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  • Sovereign Wealth Funds


  • Editor:

    Javier Santiso, PhD

    Professor of Economics, ESADE Business School

    Vice President, ESADEgeo - Center for Global Economy and Geopolitics

  • Sovereign Wealth Funds 2013 Index



    Foreword 5

    Introduction 7

    Sovereign wealth funds investment behaviour 2012 11

    I Geographic Analysis 17

    Sovereign wealth funds in Spain and Latin America 19

    The great wallet of China: China Investment Corporation (CIC) and State Administration of Foreign Exchange (SAFE) 41

    The Gulf funds after the financial crisis 51

    II Sector Analysis 59

    Sovereign wealth funds and new technologies 61

    Financing the expansion of global energy: the role of sovereign wealth fund investments as strategic private equity 77

    Sovereign wealth funds and real estate 87

    Appendix. ESADEgeo Sovereign Wealth Funds Ranking 2013 105

  • Foreword

    Sovereign Wealth Funds 2013 Foreword


  • 1. Foreword

    Sovereign Wealth Funds 2013 Foreword 6

    The world economy continued to slow in 2012; 2013, however, as

    forecasted by the IMF, should mark a turning point following which a

    new bullish phase in the world’s economic cycle should gain

    momentum. In 2012 and part of 2013 the international economic

    scene was dominated by financial strains in Europe and uncertainties

    associated with the US fiscal cliff and the slowdown of emerging

    economies. Additionally, over and above short-term considerations,

    the world economy continued to undergo profound and far-reaching

    change at a dizzying pace, in the form of the rise of new centres of

    economic power in emerging and developing countries.

    As shown in the 2012 Sovereign Wealth Funds Report, one of the

    main manifestations of this new dynamic is the increased

    investment power of emerging countries with trade and budget

    surpluses from oil and other commodities, as reflected in sovereign

    wealth funds’ transactions. These funds now manage more than

    $5.5 trillion and constitute an ever more significant and influential

    economic reality. Nevertheless they remain somewhat unknown in

    the corporate and academic worlds as well as many public

    administrations. Being aware of the importance of these new

    players in the global economy, ESADE Business School, KPMG and

    ICEX-INVEST IN SPAIN have launched this initiative to disseminate

    information as widely as possible. Here is the second in the series:

    the Sovereign Wealth Fund Report 2013.

    The Report addresses the main activity of sovereign wealth funds

    in 2012 and early 2013, analysing the motivation of the different

    funds and their investment strategies. As usual, we will examine the

    relationship of these funds with Spain and Latin America. Additionally,

    we will be turning our focus on funds from the Gulf and China.

    Spain and its companies remained again this year at the centre of

    attention of the sovereign wealth funds, not only in these funds’

    traditional sectors of operation, such as energy and finance, but also

    in real estate, technology and infrastructure.

    In addition to analysing current trends and the main transactions

    worldwide, with a special focus on Spain, in this second report we will

    examine in greater depth the relationships between these funds and

    other sectors. The analysis will cover the SWFs’ “natural” sectors, such

    as energy, sectors of future interest in many countries with SWFs, such

    as infrastructure and the quest for alternative investments outside the

    funds’ comfort zone –i.e. real estate– to improve the low returns

    resulting from the expansionary monetary policies that have been put

    in place. Lastly, we will explore a new and surprising area: the link

    between sovereign wealth funds and new technology.

    Javier Solana,

    President, ESADEgeo

    John Scott,

    President, KPMG España

    Jaime García-Legaz

    Secretary of State for Trade

  • Sovereign Wealth Funds 2013 Introduction



    Javier Santiso

    Professor of Economics, ESADE Business School

    Vice President, ESADEgeo - Center for Global Economy and Geopolitics

  • 2. introDuction

    Sovereign Wealth Funds 2013 is the second report produced by

    ESADEgeo, supported by KPMG and INVEST IN SPAIN, now part of

    ICEX. We would like to start by thanking both institutions for the

    support they have given us, enabling us to complete this report on

    sovereign wealth funds. We would like to pay particular thanks to

    Elena Pisonero, then at KPMG and now the chairwoman of Hispasat,

    for her enthusiasm and vision, without which this initiative would not

    have seen the light of day. I would also like to thank Javier Capapé

    and Tomás Guerrero´s excellent analysis and report coordination and

    Samuel Granados for his outstanding graphics and infographics.

