LP Special: Development squad

These would-be private equity investors have yet to commit wholeheartedly to the asset class, but if they did the impact would be significant.


In recent months, Chinese insurance companies such as Anbang, Ping An and China Life have powered ahead in their buying sprees both at home and abroad. China Life poured $600 million into ride-hailing app Didi Chuxing, while Anbang bought the Waldorf Astoria in New York. It’s not hard to see why. Anbang’s largest shareholders are state-owned companies Shanghai Automotive Industry Group Corporation and oil giant Sinopec Group, Ping An is backed by CITIC Securities and Temasek, while China Life is a state insurer. The big insurers have already backed several PE funds at home, but expect them to start dipping into overseas private equity.


Following the appointment of Sheikh Abdullah bin Mohammed bin Saud Al Thani as chief executive in December 2014, Qatar’s $300 billion sovereign wealth fund is looking to diversify its asset base, according to reports. QIA is intending to increase its investments in Asia and the US, and while the bulk of its private equity activity thus far has been direct, industry insiders and media reports suggest it plans to allocate more money to third-party fund managers.


Angola’s sovereign wealth fund, known as Fundo Soberano de Angola (FSDEA), has nearly $5 billion in assets under management and is looking to diversify revenue sources beyond oil production and trading. It recently increased its allocation to private equity, including infrastructure, real estate, agriculture and mezzanine investments, to 58 percent of its portfolio, up from 34 percent at the end of 2014. However, most in the private equity world won't be able to secure a commitment from FSDEA as it is focusing solely on investing in Angola and sub-Saharan Africa. FSDEA’s only exposure to North America and Europe will be through its fixed income portfolio.


Norway’s sovereign wealth fund is the largest in the world, currently valued at NKr7.15 trillion ($853 billion; €759 billion). Set up in 1990, the fund, which is managed by Norges Bank Investment Management, part of Norway’s central bank, holds the surplus wealth produced by the country's petroleum income. GPFG’s current investment strategy is 60 percent equities, 35 percent fixed income and 5 percent real estate. Setting up a private equity arm for such a behemoth would be no mean feat, but if the fund were to allocate even 1 percent of its colossal haul to private equity the impact on the industry would be substantial.


Japan’s public pension, the world’s largest at $1.2 trillion, has an untouched allocation to alternatives of up to 5 percent, or about $60 billion. GPs and investors have watched developments unfold over the last year, including the appointment of Norinchukin Bank’s ex-managing director Norihiro Takahashi as its new president; the hire of former Coller Capital partner Hiromichi Mizuno as its first head of investment; and its first move into private equity — a partnership with the International Finance Corporation to provide $500 million for investments in developing countries. Industry players are excited about the potential for other Japanese pensions to follow suit.