Sovereign Wealth Funds Real Estate Investments Plunge in the First Half of 2014

LONDON - Nov. 5, 2014 - PRLog -- London, November 3, 2014 — Sovereign wealth fund investments in real estate properties fell 43 percent in the first six months of 2014, closing deals that totaled just $5.9 billion compared to $10.4 billion in the comparable 2013 period, according to the 2014 first half report by Institutional Investor’s Sovereign Wealth Center (http://www.sovereignwealthcenter.com/home.html).

The sharp decline follows years of increasing property (http://www.sovereignwealthcenter.com/analysis/real-estate-and-infrastructure.html) purchases, es

pecially high profile commercial developments like office buildings in premiere financial centers including London, New York, and Paris, which have traditionally formed the core of sovereign wealth funds’ real estate (http://www.sovereignwealthcenter.com/analysis/real-estate-and-infrastructure.html) portfolios.

One factor driving the pull back in real estate acquisitions has been increased competition from rival investors like insurers and pension funds, which are driving prices higher, according to Victoria Barbary (https://twitter.com/EMInvestment), director of the Sovereign Wealth Center (https://www.linkedin.com/profile/view?id=53039542&trk...).  Such institutions have turned increasingly to property as a replacement for high-quality bonds, which long provided steady income for sovereign wealth funds but now trade at historically low yields.

“Sophisticated sovereign wealth funds are sensitive to valuations, and today’s top office properties are being bid into the stratosphere,” says Dr. Barbary. “That’s driven down the yields they can generate.”

Some sovereign wealth funds have shifted their focus away from commercial properties to retail and logistics complexes like warehouses,  many of them geographically distant from high-priced financial centers. Funds have also looked to the residential sector, which is generally considered to be less stable.

The full Sovereign Wealth Fund report is available here (http://www.sovereignwealthcenter.com/quarterly-reports.html)

Media Relations Contact:

Esther Lopez, +44-20-7779-8223, elopez@sovereignwealthcenter.com (mailto:esther.lopez@euromoneyplc.com)