LONDON (Reuters) - Sovereign wealth funds (SWFs) might take a further $404 billion out of global listed equities in 2016 if oil prices stay between $30 and $40 a barrel, after pulling out about half that amount last year, a research organisation said on Monday.
The largest SWFs, accounting for about 89 percent of managed assets, sold $213.37 billion of listed equities in 2015, the Sovereign Wealth Fund Institute (SWFI) said, after an oil price crash triggered massive fund redemptions and relentless selling of foreign currency reserves by producers.
“The era of petrodollar-filled wheelbarrows being dumped into giant vats seems to be numbered,” said the SWFI, whose 2015 figure includes both direct equity stakes and investments made through external fund managers.
Norway, with some $800 billion in its SWF, has said its budget will use 2.8 percent of the fund in 2016, up from 2.6 percent in 2015.
SWFs control some $7 trillion of assets globally, of which oil and gas producers account for some $4.2 trillion, according to Morgan Stanley. The SWFI says about $2.76 trillion is managed externally.
Asset managers whose businesses are skewed towards SWF mandates have been vocal about redemptions, with Aberdeen, Ashmore and Northern Trust all citing SWFs as one of the reasons for their shrinking asset base.
“These funds were set up for a rainy day and the rainy day has arrived,” Aberdeen Asset Management chief executive, Martin Gilbert, said this month, flagging more outflows.
But some industry participants dismiss claims that SWFs are behind 2016’s equity market rout.
State Street Global Advisors’ head of policy and research in the official institutions group, Elliot Hentov, says SWFs own less than 4 percent of global stock market capitalisation, of which only a fraction is being sold at any given time.
“For a certain type of manager it’s a great excuse,” he said. “SWFs aren’t particularly vocal about what they do, so it’s a great bogeyman, as the bogeyman won’t talk. It’s like a conspiracy theory you can’t disprove.”
“Even if they sold 0.5 percent of market cap, it wouldn’t move the needle,” he said.
Some SWFs have also used the sharp price falls to buy, with Norway’s fund boosting its holdings in Iberdrola, Credit Suisse, Intu Properties and Barclays over 2015, data from research house Aranca showed. Singapore’s GIC has also raised its stake in Intu Properties and travel retailer Dufry.
“The more established funds will look at the current market sell-off as an opportunity to invest, as their investment horizon runs into decades,” Aranca senior analyst, Nikhil Salvi, said.
Editing by Louise Ireland
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