The Covid-19 Response

In the first global economic crisis since 2008, sovereign wealth funds again led the fiscal, political and social response. Some also sought to profit from the upheaval in international financial markets.

2020 was a year like no other. Sovereign wealth funds had entered the COVID-19 crisis in defensive mode. In 2019, they had deployed the least amount of capital into direct investments since 2015: only $35.9 billion1, 17% less than the previous year.

Institutional investors, including sovereign wealth funds, entered the pandemic with high levels of cash2. Consequently, they were ready to support local economies or buy opportunistically in distressed international markets in March 2020. Sovereign wealth funds’ publicly disclosed direct investments almost doubled year-on-year3 to $65.9 billion, up from $35.9 billion in 2019.

Source: IFSWF Database, 2021.

The pandemic had macro, political, social, and fiscal impacts on sovereign wealth funds. In 2020, some of the trends we highlighted in previous reports reversed, some were reinforced and others paused. For the first time, sovereign development funds and hybrid4 funds’ direct investments overtook those of saving funds, as illustrated in chart 1.2.

Source: IFSWF Database, 2021.

Nevertheless, despite being a challenging year, 2020 “was one of the most active investment years in our history” according to David Crofts, executive director Enterprise Risk at Mubadala in an interview for the annual review.

This sentiment appears to have been shared by Mubadala’s peers. According to our data, it was one of the most active years on record for sovereign investors5. Their overall investment activity increased markedly and the value of their investments also doubled. The higher median value of investments recorded in 2020 – $40 million in equity – might well be a short-term aberration, as the median6 value of sovereign wealth funds’ investments in equity had been decreasing since 2016. But this trend was even evident in real assets, where the median equity invested returned to values not seen since 2015: $200 million in infrastructure and real estate.

Source: IFSWF Database, 2021.

The globalised world economy needs free flows of capital, goods and people to run smoothly. During the Global Financial Crisis, capital flows were choked and central banks pulled all the available monetary levers (and some new ones) to help free them up. During the COVID-19 pandemic, people could not move freely, and monetary policy alone would not be a sufficient policy response. Governments in developed and emerging markets had to apply expansive fiscal policies, primarily financed by borrowing at historically low interest rates7. However, most of the countries fortunate enough to have a sovereign wealth fund had sufficient fiscal space8 to increase spending, responding to emergencies and lowering taxes when necessary.

For example, Chile’s Ministry of Finance withdrew $1.1 billion from the Economic and Social Stabilization Fund (ESSF) in August 2020 to finance the amortisations of the Treasury's external debt scheduled for the same month. This drawdown was in addition to the $2 billion withdrawn at the onset of the pandemic in April 2020 when commodity prices collapsed. Finally, in October 2020, the Ministry of Finance withdrew a further $1.6 billion from the Pension Reserve Fund (PRF), whose objective is to support the financing of fiscal obligations deriving from pension contributions. Additionally, due to the economic impact of the pandemic on Chile’s economy, the government enacted measures to support families and small- and medium-sized enterprises, as well as suspending contributions to the Pension Reserve Fund in 2020 and 20219.

The world’s largest sovereign fund, Norway’s Government Pension Fund Global (GPFG), made its largest ever contribution to the government. In October, Norway’s Ministry of Finance announced that it would be withdrawing almost 3% from GPFG: $37 billion10 to cushion the country's rising spending due to the pandemic.

Strategic Funds pushing on domestic agenda

According to IFSWF data, there are currently only ten pure stabilisation funds and 26 saving funds globally. Consequently, few countries have the resources to dip into a rainy-day fund to cushion their budget needs. However, some strategic funds continued to push on with their long-term domestic agenda during the pandemic.

For example, in 2020 the Turkey Wealth Fund (TWF) invested $5.8 billion, largely to consolidate the local insurance and banks sector, and to take a 26.2% stake in mobile phone operator Turkcell. TWF managed to attract foreign investment as well, selling 10% of Istanbul’s stock exchange Borsa İstanbul AŞ to the Qatar Investment Authority (QIA) for $200 million.

Direct Response to the Pandemic

Some sovereign wealth funds set up for strategic purposes have been more directly involved in their government’s policy response during the pandemic, with specific funds allocated to support the local economy, but without veering away from the sovereign wealth funds’ main purpose. One of the best examples is the Ireland Strategic Investment Fund (ISIF), which allocated €2 billion ($2.4 billion) to the Pandemic Stabilisation and Recovery Fund (PSRF) in May 2020 as part of the government’s package of economic and societal supports in response to the Covid pandemic.

The Ireland Strategic Investment Fund has invested in Aer Lingus through its Pandemic Stabilisation and Recovery Fund

The PSRF invests in enterprises employing more than 250 employees or with an annual turnover above €50 million. ISIF has the flexibility to consider smaller companies if they are of significant national or regional economic importance. In line with its investment policy, ISIF only invests in companies that can demonstrate that their business was commercially viable before the Covid-19 pandemic, and that they can return to viability and contribute to the Irish economy after the emergency is over. Between May 2020 and the end of the year, ISIF allocated11 a total of 90% of all its direct and indirect investments to pandemic-impacted businesses. Commitments included investments in business more directly impacted by long lockdowns. For example, the national carrier Aer Lingus and tourist accommodation provider, Staycity. ISIF is currently working on a pipeline of over €600 million ($720 million) in potential investments from the PSRF.

