ADIA invests in London pension corp amid growing appetite for directs

The $828bn sovereign wealth fund joins existing investors CVC, Reinet and Legend Holdings.

Limited partner appetite for direct investing is on the rise, and long-time fund investor Abu Dhabi Investment Authority is among those dialing up the amount of capital it invests in the strategy.

Sovereign wealth funds in general have been preparing to ramp up direct investments, with almost half of those surveyed in PwC’s Sovereign Investors 2020 report in 2016 saying they would invest in targets directly, up from 21 percent two years earlier.

ADIA made its latest move into co-investments this week with the purchase of a 21.4 percent stake in London’s Pension Investment Corporation from JC Flowers. The $828 billion sovereign wealth fund joins Luxembourg securitisation vehicle Reinet Investments, which owns just under 44 percent, CVC’s €4.5 billion Strategic Opportunities vehicle, which holds 13 percent and 5 percent shareholder Legend Holdings, according to a PIC spokesman.

The deal did not add primary capital into PIC, though its owners will help fund operations over time, the spokesman added. As with CVC – which invested from its long-life fund – ADIA is likely to employ a long hold strategy on the business.

PIC was the brainchild of pensions A-lister Eddie Truell, who founded the business alongside his brother Danny in 2006 before departing six years later. The company provides insurance buyouts, buy-ins or bulk annuities to the trustees and sponsors of UK defined benefit pension funds.

ADIA’s appetite for directs is growing. It made headlines earlier this month after participating in a reported $10 billion funding round for Asian technology corporation Ant Financial.

The fund refers to directs as ‘principal investing’, which reflects its role in originating, valuing and structuring deals, as opposed to typically passive co-investment strategies. It is understood to be targeting more of these partnerships, having reduced its reliance on external managers and built out its in-house investment team.

External fund managers oversaw 55 percent of ADIA’s assets under management last year, down from 60 percent the previous year.