Sovereign Wealth Quarterly - Sovereign Wealth Fund Institute

UNITED STATES
Tread Carefully on
U.S. Natural Gas
SWF
p56
AFRICA
ADIA is a
Buyer of Hotels
p14
REAL ASSETS
Sovereign Funds
Embrace Direct Real
Asset Deals
p50
COVER STORY
The Public Investor
100 - Profiles and
Rankings
p20
Sovereign Wealth Quarterly
The Source on Sovereign Wealth Funds and Other Long-Term Public Investors
October 2013 | www.swfinstitute.org | @swfinstitute
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content
Notes From the Editor 5
3rd QTR SWFI Commentary 10
Quarterly Briefings 64
Asset Allocation & Strategy
Hedge Funds Divulge Outlook for
Sovereign Wealth 44
Peru’s Fiscal Stabilization
Fund May Look Overseas for
Investments 61
Australian Future Fund Posts
15.4% in 2012-2013 62
Thailand Sovereign Wealth Fund
Proposal Strikes Again 77
Korea and Queensland to Build
Stronger Institutional Investment
Ties 78
NSIA Appoints Stanbic IBTC as
Local Custodian 81
Data
Sovereign Wealth Fund Deal Info
60
Third Quarter LMTI
Transparency Index - 2013 63
Sovereign Wealth Fund Directory
66
Largest Sovereign Funds 79
Exclusive Interview
Deep Dive with Damon Krytzer, Trustee, the City of San Jose Police and
Fire Retirement Plan 16
Q&A with Uche Orji, CEO of the Nigeria Sovereign Investment Authority
52
Reflections with CEO/CIO of bcIMC, Doug Pearce 80
Features
U.S. Pension Executives Ink Letters Concerning PE Alignment Issues 6
AIMCo Steps up Direct Investments, Less Reliance on Wall Street 8
The Public Investor 100 20
The Public Investor 100 - TABLE RANKINGS 22
The Public Investor 100 - PROFILES 24
Chance of Splitting Norway’s Sovereign Fund Increases as Conservatives
Win 42
Sovereign Funds Embrace Direct Real Asset Deals 50
Tread Carefully on U.S. Natural Gas Sovereign Wealth Fund 56
Poll Results Are In! – SWFs and Managers Tell Us What Matters Most 59
Real Assets
The Abu Dhabi Investment Authority is a Buyer of Hotels 14
GIC Private Limited Buys Blackstone Stake in Broadgate Estate 46
Nigeria’s Sovereign Funds and IFC to Support Nigerian Infrastructure
Development 47
Abu Dhabi Investment Council in Shiba Park Building Transaction 47

6 Sovereign Wealth Quarterly | October 2013
U.S. Pension Executives Ink
Letters Concerning PE
Alignment Issues
n general, U.S.
I
public pension
funds - more than
sovereign wealth
funds - need
private equity to help reach
their annual target returns. This
give-take relationship manifests
across America, even when
partner alignment issues arise.
What has taken center stage is
when private equity firms take
monitor fees and transaction fees
on failing portfolio companies.
The debt binge left a nasty
hangover for many pre-2007
private equity funds. Side effects
include poor fund performance,
languishing portfolio companies
and unemployed workers.
Emboldened asset owners – some
of the larger U.S. pensions are
under fire from their support
base, public sector unions, in
what seems to be private equity
firms making money from fees
other than turning around actual
portfolio companies.
Take for example, Caesars
Entertainment Corporation,
which TPG Capital LP and Apollo
Global Management LLC took
private with investor money,
mostly public funds. The casino
operator became saddled with
debt affecting the financial health
of the balance sheet. Coupled with
top-line revenue shortfalls due to
losses in gambling revenues, their
investment faltered. While this is
taking place, the two buyout firms
charged Caesars Entertainment a
US$ 200 million transaction fee
on the US$ 30.7 billion buyout
deal in 2008. In addition, the
private equity firms have been
raking in US$ 30 million per
annum in monitoring fees charged
to the casino company. Usually,
when buyout investments do well,
limited partners tend to look the
other way.
What can institutional
investors do
First, they can write letters to
Oregon Public Employees Retirement Fund - History with TPG Capital
Vintage
Year
Fund Name
Capital
Commitment
Total Value
Multiple
(Millions USD)
1994 TPG Partners I 50 3.66x
1997 TPG Partners II 300 1.77x
2000 TPG Partners III 300 2.47x
2003 TPG Partners IV 300 1.9x
2006 TPG Partners V 300 0.97x
2008 TPG Partners VI 750 1.22x
2008 Apollo Investment Fund VII 400 1.76x
Source: OPERF, Date: March 31, 2013
private equity executives telling
how concerned they really are.
This is what Rhode Island General
Treasurer Gina Raimondo did.
Raimondo is tasked with looking
after the Employees’ Retirement
System of Rhode Island. The
public pension system invested
US$ 20 million with TPG Partners
V, the vehicle that invested in
Caesars Entertainment. Gina
Raimondo penned an August 19th
letter to TPG Chief Investment
Officer and Senior Partner,
Jonathan Coslet, entailing that
fund investors and private equity
managers should “sink or swim
together when investments don’t
work out.” The Rhode Island State
Treasurer articulated that TPG
share monitoring fees with its
limited partners. Heading West
to Oregon, State Treasurer Ted
Wheeler sent letters to executives
at Apollo Global Management
LLC and TPG concerning
misalignment in LP interests.
Wheeler, who is ranked #27 on
the Sovereign Wealth Fund
Institute’s Public Investor 100,
is tasked with looking out for
the best interests of Oregon’s
public employee retirees. The
Oregon Public Employees
Retirement Fund has invested
$300 million in TPG Partners
V and $200 million in Apollo
Fund VI, which also invested
in Caesars – Oregon PERS is
a major U.S. private equity
investor. uu

