SWF assets reach $4 trillion in 2011

Assets managed by sovereign wealth funds across the globe reached nearly $4 trillion at the beginning of 2011, which is more than the entire assets managed in 2010.

"Assets under management of sovereign wealth fund increased from $3.59 trillion in 2010 to $3.98 trillion at the start of 2011," said a report by research firm Preqin.

Sovereign-wealth funds are likely to continue to increase throughout 2011 as they pursue higher returns and seek increased diversity.

SWF is state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. The fund, such as Temasek Holdings of Singapore, invests globally.

"Following global economic stabilisation, many sovereign wealth funds that had delayed plans to diversify their holdings as a result of the economic downturn have now resumed these plans.

"Therefore we expect the proportion of SWFs moving into the various alternative asset classes, as well as the amount invested by SWFs in alternatives, to continue to increase in the coming year," said Preqin Managing Editor Sam Meakin.

However, unrest in the Middle East and North Africa could hit the sovereign wealth funds of Algeria and Bahrain.

Besides, the Libyan Investment Authority, which manages about $70 billion sovereign wealth funds, could also see its mandate altered following any political change in the country.

"Collectively, the MENA-based sovereign wealth funds in question have hundreds of billions of dollars in assets and changes in their investment policies would be widely felt," said the report.

About 61 per cent of sovereign wealth funds invested in infrastructure at the beginning of 2011, up from 47 per cent last year.

Besides, sovereign wealth funds also witnessed an increase in investments in real estate and private equity, it added.