Jan Randolph, head of Sovereign Risk for London-based Global Insight Inc., says the secrecy factor has raised concerns, but the reality is SWFs have been the financial markets' golden goose. But, he believes SWFs may have "taken a pause" from financial investments. "There is a growing interest in real estate and commodities, whether directly or indirectly," he tells GlobeSt.com. He says Middle Eastern SWFs are spending billions to acquire real estate in Morocco, Egypt, Turkey and Spain, and that's just the tip of the iceberg on the SWF bricks-and-mortar front.

"I think real estate as an asset class is probably one of the largest categories for investment by SWFs," says Pierre N. Rolin, founder, chairman and CEO of London-based Strategic Real Estate Advisors. "I think the preference is larger economies-of-scale transactions with higher rates of return." SWFs are running the gamut from direct investments in private equity real estate funds to real estate-backed securities.

Rolin

Rolin points out that SWFs quietly invested in US Treasuries and the debt markets for years, without raising any concerns. But, he says SWFs' shift to equity investments has pushed them into the limelight. Their abundance of capital is thanks to skyrocketing prices of commodities like oil, gold and diamonds.

"Because of the lack of liquidity in the western financial markets and the value of the dollar falling, SWFs believe this to be a potentially opportunistic time to enter the market," says John C. Alvarado, managing director of the capital markets group in Jones Lang LaSalle's Dallas office. "From the real estate equity side, we are seeing more activity than we have in a decade."