Once again in 2015, sovereign wealth funds increased their invested capital, bringing it to 4.978,16 billion dollars (+25,5 billion), despite the rumors of demobilization that followed throughout the year following the collapse in oil prices, the commodity that finances a large part of sovereign wealth funds. This was reported in the 2015 Sovereign Annual Report of Bocconi's Sovereign Investment Lab (SIL), presented today at the Borsa Italiana headquarters and meaningfully entitled The Sky Did Not Fall. “Once again, sales turned out to be lower than the new investments,” says Sil manager Bernardo Bortolotti.
Sovereign wealth funds have reacted to the period of prolonged uncertainty with a portfolio diversification strategy. In 2015, in fact, they completed a high number of deals, but with a low unit value. Against a 40% increase in the number of deals, which reached 186, there was a 30% decrease in the total value, to 48 billion dollars. Divestments amount to just $22,4 billion. "It was not the sovereign funds, properly understood, who suffered from the drop in crude oil", comments Bortolotti, "but other entities under public control, such as central banks and stabilization funds, forced to draw copiously on reserves".
Diversification has also materialized in the strong increase in investments outside the country of origin (which rose to 94% of the total) and in a shift towards already developed countries (which attracted 71,9% of investments, a share that has never reached earlier). Operators also turned to alternative and safe investments: 56,9% of the value can be attributed to investments in real estate, hotels and tourist facilities, infrastructures and utilities, sectors that offer returns only in the long term, paying a premium for the illiquidity of the investment – another sign against the divestment rumors circulated during the year.
In geographical terms, sovereign wealth funds anticipated Brexit: in 2015, for the first time, investments in eurozone countries (8,56 billion dollars) exceeded those in the United Kingdom (6,16 billion), in a context which saw a geographical rebalancing in favor of Europe and to the detriment of the United States. A final emerging trend, identified by the Report, is the growth of Sovereign-Private Partnerships, i.e. investments in collaboration between sovereign wealth funds and private investors, which in 2015 reached 50% of the total.
The Sovereign Investment Lab has been officially recognized as a research and educational partner of the International Forum of Sovereign Wealth Funds (Ifswf), the association of global sovereign wealth funds. “We are honored by this result”, continues Bortolotti, “a tangible sign of the quality of our research and its relevance for the community of our stakeholders”. The report was produced with the support of Intesa Sanpaolo, Pwc and Cassa depositi e prestiti.
