Sovereign Wealth Funds Rise & Shine in the GCC (Wealth Worth over USD 3 trillion)

[al-Hasani]

Sovereign Wealth Funds rise and shine in the GCC​

The GCC’s sovereign wealth funds are among the world’s wealthiest and most watched. 
Iona Stanley teases out trends in their investment strategies as they turn their attention to the region

Iona Stanley | Special to GN Focus

Published: 00:00 April 8, 2014

Image Credit: Gulf News Archives/Supplied
Future calling: SWFs are focusing on regional mega development projects such as the King Abdullah Economic City as part of their diversification plans

​

With more than ten funds and close to $2 trillion (Dh7.3 trillion) worth of assets under management (AUM), the six GCC countries are home to the highest concentration of the world’s sovereign wealth funds (SWFs). While global SWFs currently control an aggregate of about $5.4 trillion in AUM, SWFs in the GCC account for more than 34 per cent as per the United Nations. According to the current rankings issued by the SWF Institute, the Abu Dhabi Investment Authority (ADIA) is the world’s second-largest SWF with an AUM of $773 billion.

As liquidity tightened across the West, largely due to the lingering impact of the financial crisis, the influence yielded by the GCC’s SWFs on the global economy has grown. Now, more than ever, these SWFs are viewed by the world as an important source of capital, and this is confirmed by Moody’s Investors Service. “GCC countries, except Bahrain, have maintained fiscal surpluses and GCC governments have reinforced their global creditor position with an estimated $1.9 trillion in SWF assets, up from $1.3 trillion in 2010,” Lucio Mauro Vinhas de Souza, Managing Director — Sovereign Chief Economist of Moody’s told Gulf News last month.

However, regional SWFs appear to be viewing the West with caution and have invested less internationally in the recent past. The other obvious, and collective, reasons are their aims to diversify, benefit from international opportunities and maintain more balanced portfolios. Partly driven by international forces such as the Eurozone debt crisis, and partly by local, such as the Arab Spring, it is becoming evident that SWFs are redirecting a portion of their funds from international investments back into the region, and also into untapped areas.

Local development

It is a little known fact that the Kuwait Investment Authority (KIA), established in 1953, is the oldest sovereign wealth fund in the world. But the whole world now watches KIA’s moves with bated breath as it goes about acquiring and exiting stakes in prestigious companies such as BP, Citibank, Daimler, Merrill Lynch, CVC Capital and others. However, what is even lesser known is the great influence that KIA has on Kuwait’s economy, and the role it plays in supporting the government’s agenda of national development, often acting as the financier. In one of the many examples, the Kuwaiti Government is planning to establish the Kuwait Health Assurance Company by 2015, with an estimated capital of $1.1 billion, to augment the country’s health-care capacity and KIA is expected to hold a 24 per cent stake.

KPMG’s May 2013 report, Emerging Trends in the Sovereign Wealth Fund Landscape, poses pertinent questions about the GCC’s SWFs and easily answers most of them. In his essay, Vikas Papriwal, KPMG’s Partner and Head of Sovereign Wealth Funds and Private Equity in the UAE and Oman, writes: “Investment statistics suggest a near 70 per cent increase in GCC-focused investments by regional SWFs. Therefore, the question arises: what has driven this apparent shift in the SWF investment paradigm?”

While GCC SWFs have historically demonstrated keen interest in infrastructure and real estate investments, the proportion of these investments is set to increase considerably as governments redirect a greater portion of their sovereign wealth to achieve local development objectives. The report predicts that the GCC will spend approximately $142 billion on infrastructure until 2020, most of it on rail and road projects and planned mega projects such as Saudi Arabia’s $86-billion King Abdullah Economic City, Qatar’s $70-billion 2022 FIFA World Cup-related infrastructure, and the UAE’s $20-billion Masdar City.

“There is no doubt that SWFs in the region are continually evolving and, as part of this, becoming increasingly sophisticated in their operations and execution of their respective investment strategies. While investment objectives have certainly changed — including geographical and sector focus — diversification remains a key and common objective, as they seek to reduce their reliance on energy, oil and gas prices,” Papriwal emphasises.

Realty and diversification

Diversification is certainly part of the Qatar Investment Authority’s (QIA) plans. Rajesh Menon, Partner, KPMG Qatar, says, “Large stakes in household names in financial services such as Credit Suisse, Barclays, Agricultural Bank of China, Banco Santander Brasil, and the London Stock Exchange are as much a part of QIA’s portfolio as Volkswagen, Porsche, Tiffany, LVMH, Sainsbury’s or Harrods. Other investments include the QIA’s stake in French oil major Total, Royal Dutch Shell and BAA, the owner of London’s Heathrow airport.”

GCC Report’s January 2014 newsletter predicts patterns for the region’s SWFs for this year, based on trends that made itself felt in 2013: “Growing assets, increasing allocations to alternative investments, diversifying into emerging markets, hiring internal investment staff and increasing direct investments. However, real estate investment continues to be one of the strongest ongoing trends and is expected to remain so in 2014. While global SWFs invested $11.09 billion in real estate as of November 2013, the GCC’s SWFs continued making real estate deals into December.”

