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The Current Relationship Status of Asset Owners and Bankers

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Michael Maduell, President of the Sovereign Wealth Fund Institute

Michael Maduell, President of the Sovereign Wealth Fund Institute

Headline after headline, asset owners such as OMERS and Temasek Holdings are displacing private equity firms, taking majority positions in companies and real estate assets. Our Sovereign Wealth Fund Transaction Database shows a mounting upward trend from 2005 onward of public institutional investors going direct. 2015 has been a bumper year for direct investing.

On the scale of asset owner buying power, wealth funds and Canadian pensions will be hard to top this year. Looking deeper into the deal process, asset owners like CPPIB, Abu Dhabi Investment Authority and China Investment Corporation are gradually relying less on investment bankers. Often times, these institutional giants share investment ideas through informal networks and strategic alliances. Many wealth funds and pensions attend our conferences to share notes with peers and meet directly with asset managers. Furthermore, wealth funds and mega pensions tap ideas from the private equity community – typically asset owners agree to commit substantial sums of money to get in on “unique” deals from return generators like KKR, Ares Capital and the Blackstone’s of the world.

Many wealth funds and pensions attend our conferences to share notes with peers and meet directly with asset managers.

Under Pressure

Investment bankers, are still incredibly relevant in deal opportunities from the corporate side of the table, but they no longer hold most of the cards in sourcing potential investments. What has complicated the job of bankers is their market position. Globally, investment banking units are under pressure. European investment banks have suffered more compared to their U.S. colleagues. The Eurozone has proven to be dangerous ground as Credit Suisse and Deutsche Bank continue to make drastic cuts in headcount in various departments.

Once key profit centers, many banking units have returned lower profits and even worse, increased regulatory scrutiny for the parent company. Banks like Barclays, UBS and Deutsche Bank have had their reputations further damaged by the foreign exchange manipulation scandals.

Goldman Sachs

This issue of the Sovereign Wealth Quarterly hones in on Goldman Sachs – an investment bank that has dodged many scandals (besides the major one with Libyan Investment Authority) and has generated substantial profit figures in banking the last few quarters. In April, the bank’s IB division posted net revenue of US$ 1.9 billion – its best quarterly result since 2007.

Goldman Sachs, which has access to many U.S. and European technology companies, has been kicking deal opportunities over to sovereign funds. For example, an Abu Dhabi sovereign wealth fund ended up investing in music streaming service Spotify. Spotify had hired Goldman Sachs to find institutional investors in a huge fundraising round to help the company face off against Apple. Apple recently launched a music streaming service – Apple Music.

Sovereign wealth funds and pensions hold the keys to the vault; however, the need for advisers whether crafty investment bankers or savvy consultants will remain necessary for the time being.

The views in this article are expressed by Michael Maduell.
Michael Maduell is President of the Sovereign Wealth Fund Institute.
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Follow the Money – Episode 48

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This long-form podcast was recorded on December 11, 2018. Michael Maduell dissects the latest geopolitical trends that can impact institutional investors such as pensions, sovereign wealth funds, and endowments. Maduell lends his opinion on the lawsuit of Neiman Marcus and bumps in the road for augmented reality.

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CONTENTS
1:15 Huawei, Canada, Brexit, and Macron Headache
6:30 Sovereign Wealth Fund Asset Allocation
9:58 India Gets a New Central Bank Governor
13:26 Pensions Go Bust on U.S. Retailers
17:04 Augmented Reality and Sovereign Funds
22:00 Former CalPERS CIO Goes to Morgan Stanley Investment Management
24:30 Oman Investment Fund Goes on Defense in Public Markets
25:00 Japanese Scandals and Opportunities

EPISODE 48

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The views in this media are expressed by Michael Maduell and other participants and are not reflective of the Sovereign Wealth Fund Institute (SWFI).

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Danica Pensions Sells Danica Pension Sweden

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Danica Pension sold Danske Pension Försikringsaktiebolag (publ) (also known as Danica Pension Sweden) to a group of investors for around 2.6 billion SEK. Danica Pension is part of Danske Bank A/S. Of the total amount, 2.3 billion SEK is being paid in cash, while the rest is in the form of a debt instrument from Danica Pension.

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Stephen Gilmore Named CIO of New Zealand Superannuation Fund

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The Guardians of New Zealand Superannuation appointed Stephen Gilmore as chief investment officer. Previously, Gilmore was Chief Investment Strategist at Australia’s Future Fund – holding a series of positions between 2009 and 2018. In a press release, NZSF CEO Matt Whineray said, “We are delighted to have been able to attract a global investment leader of Stephen’s calibre to the Guardians. The NZ Super Fund is expected to grow strongly over the next few years and Stephen’s experience at the Future Fund, one of the world’s leading sovereign wealth funds, will be invaluable.”

Gilmore’s appointment is effective late February 2019.

Gilmore also had roles at Morgan Stanley, Banque AIG, the International Monetary Fund (IMF), and Chase Manhattan Bank.

Image photo is provided courtesy of the New Zealand Superannuation Fund.

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