Sovereign wealth funds stop coming to the rescue
Martin Skancke, who used to run Norway’s oil fund, the world’s largest sovereign wealth fund, added: “SWFs will not be supporting asset prices to the same degree [in the future, compared with previous years], but I would still expect them to retain their countercyclical nature through rebalancing.”
A state fund specialist at a large asset manager, who did not want to be named, rejected the idea that sovereign funds act as a safety net, pointing out that they are a far smaller investor group in terms of assets than pension funds.
The report, which was produced by the Bocconi University’s Sovereign Investment Lab, a department focused on state-backed vehicles, found that as well as investing less, sovereign funds are investing more in western markets and in so-called safe assets.
More than 57 per cent of state funds’ direct investments went into safe assets such as utilities, hotels and property last year, compared with 15.5 per cent in 2008.
The Bocconi figures include money placed directly into companies, infrastructure projects, property and other investments, rather than money invested via asset managers.
Investments via asset managers have also been falling, according to figures from eVestment, the data provider. It found that sovereign wealth funds pulled at least $46.5bn from investment houses last year.
Prof Bortolotti said state funds are becoming more discerning investors. “Funds will be much more selective [from now on]. It will be more difficult [for companies and projects] to tap sovereign funds for investments. Everything is pointing to better diversification.”