Bottom line. It is likely that SWFs, in the aggregate, may outsource 20% or so of their assets to external investors. The new SWFs that are being established may place US$150 billion or so of funds with external managers. Going forward, as the AUM of all SWFs grow over time, another US$200 billion may be placed with external managers annually over the coming five years.

Using Norway's GPF and Canada's CDQ as templates. As Norway's GPF matured in the last decade, the portion of its assets placed with external managers gradually declined from around 40% ten years ago to 20% now. Canada's CDQ (a well-established SPF, not a SWF) has placed a little over 10% with external managers. We thus use the (conservative) rule of thumb that 20% of the assets of SWFs may be placed externally.

The stock of new SWFs. Considering the SWFs of China, Russia and Chile, as well as prospective SWFs of China (Taiwan), Brazil and, importantly, Japan, there could be more than US$700 billion worth of new SWFs to be deployed in the next year or two. This 'stock' of new funds may create some US$150 billion in assets to be placed with external fund managers.

The incremental asset growth of all SWFs. The assets of all SWFs should grow over time, and probably at a very rapid pace. Our calculations suggest that, on average over the next five years, total AUM of SWFs may grow by around US$1 trillion annually. This corresponds to US$200 billion in assets to be managed by external managers.

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