In October, Sovereign Funds Pursue Internal Stability and External Profit

Recent moves by the China Investment Corporation and the Qatar Investment Authority highlight sovereign funds’ dual role as stabilizers and profiteers.

(October 15, 2009) – Recent activity by the China Investment Corporation (CIC)  and Qatar Investment Authority (QIA) is highlighting sovereign wealth fund’s (SWF) role as both internal political tool and sophisticated asset manager.


Just this week, Central Huijin Investment Ltd.—the investment arm of the US$300 billion CIC—is continuing to buy shares in China’s largest banks in order to stabilize the local economy, Bloomberg is reporting. The three banks—Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd.—have been the recipients of CIC funds for the past year. The government’s stake in the banks has reached upward of 70%, reports state.

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In conjunction with this move, the CIC is expanding outwards. According to Bloomberg, the fund is looking to make an investment in Indonesian natural resources via a partnership with coal-mining company PT Bumi Resources. In September, CIC lent PT Bumi US$1.9 billion for debt refinancing in exchange for the first right of refusal in any deal exceeding US$75 million. China also is looking to invest in Ghana, Guinea, Canada, and Hong Kong, all in an effort to access minerals and oil vital for its rapid development.


China is not the only country playing with external markets while at the same time helping the local economy. Many Gulf funds—some of the world’s largest investors—propped up local stock exchanges and banks as world credit tightened in 2008. However, at the same time, some—most notable being the QIA—also have used depressed global markets to put capital to work. Its most recent move, symbolic of the Gulf’s yearning for Western assets, is the acquisition of 24% of England-based Songbird Estates—whose main interest is in the Canary Wharf development in London—up from 15%. All together, the QIA is now Songbird’s largest investor with upward of US$555 million in the firm.



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

Facing Possible Liquidity Issues, Stanford Initiates Private Equity Sale

 

Although the university is claiming that it doesn’t need the cash, Stanford has initiated a sale of up to $1 billion in private equity stakes in the secondary markets.

 

 

(October 8, 2009) – Following similar actions at other top-tier university endowments, Stanford University has initiated a fire sale of up to 20% of its private equity holdings.

 

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According to numerous sources, the university—which ai5000 reported in June was having liquidity issues—is looking to free upward of $1 billion from the sale, which would take place in secondary markets via Cogent Partners. Standing at $17.2 billion, according to the aiGlobal 500   list of the world’s largest asset owners, the endowment invests in alternatives ranging from private equity to real estate to timber. The sale would attempt to offload Stanford’s stakes in private equity firms, as opposed to specific investments in private equity deals, reports The New York Times. Earlier this year, Stanford raised $1 billion through a taxable bond offering.

 


The move can hardly be deemed unexpected, despite Stanford’s claim that it does not need the money. Late last year, facing similar liquidity problems despite an even larger endowment, Harvard put upward of $2 billion in private equity holdings on the market. That sale, reports revealed, met with only limited success. Similarly, the California Public Employees’ Retirement System (CalPERS) has had minimal success in selling a portion of its alternatives stake.

 


Endowment spectators surely will watch the sale closely. If the stakes are sold quickly, it will be a sign that the market for such investments—decimated as of late, as indicated by the attempted Harvard sale—has rebounded. If Stanford is unable to offload the holdings, however, it will likely cause furrowed brows across the endowment universe. Earlier this year, such deals were seeing assets sold at less than 30 cents on the dollar, according to Nyppex, a market research firm. While this figure has risen as of late, the figures will be watched closely.



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

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