Sovereign Wealth Fund Weekly News Roundup: SWFs Selling Out

April 17, 2015 by Loch Adamson

Sovereign fund #roundup: SWFs cash in on soaring #HongKong #stocks
Sovereign fund #roundup: #AbuDhabi SWF in @Spotify play #tech
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Night View of Central Victoria Harbor
Night View of Central Victoria Harbor, Hong Kong
Sovereign wealth funds including the China Investment Corp., Singapore’s GIC  and Temasek Holdings have been selling down their positions in Chinese companies this week, moving to cash in on soaring valuations. 

Sell, Sell, Sell

On Tuesday the China Investment Corp. (CIC) disclosed that it had sold more than 375.6 million shares in Shanghai-based Semiconductor Manufacturing International Corp. (SMIC) in a series of transactions over the first three months of 2015, lowering its stake to 10.5 percent of SMIC’s shareholder capital. 

CIC had subscribed to purchase some HK$161.1 million ($20.6 million) in the company’s Hong Kong-listed shares in August 2014. However, SMIC’s share price has risen since then — its shares listed on the New York Stock Exchange have gained nearly 41 percent over the past 12 months — and the fund appears to have moved to cash in on the excess return. 

Singapore’s state investors have also moved to take advantage of soaring shares in Chinese companies this week. GIC sold down its stake in Far East Horizon, the Hong Kong-listed financial leasing unit of Chinese state-owned conglomerate Sinochem Group. GIC sold 60.5 million shares at an indicative range of HK$8.30 to HK$8.50 per share on April 13. GIC first invested in the company in 2011, and had sold 60 million shares in August 2014, reducing its stake to 5 percent from 6.8 percent. 

Temasek Holdings, meanwhile, offloaded $25 million of Shanghai Pharmaceuticals, China’s second-largest pharmaceutical products distributor. The Singaporean state-owned investor sold 8 million shares at an indicative range of HK$23.55 to HK$24.30 each. Temasek invested $300 million at the company’s initial public offering in 2011.

And sovereign funds are preparing to sell down their stakes in European companies, too. The Abu Dhabi Investment Authority (ADIA) is reportedly offloading 23.5 million shares in Bochum, Germany-based residential real estate firm Deutsche Annington Immobilien Group — the entirety of its 13.4 percent stake — for €750 million ($804 million). And ADIA’s peer the Abu Dhabi Investment Council (ADIC) and U.S. billionaire Wilbur Ross are planning to sell up to 60 million shares in Virgin Money, according to local media reports — just five months after they listed the U.K. financial services firm on the London Stock Exchange. 

These sales follow GIC’s offloading of more than 2 percent of Barcelona-based industrial testing group Applus Servicios Tecnologicos last week.

ADIC’s Spotify Play

As well as selling its Virgin Money shares, ADIC is rumored to be teaming up with Goldman Sachs Group to lead the latest fundraising round by music-streaming service Spotify. According to news reports, this seventh round will raise $400 million and value the London and Stockholm–based company at $8.4 billion. ADIC is increasingly targeting early-stage technology companies. Earlier this year, for instance, it invested in New York-based MongoDB, which designs online database software. 

Into Africa

Sovereign wealth funds are increasingly willing to consider investing in sub-Saharan Africa, attracted by favorable long-term demographics and improving standards of governance. 

On Wednesday, Dubai-based private equity firm Abraaj Group announced the launch of a new $990 million private equity fund  that will invest in consumer industries, resources and infrastructure in sub-Saharan African countries including Ghana, Ivory Coast, Kenya, Nigeria and South Africa. Abraaj said 75 percent of the capital raised came from sovereign wealth and pension funds. 

The funds involved in the Abraaj deal were not named. But we did learn this week that Norges Bank Investment Management, the arm of the central bank that manages Government Pension Fund Global, Norway’s giant sovereign wealth fund, is keen to increase its exposure to high-growth African markets. NBIM CEO Yngve Slyngstad told media that low bond yields in Europe had encouraged the fund to invest in Kenya and Nigeria, among other sub-Saharan nations.

Indian Investments

India continues to see interest from sovereign wealth funds, signalling their confidence in Narendra Modi’s economic reforms and the growth of an affluent middle class with considerable spending power. 

ADIA has reportedly increased its stake in Mumbai-based infrastructure investment firm IL&FS Transportation Networks by buying unsold shares in the 75 billion Indian rupees ($1.2 billion) rights issue. ADIA will raise its stake to 14 percent from 12.56 percent, maintaining its position as the company's third largest shareholder after India’s state-owned insurance group Life Insurance Corp. and Japanese financial services giant Orix Group Corp. 

GIC has been particularly busy on the subcontinent over the past twelve months and its appetite for Indian real estate looks set to continue. The fund is reportedly in talks to acquire 2 million square feet of office space in Chennai for INR86 billion from Indian financial services firm Shiram Group. The development is part of a so-called I.T. Special Economic Zone. 

And GIC also reportedly participated in a $400 million round of funding for Mumbai-based taxi firm Ola alongside New York-based hedge fund Falcon Edge Capital and Russian private equity firm DST Global. Ola will use the capital to try and outmuscle its U.S. rival Uber Technologies, which has a controversial presence in India.

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