Equity stakes in direct investments taken by the world's largest sovereign wealth funds dropped 19% to $35 billion in 2019, analysis by the International Forum of Sovereign Wealth Funds shows.
Direct investments in private equity, real estate and infrastructure fell from $43.3 billion as of Dec. 31, 2018, according to a report of the analysis. The IFSWF conducts its review and analysis of sovereign wealth funds annually.
Sovereign wealth funds were challenged in 2019 due to geopolitical tensions, slowing global economic growth, less liquid stock markets and increasing competition in private markets, the global network of sovereign wealth funds found.
The IFSWF's review of 70 funds also showed that sovereign wealth funds found value in sectors such as software and biotechnology, rather than in industrials and financial services.
"Our data shows that, as a group, sovereign wealth funds were positioning their portfolios towards sectors that have held up during the market turbulence in the wake of the COVID-19 pandemic," Duncan Bonfield, CEO of IFSWF, said Tuesday in a news release. "However, we have also seen more domestic investment activity from a range of sovereign wealth funds, suggesting that they are beginning to play an important role in supporting their local economies."
Still, overall investment activities by sovereign wealth funds declined in 2019 and these investors struggled to find pockets of value, the IFSWF said in its report.
The median value of sovereign wealth funds' investments in private equity was $25 million, less than half of the median value three years ago. Private equity investments were flat year-on-year.
The median assets invested in infrastructure was $50 million down from $100 million in 2018. Real estate investments were also down to $100 million in 2019 from $150 million a year earlier.
Sovereign wealth funds have doubled their participation in their local economies since 2015. In 2019, the share of private equity transactions conducted in local markets increased to 21%, compared to just 10% in 2015. Over a third of funds reviewed are strategic funds that invest in their home economy.