Sovereign wealth funds (SWFs) include a wide variety of government investors, with a common characteristic: to invest over the long-term for the benefit of future generations.
Most of sovereign wealth fund capital is allocated is in passive strategies, often by external managers in public markets. However some SWFs – including major savings funds, and sovereign development funds with a mandate to invest in their domestic economies – deploy capital into direct investments. It is these investments that we track in our database to provide an accurate picture of what this group of sovereign wealth funds is acquiring directly. The data is sourced from primary public sources, and then voluntarily reviewed by IFSWF members.
We are well aware that data collection on SWF investments is really only a sampling exercise, as the full population of SWF investments in any year is not observable given that SWFs are subject to the same disclosure rules in public and private markets as other investors, and the need for client confidentiality when investing with external managers.There are usually a few ways to access private markets, for example primary and secondary funds or co-investments alongside general partners. IFSWF database tracks only direct investments and not investments via limited partnerships or external managers, as these are often strictly confidential.
We launched the database in 2018 to further encourage disclosure and transparency among the sovereign wealth fund community and try to provide an accurate representation of trends in sovereign wealth fund direct investments in infrastructure, private equity, real estate, also in material stakes in public companies – where these are disclosed. We hope that this endeavour will help stakeholders better understand this diverse group of investors.
This year we decided to present the data on private markets in three distinct groups: private equity, infrastructure, and real estate. We think these asset classes have different risk-return profile, and it would be confusing to analyse them together. As we are presenting this data differently it won't be comparable with last year's report.
In our database, we include IFSWF members and SWFs that are not members that we believe conform to the definition set out in the Santiago Principles: “special purpose investment funds or arrangements that are owned by the general government. Created by the general government for macroeconomic purposes, SWFs hold, manage, or administer assets to achieve financial objectives, and employ a set of investment strategies that include investing in foreign financial assets.”
It is worth noting that this definition excludes foreign currency reserves held by central banks for monetary policy purposes, even those that in some instances manage part of the foreign exchange reserves like an SWF such as the Hong Kong Monetary Authority, China’s State Administration of Foreign Exchange (SAFE), or the Saudi Arabian Monetary Agency (SAMA).
After a rigorous research and assessment process, we have settled on a group of more than 60 state-owned investors. These are listed in Table 1.
Revenue Regulation Fund
Fundo Soberano de Angola
Western Australian Future Fund
State Oil Fund of the Republic of Azerbaijan
Bahrain Mumtalakat Holding Company
Fondo para la Revolución Industrial Productiva
Brunei Investment Agency
Alberta Heritage Savings Trust Fund
Economic and Social Stabilization Fund
Pension Reserve Fund
China Investment Corporation
Fondo de Ahorro y Estabilización (FAE)
Fund for Future Generations
Fonds Gabonais d’Investissements Stratégiques
Ghana Petroleum Funds
National Investment and Infrastructure Fund (NIIF)
Pemerintah Investasi Indonesia (PIP)
National Development Fund of Iran
Ireland Strategic Investment Fund
National Investment Corporation of National Bank
Revenue Equalization Reserve Fund
Kuwait Investment Authority
Libyan Investment Authority
Khazanah Nasional BHD
Fondo Mexicano del Petróleo para la Estabilización y el Desarrollo
New Zealand Superannuation Fund
Nigeria Sovereign Investment Authority
Government Pension Fund Global
Oman Investment Fund
State General Reserve Fund of the Sultanate of Oman
Palestine Investment Fund
Fondo de Ahorro de Panamá
Papua New Guinea Sovereign Wealth Fund
Papua New Guinea
Fondo de Estabilización Fiscal (FEF)
Qatar Investment Authority
National Wealth Fund
Russian Direct Investment Fund
Agaciro Development Fund
Public Investment Fund
Fonds Souverain d’Investissements Stratégiques (FONSIS)
GIC Private Limited
Korea Investment Corporation
Petroleum Fund of Timor–Leste
Heritage and Stabilization Fund
Trinidad and Tobago
Turkiye Wealth Fund Management
Turkmenistan Stabilization Fund
Abu Dhabi Investment Authority
Emirates Investment Authority
Investment Corporation of Dubai
Mubadala Investment Company
Alabama Trust Fund
Alaska Permanent Fund
New Mexico State Investment Council
North Dakota Legacy Fund
Permanent Wyoming Mineral Trust Fund
State Capital Investment Corp
Institutions in bold are IFSWF members (as of mid-2019)
It is important to note that our database excludes transactions by SWFs’ portfolio companies. This is particularly important for funds such as Kazakhstan’s Samruk-Kazyna, Malaysia’s Khazanah Nasional, Bahrain Mumtalakat Holding Company and Singapore’s Temasek Holdings, whose assets include government holdings in strategic companies. Where relevant, we record the initial capitalisation of the companies and any subsequent investment in them. This not only prevents double counting but also prevents us from erroneously capturing transactions that are commercial mergers and acquisition activities, rather than investments that are part of the parent SWF’s investment strategy.
