The past year has been a black one for sovereign wealth funds, as well as for pension funds, which have invested in bonds and equities. The damage they suffered was caused by the collapse of the markets, which over the past year has reduced the value of the world’s largest sovereign wealth funds and pension funds by 2.2 trillion. dollars. The picture emerges from a recent study by Global SWF. The survey results show that the value of assets of sovereign wealth funds fell from 11.5 trillion. to 10.6 trillion dollars, and the equivalent of pension funds decreased from 22.1 trillion. up to $20.8 trillion.

According to Diego Lopez, an analyst at Global SWF, the main reason for this sharp fall was the collapse in equities, which was combined with a parallel collapse in bond markets. As he points out, this combination has not been recorded for 50 years.

This situation is connected with the war in Ukraine, which has sharply increased the prices of raw materials and brought inflation to a 40-year high. As a result, the US Federal Reserve, the ECB, the Bank of England and most of the world’s central banks were forced to raise interest rates sharply. The result was a series of consecutive drops in the markets as investors sold their securities en masse.

Their value has decreased by 2.2 trillion. dollars due to falling markets.

According to the Global SWF survey, which included a sample of 455 sovereign wealth funds with assets worth $32 trillion. in dollar terms, Denmark’s ATP fared the worst with a 45% drop and a $34 billion loss for Danish pensioners. However, despite these issues, the investments of these funds have increased by 12% compared to 2021, and important deals have been recorded. Pension funds made 743 major deals totaling $257.5 billion. At the same time, sovereign wealth funds and sovereign wealth funds recorded a record number of large and important transactions totaling more than $1 billion.

Singapore’s GIC topped the list for these major deals with $690 billion in total assets and $39 billion invested in 72 different deals. More than half of this was directed to the real estate market, with investments in key real estate for the supply chain. Finally, according to the study, “if markets continue to fall in 2023, sovereign wealth funds will continue to make deals.” After all, according to a related report by the Financial Times, the sovereign wealth funds that are now accumulating big profits are owned by the oil-producing countries of the Persian Gulf. From Qatar and Saudi Arabia to Abu Dhabi, the Gulf states are watching their sovereign wealth funds once again amass unprecedented wealth for the first time in a decade, even as oil prices plunge. The reason, of course, is the energy crisis and the increase in demand for oil, which offers them the equivalent of what it was in 2008, when the price of oil jumped to $147 a barrel.

Sources: Bloomberg, Financial Times.