Empire State stake, Melbourne port among Q3 sovereign fund acquisitions

Published on 03 Oct, 2016

LONDON, Oct 3 An Australian port and a stake in the Empire State Building's operator were among assets acquired by sovereign investors such as wealth funds and state pension funds in the third quarter of 2016, with deals totalling $21.2 billion.

The combined value of deals was up 38 percent from the previous quarter, helped by a handful of jumbo-sized transactions in the infrastructure, energy and real estate segments, although the number of direct investments fell to 35 from 43 in the second quarter, according to data from Thomson Reuters.

Although some oil-backed sovereign wealth funds (SWFs) have been hit by a plunge in oil prices since June 2014, prompting withdrawals from cash-strapped governments to cover funding gaps, others, especially Asian SWFs, remain well-funded.

The single biggest deal in the third quarter was the $7.3 billion acquisition of Australia's busiest port, Melbourne, by a consortium that included China Investment Corp, the Ontario Municipal Employees Retirement System (OMERS), a Canadian pension fund, and Future Fund, an Australian SWF.

The $814 billion China Investment Corp was particularly active in the third quarter, participating in 11 deals, including the three biggest.

While the fund posted its first loss on overseas investments in four years last year, its total assets still climbed 9 percent in 2015, it said in July, and it has been ramping up its investments in real estate and infrastructure against a backdrop of low returns from publicly listed stocks and bonds.

"SWFs have a preference for well-established, existing infrastructure projects, which have long-term visibility of cashflows and operations, and provide stability of earnings," said Nikhil Salvi, a manager at Aranca, a research and analytics firm.

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