Sovereign wealth funds around the world have added more than $750 billion to their total assets under management since 2012. Last year, total assets amounted to $4.62 trillion, compared with $5.38 trillion in 2013.
This is according to new research in the 2014 Preqin Sovereign Wealth Fund Review. This growth, which is the largest annual increase in total sovereign wealth fund assets since Preqin began tracking this data in 2007, can be explained by the number of new sovereign wealth funds formed over the last few years and the capital injected into existing sovereign wealth funds, according to Preqin.
Asia-based sovereign wealth funds have shown some of the largest growth in assets under management, with the assets of these funds growing, on average, by 19% since 2012. This is in comparison with the average 6% growth in assets under management exhibited by Middle Eastern sovereign wealth funds. In fact, Asia-based sovereign wealth funds account for a significant 47% of global aggregate sovereign wealth fund assets, although they represent only 22% of sovereign wealth funds globally by number.
The research shows that the largest sovereign wealth fund in the world is Government Pension Fund Global, based in Norway, with $775.2 billion in assets under management; this is an increase of $185 billion since 2012.
Additionally, the figures reveal that the proportion of sovereign wealth funds investing in private equity and hedge funds has decreased over the past year—from 57% and 38% investing in private equity and hedge funds, respectively, in 2012 to 45% and 31%, respectively, in 2013. Some of this decline is due to the growth in the number of new sovereign wealth funds being established, because these newer sovereign wealth funds typically will not allocate to alternative investments for a few years as they build up their investment teams and accumulate assets, according to Preqin.
However, appetite for real estate and infrastructure has remained steady. Fifty-four percent of sovereign wealth funds invested in real estate in both 2012 and 2013, and the proportion investing in infrastructure rose slightly to 57% in 2013 from 56% in 2012.