* Total of 39 deals in Q2, down from 45 in Q1
* Biggest was for Alibaba (NYSE:BABA) affiliate Ant Financial
* Real estate deals amongst most popular
By Claire Milhench
LONDON, July 8 (Reuters) - Sovereign investors, including
wealth funds, made $14.1 billion worth of acquisitions in the
second quarter, down 26 percent from the first three months of
the year but underpinned by a rebound in real estate deals.
Data compiled by Thomson Reuters shows sovereign investors,
a category that can include everything from state pension funds
to oil-backed investment vehicles, were involved in 39 deals
between April and June, six fewer than in the first quarter.
The single biggest deal was the $4.5 billion funding round
for Ant Financial Services Group, an affiliate of China's
biggest e-commerce company, Alibaba Group Holding BABA.N ,
which attracted China's CIC Capital, amongst others.
Some sovereign investors witnessed reduced inflows as a
result of lower oil prices and increasing demands from
cash-strapped governments - Russia for instance is proposing to
empty one of its two sovereign funds next year.
Volatile markets have also taken a toll, with big direct
investors such as Singapore's Temasek suffering a fall in the
value of its portfolio of almost $18 billion over the past year.
This could be making the sector more cautious about
committing new capital. However, industry experts suggested the
publicly available figures might not tell the whole story, with
some deals flying below the radar, such as those carried out by
boutique fund managers on behalf of sovereign wealth funds
(SWFs).
"There's a steady secular flow into illiquid investments
which hasn't stopped, so the overall volumes should be higher,"
said Elliot Hentov, head of policy and research in the official
institutions group at State Street Global Advisors.
"There are a lot of deals we don't see that have SWF
participation."
Patrick Thomson, head of international institutional clients
at JP Morgan Asset Management, said there was no requirement for
private transactions to be reported, so some investments were
not being captured in public data.
The overall volume was still 11 percent higher than the
second quarter of 2015, helped by a handful of very large
transactions.
The second largest deal was the $3.5 billion investment in
ride-hailing service Uber by Saudi Arabia's Public Investment
Fund while the $2.5 billion sale of BlackRock's
43-storey office building in Singapore to the Qatar Investment
Authority (QIA) was in third place. ESTATE
Following Britain's vote on June 23 to leave the European
Union, London property markets have been thrown into turmoil
with many funds freezing investor cash to counter ballooning
outflows.
However, property-related deals made up roughly a quarter of
the second quarter total, as SWFs continued to diversify away
from low or negative yielding developed market government bonds.
Property offers predictable, repeatable cashflows, and
yields of 3-5 percent in some core retail markets, JPMorgan's
Thomson said. Also, prime office blocks are expensive, allowing
investors to do very large single transactions.
"SWFs have relatively limited investment staff, and need to
put quite a lot of money to work, so they need an asset class
that can absorb a lot of capital," Thomson said.
Real estate has also proved easier for SWFs to access than
infrastructure and private equity in recent years. An Invesco
survey of sovereign investors found that the average portfolio
exposure to real estate had risen to 6.5 percent in 2015, from 3
percent in 2012.
"There is a greater stock of real estate and a greater
number of places to source deals," said Alex Millar, head of
EMEA sovereigns, Middle East and Africa institutional sales at
Invesco.
Some Gulf SWFs were said to have held back from new property
buys in Britain before the referendum. But Norway's $830 billion
fund said in March it was undeterred, and Singapore's Gif said
the turmoil may even bring buying opportunities.