A trader at work on the floor of the New York Stock Exchange (NYSE) in New York, Monday, Sept. 20, 2021.
Michael Nagle | Bloomberg | Bloomberg | Getty Images
The sharp declines in stock and bond markets last year caused the combined value of global sovereign wealth and public pension funds to fall for the first time ever, to an estimated $2.2 trillion, according to an annual survey of the sector. increase.
The value of assets under management by sovereign wealth funds fell from $11.5 trillion to $10.6 trillion, while that of public pension funds fell from $22.1 trillion to $20.8 trillion, according to a report on state-owned investment vehicles by industry specialist Global SWF. decreased to
Global SWF’s Diego Lopez said the “simultaneous and significant” corrections of more than 10% suffered by major bond and equity markets were the main driver, a combination he hadn’t seen in 50 years.
That happened when Russia’s invasion of Ukraine pushed up commodity prices, pushing already high inflation to a 40-year high. In response, the US Federal Reserve and other major central banks raised interest rates, triggering a global market decline.
“These are losses on paper, and some funds may not recognize their role as long-term investors,” Lopez said.
The report, which analyzed 455 state-owned investors with combined assets of $32 trillion, estimated that Denmark’s ATP had the toughest year of all, costing Danish pensioners $34 billion in losses. It was a sharp drop of 45%.
But despite all the turmoil, the funds spent on buying businesses, real estate or infrastructure increased by 12% compared to 2021.
A record $257.5 billion was deployed in 743 deals, and sovereign wealth funds also sealed a record number of over $1 billion ‘mega deals’.
Singapore’s massive $690 billion GIC fund took the lead, spending just over $39 billion in 72 deals. More than half of that is piled up in real estate, with a clear bias towards logistics facilities.
In fact, 5 of the 10 largest ever investments by state-owned investors were made in 2022. In January, another of his Singapore institutions, Temasek, spent his $7 billion to buy testing, inspection and certification firm Element Materials from private equity fund Bridgepoint.
In March, Canada’s BCI agreed to acquire 60% of the UK’s National Grid Gas Transmission and Metering division from Macquarie. Two months later, Italy’s CDP Equity wealth fund spent his $4.4 billion on Autostrade per l’Italia alongside Blackstone and Macquarie.
“If financial markets continue to fall in 2023, sovereign wealth funds will be ‘chasing the elephant’ as an effective way to meet capital allocation requirements,” the report said.
It has prompted Gulf SWFs such as ADIA, Mubadala, ADQ, PIF and QIA to become aggressive in acquiring Western companies that have injected large amounts of oil proceeds over the past year.
