2014 Looks to Beat 2013 in Sovereign Wealth Fund Transactions

sovereign wealth fund transactionsIncreasingly, sovereign wealth funds are investing directly. The larger sovereign funds are getting involved in more deals, whether in institutional real estate, partaking as a group member in a company acquisition or buying more shares on the open market. As a whole, the world of sovereign wealth funds is rapidly expanding due to numerous factors. One significant factor is the number of new sovereign wealth funds cropping up, particularly in Africa and the Americas. Our rankings put sovereign wealth fund assets, as of September 2014, at US$ 6.7 trillion. In September 2009, sovereign wealth fund assets were at US$ 3.9 trillion. It is true that sovereign wealth is concentrated in the upper echelon of the fund rankings; however, some of the mid-sized to smaller funds are taking a more active approach to investing. These smaller funds are also increasing allocation to real estate and private equity. For example, the Texas Permanent School Fund boosted private equity allocation in 2014 to 10% from 6% in 2013. Some sovereign funds are attempting to take advantage of the illiquidity premium associated with some alternative investments.

Sovereign Wealth Fund Transaction Database

According to the Sovereign Wealth Fund Transaction Database, as of September 2014, the first half of 2014, we recorded US$ 51.13 billion in direct transactions. For the first half of 2013, we recorded US$ 42.39 billion. This 20.6% increase in sovereign wealth fund direct transactions can be greatly explained by increased real estate deals (many being larger in size).

This unique group of institutional investors engages in a variety of investment styles and asset allocation. Some of the younger sovereign funds will embark on fixed income and public equities initially, before dabbling into alternative assets like real estate, private equity and hedge funds.

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