LONDON Sales by sovereign wealth funds of $46.4 billion of assets in 2015 involved heavy redemptions of "passive" or index-tracking equity strategies in both developed and emerging markets, new data showed on Tuesday.
Following a report last week of the headline $46.4 billion outflows from external managers, research firm eVestment this week revealed a detailed breakdown. It shows sovereign wealth fund (SWF) withdrawals were concentrated in equities, largely indiscriminate, and from the most liquid segments of their investments.
Over $17 billion was withdrawn from global equity mandates, $10.5 billion from U.S. equity funds and $3.5 billion from emerging market equities, with the biggest outflows concentrated in passive strategies in each category.
Peter Laurelli, head of research at eVestment, which collates data from 4,400 firms managing money on behalf of institutional investors, said the redemptions indicated a general reduction in equity exposure by SWFs that was not being offset by sizeable allocations elsewhere.
With oil prices languishing at under $40 a barrel, SWFs and central banks in oil exporting countries such as Norway, Russia and Saudi Arabia have been running down reserves and liquidating assets to help bridge budget gaps.
At the same time equity markets have sold off heavily, with the S&P 500 down 5.5 percent since the start of the year and European stocks down around 8 percent. The benchmark emerging equity index has lost 5.6 percent.
In total, some $55.7 billion has been pulled from equity funds in the year to date, according to data from Bank of America Merrill Lynch, the longest outflow streak since 2008.
Laurelli said it was not necessarily financial market events that were prompting the SWF reductions in equity exposure, but the underlying economic factors impacting SWFs, although the redemptions did suggest a fear of further price falls.
"If you believe a holding is going to rise, then it doesn't make any sense to sell it. If you're in need of assets why not just wait a bit longer? It suggests they don't have a lot of confidence that passive equity exposure is going to be of benefit to them right now," he said.
SWFs also withdrew around $4.1 billion from emerging market fixed income strategies with external asset managers, with outflows accelerating in the fourth quarter of 2015 after poor performance across the asset class.
Some $2.1 billion was redeemed from Japanese equities and $1.97 billion from global fixed income strategies.
Among the few areas to see concentrated inflows were core U.S. fixed income, which attracted $2.7 billion, and U.S. short duration fixed income, with $3.3 billion of inflows.
Laurelli said this favoring of higher quality assets felt like defensive positioning by the rainy-day funds built up by countries producing oil and other commodities in recent years.
(Editing by Catherine Evans)