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

[AUz]

@Saif al-Arab Can you explain what are Sovereign Wealth Funds and how exactly they benefit the nations?

Also, if GCC has alot of sovereign wealth funds invested in Europe, does it buy in influence to GCC?

Please give a comprehensive overview to readers about all aspects of SWFs of GCC

 

[Saif al-Arab]

@Saif al-Arab Can you explain what are Sovereign Wealth Funds and how exactly they benefit the nations?

Also, if GCC has alot of sovereign wealth funds invested in Europe, does it buy in influence to GCC?

Please give a comprehensive overview to readers about all aspects of SWFs of GCC

Look here;

What is a Sovereign Wealth Fund? | Sovereign Wealth Fund Institute

http://pubblicazioni.iai.it/pdf/Sharaka/Sharaka_C_03.pdf

Arab sovereign investments in Europe: a strong past and an uncertain future | Aspenia online

 

[Saif al-Arab]

When Big Money Comes Calling​

Gulf-based SWFs are reorienting their investment strategies and emerging markets such as India could emerge beneficiaries
BRAD WHITTFIELD

The global sovereign wealth funds (SWFs) currently control an aggregate of approximately $5 trillion in assets under management (AUM). Of this amount, the Gulf-based SWFs — most notably the Abu Dhabi Investment Authority, the world’s third-largest SWF behind the Norway Government Pension Fund and China Investment Corporation — account for approximately 40% of global AUM.

According to market estimates, close to 80% of SWF assets owned by the Gulf Cooperation Council (GCC) states are accounted for by three major players — the Abu Dhabi Investment Authority, foreign holdings at the Saudi Arabia Monetary Authority and the Kuwait Investment Authority.

While AUMs have continued to increase year on year, there is no doubt that, like the rest of the international investor community, the GCC states felt the impact by the global financial crisis. This saw GCC SWFs take steps to curb their investment activity and, in many cases, reset their investment strategies altogether.

However, while the wider international investor community was experiencing a type of investment paralysis during this time, the impact on SWFs in the oil-rich countries was mitigated by the high price of oil — often trading well in excess of $100 per barrel since 2011. So, as liquidity tightened in the West (made worse by the Euro zone sovereign debt crisis), GCC SWFs were not only able to continue to explore investment opportunities but also build up significant cash reserves.

To put this into perspective, we can look at the various countries’ break-even oil price (the price oil needs to remain above in order for that country to balance their fiscal budgets). Saudi Arabia’s breakeven oil price is approximately $97 a barrel and the UAE’s is much lower at approximately $77 a barrel. So you can see how, during the times when oil prices were higher than $100 a barrel, these significant cash reserves were able to accumulate.

As I mentioned above, the past five years have seen GCC SWFs rethink their approach to investments. While the underlying objective is to diversify and maintain balanced investment portfolios, the approach in which SWFs are taking to investing and where they are investing has certainly evolved.

Direct Investment

While the majority of GCC 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.

We have seen an accelerating trend towards direct investment and towards strategies that offer the funds a greater level of control over investment strategy. In this respect, we are defining direct investment in a broad sense to include direct investment and co-investment alongside other investors — such as a property company — and investments made via structures over which the investor has a degree of discretion such as certain ‘managed account’ arrangements with private equity fund managers.


In support of this strategy, we have seen many funds significantly increase their internal headcount and strengthen their in-house capabilities. We are seeing a number of funds hiring investment and investment management professionals to increase their capacity to evaluate direct investment and co-investment opportunities. This is typically in asset classes that lend themselves to direct investments such as real estate and private equity.

Successful Partnerships

It has become increasingly clear that in situations where SWFs invest alongside fund managers, they need to have complete confidence in the ability of fund managers to produce results — both financial and structural. SWFs have, therefore, become more selective in deciding who their investment partners are.

SWFs are giving increased consideration to a fund manager’s ability to demonstrate a proven track record of success over an extended period of time. This is not only limited to financial returns but also to a fund manager’s ability to demonstrate good portfolio management.

In cases where SWFs are investing directly into a private equity fund as a limited partner, it is apparent that they require more certainty and control over the investment strategy of these funds. In many cases, this means certainty in relation to geographic and sector focus. Private equity funds with a focused approach may be preferred to those that have a wide investment mandate.

An Increased Regional Focus

Whether due to international forces, such as the Euro zone debt crisis, or as a result of local factors, such as the Arab Spring, it is becoming evident that GCC SWFs are redirecting a greater portion of their funds from international investments back into the region. A big part of this is driven by large-scale infrastructure plans.

