Central banks lead fall in global public investors' assets in 2015
Temasek was the global public investor with the fifth largest gain in assets last year
Singapore
WEAK oil, gold and commodity prices, low growth and divergence in monetary policies led to a fall in central banks' assets in 2015, even as sovereign funds posted their slowest assets growth in more than a decade, says an annual publication of the Official Monetary and Financial Institutions Forum (OMFIF).
The 500 central banks, sovereign wealth funds and public sector pension funds ranked in the 2016 edition of Global Public Investor managed assets totalling US$28.99 trillion at the end of last year, US$854.7 billion down from the end of 2014.
This drop was mainly due to an acceleration in central bank reserve selloffs in 2015. After central bank reserves dipped for the first time in 2014 since the global financial crisis, central banks' assets shrank by a further 6.1 per cent to US$12.24 trillion last year.
Exchange rate effects from the rising dollar lowered the value of non-dollar reserves such as the euro, in particular. Low oil prices and higher capital outflows from emerging economies late last year contributed to the fall too, OMFIF said.
In line with this overall trend, the Monetary Authority of Singapore's assets fell 3.6 per cent to US$247.7 billion, slipping one rung to rank 26th globally, the GPI report showed.
The 160 central banks covered in the report also held a reduced share of 42.2 per cent of global public investors' overall assets. With a lower exposure to fixed income investments, the 86 sovereign funds ranked by GPI held a larger share of 23.2 per cent of total assets, while the share of assets held by the 254 public pension funds rose to 34.5 per cent.
Sovereign funds grew their assets by just 0.04 per cent to US$6.74 trillion, the slowest growth in a decade, but regional differences were marked. Beating the meagre overall growth rate, Asia-Pacific sovereign funds grew their assets under management (AUM) by US$49.7 billion or 2.2 per cent, while their Middle Eastern peers' assets rose US$62.8 billion, or 3 per cent.
Singapore's GIC and Temasek Holdings - the 6th and 7th largest sovereign funds on GPI's list - contributed to Asia-Pacific funds' better performance.
The GPI report said that GIC's assets grew 3.8 per cent to US$345.8 billion, though it slipped two spots to come in 21st on the overall ranking. GIC itself does not publish the size of the government funds it manages, save to say that it manages well over US$100 billion.
Two GIC deals also made the GPI's list of "illustrative deals" of 2015-2016: its April 2016 investment of US$1.23 billion to take a 19.9 per cent stake in US power distribution firm ITC Holdings Corp, and its further investment with ADIA in June 2016 into renewable energy firm Greenko, of which GIC is the majority shareholder.
Temasek Holdings, which posted the fifth largest absolute gain in assets of all global public investors last year, grew its assets by US$27 billion, or 10.4 per cent, to US$286.9 billion at end-2015. That was also the second largest gain among the sovereign funds ranked by GPI, behind China Investment Corporation's US$94 billion increase in AUM.
Temasek - which prefers to refer to itself as an investment company but is included in GPI's list as a sovereign wealth fund - rose a spot on the overall rankings to place 23rd.
The Central Provident Fund's assets rose 1.8 per cent to US$196.6 billion, and it climbed two spots to rank 31st overall. It was the ninth largest public pension fund globally.
The four Singapore institutions on the list - GIC, Temasek, MAS and CPF - made Singapore the country with the sixth highest AUM of US$1.08 trillion, 3.7 per cent of the total AUM of the top 500 that GPI covers.
Going forward, reserves growth can be expected to resume in 2017-2018, the report said.
The US Federal Reserve has been very cautious about further tightening after its rate hike at the end of last year. "However, once US interest rates approach a more normal trajectory, and after commodity prices start to recover, there is general expectation that reserves growth in emerging market economies will resume," the GPI report said.
"One important factor here is countries' needs in many parts of the world to seek higher reserves as self-insurance against market perturbations."
