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Assets managed by sovereign wealth funds fell nearly 8%

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Assets of public pension funds dropped almost 6%

By Marc Jones

LONDON, Jan 1 (Reuters) - Heavy falls in stock and bond markets over the last year have cut the combined value of the world's sovereign wealth and public pension funds for the first time ever - and to the tune of $2.2 trillion, an annual study of the sector has estimated.

The report on state-owned investment vehicles by industry specialist Global SWF found that the value of assets managed by sovereign wealth funds fell to $10.6 trillion from $11.5 trillion, while those of public pension funds dropped to $20.8 trillion from $22.1 trillion.

Global SWF's Diego López said the main driver had been the "simultaneous and significant" 10%-plus corrections suffered by major bond and stock markets, a combination that had not happened in 50 years.

It came as Russia’s invasion of Ukraine boosted commodity prices and drove already-rising inflation rates to 40-year highs. In response, the U.S. Federal reserve and other major central banks jacked up their interest rates causing a global market sell-off.

"These are paper losses and some of the funds will not see them realized in their role as long-term investors," López said. "But it is quite telling of the moment we are living."

The report, which analysed 455 state-owned investors with a combined $32 trillion in assets, found that Denmark’s ATP had had the toughest year anywhere with an estimated 45% plunge that lost $34 billion for Danish pensioners.

Despite all the turbulence though, the money funds spent buying up companies, property or infrastructure still jumped 12% compared with 2021.

A record $257.5 billion was deployed across 743 deals, with sovereign wealth funds also sealing a record number of $1 billion-plus "mega-deals".

Singapore's supersized $690 billion GIC fund topped the table, spending just over $39 billion in 72 deals. Over half of that was piled into real estate with a clear bias towards logistics properties.

In fact, five of the 10 largest investments ever by state-owned investors took place in 2022, starting in January when another Singapore vehicle, Temasek, spent $7 billion buying testing, inspection and certification firm Element Materials from private equity fund Bridgepoint.

In March, Canada's BCI then agreed to acquire 60% of Britain's National Grid Gas Transmission and Metering arm with Macquarie. Two months later, Italy's CDP Equity wealth fund spent $4.4 billion on Autostrade per l’Italia alongside Blackstone and Macquarie.