The GCC region plans to spend approximately $140 billion on infrastructure projects between now and 2020, the majority of which relates to rail and road projects. This is in addition to planned mega projects in the region such as the $86 billion King Abdullah Economic City in Saudi Arabia, Qatar’s $70 billion 2022 FIFA World Cup-related infrastructure and the UAE’s EXPO 2020.

As the shift towards local investments appears to be gathering momentum, the question remains whether this nascent position is a transitory trend or a strategic direction for the medium term. The question as to whether the GCC economies are able to absorb large sovereign fund investments while providing SWFs with a suitable risk/return profile is an entirely separate matter.

Higher Public Spending

In stark contrast to other parts of the world where governments are promoting austerity and introducing significant cuts to public spending, years of accumulated funds from historically high oil prices have enabled the GCC governments to continue increasing public expenditure.

A number of the GCC governments, including those of Bahrain, Qatar and Saudi Arabia have introduced considerable public stimulus programmes during the past 18 months.

With a seemingly renewed focus on unemployment, education and healthcare, regional governments are making considerable efforts to invest and promote development within their own countries.

The Rise Of The Emerging Markets

A trend we have seen in the last 12 months or so has been the increase in SWF investment appetite for emerging markets. While Africa is often spoken about, this approach can only benefit the likes of India, which is not only strategically placed in its proximity to the GCC but also possesses strong demographics, a large and growing population and high growth potential.

However, GCC SWFs do remain relatively cautious in their approach to emerging markets. Those in emerging markets looking to partner alongside these funds should keep the following in mind:


Long-term local relationships: When investing in emerging markets such as India, there appears to be no substitute for having skilled and experienced people on the ground. Building relationships and forging alliances with domestic partners and regulators is a long-term process and is viewed by GCC SWFs as key for a successful execution.

Information limitations: Information asymmetry and lack of a proven track record in these geographies makes investor decisions more challenging. As with many emerging economies, quality data is hard to come by and therefore, those who are able to present it in a sophisticated manner may find themselves in the best position to capture this investment opportunity.

Close and regular monitoring of investments: Given the nature of the market and unique risks that businesses in emerging markets are subject to, investments require close and regular monitoring before, during and after an acquisition. Related to the point made above, having close and regular involvement with teams on the ground is crucial.

India — An Opportunity?

We would expect GCC SWFs to look at investment opportunities in India as part of their broader plan to explore emerging markets and generate higher returns from a more diversified portfolio of assets. Relative to the size of the Indian economy, global SWF investment to date is perhaps lower than what it ought to be.

With India’s $1.9 trillion economy predicted to grow at over 5% during 2015, the general consensus appears to be that India’s government is clearly taking significant steps to demonstrate that it is willing to make changes in order to attract investments from around the region, including the GCC.

Many believe India’s recently announced budget should have a notable impact on the country’s infrastructure sector, which according to market estimates, may require as much as $1 trillion in the next four years. The Indian infrastructure sector may well become a key area of focus for GCC SWFs.

Looking Forward

While GCC SWFs have become a key source of liquidity globally, many are predicting a slowdown due to the recent decline in oil prices. In the short term, we have not seen much of an impact in terms of investment appetite as most oil-dependent countries have successfully built up large cash reserves. However, if the prices remain depressed for a period of time, I would certainly expect a more cautious approach to investment as these cash reserves reduce.

One thing that the recent volatility in the oil price has confirmed is the need to continue to diversify. Like many emerging economies with strong fundamentals, India is well positioned to attract international attention. However, with opportunities come challenges.

GCC SWF’s have a long-term investment horizon. Therefore, those looking to attract SWF investment must demonstrate a commitment to creating and growing these long-term relationships. There must also be a willingness to accept active participation and even direct investment and these funds look to take a much more active role.

This web-exclusive Column does not appear in print magazine.

Brad Whittfield, Associate Director, KPMG (UAE)

Outlook Business | When Big Money Comes Calling

Great article.

 

[Saif al-Arab]

Rise of the sovereign wealth funds​

May 2015 | FEATURE | FINANCE & INVESTMENT

Financier Worldwide Magazine

Though they are by no means a new phenomenon, sovereign wealth funds (SWFs) have become increasingly prevalent since the turn of the century. Over the last decade and a half, SWFs have multiplied greatly, thanks in no small part to the rise of resource rich countries in the Middle East. SWFs in the Cooperation Council for the Arab States of the Gulf (GCC) have been particularly active in recent years.

SWFs are renowned for their long term planning. As such, the financial crisis of the late 2000s provided them with a golden opening, with investment opportunities springing up across multiple jurisdictions. Southern Europe, for example, attracted significant SWF investment during the protracted European debt crisis. According to research from ESADEgeo, a Spanish think-thank affiliated with the ESADE Business School, SWFs poured around €40bn worth of investment into Spain between 2009 and 2014.

