Sovereign funds' asset fall to $3.8 trln '09-report

Mon Mar 1, 2010 11:02am GMT

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LONDON, March 1 (Reuters) - Assets under management by sovereign wealth funds fell by 3 percent in 2009 to $3.8 trillion although they are set to increase to $5.5 trillion in the next couple of years, a London-based think tank said on Monday.

International Financial Services London (IFSL> also said that sovereign investment vehicles, such as pension reserve funds and development funds, held an additional $6.5 trillion, up 13 percent from the previous year.

"In 2009 SWFs gradually started to regain their appetite for foreign investment," IFSL said in a report.

"Recent SWF transactions suggest that acquisitions will be smaller and more diverse in the coming years with more focus on diversifying portfolios by investing in real estate, commodities and emerging markets."

The IFSL said mark-to-market value of their portfolios rose 15 percent last year, although they still held losses on investments at the outset of the credit crisis.

It said SWFs invested $10 billion in the first half of 2009, the slowest start to a year since 2005. Activity picked up in the second half, and much of the $50 billion they invested in this period was in foreign markets.

The financial services accounted for less than a fifth of investments last year, compared with its share of 45 percent seen since the start of the decade.

Instead, a larger proportion of funds was allocated to industry, infrastructure and other sectors, with the China Investment Corporation investing $15 billion in energy, metals, agriculture and alternative assets. The IFSL also said London was an important centre in the SWF industry as a clearing house and location from where some of these funds are managed.

(Reporting by Natsuko Waki; editing by Patrick Graham)

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