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By Sujata Rao
LONDON, March 12 (Reuters) - Sovereign wealth funds (SWFs)are set to see their assets grow to $5.6 trillion by the end of2013, a study found, a sum more than double British GDP andunderscoring their status as the world's wealthiest investors.
SWFs, state-owned vehicles such as the Qatar InvestmentAuthority which manage windfall revenues for future generations,have become key global market players after the financialcrisis, spending an estimated $90 billion buying up stakes inWestern banks including Barclays Plc for instance.
Benefiting from a decade of high commodity prices and tradesurpluses generated by booming trade, their assets have swollento record highs, growing 8 percent in 2012 to $5.2 trillion andset for further growth the study by TheCityUK found.
By comparison, Britain's GDP was $2.4 trillion in 2012,according to International Monetary Fund estimates.
"SWFs should see a continuation in the inflow of capital inthe coming years as some Asian countries, particularly China,continue to build up foreign exchange reserves, and commoditydemand increases with the recovery in the global economy andgrowth in demand from emerging markets," TheCityUK said.
TheCityUK, a London-based group tracking the financialservices industry, said the assets of SWFs funded by commodityexports - a category including Gulf funds and Norway'sGovernment Pension Fund - totaled $3 trillion at the end of2012, or 58 percent of the total.
But non-commodity SWFs in countries such as China, funded bythe transfer of assets from foreign exchange reserves or budgetsurpluses and privatisations, are also growing fast.
"Non-commodity funds are capturing an increasing share ofSWFs' assets, a trend that is likely to continue," TheCityUKsaid, noting non-commodity SWF assets were twice the level offive years ago.
Asset growth is also coming from new fund launches. Angola,Western Australia and Panama launched wealth funds last year,while Bolivia, Canada and Taiwan are among those planning funds.
HOT REAL ESTATE
Apart from bank investments, SWFs are emerging as buyers ofprime real estate in Western capitals, with the China InvestmentCorporation last year snapping up Winchester House, the Londonheadquarters of Deutsche Bank for £245 million.
Another example was Gingko Tree Investment Ltd, a unit ofChina's State Administration of Foreign Exchange, which investedmore than $1.6 billion in office buildings and student housingin London and Manchester.
The Shard tower and the Chelsea Barracks are among thetrophy London properties that have received investments fromMiddle Eastern SWFs in past years, while Norway's $700 billionfund last year said it would raise real estate assets to as muchas 5 percent of its portfolio from 0.3 percent.
There were some $10 billion in real estate transactions last year, TheCityUK said, citing data from the Sovereign InvestmentLab at Bocconi University in Milan. SWFs' predilection for realestate is driven by low bond yields in some developed countriesand stock market volatility, the report said.
The report found however that overall overseas directinvestments by SWFs dropped last year.
Their foreign direct investments totaled $57 billion in2012, down more than a third on the previous year, TheCityUKsaid, citing the SWF Institute's Sovereign Wealth FundTransaction Database, which tracks transactions in the industry.
The report noted that since 2008-2009 SWFs have been cuttingback on foreign spending to help stabilise domestic financialmarkets, which were starting to be affected by the economicdownturn and falling commodity prices.
"SWFs had also faced public criticism in their countriesfollowing a string of losses on their foreign investments at theoutset of the credit crisis," the report added. "The dealtransaction sizes have been smaller in recent years as aresult."
