Sovereign funds' direct investments double to $65.9bn in 2020

State-owned funds injected $48.6bn directly into companies last year, more than twice the amount deployed in 2020

Singapore's Temasek Holdings channlled its investment locally last year and supported a $1.5bn rights issue by Sembcorp Marine. Courtesy flickr

Sovereign wealth funds' direct investments almost doubled in 2020 to $65.9 billion, with a significant portion of that amount invested at home as funds sought to soften the hit to their economies from the Covid-19 crisis, according to a report published Tuesday.

For the first time, savings funds invested less than sovereign development funds and hybrid funds, according to the report from the International Forum of Sovereign Wealth Funds (IFSWF), based on publicly-disclosed direct investments.

Savings funds usually have a remit to deliver long-term financial returns by investing in markets, while development funds are focused more on helping to develop their local economies. Hybrid funds typically have more than one mandate.

"Institutional investors, including sovereign wealth funds, entered the pandemic with high levels of cash," said the report.

"Consequently, they were ready to support local economies or buy opportunistically in distressed international markets in March 2020."

Sovereign funds made $48.6bn in direct equity investments, more than twice the amount deployed in 2019, while $9.1bn was invested in real estate and $8.2bn in infrastructure, the report said.

Many sovereign funds were required to support domestic businesses in the pandemic's wake in 2020. Examples include Turkey's fund injecting 21bn lira ($2.5bn) into three state banks and Singapore's Temasek Holdings supporting a $1.5bn rights issue by Sembcorp Marine.

That was in addition to governments tapping into their "rainy day" funds. For example, Chile's finance ministry withdrew $1.1bn from the Economic and Social Stabilisation Fund in August 2020 to help finance maturing external debt.

In 2020, as a consequence of the pandemic, sovereign funds deployed 22 per cent of all capital towards direct investments in their local markets, the IFSWF report found.

That compares with an average of around 13 per cent in the previous five years.