Singapore's Temasek and GIC were the most active sovereign wealth funds last year, chasing investments even as deal-making by their peers, especially China, dropped sharply, according to a new report.
GIC and Temasek made 40 and 38 direct investments respectively, for a combined total of $14.3 billion, accounting for around 34 percent of the total allocations by sovereign funds, the Sovereign Wealth Center (SWC) said in a report.
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The pace hasn't slackened, with Bloomberg reporting, citing sources, that GIC is leading a group of investors interested in acquiring U.S.-based industrial-property real-estate investment trust (REIT) IndCor Properties from private-equity player Blackstone for $8 billion. Neither GIC nor Blackstone immediately returned emailed requests for comment.
What are they buying?
A deal, if it comes through, would be spot on the favorite sector for all sovereign wealth funds. Last year, property deals accounted for 50 percent of the funds' total investment value, SWC said, adding it was the highest it ever recorded for the segment and a 51 percent rise over 2012.
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Commodity investments were another favorite, SWC said, noting the funds closed 20 deals valued at $5.5 billion, with Temasek accounting for $1.8 billion of the total, establishing the Pavilion Energy and Pavilion Gas subsidiaries to build a liquefied-natural-gas hub in Singapore.
Singapore's funds were also bullish on China, SWC said, noting Temasek spent around $800 million raising its stake in ICBC to more than 8 percent from 6.7 percent and around $430 million on a 5 percent stake in China Pacific Insurance Group. Both funds also backed Chinese technology plays, including Beijing Xiaomi Technology, the top-selling smartphone maker in China last year, SWC noted.
But while Singapore's funds are closing deals, China's fund, the China Investment Corp. (CIC), lost its mojo. While CIC invested $310 billion from 2007-2012, SWC data indicate it only closed $1.9 billion worth of deals in 2013, with $1.2 billion of that a property deal for a West London office complex.
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CIC may be hamstrung by China's State Administration of Foreign Exchange (SAFE), which manages foreign-exchange reserves for China's central bank, becoming reluctant to bankroll the fund as it also pursues investments, SWC said.
Overall, sovereign funds' deal making in 2013 dropped 22.8 percent by value to $43.5 billion to just 184 direct investments , down 13.6 percent from a year earlier, SWC said, noting that the decline mirrored the 8 percent decline in cross-border deal volume, according to Dealogic.
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"Although these funds are supposed to invest for the long term and be unaffected by cyclical market movements, they're just as constrained by the current environment as other investors," the report said. "Investors' so-called great rotation out of safe money market funds into higher-risk corporate and emerging-markets sovereign bonds and equities drove up valuations. This search for yield increased competition for M&A deals, reducing sovereign funds' advantage as purveyors of liquidity in cash-starved markets."
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1