MANAMA: The executives of world’s most powerful global sovereign wealth funds, with an estimated $5 trillion worth of collective global funds, confirmed that they are still awaiting the bottom of the market before committing to further substantial investments, according to a survey findings released yesterday.
During a survey conducted by Financial Dynamics International (FD), a member of FTI Consulting Inc., the respondents confirmed unanimous view that SWFs see their role as that of passive long-term investors with no desire to behave in an activist manner toward investor companies.
In a series of one-to-one non-attributable interviews, FD talked to senior executives from a number of the world’s leading sovereign wealth funds — whose total assets accounted for well over 50 percent of the $5 trillion worth of collective global funds currently held by the SWF asset class. The research focused on current SWF attitudes toward valuations, investment strategies and where they see regional investment opportunities.
“Our research confirms that whilst sovereign wealth funds are currently adopting a very cautious investment approach to world markets, they are clearly poised to re-enter the global equity markets in the not too distant future with compelling valuation propositions beginning to present themselves across North American and Western European equity markets. Our research has also determined that contrary to widespread perceptions, sovereign wealth funds are primarily genuine long-term passive investors who have no agenda to exercise management control or behave in an activist way,” Charles Watson, CEO of FD said.
In the short term some SWFs are seeing their cash inflows diverted from their global portfolios to invest in their home countries or regions to add stability and economic stimulus to local markets.
“Whilst a number of key SWF investments have been made over the last 18 months and SWFs are still interested in broadening their portfolios, the findings showed that this particular class of investor is keeping a watchful eye on global markets, waiting for the right time to make deep value investments,” the survey added.
The majority of the SWFs interviewed in the survey confirmed that it was only a matter of time before they started to commit significant funds again to the North American and Western European markets.
“There are clearly some phenomenal value opportunities in Europe and the US. There are many high quality companies trading at unprecedented valuations.”
“The bottom has yet to come,” said one SWF executive.
“We are behaving in a very cautious manner at present. We are convinced there will better value in markets later this year,” one of the executives of SWFs added.