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Investing for Angola`s future

14 Sovereign Wealth Quarterly | October 2013
The Abu Dhabi
Investment Authority is a
Buyer of Hotels
Sovereign wealth funds are in the same lot as REITs,
insurance companies, pensions and family offices in vying
for hotel properties.
he Abu Dhabi
T
Investment Authority
(ADIA) is a major
purchaser of U.S.
institutional real
estate through various sub-entities.
It often buys partial interest
ownerships with leading real estate
managers. Gulf sovereign wealth
investors are keen on hotels,
especially in gateway cities. As the
Sovereign Wealth Fund Institute’s
transaction database makes clear,
ADIA has been a direct investor
in hotels for quite some time.
For example, ADIA through a
subsidiary, was the majority owner
of the 1,190- room Hilton San Diego
Bayfront, which they sold for $475
million to Sunstone Hotel Investors
in mid-April 2011.
Australian Hotel Real Estate
The demand for Australian hotel
real estate has exceeded supply as
large foreign buyers seek to acquire
assets near business hubs. Due in
part to competition between ADIA,
local investors, Asian investors
and Canadian pension funds, hotel
transactions have greatly increased
in Australia in the past three years.
ADIA has increased their real estate
assets in a deal with Tourism Asset
Holdings Limited (TAHL) for a
reported A$ 800 million. The deal
was completed in September
2013 which includes 31
properties from TAHL to
ADIA. The deal was viable as ADIA
real estate officials were witnessed
travelling to Australia to check out
the properties. Privatized in 2002,
“In the range of $500 to $650 billion
“ of sovereign wealth fund assets are
allocated to real estate investments, excluding
publicly-traded real estate securities,”
commented Michael Maduell, President of the
Sovereign Wealth Fund Institute. “According
to our research and sovereign wealth fund
transaction data, hotels are a strategic real
estate investment for many Gulf sovereign
investors.”
TAHL is partly owned by private
investors including the Melbournebased
Liberman family. The
majority of the hotel properties in
the portfolio are mainly leased by
Paris-based Accor SA.
In the United States, Marylandbased
Marriott International
Inc. has reached a preliminary
agreement with ADIA to sell
three properties. One is located
in London and the other two are
in Miami Beach and Manhattan.
The deal is slated to total around
$800 million. The properties are
under construction and the sale
would take place once they are
completed. Marriott is being forced
to offload the properties as rapid
expansion plans were crushed by
the Great Recession. The hotels
in question are part of the Edition
brand, a boutique strategy created
by hotelier Ian Schrager. However,
the brand is likely to survive
considering the millions ADIA is
willing to invest. Tellingly, a new
Edition hotel is also being built in
Abu Dhabi. uu

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THE
PUBLIC
INVESTOR
100

The Sovereign Wealth Fund Institute has
released a list of the 100 most significant
and impactful public investor executives
of 2013.
These men and women command billions of assets,
impacting the lives of stakeholders and constituents
globally. The people on the list were chosen by SWFI
staff – not influenced by asset managers, governments
or consultants. They come from medium to largesized
asset owners – sovereign wealth funds, public
pensions, superannuation funds, central banks and
other public investors. The size of managed assets is
not the only criteria for ranking inclusion. Another
significant factor is that some of these individuals have
contributed or been part of important trends in the
asset owner industry. Last, there are obvious names
that could not have been left off the ranking.

38 Sovereign Wealth Quarterly | Public Investor 100
#22
Adrian Orr
Chief Executive Officer
New Zealand
Superannuation Fund
Hailing from Auckland, Adrian
Orr is the chief executive officer of
the New Zealand Superannuation
Fund (NZSF) – he has quite a
story to tell. After spending years
in England, he eventually had
leading economist roles at both
National Bank and Westpac. He
then became the deputy governor of
New Zealand’s Reserve Bank. After
a competitive process, he landed his
role at the NZSF. The fund is much
bigger today since the time he took
charge.
Orr has marshaled the NZSF
resources to embark on a variety
of initiatives including creating a
reference portfolio. The reference
portfolio concept has gained traction
among large asset owners.
#23
Norman Chan
Chief Executive
Hong Kong Monetary
Authority
A long-tenured public servant
– before and after Chinese rule
– Norman Chan is the chief
executive of the Hong Kong
Monetary Authority (HKMA)
and one of the only central bank
governors in our ranking. Chan is
an expert in monetary policy, giving
speeches and advising countries on
macroeconomic issues. The reason
for Chan’s inclusion is the size of
the exchange fund and its impact in
markets.
Chan guided the HKMA
through various economic scenarios
affecting Southeast Asia including
the Asian Financial Crisis and the
recent credit meltdown. He also
introduced renminbi banking
services in Hong Kong – bridging
differences between the island and
mainland China.
#24
Pehin Dato Abd
Rahman Ibrahim
Minister of Finance II
Ministry of Finance,
Brunei
Based in Brunei, Pehin Dato Abd
Rahman Ibrahim is the minister of
finance II at the Brunei Ministry
of Finance. He is also deputy
chairman of the Brunei Investment
Agency (BIA). It was his influence
that steered the BIA toward being
an active institutional investor.
Educated in England, Ibrahim has
given over 32 years of public service
and has held noteworthy posts in the
government of Brunei. In 2001, he
was acting managing director of the
BIA – followed in 2004 as deputy
minister of finance.

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