Sovereign wealth fund assets to hit $5.2 trln - report

LONDON Wed Feb 1, 2012 11:31am EST

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LONDON Feb 1 (Reuters) - Assets managed by sovereign wealth funds are likely to grow 8 percent this year to $5.2 trillion after a 9 percent increase in 2011, a new report showed on Wednesday.

Financial services representative body TheCityUK said assets managed by the world's sovereign wealth funds (SWFs), which manage countries' windfall revenues for future generations, rose for the third consecutive year to a record $4.8 trillion in 2011.

Sovereign investment vehicles, such as pension reserve funds, development funds and state-owned corporations' funds held $7.2 billion, on top of $8.1 trillion in official foreign exchange reserves -- usually held by the central bank.

"Taken together, governments of SWFs, largely those in emerging economies, have access to a pool of funds totalling $20 trillion," the report said.

Countries affected by the recent political instability in the Middle East and North Africa collectively manage around $160 billion in SWF assets, or around 4 percent of the total.

The report also said the United States and Britain were major recipients of SWF investment, grabbing 19 percent and 17 percent of global SWF investments in the past six years, respectively.

Most recently, Chinese sovereign wealth fund China Investment Corporation bought a minority stake in London water supplier Thames Water in a deal that has an estimated value of between 600-700 million pounds.

Direct investments by SWFs totalled $60 billion last year, down a quarter from the previous year and 40 percent below the peak level in activities two years earlier.

"Recent transactions suggest that SWFs remain cautious, equity purchases are smaller and more diverse with more focus on diversifying portfolios. Emerging market countries have accounted for a growing share of investments since 2009, a trend that is likely to continue," the report said. (Reporting by Natsuko Waki. Editing by Jeremy Gaunt.)

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