Sovereign funds’ corporate deals halve in Q3, Asians stay active

Reuters: The value of corporate deals with sovereign wealth fund (SWF) participation halved in the third quarter as oil-driven funds continued to take a back seat.

Asian funds GIC of Singapore and CIC of China made all the running.

According to Thomson Reuters data, SWFs participated in deals worth just $ 14.1 billion, down from a revised $ 28.3 billion April-June, even though the number of deals rose to 38 from 31 quarter-on-quarter.

The second quarter’s total, however, was swollen by China Investment Corp’s (CIC) whopping $ 13.7 billion acquisition of warehouse firm Logicor, Europe’s biggest ever private equity real estate deal.

In a continuation of the previous quarter’s trend, CIC and GIC remained the most acquisitive funds, with CIC involved in 14 deals and GIC 10.

“The sovereign funds that are active are those that are generating current account trade surpluses,” said Michael Power, a strategist at Investec Asset Management.

In contrast, the oil-backed funds have been less acquisitive in recent quarters, reflecting the constraints imposed by persistent low oil prices.

Markus Massi, a senior partner at Boston Consulting Group, said another reason for the dominance of the Asian funds was that they had specialist teams looking for deals.

“The Asians are actively going out and scouting. If you’re a private equity company and you want to close a deal, it’s easier to go to someone who already has the knowledge and capability on the other side.”

GIC participated in the top three deals, the largest being a $ 6.4 billion offer for Danish payments processor Nets by newly-formed company Evergood 5. The deal was backed by a consortium that included GIC, led by private equity firm Hellman & Friedman.