SINGAPORE’s GIC remained the most active state-owned investor (SOI) for the fourth year in a row in 2022, according to sovereign wealth fund (SWF) tracker Global SWF in a report released on Sunday (Jan 1).

GIC completed 72 deals worth US$40.3 billion, up 17 per cent from a year earlier. Over half the capital was invested in real estate, with a “clear bias” towards logistics, the report said.

Global SWF noted that there was a high level of activity among SWFs in 2022, with US$261.1 billion invested in 747 deals. The amount invested was 13.6 per cent more than in 2021.

For the first time, however, assets managed by the world’s SWFs and public pension funds (PPF) declined.

Global SWF estimates that assets under management (AUM) of SWFs fell 7.8 per cent to US$10.6 trillion as of end-December 2022, while the AUM of PPFs fell 5.9 per cent to US$20.8 trillion.

“The major challenge of 2022 was the simultaneous and significant (more than 10 per cent) correction of bonds and stocks, which had not happened in 50 years,” the report said.

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“The global listed benchmarks for private markets also dropped significantly, with infrastructure and private credit being the most popular refuge.”

In the infrastructure space, the report noted a 41 per cent increase in SOI investments into the transport sector – to US$34.4 billion in 2022. That figure does not include a further US$30 billion that Saudi Arabia’s Public Investment Fund is planning to invest in the nation’s latest carrier, Riyadh International Airlines.

“Regulated assets such as toll roads and utilities usually involve inflation-indexed increases in charges, which ensures a hedge against inflation – a particularly important factor at a time of heightened inflationary pressures,” the report said, adding that infrastructure operators tend to have a monopolistic position in the market, which raises the barrier to entry for potential competitors.

With declines in both stocks and bonds, Global SWF also observed increased interest and allocation of sovereign investors into hedge funds.

The average allocation of sovereign investors to hedge funds is estimated to have reached an all-time high of 2 per cent – significantly beating the previous high of 1 per cent reached in 2009.

The largest allocations were made by Abu Dhabi Investment Authority, China Investment Corporation and Kuwait Investment Authority.

Global SWF expects hedge funds to “continue to benefit from the disruption of traditional markets”.

Another major trend the report identified was the re-emergence of mega-deals, defined as investments of US$1 billion or more.

Average ticket size in 2022 increased to the highest level since 2016, and there were more than 60 such mega-deals recorded.

Temasek Holdings’ acquisition of UK-based testing company Element and GIC’s acquisition of real estate investment trust Store Capital, alongside private equity firm Oak Street, were the second and third-largest transactions made by SWFs ever. The deals were valued at US$7 billion each.

Global SWF chose Caisse de dépôt et placement du Québec (CDPQ), a Canadian pension manager, as its fund of the year. The fund reported a 7.9 per cent decline in the first half of 2022, outperforming its benchmark and the average of SOIs globally.

Global SWF also recognised CDPQ’s commitment to sustainability. In 2018, CDPQ tied its employees’ variable compensation to the achievement of climate goals. And in 2021, it set an aggressive set of objectives as it renewed its climate ambitions.