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The credit crunch has led to an acceleration of investment in US and European banks by sovereign wealth funds (SWFs), with the amount invested in the first two months of this year nearly matching half the 2007 total.
- By John Burton, Financial Times
- Published: 00:34 April 5, 2008
The credit crunch has led to an acceleration of investment in US and European banks by sovereign wealth funds (SWFs), with the amount invested in the first two months of this year nearly matching half the 2007 total.
According to data from Dealogic, investments by global sovereign funds amounted to a record $48.5 billion in 2007, and $24.4 billion in just the first two months of 2008. Most, although not all, of the investments were made into banks, with financials accounting for $60.7 billion of the $72.9 billion invested by SWFs since January 2007. The figures cover investments by all sovereign funds, including those that have emerged in China and the Middle East. However, they exclude state pension funds such as Norway's government pension fund.
Singapore accounted for the majority of cross-border investments made by sovereign wealth funds in the past 14 months - accounting for 57 per cent of the total invested since 2007.
Temasek Holdings and Government of Singapore Investment Corp (GIC) have made total investments abroad of $41.7 billion since January 2007, far exceeding the $10.7 billion spent by the UAE and $8 billion by China through their sovereign funds.
Singapore has been particularly active in taking advantage of the credit crunch to buy minority stakes in some of the world's biggest commercial and investment banks as the city-state seeks to become a leading financial centre.
Temasek announced a $4.4 billion investment in Merrill Lynch in December and, together with China Development Bank, bought a small stake in Barclays last summer to help the UK bank in its attempted bid for ABN Amro. Temasek has also been increasing its stake in Standard Chartered and now holds just under 20 per cent of the UK-based emerging markets bank.
GIC, together with a Middle East investor, injected $9 billion into UBS in December. A few weeks later GIC invested a further $6.9 billion in Citigroup. Singapore's sovereign funds have large financial reserves, with Temasek having funds of more than $100 billion and GIC having an estimated $200 billion-$330 billion. This places their holdings behind only the UAE in terms of size.
GIC kept a low profile until its recent investments in Citigroup and UBS because of its traditional role as a giant asset management fund. But it has become the leading investor among sovereign funds in the past year, accounting for 39 per cent of all investments made by them at $28.6 billion.
Some of the sovereign fund investments have fallen sharply in value, such as that in UBS, while others have performed well, such as that in Standard Chartered. The Kuwait Investment Authority ranked second with $19.9 billion in deals, including stakes in Citigroup and Merrill Lynch. Temasek ranked third with $13 billion.
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