Local pension funds

In a report by Invesco presented in association with strategy consultants NMG, another emerging trend for the region’s SWFs is pension funds. The Middle East Asset Management Study 2013 states: “We estimate that pension funds now make up more than 15 per cent of all new sovereign assets placed in the region. However, we have observed top-down pressures to prioritise local over international investment, and our analysis of new asset placements suggests that local GCC allocations have increased from 62 to 71 per cent since 2011. While the trend towards local investment may be structural for SWFs, most pension funds expect international allocations to rebound in the future.”

Alternative asset classes

Another recent Invesco report states that SWFs are increasing investments in alternative assets, particularly real estate and private equity, with 69 per cent of the GCC’s SWFs citing an increase in allocations to alternative assets. A study by Natixis Bank concurs that GCC funds are increasingly switching from more conservative investments to alternative investments such as private equity and hedge funds.

Finally, in a more recent trend, GCC SWFs seem to be active in sports and fashion investments. The GCC Report observes that while Mubadala is already a minority investor in IMG, the sports, fashion and media firm ADIA is considering buying the naming rights to Sao Paulo’s World Cup football stadium and Qatar Holding is planning a 20 per cent stake in Gianni Versace S.p.A. through a transaction valued at about €250 million (around Dh1.26 billion).

Sovereign Wealth Funds rise and shine in the GCC | GulfNews.com

 

[al-Hasani]

Active 2015 seen for $2t GCC SWFs as they relocate assets

UAE investors have committed $19b across 17 projects in Africa

\​

Wednesday, November 26, 2014

GCC SWFs account for approximately 40 per cent of global SWFs by AUM. — KT file photo

Dubai: For the $2 trillion GCC Sovereign Wealth Funds 2015 will prove to be an active year as they start relocating their assets from the West to the Middle East, according to a report released on Monday.

Already, in line with this trend, investors from the UAE, which is home to one of the largest Sovereign Wealth Funds in the world, have committed $19 billion across 17 infrastructure projects in Africa.

“Low interest rates, evolving investment strategies and a growing appetite for alternative asset classes are causing a shift in SWF investment strategies,” the report said.

“Over the past two years, there has been a shift in how the Middle East’s Sovereign Wealth Funds have had to reallocate their assets. The changes are driven by market forces including the unprecedented low-interest rate environment,” said the report published by KPMG on Sovereign Wealth Funds in the Middle East.

“Middle East SWFs have been forced to navigate shifting economic currents at home and abroad as they seek to invest their oil-fuelled capital to generate the best returns for their stakeholders,” said the report.

The global SWFs currently control an aggregate of approximately $5 trillion in assets under management. Of this amount, the GCC SWFs (most notably Abu Dhabi Investment Authority, currently the world’s third largest SWF behind the Norway Government Pension Fund and China Investment Corporation) account for approximately 40 per cent of global SWFs by AUM. “While the majority of SWF funds continue to deploy their funds in bonds and global equities, a relatively low interest rate environment, continually evolving investment strategies and a growing appetite for alternative asset classes are resulting in a shift away from what has typically been a passive investment philosophy. The areas of direct investments for SWFs are generally few and chosen with the majority concentrating on infrastructure, real estate and increasingly, private equity,” said Vikas Papriwal, KPMG Partner and Head of Markets.

The report noted that the region’s Sovereign Wealth Funds are taking advantage of their scale and long-term investment perspective by allocating more of their assets to real estate such as hospitality, industrial, logistics and retail, as well as funding infrastructure, where yields are higher.

“While the Abu Dhabi Investment Authority and the Kuwait Investment Authority have been buying property since the mid-1970s, there has been a marked rise in brick and mortar investments by these funds and their peers from around the Arabian Gulf,” it said.

“The UAE, home to one of the largest SWFs in the world, recently has played a significant role in establishing relations with African countries, resulting in commitments worth $19 billion from UAE investors, across 17 infrastructure projects. This paves the way for future investments as economic linkages between the UAE and Africa continue to strengthen, in part driven by the investment strategies of local SWFs. Looking forward, 2015 is set to be an active year for SWFs in the region,” said Ashish Dave, KPMG Partner and head of PE and SWFs.

According to the report, SWFs in the Middle East are viewing the West with caution and as a result, have invested less internationally than they have done in the past while redirecting a portion of their funds from international investments back into the Middle East. “This could be due to international forces, such as the Euro zone debt crisis or local factors such as the Arab Spring. “

Western governments and organisations looking for capital from the Middle East will need to adapt and demonstrate a deep understanding of what is driving the thinking of SWFs in the region, and be dedicated to making a long-term commitment to building relationships that add value to their investment policy.

Active 2015 seen for $2t GCC SWFs as they relocate assets - Khaleej Times Mobile

​

 

[elszADaQ]

Good news! I quite believe that the GCC has a very bright future ahead of it.

