Annual Report 2013 - Private Equity

April 11, 2014

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In 2013 sovereign wealth funds favored established buyout managers focused on developed markets. Among them: London-based CVC Capital Partners, which closed its sixth fund in July, and New York–based Apollo Global Management, which closed its eighth fund in December.

As far as we can tell from the relatively opaque world of private equity, sovereign funds committed capital not just to well-established buyout shops but also to country or sector specialists that generate alpha by exploiting their deep knowledge of specific market niches. Sovereign funds’ private equity allocations included country-specific funds in India and Russia, and funds run by specialist firms that invest in currently challenging markets such as commodities and energy.

Principal Investments

Sovereign wealth funds made direct investments in a wide range of private companies last year. They tended to target relatively difficult sectors where they want to be closely involved in managing the investment. For instance, sovereign funds made seven allocations worth a total of $1.4 billion to privately held commodity and energy companies.

Notably, China Investment Corp. committed C$292 million ($285 million) to a subsidiary of Chengdu Tianqi Industry Group Co., a Chinese company whose Sichuan Tianqi Lithium Industries is the world’s largest hard-rock-lithium converter. The investment allowed Tianqi Lithium to purchase its raw-material supplier, Australia’s Talison Lithium, which owns and runs mining projects in Western Australia and Chile.

SWF Direct Private Equity Investments in 2013

The Qatar Investment Authority (QIA) backed PKC Management (UK), a vehicle established by former JPMorgan Chase & Co. minerals experts Lloyd Pengilly and Roger Kennedy to seek out mining deals in Africa and South America, with a reported $250 million. QIA’s direct-investment arm, Qatar Holding, invested alongside Jan Kulczyk, Poland’s richest man; Brazilian investment bank BTG Pactual; and New York–based hedge fund manager Och-Ziff Capital Management Group. PKC changed its name to QKR Corp. Management (UK) to reflect the composition of its new shareholders and made its first investment in February 2014, agreeing to buy Johannesburg–based AngloGold Ashanti’s Navachab gold mine in Namibia.

Asian sovereign funds made five investments with a total value of $142 million in early- and growth-stage technology companies. Notably, Malaysia’s Khazanah Nasional formed a joint venture with Usaha Tegas, which is controlled by Malaysian businessman Ananda Krishnan, to buy a 30 percent stake in Academy Award–winning, U.K.-based visual effects company Framestore. In the same vein, we saw sovereign funds fully embrace e-commerce: Singapore’s Temasek Holdings invested in BreadTrip, a smartphone application that allows users to share photos and accounts of their travel experiences and tag their locations, and Jacksonville, Florida–based sports apparel online retailer Fanatics, while QIA backed Paris-based discount fashion auction site

Percentage of Total Value of Private Market Investments

Source: Sovereign Wealth Center.

Percentage of Total Number of Private Market Investments

Source: Sovereign Wealth Center.

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