In the first half of 2014, sovereign wealth funds shifted
their private equity investments into more-volatile emerging
markets. Allocations to private equity funds in developing
countries climbed to about 43 percent of sovereign wealth
funds’ total, according to Sovereign Wealth Center
data, up from 25 percent in the first six months of 2013.
Private equity fund investments in developed markets, though
still larger at 57 percent, fell sharply from 75 percent in the
first half of the previous year.
The strategies employed by the funds in the two categories
varied too. Sovereign funds’ investments in
emerging-markets private equity tended to be classic leveraged
buyouts managed by established firms such as Hong
Kong–based Affinity Equity Partners and London-based
CVC Capital Partners.
A Spin Off of Funds
State-owned pools’ private equity fund
investments in developed markets, by contrast, tilted toward
venture and growth capital, which accounted for a third of
their allocations to such funds, according to our data.
Sovereign wealth funds are also targeting more-specialized
areas. For example, they are aiming to profit from the shale
gas boom in the U.S. and from new oil and gas extraction
technologies, and they have engaged specialist managers like
Apollo Global Management to tap the private debt markets.
Singapore’s Temasek Holdings provided the most
notable private equity event for sovereign wealth funds in the
first half of 2014. In April the state-owned investor launched
Astrea II, a special-purpose vehicle comprising its holdings in
36 private equity funds that allows a broad base of
institutional and retail investors to co-invest with Temasek.
The funds spun off include those managed by London-based BC
Partners and Equistone Partners Europe, Stockholm-based EQT
Partners, Beijing-based JD Capital, Paris-based PAI Partners
and Boston-based TA Associates. Astrea II is managed by Ardian,
a Paris-based secondary private equity specialist.