 

[Echo_419]

Active 2015 seen for $2t GCC SWFs as they relocate assets

UAE investors have committed $19b across 17 projects in Africa

\​

Wednesday, November 26, 2014

GCC SWFs account for approximately 40 per cent of global SWFs by AUM. — KT file photo

Dubai: For the $2 trillion GCC Sovereign Wealth Funds 2015 will prove to be an active year as they start relocating their assets from the West to the Middle East, according to a report released on Monday.

Already, in line with this trend, investors from the UAE, which is home to one of the largest Sovereign Wealth Funds in the world, have committed $19 billion across 17 infrastructure projects in Africa.

“Low interest rates, evolving investment strategies and a growing appetite for alternative asset classes are causing a shift in SWF investment strategies,” the report said.

“Over the past two years, there has been a shift in how the Middle East’s Sovereign Wealth Funds have had to reallocate their assets. The changes are driven by market forces including the unprecedented low-interest rate environment,” said the report published by KPMG on Sovereign Wealth Funds in the Middle East.

“Middle East SWFs have been forced to navigate shifting economic currents at home and abroad as they seek to invest their oil-fuelled capital to generate the best returns for their stakeholders,” said the report.

The global SWFs currently control an aggregate of approximately $5 trillion in assets under management. Of this amount, the GCC SWFs (most notably Abu Dhabi Investment Authority, currently the world’s third largest SWF behind the Norway Government Pension Fund and China Investment Corporation) account for approximately 40 per cent of global SWFs by AUM. “While the majority of SWF funds continue to deploy their funds in bonds and global equities, a relatively low interest rate environment, continually evolving investment strategies and a growing appetite for alternative asset classes are resulting in a shift away from what has typically been a passive investment philosophy. The areas of direct investments for SWFs are generally few and chosen with the majority concentrating on infrastructure, real estate and increasingly, private equity,” said Vikas Papriwal, KPMG Partner and Head of Markets.

The report noted that the region’s Sovereign Wealth Funds are taking advantage of their scale and long-term investment perspective by allocating more of their assets to real estate such as hospitality, industrial, logistics and retail, as well as funding infrastructure, where yields are higher.

“While the Abu Dhabi Investment Authority and the Kuwait Investment Authority have been buying property since the mid-1970s, there has been a marked rise in brick and mortar investments by these funds and their peers from around the Arabian Gulf,” it said.

“The UAE, home to one of the largest SWFs in the world, recently has played a significant role in establishing relations with African countries, resulting in commitments worth $19 billion from UAE investors, across 17 infrastructure projects. This paves the way for future investments as economic linkages between the UAE and Africa continue to strengthen, in part driven by the investment strategies of local SWFs. Looking forward, 2015 is set to be an active year for SWFs in the region,” said Ashish Dave, KPMG Partner and head of PE and SWFs.

According to the report, SWFs in the Middle East are viewing the West with caution and as a result, have invested less internationally than they have done in the past while redirecting a portion of their funds from international investments back into the Middle East. “This could be due to international forces, such as the Euro zone debt crisis or local factors such as the Arab Spring. “

Western governments and organisations looking for capital from the Middle East will need to adapt and demonstrate a deep understanding of what is driving the thinking of SWFs in the region, and be dedicated to making a long-term commitment to building relationships that add value to their investment policy.

Active 2015 seen for $2t GCC SWFs as they relocate assets - Khaleej Times Mobile

​

Impressive they should also invest in India

 

[al-Hasani]

Good news! I quite believe that the GCC has a very bright future ahead of it.

Indeed. We are already very privileged. We live in some of the most wealthy countries on the planet with top infrastructure, in welfare states, we don't pay any taxes, education etc. is mostly free (outside private schools), our countries have the highest GDP per capita in the world, our nations have tremendous natural riches and assets, some of the biggest surpluses in the world, low crime levels, no wars, stability, progress etc.

There are serious issues (lack of democracy, more rights to women and minorities, more active participation of the people, more diversification of the economy - all work in progress) as well but we cannot complain and I have no doubt that things will be moving in the right direction like for the past many decades. That's not to say that serious issues are not to be dealt with and changes not being necessary. But that goes for all countries to certain extend.

If we had Western European leaders I cannot imagine were we would be. Way ahead of the entire ME and most developing countries. That's for sure.

We do have certain limits due to the number of people, location etc though but that goes for all countries as well.

Serious reforms on those fields I mentioned that need betterment must happen though and I would like a reformer to arrive and just do what is necessary and if necessary silence the opponents with force to ensure the changes needed. If some of the clergy must go due to this then so be it. We cannot be taken hostage by them anymore. UAE has shown the way on this front partially.

Please frequent the Arabic Coffee thread. I tagged you bro but it seems that I cannot tag people as they never receive my mentions.

Impressive they should also invest in India

The GCC is already investing in India and several other developing markets. On a governmental level and private level.

 

[Falcon29]

@al-Hasani

No taxes really? This country I live in has taxes on everything. Federal tax, income tax(the most horrific if you're making over 200k), for health insurance with Obamacare if you're making over 200k good luck.

It costs like 2-3k per month. Let alone all this other insurance we have to pay.

I heard electricity/heating is also free?

