Managers of sovereign wealth funds across the Middle East hope to ratchet up their exposure to risky investments as well as the length of their investment commitments from next year, new research suggests.
The year 2012 will mark a turning point in the direction of a number of these rich state-controlled funds, many of which still hesitate to take bold bets in the wake of the financial crisis, according to Invesco Asset Management’s Middle East study for 2011.
The average investment length for sovereign wealth funds is now roughly 6.7 years, a number which is expected to increase next year. “We’re going to see an inflection point developing next year,” said Nick Tolchard, head of Invesco Perpetual’s Middle East group. “Funds will be looking to take on a longer-term investment horizon as well as more risks.”
The authors of Invesco’s analysis also illustrate how stark differences divide sovereign wealth funds, but argue that they can be classified into one of four types. The most popular variety, accounting for 85 per cent of sovereign wealth funds, are so-called “diversification vehicles”. This style of fund invests internationally and usually grades its performance against a relevant benchmark for asset and geographic allocations.
Three other sorts of funds exist as well. The first are funds that focus almost exclusively on local development projects and tend to invest mostly in their own countries. The second invest internationally for the purpose of funding select policy programmes. The final type focus exclusively on providing risk- adjusted returns.
Diversification vehicles focus on long-term investments, favouring a balanced approach and looking for target returns of 6-8 per cent over a five to 10-year period. They tend to put more money towards alternative investments such as commodities and property, but shy away from direct investments like stakes in infrastructure projects, which remain popular with the other types of sovereign wealth funds.
The funds set up to support policy programmes, for example, focus mostly on direct investments as do the risk-return sovereign wealth funds, which also maintain exposure to hedge funds. Risk-return funds typically aim for returns of at least 8 per cent a year.
Source: www.ft.com
The year 2012 will mark a turning point in the direction of a number of these rich state-controlled funds, many of which still hesitate to take bold bets in the wake of the financial crisis, according to Invesco Asset Management’s Middle East study for 2011.
The average investment length for sovereign wealth funds is now roughly 6.7 years, a number which is expected to increase next year. “We’re going to see an inflection point developing next year,” said Nick Tolchard, head of Invesco Perpetual’s Middle East group. “Funds will be looking to take on a longer-term investment horizon as well as more risks.”
The authors of Invesco’s analysis also illustrate how stark differences divide sovereign wealth funds, but argue that they can be classified into one of four types. The most popular variety, accounting for 85 per cent of sovereign wealth funds, are so-called “diversification vehicles”. This style of fund invests internationally and usually grades its performance against a relevant benchmark for asset and geographic allocations.
Three other sorts of funds exist as well. The first are funds that focus almost exclusively on local development projects and tend to invest mostly in their own countries. The second invest internationally for the purpose of funding select policy programmes. The final type focus exclusively on providing risk- adjusted returns.
Diversification vehicles focus on long-term investments, favouring a balanced approach and looking for target returns of 6-8 per cent over a five to 10-year period. They tend to put more money towards alternative investments such as commodities and property, but shy away from direct investments like stakes in infrastructure projects, which remain popular with the other types of sovereign wealth funds.
The funds set up to support policy programmes, for example, focus mostly on direct investments as do the risk-return sovereign wealth funds, which also maintain exposure to hedge funds. Risk-return funds typically aim for returns of at least 8 per cent a year.
Source: www.ft.com
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