Sovereign Wealth Fund Transactions Illustrate Increasing Confidence in Global Markets
Monitor Group and Fondazione Eni Enrico Mattei Release HI 2010 SWF Analysis;Finds Increases in Number and Value of Investments, Shift Towards Financial Services
Cambridge, Mass. – October 20, 2010—Monitor Group, one of the world’s leading advisory and consulting firms, and Fondazione Eni Enrico Mattei (FEEM), a leading international research center based in Milan, Italy, today released their Sovereign Wealth Fund Semi-Annual Report: January-June 2010, which analyzes Sovereign Wealth Fund (SWF) transactions for the first half of 2010.
Analysis of SWF transactions during H1 found 16 of the 33 SWFs on the Monitor-FEEM SWF Transaction Database undertook 92 publicly reported investments, double the number and value of the same period in 2009, with a value of $22.2 billion. However, since large domestic investments and recapitalizations inflated SWF investment value in H2 2009, and these were absent in H1 2010 SWFs, the value of SWF investment was depressed, in comparison to the previous half.
“Though the value of SWF investment in H1 2010 represented less than 40 percent of the value of investment in H2 2009, there has been a continued uptick in the number of investments made,” said William Miracky, a senior partner at Monitor Group. “SWFs’ confidence in global markets seems to be on the rise, and the increase in the number of investments in H1 2010 compared to a year earlier is an encouraging sign.”
Three sectors appeared to be particularly attractive to SWFs: financial services (19 deals, $7.4 billion); natural resources (16 deals, $4.3 billion); and utilities (6 deals, $4.3 billion). At $16.1 billion, these sectors account for almost three-quarters of SWFs’ publicly reported expenditure in H1 2010 and nearly half of all the investments made.
“In the first half of the year, SWFs turned to investments in the financial sector once again, rebounding from the failing European and American financial institutions in winter of 2007-08 and a bailout of domestic banking sectors in early 2009,” said Bernardo Bortolotti, executive director of FEEM. “These investments differed from earlier years, however, with more diversification and only three direct equity investments in banks.”
The Monitor-FEEM SWF Semi-Annual Report also addresses a key trend in SWF activity over the past year, that of attracting private capital, assessing why they are raising money in this manner, how it affects their investment strategies and whether it changes their sovereign nature.
Additionally, it assembles the most recent available data on SWF assets under management and asset allocation and examines the major trends in portfolio development during the last year.
Key Findings from the report:
- During H1 2010, 16 of the 33 funds on the Monitor-FEEM SWF Transaction Database executed 92 investments valued at $22.2 billion—a 20 percent increase in deal volume from H2 2009.
- In H1 2010, SWFs’ publicly reported deals remained spread across diverse sectors, continuing the trend we identified at the end of 2009.
- Following an established pattern of investment, Europe was the largest market for SWF investment in terms of recorded value, accounting for almost 40 percent of the total.
- Continuing with a trend observed in 2009, Asia-Pacific accounted for the largest number of deals (28) in the period. North America was the second most popular region (22 deals). SWFs also continued to demonstrate interest in Latin America, non-Pacific Asia and sub-Saharan Africa, executing 14 deals with a value of $1.5 billion in these markets.
- The most active funds were Temasek Holdings (20 deals), the China Investment Corporation and the Qatar Investment Authority (both 14 deals).
Sovereign Wealth Fund Semi-Annual Report: January-June 2010 is the latest in a series of reports and quarterly updates documenting and assessing SWF activity. All reports are also vailable at www.monitor.com.
For media inquiries around the report, please contact Rachel Adam.