‎“Global SWF”: Financial market losses caused sovereign funds ‎to suffer a historic setback during 2022‎

Estimates of an annual study showed that the heavy losses incurred by stock and bond markets over the past year led to a decrease in the combined value of sovereign wealth funds and public pension funds around the world for the first time ever, by about $2.2 trillion.

According to Reuters, the Global SWF platform report on state-owned investment tools included that the value of assets managed by sovereign wealth funds fell to $10.6 trillion, compared to $11.5 trillion, while the value of assets for public pension funds decreased to $20.8. A trillion dollars compared to 22.1 trillion dollars

Diego Lopez of Global SWF explained that the main driver was “simultaneous and large” corrections that reached ten percent or more in the major bond and stock markets, a combination that had not happened in 50 years.

This came at a time when Russia’s invasion of Ukraine had pushed up commodity prices and pushed up inflation, which was already rising to its highest level in 40 years. To deal with these developments, the Federal Reserve (the US central bank) and other major central banks raised interest rates, which led to heavy selling in global markets.

“These are book losses, and the role of some funds as long-term investors will not be affected by them,” Lopez said. “But they explain to us perfectly the moment we are standing at.”

Despite all the turmoil, the money spent by the funds to acquire companies, real estate or infrastructure jumped 12 percent compared to 2021.

The report expected that sovereign funds in the Gulf region, such as the Public Investment Fund, the Abu Dhabi Investment Authority, Mubadala and Holding (ADQ) and the Qatar Investment Authority, would become more active in buying Western companies after receiving huge financial inflows from oil revenues during the past year.