SWFs face PE deployment delays

Larger distributions from existing fund investments have increased delays, according to research from Invesco.

Sovereign wealth funds are waiting longer for their private equity capital to be invested as distributions outweigh outflows, according to research by investment management firm Invesco.

The predicted time taken for allocated capital to be called climbed to 3.2 years in 2018, up from 2.4 years in 2017, the Invesco Global Sovereign Asset Management Study 2018 found. Respondents comprised 47 sovereign wealth funds with private equity programmes.

The delays – historically driven by access to dealflow – have been aggravated in recent years by karger distributions from existing fund investments, which have outweighed capital calls, the report noted. Healthy distributions are partially due to overheated valuations generating high exit multiples and discouraging new acquisitions.

The issue has left many sovereigns underweight in private markets, Invesco noted. Some have resorted to opening offices with local staff in target markets and international financial centres to source assets directly. The $828 billion Abu Dhabi Investment Authority and the $941 billion China Investment Corporation are prime examples, having established offices in Hong Kong and New York respectively over the past two years.