QATAR’S purchase of a stake in Russian oil company Rosneft last month crowned a year of mega-acquisitions by sovereign investors in 2016, with total deal value rising 22 percent to US$82 billion whilst the number of transactions held steady.

    Other high-profile 2016 deals involving sovereign investors — a category consisting of wealth funds, central banks and State-run pension funds — included Melbourne Port and a stake in ride-hailing app Uber.

    The plunge in the pound in the wake of Brexit attracted some foreign buyers to U.K. real estate, whilst 2017 is likely to see a rise in activity in e-commerce and financial technology.

    The US$10.8 billion paid by the Qatar Investment Authority (QIA) and commodities trader Glencore for a 19.5 percent stake in Rosneft was the costliest transaction but 2016 as a whole was characterized by some big deals, as investors battled it out for the choicest assets.

    That was especially so in the infrastructure sector where demand for high-quality assets outstrips supply.

    For instance, the consortium that won the 50-year lease for the Port of Melbourne in September paid US$7.3 billion — smashing the target set by the government. This followed the whopping US$9.5 billion paid for Australian ports and rail operator Asciano in the first quarter of 2016.

    “Investors are still structurally underweight infrastructure, partly due to a lack of availability,” Alex Millar, head of EMEA sovereigns at Invesco, said, adding that income-generating assets were being bid up in a low interest rate world.

    The fourth quarter’s second-biggest deal was also in infrastructure. A consortium that included the QIA and China’s CIC Capital Corp. paid US$4.5 billion for a majority stake in Britain’s gas network.

    Coupled with the Rosneft transaction, this boosted the total deal value for the fourth quarter to US$25.4 billion. This was up 16 percent on the third quarter, despite a quarter-on-quarter fall in the number of deals to 35 from 47.

    Sovereign investors are expected to continue chasing infrastructure deals to fill their target allocations, but with interest rates set to rise, Millar questioned whether the current high multiples would persist.

    Interest in U.K. real estate mounted after sterling’s plunge following Britain’s June 23 vote to leave the European Union

    Singapore’s GIC acquired a 50 percent stake in the WestQuay Shopping Center, in Southampton, Britain for US$59.5 million.

    This followed its late September acquisition of a U.K. student housing portfolio from Oaktree Capital Management.

    Nikhil Salvi, a manager at Aranca, an investment research and analytics firm, said the sterling move had increased the lure of U.K. real estate for foreign buyers.

    “That has given investors a large cushion of safety — it’s probably one of the best times to put money in, especially if you have a decade-or-longer investment horizon,” he said.

    GIC was also behind the biggest real estate deal of the fourth quarter, stumping up US$2.7 billion for P3 Logistic Parks, a European warehouse company.(SD-Agencies)