SWFs - do they do deals?
hi all,
I was speaking with a friend who works in real estate private equity and he claimed that sovereign wealth funds across the world do not directly do deals. He said that instead, they invest in real estate private equity firms around the world and use a fund-of-funds model.
I feel as though this is a massive generalisation. Is this true? Is it true that sovereign wealth funds do not do their own in-house real estate deals? If so, why? If not, which sovereign wealth funds are known to do deals? ADIA? QIA? GIC? Gulf Capital? Public Investment Fund (PIF)?
They do both bro. Not just in RE but everything. Typically SWFs learn from the established funds by working with them, so they get more sophisticated to be able to do certain deals on their own.
Just look up QIA and see how much of London they own, including the tallest building in the city. They obviously didn't do this through funds.
Anyway, of course the less sophisticated SWFs would likely begin their journey by investing in funds before eventually doing their own.
The argument I’ve heard from a very large US pension fund is that they have too much capital and not enough people to do individual deals. I’m guessing the same is true of most SWFs. But like with everything there are exceptions.
Just from my limited experience, it was common for SWF's to co-invest during larger rounds. Since SWF's lack both the industry expertise and a precise enough investment thesis for any individual deal, this is a way to put more capital to work with investment professionals they already trust.
SWFs absolutely invest in deals, they may not lead on their own. Look at PIF, LGT, etc and what they have invested in. crunchbase, or other DBs.
SWFs make both direct and passive investments. The % of direct vs passive investments will vary by SWF, but the ones you've mentioned (ADIA, QIA, GIC) do both.
Abu Dhabi Investment Authority (ADIA) and Qatar Investment Authority (QIA), for ex, directly invest heavily in infrastructure and real estate/ hospitality assets around the world. QIA has been investing in prime real estate like The Plaza Hotel in NYC and Harrods in London. ADIA's been around the space for longer.
Can confirm (in London) they will do their own deals and occasionally lead them. However the ticket sizes are absolutely gargantuan. If it ain’t 9 figures, it doesn’t get a look in. They will typically invest with a partner who is a developer/PE/REIT and let them do the heavy lifting.
Can also confirm that in London they do their own deals. If you look at the new Chelsea Barracks development, it has QIA plastered all over their outside walls.
cheers mate! When you say "in London", do you mean from a London based team? Or the asset (Chelsea Barracks) is located in London? Or both? Because I read an article somewhere that the biggest SWFs (especially the Gulf ones) do hire in London.
(sorry if I'm being dim!)
The asset is in London. Not sure where their EU RE team is based.
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Assetd
I know QIC does individual deals, there was a deal in my market they divested from a couple years ago. Not sure if they count as a SWF though, maybe a subnational wealth fund?
If you're referring to QIC as Qatar Insurance Company, then no it's not a SWF. The only SWF of Qatar is QIA (Qatar Investment Authority), which used to go by QH (Qatar Holdings) as well previously.
Nope, I was referring to the Queensland Investment Corporation in Australia.
OP you got me with this click bait title!
Everytime is see SWF, by default i think of Single White Female. Sorry I don't have anything to add. Just wanted to voice my frustration. Enjoy the rest of your night and stay safe.
Work at one of the Middle East SWFs mentioned above. Including ourselves, SWFs mostly do fund investments, as we need to deploy very large amounts of capital each year. But time to time we also direct investments, increasingly more so over the last few years. We almost never go out and do proprietary sourcing ourselves, however. In almost all cases, a GP or PM or a brokerage firm will bring us direct/co-investment opportunities, and we'll invest in the asset but also sign a IMA with a GP/PM who has local presence to manage the asset/property. I'd say 70-75% of our work is fund/SMA investments (and re-ups), but of course this could vary by firm.
For deal teams, compensation is identical to that of BB IBD, with significantly better hours. (55-60 hrs/week) Plus most foreign employees benefit from the 0% (2x after-tax income vs U.S.) From what I heard from my colleagues in middle/back offices, their compensation is also similar to what you'd see in U.S. banks.
Thanks for this. Any thoughts on the outlook in terms of hiring etc?
If I could add on, KIA for example devotes a fair bit of capital to Henderson Park and to Cale Street, exclusively. In London.
There really isn't a formal recruiting cycle for most ME SWFs from what I know. The turnover rate at my firm is very low and most people stick around for 10 years+ barring certain family circumstances. A lot of people were recruited through headhunters including myself. Everyone at my team did IBD (or some kind of M&A advisory) or PE for 5+ yrs prior to joining the firm. Some applied online so would keep an eye on their career websites and other online channels (e.g. linkedin, efinancialcareers, indeed, etc.) if you're interested. Also, the Republic of Azerbaijan just launched their own SWF called SOFAZ, so there might be some recruiting opportunity there in the near-term future.
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