January 20, 2010 – Fondazione Eni Enrico Mattei and Monitor Group today released the quarterly Sovereign Wealth Fund Investment Behavior report, which analyzes Sovereign Wealth Fund (SWF) transactions for Q3 of 2009. 

"As SWFs re-gained confidence in global markets, they began again to invest abroad, particularly in Europe and North America, which accounted more than half of the new equity investment in Q3" said William Miracky, a senior partner at Monitor Group. "In addition, SWF  investment patterns continued to evolve; financial service investments were relatively less attractive, while transactions in engineering-related sectors and natural resources saw a significant upswing."

Analysis of SWF transactions throughout Q3 found resurgence in spending, with transactions more than doubling in number from 11 in Q2 to 25 in Q3. This growth was seen alongside a dramatic increase in value from $3.5 billion to $25.3 billion in Q3. Both the number and value of these public SWF transactions are the highest recorded since the economic collapse.

In addition, international investment continued to dominate in Q3 as 88 percent of transactions were made in OECD markets, further suggesting a renewed confidence in global markets. This figure is up from approximately 66 percent of all SWF deals made in Q2.

"As predicted in the Q2 report, SWFs are emerging with long-term strategies around investments, focusing on international markets and avoiding the financial sector" said Bernardo Bortolotti, executive director of FEEM. "It appears that the stronger funds are really starting to come out of inactivity and pick up speed quickly."

For our Q3 update, representatives of Istithmar World, a SWF affiliated with Dubai World, agreed to share with us extensive information about its investments, becoming the first SWF to voluntarily contribute to the Monitor-FEEM SWF Transaction Database. 

Key Findings from the report:

• SWFs completed 25 publicly reported acquisitions valued at $25.3 billion. This is more than twice the number of deals executed during the previous quarter and represents an increase in value by a factor of 7.5.
• The trend for funds to invest abroad continued. SWFs made only five publicly reported domestic investments, valued at $2.0 billion, less than 20 percent of the total.
• Developed markets once again proved attractive for SWF investments; for the first time since Q1 2008 the majority of SWF investment ($22.2 billion, 88 percent) occurred in the OECD.
• Financial services were a comparatively less attractive sector for SWFs, accounting for only two deals, with a public value of $2 billion. In contrast, engineering-related sectors such as automobiles and construction were more attractive. These sectors accounted for a total of five deals, valued at $11.7 billion.
• The most active funds in Q3 2009 were the China Investment Corporation, which undertook five deals valued at $3.8 billion, and Abu Dhabi’s International Petroleum Investment Company, which undertook four deals publicly valued at $6.7 billion.

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Read the press release in Italian language.

"Sovereign Wealth Fund investment Behavior: Analysis of Sovereign Wealth Fund Transactions during Q3 2009" is the latest in a series of reports and quarterly updates documenting and assessing SWF activity. All reports are available here.