Preqin’s 2016 Sovereign Wealth Fund Review shows that, despite global market volatility and low oil prices, the AUM of sovereign wealth funds globally increased by USD200 billion over the previous year to reach USD6.51 trillion in March 2016.
This growth was driven by non-commodity funds which added USD290 billion in assets; hydrocarbon funds lost USD10 billion, while other commodities funds saw their AUM more than halved from USD130 billion to USD50 billion. Forty-five percent of sovereign wealth funds saw their assets increase over the 12 month period, while 19 per cent saw their AUM remain the same as in March 2015. Although the rate of growth has been noticeably slower than in previous years, sovereign wealth funds now hold more than double the assets seen in 2009, when the aggregate AUM totalled USD3.22 trillion.
A rising proportion of sovereign wealth funds are now actively investing in alternative asset classes, although fixed income and public equities investments still comprise the largest proportion of most portfolios. Fifty-five per cent of sovereign wealth funds now invest in private equity, up from 47 per cent in 2015, while 62 per cent invest in both real estate and infrastructure. Following the Global Financial Crisis the prevalence of non-bank lenders as credit providers has risen sharply, and in March 2016 more than a third (35 per cent) of sovereign wealth funds are active in this private debt industry.
“Sovereign wealth funds are an increasingly active and important class of investor, now controlling more than six and a half trillion dollars’ worth of assets on behalf of their countries,” says Selina Sy (pictured), Premium Publications Manager at Preqin. “They have added more than two hundred billion dollars to their assets over the past year, and remain highly sophisticated and resilient investors who are increasingly becoming involved in alternative assets and direct investment.
“However, recent macroeconomic conditions have posed a particular set of challenges to sovereign wealth funds, with falling commodities prices affecting the source of funding for many funds, and global equity markets remaining volatile. Given that many sovereign wealth funds are established by oil-producing nations, it is perhaps unsurprising that the rate of increase in assets has slowed; several of these funds have been fulfilling their function by providing for budget deficits in more challenging economic periods.”
