Global Public Investor 2015

Associations, Books, Company Profiles, Finance — By on May 21, 2015 at 1:35 PM

GPI 2015Global Public Investors in ‘real asset’ drive

Central banks lose ground in assets to sovereign funds and public pension funds

Public sector asset managers around the world led by sovereign funds and public sector pension funds have been moving aggressively into real estate and infrastructure to offset low returns on traditional markets, creating the risk of asset bubbles. Central banks meanwhile appear to be continuing purchases of equities.

These are among the findings of Global Public Investor (GPI) 2015 – Real Assets for the Real Economy, a survey of $29.7tn worth of investments held by 500 public sector institutions in 180 countries, launched on 21 Mayin Beijing.

The London launch will be held at Armourers’ Hall, London,  10 June 2015. 

The publication, focusing on investments by 163 central banks, 89 sovereign funds and 248 public pension funds owning assets equivalent to 40% of world economic output, underlines important changes in public sector investment behaviour brought by low or negative interest rates on world capital markets.

Using results from the OMFIF Global Public Investors survey carried out in November 2014, OMFIF estimates that 9.1% of total assets held by the 500 GPIs are in real estate and infrastructure, a total of $2.7tn. Asked about future investments, 44% of sovereign funds and public pension funds stated they would be increasing their real estate and infrastructure holdings in the next three to five years, a greater amount than for any other asset class, while 50% will maintain holdings at current levels. Only 6% stated they would be lowering their allocations here.

The publication highlights expectations that asset price bubbles have been building up in sections of the capital markets as a result of central banks’ quantitative easing, particularly in Europe. These risks may now be spreading to real estate and infrastructure investment, which the report terms as ‘just one of the potential headaches facing the GPIs.’

The leading 10 GPIs in the top 500 are largely unchanged over the year, led by the top four, People’s Bank of China, the Japanese Ministry of Finance and Bank of Japan, Japan’s Government Pension Investment Fund and Norges Bank Investment Management. Italy’s Cassa Depositi e Prestiti replaced the Central Bank of the Russian Federation at No. 10 in the list, after Russia depleted reserves last year to help brake the rouble’s fall.

Central banks’ share of assets at end-2014 fell to 43.9% of the total from 45.2%, partly reflecting currency pressures among energy exporters, as well as the effect of the dollar’s rise on non-dollar-denominated reserves. The shares of sovereign funds and public pension funds rose respectively to 22.5% from 21.8% and 33.6% from 33.0%.

With regard to public equity investments, only 4% of respondents in the survey indicated they would be reducing allocations, the lowest fall of any asset class, with 27% increasing their share. Survey results and informal calculations indicate that central banks hold around 5% of total assets in public equity, led by the People’s Bank of China and Swiss National Bank, implying indicate total central bank public equity holdings of around $700bn, or 2% of global publicly listed equity.

Asked which region would yield the best returns over the next five years, 43% named Asia Pacific. North America came in second with 23% of responses, followed by Africa (13%), Europe (14%) and Latin America (7%). No respondents thought the Middle East would be the best region for returns in the next five years.

OMFIF’s second annual Global Public Investor is a comprehensive 200-page publication covering 63 institutions from Africa, 102 from Asia-Pacific, 165 from Europe, 42 from Latin America and the Caribbean, 33 from the Middle East, and 95 from North America. Total investable assets comprise $13.0tn in central banks, $10.0tn in public pension funds and $6.7tn in sovereign funds.

GPI 2015 features articles on investment behaviour by the heads of public sector investment funds from Australia, New Zealand, Singapore, Japan, Angola and Denmark as well as the views of central bank governors from South Africa, the Czech Republic and Hungary. It details the reasons for the rapid rises in the GPI rankings of institutions from Pakistan, Argentina, Indonesia and Vietnam and for the declines of Nigeria, Ukraine, Russia and Ireland.

Several of the themes expounded in last year’s publication have gained further prominence. GPI 2015 lists many examples of commonality between different classes of asset owners, the limits to growth in central bank reserves as well as other features such as the rise of the renminbi, the search for diversification and the potential for co-investment and partnerships.

Total assets under management (including gold) of the 500 GPIs increased $520bn or 1.8% during 2014, primarily driven by public pension funds and sovereign funds increasing their asset base by 3.8% and 5.2% respectively, making up a combined $690bn in growth.

The publication is published by the Official Monetary and Financial Institutions Forum (OMFIF), a global research and advisory group, with the support of DZ BANK, State Street Global Advisors and Quantum Global group.



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