Market misery deals sovereign wealth funds historic setback in 2022 -study

Zovio

01/01/2023 07:00

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      Assets managed by sovereign wealth funds fell nearly 8%
    

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      Assets of public pension funds dropped almost 6% 
    

  
    By Marc Jones
       LONDON, Jan 1 (Reuters) - Heavy falls in stock and bond
markets over the last year have cut the combined value of the
world's sovereign wealth and public pension funds for the first
time ever - and to the tune of $2.2 trillion, an annual study of
the sector has estimated.
    The report on state-owned investment vehicles by industry
specialist Global SWF found that the value of assets managed by
sovereign wealth funds fell to $10.6 trillion from $11.5
trillion, while those of public pension funds dropped to $20.8
trillion from $22.1 trillion.
    Global SWF's Diego López said the main driver had been 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 drove already-rising inflation rates to 40-year
highs. In response, the U.S. Federal reserve and other major
central banks jacked up their interest rates causing a global
market sell-off.
    "These are paper losses and some of the funds will not see
them realized in their role as long-term investors," López said.
"But it is quite telling of the moment we are living."
    The report, which analysed 455 state-owned investors with a
combined $32 trillion in assets, found that Denmark’s ATP had
had the toughest year anywhere with an estimated 45% plunge that
lost $34 billion for Danish pensioners.
    Despite all the turbulence though, the money funds spent
buying up companies, property or infrastructure still jumped 12%
compared with 2021.
    A record $257.5 billion was deployed across 743 deals, with
sovereign wealth funds also sealing a record number of $1
billion-plus "mega-deals".
    Singapore's supersized $690 billion GIC fund topped the
table, spending just over $39 billion in 72 deals. Over half of
that was piled into real estate with a clear bias towards
logistics properties.
    In fact, five of the 10 largest investments ever by
state-owned investors took place in 2022, starting in January
when another Singapore vehicle, Temasek, spent $7 billion buying
testing, inspection and certification firm Element Materials
from private equity fund Bridgepoint.
    In March, Canada's BCI then agreed to acquire 60% of
Britain's National Grid Gas Transmission and Metering arm with
Macquarie. Two months later, Italy's CDP Equity wealth fund
spent $4.4 billion on Autostrade per l’Italia alongside
Blackstone and Macquarie.
    "If financial markets continue to fall in 2023, it is likely
that sovereign funds will keep 'chasing elephants' as an
effective way of meeting their capital allocation requirements,"
the report said.
    It tipped SWFs from the Gulf such as ADIA, Mubadala, ADQ,
PIF, QIA to become much more active in buying up Western firms
having received large injections of oil revenue money over the
past year.
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Sovereign wealth and public pension funds hit by market troubles
   https://tmsnrt.rs/3CaoBuM
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 (Reporting by Marc Jones; Editing by Hugh Lawson)
 ((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters
Messaging: marc.jones.thomsonreuters.com@reuters.net  Twitter
@marcjonesrtrs))