The fifth edition of Global Public Investor, a comprehensive survey of 750 central banks and pension and sovereign funds prepared by the London-based Official Monetary Institutions Forum (OMFIF), charts a 7.5% asset rise in 2017 to over $35 trillion versus flat performance the previous year, with only the Middle East down. Half of holdings are in Europe and North America, while Asia led by China has 40% of the total. Equity rallies and “hard” real estate and infrastructure diversification supported the upswing, as gold reserves reached a two-decade high with China’s and Russia’s central banks controlling the bulk. Pension funds are the biggest managers with a $15 trillion stash, and in the Euro area Greece and the Baltics increased portfolios in contrast with the Gulf downturns in Qatar and Saudi Arabia, which both lost $50 billion. Turkey and Kazakhstan were also big gold buyers as instruments included retail and ETF exposure. Environmental, social and governance principles are routinely incorporated, with three-quarters polled requiring outside advisers to apply them and the same percentage already with green and sustainable investments in portfolios. Several funds plan complete fossil fuel divestment over time, and include the $150 billion green bond market in the fixed income category. 20% of respondent will lift renimbi weightings in the near term although only $125 billion is currently positioned, particularly to match the project envelope under the multi-trillion dollar Belt and Road program. Gender balance still lags among the universe at about a 20% average for women in boards and top executives, with Africa the best represented region. Chinese funds accounted for one-fifth of asset growth with a $520 billion gain, while Kuwait’s Investment Authority shrank 10% at the bottom of the pack. Government bonds take over one-third of allocation, followed by corporate debt and stocks, with illiquid property rising in popularity at a10% slice in a cross-section surveyed by State Street research. The compilation notes that Brazil is the largest emerging world debtor in a reversal of status from the immediate post-2008 crisis period, and that Islamic sukuk issuance is around $500 billion outstanding with geographies extending into conventional European centers.
Contributors to the volume touted African prospects as a remaining unexplored high-growth tier, and new structured products are available to offer institutions diversified passive exposure in keeping with conservative mandates. However the lure must be weighed against alarming reports of sovereign debt commercial distress a decade after sweeping relief under the HIPC initiative granted mainly by official creditors. According to a May analysis by S&P ratings it was only a “partial success” since general government stocks have tripled as a fraction to 55% of GDP since 2010 along with interest at 11% of revenue. It emphasized that net debt improved from pre-HIPC levels, while the service burden is currently worse and “especially high” in Ghana, Uganda and Zambia. Congo-Brazzaville and Mozambique have already defaulted, and ratings downgrades will continue across the complex around the prevailing “B” speculative mark. Zambia’s negotiations on a fresh IMF arrangement have stalled on hidden liabilities spooking investors who did not pay much attention previously to recordkeeping which lagged along with commodity export capacity.