Asset AllocationOctober 10, 2013

Global SWF Assets Hit Record High

Sovereign wealth funds' aggregate assets have grown by 68% since 2007 despite financial and political instability, Preqin has found.

Reported by Featured Author

(October 10, 2013) — Sovereign wealth funds’ total assets under management have exceeded $5 trillion, according to research by Preqin.

The study concluded that 72 funds globally have added a total of $760 billion over the last year, a 14% increase from $4.62 trillion to $5.38 trillion—a number that is comparable in scale to the entire alternative assets industry.

Preqin stated that this growth is the largest annual increase of total assets under management it has seen since 2007.

“Despite the challenging financial landscape and political unrest, sovereign wealth funds have continued to thrive and to grow, and this trend is predicted to continue over the next few years,” Amy Bensted, head of hedge fund products at Preqin, said.

The report named two possible reasons for such growth: the number of new sovereign wealth funds formed in the last few years and additional capital infused into existing funds.

Since 2008, Preqin that stated 15 new sovereign wealth funds have formed—eight of which were created in the last two years. The study said the number of funds will continue to rise as nations increasingly invest in their futures. India, Bolivia, and Panama are currently in talks to form their own sovereign wealth funds, the report said.

The research concluded that 63% of profiled sovereign wealth funds have experienced a rise in assets under management since 2012.

Of these funds, Asian funds performed best, seeing an average of 19% growth in the last year. Their money accounted for 47% of global aggregate assets, despite making up only 22% of the world’s sovereign wealth funds.

Middle Eastern funds, on the other hand, only saw an average of 6% in growth since 2012. The paper suggested that geopolitical events, particularly the Arab Spring, may have led to their poorer performance.

When categorized by invested asset classes, sovereign wealth funds allocated most heavily in infrastructure, at a steady 57%, while shrinking its appetite in private equity and hedge funds. The report found that the decline could be attributed to the rise in new funds, as they are largely unable to invest in alternatives prior to accumulating assets.

“There remains the possibility that some sovereign wealth funds may be required to cover fiscal shortfalls of governments but the overall the outlook for this investor group appears positive,” Bensted said.