Largest sovereign funds suffer $67 billion paper loss from stock market rout

By Tom Arnold

LONDON (Reuters) – The world’s largest sovereign wealth funds have made around $67 billion in losses so far this year as the fallout from the coronavirus has buffeted their major holdings.

A significant chunk of that, about $40 billion, stemmed from stakes held by a subsidiary of China Investment Corporation in Chinese financial institutions such as China Construction Bank <601939.SS>, Industrial and Commercial Bank of China <601398.SS>, Bank of China <601988.SS> and Agricultural Bank of China <601288.SS>, according to calculations from Javier Capape, director of sovereign wealth research at the IE Center for the Governance of Change.

He analysed data from 15 different funds where the initial investment was more than $1 billion to estimate the paper losses.

“Some of the big stakes were taken during the global financial crisis and those stakes in European banks like Barclays and Credit Suisse have been suffering,” he said.

Qatar Investment Authority (QIA) bought into Credit Suisse in 2008 and now holds a 5.21% stake, while Norway’s fund owns 4.98%, with QIA also holding 5.87% of Barclays, according to Refinitiv data. Singapore’s Temasek Holdings holds a 16% share of Standard Chartered , having made an initial investment before the financial crisis in 2006.

Stocks in all three banks are down between 39% and 49% year to date.

The rout comes as oil-based funds have been reeling from a crash in prices of the commodity that generates funding in their home economies.

Gulf sovereign wealth funds could see their assets decline by $296 billion by the end of this year, the Institute of International Finance estimated last month, with the lion’s share of that from stock market losses and the remainder from drawdowns taken by cash-squeezed governments.

Still, some funds been on the lookout for deals. Saudi Arabia’s Public Investment Fund (PIF) has accumulated stakes in four European oil companies: Royal Dutch Shell , France’s Total , Norway’s Equinor and Italy’s Eni , as well as an 8.2% stake in cruise operator Carnival Corp .

The investments that appear to have paid off during the current lockdown of large swathes of the global economy have been those within warehousing and logistics, Capape noted.

“Many of the warehouses around the world and in particular in Europe are owned by sovereign wealth funds and the push into e-commerce has been underlined with this crisis,” he noted. “A lot of startups doing delivery either foods or others are controlled by sovereign funds like Uber , Grab or Didi Chuxing.”

PIF owned 4.27% of Uber, the latest Refinitiv data from the end of December showed. It has also allocated $45 billion to SoftBank’s $100 billion Vision Fund, another Uber shareholder.

(Reporting by Tom Arnold; editing by Jonathan Oatis)