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UPDATE 1-Sovereign wealth funds pull $16.3 billion from market strategies in Q4

Tom Arnold
·2-min read

(Adds IFSWF comment)

By Tom Arnold

LONDON, Feb 23 (Reuters) - Sovereign wealth funds pulled$16.3 billion from public market investment strategies, largelyequities, in the fourth quarter, the most in almost four years,driven largely by redemptions, according to data and researchfirm eVestment.

The move followed a year in which some funds, includingthose from Norway, Azerbaijan and Kazakhstan, plannedwithdrawals to help their governments cope with the coronaviruscrisis.

Net outflows from equity strategies managed by third-partyfund managers reached $18.5 billion in the final three months of2020, eVestment data showed.

Global equity markets closed 2020 around record highs aftera stimulus-charged rebound helped stocks surge more than 60%from their March lows.

Across all asset classes, net outflows from long-onlymanagers handling sovereign wealth investments were $16.3billion, the largest amount since the first quarter of 2017, thedata showed.

But the significance of the data was disputed by theInternational Forum of Sovereign Wealth Funds (IFSWF).

"According to our research, these figures don't appear to beindicative of the behaviour of our members that invest in globalmarkets," said Victoria Barbary, director of strategy andcommunications at the IFSWF. "For most major sovereign wealthfunds, pooled vehicles are not the main vehicles for theirinvestment, with the exception of ETFs."

The net outflows identified within eVestment's data weredriven largely by redemptions from passive equities, notedeVestment's senior research analyst Mike Cho.There were some "isolated bright spots" in the data, withpositive net flows for active global equity strategies andactive emerging market large capitalisation equity funds, saidCho.

The latter drew net inflows of $1.4 billion, the most in atleast several years.

Some sovereign funds also poured some of their investmentsinto fixed income.

Across all fixed income classes, strategies sucked in a net$2.1 billion, the most since the first quarter of 2018, the datashowed.

For the second consecutive quarter, U.S. fixed income drewnet inflows, adding $1.3 billion during the fourth quarter.

Also for the second quarter running, sovereign funds movedinto U.S. mortgage-backed securities and U.S. short durationinstruments, while they also snapped up U.S. enhanced cashmanagement strategies.

Hopes of an economic boost provided by a huge fiscalstimulus under the new U.S. administration of President JoeBiden have tempted investors into bond funds in recent months.

(Reporting by Tom Arnold; Editing by Alex Richardson)