Sovereign-wealth funds, which are among the world’s biggest stock-market players, are unleashing more of their firepower at home, as governments lean on them to reboot pandemic-stricken economies.
The funds made about $12.7 billion in new investments directly into companies and projects in their domestic economies in 2020, more than triple the amount in 2019, according to the International Forum of Sovereign Wealth Funds, or IFSWF. So far this year, sovereign-wealth funds have invested some $4 billion at home, about the same as in all of 2019.
“There is a general shift away from investing in international markets, to demonstrate the value of sovereign-wealth funds to citizens,” Victoria Barbary, the forum’s strategy director said. “Countries planning new sovereign-wealth funds are increasingly focused on investing at home. This is a trend that Covid has accelerated.”
Sovereign-wealth funds manage trillions of dollars on behalf of nations, and where they direct their money can have a major impact on markets.
Their mandates vary. Some invest anywhere, while others can invest only internationally or domestically. Among the funds permitted to invest anywhere, since the coronavirus pandemic struck, domestic investment jumped to 44% of the total, up from 22% in the three years leading up to March 2020, according to research firm Global SWF.
Funds in Kuwait, Malaysia, Singapore, Saudi Arabia and the United Arab Emirates are investing more domestically, Global SWF said.
Singapore’s Temasek Holdings has invested $8.9 billion in
Singapore Airlines Ltd.
during the pandemic. Turkey’s sovereign-wealth fund invested $5.8 billion in 2020, mainly in local banks and insurers and in mobile-phone operator
Turkcell Iletisim Hizmetleri A.S.
, according to the IFSWF. The Ireland Strategic Investment Fund allocated 2 billion euros, the equivalent of around $2.4 billion, to a so-called Pandemic Stabilisation and Recovery Fund in 2020.
In June, CDP Equity SpA, Italy’s sovereign-wealth fund, led an investor group that agreed to buy 88% of Italian highway manager Autostrade per l’Italia SpA for about €8.1 billion.
Governments also have tapped sovereign-wealth funds for spending purposes during the pandemic. Chile’s finance ministry withdrew $4.1 billion from its Economic and Social Stabilization Fund last year and plans to withdraw more than $6 billion this year, according to a spokesman.
Norway’s Government Pension Fund Global, which invests only outside the country, made its largest contribution to the government last year. Norway’s finance ministry withdrew $34 billion from the fund in 2020, almost 3% of its overall size. Norway’s fund is one of the most transparent in the world, and its investments returned 10.9% in 2020, with the fund worth $1.27 trillion at the end of the year. Its equities returned 12.1%, and its bonds returned 7.5%.
The turn inward doesn’t necessarily mean these funds are retreating from global markets. Overseas investment was higher in 2020 than the previous four years, at more than $50 billion, according to the IFSWF.
These national investors remain some of the biggest shareholders in S&P 500 companies. Saudi Arabia’s Public Investment Fund took major stakes in
Live Nation Entertainment Inc.
and cruise-line operator
, and invested in U.S. stocks through exchange-traded funds in 2020.
One prominent direct response to the health crisis by a sovereign-wealth fund came from the Russian Direct Investment Fund, which scrambled early last year to fund development of the Sputnik V vaccine.
“We became a virtual pharma company to fight Covid,”
chief executive of the fund, said. “This is something I want to tell my grandchildren.”
RDIF invested about $200 million to develop the Sputnik vaccine and has an exclusive license to sell it outside Russia, where it is registered in 67 countries, Mr. Dmitriev said. The RDIF said this week that the Serum Institute of India, the world’s largest vaccine manufacturer by volume, plans to start producing the vaccine by September.
“The demand for sovereign-wealth funds is not just to be a passive manager,” Mr. Dmitriev said.
Write to Simon Clark at [email protected]
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