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Saudi Arabia’s sovereign wealth fund surpasses GIC as most active global investor

In 2023, Saudi Arabia’s Public Investment Fund (PIF) emerged as the most active global sovereign investor, deploying a substantial US$31.6 billion across 49 deals.

In contrast, Singapore’s GIC and Temasek scaled back investments amid market volatility, reporting declining returns.

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SAUDI ARABIA: In the previous year, Saudi Arabia’s Public Investment Fund (PIF) emerged as the most active sovereign investor worldwide, demonstrating a notable increase in deal activity.

As per the Global SWF Annual 2024 Report, while numerous global peers like Singapore’s GIC Pte and Temasek Holdings Pte curtailed their spending, PIF expanded its investments.

The data platform, which tracks over 400 SWFs and public pension funds, revealed that PIF deployed a staggering US$31.6 billion across 49 deals in 2023.

This marked a whopping 33% increase compared to the US $20.7 billion invested the previous year, standing in contrast to the broader trend among state-owned investors globally.

Overall, global state-owned investors deployed US$124.7 billion, around a fifth less than the prior year.

Singapore’s GIC and Temasek, though active, significantly reduced their profiles in 2023.

GIC decreased its investment activity by 37%, deploying 46% less capital at US$19.9 billion, thereby losing its position as the world’s most active sovereign wealth fund for the first time in six years.

Temasek also reduced new investments by 53% to US$6.3 billion amidst volatile markets, leading to reported declining returns for both Singapore-based investors.

The report highlighted that much of GIC’s decline was associated with investments in developed markets, while Singapore’s state investors continued to engage actively in emerging markets like India, with deals such as GIC’s US$1.4 billion joint venture with Brookfield India REIT and Temasek’s increased stake in Manipal Health Enterprises.

“Singapore investors are being more cautious and we’ve seen that reflected in the numbers,” Global SWF said.

The report suggested that in 2023, Sovereign Investors adopted a more restrained approach, despite having ample capital reserves for investment opportunities.

“Gulf SWFs have increased their domination of the global transaction activity, to the detriment of Singaporean and Canadian funds, and now represent 40% of all investment value deployed by Sovereign Investors.”

Notably, sovereign wealth funds controlled by fuel-rich governments in Abu Dhabi, Saudi Arabia, and Qatar secured five spots among the top 10 most active funds last year.

The region, home to various sovereign funds, has become a significant source of cash for international deals, especially after a surge in energy prices in 2022 bolstered most Gulf government budgets.

In April, PIF paid US$ 4.9 billion to US gaming company Scopely, via its subsidiary Savvy Games Group.

In August, it acquired Standard Chartered’s aircraft leasing division in a US$ 3.6 billion deal, via AviLease.

And in September, it agreed to buy SABIC’s steel unit Hadeed for US$ 3.3 billion.

“The variety of deals shows the unparalleled bandwidth and reach of PIF and its subsidiaries, which are forming a wide net to capture any value-add for Saudi Vision 2030, ” the report noted.

Global SWFs awarded Norway’s NBIM the title of “2023 Funds of the Year”

Furthermore, Global SWFs specifically recognized Norway’s Norges Bank Investment Management (NBIM) as the recipient of the 2023 Funds of the Year award, acknowledging its status as one of the world’s largest and most influential universal asset owners.

By September 30, 2023, NBIM managed approximately US$1,379 billion in investments, with half of this capital originating from net flows from the government and currency differences. The remaining half stemmed from investment returns.

Over the past 25 years, the fund has consistently delivered value, achieving an average nominal return of +6.0% (or +3.7% real return) and an alpha of +0.3% over its benchmark.

The report highlighted NBIM’s commitment to transparency, notably showcased through its website. The site features a dynamic counter enabling visitors to track the fund’s market value in real-time, reflecting fluctuations in global financial markets.

Global SWFs foresee PIF surpassing Singapore’s GIC in scale by 2030

The report projected a significant growth trajectory for SWFs, estimating an increase from $11.2 trillion in 2023 to $12.7 trillion by 2025 and a substantial leap to $18 trillion by 2030.

This anticipated expansion is expected to be fueled by the emergence of new funds globally, with 13 new funds established in this decade alone. It foresees the possibility of over 200 operational SWFs by 2030.

Despite geopolitical uncertainties looming, the report highlighted that sovereign investors will persist in gauging the landscape and crafting resilient portfolios.

This strategic approach might lead to increased diversification efforts and a heightened focus on novel or more sophisticated asset classes.

The ongoing rise of SWFs with domestic mandates will continue to reshape the industry dynamics, gradually rendering the traditional pure international financial investors’ model obsolete in the coming years.

The report also revised projections concerning the Top 15 largest sovereign investors.

It forecasted Japan’s GPIF to likely retain its position as the largest sovereign investor by 2025, with Norway’s NBIM possibly taking over soon afterwards.

China is anticipated to maintain a significant role unless there are substantial structural changes in its capital pools.

Furthermore, the projections for 2030 suggest that among the Top 15, there will likely be four Middle Eastern funds, notably Saudi Arabia’s PIF, potentially reaching a substantial $2 trillion valuation, surpassing Singapore’s GIC in terms of scale.

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