Sovereign and Pension Funds Lost 2.2 trillion due to Stock market collapse
2023.01.01 04:24
Sovereign and Pension Funds Lost 2.2 trillion due to Stock market collapse
Budrigannews.com – An annual study of the sector has estimated that the combined value of the world’s sovereign wealth and public pension funds has decreased for the first time ever, by $2.2 trillion, as a result of significant falls in the stock and bond markets over the past year.
The value of assets managed by sovereign wealth funds decreased to $10.6 trillion from $11.5 trillion in the Global SWF report on state-owned investment vehicles, while the value of assets managed by public pension funds decreased to $20.8 trillion from $22.1 trillion.
Diego López of the Global SWF stated that the primary factor was the “simultaneous and significant” corrections of 10% or more that were experienced by major bond and stock markets—a combination that had not occurred in 50 years.
It came as Russia’s invasion of Ukraine raised commodity prices and brought inflation rates, which were already rising, to 40-year highs. The U.S. Federal Reserve and other major central banks raised interest rates in response, which led to a sell-off in global markets.
According to López, “these are paper losses, and some of the funds will not see them realized in their role as long-term investors.” However, it speaks volumes about the time we are in.”
Graphic: Market woes affect sovereign wealth and public pension funds. The report, which looked at 455 state-owned investors with $32 trillion in assets, found that Denmark’s ATP had the worst year of any country, with an estimated 45 percent drop that cost Danish pensioners $34 billion.
However, despite all the turmoil, the amount of money spent on purchasing businesses, real estate, or infrastructure increased by 12% compared to 2021.
A record amount of $257.5 billion was put into 743 deals, and sovereign wealth funds also closed a record number of “mega-deals” worth more than $1 billion.
With 72 deals worth just over $39 billion, Singapore’s massive $690 billion GIC fund led the table. Over half of that went into real estate, with logistics properties clearly dominating.
In fact, five of the ten largest investments ever made by state-owned investors took place in 2022, beginning in January when another Singaporean entity, Temasek, spent $7 billion to acquire Element Materials from the private equity fund Bridgepoint.
Then, in March, BCI of Canada agreed to acquire 60% of the National Grid of Britain (LON:) Macquarie’s Gas Transmission and Metering division. Two months later, Blackstone and Italy’s CDP Equity wealth fund invested $4.4 billion in Autostrade per l’Italia (NYSE:). likewise Macquarie
“It is likely that sovereign funds will keep ‘chasing elephants’ as an effective way to meet their capital allocation requirements if financial markets continue to fall in 2023,” the report stated.
It tipped Gulf SWFs like ADIA, Mubadala, ADQ, PIF, and QIA to become significantly more active in buying up Western companies after receiving significant injections of money from oil revenue over the past year.
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