Sovereign investors and pension funds are expected to open more overseas offices in 2023, even as global growth prospects slow and the threat of inflation lingers.
In 2022, sovereign wealth funds (SWFs) and public pension funds opened 10 offices overseas, four of which were in Asia. At least two Asian asset owners - Singapore's Temasek and Malaysia's Khazanah - plan to boost their presence outside Asia.
The desire to establish an overseas presence is expected to extend into 2023.
“I don’t think recession or inflation will stop funds from opening overseas to focus on strategic markets,” said Diego Lopez, managing director of research consultancy Global SWF. “There are already six offices announced, so there may as well be more than 10 in 2023.”
Funds that opened offices overseas were Saudi Arabia’s Public Investment Fund (New York, London, Hong Kong), Ontario Teachers’ Pension Plan (San Francisco, Mumbai), GIC (Sydney), British Columbia Investment Management (New York), Canadian pension fund Caisse de dépôt et placement du Québec’s (CDPQ) real estate arms, Ivanhoé Cambridge (Sydney) and Otéra (New York) and Armenian National Interests Funds (Abu Dhabi).
This is according to the annual report released earlier this month by Global SWF.
Asset owners are increasingly finding it important to set up operations overaseas.
Many investors see merit in having an on-the-ground presence to enhance their abilities to capture more investment opportunities in overseas markets. This is especially true when investing in alternative asset classes or engaging in direct deals.
It allows easier access to key local contacts and opens up new avenues of co-operation.
Many international asset owners operating in Asia, including CDPQ and Abu Dhabi Investment Authority (ADIA), focus on private assets such as real estate and infrastructure investment in Asia.
Both CDPQ and ADIA have offices in Hong Kong.
When CDPQ unit Ivanhoe Cambridge opened a new office in Sydney in November, it said it wanted to increase investments in its primary markets in the region, namely Singapore, Australia, India and Japan.
Similarly, Asian asset owners are also bulking up their presence overseas.
Singaporean state investor Temasek has already said it will open a third European office in Paris. Opening the office reflects the importance of the Europe, Middle East and Africa region as an investment destination for Temasek, a spokesperson told AsianInvestor in November.
Malaysian sovereign wealth fund Khazanah plans to move its US office from San Francisco to New York. It has previously made private equity investments in Europe and the US.
GATEWAY TO ASIA
In Asia, Singapore and Hong have been leading investment office destinations for asset owners.
Canada’s Alberta Investment Management Corporation (AIMCo) has chosen Singapore as its Asian base of operations, according to Global SWF.
The asset owner will use Singapore to advance its private equity strategy in Asia, including Australia and New Zealand.
In February 2022, it backed a consortium led by Canada’s Brookfield Asset Management which also included Healthcare of Ontario Pension Plan, Investment Management Corporation of Ontario and PSP Investments as well as Australia’s Sunsuper Superannuation Fund to acquire Australia’s AusNet electricity network in a $7.7 billion deal.
Another Canadian fund, Healthcare of Ontario Pension Plan, is also reportedly looking at a Singapore office.
Hong Kong is seen as the gateway to China, while Singapore is seen as a gateway to the rest of Asia.
Saudi entity PIF is also reportedly opening a fourth office in mainland China and an office in India.
The fund - through a subsidiary - in November announced a $776 million joint venture with China’s SenseTime to develop artificial intelligence capabilities, indicating the growing importance of ties with that market.
SINGAPORE VERSUS HONG KONG
AIMCo’s operations in Singapore will bring the number of SWFs and and public pension funds operating in the island nation to nine with total employees exceeding 200 – excluding the country’s state-owned investors, a July 2022 Global SWF report noted.
The numbers are similar to Hong Kong, which also hosts nine overseas offices with around 250 personnel, the report said.
Finally, British Columbia Investment Management Corporation also plans to open its fourth office and second overseas office in London in 2023, capping the six already announced offices.