Sovereign wealth acquisitions double in first half 2010

The number and value of acquisitions made by sovereign wealth funds both doubled in the first half of 2010 compared to the same period the previous year, according to a Monitor Group report released Wednesday.

In the six months ended June 30, the 33 funds followed by the Monitor Group executed 92 investments totaling $22.2 billion, according to the report.

“It appears that SWFs continued a trend we identified at the end of last year — that of making more, but smaller individual investments and (generally) taking smaller shareholdings,” according to the report.

Three sectors stood out as attracting SWFs: financial services with 19 transactions totaling $7.4 billion; natural resources, 16 purchases for $4.3 billion; and utilities, six deals totaling $4.3 billion.

In financial services, SWFs preferred alternative assets over direct equity stakes in banks or recapitalizing their balance sheets, according to the report. For example, Government of Singapore Investment Corp. — which manages more than US$100 billion in assets — bought a 3% stake in London-based private equity company 3i Group during the first half of the year, according to the report.

More than 75% of SWFs’ total deal value, or $16.3 billion, and about 47% of the deals occurred in developed nations.

The SWFs followed by the Monitor Group spent the most money in Europe, which accounted for 40% of the total expenditure. North America accounted for about a third of the total value of deals, or about $7.5 billion.

“A growing number of SWF investments occurred in countries such as India, Russia and … sub-Saharan Africa,” according to the report. “While the total value of these investments remains comparatively small — around $1.5 billion — it represents an ongoing trend of the geographic diversification of SWF portfolios.”

Overall, SWFs increased allocations to equities, commodities, real estate and infrastructure during the first half of 2010, according to the report. Fund officials are also expanding private equity and hedge fund strategies “possibly in a bid to achieve higher returns in a depressed market,” according to the report.