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U.S. Pension Executives Ink Letters Concerning PE Alignment Issues

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marina_public_pensionsIn general, U.S. public pension funds more than sovereign wealth funds need private equity to help reach their annual target returns. This give-take relationship manifests across America, even when partner alignment issues arise. What has taken center stage is when private equity firms take monitor fees and transaction fees on failing portfolio companies.

The debt binge left a nasty hangover for many pre-2007 private equity funds. Side effects include poor fund performance, languishing portfolio companies and unemployed workers. Emboldened asset owners – some of the larger U.S. pensions are under fire from their support base, public sector unions, in what seems to be private equity firms making money from fees other than turning around actual portfolio companies.

Oregon Public Employees’ Retirement Fund – History with TPG Capital

Vintage Year Fund Name Capital Commitment (Millions USD) Total Value Multiple
1994 TPG Partners I 50 3.66x
1997 TPG Partners II 300 1.77x
2000 TPG Partners III 300 2.47x
2003 TPG Partners IV 300 1.9x
2006 TPG Partners V 300 0.97x
2008 TPG Partners VI 750 1.22x
2008 Apollo Investment Fund VII 400 1.76x

Date: March 31, 2013, Oregon Public Employees’ Retirement Fund

Take for example, Caesars Entertainment Corporation, which TPG Capital LP and Apollo Global Management LLC took private with investor money, mostly public funds. The casino operator became saddled with debt affecting the financial health of the balance sheet. Coupled with top-line revenue shortfalls due to losses in gambling revenues, their investment faltered.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, September 21, 2018

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U.S. Public Becomes More Aware that Gmail Scans Emails

Alphabet is a major stock holding for sovereign wealth funds and large pensions. Search giant Google is under fire for allowing third-party partners and companies, like Return Path Inc and other advertisers, to share data from Gmail accounts. Many experts and tech observers already knew this, but more people in the public are becoming aware of Google’s practices when it comes to privacy. Google disclosed in a letter to U.S. lawmakers this finding. The Wall Street Journal reported that in some instances, app companies were able to read people’s emails in order to improve their algorithms. In 2017, Google said they would stop scanning all of one’s Gmail messages for the goal of personalized ads.

GPIF Infrastructure Exposure Almost Reached 200 Billion Yen in March 2018

Japan Government Pension Investment Fund’s (GPIF) exposure to infrastructure real estate was 196.8 billion JPY at the end of March 2018. At that period, 57% of the exposure was to the UK, 15% was to Australia, 15% to Sweden, 10% to Spain and 3% to Finland. 21% of GPIF’s infrastructure portfolio was linked to airports versus 27% to ports.

AIMCo-backed sPower Closes $498.7 Million Bond Deal

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Iceland Contemplates a Sovereign Wealth Fund

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The Government of Iceland is looking to possibly form a sovereign wealth fund to stabilize the country from unforeseen shocks to the national economy. The Iceland government released a statement saying, “The state’s contributions to the Fund will be equivalent to new revenues from publicly owned power production companies which are expected to accrue in the coming years.”

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CBRE Global Wins First GPIF Global Real Estate Mandate

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Japan Government Pension Investment Fund (GPIF) awarded its first global real estate mandate by hiring CBRE Global Investment Partners Limited. This is a global core real estate fund-of-funds separate account. Overseeing this mandate as a gatekeeper is Asset Management One Co., Ltd., which is a unit of Mizuho Financial Group. This RFP was launched in April 2017.

CBRE Global Investment Partners is the multi-manager arm of CBRE Global Investors.

In addition, on August 8, 2018, GPIF hired two custodians for short-term investments. These custodians are Trust & Custody Services Bank, Ltd and The Master Trust Bank of Japan, Ltd.

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