SOVEREIGN WEALTH FUND INSTITUTE swfinstitute.org SWF ASSET ALLOCATION REPORT 2012 2010 SOVEREIGN WEALTH ASSET ALLOCATION
A Commitment to Providing Un-Biased Reasearch on Sovereign Wealth Funds and other long-term public investors SWF Institute a SOVEREIGN WEALTH ASSET ALLOCATION 2010 Sovereign Wealth Fund Institute, Inc. 2300 West Sahara Avenue, Suite 800 Las Vegas, NV 89102 United States swfinstitute.org Feedback/Suggestions: support@swfinstitute.org
Contents 04 INTRODUCTION 05 ASSET CLASS FORECAST 012 SOVEREIGN WEALTH TRANSACTIONS EUROPE 018 Norway Government Pension Fund Global 021 National Pensions Reserve Fund (Ireland) 026 National Wealth Fund (Russia) 027 Reserve Fund (Russia) 028 Strategic Investment Fund (France) MIDDLE EAST 032 Mubadala Development Company 034 Abu Dhabi Investment Authority 038 Abu Dhabi Investment Council 040 Emirates Investment Authority 041 International Petroleum Investment Company 042 Qatar Investment Authority 045 Kuwait Investment Authority 049 Mumtalakat Holdings AFRICA 052 Algeria Revenue Regulation Fund 053 Botswana Pula Fund 054 Libyan Investment Authority AMERICAS 058 Sovereign Fund of Brazil 059 Social & Economic Stabilization Fund (Chile) 060 Pension Reserve Fund (Chile) SOVEREIGN WEALTH ASSET ALLOCATION 2012 2012 Sovereign Wealth Fund Institute
061 Alberta Heritage Fund 063 Oil Revenues Stabilization Fund of Mexico 064 Heritage and Stabilization Fund (Trinidad & Tobago) 065 Alaska Permanent Fund Corporation 070 New Mexico State Investment Council 074 Texas Permanent School Fund 076 Wyoming Permanent Fund ASIA 080 State Oil Fund of Azerbaijan 081 Brunei Investment Agency 082 Kazakhstan National Fund 083 Khazanah Nasional Berhad 085 Korea Investment Corporation 087 Hong Kong Monetary Authority Investment Portfolio 089 Temasek Holdings 093 Government Investment Corporation of Singapore 097 China Investment Corporation 101 National Social Security Fund (China) 104 China-Africa Development Fund 105 SAFE Investment Company 106 State Capital Investment Corporation (Vietnam) 107 Timor-Leste Petroleum Fund AUSTRALIA AND NEW ZEALAND 110 Australia Future Fund 113 New Zealand Superannuation Fund INDEX 116 Profile Index by Country 118 Exhibit Index 2012 Sovereign Wealth Fund Institute 2012 SOVEREIGN WEALTH ASSET ALLOCATION
ASSET CLASS FORECAST been decent; however, this has been the reason why sovereign wealth funds are looking more towards inflation-hedged and predictable cash flow types of investments. Sovereign investors understand that less liquid asset classes can provide a source of returns uncorrelated to public equities. This is why sovereign funds have been actively been analyzing infrastructure deals globally. The Abu Dhabi Investment Authority and Kuwait Investment Authority are bullish in British infrastructure as well as the China Investment Corporation and other mega asset public investors. Sovereign wealth funds engaged in infrastructure markets have been attracted to regulated utilities. The Alberta Investment Management Investment Corporation (AIMCo) is a major investor in infrastructure and recently invested in a Chilean utility firm. The China Investment Corporation and the Qatar Investment Authority have been intrigued by regulated utilities as well. Both the China Investment Corporation and the Abu Dhabi Investment Authority took stakes in Kemble Water Limited, which is the holding company for Thames Water. Brazil and India have received major flows of cash to fund various infrastructure projects. Largest SWF Direct Investors by Total Transaction Amounts 1 Government of Singapore Investment Corporation Singapore 2 Qatar Investment Authority Qatar 3 Temasek Holdings Singapore 4 Kuwait Investment Authority Kuwait 5 International Petroleum Investment Company UAE - Abu Dhabi 6 Government Pension Fund - Global Norway 7 China Investment Corporation China 8 Abu Dhabi Investment Authority UAE - Abu Dhabi 9 SAFE Investment Company China 10 State Oil Fund Azerbaijan Infrastructure assets can fit into the real return asset allocation box, since asset revenues tend to go up with inflation. It beats low-yield treasuries, especially when combined with having backing from