The portfolio allocation strategies of sovereign wealth funds and the financial crisis

This paper analyzes the investment choices of sovereign wealth funds (SWFs) by country and industry in the last twenty years. Assets under management increased from $500 billion in 1995 to $4.7 trillion at end-2011. Based on a specially constructed data set, comprising 2,740 equity deals concluded by twenty-nine SWFs during the period 1990-2010 ($565 billion worth of acquisitions and $191 billion worth of divestments), we analyze sovereign fund investments by sector and geographical allocation and the impact of the global crisis. The study shows that notwithstanding the crisis the advanced economies are and continue to be the main destination for SWF investments. The sector of choice is the financial one, although since the crisis interest has surged in other sectors such as energy and commodities. Overall, the financial crisis did have an impact on SWF investment activity, although less than that on other important categories of investor.