Global sovereign wealth funds (SWFs) are increasing their investment allocations to alternative assets and real estate, according to the 2017 figures published by research provider Preqin on Thursday.
The latest Preqin Sovereign Wealth Fund Review reveals that 63% of the 76 globally active SWFs tracked have commited funds to real estate, up from 62% in 2016 and 59% in 2015. A similar percentage has set aside funds for infrastructure.
'The proportion of sovereign wealth funds investing in alternatives has grown, signalling the maturity and sophistication of this type of investor as they look to increase diversification within their portfolios,’ the review states.
The proportion of sovereign wealth funds currently investing in private equity is the highest on record at 61%, with institutions such as Ireland Strategic Investment Fund investing directly in private equity and through private equity fund structures.
By contrast, the proportions of SWFs investing in public equities and fixed income are falling: 79% of funds now commit to public equities, against 80% in 2016, and 78% to fixed income products, versus 82% in 2016.
Growth in AUM levels off
Taking all asset classes together, the value of AUM by the SWFs has stalled at $6.6 tln (€6.2 tln), compared with $6.51 tln in 2016. Growth in AUM has levelled off for the past two years, with an increase of 3% and 1% recorded for 2015 and 2016 respectively.
‘Sovereign wealth funds count among their number some of the largest single investors in public or private equities, and as such their importance as a class of investor remains large,’ said Selina Sy, editor of the 2017 Preqin Sovereign Wealth Fund Review.
‘However, the past 24 months have seen very little growth in their assets, which now stand at $6.6 tln. This is evidence of the wide range of factors that are affecting various funds globally at present – macroeconomic headwinds, low oil prices, and shifts in domestic and economic policy from their governments have all contributed to this tapering off,’ she added.
The top 10 largest funds in the world collectively hold $5.2 tln in assets – 79% of the entire investor class – and their holdings are correspondingly extensive. By contrast, a quarter of sovereign wealth funds were established in the last six years, 45% of all SWFs hold less than $10 bn in assets, and 26% of all SWFs only have exposure to traditional asset classes such as public equities and fixed income.
