BP's Former CEO Approaches Abu Dhabi's SWF to Lead New Oil Company

Tony Hayward, the former BP chief executive, has reportedly been approached by Abu Dhabi's sovereign wealth fund -- the Abu Dhabi Investment Authority (ADIA) -- to set up a new global oil company.

(February 6, 2011) — Former BP Chief Executive Tony Hayward is in talks to lead a new oil company less than six months after he quit his position following the Gulf of Mexico oil spill, the Sunday Times reported, citing an unidentified person close to the situation.

Hayward, who stepped down from his position at BP after the April 20 explosion aboard a rig in the Gulf of Mexico, has been reportedly approached by representatives from the Abu Dhabi Investment Authority (ADIA), one of the largest SWFs in the world boasting roughly $790 billion in assets, with an offer of several billion dollars to build a new company.

According to the Sunday Times, the proposal by the Abu Dhabi SWF, whose investments range from takes in Ferrari, ports, aerospace and renewable energy firms, is in its infancy and is one of several being considered by Hayward. The publication further reported that Hayward’s relationship with Abu Dhabi’s crown prince Mohammed bin Zayed bin Sultan al-Nayhan is believed to be strong.

Hayward was reported last month to be in talks about joining the board of commodities group Glencore.

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In July of last year, after BP’s stock plummeted as a result of the Gulf of Mexico disaster, Hayward had turned to sovereign wealth funds in the Middle East and Asia to attempt to guard against takeover bids. The embattled British energy giant had reportedly approached SWFs in countries that include Abu Dhabi, Kuwait, Qatar and Singapore.

Hayward was attracted to SWFs in the region because of their understanding of the oil industry and their unlikeliness to interfere with the operational side of BP’s business, with SWFs in Kuwait, Abu Dhabi and Qatar additionally viewed as “neutral” investors. The oil giant had believed relationships with these funds would avoid political tensions that would arise from associations with SWFs in other parts of the world.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Timber Too Tame an Alternative for You? Try Dairy Farms.

With the New Zealand Superannuation fund’s purchase of farmland, expected to top US$380 million in value in the coming years, further proof is seen of a growing trend among institutional investors.

(February 6, 2011) – New Zealand’s US$13.5 billion Superannuation fund has purchased the first of what is expected to be many farms, further proof that farmland purchases by institutional investors will likely rise as funds seek uncorrelated assets to protect against inflation and another 2008-style drawdown.

The purchase of a medium-sized farm in New Zealand is unto itself of little note. However, the purchase is part of a larger plan to buy, both domestically and abroad, more than US$380 million in both dairy and crop-yielding farms.

While farmland may seem a slightly esoteric investment for large institutions, long-term trends – population growth being a primary driver – and unique risk profiles make them increasingly enticing for liability-focused funds. For one, farm investments are thought to be inflation-resistant to a significant degree, and historically are largely uncorrelated to stocks and fixed-income returns. The returns of a farm-based investment are often thought to be similar to that of timber holdings, said Matt Whineray, general manager of the New Zealand fund, according to the New Zealand Herald. (Like many other large institutional investors, the New Zealand fund holds significant amount of timber in its portfolio – in this case 7%.)

There are risks involved, of course. Farmland returns can be affected by droughts, and long-term climate change risks are also considered serious. Federal Deposit Insurance Corporation Chairwoman Sheila Bair recently commented on such risks, noting that “one candidate [for a bubble] is US farmland values, which remain some 58% above their 2000 levels in inflation-adjusted terms.” In her testimony, given in October of 2010, she made clear her worries about farmland investment values. “Strong agricultural conditions have spurred renewed interest in farmland on the part of investors. But today’s positive fundamentals are subject to change,” she said.

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However, returns may be just too enticing for institutions looking to diversify and boost returns. Looking backwards, the returns (in America, at least) have been solid: according to the National Council of Real Estate Investment Fiduciaries Farmland Index, there has been only one negative quarter since 1992 in the American farmland sector, and average annualized returns approach 15% over the past ten years.

Because of such returns, it will come as no surprise that those who service America’s largest pension plans are creating or looking to create farmland investment vehicles as well. According to The Progressive Farmer, TIAA-CREF – a heavy-hitter in American pension management – has allocated $2 billion towards this asset class. Numerous smaller investment firms have also been advertising vehicles through large pensions.



<p>To contact the <em>aiCIO</em> editor of this story: Kip McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a></p>

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