BCG & Università Bocconi Sovereign Wealth Funds Newsletter

Markus Massi Alessandro Scortecci Bernardo Bortolotti

Unsurprisingly, the global slowdown of economic activity and the mounting geopolitical risks took a heavy toll on SWFs’ investment activity of the last semester. With deal values down 22% on a year-on-year basis, 2019 will most likely record a historical low in terms of SWF activity. Indeed, the oil price rally came to an end, reverting the positive trend observed since the last oil shock of late 2015, and approaching the consensus equilibrium price of $60 per barrel. The US-China dispute is causing a blow to the economic outlook of exporting nations, slowing down the accumulation of trade surplus which is one of the engines of SWF growth. Overall, SWF has less money to spend, have become more prudent in their investments as they stand ready to cover the budget shortfalls of their sponsoring governments. On the supply side, Brexit, the lackluster growth in the Eurozone, political uncertainty in the US, inflated asset prices in private markets have curbed the appeal of the main target countries and sectors of choice of global SWFs. None of these issues will be solved anytime soon, so we expect that SWF activity will remain subdued in the short and medium-term.

Principal Investors and Private Equity