Assets Held By Sovereign Wealth Funds Surpass US$6.5 Trillion by Preqin

Sovereign wealth funds add $200bn in assets under management (AUM), as alternative assets take an increasingly prominent role.

Preqin’s 2016 Sovereign Wealth Fund Review shows that, despite global market volatility and low oil prices, the AUM of sovereign wealth funds globally increased by $200bn over the previous year to reach $6.51tn in March 2016. This growth was driven by non-commodity funds which added $290bn in assets; hydrocarbon funds lost $10bn, while other commodities funds saw their AUM more than halved from $130bn to $50bn. Forty-five percent of SWFs saw their assets increase over the 12 month period, while 19% saw their AUM remain the same as in March 2015. Although the rate of growth has been noticeably slower than in previous years, sovereign wealth funds now hold more than double the assets seen in 2009, when the aggregate AUM totalled $3.22tn.

Sovereign Wealth Funds

A rising proportion of sovereign wealth funds are now actively investing in alternative asset classes, although fixed income and public equities investments still comprise the largest proportion of most portfolios. Fifty-five percent of sovereign wealth funds now invest in private equity, up from 47% in 2015, while 62% invest in both real estate and infrastructure. Following the Global Financial Crisis the prevalence of non-bank lenders as credit providers has risen sharply, and in March 2016 more than a third (35%) of SWFs are active in this private debt industry.

Sovereign Wealth Funds

Sovereign Wealth Funds – Other Key Facts:

  • Largest SWF: The Norway Government Pension Fund Global remains the largest sovereign wealth fund globally, holding $835bn in AUM. This is an increase from $818bn since March 2015 while the fund accounts for 13% of the total AUM of all SWFs.
  • Alternative Assets Investments: Seventy percent of sovereign wealth funds invest in more than one alternative asset class, and more than a fifth (22%) make investments in all six alternative asset classes tracked by Preqin. Just over a quarter (26%) of funds do not make investments in alternative assets.
  • Recent Growth: Sixty-eight percent of all sovereign wealth funds have been launched since 2000, illustrating the rapid growth of the investor type. In the last six years 14 sovereign wealth funds have been launched, with Bolivia and the Philippines reportedly in discussions to launch new funds soon.
  • SWFs by Region: Collectively, SWFs based in the Middle East and Asia represent 76% of all industry capital, and 45% of the number of funds. North America accounts for just 3% of aggregate sovereign wealth fund capital, while 14% of funds are based in the emerging region of Africa.

Sovereign Wealth Funds

Comment:

“Sovereign wealth funds are an increasingly active and important class of investor, now controlling more than six and a half trillion dollars’ worth of assets on behalf of their countries. They have added more than two hundred billion dollars to their assets over the past year, and remain highly sophisticated and resilient investors who are increasingly becoming involved in alternative assets and direct investment.

However, recent macroeconomic conditions have posed a particular set of challenges to sovereign wealth funds, with falling commodities prices affecting the source of funding for many funds, and global equity markets remaining volatile. Given that many sovereign wealth funds are established by oil-producing nations, it is perhaps unsurprising that the rate of increase in assets has slowed; several of these funds have been fulfilling their function by providing for budget deficits in more challenging economic periods.”

Selina Sy – Premium Publications Manager, Preqin