Today, SWFs have become major players on the global financial scene. By the end of 2014, they had more than $7 trillion in assets worldwide. “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, a partner at KPMG.

Increasingly, SWFs are targeting markets in Asia, Europe, Australasia and Africa and are pouring huge sums of money into infrastructure projects. As Brad Whittfield, an associate director at KPMG, notes “2014 was an active year for SWFs from an investment perspective. Interestingly, we saw a continuing shift towards direct and co-investment. I think this is the result of the funds building their in-house capabilities and also a strategic decision to be a more active and closer investment partner. We also saw an increase in the focus on emerging markets such as Africa. This continent has very favourable demographics from an investment perspective and is benefitting from an increase in investment in infrastructure.”

Direct investment was a genuine growth area for SWFs last year. These funds have been increasingly aggressive in the M&A space, investing directly in start-ups and helping to drive valuations of new businesses. For example, 2014 saw Singapore’s GIC Private Ltd invest directly in Chinese smartphone maker Xiaomi Corp. Elsewhere, Qatar Investment Authority (QIA) invested in ride-sharing firm Uber Technologies Inc., which raised $1.2bn of funding with the help of QIA. GIC Private Ltd also became directly involved in helping to fund Indian e-commerce company Flipkart Internet Pvt.

SWFs are likely to continue investing directly in alternative assets going forward. “We see the 2014 trends continuing into 2015 – an increasing focus on emerging markets and alternative asset classes for example,” says Mr Whittfield. “With the large number of regional infrastructure projects and committed pipeline, such as the UAE’s EXPO 2020 and Qatar’s Football World Cup, we would expect the proportion of fund allocation regionally to remain strong.”

Diversification

One of the chief contributing factors to the rise of SWFs has been the need for resource rich countries to protect their surplus revenues from oil exports. Diversification has resulted in many funds investing heavily in large scale infrastructure projects, as well as retail and hospitality real estate deals.

The year-long decline in oil prices has affected some funds, if not all. The Russian economy has endured a turbulent 18 months or so, with economic sanctions being heaped on top of the volatility in commodities prices – an area on which its economy relies. As a result, the Russian government has been required to utilise its sovereign wealth fund in an attempt to support the country’s faltering economy. The Russian Reserve fund has seen around $8bn siphoned off by the Russian government to cover the country’s mushrooming budget deficit.

“Direct investment was a genuine growth area for SWFs last year.”
To date, however, funds in the Middle East have generally weathered the storm of dipping oil prices. “The decline in oil prices will impact sovereign wealth funds differently,” explains Mr Whittfield. “Countries have differing break even oil prices – the price that oil needs to remain above in order to balance their respective fiscal budgets. For example, Saudi Arabia’s breakeven oil price is approximately US$97 a barrel whereas the UAE’s is much lower at approximately US$77 a barrel. In the short term, we have not seen too much of an impact in terms of investment appetite as most Middle Eastern countries have successfully built up large cash reserves. However, if prices remain depressed for a period of time, I would certainly expect a more cautious approach to investment as these cash reserves are reduced.”

Yet some SWFs have begun to cast their net further in order to chase significant returns. A great number have invested in hotels and real estate in recent years – a trend which is likely to continue for some time to come. Norway’s Government Pension Fund Global has moved into the real estate space, and now has around $893bn worth of assets under its management, according to the Sovereign Wealth Fund Institute and the Qatar Investment Authority. In 2010, Norway’s fund managers committed to shifting 5 percent of the fund’s resources into the real estate sector. Also, funds are believed to have invested around $10bn in London’s real estate market.

The hospitality sector has become a key target for SWFs, particularly those funds emanating from the GCC. Hospitality real estate investing, either directly or indirectly, has become one of the most utilised and profitable sources of cash flow for SWFs, particularly because it allows for greater diversification, and is generally perceived to be a safe investment.

Diversification has become more important over the last year or so, as a result of volatility in commodities markets. The dwindling oil prices since June 2014 has had a considerable impact on some oil producing countries. In Africa, many sub-Saharan African countries were late to the SWF party, missing out on the chief commodities boom of the 2000s; accordingly, these nations have been playing catch-up with their more established counterparts. Angola’s SWF – known as Fundo Soberano de Angola, or FSDEA – has prioritised diversification, since the country is almost entirely reliant on oil production. According to FSDEA’s chairman, José Filomeno dos Santos, the fund is now looking further afield for opportunities, and will continue to do so “especially during periods such as the one we are in now, of low commodity prices and – specifically for Angola – low oil prices, which impact the economy. It is a challenging time for Angola because it revealed, once again, the very high exposure to this type of commodity. The main goals of the fund are to preserve state reserves but also to create additional sources of revenue. We will invest in assets that give the state returns that have a different pattern of behaviour to the oil sector.”

