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September 12 th , 2008

WSG Annual Meeting, Munich 2008 Sovereign Wealth Fund Activity in Private Equity and Private Real Estate. September 12 th , 2008. Private Equity Intelligence Ltd., www.preqin.com. Sovereign Wealth Fund Activity in Private Equity and Private Real Estate.

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September 12 th , 2008

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  1. WSG Annual Meeting, Munich 2008 Sovereign Wealth Fund Activity in Private Equity and Private Real Estate September 12th, 2008 Private Equity Intelligence Ltd., www.preqin.com

  2. Sovereign Wealth Fund Activity in Private Equity and Private Real Estate • SWF universe: small number of very large investors, with total assets growing rapidly • Historically mostly conservative investors, modest allocations to alternative assets • However, ‘natural’ investors in alternatives: long time horizon; no fixed liabilities to match • Many now entering / increasing allocations • Huge growth potential: Asset Base X Allocations • Potential recognised by fund managers: • Anchor positions in large funds • Tailored fund structures • Invest in management company • Direct / co-investments • Behaving very much like other major investors

  3. Largest SWF Investors Some would include China’s State Administration of Foreign Exchange - $1,680 bn – as a SWF.

  4. SWF’s Investing in Private Equity

  5. Average LP Allocations to Private Equity SWF current PE allocations not known with precision – estimate at 2 – 3% median

  6. Patterns of SWF Investment in Private Equity • ‘Standard’ LP investments in Private Equity Funds • ADIA, GIC, Temasek, KIA, QIA, Alaska Permanent Fund, etc. • Pure investment rationale, limited influence on GP’s activities • ‘Anchor’ LP investments in Private Equity Funds • National Social Security Fund – China, Temasek Holdings, CIC investment in dedicated JC Flowers fund • Anchor investor in fund to give investor bigger stake and / or act as catalyst for economic development purposes

  7. Examples – ‘Standard’ LP Investment – Known ADIA Fund Investments

  8. Examples – ‘Anchor’ LP investments in Private Equity Funds

  9. Patterns of SWF Investment in Private Equity (contd.) • Investment in the management company itself, often in addition to investing in funds • CIC investment in Blackstone, Mubadalar investment in Carlyle, ADIA stake in EFG-Hermes, etc. • Usually seen as a means of increasing exposure to private equity; enhanced alignment between LP and GP; some influence • Direct investments in private companies • Istithmar World Capital • PIPE – Private Investment in Public Equity • ADIA investment in Citigroup

  10. What If?

  11. SWF’s Investing in Real Estate

  12. Sovereign Wealth Fund Activity in Private Equity and Private Real Estate • SWF universe: small number of very large investors, with total assets growing rapidly • Historically mostly conservative investors, modest allocations to alternative assets • However, ‘natural’ investors in alternatives: long time horizon; no fixed liabilities to match • Many now entering / increasing allocations • Huge growth potential: Asset Base X Allocations • Potential recognised by fund managers: • Anchor positions in large funds • Tailored fund structures • Invest in management company • Direct / co-investments • Behaving very much like other major investors

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