Sovereign wealth funds hire external asset managers for equity investments, meaning the extent of their foreign holdings tends to be hidden
Sovereign wealth funds' combined shareholdings are likely to be far bigger than previously thought, running to an average of at least 6-7 percent for Europe's largest listed companies, according to a study.
Some Gulf-based government funds are likely to own four times as many European shares as companies' management believe, the study by Nasdaq Corporate Solutions also found.
The study tracked share ownership in 20 major European companies from five countries and different sectors. The group provides analysis of shareholder and investor activity including on the $6.5 trillion sovereign wealth sector.
The report notes that because the funds, especially Gulf-based ones, hire external asset managers for equity investments, the extent of their foreign holdings tends to be hidden.
"SWFs own way more than any public data would show. You may be looking at SWFs owning 6-7 percent comfortably across the larger European companies. The perception is of less," Scott Young, associate director for advisory services at Nasdaq and one of the report's authors, said.
That excludes well-publicised holdings such as Qatar's stake in Volkswagen. Adding these would easily take sovereign ownership levels to 8-9 percent, Young said.
Correctly identifying ownership is important for companies because of implications for shareholder voting and taxation, Young said, noting that a firm with majority overseas-domiciled shareholders could find itself liable to changes in tax structures.
The study, released to clients last week, aggregates data from reports commissioned by companies, which permitted Nasdaq to access data from custodian banks on the underlying beneficial owners of their shares.
Norway's $850 billion fund reports its investments in detail, while China's SAFE manages a large portion of its European investments in-house.
But the Gulf-based funds in Saudi Arabia, Abu Dhabi and Kuwait are not only opaque, they also outsource 75-100 percent of their European equity investing to third parties that subsequently show up as company shareholders.
As a result, Gulf funds typically have far more invested than a company is usually aware of, the report said.
It cited the example of one unnamed company which knew of just a quarter of the actual holding in it owned by the Abu Dhabi Investment Authority (ADIA).
Young said that while the Norwegian and Chinese funds owned up to 3 percent and 1.5 percent respectively in the 20 big European firms he analysed, the study showed Saudi Arabia's SAMA likely held up to 0.75 percent while ADIA and the Kuwait Investment Authority owned around 0.3 percent each.
While the data pertains only to 20 big companies in five countries, he said the trend was so clear that "it can be applied across the largest European markets, even where you don't have disclosure laws in place."