Reviving the Domestic Economy with Sovereign Wealth Funds... Tripling Domestic Investment After COVID-19

Sovereign Wealth Fund Investment Trends [Image Source= Wall Street Journal]

[Asia Economy Reporter Park Byung-hee] According to the Wall Street Journal (WSJ), sovereign wealth funds (SWFs) around the world, known to manage assets exceeding 8 trillion dollars, have significantly increased their domestic investment proportions since the COVID-19 pandemic. As the economic crisis hit due to COVID-19, they rolled up their sleeves and focused on revitalizing the domestic economy.

According to the Sovereign Wealth Fund Institute (IFSWF), last year sovereign wealth funds invested 12.7 billion dollars in domestic companies or domestic economic development projects. This is three times the 4.34 billion dollars invested in 2019. This year, sovereign wealth funds have invested 4.03 billion dollars in their domestic economies. Although this is somewhat less than in 2020, it already matches the total annual investment amount of 2019.

Singapore's Temasek invested 8.9 billion dollars in Singapore Airlines during the COVID-19 period. Turkey's sovereign wealth fund invested 5.8 billion dollars in domestic banks, insurance companies, and the mobile phone operator Turkcell.

The Irish government launched the Pandemic Stabilization and Recovery Fund (PSRF) last year to support medium and large enterprises with annual sales exceeding 50 million euros or employment of more than 250 people in response to COVID-19. The Irish sovereign wealth fund, the Ireland Strategic Investment Fund (ISIF), contributed to raising 2 billion euros for the PSRF.

Italy's sovereign wealth fund CDP Equity led an investment in the Italian highway operator Autostrade. The consortium led by CDP Equity invested approximately 8.1 billion euros to acquire an 88% stake in Autostrade.

The Chilean government withdrew 4.1 billion dollars from its sovereign wealth fund, the Economic and Social Stabilization Fund (ESSF), last year and plans to withdraw an additional 6 billion dollars or more this year.

The Norwegian government also withdrew a record 34 billion dollars last year from the world's largest sovereign wealth fund, the Government Pension Fund Global (GPFG). This amount corresponded to 3% of the total managed assets. The GPFG manages assets totaling 1.27 trillion dollars and achieved a 10.9% investment return last year.

Russia's sovereign wealth fund, the Russian Direct Investment Fund (RDIF), invested about 200 million dollars in the development of the Sputnik vaccine and acquired exclusive overseas distribution rights for the Sputnik vaccine.

The scale of sovereign wealth funds' overseas investments also increased significantly last year. In 2016, overseas investments by sovereign wealth funds amounted to 46.45 billion dollars and then continuously decreased to 31.67 billion dollars in 2019. However, last year, when COVID-19 spread, overseas investment increased sharply to 53.02 billion dollars.

Since COVID-19, sovereign wealth fund investments have become active both domestically and internationally. While overseas investment remains the main focus, their role in revitalizing the domestic economy is also growing. Victoria Barbour, director of IFSWF, said, "The trend of sovereign wealth funds expanding domestic investments has become a new trend after COVID-19."

This content was produced with the assistance of AI translation services.