SWFs, Reshuffling Boards and Adding Overseas Offices

May 06, 2015 by Loch Adamson

#IPIC's Boardroom Reshuffle
Sovereign fund #NewOffices
#New Sovereign Funds
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Macao SWF

IPIC Board Shake Up

In April the International Petroleum Investment Corp. (IPIC) acted swiftly to shake off  concerns about its corporate governance. The government-backed vehicle reshuffled its board on April 22, with U.A.E. Minister of Energy Suhail Mohammed Faraj al-Mazrouei replacing Khadem al-Qubaisi as the fund's chief executive. Sheikh Mansour bin Zayed al-Nahyan remains as chairman of IPIC. Former IPIC CEO al-Qubaisi was also omitted from a list of new board members at Dubai-based construction firm Arabtec Holdings — in which IPIC now holds a 36.1 percent stake —  and where he had served as chairman.

On April 13, the Financial Times reported allegations that al-Qubaisi used Luxembourg-based shell companies to secure deals with some of IPIC’s holdings. Specifically, the story alleged that he used one of the companies to take out a lease on Spain’s tallest building, Madrid’s Torre Foster and nine months later to sublet it to IPIC-owned Compañía Española de Petróleos (CEPSA), of which al-Qubaisi was chairman.

Temasek CEO’s Sabbatical

Singapore's state-owned investor Temasek Holdings announced on April 15 that its chief executive officer, Ho Ching, is taking a three-month sabbatical, during which time she will carry out some ambassadorial duties on a part-time basis. In the interim, the company’s president, Lee Theng Kiat, will replace her. Ho, is the wife of the country's Prime Minister Lee Hsien Loong, who was recently diagnosed with prostate cancer and whose father, Lee Kuan Yew, founder of modern Singapore, died last month at age 91. 

Ho joined Temasek in 2002 as executive director and she was promoted CEO in 2004, transforming Temasek from a mere state holding company to an international investment house with an impressive track record, with an average annual return of 17 percent since inception, according to the fund’s accounts. In the midst of the global financial crisis, in 2009 Temasek’s board appointed Charles ("Chip") Goodyear, a former chief executive of Anglo-Australian miner BHP Billiton, as CEO-designate but he resigned six months later. Temasek re-appointed Ho as a CEO and has not disclosed any succession plans since. 

New Offices for Khazanah and KIC

Khazanah Nasional, Malaysia’s state-owned investment fund, is reportedly planning to open a new office in London by the end of 2015. Khazanah has been expanding its international footprint in the last two years, with the opening of three overseas office — in China, Turkey and the U.S. The fund has also been gradually reducing its stakes in Malaysian companies to diversify its portfolio. 

The Korea Investment Corporation (KIC) is seeking to open new offices in Asia and the Middle East. Keehong Rhee, KIC's deputy chief investment officer and head of research, said the fund has benefited from accessing "local knowledge and expertise" by opening offices in Europe and should develop a permanent presence in Beijing, Shanghai or Singapore. Rhee also said KIC hoped to open an office in the Middle East, where the fund has signed several co-investment agreements in recent months, including one with the Investment Corp. of Dubai, the emirate's sovereign wealth fund. 

QIA’s New U.S. Office

Qatar Investment Authority (QIA) is preparing to open an office in New York, establishing its first official base in the U.S., according to Mohammed bin Jaham al-Kuwari, Qatar’s ambassador to the U.S. To date, QIA has closed several high-profile investments in the U.S. including a 75 percent stake in Santa Monica-based film distributor Miramax, and a 12.5 percent position in Tiffany & Co., the New York-based luxury retailer. The Qatari fund is also funding the construction of CityCenterDC, a mixed-use project sponsored by real estate developers Hines Interests and Archstone, located on the 10-acre site of Washington, D.C.’s former convention center. 

Ireland's SWF Reloaded

The Ireland Strategic Investment Fund (ISIF), which has replaced the National Pensions Reserve Fund (NPRF), which was drawn down during the financial crisis to prop up Ireland's ailing banks — has €1 billion ($1.1 billion) to invest in 2015. According to Eugene O'Callaghan, ISIF's director, the fund will mainly commit to domestic early-stage companies in the agriculture, food and real estate sectors. The fund has already invested  in the initial public offering of Irish life sciences company Malin Corp., chocolate maker Lily O’Brien’s, and Movidius, a software company. 

Macao Plans New SWF

While Ireland resurrected its defunct fund with domestic purposes, China’s special administrative region of Macao is making plans to  start a sovereign wealth fund to take advantage of a decade-long gaming boom. The territory’s central bank, the Monetary Authority of Macao, will announce details of the proposed fund later this year, according to its president Anselmo Teng Lin Seng.

The goal is to generate a higher risk-adjusted return on the territory’s booming reserves. Teng said that MMA would outline the fund's investment strategy before the end of 2015 and would allocate some of its capital to domestic infrastructure projects. 

Mumtalakat Investigated?

While the Abu Dhabi-based IPIC reshuffled its board amidst governance concerns, another sovereign wealth fund in the region was under the spotlight. The Bahraini parliament is reportedly set to launch a probe into Bahrain Mumtalakat Holding Co. amid allegations of mismanagement. 

This wouldn't be the first time that the Bahraini parliament is questioning Mumtalakat's financial affairs. In 2010, ministers accused the company of injecting money into Gulf Air and Bahrain International Circuit Co. without disclosing sufficient information and of hiring consulting companies without organizing a state-tendered bid. This time lawmakers are investigating the sovereign state fund  over losses at some of its portfolio companies such as national carrier Gulf Air and the fund's real estate arm Edamah, recently highlighted by the Financial and Administrative Audit Bureau. 

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