The increasing power of sovereign wealth funds was underlined by research that revealed they had assets of just under $4 trillion in 2010, making SWFs a huge determinant of world-wide capital flows.
Alternative investment research consultancy Preqin said in its annual Sovereign Wealth Fund Review that assets managed by SWFs had grown by 11% in 2010, making it the second year in a row such strong growth was achieved.
The research said that the Abu Dhabi Investment Authority is the largest fund, with $625 billion under management as of 2010, closely followed by the Norwegian Government Pension Fund, founded in 2006, with $530 billion. The China Investment Corporation was founded a year later and currently has $332 billion.
The proportion of assets of SWFs investing in infrastructure has increased to 61% at the end of 2010 from 47% at the beginning of last year. There has also been an increase in the proportion of SWFs investing in real estate and private equity – 51% to 56%, and 55% to 59% respectively. The proportion of SWFs investing in hedge funds has remained static at around 36%.
“We expect the proportion of SWFs moving into the various alternative asset classes, as well as the amount invested by SWFs in alternatives, to continue to increase in the coming year,” said Sam Meakin, author of the report.
He added: “The significant collective assets under management of SWFs means that they represent an important potential source of capital for fund managers across all asset classes.”