 

[al-Hasani]

@al-Hasani

No taxes really? This country I live in has taxes on everything. Federal tax, income tax(the most horrific if you're making over 200k), for health insurance with Obamacare if you're making over 200k good luck.

It costs like 2-3k per month. Let alone all this other insurance we have to pay.

I heard electricity/heating is also free?

If you ask me it is not foreseeable for people in KSA (GCC as a whole) not to pay taxes. Imagine for a second the income the state (s) are missing? It's crazy in my mind but obviously the locals are not complaining. Why should they?

Here in Denmark, if you earn big money, you are likely to pay 50% of your monthly salary to the state. Imagine that. In KSA that would be 0% in your case.

Many, especially Westerners, take advantage of it and receive high salaries but are contributing minimally to the economy of KSA as they are spending all their earned money in their homelands or somewhere else abroad. That's my impression at least.

There should be at least minimal taxes. 5-10% initially would be a good thing.

There is corporate taxation in KSA though. 0% for companies that are 100% Saudi Arabian owned, 85% for oil and gas companies, all other companies 20%.

There is also 2.5% taxation (Zakat) on capital assets for natives though.

VAT is a big fat 0%

No neither electricity nor heating is free (that would be too much, lol) but it's not expensive. In general KSA is a cheap country to live in. Much cheaper than the smaller GCC states such as UAE, Kuwait, Qatar etc. Also in terms of rent of apartments etc.

Check this out, it is fairly accurate.

Cost of Living in Saudi Arabia. Prices in Saudi Arabia. Updated Dec 2014

 

[Falcon29]

If you ask me it is not foreseeable for people in KSA (GCC as a whole) not to pay taxes. Imagine for a second the income the state (s) are missing? It's crazy in my mind but obviously the locals are not complaining. Why should they?

Here in Denmark, if you earn big money, you are likely to pay 50% of your monthly salary to the state. Imagine that. In KSA that would be 0% in your case.

Many, especially Westerners, take advantage of it and receive high salaries but are contributing minimally to the economy of KSA as they are spending all their earned money in their homelands or somewhere else abroad. That's my impression at least.

There should be at least minimal taxes. 5-10% initially would be a good thing.

There is corporate taxation in KSA though. 0% for companies that are 100% Saudi Arabian owned, 85% for oil and gas companies, all other companies 20%.

There is also 2.5% taxation (Zakat) on capital assets for natives though.

VAT is a big fat 0%

No neither electricity nor heating is free (that would be too much, lol) but it's not expensive. In general KSA is a cheap country to live in. Much cheaper than the smaller GCC states such as UAE, Kuwait, Qatar etc. Also in terms of rent of apartments etc.

Check this out, it is fairly accurate.

Cost of Living in Saudi Arabia. Prices in Saudi Arabia. Updated Dec 2014

I agree, make some income tax system. At low percentages. Or find other way to put that money back into local economy. Because this income tax is killing people as they have to deal with insurance, heating/electricity/rent bills and all this other stuff.

 

[Echo_419]

Indeed. We are already very privileged. We live in some of the most wealthy countries on the planet with top infrastructure, in welfare states, we don't pay any taxes, education etc. is mostly free (outside private schools), our countries have the highest GDP per capita in the world, our nations have tremendous natural riches and assets, some of the biggest surpluses in the world, low crime levels, no wars, stability, progress etc.

There are serious issues (lack of democracy, more rights to women and minorities, more active participation of the people, more diversification of the economy - all work in progress) as well but we cannot complain and I have no doubt that things will be moving in the right direction like for the past many decades. That's not to say that serious issues are not to be dealt with and changes not being necessary. But that goes for all countries to certain extend.

If we had Western European leaders I cannot imagine were we would be. Way ahead of the entire ME and most developing countries. That's for sure.

We do have certain limits due to the number of people, location etc though but that goes for all countries as well.

Serious reforms on those fields I mentioned that need betterment must happen though and I would like a reformer to arrive and just do what is necessary and if necessary silence the opponents with force to ensure the changes needed. If some of the clergy must go due to this then so be it. We cannot be taken hostage by them anymore. UAE has shown the way on this front partially.

Please frequent the Arabic Coffee thread. I tagged you bro but it seems that I cannot tag people as they never receive my mentions.



The GCC is already investing in India and several other developing markets. On a governmental level and private level.

GCC has a lot of $$$ to spend & it can greatly benefit from investing in huge untapped markets like India )also the biggest)

 

[al-Hasani]

I agree, make some income tax system. At low percentages. Or find other way to put that money back into local economy. Because this income tax is killing people as they have to deal with insurance, heating/electricity/rent bills and all this other stuff.

Exactly. A taxation percentage of 5-10% (initially) would increase the income (not that this is a problem currently but it never hurts) of the state and thus further increase the state budget. This income could be relocated back to the society (like in other welfare states) and be spent on sectors such as healthcare, education, innovation etc.

It's better to introduce proper taxes now and then gradually instead of doing it rapidly one day. Some people in the GCC believe that not paying taxes and being pampered to the degree that some are, is completely normal elsewhere which is far from the reality.

