september 12 th , 2008
DESCRIPTION
WSG Annual Meeting, Munich 2008 Sovereign Wealth Fund Activity in Private Equity and Private Real Estate. September 12 th , 2008. Private Equity Intelligence Ltd., www.preqin.com. Sovereign Wealth Fund Activity in Private Equity and Private Real Estate. - PowerPoint PPT PresentationTRANSCRIPT
WSG Annual Meeting, Munich 2008
Sovereign Wealth Fund Activity in Private Equity and Private Real Estate
September 12th, 2008
Private Equity Intelligence Ltd., www.preqin.com
Sovereign Wealth Fund Activity in Private Equity and Private Real Estate
• SWF universe: small number of very large investors, with total assets growing rapidly
• Historically mostly conservative investors, modest allocations to alternative assets
– However, ‘natural’ investors in alternatives: long time horizon; no fixed liabilities to match
– Many now entering / increasing allocations– Huge growth potential: Asset Base X Allocations
• Potential recognised by fund managers:– Anchor positions in large funds– Tailored fund structures– Invest in management company– Direct / co-investments
• Behaving very much like other major investors
Largest SWF Investors
Some would include China’s State Administration of Foreign Exchange - $1,680 bn – as a SWF.
Investor Location
Estimated Funds under Management
$bnCumulative
$bnCumulative
%1 Abu Dhabi Investment Authority UAE 875 0.9 27%2 Government Pension Fund - Global Norway 362 1.2 38%3 Government of Singapore Inv Corp Singapore 330 1.6 48%4 Kuwait Investment Authority Kuwait 250 1.8 56%5 Brazil Sovereign Wealth Fund Brazil 200 2.0 62%6 China Investment Corporation China 200 2.2 68%7 Hong Kong Monetary Auth Inv Portf Hong Kong 186 2.4 74%8 Reserve Fund Russia 128 2.5 77%9 Temasek Holdings Singapore 115 2.6 81%
10 National Social Security Fund - China China 74 2.7 83%
Top 10 SWF's $2.7 tr 83%
Rest (43) $0.6 tr 17%
SWF’s Investing in Private Equity
Average LP Allocations to Private Equity
SWF current PE allocations not known with precision – estimate at 2 – 3% median
Patterns of SWF Investment in Private Equity
1. ‘Standard’ LP investments in Private Equity Funds– ADIA, GIC, Temasek, KIA, QIA, Alaska Permanent Fund,
etc.– Pure investment rationale, limited influence on GP’s
activities
2. ‘Anchor’ LP investments in Private Equity Funds– National Social Security Fund – China, Temasek
Holdings, CIC investment in dedicated JC Flowers fund– Anchor investor in fund to give investor bigger stake and
/ or act as catalyst for economic development purposes
Examples – ‘Standard’ LP Investment – Known ADIA Fund Investments
Examples – ‘Anchor’ LP investments in Private Equity Funds
Patterns of SWF Investment in Private Equity (contd.)
3. Investment in the management company itself, often in addition to investing in funds– CIC investment in Blackstone, Mubadalar investment in
Carlyle, ADIA stake in EFG-Hermes, etc.– Usually seen as a means of increasing exposure to
private equity; enhanced alignment between LP and GP; some influence
4. Direct investments in private companies– Istithmar World Capital
5. PIPE – Private Investment in Public Equity– ADIA investment in Citigroup
What If?
AUM $tr % allocation to PE $bn PE Investment Aggregate SWF % of 2008 Global PE Assets
2008 3.8 2.5% 95 5%
2010 5 4% 200 10%
2015 10 8% 800 40%
SWF’s Investing in Real Estate
Sovereign Wealth Fund Activity in Private Equity and Private Real Estate
• SWF universe: small number of very large investors, with total assets growing rapidly
• Historically mostly conservative investors, modest allocations to alternative assets
– However, ‘natural’ investors in alternatives: long time horizon; no fixed liabilities to match
– Many now entering / increasing allocations– Huge growth potential: Asset Base X Allocations
• Potential recognised by fund managers:– Anchor positions in large funds– Tailored fund structures– Invest in management company– Direct / co-investments
• Behaving very much like other major investors