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Capital Markets

Sovereign wealth funds turn to home as Covid bites

Cashed-up as the crisis began, many sovereign funds took the opportunity to invest heavily through the coronavirus pandemic. But while some looked to international markets for contrarian positions, more looked to see what they could do at home.

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The world’s sovereign wealth funds (SWF) almost doubled their direct investments during 2020, as funds found opportunity during the Covid-19 global pandemic.

The latest annual review by the International Forum of Sovereign Wealth Funds (IFSWF), whose membership includes sovereign vehicles in nearly 40 countries, shows a mixture of opportunism and duty in fund behaviour during 2020.

Publicly disclosed direct investments were $65.9 billion in 2020, up from $35.9 billion in 2019, with a particular focus on sectors such as renewable energy, food production, e-commerce and logistics.

The year before, 2019, had represented something of a low for direct investment, the lowest level since 2015, and one consequence of this was that institutional investors – particularly sovereign funds – entered the pandemic crisis with high levels of cash.

“Consequently, they were ready to support local economies or buy opportunistically in distressed international markets in March 2020,” the IFSWF report states.

David Crofts, executive director for enterprise risk at Mubadala, the UAE-based fund, called 2020 “one of the most active investment years in our history”.

Rainy day

The classic rainy-day SWF – one that saves for the future and invests internationally in a diversified fashion – proved useful during the pandemic.

Norway’s


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