A trader works on the floor of the New York Stock Exchange (NYSE) in New York, on Monday, September 20, 2021.
Michael Nagle | Bloomberg | beautiful pictures
The dramatic drop in the stock and bond markets over the past year has reduced the combined value of the world’s sovereign wealth and public pension funds for the first time – and by $2.2 trillion. la, an annual study of the field estimated.
Industry expert Global SWF’s state-owned investment vehicles report shows that the value of assets managed by sovereign wealth funds fell to $10.6 trillion from $11.5 trillion dollars, while public pension funds’ assets fell to $20.8 trillion from $22.1 trillion.
Global SWF’s Diego López said the main driver was the “simultaneous and significant” 10% plus correction suffered by the major bond and equity markets, a combination unheard of in 50 years. .
It comes as Russia’s invasion of Ukraine has pushed up commodity prices and pushed up inflation rates already to a 40-year high. In response, the US Federal Reserve and other major central banks raised interest rates, triggering a sell-off in global markets.
These are losses on paper, and some funds won’t realize them as long-term investors, says López. “But it’s pretty telling about the time we’re living in.”
The report, which analyzes 455 state-owned investors with a combined $32 trillion in assets, shows that Denmark’s ATP had its toughest year anywhere with an estimated drop of 45 %, costing Danish pensioners $34 billion.
Despite all the ups and downs, the amount the fund spends to buy companies, real estate or infrastructure is still up 12% compared to 2021.
A record $257.5 billion was deployed across 743 exchanges, with sovereign wealth funds also sealing a record over $1 billion in “major transactions”.
Singapore’s $690 billion mega-fund GIC topped the table, spending just over $39 billion on 72 deals. More than half of that is poured into real estate with a clear bias towards logistics properties.
In fact, 5 of the 10 biggest-ever investments by state-owned investors took place in 2022, starting in January when another Singaporean company, Temasek , spent $7 billion to buy testing, inspection and certification company Element Materials from private equity firm Bridgepoint.
In March, Canada’s BCI subsequently agreed to acquire 60% of the UK’s National Grid Gas Transmission and Measurement branch with Macquarie. Two months later, Italian asset fund CDP Equity spent $4.4 billion on Autostrade per l’Italia along with Blackstone and Macquarie.
“If financial markets continue to decline into 2023, it is likely that government funds will continue to ‘chase elephants’ as an effective way to meet their capital allocation requirements,” the report said. .
It makes SWFs from the Gulf like ADIA, Mubadala, ADQ, PIF, QIA much more active in acquiring Western companies that have received large sums of oil revenue in the past year.
