SWF ASSET ALLOCATION REPORT 2012 - Sovereign Wealth Fund Institute

2010 | SOVEREIGN WEALTH ASSET ALLOCATION

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sw�nstitute.orgSOVEREIGN WEALTH FUND ASSET ALLOCATION REPORT 2012

SWF ASSETALLOCATIONREPORT 2012

a SOVEREIGN WEALTH ASSET ALLOCATION | 2010

A Commitment to Providing Un-Biased Reasearch on Sovereign Wealth Funds and other long-term public investors

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Contents04INTRODUCTION

05ASSET CLASS FORECAST

012SOVEREIGN WEALTH TRANSACTIONS

EUROPE

018Norway Government Pension Fund Global

021National Pensions Reserve Fund (Ireland)

026National Wealth Fund (Russia)

027Reserve Fund (Russia)

028Strategic Investment Fund (France)

MIDDLE EAST

032Mubadala Development Company

034Abu Dhabi Investment Authority

038Abu Dhabi Investment Council

040Emirates Investment Authority

041International Petroleum Investment Company

042Qatar Investment Authority

045Kuwait Investment Authority

049Mumtalakat Holdings

AFRICA

052Algeria Revenue Regulation Fund

053Botswana Pula Fund

054Libyan Investment Authority

AMERICAS

058Sovereign Fund of Brazil

059Social & Economic Stabilization Fund (Chile)

060Pension Reserve Fund (Chile)

SOVEREIGN WEALTH ASSET ALLOCATION | 2012 © 2012 Sovereign Wealth Fund Institute

061Alberta Heritage Fund

063Oil Revenues Stabilization Fund of Mexico

064Heritage and Stabilization Fund (Trinidad & Tobago)

065Alaska Permanent Fund Corporation

070New Mexico State Investment Council

074Texas Permanent School Fund

076Wyoming Permanent Fund

ASIA

080 State Oil Fund of Azerbaijan

081Brunei Investment Agency

082Kazakhstan National Fund

083Khazanah Nasional Berhad

085Korea Investment Corporation

087Hong Kong Monetary Authority Investment Portfolio

089Temasek Holdings

093Government Investment Corporation of Singapore

097China Investment Corporation

101National Social Security Fund (China)

104China-Africa Development Fund

105SAFE Investment Company

106State Capital Investment Corporation (Vietnam)

107Timor-Leste Petroleum Fund

AUSTRALIA AND NEW ZEALAND

110Australia Future Fund

113New Zealand Superannuation Fund

INDEX

116Profile Index by Country

118Exhibit Index

© 2012 Sovereign Wealth Fund Institute 2012 | SOVEREIGN WEALTH ASSET ALLOCATION

10 SOVEREIGN WEALTH ASSET ALLOCATION | 2012 © 2012 Sovereign Wealth Fund Institute

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.

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.

TimberlandThis 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.

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

Source: Online Sovereign Wealth Fund Transaction Database

11© 2012 Sovereign Wealth Fund Institute 2012 | SOVEREIGN WEALTH ASSET ALLOCATION

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 & GasMay 2012, *Two funds combined

Largest Sovereign Wealth Funds


Select Alternative InvestmentsFund 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

Future Fund utilizes external manager for some real estate. The fund is also keen on partnering with other institutional investors.

Private Equity & InfrastructureThe 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 AllocationIn 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.

AUSTRALIA AND NEW ZEALAND

113© 2012 Sovereign Wealth Fund Institute 2012 | SOVEREIGN WEALTH ASSET ALLOCATION

New Zealand Superannuation FundInvestment 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

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 value-add 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

Country:New ZealandAssets:US$ 15.9 Billion

Profile Index by CountryALGERIA052Algeria Revenue Regulation Fund

AUSTRALIA110Australia Future Fund

AZERBAIJAN080 State Oil Fund of Azerbaijan

BAHRAIN049Mumtalakat Holdings

BOTSWANA053Botswana Pula Fund

BRAZIL058Sovereign Fund of Brazil

BRUNEI081Brunei Investment Agency

CANADA061Alberta Heritage Fund

CHILE060Pension Reserve Fund

059Social & Economic Stabilization Fund

CHINA104China-Africa Development Fund

097China Investment Corporation

101National Social Security Fund (China)

105SAFE Investment Company

EAST TIMOR107Timor-Leste Petroleum Fund

FRANCE028Strategic Investment Fund

HONG KONG087Hong Kong Monetary Authority Investment Portfolio

IRELAND021National Pensions Reserve Fund

KAZAKHSTAN082Kazakhstan National Fund

KUWAIT045Kuwait Investment Authority

LIBYA054Libyan Investment Authority

MALAYSIA083Khazanah Nasional Berhad

MEXICO063Oil Revenues Stabilization Fund of Mexico

NEW ZEALAND113New Zealand Superannuation Fund

NORWAY018Norway Government Pension Fund Global

QATAR042Qatar Investment Authority

RUSSIA026National Wealth Fund

027Reserve Fund

SINGAPORE093Government Investment Corporation of Singapore

089Temasek Holdings

SOUTH KOREA085Korea Investment Corporation

TRINIDAD & TOBAGO064Heritage and Stabilization Fund

UNITED ARAB EMIRATES034Abu Dhabi Investment Authority

038Abu Dhabi Investment Council

040Emirates Investment Authority

041International Petroleum Investment Company

032Mubadala Development Company

UNITED STATES065Alaska Permanent Fund Corporation

070New Mexico State Investment Council

074Texas Permanent School Fund

076Wyoming Permanent Fund

VIETNAM106State Capital Investment Corporation (Vietnam)


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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.

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The Online Sovereign Wealth Fund Transaction Database is a dedicated database product that tracks sovereign wealth fund transactions from 1986 till present.

Sovereign Wealth Fund Transaction Database

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SWF ASSETALLOCATIONREPORT 2012

SWF ASSET ALLOCATION REPORT 2012 - Sovereign Wealth Fund Institute

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