Many African SWFs are also looking to hospitality, considered to be a relatively safe investment sector. Funds from Mozambique, Nigeria and Ghana are all hoping to exploit the recent rises in tourism to Africa. Angola’s FSDEA has earmarked the tourism space as a particularly potent area, allocating $500m of equity capital to a Hotel Fund for Africa. The FSDEA has also noted that it is in position to take up to 50 percent debt; accordingly, the fund could double its total investment capability going forward.

Elsewhere, the Abu Dhabi Investment Authority (ADIA) has also been active in the hospitality space. ADIA, the world’s second largest sovereign wealth fund with around $773bn worth of assets under management, has recently made a number of additions to its hotel portfolio, purchasing luxury boutique hotels from Marriott International. In February, ADIA acquired the Miami Beach Edition hotel for around $230m. This deal came just over a year after the fund acquired Marriot’s London Edition hotel. The two groups are believed to be in negotiations over the sale of Marriot’s New York Edition hotel.

The telecoms sector has also become a key investment area for many SWFs. The O2 and Three mobile networks in particular have attracted attention from funds in China, Singapore and Qatar over the last 12 months.

Infrastructure development

A further primary area of SWF investment in recent years has been infrastructure development. Infrastructure stands out as an attractive and viable option – especially since the global infrastructure funding gap is expected to reach around $500bn per year by 2030.

The long-term investment horizon of SWFs makes them ideal financiers of large infrastructure projects, and with much of the developing world in need of significant infrastructure investment, it is inevitable that funds will look to deploy reserves heavily in this space. Emerging markets often make ideal investment destinations for SWFs, given the relative lack of competition, the greater need for capital and the opportunities for economic growth.

In Europe, SWFs are having a significant impact on infrastructure development, helping to finance much needed projects and realising massive profits in the process. This is set to continue, although the level of competition is likely to intensify and valuations are expected to climb.

Conclusion

As SWFs seek new assets and become more ubiquitous in the global investment market, they must be wary of increasing prices and competition. Should funds be able to navigate these challenges, 2015 is likely to be a particularly active year, with sectors such as infrastructure and hospitality remaining a key focus. Collectively, SWFs have trillions of dollars worth of assets under management, and if funds are able to navigate the potential risks in front of them – namely the availability of viable and affordable investment opportunities – the value of controlled assets could be substantially higher in 2016.

© Financier Worldwide

Rise of the sovereign wealth funds — Financier Worldwide

 

[Saif al-Arab]

10/05/10
Opening Session from the Emirates-Aspen Forum on Innovation entitled "Leadership in an Innovation Economy."

The Aspen Institute Middle East Programs convened the first Emirates-Aspen Forum on Innovation October 5 and 6, 2010 at the Emirates Palace Hotel in Abu Dhabi. Economist Global Correspondent Vijay Vaitheeswaran moderates a panel featuring H.E. Mohammed Omar Abdullah, Undersecretary of the Abu Dhabi Department of Economic Development, H.E. Waleed Al Mokarrab Al Muhairi, Chief Operating Officer of Mubadala, H.E. Saeed Al Hajeri, Executive Director of the Abu Dhabi Investment Authority and The Honorable Deborah Wince-Smith, President and CEO of the Council on Competitiveness.

 

[Irfan Baloch]

thanks for sharing
next stage is to bring the investment back home in renewable resources , investing in the western technology/ automobile industry is good step. investing and improving on education/ R&D is a must human intellectual capital has a good chance due to the wealth of liquid cash this group of countries enjoys.

moving away from the reliance on fossil fuels is a good step by diversifying.

 

[Saif al-Arab]

thanks for sharing
next stage is to bring the investment back home in renewable resources , investing in the western technology/ automobile industry is good step. investing and improving on education/ R&D is a must human intellectual capital has a good chance due to the wealth of liquid cash this group of countries enjoys.

moving away from the reliance on fossil fuels is a good step by diversifying.

All this is happening my friend. Take a look at the numerous new universities in KSA and the GCC (that rank above any other in the ME), the number of students abroad (KSA has more students at US universities per capita than any other country and in terms of sheer numbers only behind 1.3 billion big China, 1.2 billion big India and 55 million big South Korea). There is already a automobile industry in several Arab countries (including KSA) but it's small but nevertheless growing although automobile industry is a waste of investment because there will always be much cheaper manufactures out there (China for instance) etc. All of this is happening but it's not something that is developed overnight. In total the GCC is moving in the right direction, especially UAE.

Can you please change the thread title to USD 3 trillion, Irfan? Thanks.

