Sovereign wealth funds (SWFs) from the Gulf region, as well as Singapore, have shored up levels of investment among state-owned investors, despite the very challenging market conditions that caused the industry’s assets under management to shrink in value for the first time on record.
Some five of the ten most active state-owned investors (SOIs), which includes both sovereign wealth funds (SWFs) and public pension funds, came from Gulf Cooperation Council countries last year, according to the latest annual report by industry specialist research firm Global SWF published on January 1, with another two coming from Singapore and three from Canada.
“The 2022 ‘market misery’ has affected all investors, but some Gulf SWFs have been able to offset those (paper) losses with injections from oil revenues,” says Diego López, managing director of Global SWF.
By contrast, Canadian pension funds, which have traditionally stood out amongst the most active SOIs globally, have been under “pressure [from] their stakeholders (pensioners) and have been more cautious this year”, he adds.
Global SWF estimates the overall assets under management of SOIs dropped from $33.6tn in 2021 to $31.4tn in 2022.
Singapore’s GIC was ranked the most active investor among SOIs globally — a position it has held since 2018. GIC invested $39.1bn in 2022, up by 13.3% from a year earlier, across 72 deals with more than half invested in real estate and more than 60% of capital deployed in Europe and North America. Another Singaporean SWF, Temasek, came in fourth in the top 10 of the most active SOIs, with investments of $13.5bn in 2022 — a 27.3% increase from 2021.
The Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund (PIF) ranked right after GIC in the top 10 for the first time. The former deployed $25.9bn in 2022 (up by 140% from 2021); the latter $20.3bn (up by 448.6% from a year earlier).
Emirati funds Mubadala and ADQ came in sixth and seventh position, respectively. Mubadala deployed $11.3bn, (down by 22.1% from 2021), while deployed ADQ $11.2bn (up 55.5% from 2021). The Qatar Investment Authority completes the top 10 with total investments for $7.1bn — an increase up from $3.1bn.
SOIs invested 77% of their capital in developed economies in 2022, the remaining going to emerging economies — one of the lowest figures in the past six years, the report notes.
With less competition from international peers, Middle Eastern sovereign wealth funds have moved into the US and Europe. In 2022, they more than doubled their investments in Western economies to $51.2bn from $21.8bn in 2021, the report finds.
“This means that Gulf investors are driving forward with the pursuit of ‘cheap’ assets in Europe (including the UK) and in the US, and with more limited competition coming from their international peers,” it says.
Notably, most state-owned investors reduced their activity in the US public markets in 2022, Global SWF says, apart from Saudi Arabia’s PIF which bought $7bn worth of US equities during the second quarter.
Elsewhere, the year marked a return for mega-deals, or investments worth $1bn or more, as five of the top 10 largest investments ever recorded by state-owned investors were carried out in 2022. The biggest was Temasek’s acquisition of UK-based testing services firm Element Materials for $7bn in January.
Of the 60 mega-deals recorded in 2022, 25 were carried out by Gulf funds, and 17 of them were in American or European businesses, the report finds.