For example, we would not include any acquisitions carried out by ST Telemedia, a telecommunications and media company wholly owned by Temasek, as this reflects the strategy of the company, not its parent. Neither do we include subsidiaries and/or funds open to external investors, such as Vertex Venture Holdings, a venture capital firm owned by Temasek Holdings, which invests capital provided by external investors as well as Temasek.
This distinction is not often made in commercially available mergers and acquisitions databases, and, therefore, may result in our overall investment values being lower than those reported by these providers.
Asset Class Coverage
Although we consider all the funds listed to be SWFs not all of them will feature in our data. We have focused our data on direct equity investments in both public (listed) and private (unlisted) markets. Many of the institutions included in our list either have an investment mandate or liability profile that prevent them from investing in equity instruments or require them to use external investment managers.
We do not include external investment mandates in our data. The information on these allocations varies too widely to be meaningful and many contracts with external managers are covered by client confidentiality clauses.
By recording their direct equity investments, we aim to study SWFs’ strategic investments and partnerships and capture the nuances of how SWFs structure investments. Consequently, we do not include small open-market transactions that appear to be undertaken as part of a passive equity strategy executed by internal management teams.
We do record the acquisition of convertible securities. However, we record when they were bought, not when they were exercised as several conversion dates may be included in a single transaction.
In private-market investments, we are careful to consider any debt facilities used by sovereign wealth funds to finance their acquisition. This is particularly important in real estate, for example, where the use of mortgages and the issuing for mortgage-backed securities is common practice. As a result, we only record the initial equity portion of the investment, rather than the top-line value of the asset. This means that the hard currency amount we record for each investment may be lower than the volumes suggested by other providers of information about SWF activity.
In the case of joint ventures or consortium acquisitions where the total amount is disclosed, but individual contributions are not, we estimate the value by taking into consideration the number of investors, financing and typical investment behaviour by the fund in question. For example, several sovereign wealth funds disclose that they do not take stakes over a certain percentage of the equity of a company, so this is an integral part of assessing the size of the investment.
We collect data from publicly available sources. However, it might come as a surprise that we do not use any commercial mergers and acquisitions databases to provide us with information. Our team’s experience of using these is that they are often inaccurate and/or incomplete as they do not focus on sovereign wealth funds specifically.
Instead, we use a range of online tools to mine data from primary sources such as regulatory and stock-exchange filings as well as press releases. This enables us to assess the real information in the public domain, rather than relying on an interpretation of this information that may have missed vital nuances about the structuring of an investment in the private markets, or may not have noticed that a stake in a public company may have been built up by a sovereign wealth fund over a number of weeks or months, rather than in one go. This is an important nuance as it will generally affect the headline value of the investment.
This is the most accurate way of collecting data in real-time. However, it has provided us with some challenges when creating a database going back more than two years as some filings and disclosures are no longer in the public domain. As a result, we limited our database to starting in 2015, but we may have missed some transactions in the earlier part of our data.
Additionally, each year, after collecting the data, we give IFSWF members the opportunity to highlight any material errors or inaccuracies in the information we have gathered on them. We receive input from a number – but not all – of our members, as some have legal limits on what they can disclose to third parties.
We report all our data in real US dollars. These are converted from local currency on the date of the completion of the investment, as opposed to the announcement. We use the data from xe.com. In the case of slowly built stakes in public companies, we have developed a formula for providing a median value for the share price in local currency and the exchange rate.
Regions, Markets, and Industries
We use the U.N. classification of global regions in the database to record the country in which the target company primarily operates. This country is not necessarily where it is headquartered or listed. If a company operates globally or regionally we defer to the location of the headquarters.
To offer additional insight into SWF investment strategies we use Morgan Stanley Capital International (MSCI) regional indexes to group investments’ target countries by their level of market liquidity.
To identify the industry in which a company operates we follow a customised version of the Industry Classification Benchmark, to classify direct investments into 12 industries and 40 subsectors.