SWF 3.0: How sovereign wealth funds navigated COVID-19 and changed forever

Abstract

Sovereign wealth funds (SWFs) have been significantly and uniquely affected by the COVID-19 pandemic. From March 2020 to December 2021, governments around the world withdrew over US$ 211 billion from their books and “invited” them to bailout different sectors and businesses, most notably, state-owned airlines. However, some SWFs were also able to pursue opportunities overseas, and most grew their assets under management tremendously due to the stock market rally that followed the market and oil bust of the beginning of 2020. However, state investors are not expecting markets to stay bullish forever, and have been building an adequate level of liquidity in their books and of resilience as an organization for the next market shock, which may as well come with ESG. One can argue that SWFs have indeed entered a new phase “SWF 3.0” characterized by increasing size, influence, maturity, and sophistication; by an interest in different asset classes, regions, and industries; and by a focus on sustainability, collaboration, and long-term survival.