Its sights set on the United States and Asia, South Korea's $30 billion sovereign wealth fund is hunting for equities. Korea Investment Corp. (KIC) doesn't see bonds outperforming stocks over the long term, which is what has prompted the move.

Once the reallocation is executed, equities will account for half of KIC's "traditional" investments. Today, it stands at 40%. High quality equities and fixed income securities comprise 90% of KIC's portfolio, with the rest, one would gather, consisting of "non-traditional" investments.

Continue reading Korean sovereign, pension funds preparing to load up on equities

Korean sovereign, pension funds preparing to load up on equities originally appeared on BloggingStocks on Tue, 21 Jul 2009 15:00:00 EST. Please see our terms for use of feeds.

The worst may be over for AIG (NYSE: AIG), or it is getting closer.

The sale of the insurance firm's large aircraft leasing operation, International Lease Finance Corp., has drawn capital from sovereign funds which have been sitting on the sidelines as financial supporters of buyouts.

According to Reuters, potential buyer for the operation "include Singapore's Temasek Holdings Pte Ltd, Dubai's investment arm Istithmar World, Kuwait Investment Authority and China Investment Corp, the sources said." The business could be worth $10 billion.

Continue reading AIG may get a lifeline for its shares

AIG may get a lifeline for its shares originally appeared on BloggingStocks on Tue, 27 Jan 2009 04:02:00 EST. Please see our terms for use of feeds.

Reuters reports that Merrill Lynch (NYSE: MER) is taking an enormous $5.7 billion write-down on losses from mortgage-backed securities (MBSs) and plans to raise $8.5 billion.

The biggest shocker was, as Reuters reports, that Merrill signed a contract with Singapore's Temasek, a sovereign wealth fund, that requires Merrill to pay $2.5 billion under terms of a previous stock sale to Temasek, along with $2.4 billion in required dividends to preferred shareholders. That's because under its previous deal, Merrill had agreed that if it sold shares at too low a price in the future, it would reimburse investors. Temasek has agreed to purchase $3.4 billion -- or 28% of the new offering. In other words, Merrill is paying an extremely high price for its capital.

The second shocker was how much of a write-down Merrill is taking on its portfolio of collateralized debt obligations (CDOs). Private equity fund Lone Star is paying 22 cents on the dollar, or $6.7 billion for CDOs with a stated book value of $30.6 billion. At that rate, the holders of $2 trillion worth of CDOs outstanding earlier this year would need to take a $1.56 trillion haircut if they sold all the CDOs. And I don't think they have nearly enough capital to be able to afford that.

Continue reading Merrill Lynch gored by $5.7 billion worth of write-downs

Merrill Lynch gored by $5.7 billion worth of write-downs originally appeared on BloggingStocks on Mon, 28 Jul 2008 19:05:00 EST. Please see our terms for use of feeds.

It's no secret that America has financed its budget deficits from foreigners. Of course, we also buy tons of goods from foreigners.

Now, Wall Street is pitching foreigners for big slugs capital. So far it's working with more than $90 billion raised within the past few months, according to a piece in the Wall Street Journal.

Actually, this is not a new thing. If anything, the US has a long history of being wild and crazy with finances (examples: crash of 1929, the junk bond binge, the S&L crisis, the conglomerate craze and so on). After all, back in the 1800s, the U.S. financial system relied heavily on foreign sources of capital.

However, this time it's premier financial firms - such as Citigroup (NYSE: C) and Merrill Lynch (NYSE: MER) - that are selling large amounts of equity to some foreign buyers known as sovereign funds.

While no doubt these funds see big-time opportunities as the investments include juicy protections and dividend yields, foreign governments also realize that the U.S. needs to stay afloat. Despite the talk of "decoupling" of the global economy, the fact remains that the U.S. is the mega spender. Foreign governments, therefore, need to play ball with the US.

With the heated presidential election, the sovereign investments are certainly a topic of debate. But Wall Street has moved with incredible speed to complete these investments and has tried to structure the transactions as passive arrangements.

Finally, the Wall Street Journal piece also indicates that there has been lots of enthusiasm from sovereign funds. In other words, based on the due diligence, they see lots of opportunities here - at least for the long-term.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Wall Street's foreclosure sale to foreigners originally appeared on BloggingStocks on Wed, 16 Jan 2008 14:22:00 EST. Please see our terms for use of feeds.