Oxford SWF Project

By Brett Keller

Business Wire has the story: “Monitor Group Research Reveals Sovereign Wealth Fund Investment Shift from Western Markets to Middle East, North Africa and Asia.”

This report (not yet available on Monitor’s website) is an update of Monitor’s much-read June 2008 Report on SWFs (PDF). The Oxford SWF project first reported this new data in our coverage of William Miracky’s talk at SAIS. At SAIS, Miracky discussed some of this Q2 data and explained that he sees heavy investments in the US and European financial services as “atypical and opportunistic,” reflecting the 2007-8 credit crunch, and that the new data on Q2 investments may be more normal behavior for the SWFs.

From Business Wire:

…SWFs are not exploiting current US or European downturns, but are focused on building opportunities in potentially lucrative emerging markets in the Middle East and Asia. Indeed, investments in these regions accounted for 68 per cent of the total value of all publicly-traded deals in this period.

Key findings:

* In the second quarter of 2008 (Q2 2008), funds in the Monitor SWF transaction database executed 43 deals totaling $26.5 billion. In contrast those funds executed 42 deals totaling $58.3 billion during the previous quarter (Q1 2008).
* SWFs continued to invest actively in emerging markets. In Q2 2008, more than half the deals and funds invested were in emerging markets. SWFs carried out 26 deals and invested $15 billion in BRIC and non-OECD countries.
* Investment in North America dropped dramatically. In Q2 2008, four deals totaling less than $1 billion were received by North America. In contract, this region received seven deals totaling $23 billion during the previous quarter (Q1 2008).
* Half of the deals by value in Q2 were in real estate. Real estate had the largest number of deals (12) and the highest investment ($13.7 billion) in Q2 2008.
* During Q2 2008, investment has shifted away from financial services. SWFs carried out 10 deals and invested $4 billion in the financial services sector during Q2 2008. In the previous quarter (Q1 2008), funds carried out 13 deals totaling $43.4 billion.