WSG Annual Meeting, Munich 2008 Sovereign Wealth Fund Activity in Private Equity and Private Real Estate September 12 th, 2008 Private Equity Intelligence Ltd.,

Sovereign Wealth Fund Activity in Private Equity and Private Real Estate SWF universe: small number of very large investors, with total assets growing rapidly Historically mostly conservative investors, modest allocations to alternative assets – However, ‘natural’ investors in alternatives: long time horizon; no fixed liabilities to match – Many now entering / increasing allocations – Huge growth potential: Asset Base X Allocations Potential recognised by fund managers: – Anchor positions in large funds – Tailored fund structures – Invest in management company – Direct / co-investments Behaving very much like other major investors

Largest SWF Investors Some would include China’s State Administration of Foreign Exchange - $1,680 bn – as a SWF.

SWF’s Investing in Private Equity

Average LP Allocations to Private Equity SWF current PE allocations not known with precision – estimate at 2 – 3% median

Patterns of SWF Investment in Private Equity 1.‘Standard’ LP investments in Private Equity Funds – ADIA, GIC, Temasek, KIA, QIA, Alaska Permanent Fund, etc. – Pure investment rationale, limited influence on GP’s activities 2.‘Anchor’ LP investments in Private Equity Funds – National Social Security Fund – China, Temasek Holdings, CIC investment in dedicated JC Flowers fund – Anchor investor in fund to give investor bigger stake and / or act as catalyst for economic development purposes

Examples – ‘Standard’ LP Investment – Known ADIA Fund Investments

Examples – ‘Anchor’ LP investments in Private Equity Funds

Patterns of SWF Investment in Private Equity (contd.) 3.Investment in the management company itself, often in addition to investing in funds – CIC investment in Blackstone, Mubadalar investment in Carlyle, ADIA stake in EFG-Hermes, etc. – Usually seen as a means of increasing exposure to private equity; enhanced alignment between LP and GP; some influence 4.Direct investments in private companies – Istithmar World Capital 5.PIPE – Private Investment in Public Equity – ADIA investment in Citigroup

What If?

SWF’s Investing in Real Estate

Sovereign Wealth Fund Activity in Private Equity and Private Real Estate SWF universe: small number of very large investors, with total assets growing rapidly Historically mostly conservative investors, modest allocations to alternative assets – However, ‘natural’ investors in alternatives: long time horizon; no fixed liabilities to match – Many now entering / increasing allocations – Huge growth potential: Asset Base X Allocations Potential recognised by fund managers: – Anchor positions in large funds – Tailored fund structures – Invest in management company – Direct / co-investments Behaving very much like other major investors