08/02/2012 Author: Kirstie Brewer

SWF hedge fund spend falls while assets rise

Assets held by sovereign wealth funds (SWFs) climbed to a record $4.8trn in 2011, up 9%, though the number of investors in the hedge fund space fell by 1%, according to TheCityUK’s report, Sovereign Wealth Funds 2012.   

SWF assets are projected to continue growing, to $5.2trn by the end of 2012, but this has not translated into greater allocations, with 36% of SWFs investing to hedge funds, compared with 37% in 2010, said the report.

Overall portfolio allocation to hedge funds also decreased, largely due to the “more risk averse investment behaviour SWFs have adopted over the past year”, Marko Maslakovic, economic research senior manager, told HFMWeek, citing the string of losses suffered at the outset of the credit crisis as a key factor. 
 
“In 2011, overall direct investments of SWFs were about a quarter below the previous year’s levels and down about 40% on the peak in 2009.There is more diversification, transactions sizes are smaller and SWFs have increased allocation to emerging market countries,” Maslakovic said.

“They are also focusing more on their own domestic markets. The more cautious approach to investments may very well continue in the forthcoming period,” he added.