    This work has not been an isolated effort. It is part of a range of

    activities undertaken by ESADEgeo over the last two years. In 2011,

    Javier Santiso together with the then Finance Minister, Juan Carlos

    Echeverry, and his team, advised Colombia’s government on the

    creation of its sovereign wealth fund. We have also launched a series

    of conferences on emerging markets –ESADEgeo Globalization Lab–

    focusing on emerging economies, many of which have such

    institutions: On 30 May 2011 a GLab1 was held on sovereign wealth

    funds with Victoria Barbary, a member of the Monitor Group (London)

    at the time. On 7 February 2012, Christopher Balding of the Peking

    University HSBC Business School (Shenzhen, China) was in attendance

    to present his latest book2. Both of these experts have contributed to

    this report and are ESADEgeo Research Fellows. In addition, we have

    also contributed a chapter on political bias in sovereign fund

    investments to Sovereign Investment, a book edited by Karl Sauvant3.

    Our 2012 Report is already recognized internationally. It is the only

    specialized source cited in the World Investment Report 2013, edited

    by the UNCTAD, when it talks about Sovereign Wealth Funds4.

    This Report is divided into two themed sections. Before these two

    sections we address the main the main trends shown by sovereign

    wealth funds in 2012 (Victoria Barbary). In the first, we analyse the

    profiles of those funds, the main deals they have been involved in

    over the last year and the opportunities that these “giants” of

    state capitalism offer for various regions and countries. We focus

    in particular on Spain and Latin America (Javier Santiso), China

    (Christopher Balding and Ellen Campbell) and the Middle East

    (Christopher Balding and Komal Shakeel). In the second section,

    we examine the activity of sovereign funds by sector: new

    technologies (Javier Santiso), energy (Patrick Schena) and real

    estate (Xavier Reig).

    1 Available at Victoria Barbary is currently the Director of the Institutional Investor’s Sovereign Wealth Center. 2 Sovereign Wealth Funds: The new intersection of money and politics. 2012. Oxford University Press: christopher-balding-detalla-los-desafios-que-afrontan-los-fondos-soberanos-de-inversion-en-una- conferencia-de-esadegeo. 3 Santiso, J., & Avendaño, R. (2012). Are Sovereign Wealth Fund investments politically biased? A comparison with mutual funds. In K. P. Sauvant, L. E. Sachs, & W. P. F. S. Jongbloed (Eds.), Sovereign Investment: Concerns and Policy Reactions (pp. 221–257). New York: Oxford University Press. 4 Available at

    A number of conclusions can be drawn from this analysis:

    • The phenomenon of sovereign wealth funds is spreading rapidly

    throughout all emerging regions: they are not just limited to Asia

    and the Middle East, but also exist in Africa and Latin America.

    There are currently over 80 operating sovereign wealth funds, with

    assets exceeding 5.5 trillion dollars. This year, the number of

    existing and potential funds exceeds one hundred for the first time.

    • In 2012 we witnessed a deepening of South-South relations. This

    is demonstrated by the many emerging economy fund deals

    –both Arab and Asian– involving developing economy companies.

    An example of this phenomenon is the 1.7 billion dollar

    investment by the Malaysian fund Khazanah in January 2012 to

    acquire 15% of the main Turkish health holding company,

    Acibadem Healthcare Group.

    • In our earlier report, we highlighted that Europe was the main

    recipient of investment in 2011 and that Spain and its companies

    were the main destinations for sovereign funds, receiving 8.34

    billion dollars of investment, ahead of France, the UK and

    Germany. In this Report, we find that Spain remains the leading

    destination for sovereign funds. Sovereign funds