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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

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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