The amount of money sovereign wealth fund command is massive. Norway’s sovereign wealth fund has more than US$954 billion worth of assets. Below, is a list of the top 10 sovereign wealth funds according to SWF Institute:
Source: SWF Institute
Australia’s sovereign wealth fund — the Australian future fund — ranks as the 17th largest, in the world. Yet even when a small sovereign wealth fund decides to shuffle their portfolio around, investors take note. Usually, sovereign wealth funds will make long term investments. Therefore by looking at what these funds are doing, you could identify profitable long term trends.
Where do these mega funds see long term value?
According to BlackRock Inc. [NYSE:BLK], many of these funds are looking to increase their exposure to real estate. As reported by the Australian Financial Review (AFR):
‘BlackRock’s head of Australian Real Estate Hamish MacDonald says about 60 per cent of pension and sovereign wealth funds are looking to increase their allocation to real estate and that Blackrock itself has started receiving more off-market offers for its commercial property holdings.’
Yet it’s not just the big money that wants to move into real estate. The AFR continues:
‘BlackRock — the world’s largest asset manager — conducted a survey this year of their clients which revealed that 61 per cent of them wanted to increase their allocation to real assets. That percentage was almost three times the preference to increase allocations to equities.’
Running into real assets could be a sign that sovereign wealth fund and other investors are betting on low interest rates to persist. While this means you might not earn much more on you savings for a while, it’s not all that bad. There is a way you could profit from persistently low interest rates. To find out how, click here.
Junior Analyst, Markets & Money