Sovereign wealth funds (SWFs), once perceived as passive capital pools, have become major players in global private markets, shifting their focus from public equities and fixed income. This move is not a short-term response to market volatility but a structural shift reflecting long-term horizons, national development objectives, and the desire for value creation beyond quarterly performance. Private market allocations by SWFs increased from approximately 25% in 2020 to nearly 30% by the end of 2025, according to State Street Investment Management, with total private market investments reaching $3.5 trillion in their sample by end-2025.
This trend is evident in significant deals. The AI Infrastructure Partnership (AIP), backed by Abu Dhabi's MGX, Kuwait Investment Authority, and Temasek, acquired a controlling stake in Aligned Data Centers for approximately $40 billion. Saudi Arabia's Public Investment Fund (PIF) joined a consortium pursuing the $55 billion take-private of Electronic Arts. Earlier-stage investments include Singapore's GIC leading a $30 billion funding round for AI firm Anthropic in February 2026. Overall, sovereign investors committed around $15 billion to AI-related investments in 2025, with Middle Eastern SWFs like Mubadala, Kuwait Investment Authority, and Qatar Investment Authority being key players in digital investments.
SWFs are increasingly engaging in direct and co-investments, with these accounting for 50%-60% of private investments, up from about 40% in 2023. This strategy offers greater control over capital, reduces fees, and allows funds to retain more value. For example, Mubadala and GIC partnered with Partners Group and TPG Rise Climate to acquire Techem, a German energy services provider, in 2025 for about $7.9 billion. The PIF, as the largest dealmaker in 2025, deployed approximately $199 billion in domestic projects in the four years leading up to 2025, representing about 70% of its total investments, aiming to develop national champions in strategic sectors.
The aggregate assets under management by sovereign owned investors globally reached a record $15 trillion. Middle East sovereign wealth funds, especially those in the Gulf, accounted for 43% of all capital invested by state-owned investors globally, totaling $126 billion. Analysts like Julie Kassab from Deloitte Middle East and Victoria Barbary from the Milken Institute emphasize that SWFs are deliberately aligning private market investments with long-term national priorities, becoming core actors that influence capital deployment, deal structures, and long-term ownership.
While private equity remains the preferred sub-asset class, comprising 47% of all private market assets due to its broad nature including private credit and direct investments, real estate allocations have declined, likely due to structurally higher interest rates. The continued growth in private market allocations, particularly in sectors like digital infrastructure and AI, is driven by factors such as the global decarbonization agenda and geopolitical reshaping of supply chains, in addition to their inherent long-term mandates.
