Global sovereign wealth funds double AUM in the last decade
LONDON, June 14, 2023 (GLOBE NEWSWIRE) -- Today Preqin, the global leader empowering the alternatives community with essential data and insight, published its Sovereign Wealth Funds 2023 report. The report provides data and analysis on key trends in the sovereign wealth funds landscape*, as these investors look towards making enhanced allocations to alternative assets, as well as narrowing the gap between actual and target allocations.
The report demonstrates that alternative assets will continue to have a place in the portfolios of sovereign wealth funds if they provide diversification benefits and good risk-adjusted returns. With their abundant financial resources and increasingly sophisticated investment teams, sovereign wealth funds have the kind of capital that can give them access to top-performing funds.
Preqin’s Sovereign Wealth Funds Report 2023 key facts:
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Assets under Management (AUM): In the last decade, global sovereign wealth funds have doubled their AUM total to $10.4tn by the end of Q1 2023.
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Asia: Asia’s sovereign wealth funds led the increase in AUM, standing at $4.3tn by the end of Q1 2023. Notably, China Investment Corporation’s total AUM of $1.35tn surpassed Norway’s Government Pension Fund Global (GPFG) AUM of $1.2tn to become the largest sovereign wealth fund in the world.
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Middle East: The Middle East is home to some of the largest sovereign wealth funds which hold the second most in AUM of all regions globally, behind Asia. At $3.7tn, they account for 36% of the global sovereign wealth fund AUM.
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Allocations: Allocations of sovereign wealth funds to alternative assets as percentages of total allocations increased between 2021 and March 2023 in all asset classes, except for infrastructure. The biggest increase in the current median allocation was in real estate, from 6.5% in 2021 to 8.6%, by the end of Q1 2023.
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ESG: Sovereign wealth funds are influential in promoting environmental, social and governance (ESG) goals. Sovereign wealth funds with an ESG policy represent 59% of total sovereign wealth fund AUM, up 5 percentage points from 54% in 2021.
Middle Eastern sovereign wealth funds show increased appetite for alternatives
As the sheer amount of fresh capital managed by Middle East-based sovereign wealth funds far exceeds the needs and capacity of their domestic capital markets, their appetite for alternative assets has risen. Preqin analysis of Middle East-based sovereign wealth fund data shows that the average allocations to alternatives have doubled year-over-year at the end of 2022, rising from 22% of total assets at the end of 2021 to 44%. While some of this is driven by the very high allocation levels of some of smaller sovereign wealth funds in the region, this trend reflects their ongoing pursuit of non-traditional assets to boost returns. Percentage allocations are also likely to be boosted by falls in the valuations of public equities and bonds in 2022, according to the latest data. The increase shows the flexibility that these Middle Eastern sovereign wealth funds have when making investment decisions, as they often have fewer short and medium-term liabilities than other types of institutional investors.