Sovereign wealth funds have seen a resurgence in the growth of their assets over the past 12 months, according to the 2018 Preqin Sovereign Wealth Fund Review.
AUM for sovereign wealth funds has increased year-on-year since the end of 2009, but in recent years the pace of growth has slowed. Having grown by just 4 per cent from March 2015 to March 2017, though, global assets held by sovereign wealth funds have jumped by 13 per cent in the year to March 2018.
Funds worldwide added USD866bn in AUM, and the investor class now oversees a record USD7.45 trillion. Seventy-one per cent of sovereign wealth funds saw their assets increase, although almost one in five (19 per cent) saw a decrease. Notably, Norway’s Government Pension Fund Global broke the USD1 trillion barrier to record USD1.06 trillion in assets as of March. Conversely, Russia’s Reserve Fund ceased operations in early 2018, as its capital was used to cover budget shortfalls.
“In the 2017 Preqin Sovereign Wealth Fund Review we noted that the pace of growth in sovereign wealth fund assets had slowed considerably in recent years, as these investors faced significant challenges from falling oil prices and domestic budget shortfalls,” says Selina Sy (pictured), Editor, 2018 Preqin Sovereign Wealth Fund Review. “This seems to have reversed in the past 12 months, though, and sovereign investors have seen their assets resurge to almost USD7.5 trillion. This is in part due to the recovery in oil prices, as well as stronger-than- expected growth in emerging markets such as China.”
“With so much capital under their control, sovereign wealth funds are undoubtedly one of the most influential investor groups despite their relatively small number. It is interesting, then, to see that they seem to be balancing their portfolios away from traditional asset classes such as public equities and fixed income, and becoming increasingly involved with alternative assets. In particular, more sovereign wealth funds have begun investing in real assets over the past year, seeking diversification and long-term inflation hedges. Given that most operate with long horizons and capital growth priorities, real assets suit many sovereign investors’ requirements, and we may see this shift continue over the coming years.”
