Sovereign Wealth Funds: How India replaced China in terms of investments in the private sector?
As per the data released by Global SWF, India has replaced China as the most sought after destination for global Sovereign Wealth Funds investments in the private sector, which is a sign for the country's growing attraction for the investors.
Credit: Global SWF
In 2020, a record $14.8 billion is invested in India-- three times than the investment in China ($4.5 billion). The gap between the two countries in terms of investments widened this year, yet the trend started in the year 2019.
In 2019, Sovereign Wealth Funds invested $10.1 billion in India and $6.4 billion in China.
What are Sovereign Wealth Funds?
Sovereign Wealth Funds or the Social Wealth Funds are the state-owned investment funds comprising of the money generated by the government. The state-owned natural resource revenues, trade surplus, bank reserves, and so forth are the sources of Sovereign Wealth Funds.
1- Some countries have Sovereign Wealth Funds similar to venture capital for the private sector.
2- Global SWF keeps a track of over 400 Sovereign Wealth Funds.
Types of Sovereign Wealth Funds:
Sovereign Wealth Funds can be categorised as:
1- Stabilization funds
2- Savings or future generation funds
3- Public benefit pension reserve funds
4- Reserve investment funds
5- Strategic Development Sovereign Wealth Funds (SDSWF)
6- Funds targeting specific industries (possibly emerging or distressed)
7-Foreign currency reserve assets. (Some classifications may not consider these funds as SWFs.)
Top 5 largest SWFs by assets as of August 2020:
|Sovereign Wealth Funds||Assets|
|Norway Government Pension Fund Global||$1,073,590,000,000|
|China Investment Corporation||$940,604,000,000|
|Abu Dhabi Investment Authority||$579,621,120,000|
|Kuwait Investment Authority||$533,650,000,000|
|Hong Kong Monetary Authority Investment Portfolio||$528,054,000,000|
Why the gap between India and China widened?
The gap between India and China widened due to the uncertainties due to the US-China trade tensions. Despite the ongoing COVID-19 pandemic, India is now a preferred investment destination over China.
Which Sovereign Wealth Funds have invested in India?
As per the data released by VCCEdge in the year 2020, Abu Dhabi Investment Authority (AIDA), Public Investment Fund (PIF), Mubadala Investment Company, Kuwait Investment Authority and Investment Corporation of Dubai and Qatar Investment Authority together put in $7.38 billion in 14 deals in India-- more than 20% of all the private equity investments in India.
The above-mentioned Sovereign Wealth Funds have invested hugely in India but a 30% drop is noticed in the case of Singapore's foreign funds including Temasek and GIC. In 2019, they had invested $2.1 billion in India while this year they have only invested $1.6 billion in 16 deals.