Sovereign wealth funds fly to relative safety of U.S. assets amid pandemic

* Sovereign funds favour U.S. stocks in Q1 -data
* Net inflows to all equity / bond strategies at two-year
high
* No panicked sales -IFSWF, State Street

By Tom Arnold
LONDON, May 19 (Reuters) - Sovereign wealth funds flocked to
U.S. equities and bonds in the first quarter at the expense of
riskier investments such as those in emerging markets as the
coronavirus spread around the world, data shows.
U.S. equity strategies managed by third-party fund managers
sucked in net flows of $5.36 billion from sovereign funds in the
first quarter, with the majority headed to passive S&P 500
equity strategies which posted their largest inflows in at least
three years, according to data from eVestment.
U.S. fixed income was also in demand, with net inflows of
$341.1 million also the most in at least three years.
eVestment's senior research analyst Mike Cho noted the
inflows were particularly strong for those investing in
lower-risk fixed-income assets. In general, sovereign funds were
net contributors of capital to long-only strategies during the
period, Cho said.
However, emerging markets passive equity suffered a $2.12
billion pullback - the largest quarterly net outflow since late
2017.
The coronavirus and oil price shock wiped $12 trillion off
world stock markets in the first quarter, though equities have
risen some 25% from their March lows.
The investment flows suggest sovereign funds held their
nerve amid the chaos, with net inflows to third-party fund
managers across all equity and bond strategies of $1.44 billion
during the quarter the highest in two years.
A separate research report by the International Forum of
Sovereign Wealth Funds (IFSWF) recently found institutional
investors "did not engage in panicked selling of equities, as
they had done in 2008, but rather a more selective approach".
The research, compiled by a network of sovereign wealth
funds and financial services provider State Street Corporation,
found in March and April there was a general flight to safety
towards the U.S. at the expense of emerging and other developed
markets, and into defensive relative to cyclical sectors.
A regulatory filing last week showed Saudi Arabia's Public
Investment Fund has bought minority stakes in Boeing BA.N ,
Facebook FB.O and Citigroup C.N , giving it a portfolio of
nearly $10 billion in U.S.-listed stocks. An IFSWF survey of oil and non-oil sovereign funds found
only two out of 10 said their governments had sought funds, with
the same number saying they had received requests to support
additional government projects.
"Rather than tapping their rainy day funds, several
governments from oil-rich nations from the Arabian Gulf to
Kazakhstan have recently borrowed from the international bond
markets to cover budget shortfalls," it said.