By Claire Milhench
LONDON, Oct 1 (Reuters) - Sovereign wealth funds spent a
total of $24.9 billion on overseas acquisitions during the third
quarter of 2015, almost double the previous quarter as they
chased after trophy assets.
Thomson Reuters data shows that sovereign wealth funds,
which invest windfall revenues from oil and other commodity
exports for future generations, were involved in 28 deals during
the July-September period, down 10 from the previous quarter.
Deal volumes are still shy of the $30.6 billion peak reached
in the last quarter of 2014, when sovereign funds were buying up
assets at their fastest rate since the financial crisis. But it
marks a significant rebound from the first quarter when deal
value slipped to $5.4 billion for 32 transactions.
The surge in deal value is partly attributable to the
limited number of investment opportunities, especially in
infrastructure, where some funds have struggled to hit their
allocation targets.
Others have chased "trophy assets" to fill out their real
estate portfolios. But competition is fierce for these Tier 1,
headline-grabbing skyscrapers.
"There is so much capital in the market," said Joe Valente,
head of research for European real estate at JP Morgan Asset
Management. JPM.N
"By and large these assets are fully priced, but that
doesn't mean investors will stop buying them. There is such
competition for stock, that is distorting the premium."
SWF ASSETS UNTOUCHED
The $8 billion sale of Symantec's SYMC.O Veritas data
storage business to a consortium of investors that included
Singapore's GIC ID:nL3N10M444 was the biggest deal of the
quarter.
This was closely followed by the $6.4 billion sale of
Tesco's TESO.O South Korean arm Homeplus to a consortium that
included Singapore's Temasek Holdings TEM.UL and the Canada
Pension Plan Investment Board. ID:nL5N11D0HI
"Some of the sovereign funds now have significant resources
to undertake the necessary due diligence for deals of that size
- they're becoming more confident," said Gavin Ralston, head of
official institutions at fund manager Schroders . SDR.L
Real estate remained popular, with Norway's sovereign wealth
fund buying a stake in Airbnb's corporate headquarters in San
Francisco ID:nO9N0Z9025 , whilst Qatar's Katara Hospitality
hotel group acquired the Westin Excelsior hotel in Rome.
ID:nL5N11M3UO
Sovereign wealth funds have stayed active despite
predictions that falling commodity prices would force them to
dial back overseas acquisitions. ID:nL6N0ST2YZ
Much has also been made of the Qatar Investment Authority's
paper loss from the slide in Volkswagen (XETRA:VOWG) VOWG_p.DE and Glencore
shares GLEN.L . ID:nL5N11Z3CP
But year-to-date, overall spending is level-pegging with the
same period last year at around $43.4 billion. Ralston said this
was mainly because the funds active in the big direct deals
aren't dependent on oil revenues.
Yet even the oil exporters have tended to use central bank
foreign exchange reserves to bridge the gaps in their budgets,
rather than tap into their sovereign wealth funds. Saudi Arabia
has also chosen to issue domestic debt. ID:nL5N1123ZL