Sovereign Wealth Funds Compete and Cooperate with Private Equity

November 29, 2013 by Loch Adamson

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In May 2013, Singapore’s GIC bought into Houston-based enterprise software vendor BMC Software along with U.S. private equity firms Bain Capital, Golden Gate Capital and Insight Venture Partners. The $6.9 billion deal, which closed in September, was the third-largest buyout of the year. Given that GIC, which manages almost $300 billion, is one of the world’s biggest and most experienced sovereign wealth funds, it doesn’t look out of place as a co-investor in the BMC bid. But this transaction shows that sovereign funds and private equity firms are investing in concert, despite potential rivalry between the two high-profile groups. GIC and its peers have beefed up in-house capacity over the past five years so they can make more allocations using their own staff. Sovereign wealth funds have much to gain from working with private equity. They’ve always liked the private equity model because it can help them achieve higher returns…

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