Sovereign, pension funds line up to invest post demonetisation

In a positive outcome of the demonetisation exercise and black money clampdown, ‘Invest India’ — the government’s investment promotion & facilitation agency – has been flooded with queries from foreign pension funds and Sovereign Wealth Funds (SWF) regarding locations and sectors to invest in the country. Encouraged by this trend, ‘Invest India’ has decided to set up a dedicated team of experts by mid-December this year to cater to the needs of SWFs (state-owned investment entities) and foreign public & private pension funds and attract mega investments into India, Invest India’s Managing Director & Chief Executive Officer, Deepak Bagla told The Hindu. Road shows will be held soon across the world explaining how the demonetisation policy and the Goods & Services Tax legislation will ensure ease of doing business in India in a “clean manner” for SWFs and pension funds who have ‘ethical investment’ norms, he said.

The world’s 300 largest pension funds had assets under management totalling $14.8 trillion in 2015, said Willis Towers Watson, a global advisory, broking and solutions company. Also, as of December 2015, SWFs accounted for $7.4 trillion in assets, while sovereign pension funds totalled $ 4.2 trillion, it said. For ‘ethical investments’, SWFs and foreign pension funds have high transparency and governance standards, and have to stick to their internal norms on anti-corruption and anti-bribery. India, which needs more than $1.5 trillion over the next decade for infrastructure funding, will be relying on these funds to ensure there is no shortfall. Union government sources told The Hindu that during discussions including those relating to India’s National Investment and Infrastructure Fund (NIIF), the SWFs and foreign pension funds had informed the government that they will be more comfortable investing in India if there is greater transparency in doing business, especially in the real estate & construction sectors where there is prevalence of cash transactions and influence of black money. Claiming that the black money cleanup will eventually strengthen the Indian Rupee, the sources said measures to ensure tax policy certainty, remove red-tape and prevent corruption are aimed at improving investor confidence, reducing their cost of funds and other transaction costs, in turn leading to greater Return on Investment.

“The Indian economy has many positives, but the ‘post-truth’ – or statements relying more on general belief and less on objective facts – being circulated was so negative that these SWFs and pension funds have been reluctant to invest. The Investment Committees of these funds had concerns,” Mr. Bagla said. So far, India used to get only a portion of the funds allocated in the ‘emerging economy basket’ by the private equity players, but with the demonetisation and GST removing their apprehensions, they will hopefully set up a ‘country dedicated fund’ to make greater investments in India, he added. Once the SWFs and pension funds decide to step up their operations in India, the companies they have investments in, will also follow suit – leading to a multiplier effect, Mr. Bagla said. The SWFs in countries such as Norway, Canada, Singapore, US, Qatar and UAE have been making sector-specific enquiries prior to the demonetisation announcement as well as after it, but the SWFs from South Korea, Malaysia, Indonesia and Iran have done so after the demonetisation policy, the sources said. The NIIF, itself a quasi-SWF with a maximum government-holding of 49 per cent, will focus on commercially viable projects particularly in the infrastructure sector. It will see participation from foreign pension funds and SWFs as the government had held talks with SWFs like Abu Dhabi Investment Authority and Qatar Investment Authority as well as the Russian state-owned private equity & venture capital vehicle ‘Rusnano’.

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Printable version | May 8, 2021 10:08:37 AM |

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