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Thomson Reuters data shows sovereign wealth
funds, which invest windfall revenues from oil and other exports
for future generations, were involved in deals worth $40 billion
in the first nine months of 2014, the highest rate since 2007.
The money was spent across 79 transactions - the highest number
since 2008 - with real estate and infrastructure dominating the
deal flow.
Some state-owned wealth funds had come under domestic pressure
after losing an estimated $80 billion at the height of the
financial crisis by investing in beleaguered Western banks.
Prominent transactions this year include the Abu Dhabi
Investment Authority's participation in a consortium that bought
Queensland Motorways, and Qatar Investment Authority's
involvement in buying a $1.4 billion skyscraper in London's
Canary Wharf.
"There are a couple of things going on such as a return of
confidence because most of the activity in 2007 was in financial
services businesses and a lot of that didn’t work out, so they
were constrained in doing more investments," said Gavin Ralston,
head of official institutions at fund manager Schroders.
Ralston also said the pickup in activity can also be attributed
to sovereign funds building their own expertise, hiring analysts
and financiers to seek out deals.
Real estate and infrastructure can help offset poor returns from
more conventional assets such as bonds.
"These funds have always had interest in real estate as an asset
class. In a prolonged low interest rate environment real assets
have attraction," said Rodney Ringrow, a senior executive at
State Street's official institutions business.
Norway's $860 sovereign fund, the world's largest, has featured
in a number of large real estate deals this year, buying
Boston's One Beacon Street tower with Metlife, Paris's La
Madeleine building and the Pollen Estate in London's West End.
The fund currently has around 1.3 percent of its assets in real
estate but has a mandate to take the allocation up to 5 percent.
(Graphic by Vincent Flasseur; Editing by Peter Graff)
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