A broker monitors the NEWEDGE share prices trading rooms in Zurich, August 10, 2011.
Credit: Reuters/Christian HartmannBy Natsuko WakiLONDON | Thu Sep 29, 2011 08: 08 BST
LONDON (Reuters) - sovereign wealth funds can reconsider compared to alternative investments such as infrastructure and property conversion, as after a decade of equity underperformance against low yields its fixed-income investment strategies.
This means that trillion (2.6 trillion pounds) sector is $4 unlikely that White Knight hobbled to play banks of the eurozone, as it in 2008, when State investment vehicles plowed $80 billion in troubled Western lenders.
Sovereign wealth funds, national revenue from oil, raw materials or trade surpluses to managing, usually take part of a bond heavy portfolio of its National Central Bank and buy higher returns for future generations of equities and alternative.
Their investment style varies according to their introducing-some portfolio investors such as pension or Foundation funds are, while others, such as private-equity funds behavior.
JP Morgan some more than half of its assets are in the rule listed investments, 31 per cent in bonds and liquidity, and the rest in alternativen-- investments outside of mainstream asset classes, the SWF shows are hedge funds, components, property, or infrastructure.
But their asset mix can gradually change, especially in the light of the disappointing performance of the shares in the last decade. Reuters data show fixed-income-was a total return of 89 percent on a rolling basis in the last 10 years, compared with 59 per cent for global equities.
"Normal distribution of returns, which a lot of the last ways based approach is not as relevant as before." "It is time to reconsider that," said Patrick Thomson, global head of rulers at JP Morgan.
"Sovereign clients are probably..." "We are a pretty significant development in different sources of funding are, how watch infrastructure, real estate and great offers in the field of private equity."
Fairs are on direct investment in infrastructure in the face can be difficult many offerings include direct or a partnership. However, global infrastructure companies have a total yield of almost 100 percent in dollar terms since 2001, Goldman Sachs infrastructure index given.INFRAXDT.
Investment property databank global property delivered a total return of 87.2 percent between 2000 and 2010.
In August, Qatar diar, an arm of the Qatar Investment Authority, London bought the Olympic village for £ 557 million together with the developer of DeLancey. A source said the QIA also close on the purchase of London's W Hotel for £ 200 million.
Abu Dhabi investment authority is builds its private equity activities and is also looking for its investment in infrastructure, clear boost said.
The real estate sector more than 12 percent the total acquisitions of sovereign wealth funds in the past come 12 months behind financials, energy and power, and industrials, according to Thomson Reuters data.
SHARES VS. BONDS
The poor performance of the shares in recent years means that sovereign wealth funds can move their capital only between a traditional mix of stocks, bonds and cash not. Instead, they are probably part of their fortune super-liquid bonds map, then another part riskier assets such as property investing.
Only in the very long term stocks beat bonds, such as in the research, conducted by London Business School Professor Elroy Dimson shown.
An annualized return was 111 years of 6.3 per cent in real terms, to win on government bonds against a 1.8 percent U.S. stocks. However, between 1980 and the end of 2010, real annualised on government bonds 6%, largely matching 6.3 per cent for shares.
On average the risk premium realized equity compared to bonds of 2000-2010 was 3.2 per cent per annum. This means stocks underperformed risk-free investment by this amount each year.
"We all know that in the long run shares is expected to be more as bonds return, aber-- as a look at Japanese shares point-and-shoot since 1990 - we must recognize that the long-term can be very long", said John Nugee, head of the official institutions at State Street Global Advisors.
"As for other investors, is the preservation of capital, the ranks higher for sovereign wealth funds."
Many experts say even SWFs that have no liabilities and can invest in the long term, can not afford, wait so long.
After posting double-digit losses during the credit crisis, their investment horizon had to some funds, for example provides visible are to shrink every year.
"How many private investors have SWF's heavy losses during the crisis made likely, they better over, and perhaps unwilling, different types of risk," of the International Monetary Fund said in its report published earlier this month.
"In addition, can change mandates that now fiscal, economic and financial stabilization could include objectives to safer or more liquid his require."
NON-BINDING
As Savior of global finance, sovereign wealth funds was created during the financial crisis of 2007-2009 with their massive investment in the financial sector, and some euro-zone politicians can hope that they will go to the rescue again.
But so far excess Rich Nations, the SWF files have non-binding, instead prefer to see, how to play the events stay on the edge.
Australia's 76 - billion dollar, which last week said SWF, it has increased its share of bar in accordance with the market turmoil and will wait to see how the events play before the money back to work.
"SWF files went back not just ordinary investors." Long it seemed that an injection of funds from large investors the financial crisis solve how SWF files, but in hindsight, the problem was bigger than everyone thought, ", said Nugee.
Asked if SWF files to invest in French banks could be interested, he added: "I think she would like to leave this time it Governments." "Actions by third investors such as SWF files are not the solution to this problem."
(Graphics by Scott Barber and Vincent Flasseur;) (Editing by Catherine Evans)
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