the government at hand. Energy pipeline infrastructure is also a growing subsector as well, in which the Asian, Middle Eastern, and American SWFs have been investing into. Another kicker for sovereign funds in investing in direct infrastructure is if governments are interested in co-investing or supporting the purchase. Bottom line, it lowers political risk. In addition, countries that need infrastructure need to be investor friendly. There needs to be clear rules on concessions and payouts. Timberland This is an asset class that is growing among public investors. Sovereign investors like the New Zealand Superannuation Fund and Canada s Alberta Heritage Fund are investors in timberland investments. The role of timberland investments is to provide diversification and generate attractive returns through a combination of cash distributions and long-term asset appreciation and inflation protection. The sale of harvested timber produces cash yields. This depends on the maturity of the forestland and timber prices. Public investors understand that there are short-term risks associated with timber investments such as low-economic growth. These risks do not affect the long-run assumption that natural resources are limited in nature. Source: Online Sovereign Wealth Fund Transaction Database 10 SOVEREIGN WEALTH ASSET ALLOCATION 2012 2012 Sovereign Wealth Fund Institute
Largest Sovereign Wealth Funds Country Sovereign Fund Name Assets $ Billion Inception Origin UAE - Abu Dhabi Abu Dhabi Investment Authority 627.0 1976 Oil Norway Government Pension Fund - Global 611.0 1990 Oil China SAFE Investment Company 567.9 1997 Non-commodity Saudi Arabia SAMA Foreign Holdings 532.8 n/a Oil China China Investment Corporation 439.6 2007 Non-commodity Kuwait Kuwait Investment Authority 296.0 1953 Oil China - Hong Kong Hong Kong Monetary Authority Investment Portfolio 293.3 1993 Non-commodity Singapore Government of Singapore Investment Corporation 247.5 1981 Non-commodity Singapore Temasek Holdings 157.2 1974 Non-commodity Russia National Wealth Fund* 149.7 2008 Oil China National Social Security Fund 134.5 2000 Non-commodity Qatar Qatar Investment Authority 100.0 2005 Oil Australia Australian Future Fund 80.0 2006 Non-commodity UAE - Dubai Investment Corporation of Dubai 70.0 2006 Oil Libya Libyan Investment Authority 65.0 2006 Oil Kazakhstan Kazakhstan National Fund 58.2 2000 Oil UAE - Abu Dhabi International Petroleum Investment Company 58.0 1984 Oil Algeria Revenue Regulation Fund 56.7 2000 Oil UAE - Abu Dhabi Mubadala Development Company 48.2 2002 Oil South Korea Korea Investment Corporation 43.0 2005 Non-commodity US - Alaska Alaska Permanent Fund 40.3 1976 Oil Malaysia Khazanah Nasional 36.8 1993 Non-commodity Azerbaijan State Oil Fund 30.2 1999 Oil Ireland National Pensions Reserve Fund 30.0 2001 Non-commodity Brunei Brunei Investment Agency 30.0 1983 Oil France Strategic Investment Fund 28.0 2008 Non-commodity US - Texas Texas Permanent School Fund 24.4 1854 Oil & Other Iran Oil Stabilisation Fund 23.0 1999 Oil New Zealand New Zealand Superannuation Fund 15.9 2003 Non-commodity Canada Alberta s Heritage Fund 15.1 1976 Oil Chile Social & Economic Stablization Fund 15.0 2007 Copper US - New Mexico New Mexico State Investment Council 14.3 1958 Non-commodity Brazil Sovereign Fund of Brazil 11.3 2008 Non-commodity East Timor Timor-Leste Petroleum Fund 9.9 2005 Oil & Gas Bahrain Mumtalakat Holdings 9.1 2006 Non-commodity Oman State General Reserve Fund 8.2 1980 Oil & Gas May 2012, *Two funds combined 2012 Sovereign Wealth Fund Institute 2012 SOVEREIGN WEALTH ASSET ALLOCATION 11
