Sovereign wealth funds (SWFs) are to wield an increasing influence in private equity and hedge funds, research from a US investment bank reported by Reuters shows.
According to JPMorgan Chase analysts David Fernandez and Bernhard Eschweiler, this funding injection will prove “beneficiary” to the sector.
The wealth funds, including those of the governments of Singapore and UAE, already have total assets of around $3.7 trillion under their control.
They run around 7.5% of alternative assets – a stake totaling $340 billion – which could rise to 17% within four years.
“The main beneficiaries of the increased allocation by SWFs to alternatives are set to be private equity firms and hedge funds. These managers offer skills, resources and expertise that would be difficult for most SWFs to develop on their own,” added the report’s authors.
Recent high-profile SWF activity has seen the China Investment Co. buy up a $3 billion stake in private equity firm the Blackstone Group.
Banks such as Citigroup which were weakened in the credit crunch have also received around $43 billion from the funds in order to boost their balance sheets.