Market Upheaval Forcing Many Sovereign Wealth Funds to Adapt – MarketWatch
by Sue Chang
As representatives of dozens of the world’s sovereign-wealth funds gather at Milan’s posh Hotel Principe di Savoia this week for their annual conference, they will have more than networking on their minds.
The ending of a commodities bull market and the uncertainty created by China’s economic slowdown have prompted the massive funds to reassess a fast-changing global landscape. Assets managed by sovereign-wealth funds grew more than 20% annually between 2011 and 2014, in large part because of higher oil prices.
But with oil falling lately—and, perhaps, poised to fall further—experts say the funds will be forced not only to review their investments but also take on greater risk to sustain yields…
…Some funds have responded nimbly to the volatile financial environment. The New Zealand Superannuation Fund, with about $22 billion in assets under management, reported returns of 14.6% for the fiscal year ended June 30, according to Patrick Schena, co-head of SovereigNET at the Fletcher School at Tufts University.
The guardians, as the fund’s managers are known, are adroit when it comes to moving away from existing positions for other opportunities, according to Schena. The fund’s strategy “combines a disciplined approach to asset allocation via-a-vis their policy benchmark with a regiment of ‘strategic tilting’ to take tactical advantage of opportunities resulting from shifts in asset values and market volatility,” he said.