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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

SA FinMin: PIC CEO Plans to Resign

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Dr Dan Matjila, the Chief Executive Officer of the Public Investment Corporation (PIC) of South Africa, plans to resign according to South Africa’s finance ministry, which oversees the organization. The finance ministry commented that PIC’s board was dealing with Matjila’s intentions. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Goldman Sachs Sued by Abu Dhabi SWF Unit

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International Petroleum Investment Company (IPIC), which is now wrapped up into Abu Dhabi-based Mubadala Investment Company, is suing Goldman Sachs over its role in the 1MBD international corruption scandal. IPIC, through its unit Aabar Investments, was once an investment partner of 1Malaysia Development Berhad (IMDB). In the lawsuit, Aabar believes Goldman Sachs conspired with others to bribe both IPIC and Aabar Investment former executives. SWFI and other media outlets have written extensively on the matter.

In the fall, the U.S. Department of Justice (DOJ) already unsealed criminal charges against key players in the massive fraudulent scheme, while Malaysian government officials have jailed its former prime minister Najib Razak.

Lloyd Blankfein, the recent former CEO of Goldman Sachs, attended a 2009 meeting with Malaysian financier Jho Low (name: Low Taek Jho). According to various media sources, Blankfein is the unidentified Goldman executive who attended the 2009 meeting in New York in the U.S. court documents.

Goldman Sachs faces a plethora of lawsuits and regulatory probes stemming from its involvement in the 1MDB scandal.

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EXPORT DREAMS: American Reliance on World Oil at an Inflection Point

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Remember the days of experts talking about peak oil. The peak oil concept is the point in which the global petroleum production rate starts its inevitable historic decline. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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