(August 2, 2013) – Sovereign wealth funds (SWFs) are increasing their exposure to direct investments in real assets, according to data from the Sovereign Wealth Fund Institute.
In the last half of 2012, $600 billion worth of transactions were made by SWFs, with European and US commercial property among the most popular purchases. The report also found the push towards direct investment had been driven by the trend of bringing investment decisions in-house.
Bringing assets in-house has become more popular in 2012 and 2013. In May, the Abu Dhabi Investment Authority (ADIA) brought five percentage points of its considerable assets under its internal investment team, resulting in 25% of its assets now being managed internally, up from 20% a year earlier.
European core real estate accounted for $9.26 billion of the $600 billion total, up from $7.13 billion invested during the second half of 2011.
SWFs also spent substantial amounts of money on investing in US commercial property, the report said. This included a $1.2 billion deal for five properties in the US, where the Norway’s Government Pension Fund Global paid $600 million for a 49.9% share, and TIAA-CREF picked up the remaining 51.1%.
Developmental real estate proved to be attractive, particularly with Gulf-based SWFs. Two large US developments—Hudson Yards and CityCenterDC—were highlighted by the Sovereign Wealth Fund Institute as developments assisted by SWF investments.
Energy and utility investments were also popular, particularly in the first half of 2012. Singapore’s Temasek invested $7.53 billion in KrisEnergy, and Norway’s SWF bought 3% of BASF SE, the world’s largest chemical company, at the end of June last year.
Infrastructure deals typically take longer to complete, but there was evidence of rising interest in Australian assets. ADIA was part of a consortium which included Industry Funds Management, Australian Super, and QSuper to buy the lease on Port Botany and Port Kembia for AU$5.07 billion in May this year.
The full report can be read here.
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