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Sovereign wealth funds move into real estate amid volatile stock markets

Real estate is now a prime play for sovereign wealth funds (SWFs) as equity markets remain unpredictable, said an analyst Wednesday.

The Sovereign Wealth Fund Institute president Michael Maduell said, "They are looking for long-term investments where they can lock up their capital and not have to continually reinvest that capital." The institute analyzes investments by public asset owners such as SWFs and other long-term governmental investors.

Vehicles such as pension funds and endowments are also increasing investing in real estate and infrastructure, he told CNBC's "Squawk Box" on Wednesday.

For example, Norway's Government Pension Fund Global increased its allocation of real estate and was looking at core property markets in Asia, opening offices in Tokyo and Singapore, noted Maduell. The country's sovereign wealth fund is the largest in the world, with more than $830 billion in AUM.

Despite the uncertain market outlook, sovereign wealth funds increased assets under management (AUM) by $200 billion from a year ago to $6.5 trillion in March 2016, information provider Preqin said in a recent report.

Commodities funds have taken a hit from the shift into real estate and other more stable investments, with SWF holdings dropping 50 percent in March, according to Preqin's research. Also, with oil prices remaining low, exporting countries have liquidated assets in order to free up money for government spending, Preqin said.

Another big development in the space was the listing of Saudi Aramco, the state-owned oil company, Maduell said.

Saudi Arabia confirmed on Monday that it planned to sell a stake of its state oil giant Saudi Aramco, which was expected to be valued at more than $2 trillion. Proceeds from the sale will go into setting up a sovereign wealth fund designed to diversify the oil-reliant country's investments.

Less than 5 percent of the company would be made available via an initial public offering (IPO), Deputy Crown Prince Mohammed bin Salman said in an interview with the Al Arabiya News Channel.

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