Amid the rapid growth of public investors, sovereign wealth funds and pension funds in 2021, private assets – including venture capital and real estate – are expected to receive strong inflows in 2022, the latest Global report revealed. SWF.
Topics such as ESG and tech are also expected to attract more interest from institutional investors in the new year, according to a Jan.6 press conference.
The size of the sovereign wealth fund (SWF) industry, meanwhile, grew 6 percent year-on-year in 2021 and surpassed the $ 10,000 billion mark for the first time in history, supported by the stock prices and the recovery in oil prices.
Public pension funds (PPFs) also reached a historic milestone after surpassing the $ 20 trillion mark, experiencing higher annual growth of 8.7% due to increased exposure to U.S. equities and the increase in contributions from retirees around the world.
WINNERS: REAL ESTATE AND PE
In terms of performance, there was a big disparity between the performance of different asset classes in 2021, with real estate offering the most attractive returns.
Fixed income securities were the only asset class to post negative returns, as measured by the S&P 500 Global Bond Index, the report said. Listed stocks continued to show strong performance, according to the report. S&P Global 1,200 Index.
Hedge funds disappointed again with significantly lower returns than equities.
Diego Lopez, World SWF
“Private markets are always harder to follow because SOIs don’t necessarily do valuations every quarter, and if they do, they have a bit of a lag. Yet, according to listed company indices, real estate was the best performing asset class for 2021, closely followed by private equity, ”said Diego Lopez, Managing Director of Global SWF.
Daniel Brett, head of research and data at Global SWF, believes longer-term investors will continue to strive to seek out technology and venture capital opportunities in China and India despite China’s regulatory headlines. last year.
At the same time, asset owners plan to further increase their allocation to private markets this year.
For example, Canada’s CDPQ increased its allocation from 27% in 2016 to 36% in 2021 and is targeting 45% by 2024; Abu Dhabi’s ADIA recently raised its allocation target bands for private equity and infrastructure, and the Korean KIC aims to increase alternatives from 15% in 2021 to 27% by 2027.
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GIC, CPP INVEST THE MOST
According to the report, the pandemic has done little to slow the pace of SOI investments. Compared to 2020, sovereign wealth funds deployed 19% more, with 106 billion dollars in 500 transactions; while PPF investments have increased dramatically in value and volume, up to $ 112.9 billion in 354 transactions.
GIC was once again one step ahead of its competitors. Singapore’s SWF deployed $ 34.5 billion in 110 deals, nearly double that of 2020. Almost half of that capital has been invested in real estate, with a clear preference for logistics.
The second biggest spender was the Canadian CPP with $ 23.7 billion, of which 61% was invested in real assets.
TOPS REAL ESTATE AUSSIE
Real estate assets have become one of the best choices among derivatives.
Australia has emerged as a top destination for public investors in 2021, reaching new heights with $ 23.8 billion invested in real estate, infrastructure and private equity, according to the report. Transaction activity continued unabated in the real estate sector, spanning the office, retail, logistics, residential and industrial sectors.
Lopez believes that “this trend will persist as the government advances its infrastructure program, capitalizing on the country’s geographic strengths and resources to play a leading role in regional economic integration.”
In terms of cities, Sydney and Melbourne are experiencing high levels of demand for office space, which has driven rents up, while land constraints in prime locations – such as central business districts – have pushed up prices for properties. active.
Industry and logistics are focused on coastal areas with support networks, especially in cities like Perth.
Real assets have long been a priority for SOIs investing in Australia and 2021 was no exception. In value, infrastructures represent 47% of the total for the year, real estate 39%, the rest being made up of private equity. Foreign public investors took the lead, contributing 69% of the total.
READ ALSO : Real estate outlook 2022: niche asset classes boost returns
RESPONSE TO COVID-19
After two years of adapting to the pandemic, investors took a closer look at the allocation to domestic markets, according to the report.
“If we analyze the remaining sovereign wealth funds, i.e. those with a flexible mandate that can invest both at home and abroad,” Lopez said, adding that the strategies and portfolios were focused on national commitment.
In the two years leading up to Covid-19, sovereign wealth funds invested 22% of their capital in them, but during Covid-19 that percentage rose to 41%, according to a Wall Street Journal report in July.