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May 31, 2015

Companies plan to boost SWF targeting

Norges Bank and Government of Singapore were most visited in 2014

Twenty-eight percent of companies globally say they plan to increase their focus on sovereign wealth funds (SWFs) this year, according to the latest research from IR Magazine.

The number looking to boost SWF targeting is at least 11 percentage points higher than those looking to increase their focus on ESG/SRI portfolios (17 percent), private banking portfolios (17 percent), family offices (15 percent) or hedge funds (12 percent). Just 2 percent of IROs state an intention to decrease SWF shareholder targeting, compared with a high of 11 percent for hedge funds.

Asian IROs are more likely than counterparts elsewhere to increase their focus on SWFs: 39 percent say they plan to increase targeting of these funds, compared with 27 percent in Europe and 21 percent in North America.

At the cap size level, 23 percent of IR professionals at both small and mid-cap companies say they plan to increase their focus on SWFs, climbing to 34 percent and 35 percent at large and mega-cap companies, respectively.

Meeting big money

Globally, almost half of companies (48 percent) met with Norges Bank Investment Management (Norway) last year, with the Government of Singapore Investment Corporation (GSIC) not far behind at 41 percent. Abu Dhabi Investment Authority (Abu Dhabi) was the third-most popular SWF, at 29 percent. But a third of companies globally say they did not meet with any SWFs during 2014.

Regionally, the numbers again show that SWF targeting is least common at North American firms, where almost half (47 percent) met with no SWFs last year. Of the North American companies that did meet with these funds, however, the global trend is largely followed, with Norway the most popular destination, followed by GSIC.

In Europe, 27 percent of companies did not meet with any SWFs in 2014, with Norway, GSIC and Abu Dhabi proving most popular among those that did.

More than 90 percent of Asian respondents met with an SWF last year. Norway remains the most popular fund, followed by Temasek Holdings and Abu Dhabi, though 38 percent of Asian companies also met with China Investment Corporation – far more than the global average of 19 percent for that fund.

Interestingly, of the two Singaporean funds, Temasek is far more popular with Asian companies (52 percent of respondents visited the fund last year compared with the 17 percent that visited GSIC). The reverse is true when it comes to companies from outside the region: in Europe, 46 percent of companies visited GSIC last year, compared with 29 percent that had meetings with Temasek. In North America, 32 percent of firms saw GSIC, while less than half that (15 percent) visited Temasek.

At market cap level, the number of companies that failed to meet with any SWFs over the past year starts at a high of 62 percent for small-cap companies, dropping dramatically as cap size increases: 36 percent of mid-cap companies met with no SWFs in 2014, 11 percent of large caps and just 4 percent of mega-cap companies.

While Norway remains the most popular SWF across each cap size, the percentage of companies actually gaining access to the fund is vastly different. Three quarters of mega-cap respondents met with Norway last year (the same number as met with GSIC) while only 18 percent of small-cap companies successfully met with the Norwegian fund and 15 percent with GSIC.

The importance of SWFs

From the numbers that met with SWFs in 2014 or that are looking to increase their focus on these funds over the coming year, Asian IROs see SWF targeting as more important than those in other regions, while North Americans see the funds as less important.

When asked to rank the importance of targeting different investor types from zero to 10, respondents rank SWFs on top globally at 5.6 when compared with hedge funds, ESG/SRI portfolios, private banking portfolios and family offices.

SWFs are seen as the most important of the five investor types across each region, despite North American IROs ranking them at 4.4; Asians give the funds far more weight at 7.5 and European sentiment sits between the two at 6.

Among the different cap sizes, the importance of targeting SWFs largely correlates to the numbers that have been meeting the funds over 2014 and plan to further increase their focus in the coming year.

For this question, the smaller companies were split into micro-caps (less than $100 mn market cap) and small caps. Micro-cap companies rate the targeting of SWFs as least important (3.6), while small caps give SWF targeting an importance of 4.8 out of 10.

Only at these cap sizes is SWF investment not seen as the most important of the five categories. Small-cap IROs see the targeting of hedge funds, private banking portfolios and family offices as more important than SWFs, with only ESG/SRI portfolios rated lower, while micro-cap companies rate all of these higher than SWFs.

Views on targeting SWFs returns to follow the global trend at mid, large and mega-caps, where these funds are seen as the most important of the five investor types, hitting a high of 7.2 at mega-cap companies.

Garnet Roach

An award-winning journalist, Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of...