Assets under management of sovereign wealth funds (SWFs) increased for the third year running in 2011 to a record US$4.8 trillion, according to TheCityUK’s report ‘Sovereign Wealth Funds 2012′. There was an additional US$7.2 trillion held in other sovereign investment vehicles, such as pension reserve funds, development funds and state-owned corporations’ funds, and US$8.1 trillion in other official foreign exchange (FX) reserves.
TheCityUK’s projections are for SWFs’ assets to grow by 8% in 2012 to US$5.2 trillion, following the 9% increase in 2011. Taken together, governments of SWFs, largely those in emerging economies, have access to a pool of funds totalling $20 trillion. Some of these funds could in future be channelled towards funding development of infrastructure for which there is global demand.
The UK is an important centre for SWFs as a:
- Key location from where some of the funds are managed. A number of funds from Kuwait, Brunai, Singapore and United Arab Emirates have representative offices in London.
- Clearing house for SWF transactions.
Major recipient of investment funds, the UK’s 17% of global SWF investments in the past six years was second only to the 19% share of the US.
Marko Maslakovic, senior manager, economic research at TheCityUK, said: “The UK is the leading destination for SWF investments in the EU, attracting more capital than France, Germany and Spain combined. The most recent example is the acquisition of nearly 9% of the holding company for Thames Water by the China Investment Corporation, the fund’s first major share purchase in the UK.”
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