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Prioritising Stability: Sovereign Wealth Funds Return to the Real Economy
In 2024, sovereign wealth funds decisively reduced the average size of their investments, signalling a shift towards a more cautious, risk-off approach in response to persistent global uncertainty. Although their total investment reached $72.1 billion–seemingly in line with recent years–the figure was inflated by a single $24 billion real estate commitment by Abu Dhabi’s ADQ in Egypt. Without that greenfield megadeal, the total sovereign wealth funds invested in 2024 falls to $48.1 billion, broadly in line with the subdued pre-pandemic levels. The last comparable drop in investment volumes occurred in 2019, when total deployment declined to just $36 billion, highlighting a recurring pattern of retrenchment during turbulent periods.Chart 1.1 Sovereign Wealth Fund Direct Investment Activity
Source: IFSWF Database
To better capture underlying trends in investor behaviour, we use the median deal size as a reference point. While the ADQ deal significantly increases the total value of investments, it does not affect the median, which reflects the midpoint of all deals in each asset class and helps avoid distortion from outliers. As shown in the chart below, the median equity commitment in infrastructure, real estate, and equity declined across the board in 2024. While real estate deal size decreased 3% from $121.0 million to $117.5 million, infrastructure saw a 19% drop in median deal size, from $275 million to $221.3 million. Equity commitments experienced a significant decline of 25%, reaching a ten-year low of $18.8 million.
Chart 1.2 Median investments in Infrastructure, Real Estate, Equity
Source: IFSWF Database
A reduction in risk appetite did not result in indiscriminate retrenchment. Rather than chasing riskier, high-growth opportunities, sovereign wealth funds concentrated on sectors that underpin social and economic resilience – infrastructure, industrials, and healthcare. Each sector offers stable cash flows, strategic importance, and protection against inflation. Our past two annual reviews have also noted a renewed focus on investments that provide reliable, long-term returns.
Why Defensive Sectors Shine: Stability in Uncertain Times
Sectors such as infrastructure, industrials, and healthcare embody the classic features of a "risk-off" allocation: long-term contracts, returns linked to inflation, essential service delivery, and, in some cases, regulatory or sovereign backing. For sovereign wealth funds navigating current economic uncertainty, these characteristics represent both a defensive play and a long-term growth hedge.
A series of transactions illustrates this trend, underscoring the strategic emphasis on tangible assets. For example, in June 2024, Australia’s Future Fund, in partnership with the Queensland Investment Corporation, acquired a 19.8% stake in ConnectEast's EastLink toll road, the largest toll road network in the Australian state of Victoria, from the New Zealand Superannuation Fund and Teachers Insurance and Annuity Association of America. Future Fund Chief Investment Officer Ben Samild noted, “This was the Future Fund's first direct investment in an Australian toll road and was in line with our strategy to seek more Australian dollar exposures”. He added, “Infrastructure assets such as EastLink provide reliable long-term returns and help to protect the portfolio from sustained higher inflation and interest rates.
Meanwhile, in October 2024, Singaporean investors GIC and Temasek participated in a $405 million Series F financing round for Form Energy, an American technology company that develops multi-day iron-air battery systems. Led by private equity manager T. Rowe Price, the round raised Form Energy’s total funds to over $1.2 billion. Form Energy’s technology helps keep power supply steady for businesses and industries, even when renewable energy sources like wind or solar vary, or when the grid is under stress.
The investments reflect a broader vision of resilience, as articulated by GIC’s chief executive officer, Lim Chow Kiat, in September 2024. In Investing for More Resilient Future Generations, he stressed the importance of long-term thinking and strategic discipline in a world facing overlapping disruptions, from geopolitical fragmentation to the growing impact of climate change and artificial intelligence. “To manage these challenges, investors must anchor themselves to their unique purpose, while pursuing price discipline, diversification, and long-term partnerships,” he noted. GIC’s CEO highlighted resilience as a guiding principle: “We believe resilience comes from doubling down on diversification, granularity, optionality, liquidity, and long-term partnerships.” This approach, he argued, was not only a safeguard against volatility but a means of identifying opportunity in a shifting global order, aligning with the strategic investments in infrastructure and industrials exemplified by EastLink and Form Energy.
Pivoting to Hard Assets: A Decade-Defining Shift
For the first time in ten years, sovereign wealth funds invested more in hard assets (infrastructure and real estate) than in other sectors, reflecting a strategic pivot to sectors underpinning economic resilience. Chart 1.3 illustrates this shift, showing that, in 2024, hard assets accounted for 61% of publicly disclosed sovereign wealth fund direct investments, up from 40% in 2023, with real estate (boosted by the ADQ mega-deal mentioned earlier) at 42% and infrastructure at 19%. The greater emphasis these institutions placed on hard assets in 2024 exceeded equity investments, which declined to 39% of the total dollar value invested from 60% in 2023. The decade-defining shift highlights sovereign wealth funds’ focus on long-term resilience through essential sectors.