AUSTRALIA AND NEW ZEALAND Future Fund utilizes external manager for some real estate. The fund is also keen on partnering with other institutional investors. Private Equity & Infrastructure The Future Fund is committed to alternatives. It has invested in private equity and infrastructure with mandates stretching the globe. During the financial crises of 2008, it then limited its exposure to private equity in 2009 and a bit in 2010. The Future Fund invests in both listed and private pooled infrastructure funds. It also invests in co-investment and invests directly in infrastructure. The Future Fund directly purchases a large stake in London s Gatwick Airport for 145 million pounds. Future Allocation In 2013, the Future Fund will continue to emphasis alternative assets and absolute return funds. The Future Fund will remain cautious on developed markets. Allocation to external managers will continue on pace; however, managers need to demonstrate reliable customer service and the ability to generate alpha over a benchmark. Select Alternative Investments Fund Name Type of Fund Vintage Geography MAP Airports Infrastructure 2002 Europe RARE Infrastructure Value Fund Infrastructure 2006 Europe UBS International Infrastructure Fund 1 Infrastructure 2008 United States Citi Infrastructure Partners Infrastructure 2008 United States Global Infrastructure Partners Infrastructure 2008 United States Highstar Capital Fund IV Infrastructure 2010 United States Westbourne Yield Fund Infrastructure 2010 Global Real Estate Turnaround Consortium (Brookfield Asset Management) Real Estate 2009 United States CDH China Fund IV Private Equity 2010 China 112 SOVEREIGN WEALTH ASSET ALLOCATION 2012 2012 Sovereign Wealth Fund Institute
New Zealand Superannuation Fund Investment Scope Table Fixed Income Sovereign Investment Grade Corporate High Yield Fixed Income Americas Asia /AusNz Europe ME / Africa Global Other Public Equity Large Cap Small Cap Index Large Direct Public Equity Americas Asia /AusNz Europe ME / Africa Global Other Private Equity Venture/Growth Buyouts Distressed PE Credit/Mezzanine Secondaries Special / Other Private Equity Americas Asia /AusNz Europe ME / Africa Global Emerging Mgrs Hedge Funds Long/Short Global Macro Event Driven Distressed Other Hedge Funds Americas Asia /AusNz Europe ME / Africa Global Emerging Mgrs Real Estate Core Value Added Opportunistic Debt Distressed Direct Real Estate Americas Asia /AusNz Europe ME / Africa Global Emerging Mgrs Infrastructure Communication Diversified Energy/Utilities Social Transport Greenfield Infrastructure Americas Asia /AusNz Europe ME / Africa Global Real Return Alt. Commodities Gold Timberland Agriculture TIPS Country: New Zealand Assets: US$ 15.9 Billion The New Zealand Superannuation Fund (NZSF) seeks to invest prudently and commercially. The fund invests both overseas and domestic. The fund is a leader in unique alternatives like farmland and timber investments. The NZSF utilizes a reference portfolio. It is low-cost, passive portfolios that can help the fund achieve its objectives. The reference portfolio is representative of the investable market; it is the appropriate risk profile for the fund. The NZSF also has an active portfolio for valueadd purposes and that lead them to invest in illiquid assets such as infrastructure, private equity, timberland, and farmland. NZSF is also keen on investing in attractive sectors and hiring skilled investment managers. There are some mandates where the NZSF will hire external managers. Managers are chosen specifically if they can generate excess returns over a benchmark. The NZSF is seeking to collaborate more with co-investors on large-scale investments. The fund is also utilizing risk budget allocation processes. Asset allocation is vital to the NZSF. The Guardians determine the appropriate strategic asset allocation and frequently reassess on a regular basis. With regards to their allocation, they take a long term view on the economy; short term liquidity is not too large of a concern. No asset class is left untouched by the NZSF. Fixed Income and Public Equities The fixed income allocation allows the NZSF to invest in bonds, deposits, and debentures. Some of the fixed income allocation is managed externally. The NZSF invests in shares globally including shares on the New Zealand or Australian stock exchanges. The NZSF invests in hedge funds utilizing a number of strategies. The fund also mandates 2012 Sovereign Wealth Fund Institute 2012 SOVEREIGN WEALTH ASSET ALLOCATION 113
