(December 17, 2012) — The Government of Singapore Investment Corporation, Norges Bank Investment Management, and Abu Dhabi Investment Authority–what do they have in common?
Yes, they are three of the world’s largest sovereign wealth funds. But, of all the SWFs globally, they are also the most sought after as companies worldwide are continuing to increase their focus on such asset owners as prospective investors, according to a survey by BNY Mellon’s Depositary Receipts business.
The survey–which analyzed 800 public companies globally and studied their engagement with SWFs–showed that 62% of respondents reported contacting SWFs in 2012, up from 59% in 2011 and 47% in 2010. Western Europe had the highest rate of engagement (79%), North America the lowest (49%).
Energy (76%), consumer staples (74%), utilities (68%) were shown to be the top three types of global firms surveyed by BNY to be engaging most actively with SWFs. In terms of size, BNY noted SWF engagement with 86% of mega-cap firms, large-cap (83%), mid-cap (61%).
“The basis for why SWFs are increasing in prominence is their longer term approach in investment horizon,” BNY Mellon’s Guy Gresham told aiCIO. “The majority of the asset management industry is taking a more conservative approach and staying on the sidelines with this economic environment. Corporations want stability in terms of longer term investment.”
“Uncertainty is the underlying theme of this year’s survey, so it’s no surprise company executives are devoting more of their outreach to retaining current institutional investors,” added Christopher M. Kearns, deputy CEO of BNY Mellon’s Depositary Receipts business, in a statement. “Issues like the Eurozone and ‘fiscal cliff’ continue to weigh heavily on markets globally. In response to these challenges, we’re seeing more firms seeking to boost their international shareholders. Depositary receipts remain a key tool for companies in both traditional and emerging markets to source new pools of capital.”
BNY Mellon’s study highlighted that companies are continuing to voice their uncertainties over that stability of the Eurozone and global systemic market risk, along with the prospect of increased regulatory oversight.
Latin American companies point to global systemic risk and the sustainability of emerging market growth as their chief worries. The survey noted that in Asia-Pacific region, while most of those surveyed consider Eurozone stability important to market confidence, a higher percentage of firms are concerned by currency exchange rates than in other regions. “Regulatory concerns are pervasive; half of respondents are uncertain about how additional regulatory oversight will affect liquidity, with over a third saying it will be negatively impacted,” BNY Mellon said.
The growing influence of SWFs amid a shaky global economy can be seen as their assets under management boom. In April, research firm Preqin reported that assets held by SWFs rose by over 16% last year to hit $4.62 trillion.
“Sovereign wealth funds have a continued interest in private equity and many believe the asset class offers favorable long-term investment opportunities,” Alex Jones, managing editor of 2012 Preqin Sovereign Wealth Fund Review, said at the time. “Over recent years, the number of sovereign wealth funds seeking to hold more diverse portfolios of investments, by both strategy and geography, has risen. Although financial markets remain turbulent, such institutions represent a significant amount of the capital invested in private equity and are likely to continue to allocate increasing amounts to the asset class going forwards.”