Investment Direction: Sovereign Wealth Fund Cuts Stock Investment Comprehensively

New data released on Tuesday showed that sovereign wealth funds redeemed $46 billion 400 million in assets in 2015, including large scale redemption of passive or tracking indices in developed and emerging markets.

Investment.

Last week there were reports that the external assets management outflow amounted to US $46 billion 400 million.

This week, the research company eVestment announced a detailed data.

Data show that sovereign wealth fund redemption is mainly concentrated on stocks, essentially redemption without distinction, and is withdrawn from its most liquid investment category.

Among them, the global stock investment agency redeemed more than $17 billion, withdrew $10 billion 500 million from US equity funds, and withdrew $3 billion 500 million from emerging market equity funds, with the largest capital outflow concentrated in the passive investment strategy of various investment categories.

Peter Laurelli, head of eVestment research department, said the redemption investment shows that sovereign wealth funds are fully reducing stocks and exposures, and the huge allocation in other areas can not offset this part of the redemption.

EVestment represents institutional investors collecting data from 4400 Asset Management Co.

With oil prices struggling at $40 a barrel, sovereign wealth funds and central banks such as Norway, Russia and Saudi Arabia are reducing reserves and selling assets to help offset the budget gap.

At the same time, the stock market has experienced a sharp decline this year, the US Standard & Poor's 500 index.

SPX has fallen by 5.5%, and Pan European blue chip index FTSE EUROFIRST 300.FTEU3 has fallen by about 8%.

MSCI Ming Sheng emerging stock index.

MSCIEF has fallen by 5.6%.

The Sovereign Wealth Fund (SWF) is also from the external Asset Management Co.

In the fixed income strategy, about $4 billion 100 million was withdrawn. This asset class generally did not perform well and the capital outflow accelerated in the fourth quarter of 2015.

About $2 billion 100 million was redeemed from Japanese equity funds, and $1 billion 970 million withdrew from the global fixed income strategy.

According to Bank of America's Merrill Lynch data, the stock fund has outflow about $55 billion 700 million so far this year, the longest time since 2008.

Laurelli said that sovereign wealth funds reduce the risk of exposure to the stock market. Behind the scenes are not necessarily financial market events. The relevant economic factors are also affecting them, but the redemption itself does indicate a further decline in prices.

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"If you believe that your assets will go up, then it will be no fun to sell it.

If you need some assets, why don't you wait a little longer? This shows that their immediate exposure to passive stock exposure will bring benefits and is not very sure, "he said.

In a few areas where capital inflows were concentrated, the core US fixed income attracted $2 billion 700 million inflows, and the US short term renewal of fixed income attracted $3 billion 300 million inflows.

Laurelli said that this kind of favor for higher quality assets feels like the defensive position adjustment of the emergency fund established by crude oil and other commodity producing countries in recent years.