Reports

2010 SWF Annual Report

Braving the New World argues that 2010 marks the beginning of a new pattern of investment for SWFs that equips them to deal with economic realities in the wake of the Global Financial Crisis. General trends revealed by the data include the following:

After building greater in-house capacity in 2009, in 2010 direct SWF investments appear to be more prevalent. This means that we can track more of their investments and create a more nuanced picture of their investment behavior. Consequently, it is likely that we will continue to see SWFs taking a larger number of smaller stakes. Previously, we were able to track only larger investments which were taken directly.
Contextualizing our data in the current economic environment suggests that commodities and other alternative assets will become increasingly important for SWFs. Returns on many traditional asset classes are currently depressed and seem likely to remain so, particularly developed market equities and government bonds. With SWFs keen to make good returns for their sovereign government owners, it may well be that they choose to increase their allocation to alternatives as they look to realign their portfolios with new economic realities.
In this vein, SWFs have turned their eyes toward emerging markets. Asia in particular and not just China, but also India, Singapore, Indonesia and Malaysia has received a large influx of SWF investment. Yet, Asia is not the whole story. Latin America, previously a geography in which we saw very little direct SWF investment, has become more popular with funds chasing alpha returns.

2009 SWF Annual Report

2009 opened to the most challenging economic and financial climate since the Great depression. With slowing income from plummeting oil prices and contracting global trade in 2008, the volatile investment climate made sovereign wealth funds (SWFs) more risk averse. The beginning of the year saw the lowest levels of publicly reported SWF investment for half a decade as they continued to be cautious actors in the global economy, scaling back their acquisitions to reflect their perception of increased market risk. This was exacerbated by SWFs suffering mark-to-market losses of an estimated $67 billion on their investments in publicly-listed companies by the end of Q1 2009, and some SWFs stepping in to bail out their countries' faltering financial service sectors.

2008 SWF Annual Report

Since global markets first recognized the growing phenomenon of sovereign wealth fund(henceforth SWFs), these funds have been controversial. Initially depicted as scary new barbarians at the gate shaking the logic of capitalism, SWFs quickly turned into the white knights of Wall Street as the subprime crisis started to hit hard. The synchronic worldwide recession triggered by the market crash provided an automatic stabilizer of the global imbalances partly responsible for the rise of sovereign wealth, and today the funds are no longer seen as something to be dreaded and their activities no longer routinely make headlines. However, with assets worth more than $2 trillion, SWFs are likely to remain important sources of liquidity to a distressed global economic system.

Ufficio responsabile: Paolo Baffi Centre

Last updated November 15, 2011

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