“Lower oil prices, lower export growth rates, capital flight and new domestic fiscal needs may lead to a less rapid pace of asset accumulation for sovereign wealth funds,” notes the report from Morgan Stanley. From a base of $3,000bn in assets under management at the beginning of the year, losses – at least on paper – of about 25 per cent, may have pushed the figure down to $2,300bn, the report adds.
“They are still shell-shocked about their losses in the public market,” said a fundraiser for one private equity firm. “They aren't exactly saying they were fleeced but they know they went in early with Citi and Merrill Lynch and Morgan Stanley. They are licking their wounds.”
The sovereign wealth funds are also feeling the pain of investing in private equity firms. China's State Administration of Foreign Exchange, the Kuwait Investment Authority and Singapore's Government Investment Corporation were among the losers when TPG wrote down its investment in Washington Mutual to zero. And China Investment Corporation was among the casualties when JC Flowers' investment in Germany went bad.