Asian SWFs Adjust Investment Strategies for 2010

The China Investment Corp, the Korea Investment Corp, and the Government of Singapore Investment Corp navigate a difficult economic climate.

(March 4, 2010) – The global financial crisis has taken a toll on sovereign wealth funds as they adjust their investment strategies to cope with a difficult and uncertain economy.


According to a report by the International Financial Services London (IFSL), SWFs are expected to shift toward oversees investments. The report showed that about 40% of SWF assets came from Asian and Middle Eastern countries in 2009, with Europe accounting for most of the remaining funds.


Jesse Wang, president of China’s $300 billion SWF, said recently that 2010 will be a more difficult year for the fund. Unlike last year, when a recovery from the financial crisis boosted asset prices, it has become increasingly difficult to predict the direction of global energy and resources prices, said Wang, reported the Wall Street Journal.


The China Investment Corp. will have a more flexible overseas investment strategy this year. According to Bloomberg, the fund has “relatively low” cash holdings and it will resume its investment in US equities via index funds.


South Korea’s sovereign wealth fund, the Korea Investment Corp, recently reported that it will invest $100 million in a private equity fund managed by the International Finance Corp. The fund, established in 2005 with $27 billion in assets under management, said that similar to China’s SWF, it would buy stakes in companies located in South America and Africa to secure energy resources.


And Singapore’s sovereign wealth fund, which manages assets of more than $300 billion, faces a loss of about $5 billion on its investment in UBS. According to data compiled by Bloomberg, GIC isn’t alone in suffering losses from supporting banks in Europe and the US during the credit crunch. During the global crisis, SWFs invested more than $69 billion, which has so far produced $20 billion in realized and paper losses.