Here is another excellent but short link regarding taxation in KSA.

http://www2.deloitte.com/content/da...s/Tax/dttl-tax-saudiarabiahighlights-2014.pdf

GCC has a lot of $$$ to spend & it can greatly benefit from investing in huge untapped markets like India )also the biggest)

Investments and opportunities go hand in hand if you are a good investor and the GCC are good investors generally speaking.

 

[al-Hasani]

GCC Firms Embark On A Cautious Investment Spree In Africa

Africa’s fast growing economies have transformed the continent into a booming frontier market, but risk is still a primary concern for GCC investors.​

By Robert Anderson
November 22, 2014

In the year 2000, The Economist magazine famously described Africa as “the hopeless continent” on its cover, conveying a region ravaged by an endless cycle of war, famine and disease.​

Fast-forward more than a decade and Africa is being presented in an altogether different light, with a data exercise from the same publication in 2011 suggesting the continent would host seven out of the world’s 10 fastest growing economies in the coming years.

At this year’s African Global Business Forum (AGBF) in Dubai, one of the region’s best-known business magnates is also keen to stress that much has changed since the turn of the century.

“Africa is not the same Africa that you knew in the year 2000,” declares Aiko Dangote, Africa’s richest man and founder and CEO of West Africa’s largest industrial conglomerate, the Dangote Group, urging investors to have a “serious look” at the continent.

Recent figures suggest GCC investors are doing just that. Annual Gulf investment contributions to Africa are expected to average $5 billion in the coming years, or 10 per cent of total average annual inflows, according to a study by the Dubai Chamber of Commerce and Industry (DCCI).

But there is still a long way to go in terms of both plugging the continent’s infrastructure gap, and decreasing its risk perception.

BOOSTING INVESTMENT
Gulf entities have provided at least $30 billion of funding, at current prices, for African infrastructure over the last decade, much of which has been focussed in North Africa.

Recent activity, however, suggests a shift is occurring, with sovereign wealth funds called upon to play a larger role, and a particular focus on the fast growing economies to the south.

In September, the Investment Corporation of Dubai invested $300 million in a 1.4 per cent stake in Nigeria’s largest cement manufacturer Dangote Cement, while CEO H.E. Mohammed Al Shaibani reveals the fund is also exploring other deals with Dangote, particularly in agriculture and infrastructure projects

“We’d been getting a lot of proposals but, as you know, it’s not an easy environment to invest in,” says Al Shaibani.

“[The deal is] pure common sense in the basis that Nigeria is a huge economy and always an opportunity, but having the right partner especially in Africa is a key thing for any investor to come in.”

Another GCC fund investing in Africa’s largest economy is the mysterious Eagle Hills, headed by Emaar’s Mohammed Alabbar.

In July, the firm declared its role in the $18 billion Centenary City project in the Nigerian capital Abuja, signing an agreement to co-invest along with Nigerian sovereign wealth fund authorities.

The mixed-use residential and commercial development, stretching over 1,200 hectares, includes an Address Hotel, Free Trade Zone, duty free regime, tax holidays and non regulated banking services.

While elsewhere, Abu Dhabi government investment vehicle Mubadala signed a $5 billion agreement in November 2013 to develop a bauxite mine and alumina refinery in Guinea through state-owned Emirates Global Aluminium.

“Sovereign wealth fund investment is cautiously going into countries where they feel it is needed; infrastructure projects, particularly in power, real estate and commercial,” says Pratibha Thaker, regional director Middle East and Africa at the Economist Intelligence Unit.

“Some of the investment will also be in the agriculture and the manufacturing industries,” she adds.

Other recent investments have come from the likes of Qatar National Bank, which bought a 23.5 per cent stake in pan-African lender Ecobank in two stages in September for around $500 million.

Middle Eastern logistics company Aramex has also been active with two acquisitions since 2010 in South Africa and Kenya, while it is “currently considering a number of other companies in the region with suitable, scalable synergies,” says CEO Hussein Hachem.

“There is a massive underinvestment in the logistics sector in Africa, and Aramex will continue to proactively strengthen its footprint in core African markets…

We are in the process of pursuing more acquisitions, both in Africa and in other markets abroad.”

In the power sector, Saudi Arabia’s ACWA, Abu Dhabi’s TAQA and Qatar’s QEWC all have African projects and Dubai’s DP World has been operational on the continent for more than a decade, managing ports in Algeria, Djibouti, Mozambique and Senegal.

Yet even with GCC, European, development bank and Chinese activity, with the latter piling $13 billion into African infrastructure in 2012, there is still a huge infrastructure gap that needs to be filled.

As much as $93 billion is required annually to meet the continent’s infrastructure needs through to 2020, with half that amount currently being met, according to the African Development Bank.

Africa as a region has consistently recorded over five per cent GDP growth annually in recent years, but this is placing additional pressure on already subpar infrastructure.

Only 32 per cent of the Africans have access to electricity, with only 65 per cent of the urban population and 38 per cent of the rural population having access to improved water and sanitation networks. In sub-Saharan Africa, under a fifth of roads are paved.

