Assets Under Management +25.5bn: SWFs Don't Beat a Retreat

ACCORDING TO BOCCONI'S SOVEREIGN INVESTMENT LAB 2015 REPORT, PUBLISHED TODAY, THE COLLAPSE OF OIL PRICES HAS AFFECTED CENTRAL BANKS AND STABILIZATION FUNDS, BUT IT DID NOT STOP THE ADVANCE OF SOVEREIGN FUNDS. THE EUROZONE SURPASSES THE UK

Also in 2015, SWFs have increased their assets under management to $4,978.16bn (+25.5bn), despite the demise rumors circulated throughout the year following the collapse of oil prices, the commodity which finances many sovereign funds. That’s what reports the Sovereign Wealth Fund Annual Report 2015 by Bocconi’s Sovereign Investment Lab (SIL), presented today at the headquarters of Borsa Italiana, the Italian Stock Exchange, and significantly entitled The Sky Did Not Fall. "Once again, sales were eclipsed by new investments," said SIL’s Director, Bernardo Bortolotti.
 
Sovereign wealth funds have reacted to the period of prolonged uncertainty with a portfolio diversification strategy. In 2015 they concluded a high number of deals, but with a low unit value. Despite a 40% increase in the number of deals to 186, there was a 30% decrease in the total value to $48bn. Divestments amounted to a paltry $22.4bn. "Sovereign funds have not suffered the decline of oil prices", glossed Bortolotti, "as other entities under public control have done, such as central banks and stabilization funds, who were forced to draw profusely from the reserves".
 
Diversification materialized also in the strong increase in foreign investments (risen to 94% of the total) and a shift towards the OECD developed countries (which attracted a record  71.9% of the investments). Funds flew to alternative and safe investments: 56.9% went to real estate, hotels and tourism facilities, infrastructure and utilities, sectors that offer returns only in the long run, paying a premium for the investment illiquidity - another sign contrary to the demise rumors circulated during the year.
 
SWFs anticipated the Brexit: in 2015, for the first time, investment in the Eurozone countries ($8.56bn) exceeded that in the United Kingdom ($6.16bn), in a framework of geographic rebalancing from the United States to Europe.
 
A final emerging trend, identified by the Report, is the growth of Sovereign-Private Partnerships, i.e. deals realized in partnership between sovereign funds and private investors, which in 2015 reached 50% of the total.
 
The Sovereign Investment Lab has been officially recognized as a research and educational partner of the International Forum of Sovereign Wealth Funds (Ifswf), the global association of sovereign wealth funds. "We are honored by this achievement," said Bortolotti, "a tangible sign of our commitment to high-quality research and relevance to our stakeholders".
 
The report was produced with the support of Intesa Sanpaolo, PwC and Cassa Depositi e Prestiti.

by Fabio Todesco