According to a recent report, the assets managed by sovereign wealth funds (SWFs) in the Gulf Cooperation Council (GCC) region have surged by 70% since 2018, reaching a total of $3.6T.
This growth has been primarily driven by rising oil and gas prices and active investment strategies by these funds.
Notably, this figure represents about 33% of the total assets held by sovereign wealth funds globally, making the GCC the largest region in terms of SWF assets, as reported by credit rating agency DBRS Morningstar.
Gulf’s Largest SWF with $993 Billion in Assets
The Abu Dhabi Investment Authority (Adia) stands as the largest SWF in the Gulf, boasting an estimated $993B in assets, which is equivalent to 320% of Abu Dhabi’s gross domestic product, according to data from Global SWF.
Furthermore, Adia ranks as the fourth-largest sovereign wealth fund in the world, trailing behind Norway’s Government Pension Global Fund ($1.42T in assets), the China Investment Corporation ($1.35T), and China’s State Administration of Foreign Exchange (Safe) Investment Corporation ($1.03T).
Among the leading SWFs in the Gulf, Adia is followed in terms of size by the Kuwait Investment Authority, with estimated assets of $800B, and Saudi Arabia’s Public Investment Fund, which is believed to have assets of around $700B, the report outlined.
Additionally, other significant SWFs in the region include the Qatar Investment Authority, Investment Corporation of Dubai, Abu Dhabi’s Mubadala Investment Company, and the investment and holding company ADQ, based in the UAE capital.
Gulf Sovereign Wealth Funds: Driving Local Economies with Substantial Asset Growth
“SWFs in the Middle East, particularly in the oil and gas producing Gulf countries, have benefitted notably from the latest boom in oil and gas prices, according to The National News.
Boosted by the windfall, most of the Gulf SWFs have seen a significant increase in their assets and have been investing actively,” said report authors Adriana Alvarado, senior vice president of global sovereign ratings, and Nichola James, managing director and co-head of sovereign ratings.
“Their investments matter for their local economies. The success of their investments will be key for the long-term economic, social and political prospects of the Gulf countries.”
The findings align with research conducted by S&P Global Market Intelligence, which indicates that assets under management for Gulf sovereign wealth funds (SWFs) increased by an average of 20% over the past two years, reaching approximately $4T, driven by higher oil prices.
This translates to approximately 37% of the total global assets under management for sovereign wealth funds, as reported in S&P Global Market Intelligence’s August report.
Gulf SWFs to Play Bigger Role in Global Markets in 2023
Gulf SWFs are anticipated to play a more active and substantial role in global financial markets this year, as they receive significant capital injections resulting from increased oil revenue, according to the annual industry report from Global SWF, published in January.
In 2022, five out of the top 10 most active sovereign investors were from the Gulf region, as indicated by Global SWF.
Among Gulf SWFs, the Public Investment Fund (PIF) has seen the most significant growth in assets under management since 2018, with a remarkable 135% increase, followed by the Kuwait Investment Authority (KIA), Qatar Investment Authority (QIA), and the Abu Dhabi Investment Authority (Adia), as highlighted in the DBRS Morningstar report.
“The financial firepower of the Gulf’s SWFs is thus substantial and the impressive increase in AUM in recent years has placed them in an even stronger financial position to invest than in the past,” Ms Alvarado and Ms James said.
“We foresee the SWFs to continue increasing their strategic investments and their global profiles,” the authors said.
“Whether the new investments succeed in attracting long-term foreign investment to their countries and in diversifying their economies remains to be seen. The Gulf SWFs’ continuing financial diversification of their assets seems more likely.”
The success of the Gulf SWFs’ investments will have “considerable implications” for the long-term economic and social prospects of the Gulf countries, the report said.