“Africa stands on the cusp of exciting new opportunities, but we suffer a shortfall in terms of investments and infrastructure,” says John Mahama, president of Ghana.

RISK VS REWARD
One of the main factors preventing more ambitious Gulf investment into Africa is the continent’s high-risk perception. With operational problems, non-honouring of contracts, currency volatility, political risks and changing of government policy among the main concerns.

“This is not an easy continent to do business,” says Thaker.

“The political risk is still high, more elections are taking place, you have countries like South Sudan and Somalia, as well as movements like Boko Haram and Al Shabab to remind you that Africa is also politically in transition.”

DP World can attest to the political risk having had its concession to run Djibouti’s Doraleh Container Terminal rescinded and arbitration proceedings launched against it by the Djiboutian government.

The government alleges that the concession unfairly favours the company, and has accused it of bribery, launching arbitration proceedings in London in July.

While DP World’s involvement with Abdourahman Boreh, a Dubai-based businessman and former chairman of the Djibouti Ports and Free Zones Authority between 2003 and 2008, is under scrutiny.

DP World chairman Sultan Ahmad Bin Sulaymen says the Djibouti government has “tarnished” the company’s relationship, rejecting the accusations and calling the matter a misunderstanding.
He also expresses confidence that the situation in Djibouti will “go back to normal”.

In the meantime, the company continues to operate the port, although whether it will retain the concession having invested around $1.5 billion in the terminal since 2000 is still uncertain.

One of the continent’s most active private equity investors Blackstone Group, which announced a $5 billion deal with Dangote Group in August to invest in power infrastructure projects, is also familiar with local complications.

In 2005, the US firm stepped into AES Corp’s failed Ugandan Bujagali dam project, which had been beset by delays, cost overruns, and a corruption probe, forcing the AES to write off $70 million.

“Often the first people who try to do something encounter trouble. It helps to be the successor of that first group,” says Stephen Schwarzman, chairman, CEO and co-founder of Blackstone Group.

But even with its own power plant builder Sithe, and having cobbled funding together from the World Bank and other development organisations, Blackstone still suffered a series of complications.

Somali pirates hijacked a ship off the Kenyan coast delivering part of the dam’s powerhouse, forcing Blackstone to build a new one in Kenya, according to a Wall Street Journal report.

There were also hundreds of villagers to be resettled and the requirement for rituals to be performed to appease spirits in the area, which led to a long lasting dispute between two diviners, according to the report.

Despite these issues the 250MW dam began producing power in 2012, with Blackstone’s annual return on
the investment reportedly in the high teens, and the option to sell its stake in a few years.

The firm has also not been put off by the experience with similar dam projects being considered in Uganda, Tanzania and along the Rwandan border.

“When you have terrific political leadership it’s very easy to attract money. We are very sensitive to reforms,” Schwarzman advises African countries.

Although he admits the expectations of investors and governments often differ, with the former looking for a five- year exit strategy and the latter a more medium to long-term play.

In contrast, some African business heads argue that investors should come into Africa with a “planters mentality”.

“In 10 years in Africa, your multiples will be much larger than five years,” says Asian-Kenyan businessman Vimal Shah, CEO of edible oils manufacturer Bidco Group. “If you want a fast buck, go to the states. In Africa, you won’t even get exit strategies immediately.”

A GATEWAY TO AFRICA
As global attention turns towards booming African markets, Dubai is attempting to position itself as the gateway to the continent.

“How can you be a gateway to a country or a continent you’re not even part of? This is the challenge in front of us,” says Hamad Buamim, president & CEO of DCCI.

But Dubai has several advantages, he argues, particularly in terms of its proximity, infrastructure, and local carriers Emirates and FlyDubai, which are flying to an increasingly large number of African destinations. This has led several companies to set up their head office in Dubai to serve the African continent, he says.

Ashish Thakkar’s Mara Group, an African conglomerate headquartered in Dubai, with local operations in 22 countries across the continent, is one such example.

Thakkar suggests that Dubai is a “great hub” for Africa although more from an operational perspective than a financial one.

His partnership with former Barclay’s CEO Bob Diamond, Atlas Mara, aims to create a leading African financial institution through acquiring stakes in local lenders, including Development Bank of Rwanda, ABC Holdings and Union Bank of Nigeria.

“Frankly, my banks are not going to be giving facilities in Dubai…my banks are going to be giving facilities in countries on the continent,” he says.

“Whether Dubai is great as a financial hub, that’s a different question all together, that’s why I keep on emphasising the operational relevance and practicalities.”

The Economist Intelligence Unit’s Thaker suggests Dubai will retain the gateway title for a number of reasons, including logistics advantages, security, its business friendly environment and challenges on the ground on the continent.

“Those challenges, particularly infrastructure, are going to take decades of investment to resolve,” she says. To attract more business, African nations need to implement proper governance, rule of law, consistent policy and reforms, she argues.

But despite the continent’s challenges, Emaar and Eagle Hill’s Mohamed Alabbar, whose projects across Africa stretch from real estate in Egypt, Nigeria and Uganda to mining in Guinea, suggests investors can manage the risk.

