SWFs welcome a new member

by Adrienne Lawler
August 28, 2018

Published in the FT 28/8/18

Sovereign wealth fund assets ‘could reach $15tn in two years’

Egypt is poised to become the latest country with its own investment pool. Despite the economic crisis affecting ordinary Egyptians, the country is about to launch a Sovereign wealth fund. 

Chris Flood APRIL 21, 2018

The exclusive club made up of the world’s largest institutional investors is preparing to welcome its newest member after the Egyptian government last week approved a draft law to establish a sovereign wealth fund. If Egypt’s parliament approves, the newest state-backed fund will start life with an initial capital allocation of E£200bn ($11.3bn), a baby among a collection of giants that have become some of the world’s most influential investors. Assets managed by SWFs globally reached $7.45tn spread across 78 funds as at March 2018, an increase of $866bn, or 13 per cent, over the past 12 months, according to data provider Preqin. A recovery in oil prices and strong gains for equity markets drove the increase in assets, which will come as welcome news to investment managers as SWFs are among their most prestigious clients. SWFs pulled about $85bn from asset managers over the 24 months ending on December 16 as low oil prices forced governments in the Middle East to raid these rainy-day funds to prop up public spending. More than two-thirds of the world’s SWFs were established after 2000 and there is a pipeline of newer funds for which investment policies have still to be fully determined. Some estimates suggest that global SWF assets could reach $15tn as early as 2020 and scrutiny of these funds’ policies and performance is only likely to grow. As investors with ultra-long investment horizons, dealing with climate change poses the biggest challenge to SWFs, an issue complicated by the fact that many are funded by oil production. A “One Planet” working group of SWFs, including Middle East funds, was established in December. It plans to publish a framework this year to help SWFs address climate change. Copyright The Financial Times Limited 2018. All rights reserved.

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