The world’s sovereign wealth funds are scaling back on the amount of capital they’re investing in private assets – a potential sign that the so-called “smart money” is moving on. The question for other institutions – should others be following suit? In its annual review of the industry, the International Forum of Sovereign Wealth Funds reveals that, while sovereign wealth funds in 2017 completed more direct equity investments than they did in 2016, the value of those deals stayed flat – $52.6 billion, compared to 2016’s $51.4 billion. The median equity cheque was $50 million – a little over half of what it was in 2016, at $90 million.

Bricks and mortar properties and infrastructure saw the biggest slowdown – median equity invested was $27 million, falling steeply from previous years: $60 million in 2016, and $58 million in 2015.

Why the slowdown? There are a few reasons:

Slowing private market deal activity – While sovereign wealth funds have typically used their scale, long investment horizon and flexibility around liquidity to shift into private markets, the slowdown could meant that investments in unlisted markets have plateaued. This could be due to higher valuations and increased competition for deals.

Real estate fatigue – Lower volume of real estate deals has been a big contributor to the private market slowdown – in 2017, direct real estate and infrastructure investments made by sovereign wealth funds declined from a total $25 billion in 2016 , split between 77 in property, and 33 in infrastructure, to $23.2 billion, comprising only 42 deals in real estate and 28 in infrastructure. Sovereign wealth funds also reduced their investment activity in commercial and office properties. Again, crowding, high valuations, and increased competition could be a factor here.

Regulatory and competitive issues in infrastructure – The number of infrastructure investments made by sovereign wealth funds dropped by 15% year-on-year, from 33 in 2016 to 28 in 2017. Factors at play here could be regulatory pressure which prevents some of them from investing in major infrastructure assets as well as increased competition and higher valuations for mature assets in developed markets.

Increased collaboration – Partnerships are on the rise among sovereign wealth funds as they increasingly invest with peers. Such collaborations now represent a tenth of all sourced deals and data suggest this number will rise in the years ahead.

The question is, will the same happen in the pension space and are plan sponsors facing the same pressures?