- Government Fund Weekly News Roundup — SWFs Push Back On Management Fees
Government Fund Weekly News Roundup — SWFs Push Back On Management Fees
Bellagio Hotel, Las Vegas
In the news this week: Sovereign wealth funds reconsider
their relationships with asset managers. The Oman Investment
Fund participates as a cornerstone investor at a real estate
IPO in Singapore. And Norway withdraws more capital from the
Government Pension Fund Global.
Managing the Managers
Last year, the financial press was awash with stories about
how sovereign wealth funds were redeeming capital from their
asset managers in the wake of the oil price crash. While it is
true that some funds have been withdrawing money from external
firms, the reasons go deeper than the collapse in oil
The Sovereign Wealth Center’s 2015 annual report,
published this week, finds that sovereign
funds are becoming more discerning investors, keen to gain more
control over their assets. And as they in-source more of their
operations, they are demanding more from their external
partners: challenging managers over their performance records
and pushing back on fees.
The China Investment Corp. (CIC) is a good
example. Roslyn Zhang, who oversees fixed income and
absolute-return strategies at CIC, spoke at a hedge fund
conference at the Bellagio Hotel in Las Vegas this week
— and her comments epitomized sovereign wealth
funds’ increasingly assertive stance toward their
Zhang said she has been "disappointed" by the performance of
the fund’s hedge fund partners and wants to reallocate capital to more "skillful"
firms. Zhang added that a "herd mentality" had taken hold
in the hedge fund industry, making its traditional
two-and-twenty fee structures — in which managers
charge a fee of two percent of assets managed, as well as a 20
percent cut of profits — harder to justify.
"All kinds of strategies, they run different strategies, they
all have the same trade," Zhang said. "Should we pay 2 and 20
for treatment like this?"
New Zealand Superannuation Fund has also been shifting
its approach to external manager relationships. This week, NZ
Super sold small stakes in five real estate funds to Zug,
Switzerland-based private equity firm Partners Group.
In a statement, NZ Super's Head of Investments, Fiona
Mackenzie, said the move was consistent with the fund's ongoing
strategy of arranging "fewer, deeper relationships with
external managers." Rather than invest in a broad roster of
funds, NZ Super is looking to work more closely with its
partners to achieve specific strategic objectives.
OIF Acts as Cornerstone Investor at Real Estate IPO
Like NZ Super, the Oman Investment Fund (OIF) is shifting its
focus away from fund investments toward closer relationships
with management firms.
This week, OIF agreed to participate as a cornerstone investor
at the initial public offering (IPO) of Manulife U.S. Real
Estate Management (MUREM), the global real estate unit of
Toronto-based financial services company Manulife Financial
Corp. In buying a stake in MUREM — rather than simply
investing in one of its real estate funds — OIF will
gain more control over how its capital is allocated.
MUREM has started taking orders from retail investors for the
$470 million IPO in Singapore, in what will be the
city-state’s biggest equity fundraising in almost
two years. Manulife suspended a previous attempt at an IPO in
July last year, citing weak market conditions and reduced
Norway’s Government Increases SWF
According to the Norwegian government's revised 2016 budget,
issued on Wednesday, it will withdraw 84.2 billion kroner
($10.25 billion) from its sovereign wealth fund, Government Pension Fund Global (GPFG),
Although this figure is higher than 80 billion kroner
withdrawal the government projected in February, it represents
just 1.2 percent of the gargantuan fund’s total
assets under management, which stood at 7 trillion kroner as of
March 31, 2016. The government will use the withdrawal to
provide fiscal stimulus and stave off recession in an economy
battered by low oil prices.