News: Sovereign wealth funds pull $16.3 billion from market strategies in fourth quarter.
LONDON (Reuters) – SWFs withdrew $ 16.3 billion from public market investment strategies, mostly stocks, in the fourth quarter. This is the largest chunk in nearly four years, driven mostly by redemptions, according to data and research firm eVestment.
The move followed a year during which some funds, including those from Norway, Azerbaijan and Kazakhstan, were planning withdrawals to help their governments deal with the coronavirus crisis.
Net outflows from equity strategies managed by outside fund managers were $ 18.5 billion in the last three months of 2020, eVestment data showed.
Global equity markets closed record highs in 2020 after a stimulus-fueled rebound helped equities gain more than 60% from their March lows.
Across all asset classes, net outflows from long-only managers running government investments were $ 16.3 billion. That’s the largest amount since Q1 2017, the data showed.
However, the significance of the data has been contested by the International Forum of State Funds (IFSWF).
“According to our research, these numbers do not appear to be indicative of the behavior of our members who invest in global markets,” said Victoria Barbary, director of strategy and communications at IFSWF. “For most large SWFs, with the exception of ETFs, pooled vehicles are not the main investment vehicles.”
Most of the net outflows identified in eVestment’s data were due to redemptions of passive stocks, noted Mike Cho, senior research analyst at eVestment.
The data contained some “isolated bright spots” of positive net flows for active global equity strategies and active emerging market capitalization equity funds, Cho said.
The latter had net inflows of $ 1.4 billion, most for at least several years.
Some sovereign wealth funds have also invested part of their investments in fixed income securities.
Across all pension classes, the strategies have sucked in a net $ 2.1 billion, most since Q1 2018, the data showed.
Fixed income in the US recorded net inflows for the second straight quarter, increasing $ 1.3 billion in the fourth quarter.
For the second straight quarter, sovereign wealth funds also switched to US mortgage-backed and short-dated US instruments while also adopting improved US cash management strategies.
Hopes of an economic upswing from a huge fiscal stimulus under President Joe Biden’s new administration has lured investors into bond funds in recent months.
Reporting by Tom Arnold; Editing by Alex Richardson
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