Future Fund Chief Executive David Neal
In the news this week: Australia’s Future
Fund and Norway’s Government Pension Fund Global
disclose disappointing quarterly results. The Qatar Investment
Authority opens a new office in India. Singapore’s
Temasek Holdings and the Korea Investment Corp. make senior
The financial markets endured a near-cataclysmic start to 2016
as global stocks nosedived amid concerns over the Chinese
economy and falling oil prices. Four months on, and equities
have stabilized somewhat — but institutional investors
still face significant challenges. Negative interest rates, low
growth in developed nations and lingering uncertainties over
China’s debt mountain are among the economic
clouds on the horizon. And some sovereign wealth funds are
battening down the hatches in anticipation of approaching
Take Australia’s Future Fund. Over the past 12 months, the
A$117 billion ($89 billion) sovereign wealth fund has moved
heavily into cash, which accounted for 22 percent of its assets
as of March 31, 2016 — up from 15 percent three months
earlier. In a press briefing on Wednesday, Future Fund Chief
Executive David Neal said this defensive strategy reflects the
fund’s concerns about the fragility of the global
economy and the market distortions being caused by negative
Neal said the Future Fund has lowered its return expectations
since stocking up on cash. As well he might. The fund recorded
losses of 0.9 percent over the three months to March 31.
Overall, the Future Fund’s investments have
returned a paltry 0.2 percent over the first 9 months of the
Norges Bank Investment Management (NBIM), the arm of the
central bank that oversees Norway’s Government Pension Fund Global, also
shifted into relatively more-conservative assets over the first
quarter of 2016. NBIM increased the fund’s
fixed-income holdings from 35 percent to 37 percent and reduced
its equities allocation from 61 percent to 59 percent over the
first three months of 2016. Despite this strategic shift, the
fund announced investment losses of 82 billion kroner ($10.5
billion) over the quarter, which it blamed on the global
stock-market volatility at the beginning of the year.
Unlike the Future Fund, NBIM has also had to contend with
government withdrawals. Lawmakers have begun tapping the fund
for the first time in its history to help support the Norwegian
economy, which has suffered amid the drop in energy prices. The
government pulled 25 billion kroner ($3 billion) from the fund
in the first quarter.
QIA Opens India Office
Not all sovereign funds are adopting conservative strategies.
Others are leveraging their long-term investment horizons to
enter new markets and invest in illiquid assets that they hope
will deliver handsome profits over the coming years.
The Qatar Investment Authority (QIA) is a good
example. The fund has reportedly opened its first Indian office
in Mumbai's Bandra-Kurla Complex (the site also houses the
Indian offices of the Canada Pension Plan Investment Board
(CPPIB) and Singapore's GIC). QIA has been increasing its
investments in Indian real estate; in February, the fund teamed
up with Bangalore-based developer RMZ Group to buy a business
park in Mumbai for 24 billion rupees ($354 million).
Meanwhile, QIA has also continued to buy London real estate
assets. This week a $600 million real estate joint venture set
up by QIA and the Ascott, a unit of Singapore-based property
developer CapitaLand, made its first investment in Europe. The
joint venture agreed to acquire a residential complex in
Islington, North London, for £52 million ($75.9
One consequence of the challenging economic backdrop is that
funds have begun to think more deeply about how best to
organize their operations. Last week, GIC announced a reshuffle
that was designed to strengthen the fund’s
"capacity to deal with an investment environment of lower
returns, increased volatility, and greater uncertainty,"
according to GIC Group President Lim Siong Guan.
This week, GIC’s national peer Temasek Holdings followed suit. The
Singaporean investment company made five new appointments to
its wholly-owned subsidiary Temasek International, effective
May 1: Chia Song Hwee and Dilhan Pillay will join as
presidents, while Fidah Alsagoff, Michael Buchanan, Png Chin
Yee and Juliet Teo are new senior managing directors. Temasek
also said that it is reorganizing its structure, reallocating
some functions across the group to bring together its sector
and market investment teams under a single investment division.
Temasek is also establishing a new portfolio strategy and a new
sustainability and stewardship group.
Meanwhile, the Korea Investment Corp. (KIC) has appointed
Shin-woo Kang as its new CIO, according to several local media
reports. Kang replaces Heung-sik Choo, who stepped down in
February as part of a shakeup of the fund's governance
instigated by its new CEO, Sung-soo Eun. Kang joins from
Seoul-based investment firm Hanwha Asset Management, where he
was president and CEO. KIC named Sang-joon Kim as its new chief
operating officer earlier this month.