With assets worth $627 billion, the UAE’s Abu Dhabi Investment Authority (Adia) leads the world’s richest Sovereign Wealth Funds (SWFs), which together hold a staggering $5 trillion in assets – more than double the amount held by the global hedge fund industry.
If the SWFs were a country and their assets were GDP, they would already be the world’s fourth largest economy – after the US (GDP of $15 trillion), China ($7 trillion), and Japan ($5.8 trillion).
According to the SWF Institute, which tracks the wealth funds’ assets on a quarterly basis, combined assets under management in SWFs have increased almost 9 per cent in the past 12 months, from $4.55 trillion in March 2011 to $4.96 trillion this month thanks to surge in global oil prices and a relative stabilization in the prices of other asset classes.
SWF assets rose 9.6 per cent in 2011 over 2010, up from $4.4 trillion in December 2010 to $4.8 trillion in December 2011.
In comparison, hedge funds manage $1.8 trillion in assets worldwide while private equity firms control $2.6 trillion. According to Prequin, an intelligence provider in the alternative investment industry, sovereign wealth funds have now become a major component of private equity investment as well as other alternative investments.
Rising crude prices have provided a boost to SWFs, with the SWF Institute estimating that 56.8 per cent of SWF bank on oil and gas-related income. Asia is the leading region for SWFs, closely followed by the Middle East.
While the UAE’s Adia holds the bragging rights to being the world’s richest SWF with assets worth $627bn, the UAE’s seven wealth funds together have assets worth $783bn, not including the assets managed by the UAE’s federal SWF, Emirates Investment Authority (EIA), which was founded in 2007 and is mandated to manage the sovereign wealth of the UAE Federal Government.
The EIA is the sole entity responsible for the future stewardship of Federal Government stakes in over 30 corporations across the GCC, including Etisalat, Du, Gulf International Bank, United Arab Shipping Company and Gulf Investment Corporation.
Analysts estimate that if the EIA’s assets were to be made public and added to the UAE’s overall SWF assets, it could top $1 trillion.
Norway’s Government Pension Fund – Global, with total assets worth $611 billion, is the world’s second richest SWF while China’s SAFE Investment Company (assets guestimate: $568 billion) rounds up the top three global SWFs. The other two SWF in the Top 5 are Saudi Arabia’s SAMA Foreign Holding ($533 billion) and China Investment Corporation ($440 billion).
SWFs are an important source of capital in the world’s investment infrastructure, with financial services, real estate and infrastructure being particularly popular target sectors of late.
The #12 ranked Qatar Investment Authority (assets worth $85 billion), for example, has piled money into London real estate, backing the Shard project in London Bridge, buying Citigroup’s London headquarters and taking around a quarter of the Canary Wharf development company. The Qataris have also taken sizeable stakes in Barclays Bank and the London Stock Exchange.
However, SWFs have become increasingly cautious when making investments, according to figures provided by the SWF Institute. They deployed around $60bn worldwide in 2011, which was down almost a quarter on 2010. They also spread their investments more widely and bought smaller parcels of individual equities, the Institute added.