· The sectors in which sovereign funds invest have diversified: they are now more evenly distributed across technology, industry, real estate, finance and healthcare. · Sovereign funds are shifting their investments from conventional oil-related industries to green technologies. · 376 deals were completed in 354 single transactions, with an investment value of 95.2 billion dollars in 2022. · The most active sovereign investors last year were Singaporean funds Temasek and GIC, along with the Emirati fund Mubadala, which with 70 transactions in the period analysed is now in second place for the first time. |  |
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Sovereign funds made investments worth 95.2 billion dollars in 2022 by closing 376 deals, according to the latest 2023 Sovereign Funds Report, prepared by IE University's Centre for the Governance of Change in collaboration with ICEX-Invest in Spain.
The report was presented at the ICEX headquarters, in an event that was closed by the Spanish Secretary of State for Trade, Xiana Méndez, who pointed out that "an open, innovative economy exposed to international competition, such as Spain's, cannot be conceived without a large presence of international capital, and this is reflected in Spain's attractiveness for investment". She noted that the study "clearly illustrates the active role that sovereign funds play in the global economy, with operations that are not only large in volume, but increasingly diversified".
Javier Capapé, director of Sovereign Wealth Research at the IE Centre for the Governance of Change, described the key points of the publication, which analyses the trends in these large international investors every year.
The study analyses how sovereign funds have navigated the changes and challenges between January 2022 and March 2023. In a scenario marked by geopolitical tensions, supply chain disruptions, inflation, historically high interest rates and mixed performance in financial markets in general, sovereign funds have seen an 11% increase in assets under management (AUM) to 11.6 trillion dollars in 2022, from 10.39 trillion dollars in 2021, and have diversified away from technology.
Javier Capapé commented, "Compared to last year, we have seen a diversification in the number of sectors in which sovereign funds invest. This activity tends to align with global merger and acquisition trends and highlights growth in these industries. It also overlaps with the industries that played an important role during the Covid-19 pandemic. It is also very encouraging to see sovereign funds investing in green and renewable energy –with no oil or gas operations since 2021– leading by example in the transition to green energy".
The most active sovereign investors last year – in terms of new investments – were two Singapore funds: Temasek and GIC. Middle Eastern funds Mubadala Investment Company, Abu Dhabi Investment Authority, Qatar Investment Authority and Public Investment Fund also topped the list. Altogether, these six funds were involved in over 80% of the operations analysed. When considering the full period covered by the report (January 2022 to March 2023), Mubadala outperforms GIC in deal activity, engaging in almost six deals per month. This is the first time a non-Singaporean fund has reached second place.
Diversification in industries of interest
In contrast to 2021, when sovereign funds invested mainly in the technology sector, 2022 has seen a diversification in the industries that have attracted their interest. Healthcare has been a very active industry in terms of the number of transactions, although the average amount per transaction has not been as high as in the case of information technology, industry or real estate, which top the ranking.
The latter three industries (information technology, industry and real estate) accounted for approximately 66% of these investments.
Each sector attracted nearly 21 billion dollars in investment in 2022, accounting for 204 of all the 376 transactions.
The direct investment activity of sovereign funds is often aligned with global merger and acquisitions trend, showing a proactive approach to industry growth over the medium to long term.
By countries
The US attracted 60% of the value of sovereign fund deals, well ahead of its competitors. It was followed by the United Kingdom and India. China, on the other hand, fell out of the top three destination countries and saw trading halve in terms of both the number of deals and dollar volume.
Special focus on sustainability
The current focus on sustainability has led sovereign funds to shift their investments from conventional oil-related industries to green technologies. They have also diversified their investments in this direction, allocating funds to electric vehicle companies, sustainability businesses and the agri-tech industry.
All new sovereign fund investments in the energy industry between January 2022 and March 2023 were linked to renewables, with no deals in oil and gas for the first time since the IE Centre for the Governance of Change's Sovereign Wealth Research database was created in 2012.
Sovereign funds such as Abu Dhabi Investment Authority, the New Zealand Superannuation Fund and Mubadala Investment Company have made significant investments in energy grids and energy storage.
Activity in Spain
Spain experienced record levels of sovereign fund activity in 2022 and the first half of 2023, in a context of economic, geopolitical and social uncertainty. These funds carried out 11 transactions in Spain in 2022, equalling a previous record set in 2014, with a total value of 2.9 billion euros. The first quarter of 2023 was also notably active, with NBIM and Iberdrola collaborating on renewables and Mubadala investing in biofuels.
Real estate and technology attracted the most significant investments, with GIC planning to invest 1.5 billion euros in rental housing in Spain and Mubadala continuing to invest in homes for the elderly in the country. In addition, human resources technology company Factorial achieved a unicorn valuation with a $120-million dollar Series C round investment led by Atomico and with participation from GIC, among others.
These events show a significant growth in sovereign fund activity in Spain, supported by investment in several industries and the creation of new funds, such as the Co-investment Fund (Fondo de Coinversión, FOCO) and the Social Impact Fund (Fondo de Impacto Social, FIS), launched by COFIDES, which seek to attract foreign investment and promote energy transition and social impact in the country. These initiatives support the vision of strengthening the Spanish economy and moving towards a more sustainable future.
You can download the 2023 Sovereign Wealth Funds Report here.
About ICEX-Invest in Spain
ICEX's Invest in Spain Executive Directorate is responsible for promoting, attracting and encouraging foreign investment in Spain, as well as reinvestment by foreign companies already established in the country. It also works in two main areas: promoting Spain as a global centre for international business and investment, and improving the business climate in collaboration with other ministerial departments, business associations and companies based in Spain.
About IE University
IE University offers a technology-based learning ecosystem for leaders who make a difference in the world through innovation, global vision, an entrepreneurial mindset and a humanities-based approach. IE's faculty of more than 500 professors teach bachelor's, master's, doctoral and executive education programmes to students from 140 countries.
About the Centre for the Governance of Change (CGC)
The Centre for the Governance of Change (CGC) is an applied research educational institution based at IE University that studies the political, economic and social implications of the current technological revolution and proposes solutions to overcome its unintended effects.
Report methodology
The report analyses the direct investment operations of 100 sovereign funds worldwide between January 2022 and March 2023. It focuses on transactions targeting private companies, including venture capital rounds and projects, and acquisitions of significant shareholdings in listed companies. Changes in the valuation of sovereign fund portfolio holdings in listed companies and allocations to external fund managers are not monitored. The report uses primary sources (information from the websites, press releases, regulators' reports of sovereign funds) and secondary sources (industry databases such as Bloomberg, Crunchbase; local and regional media and social media) to assess each deal.
Caption (from left to right):
Jaime de Aguinaga, Vice Provost for Strategy and Development at IE University
Irene Blázquez, Director of the Center for the Governance of Change, IE University
Javier Capapé, Sovereign Wealth Research, Center for the Governance of Change, IE University
Xiana Méndez, Spanish Secretary of State for Trade
Isabela del Alcázar, Global Head of Sustainability, IE University
Elisa García Grande, Executive Director of ICEX-Invest in Spain
Alberto Sanz, Director of Financing and Investor Relations, ICEX-Invest in Spain
