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Sovereign funds may have biggest impact on alternative assets

Reuters- Sovereign wealth funds, which control up to $3.7 trillion in assets and have been making headlines as they buy assets in the West, will ultimately have the biggest impact on private equity and hedge funds, analysts at JPMorgan Chase said in a report on Thursday.

State-run investment funds currently own up to 7.5 percent of so-called alternative assets, or about $340 billion, and this stake could grow to as high as 17 percent by the end of 2012, said David Fernandez and Bernhard Eschweiler, analysts at the bank. "The main beneficiaries of the increased allocation by SWFs to alternatives are set to be private equity firms and hedge funds. These managers offer skills, resources and expertise that would be difficult for most SWFs to develop on their own," they said in the report. Indeed, last year one of the highest profile deals among sovereign wealth funds was the China Investment Co Ltd’s purchase of a $3 billion stake in U.S. private equity firm The Blackstone Group.

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