Sovereign wealth funds invested $95.2 billion in 2022 through 376 transactions, according to the Sovereign Wealth Funds 2023 Report, prepared by the Center for the Governance of Change at IE University in collaboration of ICEX-Invest in Spain. The report was presented in Madrid at the ICEX foreign trade institute attended by Spain’s Secretary of State for Trade, Xiana Méndez, who noted: "An open, innovative economy exposed to international competition such as Spain's cannot be conceived without a large presence of international capital, and this is reflected in Spain’s attractiveness for investment". She added that the report "clearly illustrates the active role that sovereign wealth funds play in the global economy through large and increasingly diversified operations." Javier Capapé, director of Sovereign Wealth Research at IE University's IE Center for the Governance of Change, detailed the main points of the annual report, which analyzes the trends of these large international investors. The latest report analyzes how sovereign wealth funds have navigated global changes and challenges between January 2022 and March 2023. In a scenario characterized by geopolitical tensions, supply chain disruptions, inflation, historically high interest rates and mixed performance in financial markets in general, sovereign wealth funds have seen an 11% increase in assets under management (AUM) rising to $11.6 trillion in 2022 from $10.39 trillion in 2021, diversifying away from technology. Javier Capapé explained, "Compared to last year, we have seen diversification in the number of sectors in which sovereign wealth funds invest. This activity tends to align with global M&A trends and highlights growth in those sectors. It also coincides with the sectors that played an important role during the Covid-19 pandemic." "It is also very encouraging to see sovereign wealth funds investing in green and renewable energy - with no oil and gas deals since 2021 - leading by example in the transition to green energy." In terms of new investments, the most active sovereign investors last year were two Singapore funds, Temasek and GIC. Middle Eastern funds Mubadala Investment Company, Abu Dhabi Investment Authority, and the Qatar Investment Authority and Public Investment Fund also topped the list. Together, these six funds took part in more than 80% of the transactions analyzed. When considering the full period covered by the report (January 2022 to March 2023), Mubadala outperformed GIC in deal activity, participating in almost six deals per month. This is the first time a non-Singaporean fund has reached the second spot. Unlike 2021, when SWFs invested mainly in the technology sector, 2022 has seen a diversification in the industries that have attracted their interest. Healthcare has been a very active sector in terms of number of transactions, although the average amount per transaction has not been as high as in the case of IT or the industrial and real estate sectors, which top the ranking. These last three sectors (IT, industrial and real estate) accounted for approximately 66% of these investments. Each sector attracted nearly $21 billion in investments in 2022, accounting for 204 of the 376 total transactions. SWF direct investment activity is generally aligned with global M&A trends, showing a proactive approach to sector growth over the medium to long term. The United States attracted 60% of the value of SWF deals, well ahead of its competitors. It was followed by the United Kingdom and India. China, on the other hand, fell out of the top three destination countries and saw deals halve in both number of deals and dollar volume. The current focus on sustainability has led SWFs to shift their investments away from conventional oil-related industries to green technologies, allocating funds to electric vehicle companies, sustainability businesses and the agricultural technology sector. Between January 2022 and March 2023, all new SWF investments in the energy sector have been linked to renewables, with no oil and gas deals, for the first time since the IE Center for the Governance of Change's Sovereign Wealth Research database was created in 2012. Sovereign wealth funds such as the Abu Dhabi Investment Authority, the New Zealand Superannuation Fund and the Mubadala Investment Company have made significant investments in energy networks and energy storage. Spain experienced record levels of SWF activity during 2022 and the first half of 2023, against a backdrop of economic, geopolitical and social uncertainty. These funds conducted 11 transactions in Spain in 2022, matching a previous record set in 2014, with a total value of €2.9 billion. In addition, the first quarter of 2023 was also notably active, highlighting NBIM's collaboration with Iberdrola in renewable energy and Mubadala's investment in biofuels. Real estate and technology attracted the most significant investments, with GIC planning to invest €1.5 billion in rental housing in Spain and Mubadala continuing its investment in homes for the elderly. On the other hand, human resources technology company Factorial achieved a unicorn valuation with a $120 million Series C round investment led by Atomico and with participation from GIC, among others. These events show significant growth in sovereign wealth fund activity in Spain, supported by investment in various sectors and the creation of new funds, such as COFIDES, Spain’s state-owned trading company that provides medium and long-term financing for viable private investment projects, the Co-investment Fund (FOCO) and the Social Impact Fund (FIS), which seek to attract foreign investment and promote energy transition and social impact in Spain. These initiatives support the vision of strengthening the Spanish economy and moving towards a more sustainable future. The Sovereign Wealth Funds 2023 Report can be downloaded here.
Javier Capapé, Director of Sovereign Wealth Research at IE University's IE CenterDiversification of sectors of interest
By country
Focus on sustainability
Activity in Spain
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The Sovereign Wealth Funds 2023 Report, prepared by the Center for the Governance of Change at IE University, sheds light on the activities of sovereign wealth funds (SWFs) in 2022 through 376 transactions totaling $95.2 billion. Here are the key points covered in the article:
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Global Economic Landscape:
- The report addresses the challenges faced by SWFs amid geopolitical tensions, supply chain disruptions, inflation, historically high interest rates, and mixed financial market performance.
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Assets Under Management (AUM):
- Sovereign wealth funds experienced an 11% increase in assets under management, reaching $11.6 trillion in 2022 from $10.39 trillion in 2021. This diversification was accompanied by a shift away from technology investments.
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Sector Diversification:
- Unlike the previous year, SWFs diversified their investments across various sectors. Healthcare emerged as an active sector, while IT, industrial, and real estate sectors continued to attract substantial investments, accounting for approximately 66% of the total.
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Top Sovereign Investors:
- The most active sovereign investors in 2022 were Singapore funds (Temasek and GIC), along with Middle Eastern funds (Mubadala Investment Company, Abu Dhabi Investment Authority, Qatar Investment Authority, and Public Investment Fund).
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Geographical Distribution:
- The United States was the primary destination for SWF investments, attracting 60% of the total value. The United Kingdom and India followed, while China experienced a decline in both the number and volume of deals.
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Sustainability Focus:
- SWFs shifted their focus to sustainability, moving away from conventional oil-related industries. All new investments in the energy sector between January 2022 and March 2023 were linked to renewables, marking a significant shift.
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Activity in Spain:
- Spain witnessed a surge in SWF activity in 2022 and the first half of 2023, with 11 transactions totaling €2.9 billion. Real estate and technology were prominent sectors, showcasing significant growth supported by the creation of new funds such as COFIDES, Co-investment Fund (FOCO), and Social Impact Fund (FIS).
This comprehensive overview underscores the dynamic nature of sovereign wealth fund activities, reflecting a strategic response to global economic challenges and a growing emphasis on sustainability and diversification. For further details, the Sovereign Wealth Funds 2023 Report can be accessed .
