The emergence of new entrants in the sovereign wealth fund space has ensured that the collective might of SWFs has continued unabated in 2008, according to the latest report from Private Equity Intelligence (Preqin).
Preqin’s most recent report, ‘2009 Preqin Sovereign Wealth Fund Review’, revealed there has been a 6% growth increase from SWFs in the past year. The total aggregate of assets under management for SWFs grew from US$3.05trn to US$3.22trn in a twelve month period.
While the growth is more moderate than previous years, it contributes to the 59% rate of growth from 2007.
New arrivals, including the reclassification of China’s US$312bn SAFE investment company as a SWF, and the inclusion of a Khazakstan-based US$29bn fund, are believed to be the primary force behind the 6% growth.
The secondary driver of SWFs success is the long-term investment prospects of the funds. Unlike other institutional investors like pension plans, SWFs do not have future liabilities they must pay out and do not have external investors that are able to withdraw capital at short notice.
But despite the noteworthy growth over the past two years, unfavourable global market conditions have taken their toll on SWFs. Due to significant losses in Western assets, particularly in financial institutions, appetite for US and European investment is being replaced by domestic and regional opportunities.