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Investing for Resilience: IFSWF Annual Review 2019

Aggiornamento: 11 giu 2020

The International Forum of Sovereign Wealth Funds (IFSWF) has published Investing for Resilience, its annual review of sovereign wealth funds’ investment activity in 2019. Drawing on IFSWF’s proprietary dataset of direct equity investments made by more than 70 sovereign wealth funds globally, the analysis reveals that sovereign wealth funds were facing mounting headwinds to investing directly in 2019. Nevertheless, sovereign wealth funds were well prepared for the financial market turmoil caused by the Covid-19 pandemic in the first four months of 2020.

IFSWF Annual Review 2019

A new report on the activity of sovereign wealth funds in 2019, carried out by the International Forum of Sovereign Wealth Funds, showed that the number of direct transactions carried out by these companies has been stagnant since 2017.

The amount of capital invested has instead decreased by over a third, from $ 54.3 billion in 2017 to $ 35 billion in 2019. ISFSWF is a network of sovereign wealth funds from nearly 40 countries and has conducted its investigation into 60 state-controlled vehicles, including Cdp Equity. The reasons for this slowdown are manifold. The lower liquidity of the stock markets and the high valuations achieved by listed companies decrease the investment opportunities on the stock exchange and encourage institutional investors to look for opportunities in private markets.

For this reason, the percentage of unlisted investments in the portfolio went from 50% in 2015 to 70% in 2019. The investments of sovereign wealth funds in infrastructure (4.5 billion) and real estate assets also dropped last year ( 9 billion). Here, too, mainly because of assessments considered excessive. The retreat is also explained by the role played by governments in favoring or not promoting the investments of these vehicles. On the one hand, government veto powers have grown over the purchase of investments in strategic companies by international funds, on the other, the executives themselves have imposed on their sovereign vehicles to invest more in national economies.

Thus in four years the closed operations within the respective borders went from 10 to 21.6%. In this regard, in the future it is possible that the crisis and pandemic will confirm and strengthen this trend in the years to come.

As for the investment sectors, the number of direct transactions in technology and telecommunications companies has more than doubled (+ 105.6%).

In the pharmaceutical sector, deals in biotech were in clear prevalence compared to traditional pharma (4.2 billion in 81 investments against 1.2 billion in 11 deals).

On the other hand, interest in sectors such as industry, energy and materials companies and financial services has decreased. Sovereign wealth funds are state-owned investment vehicles that use excess revenue (such as money from a nation's oil and gas production, as is the case for Norway (link) for example) to invest in a variety of assets, usually long term.

Source : International Forum of Sovereign Wealth Funds (IFSWF)

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