| LONDON, March 12
LONDON, March 12 Sovereign wealth funds (SWFs)
are set to see their assets grow to $5.6 trillion by the end of
2013, a study found, a sum more than double British GDP and
underscoring their status as the world's wealthiest investors.
SWFs, state-owned vehicles such as the Qatar Investment
Authority which manage windfall revenues for future generations,
have become key global market players after the financial
crisis, spending an estimated $90 billion buying up stakes in
Western banks including Barclays Plc for instance.
Benefiting from a decade of high commodity prices and trade
surpluses generated by booming trade, their assets have swollen
to record highs, growing 8 percent in 2012 to $5.2 trillion and
set for further growth the study by TheCityUK found.
By comparison, Britain's GDP was $2.4 trillion in 2012,
according to International Monetary Fund estimates.
"SWFs should see a continuation in the inflow of capital in
the coming years as some Asian countries, particularly China,
continue to build up foreign exchange reserves, and commodity
demand increases with the recovery in the global economy and
growth in demand from emerging markets," TheCityUK said.
TheCityUK, a London-based group tracking the financial
services industry, said the assets of SWFs funded by commodity
exports - a category including Gulf funds and Norway's
Government Pension Fund - totaled $3 trillion at the end of
2012, or 58 percent of the total.
But non-commodity SWFs in countries such as China, funded by
the transfer of assets from foreign exchange reserves or budget
surpluses and privatisations, are also growing fast.
"Non-commodity funds are capturing an increasing share of
SWFs' assets, a trend that is likely to continue," TheCityUK
said, noting non-commodity SWF assets were twice the level of
five years ago.
Asset growth is also coming from new fund launches. Angola,
Western Australia and Panama launched wealth funds last year,
while Bolivia, Canada and Taiwan are among those planning funds.
HOT REAL ESTATE
Apart from bank investments, SWFs are emerging as buyers of
prime real estate in Western capitals, with the China Investment
Corporation last year snapping up Winchester House, the London
headquarters of Deutsche Bank for £245 million.
Another example was Gingko Tree Investment Ltd, a unit of
China's State Administration of Foreign Exchange, which invested
more than $1.6 billion in office buildings and student housing
in London and Manchester.
The Shard tower and the Chelsea Barracks are among the
trophy London properties that have received investments from
Middle Eastern SWFs in past years, while Norway's $700 billion
fund last year said it would raise real estate assets to as much
as 5 percent of its portfolio from 0.3 percent.
There were some $10 billion in real estate transactions last
year, TheCityUK said, citing data from the Sovereign Investment
Lab at Bocconi University in Milan. SWFs' predilection for real
estate is driven by low bond yields in some developed countries
and stock market volatility, the report said.
The report found however that overall overseas direct
investments by SWFs dropped last year.
Their foreign direct investments totaled $57 billion in
2012, down more than a third on the previous year, TheCityUK
said, citing the SWF Institute's Sovereign Wealth Fund
Transaction Database, which tracks transactions in the industry.
The report noted that since 2008-2009 SWFs have been cutting
back on foreign spending to help stabilise domestic financial
markets, which were starting to be affected by the economic
downturn and falling commodity prices.
"SWFs had also faced public criticism in their countries
following a string of losses on their foreign investments at the
outset of the credit crisis," the report added. "The deal
transaction sizes have been smaller in recent years as a