@Irfan Baloch

 

[Irfan Baloch]

All this is happening my friend. Take a look at the numerous new universities in KSA and the GCC (that rank above any other in the ME), the number of students abroad (KSA has more students at US universities per capita than any other country and in terms of sheer numbers only behind 1.3 billion big China, 1.2 billion big India and 55 million big South Korea). There is already a automobile industry in several Arab countries (including KSA) but it's small but nevertheless growing although automobile industry is a waste of investment because there will always be much cheaper manufactures out there (China for instance) etc. All of this is happening but it's not something that is developed overnight. In total the GCC is moving in the right direction, especially UAE.

Can you please change the thread title to USD 3 trillion, Irfan? Thanks.

@Irfan Baloch

done
pleae avoid capitalisations as well . so I changed to mixed case which is much easier to read

 

[Saif al-Arab]

Sovereign wealth funds better poised to manage liquidity crunch
​

As per Invesco’s findings, investors – hungry for returns – are increasingly looking at alternatives as a class to allocate their assets. There also seems to be a link between asset classes and region, with an affinity in emerging markets toward infrastructure investment and in developed markets to real estate.

17/06/2015 4:20 pm EDT

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Sovereign wealth funds – global as well as Middle Eastern – are better poised than they were in 2008 to manage funding concerns over withdrawals resulting from lower oil prices.

A new study from Invesco Global Sovereign Asset Management – which conducted research among more than 50 individual sovereign investors across the globe, including those from the Middle East, representing $7.09 trillion of assets – showed that a vast majority of investors from North America (80 percent) expected funding to decline this year, even as oil-funded emerging market sovereigns in the Middle East seemed least affected from a funding perspective.

“Despite their concerns about new funding, the majority (80 percent) of North American sovereigns are confident that heir assets are protected from being drawn on to fund potential government shortfalls. Conversely, in other parts of the world, a significant number of oil-funded sovereigns expect withdrawals (67 percent) if the oil price remains below $40 per barrel for two years,” the report noted.

Despite this, on average, the liquidity objectives of sovereigns (excluding Central Banks) has increased since Invesco’s last survey from 6.7 to 7.3 on a scale to ten, where ten is the most important.

The study further showed that regional sovereigns placed the highest importance on investment objectives, with the highest average target returns and the longest average time horizons.

“In this background, it was interesting to note that the Middle East region placed the highest importance on investment objectives, overtaking the Western sovereigns. Similarly, the Middle East sovereigns had the highest average target returns and the longest time horizons at an average of 7.8 years. Such findings place the Middle East funds in a unique place among sovereign investors,” said Nick Tolchard, Chair of Invesco’s Global Sovereign Group and Head of Invesco Middle East.

As per Invesco’s findings, investors – hungry for returns – are increasingly looking at alternatives as a class to allocate their assets. There also seems to be a link between asset classes and region, with an affinity in emerging markets toward infrastructure investment and in developed markets to real estate.

“However, for both infrastructure and real estate investments, the biggest challenge for sovereign investors is sourcing deals (cited by 53 percent of sovereigns as the number one factor). This is hardest in infrastructure and, as a result, this year’s study highlights accelerated growth in collaboration between sovereign investors to source these deals,” says the report.

This could be in the wake of low oil prices that have resulted in the investment industry “becoming more integrated and complex than ever”, it concludes.

Sovereign wealth funds better poised to manage liquidity crunch « AMEInfo

Oman Wealth Fund Looks Beyond Oil​

Anthony DiPaola and Claudia Carpenter | 17-06-2015, 11:36 AM | Oman |

The country is considering diversifying with equity stakes in logistics, shipping and tourism

Oman, the largest Arab oil producer that’s not an OPEC member, is considering taking equity stakes in logistics, shipping and tourism as its sovereign wealth fund seeks to diversify government income from crude.

Oman Investment Fund, which has holdings in Italy to Vietnam and is a shareholder of the Dubai Mercantile Exchange, wants to invest in companies in Oman and abroad that are mainly outside the oil industry, says Fabio Scacciavillani, chief economist at the state-owned fund.

The fund is focusing on logistics, shipping and tourism as those industries are areas in which Oman has an advantage given its location on shipping routes connecting Europe and the Americas to Asia, he said. He didn’t disclose details on future investments.

Oman, the second-smallest economy in the Gulf, set up Oman Investment Fund in 2006 to preserve and expand the country’s wealth. The fund manages about $6 billion, according to the Sovereign Wealth Fund Institute. Scacciavillani declined to comment on the size of the fund.

Oman’s economic growth slowed last year after oil plunged by almost 50 per cent, cutting state income. Crude needs to trade in the long term at about $80 a barrel, compared with $65 now, for producers to supply enough oil to meet global demand, he said.

