State-run investment funds' holdings will surpass the economic output
of the United States by 2015, according to a re****t by Global
Insight.
-----------------------------------
"Sovereign Wealth Reaches $3.5 Trillion in 2007, growing by 24%"
"Nigeria's Sovereign Wealth Fund grows fastest, but China remains the
largest"
London, 28 April 2008 =97Global Insight, the world's leading company for
economic and financial analysis and forecasting, announced today that
Sovereign Wealth Funds have been growing at a staggering 24% annually
for the past three years. Projecting out this annual growth rate,
Sovereign Wealth Funds will surpass the entire current economic output
of the United States by 2015, and European Union by 2016.
Nigeria has grown its sovereign wealth the most rapidly over the last
five years, followed by Oman and Kazakhstan. The largest player
remains China, followed by Russia and Kuwait.
Global Insight's new Sovereign Wealth Fund Tracker maps out the
soaring growth of financial resources in emerging economies that is
changing the nature of ties between developed and developing
countries. Sovereign Wealth Funds now represent the most powerful
group of global investors and combined sovereign wealth reached US$3.5
trillion in 2007, more than enough to match the total annual economic
output of the United Kingdom, Germany or France.
"Armed with such large amounts of debt-free cash, Sovereign Wealth
Funds are the new financial power brokers, replacing the combined
financial muscle of hedge funds and private equity, and usurping
central banks as the international capital providers of last resort,"
stated Jan Randolph, Head of Sovereign Risk at Global Insight.
According to Global Insight's Sovereign Wealth Fund Tracker, in 2007
Sovereign Wealth Funds injected up to $80 billion into bank shares or
bank equity stakes in the U.S. alone and are expected to provide even
more capital in 2008 and 2009.
"There has since been a ****ft of financial weight from West to East,
particularly to China, Asia, the Middle East and other energy
countries," continued Randolph. "Riding the energy and commodities
boom, together with the wilting dollar, Sovereign Wealth Funds will
continue to be the key players in the changing financial landscape of
the global economy thrown into flux by the credit crunch," he
concluded.
Key findings of the Sovereign Wealth Fund Tracker:
The largest Sovereign Wealth (SW) generator remains China, with
approximately US$1.2 trillion, followed by Russia and Kuwait.
The fastest growing generators of SW over the last five years were:
Nigeria 291%: Oman 256%; Kazakhstan 162%; Angola 84%; Russia 74%; and
Brazil 65%.
High energy and commodity prices, combined with a declining dollar,
have turbocharged Sovereign Wealth Funds (SWF) in the Middle East, and
spawned a new generation of these Funds.
Record inflation in SWF countries is the new "push factor" behind
SWF's foreign expansion. Inflation has intensified in China, U.A.E,
Saudi Arabia, Russia and Kuwait, creating pressure to invest domestic
money abroad.
The vast majority (93%) of SWF equity investment has so far targeted
the western financial sector. But there is new interest in energy and
mining companies.
In January 2008 alone, worldwide acquisitions by SWF's totalled US
$20.6 billion or nearly one-third of the total US$60 billion that SWFs
made in mergers and acquisitions (M&A) for the entire year 2007. SWFs
accounted for 35% of world M&A activity in 2007, and 28% of all M&A in
the US during January 2008, exceeding M&A activity from private equity
buyouts, which fell in the last quarter of 2007, as the credit crunch
unwound debt leveraging.
SWFs have fostered new alliances with private equity to avoid
scrutiny. SWFs already account for approximately 10% of private equity
investments globally and should grow further in the next few years.
Http://www.globalinsight.com/PressRelease/PressReleaseDetail12347.htm
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