Photograph: Eric Kilby
In the news this week: Sovereign wealth funds convene at
the World Economic Forum in Davos, Switzerland to launch a new
long-term equities index, while Singapore’s
Temasek Holdings and Malaysia’s Khazanah Nasional
invest in Chinese technology start-ups.
Government Funds Launch New Long-Term Index
In Alejandro Gonzalez Iñárritu’s
new film, The Revenant, Leonardo
DiCaprio’s character crunches about in a snowy,
hostile landscape, worrying about bears. At the meeting of the
World Economic Forum in the Swiss town of Davos this week,
investors and policymakers did much the same, worrying about
the onslaught of a bear market in global equities.
International stocks have endured a near-catastrophic start to
2016, with concern over oil prices and the health of the
Chinese economy causing equities in France, Japan and the U.K.
to drop 20 percent below their 2015 peaks —
that’s bear-market territory.
Media speculation has suggested sovereign wealth funds have
contributed to the panic by selling shares to support their
sponsoring governments’ budgets, but little
evidence exists to support that assertion. In fact, government
investors came together at Davos to launch a scheme that
reaffirms their commitment to long-term investment principles
in the face of short-term market volatility.
On January 21, six sovereign wealth and government pension
funds issued a joint statement announcing their support for the
S&P Long-Term Value Creation Index, a new benchmark
designed to track companies based on indicators of long-term
performance. The new index was developed by Focusing Capital on
the Long-Term (FCLT), a joint initiative between the $215
billion Canada Pension Plan Investment
Board (CPPIB) and New York-based consulting
firm McKinsey & Co, together with Wall Street index
provider S&P Dow Jones Indices. The index incorporates both
qualitative and quantitative factors, including standards of
corporate governance, leverage ratios and return on
Five other government funds voiced their support for the new
index: Denmark’s $103 billion pension fund ATP, Singapore’s $343 billion
GIC, the $20 billion New Zealand Superannuation Fund, the $118
billion Ontario Teachers’ Pension
Plan (OTPP) and PGGM, which manages $208 billion on behalf
of Dutch pension funds.
These institutions have allocated a total of $2 billion to
funds that will track the new index — and that figure
is expected to rise significantly as more government investors
make use of the new tool to assess companies’
value over the long term.
China Tech Investments
In China, two state investors allocated capital to
technology start-ups this week, signalling their confidence in
the long-term prospects of the Chinese economy despite the
recent stock-market turmoil.
Singapore's state investor $194 billion Temasek Holdings is reportedly among three
investors committing $3.3 billion in new capital to
China’s largest online entertainment booking
platform, Meituan-Dianping, which was formed by the merger of
two rival start-ups last year. The fundraising, which values
the company at $18 billion, is the world's largest private
fundraising round for a venture-backed company. Other investors
supporting Meituan-Dianping — China’s
biggest online seller of movie tickets and restaurant bookings
— include Shenzhen-based internet company Tencent
Holdings and Russian private equity firm DST Global.
Malaysia's state fund $35 billion Khazanah Nasional has led a $160 million
capital-raising effort on behalf of Hong Kong-based financial
technology start-up WeLab, China’s largest
provider of mobile lending and credit analytics platforms. The
investment gives Khazanah exposure to the
country’s growing consumer loan market, which is
being driven by its expanding middle class.
OTPP and Borealis Infrastructure, a unit of Ontario Municipal Employees Retirement
System (OMERS), a $55 billion pension fund, are reportedly
in discussions to team up on a bid for the gas-distribution arm
of National Grid, the British multinational utilities company.
The distribution network covers parts of northern England and
North London and is valued at approximately £11 billion
($15.7 billion). OTTP and OMERS worked together on a similar
deal in 2004, when they formed a consortium with British energy
company SSE to acquire gas distribution networks in Scotland
and southern England from National Grid (then National Grid
Transco) for £3.2 billion.
The Russian Direct Investment Fund (RDIF), a
$10 billion development fund, and Dubai-based seaport operator
DP World have announced the launch of a new joint venture, DP
World Russia. The partners said the venture will invest up to
$2 billion in seaports and other transport infrastructure in
Russia. DP World owns 80 percent of DP World Russia, while RDIF
holds the remaining 20 percent.