Global Public Investor 2016
OMFIF Report – Press Release
29 June 2016
Gold is reassuming a more central monetary role as a favoured investment for central banks due to low and negative interest rates, increased perception of country risk, and enhanced geopolitical uncertainty, according to the 2016 OMFIF survey of Global Public Investors.
The 2016 edition of Global Public Investor highlights gold’s renaissance as a traditional investment haven, with central banks’ purchases in the second half of 2015 accelerating to the highest-ever semi-annual rate, a result of purchases by institutions led by China, Russia and Kazakhstan, and a drying up of sales by developed country central banks.
The third annual edition of Global Public Investor – which reports on asset management performance by central banks, sovereign funds and public pension funds – shows that, though central banks accelerated bullion buying last year, the falling price of gold throughout the year meant it made a negative contribution to overall GPI assets under management. The value of bullion in official assets worldwide fell to $1.12tn despite an increase in total bullion holdings last year to 32,734 tonnes by end-December 2015, the highest level since 2002.
Gold prices have risen throughout 2016, with the latest data from end-April showing that central bank holdings stood at 32,805 tonnes and were worth $1.36tn, a 22% increase in value since the start of the year. On the morning of 29 June the gold price was $1,321.17 an ounce, following its peak of $1,324.55 on 26 June – its highest price level since March 2014. Demand has been driven by international financial uncertainty after the British referendum result, and expectations that US interest rates will remain at their present low level until the end of the year.
In the febrile atmosphere on world markets, gold is ‘coming into its own’ as an asset that is not issued by any state or government, at a time when asset managers around the world are querying whether yields are sufficient to cover country risk, the OMFIF report says.
Total assets under management of the 500 largest Global Public Investors fell 2.9% in 2015 to $28.99tn, down $855bn on the slightly restated 2014 figure, with the decline driven primarily by central banks. Among other highlights, GPI 2016 documents the renminbi’s fresh popularity as a reserve asset – part of a gradual move towards an international multicurrency reserve system – as well as the growth in sustainable investment as public institutions step up their support of a low-carbon economy.
Gold has become increasingly attractive as an alternative to reserve currencies, with the euro, yen and Swiss franc all weakening against the dollar in 2015. Emerging market economies, while generally reducing their overall assets last year, have been keen to diversify away from dollar assets.
China is responsible for a large portion of the 2015 increase, having updated its gold holdings in July for the first time in six years. At end-December China’s gold reserves stood at 1,762 tonnes, making it the world’s sixth-largest monetary gold holder.
The report covers assets held by the largest 500 public sector institutions in 181 countries. Central bank assets last year fell 6.1%, with low oil prices, last year’s falling gold price and rising capital outflows from emerging market economies all contributing to the fall. Public pension fund assets fell 0.6% while those of sovereign funds grew at their slowest pace in at least a decade, 0.04%.
Global Public Investor 2016 features in-depth coverage of the investment approaches of public investors across Africa, Asia Pacific, Europe, the Middle East, North America, Latin America and the Caribbean. It provides an accessible guide to the overarching issues that link these different bodies.
Top 500 ranking table
The publication’s centrepiece – the Top 500 ranking table – encompasses a full range of Global Public Investors across the globe and is based on the assets under management of central banks, sovereign funds and public pension funds.
The Top 500 lists public sector asset managers with assets over $200m and provides maps and charts breaking down the distribution of funds. The ranking compares all public investor types to provide a complete picture of this growing and influential investment community.
The Top 10 investors show little change from last year, with continuing dominance by Asian institutions. The People’s Bank of China leads the 2016 GPI Ranking, despite a 12.6% fall in assets under management, with $3.41tn at end-2015. Within the Top 10 the biggest riser was the China Investment Corporation, which rose to No.5 with AUM rising 14.4%. This move displaced the Saudi Arabian Monetary Agency, which fell to No.7 and registered the greatest losses in the Top 10 with a 15.8% decline in AUM.
Under the revised methodology introduced this year, there is one new entry – US Thrift – displacing Cassa Depositi e Prestiti at No.10 in the table. (Had the methodology been applied last year, US Thrift would already have been at No.10). There have been rapid rises and falls in other sections of the table, with institutions from Ukraine, Macau, Vanuatu, Pakistan and Namibia making significant gains, and those from Lithuania, Liberia, Azerbaijan, Suriname and Kazakhstan registering declines.
Further GPI 2016 highlights:
• Adrian Orr, New Zealand Superannuation Fund, stresses the importance for global financial institutions to contextualise the meaning and appropriateness of financial risks.
• Ma Jun, People’s Bank of China, discusses the PBoC’s role in developing China’s green bond market, potentially one of the largest in the world.
• Akinwumi Adesina, African Development Bank, assesses Africa’s energy potential, specifically regarding renewable energy.
• Norihiro Takahashi, Government Pension Investment Fund, discusses Japan’s strategy and approach.
• Lesetja Kganyago, South African Reserve Bank, writes about emerging market risks and the challenges faced by African public investors.
• Anne Simpson, California Public Employees’ Retirement system, explains the importance of building a low-carbon future.
• Jin Liqun, Asian Infrastructure Investment Bank, writes about China’s growing role in the world economy.
Global Public Investor 2016 contains contributions from well-known public sector asset management groups. This makes it a practical and authoritative guide relevant to the Global Public Investor community itself, as well as private sector market participants. Additional contributions from specialist representatives of private sector financial groups support the publication.
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