Singapore’s sovereign wealth funds (SWFs), GIC and Temasek, slashed their investments by more than half in 2023, while the Gulf funds continued to dominate the charts, according to the Global SWF Annual 2024 report.
Saudi’s PIF, which toppled GIC as the lead investor, deployed $31.6 billion across 49 deals in 2023, a whopping 33% more than in 2022. Together with PIF, there were five funds from the GCC [Gulf Cooperation Council] countries that made it to the top 10 — the Abu Dhabi Investment Authority, Mubadala, ADQ, and Qatar Investment Authority.
Global SWF is a data platform that tracks over 400 SWFs and public pension funds (PPFs). Their annual report pointed to a 20% decrease in global investments by SWFs to $124.7 billion across 324 transactions and a 26% decline in investments by PPFs to $80.4 billion across 268 deals in 2023.
In contrast, there was a significant resurgence of interest in emerging markets. According to the report, half of the leaderboard invested more in emerging markets than in any other region in 2023, with strong interest in China, Indonesia, Brazil, and India. For instance, GIC’s investment in developing nations jumped 2.6x over 2022.
Notably, India climbed the ranks to become the second most popular destination after the US and ahead of the UK and China.
Realty rebounds
In sectoral terms, more than a quarter of the investments made in 2023 were in real estate, a trend not seen since 2014, the report noted. Financials and infrastructure remained popular, with 19% and 18% of the deals, respectively. Investment in industrial conglomerates increased due to domestic investments made by Gulf investors.
Interestingly, however, less than 50% of the capital deployed in 2023 was in real assets — the lowest in the past six years— which can be explained by lower deal tickets in renewables.
Overall, state-backed funds poured a record $26.1 billion into companies related to energy transition, including renewables, battery storage, and electric vehicles.
Gulf SWFs were responsible for almost half of that figure, while Canadian, European, Singaporean, and Australian funds are also freeing up plenty of dry powder to plunge capital into achieving their net zero ambitions.
Going forward
The report forecasted SWFs to grow from $11.2 trillion in 2023 to $12.7 trillion by 2025 and $18 trillion by 2030. The growth may be fuelled by new funds budding across the globe (13 new funds this decade so far) and there could be over 200 SWFs operating by 2030, it added.
Despite the threatening cloud of geopolitics, the report stated that sovereign investors will continue to read the room and build resilient portfolios. This may drive further diversification and the focus on new or more sophisticated asset classes.
The emergence of SWFs with domestic mandates will also continue to change the dynamics of the industry, and the industry will see the pure international financial investors model become obsolete in the next few years.