Singapore’s Temasek Holdings was another sovereign fund directly involved in supporting local companies. For example, the state holding company is promoting several projects to improve the safety of Singaporeans daily life, including the use of masks. It has also built Connect@Changi, a pilot short-stay facility near Singapore’s airport to support safe exchanges between international business travellers and Singapore residents. More importantly, Temasek participated in an oversubscribed $2 billion rights issue by Singapore Airlines12 and completed a mandatory convertible bonds issue, which was undersubscribed.

Other sovereign investment funds have been spearheading their country’s effort in fighting the virus. The Russian Direct Investment Fund has been most visible in directly fighting coronavirus. It established several international partnerships in projects to detect pneumonia, in coronavirus diagnostics systems, and in antiviral drugs – initially used to fight the worst symptoms of COVID. Finally, in November 2020, RDIF registered the world’s first vaccine against coronavirus – Sputnik V – developed by the Gamaleya National Research Institute of Epidemiology and Microbiology.

Source: IFSWF Database, 2021.

Some opportunistic investments

Saudi Arabia’s Public Investment Fund (PIF), which also has a domestic mandate, had a different approach to the crisis. In addition to supporting the Saudi economy, PIF invested more than $10 billion in US and European blue-chip companies when the stock market crashed in March. It invested counter-cyclically in the sectors most hit by the pandemic such as leisure, travelling and energy companies. For example, PIF disclosed a total of over $2 billion in stakes of the four oil and gas companies – BP, Royal Dutch Shell, Suncor Energy and Total. The Saudi fund also invested $1 billion in two companies hit by the lockdowns: hotel operator Marriott International and cruise company Carnival. Its purchases in public markets are reflected in our data pushing public market investments to jump five times from $6 billion in 2019 to $28 billion in 2020. This relatively high sovereign wealth fund activity in public markets is most certainly a short term aberration driven not only by the unusual investments of Saudi’s PIF but also by some of the strategic funds pandemic-relief supporting local companies in public markets. Additionally, according to the latest research from State Street and IFSWF13, during the pandemic, investors redeployed capital and have reached a risk-neutral level across asset classes. Sovereign wealth funds largely achieved this position by increasing allocation to equities, taking advantage of lower prices in the first half of 2020.

Although sovereign investors committed more than in the previous year in infrastructure, and the same amount in real estate, in relative terms, these investments declined in 2020, as shown in chart 1.5, continuing the long-term trend of diminishing interest in hard assets. In 2020, this trend was compounded with the great uncertainty enveloping commercial property assets, as the world switched to working from home.

Source: IFSWF Database, 2021.


In the first global economic crisis since 2008, sovereign wealth funds again appear to be front and centre of the fiscal, political and social response. The immediate response to the Covid-19 crisis, for some countries with a stabilisation fund or a savings fund with liquidity, was to draw down on the fund or to access international debt markets. The main difference to the Global Financial Crisis is that sovereign funds have mainly invested domestically across all sectors, as opposed to the concentrated overseas investments on financial services in 2008.

In direct investments, for the first time, sovereign development funds and hybrid funds committed more capital than saving funds either helping the ailing economies, focusing on the domestic agenda, or taking advantage of international opportunities.

Some other strategic funds kept on pushing on the domestic agenda as a long-term mandate even in the middle of COVID. A good example of this approach was TWF’s effort to consolidate the insurance and savings sector in Turkey.

On the other hand, some funds with a hybrid mandate doubled down both on the domestic front and at the same time took advantage of low valuations in international stock markets at the peak of the crisis in March 2020, like Saudi’s PIF has shown.

In short, the relationships between sovereign wealth funds and their domestic economies remain central. Although some of them are specifically forbidden from investing domestically, over time, the number of sovereign investment funds with a mandate to attract capital to their local markets is increasing, as investors face diminishing returns from international stock markets in a low-interest-rate environment.


  1. Please see our previous report: “Investing for Resilience: IFSWF Annual Review 2019”. May 2020.
  2. Please see Sovereign Wealth Funds and Institutional Investors Maintain Exposure to Risk Assets in the Face of Covid-19
  3. Please see IFSWF’s methodology
  4. We define hybrid funds as sovereign wealth funds with more than one mandate. For example the Nigeria Sovereign Investment Authority was founded in 2012 to oversee three funds with separate mandates: a future generations fund, a stabilisation fund and a Nigeria Infrastructure Fund.
  5. IFSWF’s database goes back to 2015
  6. As customary for this report we used the median rather than the average, to temper the influence of very large deals as outliers and all the transactions with a null or missing value. In this case the median provides a much more representative number for our sample.
  7. Please see IMF Policy responses tracker
  8. Please see Andrew Bauer’s article: How Have Governments of Resource-Rich Countries Used Their Sovereign Wealth Funds During the Crisis?
  9. Please see Ministry of Finance withdraws US$ 1,576 million from the Pension Reserve Fund
  10. Please see Norway’s Ministry of Finance press release:
  11. Please see
  12. Please see more information:
  13. State Street IFSWF research report: Pandemic no Panic. March 2020.