The UK is one of the most important markets for sovereign wealth funds (SWFs) – as a location from where many of these funds are managed, a clearing house for their transactions and a destination for investments. The UK’s openness to foreign business, deep pool of expertise and experience, transparent legal system, and safe and stable regulatory environment have contributed to the country’s development as the largest fund management centre in Europe.
SWFs have risen in number and grown substantially in assets under management over the past
decade. This reflects the changing global geography of finance and investment and the rising
importance of emerging markets. SWFs provided a much-needed source of finance during the
recent economic downturn, as a number of them injected money into Western financial firms.
Since then, SWFs have maintained their position as an important source of capital for the global
There has been a notable increase in SWFs’ investment into global infrastructure in recent years. This comes at a time of great need, as it is estimated that over $50 trillion in investment will be required over the next 15 years to develop global infrastructure. The long-term investment horizon of SWFs makes them ideal financiers of large infrastructure projects. SWFs represent a welcome addition to the range of financing sources that governments can turn to. They are likely to continue to play a positive role, alongside other long-term investors such as insurers and pension funds, to find new ways of addressing the infrastructure funding gap.
London is the leading Western centre for management of SWFs’ assets. Nine of the largest twenty
SWFs have offices in London, compared to seven in New York. Other Western centres are far behind.
That the International Forum of Sovereign Wealth Funds (IFSWF) relocated its Secretariat from
Washington DC to London in 2014 further underlines the UK’s pre-eminence in the market. While
London is central to the UK’s leading position, other cities such as Aberdeen, Birmingham, Cardiff,
Edinburgh, Glasgow, Liverpool and Manchester are also important centres for fund managers.
The UK is also a leading global destination for SWF investments. It attracts five times more SWF
investment in relation to the size of its economy than the US. In order to encourage further investment, there is a need for policy certainty, especially in the energy sector and other regulated utilities.