Chart 1.3 Activity in Infrastructure, Real Estate, Private and Public Equity
Source: IFSWF Database
Building on Past Insights: A Shift to Resilient Sectors
Last year's IFSWF Annual Review highlighted a strong focus on industrials, with sovereign wealth funds investing $6 billion across 68 deals, driven by developing technologies such as automation and those related to the energy transition. In 2024, the momentum continued, with investment reaching $6.4 billion across 48 deals, marking a six-year high in capital deployment to the sector. Infrastructure remains a core area of interest, with capital directed towards assets that enhance economic development and climate resilience. Healthcare deal volumes remained steady at 40 transactions, but equity investment dropped sharply to $2.1 billion from $5.7 billion in 2023. The trend likely reflects reduced valuations in biotechnology companies and sovereign wealth funds focusing on smaller and earlier-stage firms developing cutting-edge technologies, rather than later-stage, lower-risk companies, which reflected the more cautious approach to healthcare innovation they had previously been taking. For instance, the Alaska Permanent Fund invested in the $82 million series A financing of Kenai Therapeutics, a biotechnology company working on a novel method of discovering and developing allogeneic neuron replacement cell therapies for neurological disorders.
Nonetheless, sovereign wealth funds continue to invest in bolstering healthcare system resilience, especially in diagnostics, health infrastructure, and digital health. Investments in healthcare are often perceived as counter-cyclical, socially aligned, and crucial to national security and resilience, particularly in light of ageing populations in the developed world and the need to prepare for future pandemics.
The increasing emphasis on robust and nationally strategically important sectors illustrates a deliberate and forward-thinking method for navigating times of considerable economic and geopolitical instability. Such a strategic allocation of resources intends to lessen the risks linked to increased uncertainty and to protect—and potentially improve—long-term asset value.
By prioritising investments in key industries, sovereign wealth funds indicate their dedication to national economic security and the continued growth of their portfolios amid global disruption. This approach, sometimes referred to as civil defence, reflects a wider movement towards more defensive investment strategies, highlighting the fundamental strength and long-term prospects of crucial infrastructure and essential services. Many of the themes explored in this section are analysed in further detail in our April 2025 joint report with State Street Associates, Navigating Market Divergence and New Narratives: Evidence from Long-Term Investors, which identifies early signs of a shift toward more defensive, resilience-focused strategies by long-term investors.
Geographic Allocations: Prioritising Resilience Across Regions
Sovereign wealth funds’ investments in 2024 reflect a strategic approach to the geographies in which they invest, aligning with resilient sectors to balance stability and growth.
Chart 1.5 Sovereign Direct Investments by Region
Source: IFSWF Database
The data from the chart highlights the following key trends:
North America (primarily the United States) was the preferred geography for sovereign wealth funds, representing 42% of deal volumes, up from 38% in 2023, driven by its robust regulatory framework, innovative ecosystem, and deep capital markets, as affirmed by the World Bank’s Business Ready (B-READY) 2024 report, which highlights the region’s transparent regulations and strong investor protections.
This region also accounted for 21% of the total equity sovereign wealth funds invested in 2024, reflecting its strong market fundamentals. A notable example is the Abu Dhabi Investment Authority (ADIA) and GIC’s investment in Copeland Joint Venture alongside private equity firm Blackstone. The firm is a leader in heating, ventilation, and air conditioning.
In Asia, which accounted for 27% of their deals, sovereign wealth funds prioritised digital infrastructure, such as India’s National Infrastructure Investment Fund’s stake in digital infrastructure solutions group iBUS, a company seeking to enhance connectivity across the world’s most populous country. Asia accounted for 22% of the total equity sovereign wealth funds directly invested in 2024, with South-East Asia leading the continent with a $263 billion digital economy in 2024, according to the e-Conomy SEA 2024 report by Google, Temasek and Bain & Company, highlighting the region's commitment to digital advancements.
European markets maintained their share at 21% of deal volumes, favouring climate-resilient infrastructure, for example, ADIA’s co-investment in Italy’s digital network FiberCop. This alignment with climate goals underscores Europe's commitment to sustainability and its established regulatory framework for utility-scale renewable energy projects.
Frontier markets represented 9% of sovereign wealth funds’ deals in 2024, with Africa accounting for over a third of the total equity invested in these economies. Here, a significant theme was climate adaptation. For example, the Fundo Soberano de Angola (FSDEA) supported the country's food security by investing in the Cabinda Phosphate Fertiliser Project. A significant outlier is ADQ’s $24 billion acquisition of development rights for the new city of Ras El-Hekma in Egypt, which substantially influenced the equity distribution.
How sovereign wealth funds distributed their investments geographically in 2024 demonstrates their cautious approach. They either favoured low-risk, developed regions with strong fundamentals or developing economies with high-impact potential. These geographic priorities position funds to address climate and digital challenges effectively, ensuring resilience and growth across diverse regions.