Investors concerned over influx of sovereign funds
September 10, 2014 8:28 am
Private investors are worried that the massive influx of high yield hunting sovereign funds could threaten global markets.
With central banks all over the world cutting interest rates to boost growth and government bonds trading at their cheapest prices, managers of sovereign funds have started to get into assets such as real estate and stock markets as the venue to grow bank reserves and pension funds. As a result, insiders claim that market prices are starting to turn away from their actual financial value and towards reflecting political priorities. Additionally, the possibility of inflating price bubbles, which central banks are aiming to prevent, is increasing in likelihood.
Around the world, sovereign investors manage assets that are equal to 40% of the global economy at $29.1 trillion. Data from the Official Monetary Financial Institutions Forum (OMFIF) shows that these assets are held primarily by 157 central banks which are followed by 156 pension funds, and 87 sovereign wealth funds.
Norway, which holds the world’s largest sovereign fund worth $890 billion thanks to its oil reserves, currently owns 1.3% of all shares globally and is looking towards allocating more funds towards equities and infrastructure. Similarly, 32% of the $575 billion held by China Investment Corporation is now distributed among public equities alongside a proportionate amount in long term real estate and private equity.
In 2008, the International Monetary Fund gathered a group of state backed funds and drew up a set of practices aimed towards more disclosure and in making the process more transparent.
The material has been provided by InstaForex Company – www.instaforex.com
Private investors are worried that the massive influx of high yield hunting sovereign funds could threaten global markets.
With central banks all over the world cutting interest rates to boost growth and government bonds trading at their cheapest prices, managers of sovereign funds have started to get into assets such as real estate and stock markets as the venue to grow bank reserves and pension funds. As a result, insiders claim that market prices are starting to turn away from their actual financial value and towards reflecting political priorities. Additionally, the possibility of inflating price bubbles, which central banks are aiming to prevent, is increasing in likelihood.
Around the world, sovereign investors manage assets that are equal to 40% of the global economy at $29.1 trillion. Data from the Official Monetary Financial Institutions Forum (OMFIF) shows that these assets are held primarily by 157 central banks which are followed by 156 pension funds, and 87 sovereign wealth funds.
Norway, which holds the world’s largest sovereign fund worth $890 billion thanks to its oil reserves, currently owns 1.3% of all shares globally and is looking towards allocating more funds towards equities and infrastructure. Similarly, 32% of the $575 billion held by China Investment Corporation is now distributed among public equities alongside a proportionate amount in long term real estate and private equity.
In 2008, the International Monetary Fund gathered a group of state backed funds and drew up a set of practices aimed towards more disclosure and in making the process more transparent.
The material has been provided by InstaForex Company – www.instaforex.com
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