Global SWFs boost private investments in emerging markets

Source:Reuters-Global Times Published: 2017/9/10 17:18:44

Private market investments have become a crucial part of sovereign wealth funds' (SWF) portfolios, helping them better tap the potential of key emerging markets such as China and India, a Goldman Sachs Asset Management executive said.

Global sovereign wealth funds have been increasing their spending on alternative investments such as private equity over the last few years, in part due to lower returns on other asset classes, especially bonds.

Sheila Patel, chief executive for international business at Goldman Sachs Asset Management, whose clients include SWFs, said such investments were particularly important in leading emerging markets where there are fewer listed companies than in developed economies.

"A key point of discussion at this conference and a key opportunity, but also a challenge, is investing in long-term assets, which include private assets, private equity, private credit," Patel said at an SWF conference in Kazakhstan.

"Given the focus and the importance of getting the emerging markets right, such as China and India, private markets play a critical role in investing in the overall strategy in these markets," Patel noted.

With some $6.5 trillion in assets, sovereign investors already account for 19 percent of capital committed to private equity.

By the end of 2016, 61 percent of SWFs had allocations to private equity, a record high, and 63 percent to real estate.

One of the world's largest SWFs, the Abu Dhabi Investment Authority, said in July it was looking for direct investment opportunities in private equity and alternative investments after returns slowed last year.

Patel said SWFs had the flexibility to complement or avoid index investing in markets such as China and India, dominated by state-owned companies and traditional sectors such as energy and telecoms.

"So we see quite a bit of activity from clients in both the public, listed, active and liquid markets like in China and India and emerging markets overall as well as in the private markets," she said.



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