How COVID-19 is Affecting the World’s Sovereign Wealth Funds
Global sovereign wealth funds have been severely impacted by COVID-19. Several sovereign wealth funds have seen a dramatic drop in the wealth of their holdings.
The majority of sovereign wealth funds depend on severance taxes on mineral wealth, primarily oil and natural gas, to initially fund and add to their funds. While some funds use excess currency reserves to establish their funds, a prime example being the China Investment Corporation, they are in the minority.
The Government Pension Fund of Norway (GPFG) in the fourth quarter of 2019 saw a return on investment of 19.9% which had increased its value to $1.1 trillion. The GPFG reported a loss of 14.6% in the first quarter of 2020. This number was reported by Oslo, and reported that the GPFG had lost $110.5 billion. This number is verified by Norges Bank, which oversees the investment portfolio of the GPFG, which had listed the value of the GPFG as $955.3 billion as of April 7, 2020. Equity investments of the GPFG lost some 21.1% as of the end of the first quarter of 2020. The GPFG had a 70.8% allocation in equities worldwide as of December 31, 2019. There has been no further update as to the allocation of the GPFG as of the writing of this article.
The Alaska Permanent Fund has also reported losses. Prior to the outbreak of COVID-19, the fund’s assets were recorded as more than $64 billion. As of March 16, 2020, the valuation of the Alaska Permanent Fund was $58.7 billion. The current valuation of the Alaska Permanent Fund as of this writing has not been released by the Alaska Permanent Fund.
37% of the APF’s wealth is in public equities, 20% of the fund is in fixed-income assets, private equity, and special opportunities are listed as 13%, real estate properties are at 12%, infrastructure and income opportunities are at 8%, absolute return and asset allocation make up a further 10%. The asset allocation can be viewed at this link.
The above examples are a small segment of the sovereign wealth funds that have published their current valuations that have been affected by the COVID-19 outbreak.
Many other sovereign wealth funds have not updated their valuations since the outbreak and for that reason empirical information of the current state of sovereign wealth funds is difficult to ascertain. However, based on this small sample of sovereign wealth funds, it can be safe to assume that the world’s sovereign wealth funds have depreciated since the outbreak of COVID-19 and it is unknown how large the economic losses really are.