The aggregate total assets of all sovereign wealth funds (SWFs) continued to increase over the past year with more investment focus turning towards alternative asset classes, said a study released yesterday.
Recovery in global equities markets helped certain SWFs regain ground lost as a result of the economic downturn.
However, some funds have been used by governments to cover budget deficits and support financial institutions, said a study by Preqin, one of the leading private equity information providers.
The 2010 Preqin Sovereign Wealth Fund Review statistics showed that the aggregate total assets under management of all sovereign wealth funds currently stands at an estimated $3.5 trillion (Dh12.8trn) from $3.2trn a year ago, representing a nine per cent rise.
Sovereign wealth fund activity in the alternative asset classes is significant with 55 per cent of them known to invest in private equity, 51 per cent in real estate, 47 per cent infrastructure and 37 per cent in hedge funds. One of the largest increases in assets came at Norway's Government Pension Fund – Global, which reported returns in 2009 of more than 25 per cent and now has well over $400 billion in assets.
Asia-based SWFs control 40 per cent of the aggregate assets of all SWFs.
Those based in the Mena control 35 per cent, and Europe-based SWFs manage 19 per cent.
Sovereign wealth fund activity in alternative asset classes is considerable, with 55 per cent known to invest in private equity, 51 per cent in real estate, 47 per cent in infrastructure and 37 per cent in hedge funds.
"The rise in the aggregate assets under management of sovereign wealth funds, which has been assisted by the start of the global recovery, demonstrates that their collective influence in the world of institutional investors has not diminished.
"Many SWFs that had put portfolio diversification plans on hold are now considering resuming these plans, and their appetite for alternative investments continues to rise," said Sam Meakin, – Managing Editor of the 2010 Preqin Sovereign Wealth Fund Review.