“If you want to live on a three per cent return go to London and go to the US…if you want to do the big stuff, come to the Middle East, come to Africa,” he says.

GCC Firms Embark On A Cautious Investment Spree In Africa - Gulf Business

Very interesting.

@ebray

 

[al-Hasani]

Middle East Wealth Funds To Actively Invest In 2015​

Sovereign wealth funds in the region are investing more in emerging markets such as Africa and China as they shift away from Western markets.
By Mary Sophia
November 30, 2014

Sovereign wealth funds (SWFs) in the Middle East are looking to invest actively in an effort to generate better returns for their shareholders, according to a new study by auditing and consulting firm KPMG.

The report also found that there has been a shift in the last two years on how SWFs allocate their assets.

“While the majority of SWFs continue to deploy their funds in bonds and global equities, a relatively low interest rate environment, continually evolving investment strategies and a growing appetite for alternative asset classes are resulting in a shift away from what has typically been a passive investment philosophy,” said Vikas Papriwal, KPMG partner and head of markets.

“The areas of direct investments for SWFs are generally few and chosen with the majority concentrating on infrastructure, real estate and increasingly, private equity.”

KPMG also noted that the region’s SWFs are taking advantage of their scale and long-term investment strategies to allocate more of their assets to sectors such as hospitality, industry, logistics and retail. The SWFs also continued to pour in capital to fund infrastructure, where yields are higher, the report said.

Although stalwarts Abu Dhabi Investment Authority (ADIA) and Kuwait Investment Authority have been investing in property since mid-1970s, there has also been a marked rise in brick and mortar investments by the region’s wealth funds.

In addition, the Middle East SWFs are increasingly shifting away from European markets due to the economic conditions there and have redirected a portion of funds to the Middle East market.

In a turnaround investment strategy, the wealth funds have began targeting emerging markets like Africa and China.

“UAE is home to one of the largest SWFs in the world, and recently has played a significant role in establishing relations with African countries, resulting in commitments worth $19 billion from UAE investors, across 17 infrastructure projects,” said Ashish Dave, KPMG partner and head of PE and SWFs.

“This paves the way for future investments as economic linkages between the UAE and Africa continue to strengthen, in part driven by the investment strategies of local SWFs.”

Meanwhile, Qatar Investment Authority, which has the largest number of assets in Europe, is also looking to diversify its portfolio with more investments in Asia.

In November 2014, QIA’s chief executive Ahmed Al Sayed said that the fund is looking to invest between $15 billion and $20 billion over the next five years in Asia. He specifically noted that China’s property, infrastructure and healthcare sectors are of interest to the QIA for future investments.

“Looking forward, 2015 is set to be an active year for SWFs in the region,” said Dave.

Global SWFs currently control an aggregate of approximately $5 trillion in assets under management (AUM), the report said.

Of this amount, the SWFs in the GCC (most notably ADIA, currently the world’s third largest SWF as per KPMG’s estimations) account for approximately 40 per cent of global SWFs by AUM.

Middle East Wealth Funds To Actively Invest In 2015 - Gulf Business

 

[Aepsilons]

Global SWFs currently control an aggregate of approximately $5 trillion in assets under management (AUM), the report said.

Absolutely impressive.

 

[al-Hasani]

Absolutely impressive.

Indeed it is my friend and the size of those sovereign wealth funds are growing at a quick rate.

You should take a look at this article below;

Investors increasingly explore GCC’s non-oil sectors | World Finance

The South East Asian brothers should take a look at this thread below dealing with GCC and ASEAN cooperation;

Gulf region emerging as prominent trade, investment partner for Asean

@Wahhab2701 @Indos @madokafc

 

[Saif al-Arab]

Gulf sovereign wealth funds punching above their weight
Their conservative investment approach and focus on mature markets helps mitigate risks but they still need to pare down exposure to euro-dominated assets

By Babu Das Augustine, Banking Editor
March 15, 2015

Image Credit: Courtesy: Suisse

Dubai: According to the Sovereign Wealth Fund (SWF) Institute, GCC-based SWFs have a total of $2.6 trillion (Dh9.54 trillion) in assets — about 37 per cent of total SWF assets worldwide.

Close to 80 per cent of SWF assets in GCC states are accounted for by three major players — the Abu Dhabi Investment Authority with $773 billion, foreign holdings at the Saudi Arabia Monetary Authority (SAMA) at $757 billion and the Kuwait Investment Authority with $548 billion. By assets, Adia and Sama are the second and third largest SWFs globally.

The UAE has seven large SWFs in total: four in Abu Dhabi, one each in Dubai and Ras Al Khaimah, while the last is a federal fund. By number of funds, this is more than any other country in the GCC and globally, second only to the US which has several smaller-sized state-level SWFs.

In total, the UAE’s SWFs have assets of just over $1 trillion, the bulk of which are accounted for by the ADIA ($773 billion). The remaining Abu Dhabi SWFs are the Abu Dhabi Investment Council ($90 billion), the International Petroleum Investment Company ($68 billion) and Mubadala ($61 billion).

