Building Bridges: Sovereign Wealth Fund Partnerships in Real Estate and Infrastructure Development Projects

March 17, 2014 by Loch Adamson

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MANY SOVEREIGN WEALTH FUNDS are changing the way they invest. Instead of simply awarding mandates or committing to commingled investment vehicles, they’re creating strategic partnerships with commercial partners. Some firms with whom sovereign funds invest have expressed concern that this trend may hurt their business. The fear: Sovereign clients will use a relationship that starts as an alliance to gain more control over their assets and improve the skills of their staff without paying full fees. The partnership may end with sovereign funds insourcing management of nearly all of their assets, leaving fewer opportunities for external managers. Although there may be some truth to this scenario, sovereign wealth funds have much broader reasons for establishing partnerships. Such relationships appear to be less about trying to put asset managers out of a job than becoming more knowledgeable and effective investors. The goal is to deliver better returns — macroeconomic, social or…

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