The fund holds a stake in the Dubai Mercantile Exchange, a platform which trades the country’s crude. Since it’s outside the Organization of Petroleum Exporting Countries, Oman sees the exchange as a strategic investment for the pricing and sale of its oil, Scacciavillani said. CME Group, the world’s largest futures exchange, also owns part of the Dubai oil exchange.

The Oman Investment Fund this year bought a 40 per cent stake in Italian automotive plastics supplier Sigit, he said. “Equity capital stakes are a very effective strategy for us in countries where there is a credit crunch,” he said.

Sigit, with production sites globally, could eventually benefit from establishing manufacturing in Oman where it would have access to the chemical feedstock used in plastics along with easy access to ports, while creating jobs locally, he said.

The fund in March also signed an agreement with Singapore- based Alila Hotels & Resorts to manage a facility in a tourism development planned in Oman’s Salalah region, Scacciavillani said.

Bloomberg News

- See more at: Oman Wealth Fund Looks Beyond Oil

Qatar's sovereign wealth fund to restructure, say sources​

By Reuters
Tuesday, 16 June 2015 2:31 PM

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Qatar Investment Authority, one of the world's most aggressive sovereign wealth funds, will set asset allocation targets for the first time and restructure internal decision-making, sources say, in response to a drop in oil prices that has crimped available funds as competition for assets grows.

In a cryptic reference on QIA's website, a tab saying 'QIA Review - Coming Soon' leads to a page which does not yet exist. The sources, who all either work in Qatar or for foreign institutions which work with the QIA, said the review process was currently ongoing.

They spoke on condition of anonymity as they did not want to jeopardise working links with the secretive fund.

A spokesman for the QIA, which is estimated by industry tracker the Sovereign Wealth Center to have $304 billion of assets, declined to comment.

QIA, set up in 2005 by the Supreme Council of Economic Affairs, a body chaired by Emir Sheikh Tamim bin Hamad Al Thani, was one of few sources of capital available to stressed sellers during the global financial crisis and thus snapped up, at rock bottom prices, many indiscriminate assets like ownership of the Shard skyscraper in London and Harrods department store, and stakes in Credit Suisse and Volkswagen.

Now, however, as the global economy recovers, QIA faces competition from other funds again as it seeks to diversify its hydrocarbon-centric economy. On top of that lower oil prices have reduced new investment funds available to it - though they still stand at tens of billion of dollars.

It's also faced criticism for extreme secrecy because the fund doesn't disclose its performance or total assets under management.

"As any organisation grows up, it makes much more sense to take a more institutionalised approach, and this is something which has happened at other sovereign funds in the past," said a senior Gulf-based banker who works with the QIA.


The review would enshrine formal asset allocation targets for geographies and sectors for the first time, according to a senior Doha-based banker and a private equity source, ending the scattergun approach that marked the fund's early years as it prioritised fast growth.

The fund was run between 2008 and July 2013 by Sheikh Hamad bin Jassim Al Thani - a charismatic dealmaker who was also prime minister and foreign minister for most of his tenure and often used the QIA as a foreign policy tool, deploying its cash into areas which would help boost Qatar's power and prestige.

Setting targets now could result in the fund exiting areas like food and mining where it overlaps with specialist funds such as Hassad Food and Qatar Mining. QIA is already evaluating its investments in some mining assets, sources told Reuters last week.

The review could also see tens of billions of dollars flow into new geographies to diversify a fund which in late-2013 was believed to be around 80 percent invested in European assets.

That would crystallise a recently-announced shift towards the developed markets of Asia and North America. The fund said in April it would open an office in New York in light of its growing portfolio in the United States and last November announced plans to invest $20 billion in Asia over the next five years.

Those funds are likely to flow in particular to sectors where QIA has a penchant such as financial services, real estate and consumer goods, said a second source, a senior Doha-based banker.

The other major shift expected to emerge from the review is a greater use of consensus in decision-making.

Its current director Sheikh Abdullah bin Mohamed bin Saud Al Thani - former chairman of telecommunications firm Ooredoo for 14 years prior to joining the QIA - is heavily involved in most matters and asks to be briefed on everything going on, according to a Doha-based lawyer.

"There now seems to be a greater ethos of valuing all opinions, which makes people feel they are bringing their value added to the fund," said the senior Doha-based banker.

It remains to be seen whether the review will advocate greater transparency for a fund rated in October by political risk group GeoEconomica as the only SWF not complying with the Santiago Principles, a voluntary code of practice meant to govern these often highly-secretive funds.

"Transparency is not an end here," said the first source, a senior Gulf-based banker.

"There are always shades of grey when it comes to SWFs, especially when they are still evolving like the QIA, so it's more of a case of gradual, steady progress and not just flipping a switch."

