Sovereign Wealth Funds Bought the Dip in 1H 2020, Shied from Real Estate

Posted on 09/17/2020


After the paralyzing coronavirus outbreak market shake up in March 2020, sovereign wealth funds like Saudi Arabia’s Public Investment Fund (PIF) rushed in to directly invest in companies, both public and private. PIF was given extra money to manage from Saudi Arabia’s central bank.

From a low in the first half of 2019, US$ 24.2 billion in direct investments by sovereign funds was tallied in the transaction database versus momentum totals of US$ 84.098 billion in the second half of 2019 and US$ 98.465 billion in the first half of 2020. The COVID-19 pandemic started to gain traction in late February and early March, thus prompting lockdowns across various jurisdictions.

Direct Transactions by Sovereign Wealth Funds


Source: SWFI.com, Closed dates. Type: Deal, New Security Issue, Open Market, Excluding Fund Commitments. Sector: Real Estate. Transaction totals are in U.S. dollars. These transactions also exclude most fixed income investments.

Real Estate Sector

Furthermore, sovereign investors have drastically slowed down direct real estate investments. For example, in the last half of 2019, SWFs directly invested over US$ 17.4 billion in the real estate sector, excluding fund commitments, versus US$ 5.538 billion in the first half of 2020. Some of the bigger direct deals in the real estate sector that were closed in the first half of 2020, centered in Asia, such as Norway Government Pension Fund Global investment in a 39.9% interest in a part of the Otemachi Park Building, an office complex located in Tokyo. Singapore’s Temasek Holdings disclosed a venture in June 2020 with KKR to take a US$ 650 million minority stake in Vietnam’s developer Vinhomes.

Forecast

Will the large sovereign wealth funds and public pensions sell-off equities in the remaining time left in 2020 to rebalance their portfolios?

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