth funds, representing exposure to real assets. The long-term characteristics of infrastructure, combined with the attributes and time horizon of large sovereign wealth funds, make allocating capital attractive. The big hurdles for 2015 are the available opportunities in infrastructure, political risk and fair prices of developed assets.

This brief SWFI trend report charts and graphs direct infrastructure investments made by sovereign wealth funds.

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Source: SWFI – Sovereign Wealth Fund Transaction Database -www.swftransaction.com, February 24, 2015

Mergermarket Gets Ready to be Sold

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Private equity firm BC Partners hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to advise on the sales of Acuris. Acuris is a collection of financial news and data sites, which includes Mergermarket, Dealreporter, and Debtwire. In 2017, BC Partners sold around a 30% stake in GIC Private Limited.

Before the rebranding to Acuris, Mergermarket was part of The Financial Times Group until 2013 when it was sold off to BC Partners.

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Why Japan Post Sees Promise in Aflac

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Aflac Inc. is an American insurance company founded in 1955. The company is the biggest provider of supplemental insurance in the United States. Aflac also has major operations in Japan.

In December 2018, Japan Post Holdings (JPHLF) signaled it was spending US$ 2.64 billion for a 7-8 % stake in Aflac. The goal is that, in four years time, Aflac will become an affiliate of Japan Post. Japan Post hopes to accomplish this by becoming the largest voting shareholder of the company. The world’s 13th largest company, with 400,000 employees, Japan Post needs to expand to chase further growth, mainly because Japan Post expects the postal business to decline. Diversification is seen as the optimal route to long term stability for the holding company. Japan’s economy is worrying. Japan’s aging population means that many insurance companies are facing a shrinking customer base, Japan Post settled on a plan to expand overseas.

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RDIF and Development Agency of Serbia Agree to Explore Joint Investments

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The Russian Direct Investment Fund (RDIF) and the Development Agency of Serbia, also known as Razvojna agencija Srbije, reached an agreement to work together to identify attractive investment projects to strengthen bilateral economic ties and increase investment flows between Russia and Serbia. Russian capital and businesses are keen on investing in Serbia.

In addition, the two countries signed an agreement to cooperate on civil nuclear energy, according to state-owned Russian reactor builder Rosatom (Rosatom State Nuclear Energy Corporation). Rosatom continues to expand it business of nuclear cooperation deals in a wide number of countries.

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