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Why Sovereign Funds are Cold on Deutsche Bank

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Very few sovereign funds are heavily invested in Deutsche Bank stock. One can count Norway Government Pension Fund Global, but that sovereign fund is invested in all major European listed equities. The Qatar royal family through vehicles remains a top shareholder and HNA Group peaked up, holdings its shares of the German bank in a complex structure.

Post global financial crisis, Deutsche Bank recruited a bank veteran who had worked at Temasek Holdings – John Cryan – to try and turn the ship around dubbing a program called “Strategy 2020”. Unlike Credit Suisse and UBS, which had resilient private banking franchises to fall back on, Deutsche Bank was overly anchored in trading and investment banking revenues. Cryan’s cost-cutting measures involved selling off business units, assets, solving outstanding legal headaches and layoffs. In 2016, Deutsche Bank was at an inflection point as its stock dropped precipitously and the CoCos (contingent convertible capital instruments) payment scare story flooded financial media, after announcing its first full year loss since 2008. Sovereign funds, especially ones in the Middle East, have an aversion to invest in large Western financial institutions. Many sovereign funds got burned in the global financial crisis – one can recall the Abu Dhabi Investment Authority losing big in Citigroup. Sovereign funds would rather be the contrarian capital, picking up the pieces in broken down entities or cherry picking distressed assets from banks.

Armed with a new CEO, Christian Sewing, the bank’s stock got hammered in May in the equity markets, nearing a market capitalization equivalent to Twitter. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, June 21, 2018

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PSP Investments Nears Deal on Azelis

PSP Investments and EQT Partners (through fund EQT VIII) are in exclusive talks to acquire Belgium-based Azelis S.A. from funds managed by Apax Partners. Formed in 2001, Azelis is a specialty chemicals and food ingredients distributor. The transaction is subject to regulatory approvals.

Oxford Properties Wins Rights on Barangaroo Office Development

Melbourne-based Grocon Pty Ltd selected Oxford Properties, the real estate unit of OMERS, as a preferred partner for it’s a A$ 2 billion, 5.2-hectare Barangaroo Central project development. This is an office tower development. Oxford Properties essentially won the rights toward the project (rumored at a price of A$ 100 million), freeing the developer from a high-cost finance deal with Maxcap, a lender.

Investment Management Corporation of Ontario Selects Jean Michel as CIO

The Investment Management Corporation of Ontario named Jean Michel as chief investment officer. This role is effective July 3, 2018. Michel was executive vice president, advisory services to depositors and strategic analysis, at Caisse de Depot et Placement du Quebec (CDPQ).

Wil Warren Named President of Lexington Partners

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Large Public Asset Owners Commit to Goodman Brazil Logistics Partnership

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Canada Pension Plan Investment Board (CPPIB) unveiled plans to commit 500 million BRL (C$ 175 million) in equity for a 20% interest in the newly established Goodman Brazil Logistics Partnership to invest in prime logistics and industrial assets in the key gateway cities of São Paulo and Rio de Janeiro. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Mubadala Supports Two European Aquaculture Transactions

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Mubadala Investment Company is keen on growing exposure to agribusinesses whether in farming or aquaculture. With money from Mubadala and AMERRA Capital Management LLC, Andromeda Group acquired Nireus SA (at 74.34% stake) and Selonda SA at (79.62% stake), two European aquaculture companies that focus on sea bream and sea bass. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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