Monday, January 18, 2021

Indonesia launches second fundraiser for sovereign wealth fund

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Indonesia is ready to launch a second round of fundraising for its new sovereign wealth fund after securing a first tranche of around $ 15 billion for the entity, according to a senior minister.

Luhut Pandjaitan, minister of maritime affairs and investment, told the Financial Times that Indonesia raised up to $ 15.5 billion in the first round of financing for the funds, which aims to boost investment in infrastructure in Southeast Asia’s largest economy.

The new fund could be launched as early as mid-January after President Joko Widodo signed a presidential decree last week finalizing its structure, Pandjaitan said.

The fund represents the first serious test of a set of radical reforms adopted by Indonesia in October and designed to attract foreign investors to the world’s fourth most populous country as it seeks to counter the economic impact of the coronavirus pandemic.

It will also be the first significant indicator of the international appetite for sovereign wealth funds in the region following the multibillion dollar embezzlement scandal 1Malaysia Development Berhad in neighboring Malaysia.

Mr Pandjaitan said the headhunters aimed to hire managers for the fund, known as the Nusantara Investment Authority, by next month.

Mr Pandjaitan, who coordinated efforts to set up the new vehicle, said he had had discussions with the Caisse de dépôt et placement du Québec (CDPQ), Canada’s second-largest public pension fund, on potential investments worth up to $ 2 billion. while APG, the Netherlands’ largest pension fund, allocated $ 1.5 billion to the vehicle.

The pension funds would join the US International Development Finance Corporation and the Japan Bank for International Cooperation, which would invest $ 2 billion and $ 4 billion respectively in the new vehicle, Pandjaitan said. Indonesia would start the fund with up to $ 6 billion.

A JBIC spokesperson declined to comment on the “confidential negotiations.” The DFC did not respond to requests for comment. APG declined to comment.

The CDPQ said: “The CDPQ sees Indonesia as an attractive market for investment – particularly in the infrastructure sector – and is in preliminary discussions with the relevant ministries around a possible partnership with the Nusantara Investment Authority”

Jakarta is also in talks with the Abu Dhabi Investment Authority, which is helping Indonesia set up the new fund.

ADIA plans to brief global funds managing between $ 5 billion and $ 10 billion in total on the Nusantara fund via a virtual meeting, Pandjaitan said. Guests will include the Saudi Arabia Public Investment Fund, as well as Scandinavian and European entities, he added.

“The ADIA brand could also provide [our] the reputation of the sovereign wealth fund has increased, ”Mr. Pandjaitan said.

ADIA declined to comment. PIF did not respond to requests for comment.

Analysts said the search for yield in a low interest rate environment could help investor interest in the new sovereign wealth fund.

“With low interest rates everywhere, people are hungry for yield [so] this is what you expect to see. . . people moving into riskier assets, ”said Gareth Leather, Asia economist at Capital Economics. “Indonesian infrastructure projects certainly fall into this category.”

Mr Pandjaitan traveled to the United States last month to introduce the Nusantara fund to private equity firms such as Blackstone and Carlyle.

He also contacted BlackRock, EIG Partners, Global Infrastructure Partners, Stonepeak, I Squared Capital and JPMorgan, according to the Indonesian Ministry of Maritime Affairs and Investment.

Additional reporting by Leo Lewis in Tokyo

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