Which Country is the SWFs’ Sweetheart?

Around a fifth of all SWF capital is invested in one country – can you guess which one?

(March 13, 2013) — Investments in the United States have made up a fifth of all sovereign wealth fund (SWF) capital placements since 2005, research has shown.

TheCityUK, an organisation for financial businesses in the United Kingdom, found the US had been the favoured home for investment capital over the past seven years. The UK accounted for one sixth of these investors’ capital, with China, France, Switzerland, Germany, and Qatar other important destinations.

As an example, in February, the manager of the world’s largest sovereign wealth fund, the Norway Pension Fund-Global announced a $1.2 billion agreement with TIAA-CREF to create a joint US real estate venture.

Emerging market countries have accounted for a growing share of investments over the past two years, the TheCityUK report said, adding that the trend was likely to continue.

Altogether, SWF assets reached an estimated $5.2 trillion at the end of last year, the report said, marking an increase of 8%. This total is estimated due to the opaque nature of some of the investment organisations, which are reluctant to reveal details of their assets and strategies.

The report predicted this total asset pool will rise to $5.6 trillion by the end of 2013.

There is a further $7.7 trillion held in other sovereign investment vehicles, such as pension reserve funds and development funds, but again this is an estimated total for the same reasons highlighted above.

Along with investment returns and contributions made to the funds by governments and local sovereign organisations, the increase in the assets held in this sector is partly due to new SWFs being created to manage national balance sheet surpluses.

Several African nations have announced they are launching SWFs in order to invest the income from their country’s natural resources for their citizens’ future, while other countries are banking currencies surpluses.

“A number of new SWFs were launched during 2012,” the report said. “This included the Angolan Fundo Soberano de Angola, established in October 2012 to help to manage revenue generated from the sale of crude oil. The purpose of the fund is to facilitate Angola’s social and economic development. Other funds launched in 2012 include Australia’s Western Australian Future Fund and Panama’s Fondo de Ahorro de Panama.”

TheCityUK said countries that are planning to establish new SWFs included Bolivia, Canada, India, Japan, Taiwan, and Thailand.

Related content: The Last Bastions of Risk-Taking? SWFs & Defeating All Comers? aiCIO Talks to the Norway Pension Fund-Global

«