Sovereign Wealth Funds Returned to the Deal Table in 2021

Posted on 09/02/2021

The big trend outlier for the first half of 2020 is Russia-based National Welfare Fund’s investment in Sberbank Rossia in which 1H 2020 sovereign wealth fund direct investments ex-open market totaled US$ 57.122 billion Excluding the National Welfare Fund (NWF) deal in the calculation, which was US$ 29 billion, SWFs invested US$ 28.122 billion as adjusted. Some notable deals in the first half of 2020 which had dealt with the coronavirus (COVID-19) pandemic lockdowns globally include Abu Dhabi Investment Authority’s (ADIA) investment in Thyssenkrupp AG’s Elevator Business Unit and Alberta Investment Management Corporation’s investment in Coastal GasLink Pipeline Ltd. In March 2020, the world’s largest central banks went full-throttle on quantitative easing (QE) mode, while governments printed money to cushion the blow of the forced pandemic lockdowns.

Sovereign wealth funds armed with cash returns from “buying the dip” in March 2021, came back to the deal table for distressed real assets and companies with strong defensive moats. In the first half of 2021, sovereign wealth fund direct investments ex-open market totaled US$ 47.187 billion. Some noteworthy transactions include Singapore’s GIC Private Limited investing in the Equinix GIC xScale data center program, while Mubadala Investment Company invested in Aramco Oil Pipelines Company. Other key mentions include ADIA and GIC investing in Medline Industries, Inc. Australia’s Future Fund partnered with QIC on Tilt Renewables Limited. Some wealth funds such as Mubadala viewed openings in the U.S. real estate market, as inflation reared its ugly head due to excessive monetary stimulus and government spending. Mubadala tied up a joint venture with Crow Holdings on U.S. logistics properties. According to the last SWFI Global Asset Owner Survey, public funds issued concern on inflation. Norway Government Pension Fund Global embarked on a u-turn and is now pursuing unlisted real estate assets globally. Years ago, the Norwegian SWF winded down its private real estate investing team.

First Half of 2021 vs. First Half of 2020: Direct Investments by Sovereign Wealth Funds

Source: (SWFI Asset Owner Platform).
Excluding open market transactions and fund commitments.
Closed Dates. Jan 1-Jun 30.

Not all sovereign wealth funds navigated the COVID crisis smoothly. Some experienced changes in management such as the Kuwait Investment Authority, while others took the opportunity to shift organization structure such as the Korea Investment Corporation (KIC) and China Investment Corporation (CIC). CIC and KIC will continue their push to allocate more overseas assets into alternatives such as real estate, infrastructure, private credit, and private equity. All in all, sovereign wealth funds (the larger ones) benefitted greatly from central bank QE COVID policy as equity markets sharply spiked back to new highs.

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