Economic Recovery and Equity Rally Swell Public Sector Assets by $2.5tn

LONDON, May 23, 2018

The global economic recovery and upturn in equity markets boosted central bank, sovereign fund and public pension fund assets by $2.5tn in 2017 according to Global Public Investor, published annually by OMFIF, the London and Singapore-based think tank.

The $2.5tn surge, representing a 7.3% rise from 2016 to $36.2tn, is the largest such increase in the five years since OMFIF began tracking the assets under management of the 750 institutions covered in GPI 2018. GPI assets grew across all types and all continents, with one exception: there was a $32bn decline in Middle East central bank holdings.

The largest percentage increase in assets was among European public investors, whose holdings rose by $7.6tn, 12% higher than the previous year. Central banks led this performance. The Swiss National Bank added $133bn, bringing its total assets to $812bn, 20% higher than the year before. As with other investors, the SNB profited greatly from large gains in its foreign equity holdings.

Asia was the second-best performing region after Europe, as assets grew by $950bn. With $13.7tn in holdings, it remains the world’s most important GPI hub and is home to the world’s three largest public investors: the People’s Bank of China, Japan’s Government Pension Investment Fund and the Bank of Japan.

Central banks around the world benefited from the rise in the price of gold, reflecting the precious metal’s significance in their reserves. They added more than 371 tonnes of gold during 2017, bringing total holdings to almost 31,800 tonnes, the highest level since the 1990s.

On currencies, 18% of public investors surveyed by OMFIF intend to increase their exposure to renminbi over the next 12-24 months, and none plan to decrease. This is the highest response for all currencies, which illustrates the renminbi’s growth as a critical trade and investment currency.

Institutions are also adjusting their investment strategies to reflect their commitment to responsible ownership. They are increasingly investing in sustainable assets, with 36% of public investors responding that they plan to increase their green bond investments over the next 12-24 months, with the equivalent figure at 18% for green equities.