Drivers of Change: Sovereign Wealth

Over the past two decades, the boundaries between the public sector and institutional investing have been blurring with the growth of sovereign investors. Sovereign wealth investors (including public pension funds, sovereign funds, and state-owned enterprises) are strong and discreet representatives of the heterogeneous matrix of institutional investors which support capitalism as we know it today. With assets amounting to $8 trillion, sovereign wealth funds (SWFs) own on average 5% of all listed equities globally, yet, little is known about them. SWFs became more prevalent in the global finance during the Great Crisis of 2008, when they saved multiple Western core financial institutions.

Since then, SWFs from the Middle East, China, Singapore or Africa, have sophisticated their investment strategies. This research program helps better understand this critical long-term investor group and the transformative role SWFs might play on central areas such as technology disruption, sustainable finance, economic development and corporate governance.

The program produces an Annual Report on Sovereign Wealth Funds, peer-reviewed papers in top academic journals and academic book chapters. Activities include an Annual Conference Agents of Change: Sovereign Wealth Funds, closed-door Seminars with regional and industry, open conversation spaces with sovereign wealth stakeholders and training programs on sovereign wealth strategies.

Sovereign Wealth Funds Report 2020

Sovereign wealth funds have increased in number and volume of assets during the pandemic, exceeding $9 trillion in assets under management for the first time. The 2020 report shows the heterogeneity and paradoxes of an industry in transformation. SWFs keep pushing for alternative sources of energy, mobility or food, investing heavily in tech-based companies and focusing on four major markets: the United States, China, India and the United Kingdom. Simultaneously, real estate (not only industrial, but also offices and hotels) and infrastructure (not only communications but also mid-stream natural gas assets and road transportation) remain attractive target sectors.

SWFs have been instrumental during the pandemic supporting some of the large-scale vaccine development programs, procuring medical equipment, or contributing to national economic and social emergency plans. This emergency focus and the uncertainty of the global lockdowns explain why 1from July 2019 to September 2020, the total value of sovereign fund transactions was down to 43 billion dollars, a heavy drop compared to our previous report, yet not translated to deal activity, which continued strong and focus on technology, life sciences and services. An asset rotation strategy grows within SWFs as they support software companies built on artificial intelligence and big data, sustainable food and agriculture projects, online payment methods and, as a priority, biotechnology companies.

project_management_pharma_biotech

In addition to these trends, the analysis in this edition is enriched by several aspects of interest and includes an in-depth focus on one sector, one region and one sovereign fund. Concerning the sector, we examine the continued interest in logistics real estate reinforced by the rise of e-commerce in the post-pandemic world. The study of the geographic area consists of a novel analysis of the sovereign funds currently operating in Latin America, with a proposal that they can be used both as instruments for stabilizing the economic cycle and for strategic investment goals. The “in-depth” analysis focuses on China Investment Corporation  (CIC), the world’s second-largest of its kind and one of the main investment arms of the Chinese government. Finally, we include a ranking of the currently active and prospective sovereign wealth funds and analyze the latest transactions carried out in Spain.

ie-cgc-icex-swf-report-2020-18-1

Research Team

Javier Capapé

IE University

Patrick J. Schena

Tufts University

Ignacio de la Torre

Arcano Partners

In partnership with:

icex_gobierno_new_