Sovereign wealth funds (SWFs) are shifting investments away from the United States and Europe and into the Middle East and Asian economies, according to research released today by Monitor Group, one of the world´s leading advisory and consulting firms. The trend, highlighted by Monitor Group in its April - June 2008 quarterly analysis of global SWF investments, indicates that SWFs are not exploiting current US or European downturns, but are focused on building opportunities in potentially lucrative emerging markets in the Middle East and Asia. Indeed, investments in these regions accounted for 68 per cent of the total value of all publicly–traded deals in this period.
The latest Monitor Group analysis is an update to its June 2008 report: "Assessing the Risks: The Behaviors of Sovereign Wealth Funds in the Global Economy." Key findings of the latest analysis include:
- In the second quarter of 2008 (Q2 2008), funds in the Monitor SWF transaction database executed 43 deals totaling $26.5 billion. In contrast those funds executed 42 deals totaling $58.3 billion during the previous quarter (Q1 2008).
- SWFs continued to invest actively in emerging markets. In Q2 2008, more than half the deals and funds invested were in emerging markets. SWFs carried out 26 deals and invested $15 billion in BRIC and non–OECD countries.
- Investment in North America dropped dramatically. In Q2 2008, four deals totaling less than $1 billion were received by North America. In contract, this region received seven deals totaling $23 billion during the previous quarter (Q1 2008).
- Half of the deals by value in Q2 were in real estate. Real estate had the largest number of deals (12) and the highest investment ($13.7 billion) in Q2 2008.
- During Q2 2008, investment has shifted away from financial services. SWFs carried out 10 deals and invested $4 billion in the financial services sector during Q2 2008. In the previous quarter (Q1 2008), funds carried out 13 deals totaling $43.4 billion.
"Our transaction data show that SWFs have focused recent equity investment away from volatile geographic markets and sectors, like North America and financial services, and are instead seeking more attractive returns in emerging markets and other sectors, including real estate," said William Miracky, Senior Partner of Monitor Group.
Monitor Group collected and investigated data on the 17 SWFs originally identified in the "Assessing the Risks" report and found that only nine had publicly–reported deals in Q2 2008. The value of the deals was relatively evenly split between Middle Eastern and Asia–Pacific funds. The five Middle Eastern funds made 25 deals with a reported value of $13.5 billion in Q2 2008, or 51 percent of the total SWF spend for the quarter. The four Asia–Pacific funds made 20 deals with a reported value of $12.9 billion. A breakdown of the investments and the full report update is available by contacting Andrea Krull (akrull@racepointgroup.com).
About Monitor Group
Monitor Group works with the world´s leading corporations, governments and social sector organizations to drive growth on the issues that are most important to them. The firm offers a range of services – advisory, capability–building and capital services - designed to unlock the challenges of achieving sustained growth. Founded in 1983 by six entrepreneurs, including Harvard Business School Professor Michael Porter and Monitor´s current Chairman Mark Fuller, Monitor brings leading edge ideas, approaches and methods to bear on clients´ toughest problems and biggest opportunities. Headquartered in Cambridge, Massachusetts, the firm employs over 1,500 people in 22 countries worldwide. For more information visit www.monitor.com.
