Estimates from an annual study showed that heavy losses suffered by equity and bond markets over the past year have led to a decline in the combined value of sovereign wealth funds and public pension funds worldwide for the first time ever, by about $2.2 trillion.
The report by the Global SWF platform on state-owned investment vehicles indicated that the value of assets managed by sovereign wealth funds fell to $10.6 trillion from $11.5 trillion, while the value of public pension fund assets fell to $20.8 trillion from $22.1 trillion.
Global SWF’s Diego Lopez said the main driver was “simultaneous and large” corrections of 10% and more in major bond and equity markets, a combination not seen in 50 years.
This came at a time when the Russian invasion of Ukraine had sent commodity prices soaring and inflation already climbing to its highest level in 40 years. To deal with these developments, the US Federal Reserve and other major central banks raised interest rates, which led to heavy selling off in global markets.
“These are accounting losses and some funds’ role as long-term investors won’t be affected…but it makes it clear to us exactly where we stand,” Lopez said.
Despite all the turmoil, money spent by funds to acquire companies, real estate or infrastructure has increased by 12% compared to 2021.
The report predicted that sovereign wealth funds in the Gulf region, such as the Abu Dhabi Investment Authority, Mubadala and Holding (ADQ), the Public Investment Fund and the Qatar Investment Authority, would become more active in buying Western companies after receiving huge financial inflows from oil revenues over the past year.
