Assets held by sovereign wealth funds across the globe increased 3.2% to $6.51 trillion in the 12-month period through March, driven by growth in non-commodity funds, Preqin said.
The research firm reported that funds that do not derive their assets from commodities added $290 billion in assets over the year, while funds reliant on hydrocarbon assets, including oil, lost $10 billion. Other commodities funds lost more than half of their wealth, dropping by more than half to $50 billion, from $130 billion a year earlier.
Preqin, which analyzed the growth and asset allocations of 74 sovereign wealth funds, highlighted in its research the effect of the oil price collapse on investors.
“For over a decade the assets of sovereign investors have grown significantly. For many, this is a result of substantial state oil and other commodity revenues. The leadership at funds such as Norges Bank Investment Management (which manages the assets of the $835 billion Government Pension Fund Global), Abu Dhabi Investment Authority and Kuwait Investment Authority have had the luxury of focusing on the deployment of inflows and not having to manage redemptions,” the research report said.
However, the “dramatic” drop in oil prices, to below $30 a barrel in January, “presents a new environment as commodity-dependent states face the need to address fiscal deficits and have turned to (sovereign investor) assets,” the report said.
Of the funds, 45% saw assets increase vs. 19% that saw no change. The remaining 36% saw a decrease in assets.
Also, Preqin found the asset allocation of these sovereign wealth funds has further favored alternatives over the past three years, at the expense of more mainstream asset classes. Some 55% of funds have allocations to private equity in 2016, compared with 47% in 2015 and 51% in 2014; real estate, increased to 62% of plans, up from 59% in 2015 and 54% in 2014; and infrastructure, 62% of funds, vs. 60% in 2015 and 57% in 2014. Hedge fund allocations remained steady, at 32% in 2016, vs. 33% in 2015 and 31% in 2014. In the 2016 research, 80% said they invest in public equities, down from 81% last year and 82% in 2014.
Middle East and Asia sovereign wealth funds collectively represented 76% of the assets in the research, and 45% of the number of funds. North America accounted for 3% of total capital. Emerging Africa represents 14% of funds.