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Top 10 Sovereign Wealth Fund Game-Changers of 2011

sovereignwealth_transactionsIn general, 2011 was a tough year for sovereign investors. A major lack of public investor confidence combined with structural economic issues coming to roost depressed valuations in capital markets. Our staff has compiled a list of the top ten game-changers that will set the tone for sovereign wealth funds in 2012.

10.) Continual Low-Yield Environment – Pushing Allocation

Central banks and sovereign wealth funds are dealing with a low-yield fixed income environment. We saw a trend of the nearly full migration out of American MBS towards safe haven sovereign debt such as the United States, Germany, and the United Kingdom. Credit funds are generating major buzz. Bottom line – Liquidity – Safety – Flight

9.) Goldbug

Gold markets stayed liquid throughout the financial crisis.

Gold is up this year and it is seen mostly as an inflation hedge. Many sovereign investors have exposure to gold in ways such as funds, investing in gold mining companies, and derivatives. A few governments have actually purchased physical gold. The Qatar Investment Authority created a sovereign wealth enterprise to invest in gold, commodities, and other metals. Some investors see gold as comparable to a bond that never matures.

8.) Real Estate (Europe & U.S.)

Norway’s GPFG pulled the trigger in real estate. Granted they look expensive, core real estate in the United States and Europe are seen as a safe inflation hedge and cash flow generator. In 2012, we might see a more substantial move out of the “popular” markets such as London and Paris to secondary markets.

7.) Private Equity and the Sovereign Investor Relationship

Co-investment deals are increasing in frequency creating indirect competition for private equity firms. Private equity firm investing is a growing strategy among larger sovereign wealth funds and public pension funds. The secondary market is appealing to SWFs allocated in alternatives. More and more governments are creating joint venture country funds.

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SouthGobi’s CEO Arrested, CIC Struggles with Investment

The China Investment Corporation (CIC) has long struggled with its investments in coal assets, specifically in globally-listed coal miner SouthGobi Resources Ltd, which operates its flagship coal mine in Mongolia. In November 2009, CIC and SouthGobi Resources inked a convertible debenture deal. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Qatar Central Bank Deals with MSCI

MSCI, a stock index company whose benchmarks influence investor behavior, has tremendous indirect power impacting the stock markets of smaller economies. In 1988, MSCI released its emerging markets index, a now-widely-used benchmark for many institutional investors wanting access to growth markets. China and South Korea make up the majority of the benchmark, but smaller economies such as Poland, Chile and even Qatar make up other pieces of it.

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bcIMC Buys into Bottling Business with PAI in €1.623 Billion Takeover of Refresco

Dutch soft-drink bottler Refresco Group N.V. has agreed to a buyout offer for all 81.2 million of its shares from French private equity firm PAI Partners SAS (PAI) and Canadian pension manager British Columbia Investment Management Corporation (bcIMC) in exchange for €20 in cash per ordinary share for a total consideration of €1.623 billion. Refresco’s major shareholders, which includes 3i Group, and shareholding members of its boards, who represent 26.5% of outstanding shares, have said they stand behind the deal.

Refresco’s board rejected an initial offer from PAI in April 2017 of €1.4 billion, which they felt did not adequately capture the value added by their plans to bolster its presence in North America through the acquisition of Canadian bottler Cott TB, a deal that went through in July for US$ 1.25 billion.

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