Sovereign funds rethink strategies after shock of redemptions

London

HAVING gone from bumper cash inflows to redemptions in just two years, many sovereign wealth funds (SWFs) have been forced to shake up their investment strategies to embrace both super-liquid safe assets with more esoteric illiquid plays to bolster returns.

If the price of retaining easy-to-sell assets to meet sudden government cash calls is near-zero yields in cash deposits or Western government debt, then the US$6.5 trillion sovereign fund sector will have to claw back returns by simultaneously moving deeper into riskier, less liquid territory.