“Everybody has been impacted by investment performance in the last 12 months including sovereign wealth funds,” says Guy Langford principal at Deloitte. “Similar to what we might be doing as individuals, sovereign wealth funds are also revisiting the weighting and the balancing in their respective portfolios and evaluating their total exposure to real estate.”
As a result many of the funds are holding back, waiting for signs of better times. “I don’t think the real estate market has had it’s medicine yet, so there’s no point in rushing in,” says Mike Straneva, partner & Americas director, transaction real estate Ernst & Young.
When sovereign wealth funds invest it is most likely to be in 24-7 gateway cities. Plus the properties are those considered the area’s prime facilities, the class A spaces. Specifically, in the gateway cities, both here in the United States and abroad, sovereign wealth funds are looking more closely at office and hospitality properties. Retail is an area they are staying away from as the risk factor is considered big, with a number of big box retailers closing. Still Straneva says that in the right circumstance, sovereign wealth funds might consider a distressed retail asset, if the returns are there.
Some sovereign wealth funds are looking to invest in their own country, in order to boost its economy. “A number of the countries that have large sovereign wealth funds also need to address domestic liquidity needs and domestic issues that they may be required to direct funds to themselves. This determines when and where they will be deploying funds,” Langford says.
Tim Sketchley, chairman, UK capital markets Cushman & Wakefield, agrees, offering the Kuwait Investment Authority as one such example. The sovereign wealth fund had to start buying locally listed shares. “The central bank governor said he thought the Sovereign Wealth Fund of Kuwait was there to play the role of a market maker and for the government to make good long returns.” He continues, “The governments are influencing the investment criteria adopted by the sovereign wealth funds.”
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US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
