Sign in
- You are currently accessing unquote.com via your Enterprise account.
  
  If you already have an account please use the link below to sign in.
  
  If you have any problems with your access or would like to request an individual access account please contact our customer service team.
  
  Phone: +44 (0)203 741 1137
  
  Email: Georgina.Lawson@acuris.com
  - Sign in
Follow us
- Twitter
- LinkedIn
Free Trial
Subscribe

Sovereign health

Tweet
Facebook
LinkedIn
Google plus
Send to

Not long ago, sovereign wealth funds (SWFs) achieved saviour status among an ailing private equity industry, with many commentators indicating that they would replace a large chunk of institutional money fleeing from the industry. Many GPs have indicated that future fundraisings will feature a relatively higher proportion of such investors, and sound grateful for the diversification into such "safe" backers. Such a reputation was illustrated earlier this year when Barclays secured an investment from the Persian Gulf, which was credited with staving off government ownership. The executive that orchestrated the deal, Roger Jenkins, has since left to set up a firm to advise SWFs

Deemed exotic as recently as five years ago, SWFs have made real inroads into the private equity space; initially as fund backers and more recently, as their sophistication grows, even as direct investors. Earlier this year, Apax got in on the game, selling a stake in its management company to the PE arm of Singapore's SWF and Australia's Future Fund. Now, China Investment Corporation may invest up to EUR800m in Apax's EUR11.2bn fund and take a stake in the management company. The move is intended to relieve liquidity pressure for extant LPs and create a permanent (read: safe) pool of capital.

All the cooperation between private equity and SWFs makes the recent debt debacle in Dubai alarming. The quick rebound in stock markets indicated that investors deem the tiny emirate insignificant to the global economy. But such sentiment is to ignore not only globalisation, but what such difficulties may signal. Until now, government money was deemed sound, and the Icelandic situation a one-off. But the subsequent increase in Dubai's credit default swap rates attest to its newfound risk. Might it serve as a harbinger for other sovereign sources of capital the West has come to lean on, and sovereign wealth prove the second dip in this recession?

Maybe. But as one adviser told unquote": "Half of LP money will not come back to private equity, and SWFs represent the only place to go. Yes, there is risk, but such is the case with all investors right now."

Yours sincerely,

Kimberly Romaine

Editor-in-chief, unquote"

Tel: +44 20 7004 7526

kimberly.romaine@incisivemedia.com.