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Wed 18 Nov 2009 01:58 PM

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SWF global funds set to hit $8tn by 2015 - study

New report by Ernst & Young says funds set to enter period of 'sustained growth'.

Total funds under management by sovereign wealth funds (SWF) globally could climb to $8 trillion by 2015 a new report by Ernst & Young predicted on Wednesday.

Although this is down on the $10 trillion plus that was predicted prior to the global recession, it will still ensure that SWFs will be powerful players in the capital markets in the years to come, the report by the Ernst & Young ITEM Club added.

It said that despite the impact of the last 12 months, SWFs were poised to enter another period of sustained and impressive growth.

Francis Small, global sovereign wealth fund Leader at Ernst & Young said: “Although the lessons of the financial crisis will lead many countries to build an even larger cushion of reserves, the desire to diversify and invest part of these means that the rise of the sovereign wealth fund will resume.”

The report added that while funds managed by SWFs may have fallen in value in the last 12 months to some $3-3.5 trillion, they "remained in a far stronger position than the private equity and hedge funds sectors that have suffered disproportionately far more in the recession and are also facing the threat of potential tighter global regulation".

ITEM forecast that, assuming growth in assets of some 12-15 percent per annum, total funds under management by SWFs could climb to $8 trillion by 2015.

The report said the substantial increase in the price of oil and other commodities was the main driver behind the recent recovery in the strength of the SWFs and it saw "little chance of that dynamic changing in the medium to long term".

Chris Portman, economic advisor to the Ernst & Young ITEM Club said: “Commodity-based funds account for 65 percent of total SWF managed funds, while those in Asia and the Middle East account for 80 percent of the total. Rising surpluses in these two regions as well as other oil producers, including Russia, despite its current problems, will boost funds available for SWFs to invest.”

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