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Top 10 Sovereign Wealth Fund Game-Changers of 2012

SWFI_logo_122012 proved to be a dynamic year for sovereign wealth funds in terms of policy decisions and investment strategies. Notably, a number of sovereign funds were created, especially in resource rich nations like Angola. Our staff has compiled a list of the top ten game-changers that will set the tone for sovereign wealth funds in 2013.

10.) Sovereign Wealth Bankers

As Western banks are smacked with a surplus of regulations, banks are not lending as much, especially to projects and certain lines of business. Financial institutions are concerned about illiquid investments; Basel III makes it more challenging. Banks are cautious about adding illiquid liabilities on their balance sheets. Sovereign wealth funds have the chance of becoming the new bankers for the next decade. Many are creating offshore entities to begin lending operations.

Sovereign wealth funds are involved in the real estate lending business. For example, Singapore’s GIC was a lender for the resorts that Paulson and other investors owned. When Paulson & Co lost the resorts, Singapore’s GIC purchased them in bankruptcy.

9.) Capital Competition, Spreads Across Continents

The world is competing for capital, more so than ever before. Russia has constructed state investment vehicles like the Russia-Direct Investment Fund (RDIF) to boost their economy and give foreign investors access to opportunities in Russia untouchable in years past. A number of nations in the Middle East are developing policies to attract long-term investments, such as co-investing in government energy infrastructure.

Capital-starved Europe continues to sell off public assets to amass capital to pay down unsustainable deficits. Even, China has removed the QFII barrier for sovereign wealth fund investors to provide long-term capital in their domestic security markets.

8.) Fertilizer, Food and Milk

The world now has around 7 billion people. Population growth, modifications in tastes and preferences, limited resources, and environmental issues are factors pushing up the price of food. Mega institutional investors want access to agriculture and land as an asset class.

Fertilizer is in demand, as farmlands need to increase productivity. The China Investment Corporation invested Uralkali OAO, a global potash producer that possesses five mines and seven ore-treatment mills located in Perm Territory in Russia. There has been sovereign wealth interest in dairy farms in New Zealand. Middle Eastern SWFs and other public pension funds have been purchasing agricultural land and food companies in Latin America.

7.) Investing in Financials in Developing Middle-Class Economies

Singapore’s Temasek Holdings purchased a stake in a November secondary public offering in Turkiye Halk Bankasi AS, a government-owned bank in Turkey. It is Turkey’s second largest state-owned bank by assets. In September 2012, the Government of Singapore Investment Corporation Private Limited was subscribing to a Hong Kong H-share private placement by China Pacific Insurance (Group) Co Ltd (CPIC).

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Turkey Wealth Fund Corrals Investors Toward Domestic Projects

The Turkey Wealth Fund is continuing talks with other global asset owners and financial institutions to lure capital toward projects and assets within the country. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Ardian Auctions Off €1 Billion in Infrastructure Assets to APG

French private equity giant Ardian has auctioned off an undisclosed stake in a portfolio of European infrastructure assets valued at €1 billion to Dutch asset owner manager APG Investments. APG, which first invested in the portfolio in 2006, plans on buying out partnership interests in the portfolio held by other investors. French multinational insurance firm AXA SA will retain its stake as a co-owner of the portfolio alongside APG, with Ardian staying on as asset manager and advisor. The transaction remains subject to regulatory approval.

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Tribal Council Approves Cherokee Nation Sovereign Wealth Fund Act

Tahlequah, Oklahoma-based Cherokee Nation Tribal Council approved the creation of the Cherokee Nation Sovereign Wealth Fund Act to establish a fund to ensure the continuation of tribal operations and the general welfare of tribal citizens.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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