Sovereign Wealth Funds Sticking With Listed Equities


Despite Greece stimulating drama among its people and creditors, Iran and the U.S. striking a nuclear deal, and China’s volatile equity markets, public institutional investors have stuck with listed equities in developed markets. It is true that trends (including SWFI’s own internal research) are showing wealth funds and large U.S. pensions socking more money toward alternative investments like real estate and infrastructure. Sovereign wealth centers on having a long-term point of view. However, many of these mammoth-like investors such as the Abu Dhabi Investment Authority (ADIA) and Norway’s Government Pension Fund Global (GPFG) are on top of the food chain when it comes to finding real estate assets. Their investment philosophies tend to be more “patient” than other types of public funds.

Not so long ago, investors shrugged off European equities.

Japanese Equities Shine

More annual reports are being published as July ends. Some of the top performing asset heavy pensions and sovereign funds had a unique trait – allocation to U.S. and European listed equities. With slow steady growth, floor-like interest rates and a strong dollar, institutional investors who allocated to equity markets like Japan have prospered in the past twelve months. Japan’s Government Pension Investment Fund (GPIF) had a record 12% return for their latest fiscal year in which they allocated a significant chunk to Japanese equities. GPIF also hired their first chief investment officer, appointing Hiromichi Mizuno back in November 2014. The pension giant has been working on their asset allocation plans for quite some time, aiming to keep on the path of increasing their equity exposure.

Not so long ago, investors shrugged off European equities. That was until QE policy helped provide jolts to the European capital markets. Wealth funds have augmented ownership stakes in European listed companies, specifically companies that are multi-national. According to the Sovereign Wealth Fund Transaction Database, in the first half of 2015, Singapore’s GIC purchased over US$ 150 million worth of shares in Tesco and over US$ 180 million worth of shares in BHP Billiton.

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