In 2021 the number of direct investments made by sovereign wealth funds reached a record number, jumping to 429 in 2021 from 316 in 2020, a 50% increase year-on-year, according to data from the International Forum of Sovereign Wealth Funds (IFSWF).
The total value of those direct investments also climbed to $71.6 billion in 2021, eclipsing the $67.8 billion of cash deployed by sovereign funds in 2020.
Investments in global technology and consumer goods accounted for more than a third of the total value of direct investments at $25 billion and the Asian market saw a large portion of that capital.
“Sovereign wealth funds and other long-term investors still see Asia as a high-growth market,” Dr Victoria Barbary, director of strategy at IFSWF told AsianInvestor.
“As highlighted in the review: sovereign wealth funds invested 12% of the total capital deployed into Asian consumer companies. They deployed $8.9 billion across 38 investments, mainly in companies tapping the e-commerce boom,” said Barbary.
From the IFSWF’s findings, Barbary also believes that real estate and infrastructure in Asia provide an opportunity for those funds that allocate to real assets.
ASIA LEAD IPO BOOM
According to the IFSWF review, it was a record-breaking year for sovereign wealth funds’ participation in intial public offerings (IPOs). SWFs invested a total of $5.1 billion in 71 deals, up 45% by equity and 108% by deal numbers. Asia captured the majority of this capital with $3 billion invested in 47 IPOs across the region.
“Investing as a cornerstone IPO investor is still a preferred way to access some direct investments in Asia since opportunities in private markets are still limited and can be challenging as they require a deep understanding of the market,” said Barbary.
Some 74% of Asia’s IPOs were in India and were dominated by e-commerce and internet companies tapping the public markets.
“India has recently become a conveyor belt for listing new companies on the stock market. As sovereign wealth funds start to build their exposure to this high-growth region, they are using IPOs as an efficient way to deploy more capital,” she said.
Indian tech companies also gained an edge over counterparts in China – a major source of IPOs in digital companies – as Chinese authorities tightened regulation on local technology companies listing abroad.
Barbary believes the Bombay Stock Exchange is likely to remain in a strong position over its main rival for Asian listings - Hong Kong - due to the challenges imposed by China.
“China's regulation of the tech sector which has previously been highly attractive for sovereign wealth funds, in addition to the continuing challenges of the country's zero-Covid policy and recent geopolitical developments, has reduced the volume of listings on the HKEX,” said Barbary.