In the news this week: Singapore’s GIC
fastens its seatbelt for a turbulent post-Brexit ride.
Russia’s state-run development fund the Russian
Direct Investment Fund (RDIF) launches an eclectic shopping
spree. And troubled mining companies try to get on the good
side of their sovereign-fund investors.
Singapore's GIC Braces for Market Turbulence
While investors all over the world anxiously hedge their
portfolios against market volatility in the aftermath of the
U.K’s vote to leave the European Union —
known colloquially as 'Brexit’ —
Singapore's sovereign wealth fund GIC has been reassuring its
stakeholders that it’s
perfectly capable of weathering the storm. Lim Chow Kiat,
GIC’s deputy president and group chief investment
officer, released a statement this morning reiterating
GIC’s long-term stance and affirming, "What's most
important to us is that markets remain open." Lim made the
comments as global financial markets reeled as the final voting
tallies confirmed the heretofore unthinkable result: The U.K.
wants out of the E.U. The British government now has two years
to implement a divorce from its largest trading partner. GIC
has approximately $25 billion invested in the U.K., or 7
percent of its portfolio, according to Sovereign Wealth Center
estimates, making it one of the most exposed state investors
operating in the British Isles. In 2015, sovereign wealth funds
plowed $12.5 billion into foreign direct investments in the
U.K., making it the third largest target market (in dollars
allocated) for government funds after the U.S. (at $17.9
billion) and China (at $14.4 billion).
Pursued by a Bear: RDIF’s Jumble of
Here’s a head-scratcher for you: What do a
futuristic transport company, a French tableware maker and
Russian helicopter manufacturer all have in common?
They’ve all caught the eye of the Russian
Development Fund (RDIF).
Russia’s state-run development fund started making
at the end of last week when it announced no fewer than
five separate deals simultaneously. Alongside several unnamed
Middle Eastern SWFs, RDIF bought a 25 percent stake in
Moscow-based helicopter manufacturer Russian Helicopters for
$600 million. RDIF also invested in St. Petersburg-based
cereals producer AFG National Agro Holding with the help
as-yet-unidentified Middle Eastern funds. Next up?
RDIF’s new agreement with CDC International
Capital, a unit of Paris-based development fund Caisse des
Dépôts et Consignations, to support the global
expansion of French tableware manufacturer Arc International.
Lastly, RDIF made two healthcare investments, allocating
capital to St. Petersburg-based pharmaceuticals firm Geopharm
and signing an agreement with Chinese partners to finance a
project manufacturing robots for use in medical procedures.
Just in case that wasn’t enough news, RDIF also
inked a partnership with Italian construction group Impresa
Pizzarotti & C. and the municipal government of St.
Petersburg to invest in the design, construction, maintenance
and technical operation of a medical pavilion for St.
Petersburg's Municipal Hospital №40.
Another RDIF healthcare investment this week
participated in the Series B financing round for Los
Angeles-headquartered experimental transport company Hyperloop
One. The company’s technology uses pods tipped
with a compressor; pressurized air then levitates and
accelerates to pods to high speeds through connected tubes.
Although the project is currently only in the testing stage in
the Nevada desert, Moscow already has a keen eye on its own
Hyperloop transport system. RDIF’s investment was
announced as Hyperloop One and Moscow-based
construction-and-engineering conglomerate the Summa Group
partnered to launch a feasibility study on building a Hyperloop
system for Russia's capital.
Mining Firms’ Debts Leave SWFs Digging
Vancouver-based mining company SouthGobi Resources, which
operates coal mines in Mongolia,
is once again renegotiating a debt obligation to
China’s sovereign wealth fund, China
Investment Corp. (CIC). SouthGobi has been struggling with its
debts to CIC for some years: In 2014, the company raised $9
million through a private placement to meet its debts to CIC.
On May 30, SouthGobi deferred an interest obligation to CIC,
agreeing to repay $18.7 million by June 17. The deadline passed
without payment and the company is now trying to negotiate a
payment extension. Cash-strapped SouthGobi is struggling with
low coal prices and a slump in demand for the fossil fuel in
China, where nuclear and renewable electricity generation is
rapidly replacing coal-fired power stations as the government
seeks to assuage citizens’ disquiet over
widespread air pollution.
Meanwhile, Irish mining firm Kenmare Resources
released further details of its recent capital-raising
effort, which began in late April. Oman’s
sovereign wealth fund, the State General Reserve Fund of the
Sultanate of Oman (SGRF) — which is already
participating as a cornerstone investor — has now
agreed to commit $100 million via a subsidiary, SGRF Investor,
towards Kenmare’s fundraising. The company is
seeking to generate at least $275 million in new funds (up to a
maximum of $368 million) to reduce its debts and accrued
interest. In the event of Kenmare raising just the minimum,
SGRF’s $100 million investment would convert into
a 29.18 percent stake in the company on completion of the
capital restructuring. Should Kenmare raise the $368 million
maximum, SGRF’s holding would translate into a
stake of 24.3 percent.