BRIEFING: Sovereign Funds Hold Steady on Private Equity Allocation

swfi_PE_coveraug2016_1Sovereign wealth funds are major allocators to private equity in all forms, whether in private equity funds, co-investing or direct investing. As of June 2016, total sovereign wealth fund assets amounted to US$ 7.37 trillion.

Sovereign Wealth Fund Private Equity Allocators – 2016

Sovereign Wealth Fund Private Equity Allocators – 2015

Traditionally, public pensions have been a reliant source of capital for private equity deals. However, sovereign wealth funds continue to gain ground in the private equity investor base, as assets steadily grow for the institutional investor class. The total sovereign fund allocation to private equity tepidly increased for the year ended June 30, 2016, for a number of reasons. First, several wealth funds have been realigning their private equity fund interests, selling some off to secondary buyers (sometimes even other asset owner peers), while continuing to recommit to strategic/geopolitical private equity funds, push capital into separate accounts, augment co-investment activity or allocate to top-quartile funds. Second, a clear majority commodity-based wealth funds, along with a number of Asian wealth funds, needed to increase portfolio liquidity in 2015 and early 2016. This also led to wealth funds selling off direct investments in private equity and real estate. By doing this, wealth funds are building cash reserves in case of liability needs, while “storing energy” for distressed companies and assets down the road.

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Source: SWFI – August 17, 2016

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