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One in two sovereign funds invest in alternatives - report

U.S. dollar bills are displayed in Toronto March 26, 2008. REUTERS/Mark Blinch/Files

LONDON (Reuters) - Around one in two sovereign wealth funds invest in private equity, real estate and infrastructure assets to seek a diversified source of returns, a report showed on Wednesday.

The report from Preqin, alternative assets research firm, also showed that assets managed by the world’s sovereign wealth funds rose 9 percent to $3.51 trillion and more than a quarter of total SWF assets are held by funds in Abu Dhabi, Norway and China.

Preqin said 55 percent of the funds are known to invest in private equity, 51 percent in real estate and 47 percent in infrastructure. More than a third of them invest in hedge funds.

Sovereign wealth funds have been increasingly investing in alternative assets as some of them suffered huge losses after pouring money into Western banks at the height of the crisis.

“The increase in the aggregate assets under management of sovereign wealth funds, which has been assisted by the start of the global recovery, demonstrates that their collective influence in the world of institutional investors has not diminished,” said Sam Meakin, managing editor of the report.

“Many SWFs that had put portfolio diversification plans on hold are now considering resuming these plans, and their appetite for alternative investments continues to increase.”

Reporting by Natsuko Waki; editing by Stephen Nisbet