Qatar's sovereign wealth fund to restructure, say sources - ArabianBusiness.com

@azzo @Frosty @Full Moon @Halimi @Ahmed Jo @BLACKEAGLE @Falcon29 @ebray @JUBA etc.

 

[Saif al-Arab]

Qatar’s sovereign wealth fund looks to diversify in Asia and US​

Simeon Kerr in Dubai

June 18, 2015 3:20 pm

Qatar’s $256bn sovereign wealth fund has unveiled a new investment strategy which will see it make investments in Asia and the US as it looks to diversify its asset base, according to people familiar with the matter.

The Qatar Investment Authority new strategy follows a review carried out by chief executive, Sheikh Abdullah bin Mohamed bin Saud Al Thani, who was appointed last December.

In a presentation to staff made in the past few weeks, the fund said it would focus on Asia and the US to complement its strong base in European real estate and blue-chips, the people said.

As part of its new focus, the QIA will also allocate more money to third-party fund managers outside the fund.

“There will also be more of a focus on passive investment strategies,” said one banker who regularly deals with the fund. The QIA declined to comment.

The QIA is reawakening after a relatively quiet period on the global investment stage that followed the ascent of the new emir, Sheikh Tamim bin Hamad Al Thani, on his father’s abdication in 2013.

The tiny gas-rich state is deploying billions of dollars a year overseas, in spite of lower oil prices and domestic infrastructure needs for its controversial hosting of the 2022 football World Cup.

The QIA last year said it had earmarked $15bn-$20bn for investments into Asian sector such as healthcare, infrastructure and real estate.

The Doha-based fund, which is opening an office in New York, also has representative offices in China and India.

The fund last week spent around $1bn to acquire a 20 per cent stake in HK Electric, a Hong Kong utility investment trust. In December, the QIA raised its stake in a Hong Kong department store.

The QIA has long been keen to move into Asia but has until now been more at ease making investments in markets such as London and Paris, where its leadership has enjoyed close bilateral relations. In January, the sovereign wealth fund joined forces with Canadian property group Brookfield to acquire London’s Canary Wharf for £2.6bn.

Qatar does not reveal the size of its assets, but the London-based Sovereign Wealth Fund Institute estimates its holdings at $256bn, making it the ninth largest fund in the world. Some Doha-based bankers estimate its size to be more than $300bn.

Reflecting broader government policy, the QIA is also hoping to raise the percentage of its 400-odd staff drawn from the local population. No reduction of headcount is expected, the people said.

Bankers said the new regime at QIA under Sheikh Abdullah is starting to take root. The fund’s top management has devolved more power to managers, who have a better idea of the opportunities they are likely to be able to pursue.

“The people at QIA have clearer idea of what they want, which really helps when we pitch to them,” said one Doha-based banker.

http://www.ft.com/intl/cms/s/0/dd04201c-15bd-11e5-be54-00144feabdc0.html#axzz3e0ntmHtj

3 trillion USD (constantly growing too) is a MASSIVE amount of money. Investing it cleverly to the benefit of the GCC and the people should and must be the goal. Wider Arab and Muslim world too (allied states).Regardless of what it is an tremendous asset to have.

Also it's worth to notice that it's only sovereign wealth funds. Domestic and foreign investments and assets other than sovereign wealth funds are not included here.

@azzo your comments about this topic? It seems to me that not many people are aware of this in the GCC. I mean those that are not interested in economics.

 

[black-hawk_101]

They have a good DEBT as well.

 

[Saif al-Arab]

They have a good DEBT as well.

What are you talking about my friend?

Both China and KSA especially (along with the GCC) are the main "trade surplus" nations in the world, and also amongst the world's largest creditor nations.

 

[Shotgunner51]

What are you talking about my friend?

Both China and KSA especially (along with the GCC) are the main "trade surplus" nations in the world, and also amongst the world's largest creditor nations.

Yes China (incl HK/Macau) and GCC have large trade surpluses, SWF, net savings balance and are major creditor nations. The have much to co-operate!

 

[Saif al-Arab]

