Sovereign Funds Went Big in the Final Quarter of 2016

Despite a succession of political shockwaves, sovereign wealth funds went back to plowing money into direct investments in the fourth quarter of 2016, investing US$ 60.31 billion versus US$ 30.43 billion in 4Q 2015, according to data from the Sovereign Wealth Fund Institute (SWFI). The SWFI transaction database tracks direct transactions made by sovereign funds, pensions and other public funds. Sovereign investors rallied in listed equities in the final quarter of 2016, with the United States far ahead.

Direct Transactions by Sovereign Wealth Funds – Billions USD

Source: Sovereign Wealth Fund Transaction Database, Extracted April 17, 2017

Source: Sovereign Wealth Fund Transaction Database, Extracted April 17, 2017

Sovereign investors rallied in listed equities in the final quarter of 2016, with the United States far ahead.

Energy and Real Estate

The energy sector contributed a whopping US$ 12.3 billion in the fourth quarter of 2016 by wealth fund direct investments. Next, the real estate sector represented US$ 11.4 billion in direct investments by sovereign funds in the fourth quarter of 2016. Some major real estate deals boosted the total, such as the China Investment Corporation (CIC) acquiring Canada Pension Plan Investment Board’s (CPPIB) 45% ownership stake in 1221 Avenue of the Americas, a Manhattan office property. The sales price for the stake was US$ 1.03 billion, with net proceeds to CPPIB of approximately US$ 950 million before closing adjustments.

Betting on Banks

Arguably one of the central reasons why global institutional investors bet large on banks is the probable rise of U.S. interest rates, coupled with possible reforms on the U.S. Dodd–Frank Wall Street Reform and Consumer Protection Act. The financial sector was a significant contributor to the total amount of direct wealth fund transactions in the ending quarter. Direct investments in the financial sector by sovereign funds surged to US$ 6.56 billion in the fourth quarter of 2016 compared to US$ 3.49 billion in the third quarter of 2016. Some notable transactions include large purchases of positions of listed equities in Comerica and Aviva.



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