Sovereign Wealth Fund Weekly News Roundup — ADIA Shifts Managers

June 19, 2015 by Loch Adamson

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Lyon, France

The Abu Dhabi Investment Authority cuts loose a bond manager and shuffles properties. Sovereign wealth funds are contributing to the White House’s new green vehicle and CITIC’s share issue draws interest from Kuwait, Malaysia and Singapore.

ADIA’s Activity

The Abu Dhabi Investment Authority (ADIA), which the Sovereign Wealth Center estimates has some $621 billion in assets under management, has been busy. Earlier this month, ADIA issued its 2014 annual report, revealing it has been reducing its use of external managers — and the fund is putting new internal hires to work.

The report specifically mentioned that ADIA had built up its in-house real estate investment team — and the fund is continuing to actively manage its property portfolio. On June 17 the fund reportedly offered €80 million ($90.2 million) to buy a property in the center of Lyon from ANF Immobilier, a French real estate firm. The building is located on the Rue de la République in the city's desirable shopping district. The fund has also moved to cash in on surging valuations in Australia, selling the Novotel Canberra, one of its Australian hotels, for A$77 million ($59 million).

In emerging markets, ADIA usually prefers to invest with local partners to share risk. The fund reportedly invested this week in a $1 billion real estate investment fund launched by Mumbai-based mortgage lender Housing Development Finance Corp. (HDFC). According to media reports, ADIA participated in the new vehicle's initial $500 million capital raising, which the investment fund will use to finance the construction of affordable housing across India.

Also according to reports this week, ADIA ended its relationship with Boston-based Regiment Capital Advisors, which specializes in high-yield debt. Regiment, which oversaw a separate account for ADIA, has lately experienced several client redemptions, the reports said. It is not clear whether ADIA’s move is related to the overall reduction in outside managers.

Green Investments

Sovereign wealth fund investments in clean energy continue. The $21.5 billion New Zealand Superannuation Fund and the $51.5 billion Alaska Permanent Fund Corp. (APFC) are contributing a combined $550 million to a new U.S. government clean energy initiative. The funds have joined a consortium that is committing $1.2 billion to create a new intermediary organization that will assess the commercial viability of investments in innovative clean energy projects. The intermediary will focus on opportunities that do not fit into existing fund structures and which suit the long-term investment horizons of the consortium's participants.

NZ Super has pledged $350 million and APFC $200 million. The University of California, New York-based Teachers Insurance and Annuity Association–College Retirement Equities Fund (TIAA-CREF) and private equity investor Tamarisc, of Irvine, California, are also part of the consortium. The White House announced the plan as part of a wider funding drive to attract a total of $4 billion for investments in government-backed renewable energy projects.

CITIC Share Issue Lures SWFs

Four sovereign funds are participating in Beijing-based CITIC Securities Co.’s issue of $3.5 billion in new shares. The state-owned investors are the $548 billion Kuwait Investment Authority (KIA), Malaysia's $41.6 billion Khazanah Nasional and Singapore's two state investors, the $342.6 billion GIC and $177.2 billion Temasek Holdings.

Chinese pension manager National Social Security Fund led the fundraising, injecting $2 billion. KIA agreed to take up $476 million of the offering, while Khazanah and Temasek are committing $300 million. GIC agreed to buy $250 million of the shares.

CITIC will issue the shares at HK$24.60 ($3.17) a discount of just under 20 percent on the average closing H-Share price for the five full trading days prior to the placement. Other investors include Fidelity Investments ($319 million) and Och-Ziff Capital Management Group ($307 million). Jack Ma, founder of Chinese internet giant Alibaba Group, also participated through his Shanghai-based private equity vehicle, Yunfeng Capital, and is committing $307 million. Harvest Global Investments, another Chinese private equity firm, pledged $256 million.

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