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Compared with the 2014 inaugural edition of Global Public Investor, this year’s publication has made some extensive advances, providing an illuminating description of institutions that form the bedrock of the world economy.
We extend the ranking table to 500 institutions with assets under management of $29.7tn, from 181 countries, equivalent to 40% of world GDP. Of these, 63 are from Africa, 103 from Asia Pacific, 164 from Europe, 42 from Latin America and the Caribbean, 33 from the Middle East, and 95 from North America. The GPI list includes 164 central banks, 89 sovereign funds and 247 public pension funds.
We have witnessed an intriguing rebalancing of the make-up of the GPI community. Central banks’ share of assets has fallen to $13.0tn, or 43.9% of the total, partly reflecting the effect of the dollar’s rise on non-dollar-denominated reserves. The shares of sovereign funds and public pension funds have risen to $6.7tn (22.5% of the total) and $10.0tn (33.6%) respectively.
Although the Top 10 investors show little change on last year, there have been rapid rises and falls in other sections of the table, with institutions from Pakistan, Argentina, Indonesia and Vietnam moving up in the rankings and representatives of Nigeria, Ukraine, Russia and Ireland falling.
We highlight a number of other features that already played a role in last year’s publication, including the rise of the renminbi, central banks’ move into public equities and corporate bonds, and the ever-growing potential for co-investment and partnerships.
Central banks’ renewed interest in gold, with the large holders in industrialised countries no longer selling and important emerging market economies starting to buy bullion, is a notable feature of GPI 2015, including an analysis of Chinese gold policy. Official interest in the renminbi is highlighted by contributions from authoritative figures from central banks and monetary agencies around the world.
The main factor generating change in investors’ behaviour – the fall in interest rates in developed markets, induced by low inflation and only sluggish growth – was already apparent last year, but has now become still more marked, with rates at negative levels in many parts of Europe. This has prompted a further quest for ‘real economy’ assets.
There is a widespread view that asset price bubbles have been building up in sections of the capital markets as a result of central banks’ quantitative easing operations, particularly in Europe where the European Central Bank’s large-scale bond purchases started only as late as March 2015.
Real estate and infrastructure investment are much in vogue. The risk that bubbles may be building up in these sectors is just one of the potential headaches facing GPIs in what will be another busy and challenging year.