KSA needs a proper sovereign wealth fund​

ABDEL AZIZ ALUWAISHEG

Published — Monday 13 July 2015

Last update 12 July 2015 11:51 pm

Despite the substantial financial surpluses Saudi Arabia has accumulated over the past few decades, it is the only major oil producing country without a proper sovereign wealth fund (SWF). There are of course several institutions managing those surpluses, but not in the usual SWF format.
Most countries with financial windfalls, whether from oil and gas or other sources, have established SWFs to invest those surpluses over the long run to help weather financial crises and preserve wealth for future generations. The SWF Institute estimates the values of those funds at about $7.3 trillion globally, $4.2 of which belong to oil and gas producers, primarily GCC countries.
Published information about SWF in Saudi Arabia is not always accurate, because of data limitations and also due to the usage of different definition for SWFs. For example, the SWF Institute includes reserves held by Saudi Arabian Monetary Agency (SAMA) as if they were a proper SWF, but the Saudi General Investment Fund (GIF) is really closer to what might be considered as such.
Regardless of definitions, however, Saudi Arabia has accumulated surpluses in excess of SR3 trillion ($800 billion) managed by several different institutions.
The need to establish a proper SWF has become more urgent now than ever, with oil prices plummeting over 60 percent since last summer, a situation that may last for some time. A well-defined SWF would manage national wealth so as to augment government resources and spur economic growth. The fund should be able to channel funds into the national economy when and where needed, timed against the ups and downs of business cycles, as well as global crises and future needs.
I will focus today on SAMA’s reserves and GIF’s portfolio, which together exceed $800 billion and by far are the most important public investment channels currently. There are other funds and portfolios, but they are either too small or operate under specific restrictions.
GIF was established in 1971 to fund strategic and commercial projects that could not be undertaken by private companies. It has funded oil refineries, pipelines and storage tanks, aircraft purchases, maritime shipping, railroads, basic and manufacturing petrochemicals, as well as energy, desalination, and mining projects. The fund has also contributed to the capitalization of many companies, locally and abroad.
Funding is carried out through loans, exceeding $30 billion, or partial or total ownership, exceeding $40 billion.
In a significant development, on March 23, 2015 the Council of Ministers changed GIF’s affiliation from the Ministry of Finance to the newly-created Council for Economic and Development Affairs, whose chair became chairman of GIF board of directors, which is appointed by the prime minister, indicating the new importance now attached to GIF and public investment in general and raising hopes that the new changes would lead to improvements in the way the fund is run.
SAMA’s reserves represent the bulk of Saudi financial wealth. As such, it is important that those reserves are run as a normal SWF, instead of as a currency reserve fund, by turning over those funds to GIF, or creating a new SWF to manage them.
SAMA’s reserves accumulated rapidly during the past several years, exceeding $700 billion earlier this year. Although China and Japan keep higher reserves, Saudi reserves are the highest when measured against GDP, exceeding 90 percent.
Normally, central banks keep reserves to support monetary policy, i.e. to support the exchange rate and provide liquidity when needed. As such, reserves need to be kept in hard currencies and gold or invested in short-term, stable and secure vehicles, such as treasury bills and high-grade debt instruments, which can be easily and quickly liquidated when the need arises.
Almost all of those instruments have little or no return, but are kept as a reserve to support and protect the currency. But SAMA’s reserves have for some time exceeded currency reserve needs, which are typically set to cover 3-4 months of imports. In the case of Saudi Arabia, that amounts to about $38 billion. In other words, the reserves kept by SAMA are about 20 times the required levels, covering about 60 months of imports.
Therefore, about 80 percent or more of SAMA’s reserves could easily be turned over to GIF, or to a newly-established SWF, to manage them according to a long-term investment strategy, without any negative impact on currency reserve requirements. The fund could then be run according to state-of-the-art investment standards, balancing benefits versus risks, domestic versus international investment vehicles, and present versus future needs of future post-oil generations.

KSA needs sovereign wealth fund | Arab News

Yes China (incl HK/Macau) and GCC have large trade surpluses, SWF, net savings balance and are major creditor nations. The have much to co-operate!

My friend trade relations between China and the GCC alone (I have not included the remaining regions of the Arab world) was close to 200 billion dollars last year (2014). It will only go one way in the future and that's up. Patience and hard work is the key. Rest will follow.

 

[Saif al-Arab]

According to CNBC 4 of the 10 biggest sovereign wealth funds in the world are found in the GCC.

See the list below:

The world's biggest sovereign wealth funds

The GCC is almost an 2 trillion dollar economy (GDP nominal) and now the goal should be to continue the investments in science, infrastructure and obviously to diversity the economy. Liberalizing the private sector, combating nepotism/corruption and conducting economic reforms (how about starting to introduce a certain thing called taxes like almost any country on the planet has and enjoys HUGE revenues from?) and help more local women to become a part of the workforce. This last step alone would reduce the need for millions of migrant workers. Obviously not immediately but definitely on the long run.

Let's not forget investments in alternative energy sources (solar and wind predominantly). A HUGE potential there.

Tourism too which has a very, very big potential. Imagine where KSA could be on this front with changes in laws and better tourism friendly infrastructure. The Hajj and Umrah alone is a potential diamond mine that will never end and only increase with each year. The aviation sector is closely connected to tourism. Just look at our GCC neighbors. Leading aviation hobs of not only the region but world as well.

What are your thoughts about this @Full Moon and @azzo ?