Profile Index by Country ALGERIA 052 Algeria Revenue Regulation Fund AUSTRALIA 110 Australia Future Fund AZERBAIJAN 080 State Oil Fund of Azerbaijan BAHRAIN 049 Mumtalakat Holdings BOTSWANA 053 Botswana Pula Fund BRAZIL 058 Sovereign Fund of Brazil BRUNEI 081 Brunei Investment Agency CANADA 061 Alberta Heritage Fund CHILE 060 Pension Reserve Fund 059 Social & Economic Stabilization Fund CHINA 104 China-Africa Development Fund 097 China Investment Corporation 101 National Social Security Fund (China) 105 SAFE Investment Company EAST TIMOR 107 Timor-Leste Petroleum Fund FRANCE 028 Strategic Investment Fund HONG KONG 087 Hong Kong Monetary Authority Investment Portfolio IRELAND 021 National Pensions Reserve Fund KAZAKHSTAN 082 Kazakhstan National Fund KUWAIT 045 Kuwait Investment Authority LIBYA 054 Libyan Investment Authority
MALAYSIA 083 Khazanah Nasional Berhad MEXICO 063 Oil Revenues Stabilization Fund of Mexico NEW ZEALAND 113 New Zealand Superannuation Fund NORWAY 018 Norway Government Pension Fund Global QATAR 042 Qatar Investment Authority RUSSIA 026 National Wealth Fund 027 Reserve Fund SINGAPORE 093 Government Investment Corporation of Singapore 038 Abu Dhabi Investment Council 040 Emirates Investment Authority 041 International Petroleum Investment Company 032 Mubadala Development Company UNITED STATES 065 Alaska Permanent Fund Corporation 070 New Mexico State Investment Council 074 Texas Permanent School Fund 076 Wyoming Permanent Fund VIETNAM 106 State Capital Investment Corporation (Vietnam) 089 Temasek Holdings SOUTH KOREA 085 Korea Investment Corporation TRINIDAD & TOBAGO 064 Heritage and Stabilization Fund UNITED ARAB EMIRATES 034 Abu Dhabi Investment Authority
Disclaimer All rights reserved. The entire contents of SWF Asset Allocation Report 2012 are the Copyright of the Sovereign Wealth Fund Institute, Inc. No part of this report or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of the Sovereign Wealth Fund Institute, Inc. The information, data, graphics, analysis, and any opinion or recommendation included in the report are not intended for investment purposes and do not constitute investment advice or an offer, or an invitation to make an offer, to buy or sell any securities or any derivatives related to such securities. Nor does this report constitute or contain legal advice. If you require legal advice, you should consult with your own counsel. Sovereign Wealth Fund Institute does not warrant the accuracy of this report for any particular purpose and expressly disclaims any warranties of merchantability or fitness for a particular purpose; nor does Sovereign Wealth Fund Institute guarantee the accuracy, validity, timeliness or completeness of any information or data included in this report for any particular purpose. Sovereign Wealth Fund Institute is under no obligation to provide you with any current or corrected information. Neither Sovereign Wealth Fund Institute, nor any of its affiliates, directors, officers or employees, will be liable or have any responsibility of any kind for any loss or damage (whether direct, indirect, consequential, or any other damages of any kind even if Sovereign Wealth Fund Institute was advised of the possibility thereof) that you incur in connection with, relating to or arising out of these materials or the analysis, views, recommendations, opinions or information contained therein, or from any other cause relating to your access to, inability to access, or use of these materials, whether or not the circumstances giving rise to such cause may have been within the control of Sovereign Wealth Fund Institute. The information provided in these materials is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Sovereign Wealth Fund Institute or its affiliates to any registration requirement within such jurisdiction or country. 120 SOVEREIGN WEALTH ASSET ALLOCATION 2012 2012 Sovereign Wealth Fund Institute
Sovereign Wealth Fund Transaction Database The Online Sovereign Wealth Fund Transaction Database is a dedicated database product that tracks sovereign wealth fund transactions from 1986 till present. Download a FREE sample at: http://www.swfinstitute.org/products-services/swf-transactions
SOVEREIGN WEALTH FUND ASSET ALLOCATION REPORT 2012 SWF Institute SOVEREIGN WEALTH FUND INSTITUTE 2300 West Sahara Avenue, Suite 800 Las Vegas, NV 89102 United States