Have SWFs Re-Gained Their Confidence?

Ashby Monk

The second half of 2009 saw an up-tick in SWF activity. According to a new report by the Monitor Group and Eni Enrico Mattei, SWF transactions more than doubled in number from 11 in Q2 2009 (worth $3.5 billion) to 25 in Q3 2009 (worth $25.3 billion).   According to the report’s authors:

“…the most recent quarter represents the largest quarterly deal value since Q1 2008 and the greatest number of publicly reported transactions since Q3 2008.”

The report suggest that this reflects a “re-gained confidence” among SWFs.

While I hope the authors are correct, I think we need to put things in perspective. Consider this: Q1 of 2008 saw 175 equity transactions by SWFs valued at $128 billion. So while Q3 2009 saw an increase in activity, it still had SWFs operating at about 14% of where they were a year and a half earlier. Is that encouraging?

Additionally, it looks as though three SWFs were responsible for almost all of 3Q 2009 activity. Investments by the China Investment Corporation ($3.8 billion), Abu Dhabi’s International Petroleum Investment Company ($6.7 billion) and the Qatar Investment Authority ($11.7 billion) accounted for 88% of the 3Q 2009 transactional value.

To me this raises some pressing questions: What were the other 30 SWFs in the Monitor FEEM data doing in 3Q 2009? When will these SWFs re-gain their confidence?

2 Responses to “Have SWFs Re-Gained Their Confidence?”

  1. 1 Victoria Barbary January 21, 2010 at 6:39 pm

    Quick off the mark Ashby!

    It’s worth pointing out here that only about 1/3 of SWF activity is publicly reported, so our data can’t account for the majority of SWF investment – there’s no way of tracking it. We can only comment on what we see.

    Second, of the funds on our list, less than half are “active”, i.e. habitually undertake publicly reported investments (or have done in the last 2 years). In Q3 2009 we recorded investments for 10 funds – up from 5 in Q2. It may not be the levels of activity we saw during the “frenzy” (2006-Q1 08), investment activity is picking up. I think cautious optimism is on the cards here.

  2. 2 Ashby Monk January 21, 2010 at 6:41 pm

    Thanks, Victoria, for the clarification. That does make me a bit more optimistic! Cheers.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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