Market Crisis Dealt Sovereign Wealth Funds A Severe Setback In 2022

The report drafted by the industrial specialist global SWF’s Diego Lopez suggests that for the first time in 50 years a combination of major bond and stock markets suffered by 10%-plus corrections. He added that this main factor has been simultaneous and significant in driving market into the misery.

The crash of stock and bond markets, initiating a bear run at the end of the year 2021 has widely driven to cut the value of sovereign wealth funds combined a loss of $2.2 trillion during the financial year 2021.

This Is The Fastest Rate Of Decline Ever Seen In Sovereign Wealth Fund

The sovereign wealth fund has dropped at this rate for the first time in history. The reports drafted by the industrial specialist of Global sovereign wealth fund indicates that the value of the assets managed by sovereign wealth fund has resulted in to drop to $10.6 trillion from $11.5 trillion, whereas the public funds have scrapped a whopping $1.3 trillion dollars, the value declined from $22.1 trillion to $20.8 trillion.

In one way, the Ukraine-Russia war is responsible for driving the already inflated economy caused by the global pandemic further down. These factors have led the inflation rates to 40- a year high. To counter the inflation, some of the major central banks and the U.S. federal reserve spiked up the interest rates which resulted to generate a massive sell-off in the global market.

The analysis was conducted on the 455 state-owned investors, all the assets together formulated around $32 trillion in assets. Around the globe, the charts suggest that Denmark’s ATP  had the toughest loss, the investment company had a loss of around $34 billion in the pension fund. 

The entire asset plunged by over 45% in its value. Despite the tough market to inject the funds, most of the sovereign funds ended up in pilings in the exchange for companies, property as well as infrastructures. Compared to 2021, its value of it jumped by 12% across the property and infrastructure market.

While most of the sovereignty funds have plunged, Ireland’s state-owned Ireland Strategic Investment fund (ISIF) has ranked as one of the top socially responsible sovereign funds in the world. The assets are estimated at $16 billion which combines the $10 billion of co-investments. China’s investment corporation ranked 1st in the list claiming a whopping $1.3 trillion

Overall, a record of $257.5 billion in sovereign wealth funds was slashed in 743 deals, which includes grappling with numerous mega deals worth more than $1 billion.

Asia’s huge mega deals could not power up the sovereign wealth funds to compensate for the loss of others. Singapore recorded spending of $39 billion in 72 deals with the most active state investor in 2022, which also includes the acquisition of Bridgepoint element materials for a massive $7 billion in investments in early January. This transaction between both parties is regarded as one of the top acquisitions in 2022.

Another acquisition of Britain’s National Grid’s British gas transmission and metering business by Australia’s Macquarie asset management British Columbia Investment management and corporation for a whopping $12.7 billion, which involves a 60% stake of the business.

>Read: U.S. Stocks Fall On Recession Concerns, Nasdaq Hits Bear Market Low

In another wind, Macquarie asset management and Blackstone infrastructure partners along with the Italian sovereign wealth fund CDP equity had acquired 88% of the equity in Autostrade per Italia, an Italian joint-stock company; for $4.4 billion in early June.

The report further accuses the sovereign funds of chasing elephants in 2023 if the financial market continues to fall in reflection to 2022. In addition, the assistance to buy more firms in the West by the middle east would ease off the burning fire. The middle has received a huge amount of revenue in exchange for oil in the past year.

Furthermore, the middle east sovereign wealth funds have been largely involved in investment programs in the UK and other countries mainly focused on firms that specialize in Banking services, Technology, and infrastructure. The experts imply that the Middle Eastern and Asian sovereign wealth can assist in recovering the western economy.