The annual report for the Abu Dhabi Investment Authority is out. Want to know how to invest like a sovereign wealth fund?
Read on, but anyone interested in actual numbers best brace for disappointment. Read more
China’s main sovereign wealth fund will invest $1bn with its Russian counterpart, giving the Russian Direct Investment Fund its first capital commitment since it was established in June, reports the FT. The agreement was signed in Beijing on Tuesday at a meeting between Wen Jiabao, Chinese premier, and the Russian prime minister Vladimir Putin, who is in China for his first overseas visit since announcing his intention to reclaim the Russian presidency next year. China Investment Corp and RDIF will both contribute $1bn to a new Russia-China Investment Fund, which is also hoping to raise an additional $2bn from other Chinese investors.
From our field research, it would appear that the Gulf States assumed that breaking with the past by adopting the SWF institution was preferable to remaking their inherited institutions. By this logic, the SWF is symbolic of a commitment among the Gulf states to adopt the instruments of advanced financial management to facilitate the modernisation of what were otherwise semi-feudal states. The SWF is more than just a tool for managing resource wealth; it is a step towards modernity and economic development…
According to official literature and formal communications, the process of SWF adoption appears to be going extremely well. On the surface, these funds are operating like any other globally-oriented financial institution… Upon deeper examination, interviews with current and former financial market-oriented employees at Gulf States’ SWFs have identified a variety of problems with these official characterizations.
The Gulf Cooperation Council plans to set up a fund worth more than $10 billion, Kuwait’s foreign minister said, to help the rulers of Bahrain and Oman appease popular protest movements.
Mubadala Development, an investment arm of the Abu Dhabi government, is increasing its stake in Carlyle, the US private equity group, in a $500m investment that will also see it take on convertible subordinated notes, reports the FT. The deal highlights Carlyle’s search for strategic investors as it prepares for an initial public offering. Other big private equity firms, such as TPG, are considering similar approaches and have been in talks with sovereign wealth funds in the Middle East and Asia. Both Carlyle and Apollo Management, which is also planning a New York listing, have sold stakes in themselves to Calpers, the Californian pension fund. Carlyle’s latest deal with Mubadala follows an initial $1.35bn investment in 2007, in which the Abu Dhabi fund took a 7.5% stake.
ACS of Spain on Wednesday sweetened its offer for Hochtief, hours after the German construction company formally rejected what it had described as a hostile, lowball bid to gradually take control, reports the FT. Spain’s biggest engineering group said it would offer nine ACS shares for every five in Hochtief, instead of its initial eight-for-five offer announced in September. The move came as Herbert Lütkestratkötter, Hochtief’s CEO, reversed his refusal to meet ACS and said talks would commence soon. ACS’s revised bid followed Hochtief’s deal last week to sell 10% of new equity to a Qatari investment fund. The WSJ notes that already, the bid is testing Germany’s tolerance for foreign acquisitions in key industries.
Aabar, one of oil-rich Abu Dhabi’s most active investment vehicles, has sold its stake in Banco Santander’s Brazilian unit, as it seeks investments in European infrastructure, western telecoms companies and agricultural assets. Khadem al-Qubaisi, chairman of the state-controlled Aabar, told the FT the fund was considering two European infrastructure investments, each valued between €500m ($685m) and €1bn, and a ‘small stake’ in a blue-chip telecoms company in Europe or the US. He also disclosed that Aabar’s parent company, International Petroleum Investment Co, considered buying up to 10% of BP after an approach by Tony Hayward, then chief executive, following the UK oil major’s Gulf spill disaster. But IPIC backed off when BP said would sell shares in the open market.
This is – in a way - yet another of those posts commemorating the fall of Lehman Brothers, two years ago to the day.
Then again — the post-Lehman sovereign wealth fund really has become something to behold, given the past two years of change. Read more
Eurozone bond markets gained a significant boost after one of the world’s biggest investors stepped up purchases in the second quarter of debt of the troubled peripheral economies of Greece, Portugal and Ireland, reports the FT. The move by Norway’s sovereign wealth fund, the world’s second-biggest SWF with $450bn of assets under management, followed a volatile week for eurozone markets. But analysts warned that the bond markets of the weakest economies were still vulnerable amid continuing worries that one or more will default.
Morgan Stanley’s word of the week in China has to be “irony”, as news emerged late on Tuesday that the US Federal Reserve has given the go-ahead for China Investment Corp, the country’s main sovereign wealth fund, to buy up to 10 per cent of voting shares in the US bank.
The sovereign wealth funds of China and South Korea are set to lead a $900m investment in a top US producer of shale gas, becoming the latest Asia-based groups to focus on the sector, reports the FT. CIC and Korea Investment Corp are in advanced talks to join a consortium planning to acquire convertible preferred stock in New York-listed Chesapeake Energy. The talks follow last week’s news that Singapore’s Temasek and Chinese buy-out firm Hopu had acquired $600m of Chesapeake’s convertible preferred stock.
Carlyle, the US-based private equity group, has poached Eric Kump, head of Dubai International Capital’s European private equity team, leaving the sovereign wealth fund with a troubled portfolio and lacking funds for new deals, the FT reports. Mr Kump will on Tuesday be unveiled by Carlyle as a new managing director in its European buy-out team, only two years after the 39-year-old was hired by DIC.
India is facing demands from the local state-owned oil industry to create the country’s first sovereign wealth fund to compete with China in the race to secure global energy assets, according to government and industry officials. Elsewhere the Opec oil cartel on Wednesday kept its production quotas unchanged, as ministers flipped from worrying about oil prices falling too far to becoming wary of them rising too high.
For a prime example of investor chutzpah, look no further than China Investment Corp, the country’s mega sovereign wealth fund, which has just done a deal with Apax to invest €685m (£599m) in the UK private equity group’s €11.2bn buy-out fund.
Even after heavy domestic criticism – and some international derision – for spending $3bn two years ago to acquire 10 per cent of Blackstone just before shares in the US buy-out group tanked – CIC has come roaring back with a big appetite for big deals. This after sitting on the sidelines for most of last year with about 90 per cent of its available funds in cash. Read more
Back in December, Thai prime minister Abhisit Vejjajiva told attendees at a conference in Bangkok that the country’s central bank has been considering setting up a sovereign wealth fund.
China Investment Corp, the Chinese sovereign wealth fund, is expected to receive a fresh injection of capital from the country’s foreign exchange reserves in the coming months, according to government officials and other sources. While a final decision has yet to be made, CIC is said to be likely receive a similar amount to the initial $200bn it was given on its establishment in 2007.
Built on the oil revenue that’s transformed Norway into one of the richest and best places to live on the planet, the fund lost 14.5 percent of its value through September. The third quarter was the worst in its 18-year history.
- reports Bloomberg, on the performance of Norway’s $300bn sovereign wealth fund. We’d be curious to know just how other SWFs were faring. A quick check back at Paul Kedrosky’s SWF loss live widget from way way back in March reveals a host of nasty numbers across big-name investments. A loss of 80 per cent or more seems de rigueur.
Nicolas Sarkozy said France would set up a new “strategic investment fund” to stop French companies from falling into the hands of foreign “predators”. The new fund will be operated by Caisse des Dépôts et Consignations — the country’s existing sovereign wealth fund – but would be “more active, more offensive, more mobile”, France’s President said yesterday. Seperately, European Commission President José Manuel Barroso called for an “unprecedented” exercise in global co-operation to deal with the current international financial crisis.