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SWFs are back… not that they ever went away
Sovereign wealth funds hold a cool $3 trillion in assets. Some say they’re set to become more vocal and activist after being ‘missing in action’ during the tough times. But they never stopped investing.
February 5, 2010 1:58 by Ben Flanagan
“There was a massive surge in visibility, and then it looked like they’d gone away [during the downturn],” adds Aka. “But I never thought [SWFs] went away. Were they having to constantly review investments? Yes. Were they having to pump more money into their domestic economies? Yes. Did they have a pause? Potentially. But at no point did they close the books and say they were not going to invest. They continued to maintain an eye on the market, and when they saw a good opportunity, they took it.”
So, though SWFs may have kept a lower profile during the recession, and changed their investment strategy, by no means did they stop investing.
But while SWFs may have appeared to be ‘missing in action’ during the recession, they could be about to enter the battlefield once more: Experts say SWFs will become more vocal in the near future. One indication of this is the fact that representatives from some of the major sovereign funds attended the World Economic Forum in Davos this year. In 2009, the SWFs shied away from attending the forum.
Gary Smith, head of central banks, supranationals and SWFs at BNP Paribas Investment Partners, says that the wealth funds could also become more visible – and be more active shareholders – in the future. “SWFs are not a political hot potato any more,” he told reporters in Davos. “As funds become more experienced and exist for longer, the natural tendency for them is to be more involved in their obligations as shareholders, voting on shareholder motions, etc.”
Efraim Chalamish, an SWF expert and global fellow at New York University Law School, agrees. “As [SWFs] become even bigger and more successful, they feel more comfortable in investing in larger stakes. As they have a bigger share in the pie, we expect them to become more active… If I give you the stick will you use it? Usually the answer is yes,” Chalamish told Reuters.
However, the Abu Dhabi Investment Authority (ADIA) – the world’s largest SWF, with an estimated $600 billion in assets – says it will not change its policy of waiving its shareholder voting rights.