Sovereign wealth funds ramped up investment in their local economies in response to the impact of the Covid-19 pandemic, Global SWF research has found.
If all SWFs are considered, the value of domestic investments increased from 28% of the total in 2017 to mid-March 2020 (the moment lockdowns kicked in globally) to 33% - although in volume, they fell from 31% to 25%.
We repeated the exercise to strip out the funds that are forbidden from investing domestically (ADIA, GIC, KIC, NBIM, etc) and those that only invest domestically (Bpifrance, ISIF, NIIF, Samruk, etc) to exclude their distorting effects. The results for mixed mandate funds were even more stark. Our research found a huge jump in the value of domestic investments from 22% pre-lockdown to 44% - although volume remained largely unchanged.
KIA, Khazanah, PIF and Temasek were the key drivers of this shift – all for different reasons. Khazanah’s main domestic target was rescuing its flag carrier airline, while KIA bought performing assets from the government to help bridge its yawning budget deficit as it struggles to pay its bills.
For others, the focus was less on crisis management than looking to long-term objectives. Saudi Arabia’s PIF continues to concentrate on developing large-scale national infrastructure and economic development to diversify the economy in its drive towards Vision 2030 objectives. Temasek has focused on backing the development of domestic ventures focused on taking advantage of the disruption presented by the pandemic with funds poured into early stage startups in e-commerce, fintech and agricultural tech – its emphasis is also domestic self-sufficiency, but on a venture capital scale.