According to MUFG’s Middle East 2023 outlook report, the power of Middle Eastern sovereign wealth funds will increase as Brent crude is expected to average $94 per barrel over the next four years. This will result in the net financial wealth reaching $5.6T or 247% of GDP, by 2026, a significant increase of $1.8T from its current amount of $3.8T.
The report states that this large surplus will support regional risk assets, strengthen the region’s position as a critical creditor in the global economy, and fortify its balance sheets. Saudi Arabia has already announced plans to grow its Public Investment Fund, its sovereign wealth fund, from $607B to $1.8T by 2030. Additionally, the reputation of Middle Eastern funds has changed as they are now viewed as smart, flexible, and mature investors, breaking away from the previous notion of them following covert strategies and only pursuing trophy assets, according to Zawya.
MUFG stated that the upcoming decade-long energy supercycle and the strong dollar peg serve as stability anchors, positioning Middle Eastern sovereign wealth funds well for the long term. The investments of these funds have doubled, growing from $22B in 2021 to $52B in 2022. Furthermore, five out of the ten most active sovereign wealth funds are from the Middle East.
A recent report from Bain & Company stated that Middle Eastern sovereign wealth funds are using mergers and acquisitions as a means of expanding into new industries and creating local leaders. Out of the 60 mega deals worth over $1B that took place last year, 26 were carried out by Middle Eastern sovereign wealth funds. The largest deal was made by Abu Dhabi Investment Authority, which invested $4B in Ardian’s ASF IX and $2B in joint co-investments. The report cited an example of Saudi Arabia’s Public Investment Fund investing $1.3B in four Egyptian companies in August 2022.
