Sovereign Wealth Funds Shy away from Finance and Diversify
In 2012 the assets managed by sovereign wealth funds (SWFs) have exceeded $3 trillion, but the Sovereign Wealth Fund Annual Report edited by Paolo Baffi Centre's Sovereign Investment Lab (SIL) still observes "a persistent knowledge gap about the role, mission and strategies of one of the most relevant, yet most poorly understood, new actor in global finance.
The keyword to understand last year's trends is diversification. As large deals in the financial sector and especially bank bailouts slowed down, 2012 recorded a 14% increase in the number of deals (to 270), but a 30% decrease in value (to $58.4 billion).
Real estate, commodities, energy and associated processing industries were the major beneficiaries of the new emphasis on diversification and the most important deal of the year, the merger of commodity giants Glencore and Xstrata, managed by Qatar Investment Authority in concert with other SWFs, set a new high-mark of successful co-investment involving SWFs.
Europe still got the lion share of SWFs' investments (48% of the total), while activity in North America dropped to a paltry 6%. "Indirect exposure to emerging markets growth is highly visible in the choice of established multinational firms as targets", SIL's director, Bernardo Bortolotti, said.