The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Investment opportunities, not drawdowns, are the biggest challenge for sovereign funds

If a sovereign wealth fund is a coat for a rainy day, then why is hardly anyone putting one on when it’s been pouring down since March?

umbrella money 780



One of the curiosities of the Covid-19 pandemic, and the economic carnage it has wrought, is that it has not prompted countries to draw down on the funds they have built to provide resilience at moments exactly like these.

The International Forum of Sovereign Wealth Funds (IFSWF) and State Street recently released research showing that sovereign wealth funds had not undertaken large-scale liquidations to provide liquidity for governments, despite widespread expectation that they would. Only two of 10 funds they spoke to had been drawn down. 

On June 9, as the IFSWF launched its annual review for 2019, its executives confirmed this was still the case. Norway’s sovereign wealth fund is undertaking its biggest ever withdrawal, Oman’s fund has been repurposed, and Ireland’s Strategic Investment Fund has set up a new €2 billion Pandemic Stabilization and Recovery Fund – but otherwise, it’s business as usual.

Lessons learned

Why should this be? Partly, it’s because of the lessons of the global financial crisis. Then, several sovereign wealth funds – which back then were mostly smaller and less sophisticated than today – liquidated funds to deal with the crisis of the day, often by selling equities, the result being that they locked in losses at the bottom.




You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree