Stock and bond market declines during the last year have reduced the total worth of the world’s sovereign wealth and public pension funds for the first time ever – by $2.2 trillion, according to an annual survey of the industry.
According to Global SWF’s study on state-owned investment vehicles, the value of assets managed by sovereign wealth funds declined to $10.6 trillion from $11.5 trillion, while that of public pension funds fell to $20.8 trillion from $22.1 trillion.
According to Global SWF’s Diego López, the key reason was the “simultaneous and massive” 10 percent-plus corrections in major bond and stock markets, a combination that had not occurred in 50 years.
It happened as Russia’s invasion of Ukraine drove commodity prices higher and inflation rates to 40-year highs. In reaction, the Federal Reserve of the United States and other major central banks raised interest rates, prompting a global market sell-off.
“These are paper losses, and some of the funds will not see them realised as long-term investors,” López explained. “However, it is pretty telling of the time we are living in.”
According to the analysis, which examined 455 state-owned investors with a combined $32 trillion in assets, Denmark’s ATP had the worst year anywhere, with an estimated 45 percent drop that cost Danish pensioners $34 billion.
Despite the turmoil, capital spent on acquiring firms, real estate, or infrastructure increased by 12 percent compared to 2021.
A record $257.5 billion was deployed over 743 transactions, with sovereign wealth funds also closing a record number of “mega-deals” worth $1 billion or more.
Singapore’s massive $690 billion GIC fund topped the list, spending slightly over $39 billion in 72 transactions. Over half of total was invested in real estate, with a clear preference for logistics properties.
In fact, five of the ten largest investments ever made by state-owned investors occurred in 2022, beginning in January with Temasek’s $7 billion purchase of testing, inspection, and certification firm Element Materials from private equity fund Bridgepoint.
In March, BCI and Macquarie agreed to buy 60% of Britain’s National Grid Gas Transmission and Metering business. Two months later, Italy’s CDP Equity wealth fund, along with Blackstone and Macquarie, spent $4.4 billion on Autostrade per l’Italia.