The assets of the Investment Corporation of Dubai amount to $70 billion while those of the federal Emirates Investment Authority stand at $15 billion. The Ras Al Khaimah Investment Authority has $1 billion in assets.

Regional SWFs are estimated to have substantial exposure to euro-denominated financial assets. Thus, the continued depreciation of the euro will certainly weigh on the value of their investments.

“We understand SWFs engage in currency hedging to an extent to mitigate such losses, though it is difficult to ascertain the level to which this is done,” Bruno Daher, chief executive officer of Credit Suisse in the Middle East and the Indian subcontinent, said.

“We note that SWFs will also structure natural hedges into their investments, such as investments denominated in currencies expected to appreciate.”

Gulf SWFs have a conservative investment approach and favour exposure to mature markets. Emerging market exposure has historically been taken more selectively, though in recent years SWFs have increased their focus here both in response to the financial crisis in North America and Europe and in an effort to capture higher yields.

India and China stand out as major investment opportunities in the emerging market space and both countries benefit from long-term secular growth trends.

“We would expect SWFs to capitalise on this through investments in energy, utilities and infrastructure which offer long-term stable returns with lower risk,” he said.

Gulf sovereign wealth funds punching above their weight | GulfNews.com

Sovereign wealth a major GCC asset
Author: Dr Jassim Hussein
March 17, 2015 - 12:58:01 am
Despite the sharp decline in oil prices, especially during the second half of 2014, the GCC countries own huge sovereign wealth. It is remarkable that the wealth of Gulf sovereign wealth funds increased during the course of the year.

According to Sovereign Wealth Fund Institute, which monitors sovereign wealth, sovereign wealth funds have registered steady growth during the past few years. Oil wealth accounts for around 60 percent of global sovereign wealth.

Based on the institute’s statistics, the value of sovereign wealth at present is around $7,111bn, rising from $7,057bn, $6,831bn, and $6,609bn in December, September, and June of 2014, respectively.

This marks steady growth in the value of sovereign wealth during the oil price fall, which indicates investments outside the oil sector.

The report said the sovereign wealth of the GCC states was $2,676bn, according to the last available statistics. This is a significant figure since it forms around 38 percent of the world’s sovereign wealth. It reflects the global importance of the Gulf.

Of course, the Gulf also controls over a quarter of global oil production. At the moment, Saudi Arabia is the biggest exporter of crude oil. Thanks to Qatar, the GCC countries are also key players in the field of natural gas.

Over the past few years, the value of sovereign wealth in the GCC has improved. Looking back, Gulf sovereign wealth formed about 36 percent of world sovereign wealth in March 2014.

The value of the GCC sovereign wealth reached $1,775bn at the end of 2012. This means that it has increased by $900bn in two years, and this is a major achievement.

As of today, the GCC countries have the best statistics when it comes to the size of their global sovereign wealth and its international significance.

Through consideration, Emirates alone acquired more than a trillion dollars (to be precise, $1,079bn), which accounts for more than 15 percent of sovereign wealth worldwide.

This figure includes wealth belonging to Abu Dhabi Investment Authority and a group of organisations belonging to the emirate of Abu Dhabi, including Mubadala Development Company, in addition to Dubai’s wealth.

The value of the sovereign wealth held by ADIA is second only to that of Norway’s retirement fund.

Norway spends only a portion of its oil revenue, keeping the rest for future generations on the principle that no one generation should benefit from the country’s wealth more than another generation.

Norway is distinct among oil producing countries in that its political circumstances do not change with oil prices.

Additionally, three GCC members own huge sovereign wealth. These are Saudi Arabia, with $763bn, Kuwait ($548bn) and Qatar ($256bn).

Qatar is known for transparency in its investments, especially since it announced the details of its purchase of the Harrods store in London.

On the other hand, Oman and Bahrain have limited sovereign wealth, according to Gulf standards, with about $19bn and $11bn, respectively.

The GCC has a remarkable record of using its wealth to solve international problems. This was clearly demonstrated during the peak of the global financial crisis in 2008.

At that time, the Gulf states generously contributed to a fund established under the supervision of the International Monetary Fund to address the crisis.

Also, some GCC countries, including Qatar, invested in Greece at the peak of the economic crisis in the debt-ridden EU member.

Moreover, the GCC countries are always ready to use their money to solve local problems. Kuwait used part of its sovereign wealth to liberate the country in 1990, and also provided financial support to its citizens who stayed abroad during the Iraqi occupation.

Kuwait is considered a pioneer in this field as it established the Kuwait Investment Authority way back in 1953.

Abu Dhabi offered financial support to Dubai in 2009 to help it out of a debt crisis after it had delayed payment of some of its financial commitments.

In the GCC, the four countries with substantial sovereign wealth had announced that they would offer $10bn in financial aid to Bahrain and Oman for development, after political unrest in the two countries at the start of 2011.

Because of their readiness to offer financial support, the GCC countries, especially the United Arab Emirates, Saudi Arabia, Kuwait and Qatar come to mind whenever there is mention of sovereign wealth funds.

The author is an economist researching GCC economies

The Peninsula Qatar - Sovereign wealth a major GCC asset