The Chinese State Administration of Foreign Exchange (SAFE) sovereign fund has, as of 31st December 2012, become the largest sovereign wealth fund in the world, with $743 billion in assets under management, ahead of the Norwegian Government Pension Fund ($740 billion). Operating within the structures that manage foreign exchange reserves – $3.4 trillion – SAFE’s direct investments and investments in international portfolios have exceeded those of any competitor in the SWF industry. SAFE is characterised by unyielding opacity, which contrasts with the impeccable transparency of its Norwegian counterpart, confirming forecasts made years ago by international agencies. According to the IMF, in 2017 the Chinese economy will be the largest in the world, breaking the 123 year hegemony of the US. In 2013, the largest sovereign wealth fund in the world is now Chinese.
Besides, the new map and ranking published by ESADE show that the total volume of assets managed by the sovereign wealth fund (SWF) industry has continued to grow. At present, 76 SWFs worldwide manage more than $5.53 trillion, an increase of nearly $550 billion over the $4.98 trillion they managed in December 2012. In other words, the industry grew by 11% in the last quarter. The reasons for this growth are threefold: existing funds have accumulated more assets; transparency has improved, leading to better estimations of the funds’ assets (although this factor continues to distort the data); and new funds have recently been created.
Sovereign wealth funds by country
ESADEgeo recently created two dynamic new tools for comparing and studying quarterly changes in SWFs around the world: an interactive map and an international ranking.
The map, known as the ESADEgeo SWF Tracker, illustrates the distribution of SWFs by region and provides various types of information. The shading of each country indicates the number of SWFs it manages. Blue circles represent the total volume of SWF assets managed by each country. Drop-down lists show the name, year of creation and assets of each SWF in a given country. With just one click, visitors can access the source of any piece of information displayed on the map. The map also allows visitors to zoom in on any of seven regions: North and South America, Europe, Africa, Middle East, Asia and Australasia.
Middle East and China lead the ranking
Geographically, the funds are concentrated in four areas that account for 79.17% of all SWF assets: the Middle East (18 funds that manage $1.81 trillion), China (four funds, $1.36 trillion), Norway (one fund, with $740 billion) and Southeast Asia (eight funds, $500 billion). Further down the list are countries such as the United States ($98.5 billion) and Russia ($97.1 billion). Chile is home to the largest SWFs in Latin America, which manages a total of $20.8 billion.
The ESADEgeo SWF Ranking allows visitors to classify funds, directly access the websites of information sources (central banks, monetary authorities and the funds themselves), and see how many places a particular fund has risen or fallen since the last ranking.
New funds in 2013
With this first-quarter update using data through 31st March 2013 (updated now until 25th May 2013), the map and the ranking paint a picture of a growing SWF industry. Since the ESADEgeo SWF Ranking was launched in December 2012, four new funds have been added: the Russian Direct Investment Fund, which manages $10 billion; the Angola Sovereign Fund, with $5 billion; the Western Australia Future Fund, with $1 billion; and the Zimbabwe Empowerment Fund, with $4.9 billion.
The appearance of these new funds underscores the fact that SWFs are an increasingly popular financial vehicle all over the planet: in OECD countries (Australia), emerging economies (Russia) and new frontier markets (Angola and Zimbabwe).
Apart from SAFE taking first place in the ESADEgeo SWF Ranking, the main changes in the ranking this quarter are due to the appearance of these four new funds and a better estimation of the assets managed by the Hong Kong Monetary Authority Investment Portfolio, which has given third place over to the Saudi Arabia SAMA sovereign fund, and now occupying sixth in the ranking. Other significant changes include the rise of two sovereign wealth funds: the International Petroleum Investment Company (in Abu Dhabi, United Arab Emirates) and the Bahrain Mumtalakat Holding Company (Bahrain) have climbed two and three positions respectively due to an increase of $16.4 billion in the case of IPIC and $2.1 billion in the case of the Bahrain fund.
The SWF boom is symptomatic of the economic transformation taking place across the globe. SWFs are complex organisations that practice a new form of state capitalism in which equity investments play a key role. Some SWFs – such as those of Chile and Norway – are examples of good institutional governance practices, according to ESADE’s 2012 Sovereign Wealth Fund Report. Edited by Javier Santiso, Associate Professor of Economics at ESADE and Vice President of ESADEgeo, this report was the first of its kind to be published in Spanish. Like the report, the SWF Tracker and SWF Ranking are expected to become key sources of intelligence on SWFs.
Original Article: http://www.esade.edu/web/eng/about-esade/today/news/viewelement/289708/1/china-overtakes-norway-in-having-the-worlds-largest-sovereign-fund?utm_content=buffer265fd&utm_source=buffer&utm_medium=twitter&utm_campaign=Buffer