A trader works on the floor of the New York Stock Exchange (NYSE) on Monday, Sept. 20, 2021 in New York.
Michael Nagle | Bloomberg | Getty Images
The steep slide in stock and bond markets over the past year has cut the combined value of the world’s sovereign assets and public pension funds for the first time – and is estimated by an annual study of the sector at $2.2 trillion.
The report on state-owned investment vehicles by industry specialist Global SWF found that the value of assets managed by sovereign wealth funds fell from $11.5 trillion to $10.6 trillion, while that of public pension funds declined from $22.1 trillion to $20.8 trillion. Done.
Diego Lopez of Global SWF said the main drivers were the “simultaneous and significant” 10%-plus corrections suffered by major bond and stock markets, a combination that had not happened in 50 years.
It came as Russia’s invasion of Ukraine boosted commodity prices and already soaring inflation rates to a 40-year high. In response, the US Federal Reserve and other major central banks raised their interest rates, leading to a global market selloff.
“These are paper losses and some funds will not feel them in their role as long-term investors,” Lopez said. “But it’s pretty telling of the moment we’re living in.”
The report, which analyzed 455 state-owned investors with a combined $32 trillion in assets, found Denmark had the toughest year anywhere, with an estimated 45% drop in ATP, which saved $34 billion for Danish pensioners. harm done.
However, despite all the turmoil, money spent to buy companies, assets or infrastructure is still up 12% compared to 2021.
A record $257.5 billion was invested in 743 deals, with sovereign wealth funds sealing a record number of “mega-deals” exceeding $1 billion.
Singapore’s supersized $690 billion GIC fund topped the table, having spent a little over $39 billion across 72 deals. More than half of that was piled up in real estate, with a clear bias towards logistics assets.
In fact, five of the 10 biggest investments ever by state-owned investors took place in 2022, beginning in January when another Singaporean vehicle, Temasek, acquired testing, inspection and certification firm Element from private equity fund Bridgepoint. Spent 7 billion dollars to buy material.
In March, Canada’s BCI agreed with Macquarie to acquire 60% of the UK’s National Grid gas transmission and metering arm. Two months later, Italy’s CDP Equity Wealth Fund spent $4.4 billion on Autostrade per l’Italia, along with Blackstone and Macquarie.
“If financial markets continue to slide in 2023, it is likely that sovereign funds will continue to ‘chase elephants’ as an effective way of meeting their capital allocation requirements,” the report said.
This tipped off SWFs from the Gulf such as ADIA, Mubadala, ADQ, PIF, QIA to become more active in buying western firms that have received large injections of oil revenue over the past year.