Falling oil price has mixed effect on sovereign funds

June, 2015 Print

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According to a report from Invesco, the falling oil price has had a mixed impact on sovereign funds around the world. While Middle Eastern sovereign funds say that they are the least affected by the fall in oil prices, 80% of sovereign funds in North America say that their funding will be adversely affected.

Nick Tolchard, chair of Invesco’s Global Sovereign Group and head of Invesco Middle East, commented: “The timing of the fall in oil prices has been particularly challenging for state governments in North America and Canada; with reduced revenues from oil producers having driven down state taxation income, at the same time as state expenses are rising sharply as a result of the baby boom generation retiring.”

Among other findings, the report said sovereign funds based in emerging markets are showing a preference for infrastructure, while those based in the developed world tend to prefer real estate. There is also a trend for greater collaboration between sovereign funds when investing in these assets, in order to improve sourcing of investment opportunities and reduce costs.

Report

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