Sovereign funds pull $4.2 billion from market strategies in Q2

·2 min read

By Tom Arnold

LONDON, Aug 18 (Reuters) - Sovereign wealth funds pulled $4.2 billion from public market investment strategies in the second quarter, driven largely by exits from stocks, data from eVestment showed.

The pullback continues the outflows seen in the first three quarters since the COVID-19 pandemic, according to the data which captures all global equity and bond strategies run by third-party fund managers.

The outflows, which follows $23.9 billion in first quarter inflows, included $3.5 billion out of equity strategies.

Stocks scaled record peaks during the second quarter and have since held near highs on signs of an economic rebound from the COVID-19 crisis.

To help their governments cope with the fallout from the pandemic, several funds, including those from Norway, Azerbaijan and Kazakhstan, last year planned withdrawals. Chile reported withdrawals of $3.5 billion from its funds in June.

"A number of the sovereign funds have stated they may still need to continue to cover specific pandemic-related expenses, so it is possible they are preparing to cover some of that or take some of the very strong rebound in U.S. equities and redeploy that into other strategies," said Rod Ringrow, head of official institutions at Invesco.

The asset manager was still seeing active interest from the sovereign community in equity investment, said Ringrow, including emerging market equities.

Equities make up one of the largest portions of investment allocations for most sovereign funds.

Of the few that disclose their movements in public equities every quarter via U.S. filings, Singapore's Temasek Holdings and Saudi Arabia's Public Investment Fund both saw their holdings grow during the second quarter, mainly due to a stocks rally, said Global SWF.

Temasek's allocations to U.S. public equities increased by a third from the previous quarter to $32.2 billion as it raised its exposure to financial services, retail and consumer services, said the industry data specialist. (Reporting by Tom Arnold Editing by Chizu Nomiyama)